<PAGE>
As filed with the Securities and Exchange Commission on May 31, 1995
1933 Act File No. 2-92915
1940 Act File No. 811-4096
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 27
AND
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 28
MFS MUNICIPAL SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
500 Boylston Street, Boston, Massachusetts 02116
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (617) 954-5000
Stephen E. Cavan, Massachusetts Financial Services Company
500 Boylston Street, Boston, Massachusetts 02116
(Name and Address of Agent for Service)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
It is proposed that this filing will become effective (check appropriate box)
|X| immediately upon filing pursuant to paragraph (b)
|_| on [date] pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(i)
|_| on [date] pursuant to paragraph (a)(i)
|_| 75 days after filing pursuant to paragraph (a)(ii)
|_| on [date] pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
|_| this post-effective amendment designates a new effective date for
a previously filed post-effective amendment
Pursuant to Rule 24f-2, the Registrant has registered an indefinite number of
its Shares of Beneficial Interest (without par value), under the Securities Act
of 1933. The Registrant will file a Rule 24f-2 Notice on behalf of all of its
series for its fiscal year ended March 31, 1995 on or before May 31, 1995.
CALCULATION OF REGISTRATION FEE
PROPOSED
MAXIMUM PROPOSED
NUMBER OFFERING MAXIMUM
OF SHARES PRICE AGGREGATE AMOUNT OF
TITLE OF SECURITIES BEING PER OFFERING REGISTRATION
BEING REGISTERED REGISTERED SHARE PRICE FEE
- --------------------------------------------------------------------------------
Shares of Beneficial
Interest (without par 26,119,450 $11.57 $290,000 $100
value)
Registrant elects to calculate the maximum aggregate offering price pursuant to
Rule 24e-2. 90,853,262 shares were redeemed during the fiscal year ended March
31, 1995. 64,758,876 shares were used for reductions pursuant to paragraph (c)
of Rule 24f-2 during the current fiscal year. 26,094,386 shares is the amount of
redeemed shares used for reduction in this Amendment. Pursuant to Rule 457(d)
under the Securities Act of 1933, the maximum public offering price of $11.57
per share on May 18, 1995 is the price used as the basis for calculating the
registration fee. While no fee is required for the 26,094,386 shares, Registrant
has elected to register, for $100, an additional $290,000 of shares (25,064
shares at $11.57 per share).
================================================================================
<PAGE>
MFS MUNICIPAL SERIES TRUST
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 LOUISIANA MUNICIPAL BOND FUND
MFS MARYLAND MUNICIPAL BOND FUND
MFS MASSACHUSETTS MUNICIPAL BOND FUND
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 TEXAS MUNICIPAL BOND FUND
MFS VIRGINIA MUNICIPAL BOND FUND
MFS WASHINGTON MUNICIPAL BOND FUND
MFS WEST VIRGINIA MUNICIPAL BOND FUND
CROSS REFERENCE SHEET
(Pursuant to Rule 404 showing location in Prospectus and/or Statement of
Additional Information of the responses to the Items in Parts A and B of Form
N-1A)
<TABLE>
<CAPTION>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION
- ----------------- ------------------ -----------
<S> <C> <C>
1 (a), (b) Front Cover Page *
2 (a) Expense Summary *
(b), (c) * *
3 (a) Condensed Financial Information *
(b) * *
(c) Information Concerning Shares of *
the Trust - Performance
Information
<PAGE>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION
- ----------------- ------------------ -----------
(d) Condensed Financial Information *
4 (a) The Trust; Investment Objective *
and Policies
(b), (c) Investment Objective and Policies *
5 (a) The Trust; Management of the Trust - *
Investment Adviser
(b) Front Cover Page; Management *
of the Trust- Investment Adviser;
Back Cover Page
(c) Management of the Trust *
(d) Management of the Trust - *
Investment Adviser; Back
Cover Page
(e) Management of the Trust - *
Shareholder Servicing Agent;
Back Cover Page
(f) Expense Summary; Condensed *
Financial Information
(g) Information Concerning Shares *
of the Trust - Purchases;
Investment Objective and
Policies - Portfolio Trading
5A (a), (b), (c) ** **
6 (a) Information Concerning Shares *
of the Trust- Description of Shares,
Voting Rights and Liabilities;
Information Concerning Shares
of the Trust - Redemptions and
Repurchases; Information
Concerning Shares of the Trust -
Purchases; Information Concerning
Shares of the Trust - Exchanges
<PAGE>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION
- ----------------- ------------------ -----------
(b), (c), (d) * *
(e) Shareholder Services *
(f) Information Concerning Shares *
of the Trust - Distributions;
Shareholder Services -
Distribution Options
(g) Information Concerning Shares *
of the Trust - Tax Status;
Information Concerning Shares
of the Trust - Distributions
7 (a) Front Cover Page; Management *
of the Trust - Distributor; Back
Cover Page
(b) Information Concerning Shares *
of the Trust - Purchases; Information
Concerning Shares of the Trust -
Net Asset Value
(c) Information Concerning Shares *
of the Trust - Purchases; Information
Concerning Shares of the Trust -
Exchanges; Shareholder Services
(d) Front Cover Page; Information *
Concerning Shares of the Trust -
Purchases; Shareholder Services
(e) Information Concerning Shares *
of the Trust - Distribution Plans;
Information Concerning Shares
of the Trust - Purchases; Expense
Summary
(f) Information Concerning Shares *
of the Trust - Distribution Plans
<PAGE>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART A PROSPECTUS CAPTION INFORMATION
- ----------------- ------------------ -----------
8 (a) Information Concerning Shares *
of the Trust - Redemptions and
Repurchases; Information
Concerning Shares of the Trust -
Purchases; Shareholder Services
(b), (c), (d) Information Concerning Shares *
of the Trust - Redemptions and
Repurchases
9 * *
<PAGE>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION
- ----------------- ------------------ -----------
10 (a), (b) * Front Cover Page
11 * Front Cover Page
12 * Definitions
13 (a), (b), (c) * Investment Objective,
Policies and Restrictions
(d) * *
14 (a), (b) * Management of the Trust -
Trustees and Officers
(c) * Management of the Trust -
Trustees and Officers;
Appendix D
15 (a) * *
(b), (c) * Management of the Trust -
Trustees and Officers
16 (a) Management of the Trust - Management of the Trust -
Investment Adviser Investment Adviser;
Management of the Trust -
Trustees and Officers
(b) Management of the Trust - Management of the Trust -
Investment Adviser Investment Adviser
(c) * *
(d) * Management of the Trust -
Investment Adviser
(e) * Portfolio Transactions
(f) Information Concerning Shares Distribution Plans
of the Trust - Distribution Plans
(g) * *
<PAGE>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION
- ----------------- ------------------ -----------
(h) * Management of the Trust -
Custodian; Independent
Accountants and Financial
Statements; Back Cover
Page
(i) * Management of the Trust -
Shareholder Servicing Agent
17 (a) * Portfolio Transactions
(b) * *
(c), (d) * Portfolio Transactions
(e) * *
18 (a) Information Concerning Shares Description of Shares,
of the Trust - Description of Voting Rights and
Shares, Voting Rights and Liabilities
Liabilities
(b) * *
19 (a) Information Concerning Shares Shareholder Services
of the Trust - Purchases;
Shareholder Services
(b) Information Concerning Shares Performance Information;
of the Trust - Net Asset Value; Determination of Public
Information Concerning Shares Offering Price and Net Asset
of the Trust - Purchases Value; Valuation of
Portfolio Securities;
Management of the Trust -
Distributor
(c) * *
20 * Tax Status
21 (a), (b) * Management of the Trust -
Distributor; Distribution
Plans
(c) * *
<PAGE>
STATEMENT OF
ITEM NUMBER ADDITIONAL
FORM N-1A, PART B PROSPECTUS CAPTION INFORMATION
- ----------------- ------------------ -----------
22 (a) * *
(b) * Performance Information;
Determination of Public
Offering Price and Net Asset
Value; Valuation of
Portfolio Securities
23 * Independent Accountants and
Financial Statements
- -----------------------------
* Not Applicable
** Contained in Annual Report
</TABLE>
<PAGE>
MFS ALABAMA MUNICIPAL BOND FUND MFS NEW YORK MUNICIPAL BOND FUND
MFS ARKANSAS MUNICIPAL BOND FUND MFS NORTH CAROLINA MUNICIPAL BOND FUND
MFS CALIFORNIA MUNICIPAL BOND FUND MFS PENNSYLVANIA MUNICIPAL BOND FUND
MFS FLORIDA MUNICIPAL BOND FUND MFS SOUTH CAROLINA MUNICIPAL BOND FUND
MFS GEORGIA MUNICIPAL BOND FUND MFS TENNESSEE MUNICIPAL BOND FUND
MFS LOUISIANA MUNICIPAL BOND FUND MFS TEXAS MUNICIPAL BOND FUND
MFS MARYLAND MUNICIPAL BOND FUND MFS VIRGINIA MUNICIPAL BOND FUND
MFS MASSACHUSETTS MUNICIPAL BOND FUND MFS WASHINGTON MUNICIPAL BOND FUND
MFS MISSISSIPPI MUNICIPAL BOND FUND MFS WEST VIRGINIA MUNICIPAL BOND FUND
Supplement to be affixed to the current Prospectus for distribution in Missouri
The Trust intends to fully manage the portfolio of each Series by buying and
selling securities, as well as holding securities to maturity. The annual
portfolio turnover rate of a Series generally should not exceed 200% (excluding
turnover obligations having a maturity of one year or less). A high turnover
rate may involve greater expenses to the Trust. The portion of income
distributions not designated as tax exempt and any distributions from net
short-term capital gains are taxable to shareholders as ordinary income for
federal tax purposes.
The date of this Supplement is June 1, 1995.
<PAGE>
PROSPECTUS
June 1, 1995
Class A Shares of Beneficial Interest
MFS(R) MUNICIPAL Class B Shares of Beneficial Interest
SERIES TRUST Class C Shares of Beneficial Interest
(A member of the MFS Family of Funds(R)) (For Certain Funds)
- --------------------------------------------------------------------------------
MFS Municipal Series Trust (the "Trust") is a mutual fund including the
following 18 separate series: MFS Alabama Municipal Bond Fund (the "Alabama
Fund"); MFS Arkansas Municipal Bond Fund (the "Arkansas Fund"); MFS California
Municipal Bond Fund (the "California Fund"); MFS Florida Municipal Bond Fund
(the "Florida Fund"); MFS Georgia Municipal Bond Fund (the "Georgia Fund"); MFS
Louisiana Municipal Bond Fund (the "Louisiana Fund"); MFS Maryland Municipal
Bond Fund (the "Maryland Fund"); MFS Massachusetts Municipal Bond Fund (the
"Massachusetts Fund"); MFS Mississippi Municipal Bond Fund (the "Mississippi
Fund"); MFS New York Municipal Bond Fund (the "New York Fund"); MFS North
Carolina Municipal Bond Fund (the "North Carolina Fund"); MFS Pennsylvania
Municipal Bond Fund (the "Pennsylvania Fund"); MFS South Carolina Municipal Bond
Fund (the "South Carolina Fund"); MFS Tennessee Municipal Bond Fund (the
"Tennessee Fund"); MFS Texas Municipal Bond Fund (the "Texas Fund"); MFS
Virginia Municipal Bond Fund (the "Virginia Fund"); MFS Washington Municipal
Bond Fund (the "Washington Fund"); and MFS West Virginia Municipal Bond Fund
(the "West Virginia Fund") (collectively referred to as the "Funds"). The
investment objective of each Fund is to provide current income exempt from
federal income taxes and from the personal income taxes, if any, of the State to
which its name refers. Each Fund will seek to achieve its investment objective
by investing its assets primarily in municipal bonds and notes issued by the
State to which its name refers, its political subdivisions, municipalities,
agencies, instrumentalities or public authorities. Not more than one-third of
the total assets of each Fund may be invested in tax-exempt securities which are
rated lower than the three highest rating categories of recognized rating
agencies or in comparable unrated securities. Such securities generally involve
greater volatility of price and risks to principal and income than securities in
the higher rating categories. See "Investment Objective and Policies." The
minimum initial investment in a Fund is generally $1,000 per account (see
"Purchases").
The investment adviser and distributor for each Fund are
Massachusetts Financial Services Company ("MFS" or the "Adviser") and MFS Fund
Distributors, Inc. ("MFD"), respectively, both of which are located at 500
Boylston Street, Boston, Massachusetts 02116.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
MFS MUNICIPAL SERIES TRUST
500 Boylston Street, Boston, Massachusetts 02116 (617) 954-5000
This Prospectus sets forth concisely the information concerning the Trust and
each Fund that a prospective investor ought to know before investing. The Trust
has filed with the Securities and Exchange Commission ("SEC") a Statement of
Additional Information, dated June 1, 1995, which contains more detailed
information about the Trust and each Fund and is incorporated into this
Prospectus by reference. See page 65 for a further description of the
information set forth in the Statement of Additional Information. A copy of the
Statement of Additional Information may be obtained without charge by contacting
MFS Service Center, Inc. (the "Shareholder Servicing Agent") (see back cover for
address and phone number).
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE>
TABLE OF CONTENTS
- ----------------------------------------------------------------------------
Page
----
1. Synopsis ........................................................ 3
2. Condensed Financial Information ................................. 8
3. Investment Objective and Policies ............................... 34
4. Management of the Trust ......................................... 41
5. Information Concerning Shares of the Trust ...................... 43
Purchases ..................................................... 43
Exchanges ..................................................... 49
Redemptions and Repurchases ................................... 50
Distribution Plans ............................................ 52
Distributions ................................................. 54
Tax Status .................................................... 55
Net Asset Value ............................................... 62
Description of Shares, Voting Rights and Liabilities .......... 62
Performance Information ....................................... 62
Expenses ...................................................... 63
6. Shareholder Services ............................................ 63
Appendix A -- Tax Equivalent Yield Tables ....................... A-1
Appendix B -- Description of Municipal Obligations and Ratings ... B-1
Appendix C -- Portfolio Composition Charts ...................... C-1
Appendix D -- Additional Information Concerning the Funds ....... D-1
<PAGE>
1. SYNOPSIS
<TABLE>
<CAPTION>
EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES: CLASS A CLASS B CLASS C
------- ------- -------
Maximum Initial Sales Charge Imposed on
Purchases of Shares of each Fund (as a
percentage of offering price) ............. 4.75% 0.00% 0.00%
Maximum Contingent Deferred Sales Charge (as
a percentage of original purchase price or
redemption proceeds, as applicable) ........ See Below<F1> 4.00% 0.00%
THE FOLLOWING ANNUAL OPERATING EXPENSES FOR EACH CLASS OF SHARES OF EACH FUND
ARE SHOWN AFTER APPLICABLE FEE REDUCTIONS AND REIMBURSEMENTS, AS DESCRIBED IN
THE FOOTNOTES
<CAPTION>
ANNUAL OPERATING EXPENSES OF CLASS A SHARES OF EACH FUND (AS A PERCENTAGE OF AVERAGE NET ASSETS):<F2>
Alabama Arkansas California Florida Georgia Louisiana
Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Management Fees ................ 0.55% 0.55% 0.40%<F3> 0.45%<F3> 0.55% 0.20%<F3>
Rule 12b-1 Fees<F4> ............ 0.25%<F5> 0.10%<F5> 0.00%<F5> 0.00%<F5> 0.25%<F5> 0.00%<F5>
Other Expenses ................. 0.35% 0.28% 0.29% 0.28% 0.34% 0.00%<F6>
---- ---- ---- ---- ---- ----
Total Operating Expenses<F7> ... 1.15%<F7> 0.93% 0.69%<F7> 0.73%<F7> 1.14%<F7> 0.20%<F7>
<CAPTION>
North
Maryland Massachusetts Mississippi New York Carolina Pennsylvania
Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Management Fees ................ 0.55% 0.55% 0.35%<F3> 0.55% 0.55% 0.10%<F3>
Rule 12b-1 Fees<F4> ............ 0.35% 0.35% 0.00%<F5> 0.25%<F5> 0.35% 0.00%<F5>
Other Expenses ................. 0.31% 0.27% 0.00%<F6> 0.28% 0.26% 0.00%<F6>
---- ---- ---- ---- ---- ----
Total Operating Expenses<F7> ... 1.21% 1.17% 0.35%<F7> 1.08%<F7> 1.16% 0.10%<F7>
<CAPTION>
South West
Carolina Tennessee Texas Virginia Washington Virginia
Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Management Fees ................ 0.55% 0.55% 0.20%<F3> 0.55% 0.20%<F3> 0.55%
Rule 12b-1 Fees<F4> ............ 0.35% 0.35% 0.00%<F5> 0.35% 0.00%<F5> 0.35%
Other Expenses ................. 0.29% 0.32% 0.00%<F6> 0.26% 0.00%<F6> 0.29%
---- ---- ---- ---- ---- ----
Total Operating Expenses<F7> ... 1.19% 1.22% 0.20%<F7> 1.16% 0.20%<F7> 1.19%
<CAPTION>
ANNUAL OPERATING EXPENSES OF CLASS B SHARES OF EACH FUND (AS A PERCENTAGE OF AVERAGE NET ASSETS):<F2>
Alabama Arkansas California Florida Georgia Louisiana
Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Management Fees ................ 0.55% 0.55% 0.40%<F3> 0.45%<F3> 0.55% 0.20%<F3>
Rule 12b-1 Fees<F8> ............ 1.00% 1.00%<F9> 1.00%<F9> 1.00%<F9> 1.00% 1.00%<F9>
Other Expenses ................. 0.42% 0.35% 0.36% 0.35% 0.41% 0.00%<F6>
---- ---- ---- ---- ---- ----
Total Operating Expenses<F10> .. 1.97% 1.90% 1.76%<F10> 1.80%<F10> 1.96%<F10> 1.20%<F10>
<CAPTION>
North
Maryland Massachusetts Mississippi New York Carolina Pennsylvania
Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Management Fees ................ 0.55% 0.55% 0.35%<F3> 0.55% 0.55% 0.10%<F3>
Rule 12b-1 Fees<F8> ............ 1.00% 1.00% 1.00%<F9> 1.00% 1.00% 1.00%<F9>
Other Expenses ................. 0.38% 0.34% 0.00%<F6> 0.35% 0.33% 0.00%<F6>
---- ---- ---- ---- ---- ----
Total Operating Expenses<F10> .. 1.93% 1.89% 1.35%<F10> 1.90%<F10> 1.88% 1.10%<F10>
<CAPTION>
South West
Carolina Tennessee Texas Virginia Washington Virginia
Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Management Fees ................ 0.55% 0.55% 0.20%<F3> 0.55% 0.20%<F3> 0.55%
Rule 12b-1 Fees<F8> ............ 1.00% 1.00% 1.00%<F9> 1.00% 1.00%<F9> 1.00%
Other Expenses ................. 0.36% 0.39% 0.00%<F6> 0.33% 0.00%<F6> 0.36%
---- ---- ---- ---- ---- ----
Total Operating Expenses<F10> .. 1.91% 1.94% 1.20%<F10> 1.88% 1.20%<F10> 1.91%
ANNUAL OPERATING EXPENSES OF CLASS C SHARES OF EACH FUND (AS A PERCENTAGE OF AVERAGE NET ASSETS):<F2>
<CAPTION>
California Carolina Virginia
Fund Fund Fund
---- ---- ----
<S> <C> <C> <C>
Management Fees ................ 0.40%<F3> 0.55% 0.55%
Rule 12b-1 Fees<F8> ............ 1.00% 1.00% 1.00%
Other Expenses ................. 0.29% 0.26% 0.25%
---- ---- ----
Total Operating Expenses ....... 1.69%<F11> 1.81% 1.80%
<FN>
<F1> Purchases of $1 million or more are not subject to an initial sales charge; however, a contingent
deferred sales charge ("CDSC") of 1% will be imposed on such purchases in the event of certain
redemption transactions within 12 months following such purchases (see "Purchases" below).
<F2> Percentages are based on fees incurred during the fiscal year ended March 31, 1995, except to the
extent that management fees are based on fees in effect or to be in effect during the current fiscal
year (see footnote (3)).
<F3> The Adviser has voluntarily reduced the management fee with respect to the Florida and Mississippi
Funds to 0.45% and 0.35%, respectively, of each Fund's average daily net assets, to be increased by
0.05% each calendar quarter commencing on July 1, 1995 until such fee reaches 0.55% of each Fund's
average daily net assets. The Adviser has voluntarily reduced its management fee with respect to the
California, Louisiana, Pennsylvania, Texas and Washington Funds to 0.40%, 0.20%, 0.10%, 0.20% and
0.20%, respectively, of each Fund's average daily net assets for an indefinite period of time. Absent
these reductions, "Management Fees" would be 0.55% for each Fund. See "Management of the Trust" below.
<F4> Each Fund has adopted a distribution plan for its Class A shares in accordance with Rule 12b-1 under
the Investment Company Act of 1940, as amended (the "1940 Act "), which provides that it will pay
distribution/service fees aggregating up to (but not necessarily all of) 0.35% per annum of the net
assets of the Fund attributable to Class A shares (see "Distribution Plans "). Currently, a portion of
the fees payable under the Class A Distribution Plans with respect to certain Funds is being waived,
while certain other Funds have not commenced payments under the Class A Distribution Plans (see
footnote (5)). After a substantial period of time, distribution expenses paid under this plan,
together with the initial sales charge, may total more than the maximum sales charge that would have
been permissible if imposed entirely as an initial sales charge.
<F5> For the California, Florida, Louisiana, Mississippi, Texas and Washington Funds, fees payable under
the Class A Distribution Plans will become payable pursuant to such Plans on such date or dates as the
Trustees of the Trust may determine. For the Pennsylvania Fund, fees payable under the Class A
Distribution Plan will become payable pursuant to such Plan when net assets attributable to Class A
shares first equal or exceed $50 million. For the Arkansas Fund, the Trustees of the Trust have
implemented a 0.10% service fee under the Arkansas Fund's Class A Distribution Plan; other fees
payable under this Class A Distribution Plan will become payable pursuant to this Plan on such date or
dates as the Trustees of the Trust may determine. MFD is currently voluntarily waiving its right to
receive 0.10% of fees payable under the Class A Distribution Plans with respect to the Alabama,
Georgia and New York Funds. See "Distribution Plans" below.
<F6> MFS has agreed to pay "Other Expenses" of the Louisiana, Mississippi, Pennsylvania, Texas and
Washington Funds for a period of time, subject to reimbursement by such Funds. See "Expenses" below.
To accomplish such reimbursement, the Adviser is entitled to receive an additional fee from such Funds
equal to 0.40% of such Fund's average daily net assets. During the year ended March 31, 1995, the
Adviser voluntarily waived receipt of this expense reimbursement fee. Absent this expense arrangement,
"Other Expenses" would have been .66%, .38%, .63%, .62% and .71%, respectively, for Class A shares,
and would have been .73%, .45%, .70%, .69% and .78%, respectively, for Class B shares, of the
Louisiana, Mississippi, Pennsylvania, Texas and Washington Funds.
<F7> Absent a reduction in certain Funds' management fees, fees payable under the Class A Distribution Plan
and/or expense reimbursement arrangements, "Total Operating Expenses" for Class A shares of the
Alabama, California, Florida, Georgia, Louisiana, Mississippi, New York, Pennsylvania, Texas and
Washington Funds would have been 1.25%, 0.84%, 0.83%, 1.24%, 1.21%, 0.93%, 1.18%, 1.18%, 1.17% and
1.26%, respectively.
<F8> Each Fund has adopted separate distribution plans for its Class B shares and Class C shares (if
offered by the Fund) in accordance with Rule 12b-1 under the 1940 Act, which provide that it will pay
distribution/service fees aggregating up to (but not necessarily all of) 1.00% per annum of the
average net daily assets attributable to the Class B shares under the Class B Distribution Plan and
the Class C shares under the Class C Distribution Plan (see "Distribution Plans"). After a substantial
period of time, distribution expenses paid under these Plans, together with any CDSC payable upon
redemption of Class B shares, may total more than the maximum sales charge that would have been
permissible if imposed entirely as an initial sales charge.
<F9> Except in the case of the 0.25% per annum first year service fee, service fees under a Fund's Class B
Distribution Plan will become payable for the California, Florida, Louisiana, Mississippi,
Pennsylvania, Texas and Washington Funds on such date or dates as the Trustees of the Trust may
determine. Except in the case of the 0.25% per annum first year service fee, service fees payable
under the Arkansas Fund's Class B Distribution Plan have been established by the Trustees of the Trust
at 0.10%, subject to increase on such date or dates as the Trustees of the Trust may determine. (See
"Distribution Plans" below).
<F10> Absent a reduction in certain Funds' management fees and/or expense reimbursement arrangements, "Total
Operating Expenses" for Class B shares of the California, Florida, Louisiana, Mississippi,
Pennsylvania, Texas and Washington Funds would have been 1.91%, 1.90%, 2.28%, 2.00%, 2.25%, 2.24% and
2.33%, respectively.
<F11> Absent a reduction in the California Fund's management fees, "Total Operating Expenses" for Class C
shares would have been 1.84%.
</TABLE>
EXAMPLE OF EXPENSES
-------------------
An investor would pay the following dollar amounts of expenses on a hypothetical
$1,000 investment in a Fund, assuming (a) 5% annual return and (b) redemption at
the end of each of the time periods indicated (unless otherwise noted):
<TABLE>
<CAPTION>
ALABAMA FUND ARKANSAS FUND CALIFORNIA FUND FLORIDA FUND
-------------------------- -------------------------- ----------------------------------- -------------------------
PERIOD CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS C CLASS A CLASS B
- ------ -------- ----------------- -------- ----------------- -------- -------------------------- ------- -----------------
<F1> <F1> <F1> <F1>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year ...... $ 59 $ 60 $ 20 $ 56 $ 59 $ 19 $ 54 $ 58 $ 18 $ 17 $ 55 $ 58 $ 18
3 years ..... 82 92 62 73 90 60 69 85 55 53 70 87 57
5 years .... 108 126 106 91 123 103 84 115 95 92 86 117 97
10 years .... 181 208<F2> 108<F2> 145 194<F2> 194<F2> 129 179<F2> 179<F2> 200 134 183<F2> 183<F2>
GEORGIA FUND LOUISIANA FUND MARYLAND FUND MASSACHUSETTS FUND
-------------------------- -------------------------- -------------------------- ----------------------------------
PERIOD CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
- ------ -------- ----------------- -------- ----------------- -------- ----------------- -------- -------------------------
<F1> <F1> <F1> <F1>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year ...... $ 59 $ 60 $ 20 $ 49 $ 52 $ 12 $ 59 $ 60 $ 20 $ 59 $ 59 $ 19
3 years ..... 82 92 62 54 68 38 84 91 61 83 89 59
5 years ..... 107 126 106 58 86 66 111 124 104 109 122 102
10 years .... 180 207<F2> 207<F2> 72 118<F2> 118<F2> 187 207<F2> 207<F2> 183 202<F2> 202<F2>
MISSISSIPPI FUND NEW YORK FUND NORTH CAROLINA FUND PENNSYLVANIA FUND
-------------------------- -------------------------- ----------------------------------- -------------------------
PERIOD CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS C CLASS A CLASS B
- ------ -------- ----------------- -------- ----------------- -------- -------------------------- ------- -----------------
<F1> <F1> <F1> <F1>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year ...... $ 51 $ 54 $ 14 $ 58 $ 59 $ 19 $ 59 $ 59 $ 19 $ 18 $ 48 $ 51 $ 11
3 years ..... 58 73 43 80 90 60 83 89 59 57 51 65 35
5 years ..... 66 94 74 104 123 103 108 122 102 98 53 81 61
10 years .... 90 135<F2> 135<F2> 173 201<F2> 201<F2> 182 201<F2> 201<F2> 213 60 106<F2> 106<F2>
SOUTH CAROLINA FUND TENNESSEE FUND TEXAS FUND VIRGINIA FUND
-------------------------- -------------------------- -------------------------- ----------------------------------
PERIOD CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS B
- ------ -------- ----------------- -------- ----------------- -------- ----------------- -------- ---------------- --------
<F1> <F1> <F1> <F1>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year ...... $ 59 $ 59 $ 19 $ 59 $ 60 $ 20 $ 49 $ 52 $ 12 $ 59 $ 59 $ 19 $ 18
3 years ..... 83 90 60 84 91 61 54 68 38 83 89 59 57
5 years ..... 110 123 103 111 125 105 58 86 66 108 122 102 97
10 years .... 185 205<F2> 205<F2> 188 208<F2> 208<F2> 72 118<F2> 118<F2> 182 201<F2> 201<F2> 212
WASHINGTON WEST VIRGINIA
FUND FUND
-------------------------- --------------------------
PERIOD CLASS A CLASS B CLASS A CLASS B
- ------ -------- ----------------- -------- -----------------
<F1> <F1>
<C> <C> <C> <C> <C> <C> <C>
1 year ...... $ 49 $ 52 $ 12 $ 59 $ 59 $ 19
3 years ..... 54 68 38 83 90 60
5 years ..... 58 86 66 110 123 103
10 years .... 72 118<F2> 118<F2> 185 205<F2> 205<F2>
<FN>
<F1> Assumes no redemption.
<F2> Class B shares convert to Class A shares approximately eight years after
purchase; therefore years nine and ten reflect Class A expenses.
</FN>
</TABLE>
THE "EXAMPLE" SET FORTH ABOVE REFLECTS THE IMPOSITION OF THE MAXIMUM SALES
CHARGE AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
OF A FUND; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of the expense table is to assist investors in understanding the
various costs and expenses that a shareholder in a Fund will bear directly or
indirectly. More complete descriptions of the following Trust expenses are set
forth in the following sections of the Prospectus: (i) varying sales charges on
share purchases -- "Purchases"; (ii) varying CDSCs -- "Purchases"; (iii)
management fees -- "Management of the Fund -- Investment Adviser"; and (iv) Rule
12b-1 (i.e., distribution plan) fees -- "Distribution Plans."
THE TRUST
The Trust is an open-end, management investment company which was organized as a
business trust under the laws of The Commonwealth of Massachusetts in 1984. The
Trust presently consists of 19 separate series, each of which represents a
portfolio with separate investment policies. This Prospectus offers shares of:
the Alabama Fund; the Arkansas Fund; the California Fund; the Florida Fund; the
Georgia Fund; the Louisiana Fund; the Maryland Fund; the Massachusetts Fund; the
Mississippi Fund; the New York Fund; the North Carolina Fund; the Pennsylvania
Fund; the South Carolina Fund; the Tennessee Fund; the Texas Fund; the Virginia
Fund; the Washington Fund; and the West Virginia Fund (each of which is a
non-diversified series). Shares of the remaining series of the Trust, the MFS
Municipal Income Fund, which is a diversified series, are offered and sold
pursuant to a separate prospectus and statement of additional information.
Each Fund currently offers Class A and Class B shares to the public. In
addition, the California Fund, the North Carolina Fund and the Virginia Fund
currently offer Class C shares to the public. Class A shares are offered at net
asset value plus an initial sales charge (or a CDSC in the case of certain
purchases of $1 million or more) and are subject to a Distribution Plan
providing for an annual distribution fee and service fee. Class B shares are
offered at net asset value without an initial sales charge but are subject to a
CDSC and a Distribution Plan providing for an annual distribution fee and
service fee which are greater than the Class A distribution fee and service fee.
Class B shares will convert to Class A shares approximately eight years after
purchase. Class C shares are offered at net asset value without an initial sales
charge or a CDSC but are subject to a Distribution Plan providing for an annual
distribution and service fee which are equal to the Class B annual distribution
fee and service fee. Class C shares do not convert to any other class of shares.
Each Fund is "non-diversified" which means that each Fund will, subject to the
diversification requirements of the Internal Revenue Code of 1986, as amended
(the "Code"), be able to invest more than 5% of its assets in obligations of
each of one or more issuers. The proceeds of sales of shares of each Fund are
used to buy securities (primarily municipal bonds and notes and other debt
instruments the interest on which is exempt from federal income taxes and from
the personal income taxes, if any, of that State) for the portfolio of that
Fund. The Trust's Board of Trustees provides broad supervision over the affairs
of the Trust and each Fund.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of each Fund is to provide current income exempt from
federal income taxes and from the personal income taxes, if any, of the State to
which its name refers. Not more than one-third of each Fund's total assets may
be invested in tax-exempt securities which are rated lower than the three
highest grades of recognized rating agencies or comparable unrated securities.
Such securities generally involve greater volatility of price and risks to
principal and income than securities in the higher rating categories.
Prospective investors should be aware that the net asset value of the shares of
each Fund (as with any open-end investment company) will change as the general
levels of interest rates fluctuate. When interest rates decline, the value of a
portfolio invested in fixed income securities can be expected to rise.
Conversely, when interest rates rise, the value of such a portfolio can be
expected to decline. See "Investment Objective and Policies" below.
INVESTMENT ADVISER
MFS is the Trust's investment adviser. The Adviser is responsible for the
management of the assets of each Fund, and manages the portfolio of each Fund
from day to day in accordance with its investment objective and policies. For
these management and other services, the Adviser receives a management fee from
the Trust on behalf of each Fund computed and paid monthly at an annual rate
equal to 0.55% of the Fund's average daily net assets. For certain Funds, the
Adviser has voluntarily reduced the management fee. See "Expense Summary" and
"Management of the Trust" in this Prospectus. The MFS organization, with a
history of money management dating back to 1924, advises and administers each of
the other funds in the MFS Family of Funds (the "MFS Funds"). MFS and its wholly
owned subsidiary, MFS Asset Management, Inc., manage assets for certain other
registered investment companies and for substantial private clients.
NET ASSET VALUE OF SHARES
The value of each share of each class of each Fund is its net asset value. The
net asset value per share of each class of shares is determined by deducting the
amount of the liabilities attributable to the class from the value of the assets
attributable to the class and dividing the difference by the number of shares of
the class outstanding. The value of each share of each class of each Fund
changes daily as the aggregate value of the securities in the portfolio of that
Fund increases or decreases. See "Net Asset Value" below. Therefore, the value
of shares owned by a shareholder may be more or less than the shareholder's
cost.
PURCHASE OF SHARES
Shares of each Fund are continuously sold to the public and may be purchased
through any securities dealer or other financial institution having a selling
agreement with MFD in its capacity as the Trust's distributor. Each Fund
currently offers Class A and Class B shares to the public. In addition, the
California Fund, the North Carolina Fund and the Virginia Fund currently offer
Class C shares to the public. Class A shares are offered at net asset value plus
an initial sales charge (or a CDSC in the case of certain purchases of $1
million or more) and subject to a Distribution Plan providing for a distribution
fee and service fee. Class B shares are offered at net asset value without an
initial sales charge but subject to a CDSC and a Distribution Plan providing for
an annual distribution fee and service fee which are greater than the Class A
distribution fee and service fee. Class B shares will convert to Class A shares
approximately eight years after purchase. Class C shares are offered at net
asset value without an initial sales charge or a CDSC but are subject to a
Distribution Plan providing for an annual distribution and service fee which are
equal to the Class B annual distribution fee and service fee. Class C shares do
not convert to any other class of shares. The minimum initial investment is
generally $1,000 per account.
DISTRIBUTIONS
The Trust intends to declare daily and pay monthly dividends to the shareholders
of each class from the net investment income of the Fund allocable to that
class. If a Fund has profits from the sale of securities from its portfolio
(after taking into account any available capital losses, including capital loss
carryforwards from prior years), one or more capital gain distributions will be
made to shareholders of the Fund during the calendar year. A shareholder may
elect to receive dividends and capital gain distributions in either cash or
additional shares. See "Tax Status" and "Distributions" below.
REDEMPTION OF SHARES
The Trust will buy back shares of each Fund at their net asset value (subject,
in the case of Class B shares and in the case of certain Class A shares, to any
applicable CDSC) determined either on the day a dealer places an order or on the
day a shareholder's instructions are received in proper form by the Shareholder
Servicing Agent. The Trust reserves the right to pay the redemption price,
either totally or partially, by a distribution in kind of securities from the
portfolio of a Fund (instead of cash).
EXCHANGE AND OTHER PRIVILEGES
Shareholders have the right to obtain quantity discounts on sales charges for
purchases of Class A shares under certain circumstances. Additionally,
shareholders have the right to exchange shares of a class of a Fund for shares
of the same class of another Fund (subject to residency requirements) or the
same class of shares of certain of the other MFS Funds. See "Exchanges" and
"Shareholder Services" below.
2. CONDENSED FINANCIAL INFORMATION
The following information should be read in conjunction with the financial
statements included in the Funds' Annual Reports to Shareholders, which are
incorporated by reference into the Statement of Additional Information in
reliance upon the reports of Deloitte & Touche LLP, independent certified public
accountants, as experts in accounting and auditing.
Further information about the performance of each Fund is contained in the
Funds' Annual Reports to Shareholders, which can be obtained from the
Shareholder Servicing Agent (see back cover for address and phone number)
without charge.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ALABAMA FUND
----------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, YEAR ENDED JANUARY 31, MARCH 31, JANUARY 31,
----------------------------------------------------------------------------------------------------
1995 1994<F8> 1994 1993 1992 1991 1995 1994<F8> 1994<F1>
---- ---- ---- ---- ---- ---- ---- ---- ----
CLASS A CLASS B
----------------------------------------------------------------------- ----------------------------
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value --
beginning of period ...... $10.27 $10.98 $10.33 $ 9.95 $ 9.65 $ 9.53 $10.27 $10.98 $10.93
------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations<F7> --
Net investment income<F5> $ 0.56 $ 0.09 $ 0.55 $ 0.56 $ 0.60 $ 0.59 $ 0.47 $ 0.08 $ 0.18
Net realized and
unrealized gain (loss)
on investments ......... 0.09 (0.71) 0.69 0.41 0.41 0.08 0.09 (0.71) 0.07
------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations ........... $ 0.65 $(0.62) $ 1.24 $ 0.97 $ 1.01 $ 0.67 $ 0.56 $(0.63) $ 0.25
------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions declared
to shareholders --
From net investment
income ................. $(0.55) $(0.08) $(0.54) $(0.58) $(0.65) $(0.55) $(0.46) $(0.08) $(0.18)
From net realized gain
on investments ......... -- -- (0.04) (0.01) (0.06) -- -- -- (0.02)
In excess of net
investment income<F2> .. -- (0.01) (0.01) -- -- -- -- -- --
In excess of net realized
gain on investments .... (0.03) -- -- -- -- -- (0.03) -- --
------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions
declared to
shareholders ......... $(0.58) $(0.09) $(0.59) $(0.59) $(0.71) $(0.55) $(0.49) $(0.08) $(0.20)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value --
end of period ............ $10.34 $10.27 $10.98 $10.33 $ 9.95 $ 9.65 $10.34 $10.27 $10.98
====== ====== ====== ====== ====== ====== ====== ====== ======
Total return<F6> .......... 6.51% (5.66)%<F4> 12.26% 10.08% 10.92% 7.31% 5.64% (5.79)%<F4> 2.29%<F4>
RATIOS (TO AVERAGE NET
ASSETS)/SUPPLEMENTAL
DATA:<F5>
Expenses ................ 1.15% 1.18%<F3> 1.21% 1.08% 0.95% 0.57%<F3> 1.97% 2.01%<F3> 1.98%<F3>
Net investment income ... 5.47% 5.17%<F3> 5.13% 5.79% 6.19% 6.63%<F3> 4.63% 4.30%<F3> 3.98%<F3>
Portfolio turnover ........ 30% 4% 12% 17% 23% 64% 30% 4% 12%
NET ASSETS AT END OF
PERIOD (000 OMITTED) ..... $83,805 $81,501 $87,344 $67,678 $48,476 $22,076 $4,396 $2,849 $2,269
- ---------------
<FN>
<F1> For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F2> Per share distributions in excess of net investment income for the year ended January 31, 1992 were $0.004.
<F3> Annualized.
<F4> Unannualized.
<F5> The investment adviser did not impose all or a portion of its advisory, distribution or expense reimbursement fees for
the periods indicated. If these fees had been incurred by the Fund, the net investment income per share and the ratios
would have been:
Net investment income $ 0.55 $ 0.09 $ 0.54 $ 0.55 $ 0.59 $ 0.52 -- -- --
RATIOS (TO AVERAGE
NET ASSETS):
Expenses ............ 1.25% 1.28%<F3> 1.31% 1.18% 1.08% 1.33%<F3> -- -- --
Net investment income 5.37% 5.07%<F3> 5.03% 5.69% 6.06% 5.87%<F3> -- -- --
<F6> Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F7> Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
<F8> For the two months ended March 31, 1994.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARKANSAS FUND
-----------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, JANUARY 31, MARCH 31, JANUARY 31,
-----------------------------------------------------------------------------------------
1995 1994<F5> 1994 1993<F1> 1995 1994<F5> 1994<F2>
------ ------ ------ ------ ------ ------ ------
CLASS A CLASS B
----------------------------------------------------- -----------------------------------
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value --
beginning of period .............. $ 9.69 $10.47 $ 9.88 $ 9.53 $ 9.69 $10.47 $10.42
------ ------ ------ ------ ------ ------ ------
Income from investment
operations<F10> --
Net investment income<F8> ....... $ 0.53 $ 0.09 $ 0.56 $ 0.58 $ 0.42 $ 0.07 $ 0.23
Net realized and unrealized gain
(loss) on investments ........... 0.02 (0.77) 0.60 0.35 0.01 (0.78) (0.04)
------ ------ ------ ------ ------ ------ ------
Total from investment operations $ 0.55 $(0.68) $ 1.16 $ 0.93 $ 0.43 $(0.71) $ 0.19
------ ------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders --
From net investment income ...... $(0.53) $(0.08) $(0.55) $(0.58) $(0.42) $(0.07) $(0.14)
From net realized gain on
investments<F3> ................ -- -- -- -- -- -- --
In excess of net investment
income<F4> ..................... -- (0.02) (0.02) -- -- -- --
In excess of net realized gain
on investments ................. (0.05) -- -- -- (0.05) -- --
------ ------ ------ ------ ------ ------ ------
Total distributions declared
to shareholders .............. $(0.58) $(0.10) $(0.57) $(0.58) $(0.47) $(0.07) $(0.14)
------ ------ ------ ------ ------ ------ ------
Net asset value -- end of period .. $ 9.66 $ 9.69 $10.47 $ 9.88 $ 9.65 $ 9.69 $10.47
====== ====== ====== ====== ====== ====== ======
Total return<F9> .................. 5.90% (6.61)%<F7> 11.95% 10.11%<F7> 4.67% (6.81)%<F7> 2.18%<F7>
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA<F8>:
Expenses ........................ 0.75% 0.75%<F6> 0.63% 0.16%<F6> 1.84% 1.82%<F6> 1.75%<F6>
Net investment income ........... 5.51% 5.21%<F6> 5.30% 6.04%<F6> 4.40% 4.11%<F6> 3.87%<F6>
PORTFOLIO TURNOVER ................ 24% 1% 3% 10% 24% 1% 3%
NET ASSETS AT END OF PERIOD
(000 OMITTED) .................... $187,105 $195,042 $203,542 $124,644 $7,231 $5,895 $5,179
- ---------------
<FN>
<F1> For the period from the commencement of investment operations, February 3, 1992 to January 31, 1993.
<F2> For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F3> For the year ended January 31, 1994, the per share distributions from net realized gain on investments and in excess of
net realized gain on investments were $0.0016 and $0.0003, respectively, for both Class A and Class B shares.
<F4> Per share distributions in excess of net investment income for the two months ended March 31, 1994 and the year ended
January 31, 1994, respectively, were $0.002 and $0.004 for Class B shares.
<F5> For the two months ended March 31, 1994.
<F6> Annualized.
<F7> Unannualized.
<F8> The investment adviser did not impose all or a portion of its advisory, distribution or expense reimbursement fees for
the periods indicated. If these fees had been incurred by the Fund, the net investment income per share and the ratios
would have been:
Net investment income ....... $ 0.52 $ 0.09 $ 0.53 $ 0.52 $ 0.41 $ 0.07 $ 0.12
RATIOS (TO AVERAGE NET ASSETS):
Expenses .................. 0.82% 0.96%<F6> 0.91% 0.75%<F6> 1.91% 2.02%<F6> 3.44%<F6>
Net investment income ..... 5.43% 5.01%<F6> 5.01% 5.45%<F6> 4.33% 3.91%<F6> 2.18%<F6>
<F9> Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
<F10> Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
</FN>
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CALIFORNIA FUND
--------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, JANUARY 31, FEBRUARY 28,
-------------------------- --------------------------- -------------------
1995 1994<F8> 1994<F7> 1993 1992 1991
---- ---- ---- ---- ---- ----
CLASS A
--------------------------------------------------------------------------
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
<S> <C> <C> <C> <C> <C> <C>
Net asset value --
beginning of period .............. $ 5.47 $ 5.95 $ 5.88 $ 5.42 $ 5.26 $ 5.19
------ ------ ------ ------ ------ ------
Income from investment
operations<F5> --
Net investment income<F3> ....... $ 0.31 $ 0.05 $ 0.30 $ 0.34 $ 0.35 $ 0.33
Net realized and unrealized gain
(loss) on investments .......... (0.05) (0.48) 0.14 0.47 0.20 0.07
------ ------ ------ ------ ------ ------
Total from investment operations $ 0.26 $(0.43) $ 0.44 $ 0.81 $ 0.55 $ 0.40
------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders --
From net investment income ...... $(0.31) $(0.04) $(0.29) $(0.34) $(0.37) $(0.33)
From net realized gain on
investments .................... -- -- (0.07) (0.01) (0.02) --
In excess of net investment
income<F6> ..................... -- (0.01) (0.01) -- -- --
In excess of net realized gain
on investments ................. (0.01) -- -- -- -- --
------ ------ ------ ------ ------ ------
Total distributions declared
to shareholders .............. $(0.32) $(0.05) $(0.37) $(0.35) $(0.39) $(0.33)
------ ------ ------ ------ ------ ------
Net asset value -- end of period .. $ 5.41 $ 5.47 $ 5.95 $ 5.88 $ 5.42 $ 5.26
====== ====== ====== ====== ====== ======
Total return<F4> .................. 4.85% (7.21)%<F2> 7.64% 15.55% 10.69% 8.03%
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA<F3>:
Expenses ........................ 0.69% 0.68%<F1> 0.60%<F1> 0.39% 0.40% 0.87%
Net investment income ........... 5.80% 5.27%<F1> 4.99%<F1> 6.18% 6.53% 6.39%
PORTFOLIO TURNOVER ................ 57% 8% 38% 64% 73% 102%
NET ASSETS AT END OF PERIOD
(000 OMITTED) .................... $272,161 $313,790 $356,419 $272,179 $177,291 $84,551
- ---------------
<FN>
<F1> Annualized.
<F2> Unannualized.
<F3> The investment adviser did not impose all or a portion of its advisory, distribution or expense reimbursement
fees for the periods indicated. If these fees had been incurred by the Fund, the net investment income per
share and the ratios would have been:
Net investment income ........ $ 0.30 $ 0.05 $ 0.29 $ 0.32 $ 0.33
RATIOS (TO AVERAGE NET ASSETS):
Expenses ................... 0.84% 0.83%<F1> 0.78%<F1> 0.77% 0.79%
Net investment income ...... 5.65% 5.12%<F1> 4.82%<F1> 5.80% 6.14%
<F4> Total returns for Class A shares do not include the applicable sales charge. If the charge had been included,
the results would have been lower.
<F5> Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
<F6> Per share distributions in excess of net investment income for the year ended March 31, 1995 were $0.0027 for
Class A shares.
<F7> For the eleven months ended January 31, 1994.
<F8> For the two months ended March 31, 1994.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CALIFORNIA FUND
---------------------------------------------------------
YEAR ENDED
FEBRUARY 28,
---------------------------------------------------------
1990 1989 1988 1987 1986<F1>
---- ---- ---- ---- ----
CLASS A
---------------------------------------------------------
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
<S> <C> <C> <C> <C> <C> <C>
Net asset value -- beginning of period .......... $ 5.06 $ 5.08 $ 5.38 $ 5.07 $ 4.76
------ ------ ------ ------ ------
Income from investment operations<F6> --
Net investment income<F10> .................... $ 0.33 $ 0.32 $ 0.31 $ 0.32 $ 0.20
------ ------ ------ ------ ------
Net realized and unrealized gain (loss)
on investments ............................... 0.13 (0.02) (0.29) 0.34 0.28
------ ------ ------ ------ ------
Total from investment operations ........... $ 0.46 $ 0.30 $ 0.02 $ 0.66 $ 0.48
------ ------ ------ ------ ------
Less distributions declared to shareholders --
From net investment income .................... $(0.33) $(0.32) $(0.31) $(0.33) $(0.17)
From net realized gain on investments ......... -- -- (0.01) (0.02) --
In excess of net investment income<F7> ........ -- -- -- -- --
In excess of net realized gain on investments . -- -- -- -- --
Total distributions declared to shareholders $(0.33) $(0.32) $(0.32) $(0.35) $(0.17)
------ ------ ------ ------ ------
Net asset value -- end of period ................ $ 5.19 $ 5.06 $ 5.08 $ 5.38 $ 5.07
====== ====== ====== ====== ======
Total return<F5> ................................ 9.28% 6.07% 0.83% 13.57% 9.77%
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA:<F10>
Expenses ...................................... 1.00% 1.28% 1.20% 1.04% 0.95%<F8>
Net investment income ......................... 6.35% 6.35% 6.33% 6.25% 7.34%<F8>
PORTFOLIO TURNOVER .............................. 243% 188% 240% 54% 23%
------ ------ ------ ------ ------
NET ASSETS AT END OF PERIOD (000 OMITTED) ....... $68,879 $59,212 $59,479 $62,368 $17,488
<PAGE>
<CAPTION>
FINANCIAL HIGHLIGHTS [continued]
CALIFORNIA FUND [continued]
----------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, JANUARY 31, MARCH 31, JANUARY 31,
------------------------- ----------- --------------------- -----------
1995 1994<F4> 1994<F2> 1995 1994<F4> 1994<F3>
---- ---- ---- ---- ---- ----
CLASS B CLASS C
------------------------------------- ---------------------------------
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
<S> <C> <C> <C> <C> <C> <C>
Net asset value -- beginning of period .......... $ 5.47 $ 5.95 $ 6.02 $ 5.48 $ 5.95 $ 5.89
------ ------ ------ ------ ------ ------
Income from investment operations<F6> --
Net investment income<F10> .................... $ 0.25 $ 0.04 $ 0.10 $ 0.26 $ 0.03 $ 0.01
Net realized and unrealized gain (loss)
on investments ............................... (0.05) (0.48) -- (0.06) (0.46) 0.06
------ ------ ------ ------ ------ ------
Total from investment operations ........... $ 0.20 $(0.44) $ 0.10 $ 0.20 $(0.43) $ 0.07
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders --
From net investment income .................... $(0.25) $(0.04) $(0.10) $(0.25) $(0.04) $(0.01)
From net realized gain on investments ......... -- -- (0.07) -- -- --
In excess of net investment income<F7> ........ -- -- -- -- -- --
In excess of net realized gain on investments . (0.01) -- -- (0.01) -- --
------ ------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.26) $(0.04) $(0.17) $(0.26) $(0.04) $(0.01)
------ ------ ------ ------ ------ ------
Net asset value -- end of period ................ $ 5.41 $ 5.47 $ 5.95 $ 5.42 $ 5.48 $ 5.95
====== ====== ====== ====== ====== ======
Total return<F5> ................................ 3.73% (7.38)%<F9> 1.68%<F9> 3.79% (7.22)%<F9> 1.25%
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA:<F10>
Expenses ...................................... 1.76% 1.69%<F8> 1.60%<F8> 1.69% 1.64%<F8> 2.02%<F8>
Net investment income ......................... 4.72% 4.18%<F8> 3.64%<F8> 4.79% 3.92%<F8> 1.78%<F8>
PORTFOLIO TURNOVER .............................. 57% 8% 38% 57% 8% 38%
NET ASSETS AT END OF PERIOD (000 OMITTED) ....... $29,057 $21,252 $19,360 $3,858 $1,701 $ 917
- ---------------
<FN>
<F1> For the period from the commencement of investment operations, June 18, 1985 to February 28, 1986.
<F2> For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F3> For the period from the commencement of offering of Class C shares, January 3, 1994 to January 31, 1994.
<F4> For the two months ended March 31, 1994.
<F5> Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
<F6> Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
<F7> Per share distributions in excess of net investment income for the two months ended March 31, 1994 were $0.002 and
$0.001 for Class B and Class C shares, respectively, and for the eleven months ended January 31, 1994 were $0.003
for both Class B and Class C shares.
<F8> Annualized.
<F9> Unannualized.
<F10> The investment adviser did not impose all or a portion of its advisory, distribution or expense reimbursement fees
for the periods indicated. If these fees had been incurred by the Fund, the net investment income per share and
the ratios would have been:
Net investment income $ 0.24 $ 0.04 $ 0.09 $ 0.25 $ 0.03 $ 0.00
Ratios (to average net assets):
Expenses ................................ 1.91% 1.83%<F8> 1.81%<F8> 1.84% 1.80%<F8> 3.53%<F8>
Net investment income ................... 4.57% 4.04%<F8> 3.43%<F8> 4.64% 3.77%<F8> 0.27%<F8>
</FN>
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FLORIDA FUND
-----------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, JANUARY 31, MARCH 31, JANUARY 31,
-----------------------------------------------------------------------------------------
1995 1994<F5> 1994 1993<F1> 1995 1994<F5> 1994<F2>
------ ------ ------ ------ ------ ------ ------
CLASS A CLASS B
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD):
Net asset value -- beginning
of period ..................... $ 9.65 $10.63 $ 9.89 $ 9.53 $ 9.64 $10.62 $10.69
------ ------ ------ ------ ------ ------ ------
Income from investment
operations<F4> --
Net investment income<F8> ...... $ 0.54 $ 0.09 $ 0.57 $ 0.58 $ 0.43 $ 0.07 $ 0.18
Net realized and unrealized gain
(loss) on investments 0.02 (0.98) 0.86 0.36 0.04 (0.98) 0.03
------ ------ ------ ------ ------ ------ ------
Total from investment operations $ 0.56 $(0.89) $ 1.43 $ 0.94 $ 0.47 $(0.91) $ 0.21
------ ------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders --
From net investment income ..... $(0.54) $(0.08) $(0.57) $(0.58) $(0.44) $(0.06) $(0.17)
From net realized gain on
investments .................. (0.04) -- (0.11) -- (0.04) -- (0.10)
In excess of net investment income -- (0.01) (0.01) -- -- (0.01) (0.01)
In excess of net realized gain on
investments .................. (0.03) -- -- -- (0.03) -- --
------ ------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders ................ $(0.61) $(0.09) $(0.69) $(0.58) $(0.51) $(0.07) $(0.28)
------ ------ ------ ------ ------ ------ ------
Net asset value -- end of period . $ 9.60 $ 9.65 $10.63 $ 9.89 $ 9.60 $ 9.64 $10.62
====== ====== ====== ====== ====== ====== ======
Total return<F6> ................ 6.07% (8.39)%<F4> 14.71% 10.28%<F4> 5.06% (8.55)%<F4> 4.87%<F3>
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA:<F8>
Expenses ...................... 0.60% 0.77%<F3> 0.49% 0.05%<F3> 1.68% 1.82%<F3> 1.64%<F3>
Net investment income ......... 5.75% 5.15%<F1> 5.42% 6.27%<F3> 4.63% 4.08%<F3> 3.82%<F3>
PORTFOLIO TURNOVER .............. 131% 19% 53% 54% 131% 19% 53%
NET ASSETS AT END OF PERIOD
(000 OMITTED) ................. $89,894 $108,579 $124,131 $74,329 $12,667 $7,995 $7,244
<FN>
- -------------
<F1> For the period from the commencement of investment operations, February 3, 1992 to January 31, 1993.
<F2> For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F3> Annualized.
<F4> Unannualized.
<F5> For the two months ended March 31, 1994.
<F6> Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F7> Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
<F8> The investment adviser did not impose all or a portion of its advisory, distribution or expense reimbursement fees for the
periods indicated. If these fees had been incurred by the Fund, the net investment income per share and the ratios would have
been:
Net investment income ...... $ 0.52 $ 0.08 $ 0.52 $ 0.51 $ 0.41 $ 0.06 $ 0.16
RATIOS (TO AVERAGE NET ASSETS):
Expenses ................. 0.83% 1.12%<F3> 0.93% 0.81%<F3> 1.91% 2.17%<F3> 2.09%<F3>
Net investment income .... 5.52% 4.80%<F3> 4.97% 5.51%<F3> 4.40% 3.72%<F3> 3.38%<F3>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
GEORGIA FUND
---------------------------------------------------------
YEAR ENDED YEAR ENDED
MARCH 31, JANUARY 31,
---------------------------------------------------------
1995 1994<F5> 1994 1993 1992
---- ---- ---- ---- ----
CLASS A
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period ....... $10.38 $11.30 $10.57 $10.22 $ 9.83
------ ------ ------ ------ ------
Income from investment operations<F7> --
Net investment income<F8> ................... $ 0.57 $ 0.09 $ 0.57 $ 0.58 $ 0.61
Net realized and unrealized gain (loss) on
investments ................................ -- (0.92) 0.75 0.38 0.46
------ ------ ------ ------ ------
Total from investment operations ........... $ 0.57 $(0.83) $ 1.32 $ 0.96 $ 1.07
------ ------ ------ ------ ------
Less distributions declared to shareholders --
From net investment income .................. $(0.56) $(0.06) $(0.55) $(0.60) $(0.66)
From net realized gain on investments ....... (0.01) -- (0.01) (0.01) (0.02)
In excess of net investment income .......... -- (0.03) (0.03) -- --
In excess of net realized gain on investments (0.03) -- -- -- --
------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.60) $(0.09) $(0.59) $(0.61) $(0.68)
------ ------ ------ ------ ------
Net asset value -- end of period ............. $10.35 $10.38 $11.30 $10.57 $10.22
====== ====== ====== ====== ======
Total return<F6> ............................. 5.65% (7.34)%<F4> 12.71% 9.56% 11.29%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA<F8>:
Expenses .................................... 1.14% 1.18%<F3> 1.21% 1.08% 0.99%
Net investment income ....................... 5.50% 5.05%<F3> 5.10% 5.75% 6.08%
PORTFOLIO TURNOVER ........................... 56% 5% 14% 27% 36%
NET ASSETS AT END OF PERIOD
(000 OMITTED) .............................. $74,432 $85,878 $94,407 $64,649 $47,869
<PAGE>
<CAPTION>
FINANCIAL HIGHLIGHTS [continued]
GEORGIA FUND [continued]
----------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
JANUARY 31, MARCH 31, JANUARY 31,
------------------------------------- --------------------- -----------
1991 1990 1989<F1> 1995 1994<F5> 1994<F2>
---- ---- ---- ---- ---- ----
CLASS A CLASS B
------------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period ........ $ 9.73 $ 9.73 $ 9.53 $10.38 $11.30 $11.26
------ ------ ------ ------ ------ ------
Income from investment operations<F7> --
Net investment income<F8> ................... $ 0.63 $ 0.66 $ 0.32 $ 0.47 $ 0.07 $ 0.19
Net realized and unrealized gain (loss) on
investments ................................ 0.12 0.02 0.14 0.02 (0.91) 0.05
------ ------ ------ ------ ------ ------
Total from investment operations ........... $ 0.75 $ 0.68 $ 0.46 $ 0.49 $(0.84) $ 0.24
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders --
From net investment income .................. $(0.63) $(0.66) $(0.26) $(0.47) $(0.07) $(0.18)
From net realized gain on investments ....... (0.02) (0.02) -- (0.01) -- (0.01)
In excess of net investment income .......... -- -- -- -- (0.01) (0.01)
In excess of net realized gain on investments -- -- -- (0.03) -- --
------ ------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.65) $(0.68) $(0.26) $(0.51) $(0.08) $(0.20)
------ ------ ------ ------ ------ ------
Net asset value -- end of period ............. $ 9.83 $ 9.73 $ 9.73 $10.36 $10.38 $11.30
====== ====== ====== ====== ====== ======
Total return<F1> ............................. 8.06% 7.19% 7.57%<F3> 4.88% (7.47)%<F4> 5.34%<F3>
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA<F8>:
Expenses .................................... 0.74% 0.42% 0.40%<F3> 1.96% 1.99%<F3> 1.97%<F3>
Net investment income ....................... 6.46% 6.72% 6.18%<F3> 4.66% 4.17%<F3> 3.83%<F3>
PORTFOLIO TURNOVER ........................... 71% 99% -- 56% 5% 14%
NET ASSETS AT END OF PERIOD
(000 OMITTED) .............................. $29,214 $12,628 $4,383 $8,695 $6,631 $5,766
- ----------
<FN>
<F1> For the period from the commencement of investment operations, June 6, 1988 to January 31, 1989.
<F2> For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F3> Annualized.
<F4> Unannualized.
<F5> For the two months ended March 31, 1994.
<F6> Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F7> Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
<F8> The investment adviser did not impose all or a portion of its advisory, distribution or expense reimbursement fees for the
periods indicated. If these fees had been incurred by the Fund, the net investment income per share and the ratios would have
been:
Net investment income ..... $ 0.56 $ 0.09 $ 0.56 $ 0.57 $ 0.60 $ 0.59 $ 0.57 $ 0.29 $ -- $ -- $ 0.19
RATIOS (TO AVERAGE NET ASSETS):
Expenses ................ 1.24% 1.28%<F3> 1.31% 1.18% 1.09% 1.11% 1.31% 1.07%<F3> -- -- 1.97%<F3>
Net investment income .... 5.40% 4.95%<F3> 5.00% 5.65% 5.98% 6.09% 5.83% 5.51%<F3> -- -- 3.83%<F3>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
LOUISIANA FUND
---------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, JANUARY 31, MARCH 31, JANUARY 31,
---------------------------------------------------------------------------
1995 1994<F7> 1994 1995 1994<F7> 1994<F1>
------ ------ ------ ------ ------ ------
CLASS A CLASS B
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value - beginning of period $ 9.22 $10.13 $ 9.53 $ 9.23 $10.13 $10.08
------ ------ ------ ------ ------ ------
Income from investment operations<F6> --
Net investment income<F4> ......... $ 0.57 $ 0.09 $ 0.52 $ 0.47 $ 0.07 $ 0.18
Net realized and unrealized gain
(loss) on investments ............ 0.06 (0.91) 0.62 0.06 (0.89) 0.07
------ ------ ------ ------ ------ ------
Total from investment operations . $ 0.63 $(0.82) $ 1.14 $ 0.53 $(0.82) $ 0.25
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders --
From net investment income ........ $(0.56) $(0.09) $(0.52) $(0.47) $(0.08) $(0.18)
From net realized gain on
investments ..................... (0.02) -- (0.02) (0.02) -- (0.02)
In excess of net realized gain on
investments ..................... (0.03) -- -- (0.03) -- --
------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders ................... $(0.61) $(0.09) $(0.54) $(0.52) $(0.08) $(0.20)
------ ------ ------ ------ ------ ------
Net asset value -- end of period ... $ 9.24 $ 9.22 $10.13 $ 9.24 $ 9.23 $10.13
====== ====== ====== ====== ====== ======
Total return<F5> ................... 7.18% (8.10)%<F3> 12.33% 6.01% (8.16)%<F3> 2.48%<F3>
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA<F4>:
Expenses ......................... 0.02% 0.00%<F2> 0.00% 1.02% 1.00%<F2> 1.00%<F2>
Net investment income ............ 6.25% 5.64%<F2> 5.41% 5.25% 4.54%<F2> 4.32%<F2>
PORTFOLIO TURNOVER ................. 81% 2% 33% 81% 2% 33%
NET ASSETS AT END OF PERIOD
(000 OMITTED) .................... $16,837 $13,401 $13,781 $2,735 $1,608 $1,263
<FN>
- -----------
<F1> For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F2> Annualized.
<F3> Unannualized.
<F4> The investment adviser did not impose all or a portion of its advisory, distribution or expense reimbursement fees for the
periods indicated. If these fees had been incurred by the Fund, and if the expense reimbursement agreement had not been in
effect, the net investment income per share and the ratios would have been:
Net investment income ........ $ 0.46 $ 0.05 $ 0.32 $ 0.36 $ 0.03 $ 0.09
RATIOS (TO AVERAGE NET ASSETS):
Expenses ................... 1.21% 2.33%<F2> 2.03%<F2> 2.28% 3.40%<F2> 3.08%<F2>
Net investment income ...... 5.06% 3.31%<F2> 3.38%<F2> 3.99% 2.14%<F2> 2.24%<F2>
<F5> Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F6> Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
<F7> For the two months ended March 31, 1994.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
MARYLAND FUND
-----------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
MARCH 31, JANUARY 31,
--------------------- -------------------------------------------------------------------
1995 1994<F3> 1994 1993 1992 1991 1990
------ ------ ------ ------ ------ ------ ------
CLASS A
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning
of period .................... $10.89 $11.81 $11.40 $11.20 $10.97 $10.79 $10.76
------ ------ ------ ------ ------ ------ ------
Income from investment operations<F5> --
Net investment income ......... $ 0.59 $ 0.10 $ 0.62 $ 0.67 $ 0.70 $ 0.70 $ 0.69
Net realized and unrealized gain
(loss) on investments ....... 0.09 (0.92) 0.53 0.24 0.31 0.19 0.04
------ ------ ------ ------ ------ ------ ------
Total from investment
operations ................. $ 0.68 $(0.82) $ 1.15 $ 0.91 $ 1.01 $ 0.89 $ 0.73
------ ------ ------ ------ ------ ------ ------
Less distributions declared
to shareholders --
From net investment income<F6> . $(0.59) $(0.06) $(0.61) $(0.69) $(0.76) $(0.70) $(0.69)
From net realized gain on
investments ................. -- -- (0.07) (0.02) (0.02) (0.01) (0.01)
In excess of net investment
income ...................... -- (0.04) (0.04) -- -- -- --
In excess of net realized gain
on investments .............. (0.04) -- (0.02) -- -- -- --
From paid-in capital .......... -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Total distributions declared
to shareholders ............ $(0.63) $(0.10) $(0.74) $(0.71) $(0.78) $(0.71) $(0.70)
------ ------ ------ ------ ------ ------ ------
Net asset value -- end of period $10.94 $10.89 $11.81 $11.40 $11.20 $10.97 $10.79
====== ====== ====== ====== ====== ====== ======
Total return<F4> ............... 6.51% (6.96)%<F2> 10.27% 8.34% 9.55% 8.51% 6.90%
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA:
Expenses ...................... 1.21% 1.23%<F1> 1.25% 1.14% 1.16% 1.17% 1.18%
Net investment income ......... 5.46% 4.97%<F1> 5.42% 6.13% 6.32% 6.45% 6.33%
Portfolio turnover ............. 31% 1% 25% 5% 9% 41% 58%
NET ASSETS AT END OF PERIOD
(000 OMITTED) ................ $145,361 $161,290 $173,419 $145,794 $119,120 $101,742 $93,175
<FN>
- ----------
<F1> Annualized.
<F2> Unannualized.
<F3> For the two months ended March 31, 1994.
<F4> Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F5> Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
<F6> For the year ended March 31, 1995, includes distributions in excess of net investment income of $0.003 on Class A and Class B
shares.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
MARYLAND FUND
-----------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
YEAR ENDED JANUARY 31, MARCH 31, JANUARY 31,
----------------------------------- -------------------------- --------------------------
1989 1988 1987 1986 1995 1994<F4> 1994<F1>
------ ------ ------ ------ ------ ------ ------
CLASS A CLASS B
-------------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning
of period .................... $10.62 $11.20 $10.44 $ 9.89 $10.88 $11.80 $11.88
------ ------ ------ ------ ------ ------ ------
Income from investment operations<F6> --
Net investment income ......... $ 0.69 $ 0.68 $ 0.71 $ 0.81 $ 0.51 $ 0.08 $ 0.22
Net realized and unrealized gain
(loss) on investments ....... 0.14 (0.57) 0.78 0.62 0.09 (0.91) (0.01)
------ ------ ------ ------ ------ ------ ------
Total from investment operations $ 0.83 $ 0.11 $ 1.49 $ 1.43 $ 0.60 $(0.83) $ 0.21
------ ------ ------ ------ ------ ------ ------
Less distributions declared to shareholders --
From net investment income<F8> $(0.69) $(0.67) $(0.73) $(0.82) $(0.51) $(0.08) $(0.21)
From net realized gain on
investments .................. -- (0.01) -- (0.06) -- -- (0.05)
In excess of net investment
income ...................... -- -- -- -- -- (0.01) (0.01)
In excess of net realized gain
on investments .............. -- -- -- -- (0.04) -- (0.02)
From paid-in capital<F7> ...... -- (0.01) -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Total distributions declared
to shareholders ............ $(0.69) $(0.69) $(0.73) $(0.88) $(0.55) $(0.09) $ (0.29)
------ ------ ------ ------ ------ ------ ------
Net asset value -- end of period $10.76 $10.62 $11.20 $10.44 $10.93 $10.88 $11.80
====== ====== ====== ====== ====== ====== ======
Total return<F5> ............... 8.15% 1.25% 14.86% 15.47% 5.75% (7.08)%<F3> 4.45%<F2>
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA:
Expenses ..................... 1.14% 1.10% 1.10% 0.98% 1.93% 1.95%<F2> 1.81%<F2>
Net investment income ........ 6.52% 6.47% 6.60% 8.22% 4.73% 4.19%<F2> 4.23%<F2>
PORTFOLIO TURNOVER ............. 34% 13% 11% 26% 31% 1% 25%
NET ASSETS AT END OF PERIOD
(000 OMITTED) ................ $84,380 $79,906 $81,712 $33,818 $11,168 $ 6,478 $ 5,345
<FN>
- -----------
<F1> For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F2> Annualized.
<F3> Unannualized.
<F4> For the two months ended March 31, 1994.
<F5> Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F6> Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
<F7> For the year ended January 31, 1986, the per share distribution from paid-in capital was $0.0005.
<F8> For the year ended March 31, 1995, includes distributions in excess of net investment income of $0.003 on Class A and Class B
shares.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
MASSACHUSETTS FUND
-----------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
MARCH 31, JANUARY 31,
--------------------- ---------------------------------------- --------------------------
1995 1994<F3> 1994 1993 1992 1991 1990
------ ------ ------ ------ ------ ------ ------
CLASS A CLASS A
--------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning
of period .................... $10.90 $11.75 $11.41 $11.05 $10.68 $10.58 $10.65
------ ------ ------ ------ ------ ------ ------
Income from investment operations<F5> --
Net investment income ......... $ 0.64 $ 0.11 $ 0.64 $ 0.68 $ 0.73 $ 0.71 $ 0.72
Net realized and unrealized gain
(loss) on investments ....... (0.03) (0.85) 0.58 0.39 0.43 0.11 (0.07)
------ ------ ------ ------ ------ ------ ------
Total from investment operations $ 0.61 $(0.74) $ 1.22 $ 1.07 $ 1.16 $ 0.82 $ 0.65
====== ====== ====== ====== ====== ====== ======
Less distributions declared to
shareholders --
From net investment income .... $(0.64) $(0.07) $(0.64) $(0.71) $(0.78) $(0.72) $(0.72)
From net realized gain on
investments ................. (0.02) -- (0.20) -- -- -- --
In excess of net investment
income ...................... -- (0.04) (0.04) -- -- -- --
In excess of net realized gain
on investments .............. (0.01) -- -- -- -- -- --
From paid-in capital .......... -- -- -- -- (0.01) -- --
------ ------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders ............... $(0.67) $(0.11) $(0.88) $(0.71) $(0.79) $(0.72) $ (0.72)
------ ------ ------ ------ ------ ------ ------
Net asset value -- end of period $10.84 $10.90 $11.75 $11.41 $11.05 $10.68 $10.58
====== ====== ====== ====== ====== ====== ======
Total return<F4> ............... 5.89% (6.34)%<F2> 11.02% 10.03% 11.23% 8.12% 6.28%
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA:
Expenses ...................... 1.17% 1.19%<F1> 1.19% 1.08% 1.06% 1.07% 1.10%
Net investment income ......... 6.01% 5.64%<F1> 5.71% 6.33% 6.65% 6.74% 6.75%
PORTFOLIO TURNOVER ............. 31% 4% 30% 32% 51% 43% 52%
NET ASSETS AT END OF PERIOD
(000 OMITTED) ................ $262,551 $277,748 $300,894 $270,778 $239,311 $213,679 $215,381
<FN>
- ------------
<F1> Annualized.
<F2> Unannualized.
<F3> For the two months ended March 31, 1994.
<F4> Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F5> Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
MASSACHUSETTS FUND
-----------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
JANUARY 31, MARCH 31, JANUARY 31,
------------------------------------------------- ---------------------------------------
1989 1988 1987 1986<F1> 1995 1994<F5> 1994<F2>
------ ------ ------ ------ ------ ------ ------
CLASS A CLASS B
------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning
of period .................... $10.60 $11.25 $10.59 $ 9.52 $10.90 $11.75 $11.91
------ ------ ------ ------ ------ ------ ------
Income from investment operations<F7> --
Net investment income ......... $ 0.72 $ 0.71 $ 0.74 $ 0.54 $ 0.55 $ 0.09 $ 0.23
Net realized and unrealized gain
(loss) on investments ....... 0.05 (0.65) 0.68 0.99 (0.02) (0.85) 0.04
------ ------ ------ ------ ------ ------ ------
Total from investment operations $ 0.77 $ 0.06 $ 1.42 $ 1.53 $ 0.53 $(0.76) $ 0.27
------ ------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders --
From net investment income ..... $(0.72) $(0.71) $(0.75) $(0.46) $(0.56) $(0.09)<F8> $(0.22)
From net realized gain on
investments .................. -- -- (0.01) -- (0.02) -- (0.20)
In excess of net investment income -- -- -- -- -- -- (0.01)
In excess of net realized gain on
investments .................. -- -- -- -- (0.01) -- --
------ ------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders ................ $(0.72) $(0.71) $(0.76) $(0.46) $(0.59) $(0.09) $(0.43)
------ ------ ------ ------ ------ ------ ------
Net asset value -- end of period $10.65 $10.60 $11.25 $10.59 $10.84 $10.90 $11.75
====== ====== ====== ====== ====== ====== ======
Total return<F6> ................ 7.65% 0.80% 14.10% 20.51%<F3> 5.13% (6.46)%<F4> 5.89%<F3>
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA:
Expenses ....................... 1.07% 1.04% 0.87% 0.86%<F3> 1.89% 1.91%<F3> 1.81%<F3>
Net investment income .......... 6.90% 6.79% 6.83% 7.82%<F3> 5.27% 4.89%<F3> 4.62%<F3>
PORTFOLIO TURNOVER .............. 26% 27% 7% 27% 31% 4% 30%
NET ASSETS AT END OF PERIOD
(000 OMITTED) ................. $212,763 $224,219 $242,119 $94,575 $ 8,676 $ 4,993 $ 4,191
<FN>
- -----------
<F1> For the period from the commencement of investment operations, April 9, 1985 to January 31, 1986.
<F2> For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F3> Annualized.
<F4> Unannualized.
<F5> For the two months ended March 31, 1994.
<F6> Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F7> Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
<F8> For the year ended March 31, 1994, the per share distribution in excess of net investment income was $0.0055.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
MISSISSIPPI FUND
-----------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, JANUARY 31, MARCH 31, JANUARY 31,
-----------------------------------------------------------------------------------
1995 1994<F9> 1994 1993<F1> 1995 1994<F9> 1994<F2>
---- ---- ---- ---- ---- ---- ----
CLASS A CLASS B
--------------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period ..... $ 9.19 $10.00 $ 9.38 $ 9.53 $ 9.19 $ 9.99 $ 9.94
------ ------ ------ ------ ------ ------ ------
Income from investment operations<F7> --
Net investment income<F5> ................. $ 0.54 $ 0.09 $ 0.55 $ 0.24 $ 0.45 $ 0.07 $ 0.18
Net realized and unrealized gain (loss)
on investments ........................... (0.01) (0.81) 0.62 (0.15) -- (0.79) 0.05
------ ------ ------ ------ ------ ------ ------
Total from investment operations ......... $ 0.53 $(0.72) $ 1.17 $ 0.09 $ 0.45 $(0.72) $ 0.23
------ ------ ------ ------ ------ ------ ------
Less distributions declared to shareholders --
From net investment income<F8> ............ $(0.54) $(0.09) $(0.55) $(0.24) $(0.45) $(0.08) $(0.18)
From net realized gain on investments<F10> -- -- -- -- -- -- --
In excess of net investment income<F11> ... -- -- -- -- -- -- --
In excess of net realized gain on investments (0.03) -- -- -- (0.03) -- --
------ ------ ------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.57) $(0.09) $(0.55) $(0.24) $(0.48) $(0.08) $(0.18)
------ ------ ------ ------ ------ ------ ------
Net asset value -- end of period ........... $ 9.15 $ 9.19 $10.00 $ 9.38 $ 9.16 $ 9.19 $ 9.99
====== ====== ====== ====== ====== ====== ======
Total return<F6> ........................... 6.08% (7.20)%<F4> 12.80% 5.00%<F4> 5.14% (7.27)%<F4> 2.33%<F4>
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL
DATA<F5>:
Expenses .................................. 0.22% 0.10%<F3> 0.03% 0.00%<F3> 1.23% 1.10%<F3> 1.06%<F3>
Net investment income ..................... 5.99% 5.69%<F3> 5.68% 5.59%<F3> 4.97% 4.67%<F3> 4.29%<F3>
PORTFOLIO TURNOVER ......................... 47% 2% 28% 14% 47% 2% 28%
NET ASSETS AT END OF PERIOD (000 OMITTED) .. $79,033 $79,541 $84,177 $41,212 $9,429 $6,526 $6,268
<FN>
<F1> For the period from the commencement of investment operations, August 6, 1992 to January 31, 1993.
<F2> For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F3> Annualized.
<F4> Unannualized.
<F5> The investment adviser did not impose all or a portion of its advisory, distribution or expense reimbursement fees for the
periods indicated. If these fees had been incurred by the Fund, and if the reimbursement agreement had not been in effect,
the net investment income per share and the ratios would have been:
Net investment income ................. $ 0.48 $ 0.08 $ 0.45 $ 0.19 $ 0.38 $ 0.06 $ 0.14
RATIOS (TO AVERAGE NET ASSETS):
Expenses ............................. 0.93% 0.88%<F3> 1.01% 1.17%<F3> 2.01% 1.95%<F3> 2.12%<F3>
Net investment income ................ 5.28% 4.91%<F3> 4.69% 4.42%<F3> 4.19% 3.82%<F3> 3.23%<F3>
<F6> Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F7> Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
<F8> The per share distribution in excess of net investment income for the two months ended March 31, 1994 was $0.002 for Class B
shares.
<F9> For the two months ended March 31, 1994.
<F10>The per share distribution from net realized gain on investments for the year ended March 31, 1995 was $0.0016 for Class A
and Class B shares.
<F11>The per share distributions in excess of net investment income for the year ended March 31, 1995 were $0.0035 and $0.0029
for Class A and Class B shares, respectively.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
NEW YORK FUND
--------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, YEAR ENDED JANUARY 31, MARCH 31, JANUARY 31,
---------------- ------------------------------------------------- ----------------- ------------
1995 1994<F5> 1994 1993 1992 1991 1990 1989<F1> 1995 1994<F5> 1994<F2>
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
CLASS A CLASS B
-------------------------------------------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value --
beginning of period ......... $10.50 $11.34 $10.78 $10.25 $ 9.90 $ 9.74 $ 9.79 $ 9.53 $10.50 $11.34 $11.46
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations<F7> --
Net investment income<F8> . $ 0.56 $ 0.09 $ 0.59 $ 0.63 $ 0.65 $ 0.65 $ 0.68 $ 0.29 $ 0.47 $ 0.07 $ 0.18
Net realized and unrealized
gain (loss) on investments 0.05 (0.84) 0.74 0.58 0.44 0.16 0.01 0.21 0.05 (0.83) 0.04
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations .............. $ 0.61 $(0.75) $ 1.33 $ 1.21 $ 1.09 $ 0.81 $ 0.69 $ 0.50 $ 0.52 $(0.76) $ 0.22
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders --
From net investment income $(0.56) $(0.06) $(0.57) $(0.65) $(0.69) $(0.65) $(0.67) $(0.24) $(0.47) $(0.07) $(0.18)
From net realized gain on
investments .............. -- -- (0.17) (0.03) (0.05) -- (0.06) -- -- -- (0.15)
In excess of net investment
income ................... (0.01) (0.03) (0.03) -- -- -- -- -- (0.01) (0.01) (0.01)
In excess of net realized gain
on investments .......... (0.05) -- -- -- -- -- -- -- (0.05) -- --
From paid-in capital ..... -- -- -- -- -- -- (0.01) -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions declared
to shareholders ........ $(0.62) $(0.09) $(0.77) $(0.68) $(0.74) $(0.65) $(0.74) $(0.24) $(0.53) $(0.08) $(0.34)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value --
end of period .......... $10.49 $10.50 $11.34 $10.78 $10.25 $ 9.90 $ 9.74 $ 9.79 $10.49 $10.50 $11.34
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return<F6> .......... 6.03% (6.58)%<F4> 12.69% 12.23% 11.42% 8.74% 7.33% 8.16%<F3> 5.17% (6.71)%<F4> 5.20%<F3>
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA:<F8>
Expenses ................. 1.07% 1.03%<F3> 0.93% 0.53% 0.65% 0.54% 0.40% 0.40%<F3> 1.89% 1.87%<F3> 1.79%<F3>
Net investment income .... 5.43% 5.09%<F3> 5.21% 6.16% 6.44% 6.73% 6.88% 5.93%<F3> 4.58% 4.21%<F3> 3.90%<F3>
PORTFOLIO TURNOVER ........ 147% 15% 51% 61% 80% 188% 236% 32% 147% 15% 51%
NET ASSETS AT END OF PERIOD
(000 OMITTED) ............. $146,597 $162,621 $184,523 $135,749 $79,524 $37,385 $20,156 $6,412 $11,885 $6,265 $4,828
<FN>
<F1> For the period from the commencement of investment operations, June 6, 1988 to January 31, 1989.
<F2> For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F3> Annualized.
<F4> Unannualized.
<F5> For the two months ended March 31, 1994.
<F6> Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F7> Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
<F8> The investment adviser did not impose all or a portion of its advisory, distribution or expense reimbursement fees for the
periods indicated. If these fees had been incurred by the Fund, the net investment income per share and the ratios would have
been:
Net investment income $ 0.55 $ 0.07 $ 0.56 $ 0.57 $ 0.60 $ 0.61 $ 0.59 $ 0.26 $ 0.47 $ 0.07 $ 0.17
RATIOS (TO AVERAGE NET ASSETS):
Expenses ............ 1.18% 1.23%<F3> 1.23% 1.13% 1.16% 0.95% 1.32% 1.09%<F3> 1.91% 1.97%<F3> 2.00%<F3>
Net investment income 5.31% 4.88%<F3> 4.90% 5.56% 5.93% 6.33% 5.96% 5.24%<F3> 4.57% 4.11%<F3> 3.69%<F3>
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
NORTH CAROLINA FUND
------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
MARCH 31, JANUARY 31,
------------------ ----------------------------------------------------------------
1995 1994<F3> 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ---- ----
CLASS A
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period ..... $11.48 $12.37 $11.80 $11.45 $11.30 $11.18 $11.15 $11.13
------ ------ ------ ------ ------ ------ ------ ------
Income from investment operations<F6> --
Net investment income ..... $ 0.61 $ 0.10 $ 0.64 $ 0.65 $ 0.70 $ 0.72 $ 0.73 $ 0.74
Net realized and unrealized gain
(loss) on investments ..... 0.03 (0.89) 0.58 0.37 0.26 0.17 0.03 0.02
------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations ..... $ 0.64 $(0.79) $ 1.22 $ 1.02 $ 0.96 $ 0.89 $ 0.76 $ 0.76
------ ------ ------ ------ ------ ------ ------ ------
Less distributions declared to shareholders --
From net investment income ..... $(0.60) $(0.07) $(0.61) $(0.67) $(0.76) $(0.72) $(0.73) $(0.74)
From net realized gain on investments ..... (0.06) -- (0.01) -- (0.01) (0.05) -- --
In excess of net investment income ..... -- (0.03) (0.03) -- -- -- -- --
In excess of net realized gain on investments (0.04) -- -- -- -- -- -- --
From paid-in capital<F4> ..... -- -- -- -- (0.04) -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.70) $(0.10) $(0.65) $(0.67) $(0.81) $(0.77) $(0.73) $(0.74)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value -- end of period ..... $11.42 $11.48 $12.37 $11.80 $11.45 $11.30 $11.18 $11.15
====== ====== ====== ====== ====== ====== ====== ======
Total return<F5> ..... 5.86% (6.39)%<F2>10.59% 9.23% 8.82% 8.34% 6.97% 7.12%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses ..... 1.16% 1.16%<F1> 1.19% 1.07% 1.09% 1.09% 1.12% 1.11%
Net investment income ..... 5.38% 4.96%<F1> 5.21% 5.80% 6.17% 6.47% 6.48% 6.70%
PORTFOLIO TURNOVER ..... 58% 2% 12% 2% 39% 44% 61% 25%
NET ASSETS AT END OF PERIOD (000 OMITTED) $429,131 $460,321 $495,158 $398,352 $312,466 $226,806 $175,101 $129,287
- --------------------
<FN>
<F1>Annualized.
<F2>Unannualized.
<F3>For the two months ended March 31, 1994.
<F4>For the year ended January 31, 1991, the per share distribution from paid-in capital was $0.0005.
<F5>Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F6>Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
NORTH CAROLINA FUND
--------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JANUARY 31, MARCH 31, JANUARY 31, MARCH 31, JANUARY 31,
--------------------------------------------------------------------------------------------
1988 1987 1986 1995 1994<F5> 1994<F1> 1995 1994<F5> 1994<F2>
---- ---- ---- ---- ---- ---- ---- ---- ----
CLASS A CLASS B CLASS C
----------------------- ------------------------------- --------------------------------
PER SHARE DATA (FOR A SHARE
OUTSTANDING THROUGHOUT EACH PERIOD):
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value --
beginning of period ............... $11.82 $11.09 $10.01 $11.47 $12.36 $12.36 $11.47 $12.36 $12.24
------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment operations<F8> --
Net investment income ............. $ 0.73 $ 0.75 $ 0.82 $ 0.52 $ 0.08 $ 0.22 $ 0.53 $ 0.10 $ 0.02
Net realized and unrealized gain
(loss) on investments ............ (0.69) 0.90 1.12 0.05 (0.89) 0.01 0.04 (0.90) 0.12
------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations $ 0.04 $ 1.65 $ 1.94 $ 0.57 $(0.81) $ 0.23 $ 0.57 $(0.80) $ 0.14
Less distributions declared to shareholders --
From net investment income<F6> .... $(0.73) $(0.76) $(0.82) $(0.52) $(0.08) $(0.21) $(0.53) $(0.09) $(0.02)
From net realized gain on investments -- (0.16) (0.04) (0.06) -- (0.01) (0.06) -- --
In excess of net investment income . -- -- -- -- -- (0.01) -- -- --
In excess of net realized gain
on investments .................... -- -- -- (0.04) -- -- (0.04) -- --
------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions declared
to shareholders .................. $(0.73) $(0.92) $(0.86) $(0.62) $(0.08) $(0.23) $(0.63) $(0.09) $(0.02)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value -- end of period ... $11.13 $11.82 $11.09 $11.42 $11.47 $12.36 $11.41 $11.47 $12.36
====== ====== ====== ====== ====== ====== ====== ====== ======
Total return<F7>..................... 0.65% 15.76% 20.63% 5.20% (6.51)%<F4> 4.58%<F3> 5.18% (6.50)%<F4> 16.50%<F3>
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA:
Expenses .......................... 1.08% 1.07% 0.90% 1.88% 1.88%<F3> 1.84%<F3> 1.81% 1.82%<F3> 1.44%<F3>
Net investment income ............. 6.71% 6.63% 8.02% 4.64% 4.18%<F3> 4.03%<F3> 4.71% 4.25%<F3> 2.33%<F3>
PORTFOLIO TURNOVER ................. 10% 10% 78% 58% 2% 12% 58% 2% 12%
NET ASSETS AT END OF PERIOD
(000 OMITTED) ................... $110,462 $105,668 $53,561 $26,260 $15,866 $13,379 $8,149 $6,661 $4,584
<FN>
<F1>For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F2>For the period from the commencement of offering of Class C shares, January 3, 1994 to January 31, 1994.
<F3>Annualized.
<F4>Unannualized.
<F5>For the two months ended March 31, 1994.
<F6>Includes distributions in excess of net investment income of $0.004 and $0.002, respectively, for Class B and Class C shares
for the two months ended March 31, 1994 and $0.003 per share for Class C shares for the year ended January 31, 1994.
<F7>Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F8>Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
PENNSYLVANIA FUND
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, JANUARY 31, MARCH 31, JANUARY 31,
------------------------------------------------------------------------
1995 1994<F5> 1994<F1> 1995 1994<F5> 1994<F2>
---- ---- ---- ---- ---- ----
CLASS A CLASS B
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period ..... .......... $ 9.15 $10.14 $ 9.53 $ 9.15 $10.15 $10.06
------ ------ ------ ------ ------ ------
Income from investment operations<F7> --
Net investment income<F9> ..... ...................... $ 0.54 $ 0.09 $ 0.50 $ 0.45 $ 0.06 $ 0.17
Net realized and unrealized gain (loss)
on investments ...................................... 0.18 (0.99) 0.62 0.18 (0.99) 0.10
------ ------ ------ ------ ------ ------
Total from investment operations .................... $ 0.72 $(0.90) $ 1.12 $ 0.63 $(0.93) $ 0.27
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders --
From net investment income<F8> ....................... $(0.54) $(0.09) $(0.50) $(0.45) $(0.07) $(0.17)
From net realized gain on investments ................ (0.01) -- (0.01) (0.01) -- (0.01)
In excess of net realized gain on investments ........ (0.03) -- -- (0.03) -- --
------ ------ ------ ------ ------ ------
Total distributions declared to shareholders ..... .. $(0.58) $(0.09) $(0.51) $(0.49) $(0.07) $(0.18)
------ ------ ------ ------ ------ ------
Net asset value -- end of period ...................... $ 9.29 $ 9.15 $10.14 $ 9.29 $ 9.15 $10.15
====== ====== ====== ====== ====== ======
Total return<F6> ..... ................................ 8.14% (8.91)%<F4> 12.12% 7.07% (9.16)%<F4> 6.76%<F3>
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA<F9>:
Expenses ..... ....................................... 0.01% 0.00%<F3> 0.00%<F3> 1.01% 1.00%<F3> 1.00%<F3>
Net investment income ..... .......................... 5.97% 5.43%<F3> 5.30% 4.96% 4.37%<F3> 4.22%<F3>
PORTFOLIO TURNOVER ..... .............................. 49% 1% 10% 49% 1% 10%
NET ASSETS AT END OF PERIOD (000 OMITTED) ............. $16,411 $13,961 $13,987 $7,699 $4,304 $3,401
<FN>
<F1>For the period from the commencement of investment operations, February 1, 1993 to January 31, 1994.
<F2>For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31 1994.
<F3>Annualized.
<F4>Unannualized.
<F5>For the two months ended March 31, 1994.
<F6>Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F7>Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
<F8>For the two months ended March 31, 1994, Class B net investment income includes distributions in excess of net investment
income of less than $0.001 per share.
<F9>The investment adviser did not impose all or a portion of its advisory, distribution or expense reimbursement fees for the
periods indicated. If these fees had been incurred by the Fund, the net investment income per share and the ratios would have
been:
Net investment income .............................. $ 0.43 $ 0.06 $ 0.32 $ 0.34 $ 0.04 $ 0.05
RATIOS (TO AVERAGE NET ASSETS):
Expenses ..... 1.18% 1.84%<F3> 1.94%<F3> 2.26% 2.91%<F3> 2.50%<F3>
Net investment income ..... 4.80% 3.60%<F3> 3.36%<F3> 3.72% 2.47%<F3> 1.29%<F3>
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
SOUTH CAROLINA FUND
-----------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
MARCH 31, JANUARY 31,
-----------------------------------------------------------------------------
1995 1994<F3> 1994 1993 1992 1991 1990
CLASS A
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period ..... $11.79 $12.74 $12.02 $11.74 $11.45 $11.30 $11.24
------ ------ ------ ------ ------ ------ ------
Net investment income ..................... $ 0.63 $ 0.08 $ 0.63 $ 0.67 $ 0.70 $ 0.71 $ 0.72
Net realized and unrealized gain
(loss) on investments ..... .............. 0.15 (0.92) 0.74 0.34 0.40 0.21 0.06
------ ------ ------ ------ ------ ------ ------
Total from investment operations ......... $ 0.78 $(0.84) $ 1.37 $ 1.01 $ 1.10 $ 0.92 $ 0.78
------ ------ ------ ------ ------ ------ ------
Less distributions declared to shareholders --
From net investment income ................ $(0.62) $(0.08) $(0.61) $(0.69) $(0.76) $(0.71) $(0.72)
From net realized gain on investments ..... (0.06) -- (0.01) (0.04) (0.05) (0.06) --
In excess of net investment income ........ -- (0.03) (0.03) -- -- -- --
In excess of net realized
------ ------ ------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.71) $(0.11) $(0.65) $(0.73) $(0.81) $(0.77) $(0.72)
------ ------ ------ ------ ------ ------ ------
Net asset value -- end of period ........... $11.86 $11.79 $12.74 $12.02 $11.74 $11.45 $11.30
====== ====== ====== ====== ====== ====== ======
Total return<F4> ........................... 6.93% (6.65)%<F2> 11.69% 8.89% 9.95% 8.46% 7.13%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses ..... ............................ 1.19% 1.23%<F1> 1.22% 1.12% 1.15% 1.18% 1.21%
Net investment income ..................... 5.37% 5.09%<F1> 5.06% 5.74% 6.07% 6.30% 6.35%
PORTFOLIO TURNOVER ......................... 30% 4% 10% 11% 22% 47% 54%
NET ASSETS AT END OF PERIOD (000 OMITTED) ... $171,045 $173,316 $187,307 $144,539 $101,434 $75,922 $57,675
<FN>
<F1>Annualized.
<F2>Unannualized.
<F3>For the two months ended March 31, 1994.
<F4>Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F5>Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
SOUTH CAROLINA FUND
------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
JANUARY 31, MARCH 31, JANUARY 31,
-------------------------------------------- ---------------------- ------------
1989 1988 1987 1986 1995 1994<F4> 1994<F1>
---- ---- ---- ---- ---- ---- ----
CLASS A CLASS B
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period ....... $11.14 $11.54 $10.89 $ 9.95 $11.78 $12.73 $12.67
------ ------ ------ ------ ------ ------ ------
Income from investment operations<F8> --
Net investment income ....................... $ 0.76 $ 0.77 $ 0.77 $ 0.84 $ 0.54 $ 0.08 $ 0.21
Net realized and unrealized gain
(loss) on investments ...................... 0.11 (0.36) 0.69 0.95 0.17 (0.94) 0.06
------ ------ ------ ------ ------ ------ ------
Total from investment operations ........... $ 0.87 $ 0.41 $ 1.46 $ 1.79 $ 0.71 $(0.86) $ 0.27
------ ------ ------ ------ ------ ------ ------
Less distributions declared to shareholders --
From net investment income .................. $(0.77) $(0.77) $(0.78) $(0.84) $(0.54) $(0.08) $(0.20)
From net realized gain on investments ....... -- -- (0.03) (0.01) (0.06) -- --
In excess of net investment income<F5> ...... -- -- -- -- -- (0.01) (0.01)
In excess of net realized gain on investments -- -- -- -- (0.03) -- --
From paid-in capital<F6> .................... -- (0.04) -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.77) $(0.81) $(0.81) $(0.85) $(0.63) $(0.09) $(0.21)
------ ------ ------ ------ ------ ------ ------
Net asset value -- end of period ............. $11.24 $11.14 $11.54 $10.89 $11.86 $11.78 $12.73
====== ====== ====== ====== ====== ====== ======
Total return<F7> ............................. 8.18% 3.92% 14.05% 19.13% 6.26% (6.77)%<F3> 5.47%<F2>
Ratios (to average net assets)/Supplemental data:
Expenses .................................... 0.97% 0.81% 0.99% 1.01% 1.90% 1.96%<F2> 1.90%
Net investment income ....................... 6.90% 7.07% 7.00% 8.26% 4.63% 4.29%<F2> 3.86%
Portfolio turnover ........................... 27% 12% 13% 28% 30% 4% 10%
Net assets at end of period (000 omitted) .... $45,391 $34,025 $27,978 $10,936 $12,964 $10,085 $ 8,217
- ---------------------
<F1>For the period from the commencement of offering of Class B shares, September 7, 1993, to January 31, 1994.
<F2>Annualized.
<F3>Unannualized.
<F4>For the two months ended March 31, 1994.
<F5>For the year ended March 31, 1995, the Class B distribution in excess of net investment income was $0.00436 per share.
<F6>For the year ended January 31, 1986, the per share distribution from paid-in capital was $0.00042.
<F7>Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F8>Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
TENNESSEE FUND
-------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
MARCH 31, JANUARY 31,
------------------------ -----------------------------------------------------------
1995 1994<F3> 1994 1993 1992 1991 1990 1989<F1>
CLASS A
-------------------------------------------------------------------------------------
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value -- beginning of period $10.26 $10.94 $10.37 $10.10 $ 9.90 $ 9.80 $ 9.68 $ 9.53
------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations<F7> --
Net investment income<F10> ........ $ 0.56 $ 0.09 $ 0.57 $ 0.57 $ 0.61 $ 0.62 $ 0.67 $ 0.22
Net realized and unrealized gain
(loss) on investments ............ 0.02 (0.68) 0.57 0.31 0.30 0.13 0.11 0.10
------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations $ 0.58 $(0.59) $ 1.14 $ 0.88 $ 0.91 $ 0.75 $ 0.78 $ 0.32
------ ------ ------ ------ ------ ------ ------ ------
Less distributions declared
to shareholders --
From net investment income ........ $(0.56) $(0.07) $(0.54) $(0.57) $(0.66) $(0.63) $(0.66) $(0.17)
From net realized gain on
investments<F5> .................. -- -- -- (0.01) (0.05) (0.02) -- --
In excess of net investment income -- (0.02) (0.03) (0.03) -- -- -- --
In excess of net realized gain
on investments ................... (0.01) -- -- -- -- -- -- --
From paid-in capital<F4> .......... -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Total distributions declared
to shareholders ................ $(0.57) $(0.09) $(0.57) $(0.61) $(0.71) $(0.65) $(0.66) $(0.17)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value -- end of period .... $10.27 $10.26 $10.94 $10.37 $10.10 $ 9.90 $ 9.80 $ 9.68
====== ====== ====== ====== ====== ====== ====== ======
Total return<F6> .................... 5.86% (5.39)%<F9> 11.20% 9.03% 9.50% 7.96% 8.30% 3.43%<F9>
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA<F10>:
Expenses .......................... 1.22% 1.21%<F8> 1.29% 1.14% 1.15% 1.03% 0.53% 0.40%<F8>
Net investment income ............. 5.52% 5.31%<F8> 5.25% 5.89% 6.11% 6.37% 6.70% 5.98%<F8>
PORTFOLIO TURNOVER .................. 27% 4% 12% 9% 42% 58% 78% 5%
NET ASSETS AT END OF PERIOD
(000 OMITTED) ...................... $117,572 $117,117 $123,050 $99,443 $87,898 $72,108 $56,048 $15,832
<FN>
<F10> The investment adviser did not impose all or a portion of its advisory, distribution or expense reimbursement fees
for the periods indicated. If these fees had been incurred by the Fund, the net investment income per share and
the ratios would have been:
Net investment income ......... $ 0.61 $ 0.60 $ 0.20
RATIOS (TO AVERAGE NET ASSETS):
Expenses .................... 1.17% 1.24% 0.95%<F8>
Net investment income ....... 6.23% 5.99% 5.43%<F8>
</FN>
<PAGE>
<CAPTION>
FINANCIAL HIGHLIGHTS [continued]
TENNESSEE FUND [continued]
--------------------------------------
YEAR ENDED YEAR ENDED
MARCH 31, JANUARY 31,
--------------------------- ------------
1995 1994<F3> 1994<F2>
CLASS B
--------------------------------------
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
<S> <C> <C> <C>
Net asset value -- beginning of period $10.26 $10.95 $10.87
------ ------ ------
Income from investment
operations<F7> --
Net investment income<F10> ........ $ 0.48 $ 0.08 $ 0.19
Net realized and unrealized gain
(loss) on investments ............ 0.01 (0.69) 0.08
------ ------ ------
Total from investment operations $ 0.49 $(0.61) $ 0.27
------ ------ ------
Less distributions declared
to shareholders --
From net investment income ........ $(0.48) $(0.08) $(0.19)
From net realized gain on
investments<F5> .................. -- -- --
In excess of net investment income -- -- --
In excess of net realized gain
on investments ................... (0.01) -- --
From paid-in capital<F4> .......... -- -- --
------ ------ ------
Total distributions declared
to shareholders ................ $(0.49) $(0.08) $(0.19)
------ ------ ------
Net asset value -- end of period .... $10.26 $10.26 $10.95
====== ====== ======
Total return<F6> .................... 5.00% (5.59)%<F9> 2.48%<F9>
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA<F10>:
Expenses .......................... 1.94% 1.93%<F8> 1.93%<F8>
Net investment income ............. 4.80% 4.49%<F8> 4.20%<F8>
PORTFOLIO TURNOVER .................. 27% 4% 12%
NET ASSETS AT END OF PERIOD
(000 OMITTED) ...................... $10,006 $5,294 $3,818
<FN>
<F1> For the period from the commencement of investment operations, August 12, 1988 to January 31, 1989.
<F2> For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F3> For the two months ended March 31, 1994.
<F4> The per share distribution from paid-in capital for the year ended January 31, 1991 was $0.0013.
<F5> The per share distribution from net realized gain on investments for the year ended March 31, 1995 was $0.00139
for Class A and Class B shares.
<F6> Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
<F7> Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
<F8> Annualized.
<F9> Unannualized.
</FN>
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
TEXAS FUND
------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, JANUARY 31, MARCH 31, JANUARY 31,
------------------------------------------------------------------------------------
1995 1984<F10> 1994 1993* 1995 1994<F10> 1994<F2>
---- ---- ---- ---- ---- ---- ----
CLASS A CLASS B
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period ....... $ 9.88 $10.86 $10.01 $ 9.53 $ 9.89 $10.86 $10.79
------ ------ ------ ------ ------ ------ ------
Income from investment operations<F9> --
Net investment income<F7> ................... $ 0.60 $ 0.10 $ 0.61 $ 0.57 $ 0.50 $ 0.08 $ 0.19
Net realized and unrealized gain
(loss) on investments ..... ............... 0.09 (0.99) 0.86 0.47 0.10 (0.96) 0.09
------ ------ ------ ------ ------ ------ ------
Total from investment operations ..... .... $ 0.69 $(0.89) $ 1.47 $ 1.04 $ 0.60 $(0.88) $ 0.28
------ ------ ------ ------ ------ ------ ------
Less distributions declared to shareholders --
From net investment income ................. $(0.59) $(0.09) $(0.61) $ (0.56) $(0.50) $(0.08) $(0.19)
From net realized gain on investments<F4> ... (0.03) -- (0.01) -- (0.03) -- (0.01)
In excess of net investment income<F3> ..... -- -- -- -- -- (0.01) (0.01)
In excess of net realized gain
on investments ............................ (0.03) -- -- -- (0.03) -- --
Total distributions declared
to shareholders ......................... $(0.65) $(0.09) $(0.62) $ (0.56) $(0.56) $(0.09) $(0.21)
------ ------ ------ ------ ------ ------ ------
Net asset value -- end of period ............ $ 9.92 $ 9.88 $10.86 $ 10.01 $ 9.93 $ 9.89 $10.86
====== ====== ====== ======= ====== ====== ======
Total return<F8> ............................ 7.42% (8.13)%<F6> 15.08% 11.30%<F6> 6.35% (8.19)%<F6> 2.65%<F6>
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:<F7>
Expenses ................................... 0.02% 0.00%<F5> 0.00% 0.00%<F5> 1.02% 1.00%<F5> 1.00%<F5>
Net investment income ...................... 6.16% 5.71%<F5> 5.74% 6.03%<F5> 5.14% 4.68%<F5> 4.41%<F5>
PORTFOLIO TURNOVER .......................... 104% 1% 7% 40% 104% 1% 7%
NET ASSETS AT END OF PERIOD (000 OMITTED). ... $18,318 $17,515 $18,987 $8,485 $2,273 $1,183 $956
<FN>
<F1>For the period from the commencement of investment operations, February 3, 1992 to January 31, 1993.
<F2>For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F3>The per share distributions in excess of net investment income for the two months ended March 31, 1994 and for the year ended
January 31, 1994 were $0.004 and $0.003, respectively, for Class A shares.
<F4>For the year ended January 31, 1994, the per share distribution in excess of net realized gain on investments was $0.0008 for
both Class A and Class B shares.
<F5>Annualized.
<F6>Unannualized.
<F7>The investment adviser did not impose all or a portion of its advisory, distribution or expense reimbursement fees for the
periods indicated. If these fees had been incurred by the Fund, and if the expense reimbursement agreement had not been in
effect, the net investment income per share and the ratios would have been:
<S> <C> <C> <C> <C> <C> <C> <C>
Net investment income .................... $ 0.49 $ 0.07 $ 0.44 $ 0.32 $ 0.38 $ 0.05 $ 0.11
RATIOS (TO AVERAGE NET ASSETS):
Expenses ................................ 1.17% 1.67%<F5> 1.56% 2.67%<F5> 2.24% 2.74%<F5> 2.90%<F5>
Net investment income ................... 5.01% 4.04%<F5> 4.18% 3.36%<F5> 3.92% 2.94%<F5> 2.51%<F5>
<FN>
<F8>Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F9>Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
<F10>For the two months ended March 31, 1994.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
VIRGINIA FUND
---------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
MARCH 31, JANUARY 31,
--------------------------- -----------------------------------------------------------
1995 1994<F3> 1994 1993 1992 1991 1990 1989
CLASS A
---------------------------------------------------------------------------------------
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value -- beginning of period .. $11.15 $12.07 $11.72 $11.44 $11.16 $10.97 $10.91 $10.75
------ ------ ------ ------ ------ ------ ------ ------
Income from investment operations<F5> --
Net investment income ................. $ 0.56 $ 0.10 $ 0.65 $ 0.68 $ 0.71 $ 0.73 $ 0.73 $ 0.74
Net realized and unrealized gain (loss)
on investments ....................... 0.04 (0.92) 0.56 0.30 0.34 0.19 0.06 0.16
------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations .... $ 0.60 $(0.82) $ 1.21 $ 0.98 $ 1.05 $ 0.92 $ 0.79 $ 0.90
------ ------ ------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders --
From net investment income<F7> ........ $(0.61) $(0.06) $(0.62) $(0.70) $(0.77) $(0.73) $(0.73) $(0.74)
From net realized gain on
investments<F6> ...................... (0.04) -- (0.20) -- -- -- -- --
In excess of net investment income .... -- (0.04) (0.04) -- -- -- -- --
In excess of net realized gain on
investments .......................... (0.01) -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders ....................... $(0.66) $(0.10) $(0.86) $(0.70) $(0.77) $(0.73) $(0.73) $(0.74)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value -- end of period ........ $11.09 $11.15 $12.07 $11.72 $11.44 $11.16 $10.97 $10.91
====== ====== ====== ====== ====== ====== ====== ======
Total return<F4> ........................ 5.67% (6.80)%<F2> 10.67% 8.88% 9.76% 8.74% 7.46% 8.76%
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA:
Expenses .............................. 1.16% 1.17%<F1> 1.18% 1.08% 1.08% 1.11% 1.12% 1.09%
Net investment income ................. 4.91% 5.33%<F1> 5.37% 6.02% 6.32% 6.64% 6.67% 6.91%
PORTFOLIO TURNOVER ...................... 27% 5% 22% 20% 13% 38% 41% 38%
NET ASSETS AT END OF PERIOD (000 OMITTED) $430,688 $443,580 $479,333 $399,696 $328,664 $275,202 $240,553 $270,680
- ---------------
<FN>
<F1> Annualized.
<F2> Unannualized.
<F3> For the two months ended March 31, 1994.
<F4> Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
<F5> Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
<F6> For the year ended January 31, 1993, the per share distribution from net realized gain on investments was $0.00348.
<F7> For the year ended March 31, 1995, includes a distribution in excess of net investment income of $0.002 on Class A
shares.
</FN>
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
VIRGINIA FUND
<CAPTION>
--------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JANUARY 31, YEAR ENDED MARCH 31, JANUARY 31, MARCH 31, JANUARY 31,
--------------------------- ------------------------- ----------- ----------------------- --------
1988 1987 1986 1995 1994<F5> 1994<F1> 1995 1994<F5> 1994<F2>
---- ---- ---- ---- ---- ---- ---- ---- ----
CLASS A CLASS B CLASS C
--------------------------- ------------------------------------- --------------------------------
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value --
beginning of period ..... $11.38 $10.78 $10.01 $11.14 $12.06 $12.14 $11.14 $12.06 $11.94
------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations<F9> --
Net investment income ... $ 0.72 $ 0.74 $ 0.81 $ 0.53 $ 0.09 $ 0.22 $ 0.56 $ 0.08 $ 0.02
Net realized and
unrealized gain (loss)
on investments ......... (0.57) 0.61 0.77 (0.01) (0.92) 0.01 (0.04) (0.91) 0.12
------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations ........... $ 0.15 $ 1.35 $ 1.58 $ 0.52 $(0.83) $ 0.23 $ 0.52 $(0.83) $ 0.14
------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions declared
to shareholders --
From net investment
income ................. $(0.71) $(0.75) $(0.80) $(0.53)<F6> $(0.09)<F6> $(0.21) $(0.54)<F6> $(0.09) $(0.02)<F6>
From net realized gain
on investments ......... (0.05) -- (0.01) (0.04) -- (0.0 9) (0.04) -- --
In excess of net
investment income ...... -- -- -- -- -- (0.01) -- -- --
In excess of net realized
gain on investments -- -- -- (0.01) -- -- (0.01) -- --
From paid-in capital<F7> (0.02) -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions
declared to
shareholders ......... $(0.78) $(0.75) $(0.81) $(0.58 ) $(0.09) $(0.31) $(0.59) $(0.09) $(0.02)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value --
end of period ............ $10.75 $11.38 $10.78 $11.08 $11.14 $12.06 $11.07 $11.14 $12.06
====== ====== ====== ====== ====== ====== ====== ====== ======
Total return<F8> .......... 1.61% 13.12% 16.82% 4.91% (6.92)%<F4> 4.93%<F3> 4.85% (6.91)%<F4> 17.05%<F3>
RATIOS (TO AVERAGE NET
ASSETS)/SUPPLEMENTAL DATA:
Expenses ................ 1.04% 1.02% 0.83% 1.88% 1.88%<F3> 1.82%<F3> 1.80% 1.82%<F3> 1.18%<F3>
Net investment income ... 6.75% 6.73% 8.89% 4.84% 4.52%<F3> 4.25%<F3> 4.90% 4.48%<F3> 1.79%<F3>
PORTFOLIO TURNOVER ........ 11% 20% 23% 27% 5% 22% 27% 5% 22%
NET ASSETS AT END OF PERIOD
(000 OMITTED) ..... $192,104 $181,937 $85,706 $22,007 $13,337 $10,877 $2,300 $1,760 $ 833
- ---------------
<FN>
<F1> For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F2> For the period from the commencement of offering of Class C shares, January 3, 1994 to January 31, 1994.
<F3> Annualized.
<F4> Unannualized.
<F5> For the two months ended March 31, 1994.
<F6> Includes a distribution in excess of net investment income of $0.002 on Class B and Class C shares for the periods
indicated.
<F7> For the years ended January 31, 1987 and 1986, the per share distributions from paid-in capital were $0.0005 and
$0.0015, respectively.
<F8> Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
<F9> Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
</FN>
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
WASHINGTON
------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, JANUARY 31, MARCH 31, JANUARY 31,
------------------------------------------------------------------------------------
1995 1994<F8> 1994 1993<F1> 1995 1994<F8> 1994<F2>
---- ---- ---- ---- ---- ---- ----
CLASS A CLASS B
--------------------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period ....... $ 9.29 $10.25 $ 9.54 $ 9.53 $ 9.29 $10.24 $10.26
------ ------ ------ ------ ------ ------ ------
Income from investment operations<F7> --
Net investment income<F5> .................. $ 0.57 $ 0.09 $ 0.57 $ 0.22 $ 0.48 $ 0.07 $ 0.18
Net realized and unrealized
gain (loss) on investments ................ 0.31 (0.96) 0.78 0.01 0.30 (0.94) 0.05
------ ------ ------ ------ ------ ------ ------
Total from investment operations .......... $ 0.88 $(0.87) $ 1.35 $ 0.23 $ 0.78 $(0.87) $ 0.23
------ ------ ------ ------ ------ ------ ------
Less distributions declared to shareholders --
From net investment income ................. $(0.57) $(0.09) $(0.57) $(0.22) $(0.47) $(0.08) $(0.18)
From net realized gain on investments ...... -- -- (0.07) -- -- -- (0.07)
In excess of net investment income<F9> ..... -- -- -- -- -- -- --
In excess of net realized gain on investments (0.01) -- -- -- (0.01) -- --
------ ------ ------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.58) $(0.09) $(0.64) $(0.22) $(0.48) $(0.08) $(0.25)
------ ------ ------ ------ ------ ------ ------
Net asset value -- end of period ............ $ 9.59 $ 9.29 $10.25 $ 9.54 $ 9.59 $ 9.29 $10.24
====== ====== ====== ====== ====== ====== ======
Total return<F6> ............................. 9.80% (8.47)%<F4> 14.55% 2.72%<F4> 8.72% (8.54)%<F4> 2.30%<F4>
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA<F5>:
Expenses ................................... 0.02% 0.00%<F1> 0.00% 0.00%<F1> 1.02% 1.00%<F1> 1.00%<F1>
Net investment income ...................... 6.17% 5.69%<F1> 5.63% 5.64%<F1> 5.14% 4.56%<F1> 4.28%<F1>
PORTFOLIO TURNOVER .......................... 44% 3% 26% 12% 44% 3% 26%
NET ASSETS AT END OF PERIOD (000 OMITTED). ... $15,364 $17,993 $19,208 $9,574 $2,707 $1,913 $1,528
<FN>
<F1>For the period from the commencement of investment operations, August 7, 1992 to January 31, 1993.
<F2>For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F3>Annualized.
<F4>Unannualized.
<F5>The investment adviser did not impose all or a portion of its advisory, distribution or expense reimbursement fees for the
periods indicated. If these fees had been incurred by the Fund, and if the expense reimbursement agreement had not been in
effect, the net investment income per share and the ratios would have been:
Net investment income ..... .............. $ 0.45 $ 0.07 $ 0.42 $ 0.12 $ 0.36 $ 0.05 $ 0.10
RATIOS (TO AVERAGE NET ASSETS):
Expenses ..... .......................... 1.26% 1.43%<F3> 1.46% 2.47%<F3> 2.33% 2.51%<F3> 2.79%<F3>
Net investment income ..... ............. 4.92% 4.26%<F3> 4.17% 3.17%<F3> 3.83% 3.05%<F3> 2.49%<F3>
<F6>Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F7>Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
<F8>For the two months ended March 31, 1994.
<F9>Per share distributions in excess of net investment income for the two months ended March 31, 1994 were $0.001 and $0.004 for
Class A and Class B shares, respectively.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
WEST VIRGINIA FUND
------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
MARCH 31, JANUARY 31,
-------------------- ------------------------------------------------------------
1995 1994<F3> 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
CLASS A
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period ....... $11.19 $12.06 $11.50 $11.20 $10.93 $10.72 $10.68
------ ------ ------ ------ ------ ------ ------
Income from investment operations<F5> --
Net investment income ..... ................ $ 0.62 $ 0.01 $ 0.64 $ 0.66 $ 0.70 $ 0.71 $ 0.71
Net realized and unrealized
gain (loss) on investments ..... .......... 0.03 (0.78) 0.69 0.34 0.34 0.21 0.04
------ ------ ------ ------ ------ ------ ------
Total from investment operations .......... $ 0.65 $(0.77) $ 1.33 $ 1.00 $ 1.04 $ 0.92 $ 0.75
------ ------ ------ ------ ------ ------ ------
Less distributions declared to shareholders --
From net investment income ..... ........... $(0.62) $(0.06) $(0.61) $(0.69) $(0.76) $(0.71) $(0.71)
From net realized gain on investments ..... -- -- (0.12) (0.01) (0.01) -- --
In excess of net investment income ..... ... -- (0.04) (0.04) -- -- -- --
In excess of net realized gain on investments (0.01) -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.63) $(0.10) $(0.77) $(0.70) $(0.77) $(0.71) $(0.71)
------ ------ ------ ------ ------ ------ ------
Net asset value -- end of period ..... ...... $11.21 $11.19 $12.06 $11.50 $11.20 $10.93 $10.72
====== ====== ====== ====== ======= ======= ======
Total return<F4> ..... ...................... 6.07% (6.37)%<F2> 11.80% 9.12% 9.84% 8.91% 7.26%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses ..... ............................. 1.19% 1.30%<F1> 1.24% 1.15% 1.17% 1.21% 1.22%
Net investment income ..... ................ 5.62% 5.36%<F1> 5.30% 5.97% 6.33% 6.59% 6.63%
PORTFOLIO TURNOVER ..... .................... 23% 2% 26% 19% 14% 37% 34%
NET ASSETS AT END OF PERIOD (000 OMITTED) .... $127,616 $130,726 $141,190 $115,289 $80,440 $61,984 $52,398
<FN>
<F1>Annualized.
<F2>Unannualized.
<F3>For the two months ended March 31, 1994.
<F4>Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F5>Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
WEST VIRGINIA FUND
------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
JANUARY 31, MARCH 31, JANUARY 31,
----------------------------------------- ------------------- -------------
1989 1988 1987 1986 1995 1994<F4> 1994<F1>
---- ---- ---- ---- ---- ---- ----
CLASS A CLASS B
------------------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period ....... $10.51 $11.30 $10.77 $ 9.83 $11.19 $12.06 $12.13
------ ------ ------ ------ ------ ------ ------
Income from investment operations<F7> --
Net investment income ..... ................ $ 0.77 $ 0.77 $ 0.81 $ 0.84 $ 0.53 $ 0.01 $ 0.22
Net realized and unrealized gain
(loss) on investments 0.18 (0.72) 0.56 0.96 0.04 (0.87) 0.05
------ ------ ------ ------ ------ ------ ------
Total from investment operations ..... .... $ 0.95 $ 0.05 $ 1.37 $ 1.80 $ 0.57 $(0.86) $ 0.27
------ ------ ------ ------ ------ ------ ------
Less distributions declared to shareholders --
From net investment income ..... ........... $(0.78) $(0.76) $(0.81) $(0.85) $(0.54) $(0.01) $(0.21)
From net realized gain on investments ..... -- (0.02) (0.03) (0.01) -- -- (0.12)
In excess of net investment income<F5> ..... -- -- -- -- -- -- (0.01)
In excess of net realized gain on investments -- -- -- -- (0.01) -- --
From paid-in capital<F6> ..... ............. -- (0.06) -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.78) $(0.84) $(0.84) $(0.86) $(0.55) $(0.01) $(0.34)
------ ------ ------ ------ ------ ------ ------
Net asset value -- end of period ..... ...... $10.68 $10.51 $11.30 $10.77 $11.21 $11.19 $12.06
====== ====== ====== ====== ====== ====== ======
Total return<F7> ..... ...................... 9.43% 0.76% 13.42% 19.42% 5.30% (6.48)%<F3> 5.59%<F2>
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses ..... ............................. 0.86% 0.79% 0.87% 1.00% 1.91% 2.02%<F2> 1.89%<F2>
Net investment income ..... ................ 7.01% 7.32% 7.42% 8.40% 4.87% 4.56%<F2> 4.14%<F1>
PORTFOLIO TURNOVER ..... .................... 9% 11% 9% 24% 23% 2% 26%
NET ASSETS AT END OF PERIOD (000 OMITTED) $43,026 $36,276 $34,436 $17,733 $10,046 $ 5,456 $4,530
<FN>
<F1>For the period from the commencement of offering of Class B shares, September 7, 1993, to January 31, 1994.
<F2>Annualized.
<F3>Unannualized.
<F4>For the two months ended March 31, 1994.
<F5>For the year ended March 31, 1995, the Class B distribution in excess of net investment income was $0.00051 per share.
<F6>For the years ended January 31, 1987 and 1986, the per share distributions from paid-in capital were $0.0018 and $0.0005,
respectively.
<F7>Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F8>Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
</TABLE>
3. INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE -- The investment objective of each Fund is to provide
current income exempt from federal income taxes and personal income taxes, if
any, of the State to which its name refers. Any investment involves risk and
there can be no assurance that any Fund will achieve its investment objective.
INVESTMENT POLICIES -- As a fundamental policy, each Fund seeks to achieve its
investment objective by investing its assets primarily (i.e., at least 80% of
its net assets under normal conditions) in municipal bonds and notes and other
debt instruments the interest on which is exempt from federal income taxes and
from the personal income taxes, if any, of the State to which its name refers.
These obligations are issued primarily by such States, its political
subdivisions, municipalities, agencies, instrumentalities or public authorities.
Although each Fund seeks to invest all its assets in the obligations described
in the preceding paragraph, market conditions may from time to time limit the
availability of such obligations. During periods when a Fund is unable to
purchase obligations described in the preceding paragraph, the Fund will seek to
invest its assets in Municipal Obligations (as defined below) the interest on
which would be exempt from federal income taxes, but would be subject to
personal income taxes of the State to which its name refers. Also, as a
temporary defensive measure during times of adverse market conditions, up to 50%
of the assets of a Fund may be held in cash or invested in the short-term
obligations described in paragraphs 4 and 5 below. Under normal conditions,
substantially all of the investments of each Fund will be made in:
(1) Tax-exempt securities which are rated AAA, AA, or A by Standard &
Poor's Ratings Group ("S&P"), Fitch Investors Service, Inc. ("Fitch") or
Duff & Phelps Credit Rating Co. ("Duff & Phelps") or are rated Aaa, Aa, or A
by Moody's Investors Service, Inc. ("Moody's"), or which are unrated but are
considered to have essentially the same characteristics and quality as
securities having such ratings and are issued by issuers which have other
securities rated not lower than A by S&P, Fitch or Moody's;
(2) Tax-exempt securities which are not rated and do not qualify under
paragraph 1 above or which are rated lower than the three highest grades of
S&P, Fitch or Moody's. However, not more than one-third of a Fund's total
assets will be invested in such securities;
(3) Notes of issuers having an issue of outstanding Municipal
Obligations rated AAA, AA or A by S&P or Fitch or Aaa, Aa or A by Moody's or
which are guaranteed by the U.S. Government or which are rated MIG-1 or
MIG-2 by Moody's;
(4) Obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities; and
(5) Commercial paper which is rated A-1 or A-2 by S&P or P-1 or P-2 by
Moody's (or which is unrated but which is considered to have essentially the
same characteristics and qualities as commercial paper having such ratings),
obligations (including certificates of deposit, bankers' acceptances and
repurchase agreements) of banks with $1 billion or more of assets, and cash.
From time to time, a portion of a Fund's distributions will be taxable to
shareholders, for example, distributions of income from the obligations
described in paragraphs 4 and 5 above, from capital gains, from transactions in
certain Municipal Bonds purchased at a market discount and from certain other
transactions. The Trust may purchase Municipal Obligations the interest on which
may be subject to an alternative minimum tax (for purposes of this Prospectus,
the interest thereon is nonetheless considered to be tax-exempt). See "Tax
Status." For a comparison of yields on Municipal Obligations and taxable
securities, see the Taxable Equivalent Yield Tables in Appendix A. For a general
discussion of Municipal Obligations, the risks associated with an investment
therein, and descriptions of the ratings of S&P, Fitch and Moody's of Municipal
Obligations and short-term obligations permitted as investments, see Appendix B.
As used in this Prospectus, the terms "Municipal Obligations" and "tax-exempt
securities" are used interchangeably to refer to debt instruments issued by or
on behalf of States, territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies or
instrumentalities, the interest on which is exempt from federal income taxes
(without regard to whether the interest thereon is also exempt from the personal
income taxes of any State).
LOWER RATED MUNICIPAL OBLIGATIONS -- The lower rated or unrated securities
described in paragraph 2 above, while generally providing greater income than
investments in higher rated securities, usually are high risk securities
involving greater volatility of price (especially during periods of economic
uncertainty or change) and risk to principal and income (including the
possibility of default by or bankruptcy of the issuers of such securities) than
securities in the higher rating categories and because yields vary over time, no
specific level of income can ever be assured. These lower rated high yielding
fixed income securities generally tend to reflect economic changes (and the
outlook for economic growth), short-term corporate and industry developments and
the market's perception of their credit quality (especially during times of
adverse publicity) to a greater extent than higher rated securities which react
primarily to fluctuations in the general level of interest rates, although these
lower rated fixed income securities are also affected by changes in interest
rates. In particular, securities rated BBB by S&P or Fitch or Baa by Moody's
(and comparable unrated securities) while normally exhibiting adequate
protection parameters, have speculative characteristics and changes in economic
conditions and other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than in the case of higher
rated Municipal Obligations. Securities rated lower than BBB by S&P or Fitch or
Baa by Moody's (and comparable unrated securities) (commonly referred to as
"junk bonds"), are considered speculative. While these high risk securities may
have some quality and protective characteristics, these can be expected to be
outweighed by large uncertainties or major risk exposures during times of
adverse market conditions. Furthermore, an economic downturn may result in a
higher incidence of defaults by issuers of these securities. During certain
periods, the higher yields on a Fund's lower rated high yielding fixed income
securities are paid primarily because of the increased risk of loss of principal
and income, arising from such factors as the heightened possibility of default
or bankruptcy of the issuers of such securities. Due to the fixed income
payments of these securities, a Fund may continue to earn the same level of
interest income while its net asset value declines due to portfolio losses,
which could result in an increase in the Fund's yield despite the actual loss of
principal. In addition, these lower rated or unrated high risk tax-exempt
securities are frequently traded only in markets where the number of potential
purchasers, if any, is very limited. Therefore, the judgment of the Adviser may
at times play a greater role in valuing these securities than in the case of
higher rated tax-exempt securities. This consideration may have the effect of
limiting the ability of the Trust to sell such securities for a particular Fund
at their fair value either to meet redemption requests or to respond to changes
in the economy or the financial markets. While the Adviser may refer to ratings
issued by established credit rating agencies, it is not a policy of the Funds to
rely exclusively on ratings issued by these agencies, but rather to supplement
such ratings with the Adviser's own independent and ongoing review of credit
quality. Furthermore, no minimum rating standard is required by the Funds. With
respect to those Municipal Obligations which are not rated by a major rating
agency, the Funds will be more reliant on the Adviser's judgment, analysis and
experience than would be the case if such Municipal Obligations were rated. To
the extent a Fund invests in these lower rated securities, the achievement of
its investment objective may be more dependent on the Adviser's own credit
analysis than in the case of an investment in higher quality bonds. In
evaluating the creditworthiness of an issue, whether rated or unrated, the
Adviser may take into consideration, among other things, the issuer's financial
resources, its sensitivity to economic conditions and trends, the operating
history of and the community support for the facility financed by the issue, the
ability of the issuer's management and regulatory matters.
See Appendix C to this Prospectus for charts indicating the composition of the
bond portion of the portfolio of each Fund for its fiscal year ended March 31,
1995 with the debt securities separated into rating categories.
Although higher quality tax-exempt securities may produce lower yields, they are
generally more marketable. To protect the capital of shareholders of a Fund
under adverse market conditions, a Fund may from time to time deem it prudent to
hold cash or to purchase higher quality securities or taxable short-term
obligations with a resultant decrease in yield or increase in the proportion of
taxable income.
NON-DIVERSIFIED STATUS -- Each Fund is a "non-diversified" series of the Trust
which means that more than 5% of the assets of each Fund may be invested in the
obligations of each of one or more issuers, subject to the diversification
requirements of the Code. Since a relatively high percentage of the assets of a
Fund may be invested in the obligations of a limited number of issuers, the
value of shares of a Fund may be more susceptible to any single economic,
political or regulatory occurrence than would be the shares of a diversified
investment company.
CHARACTERISTICS OF MUNICIPAL OBLIGATIONS -- Each Fund may invest its assets in a
relatively high percentage of municipal bonds issued by entities having similar
characteristics. The issuers may pay their interest obligations from revenue of
similar projects such as multi-family housing, nursing homes, electric utility
systems, hospitals or life care facilities. This too may make any Fund more
susceptible to similar economic, political, or regulatory occurrences,
particularly since such issuers would likely be located in the same State. As
the similarity in issuers increases, the potential for fluctuation of the net
asset value of the Fund's shares also increases. Each Fund will only invest in
securities of issuers which it believes will make timely payments of interest
and principal.
Each Fund may invest more than 25% of its assets in industrial revenue bonds
(referred to under current tax law as private activity bonds), and also may
invest more than 25% of its assets in revenue bonds issued for housing,
including multi-family housing, health care facilities or electric utilities, at
times when the relative value of issues of such a type is considered, in the
judgment of the Adviser, to be more favorable than that of other available types
of issues, taking into consideration the particular restrictions on investment
flexibility arising from the investment objective of each Fund. Therefore,
investors should also be aware of the risks which these investments may entail.
Industrial revenue bonds are issued by various state and local agencies to
finance various projects.
If a revenue bond is secured by payments generated from a project, and the
revenue bond is also secured by a lien on the real estate comprising the
project, foreclosure by the indenture trustee on the lien for the benefit of the
bondholders creates additional risks associated with owning real estate,
including environmental risks.
Housing revenue bonds typically are issued by a state, county or local housing
authority and are secured only by the revenues of mortgages originated by the
authority using the proceeds of the bond issue. Because of the impossibility of
precisely predicting demand for mortgages from the proceeds of such an issue,
there is a risk that the proceeds of the issue will be in excess of demand,
which would result in early retirement of the bonds by the issuer. Moreover,
such housing revenue bonds depend for their repayment upon the cash flow from
the underlying mortgages, which cannot be precisely predicted when the bonds are
issued. Any difference in the actual cash flow from such mortgages from the
assumed cash flow could have an adverse impact upon the ability of the issuer to
make scheduled payments of principal and interest on the bonds, or could result
in early retirement of the bonds. Additionally, such bonds depend in part for
scheduled payments of principal and interest upon reserve funds established from
the proceeds of the bonds, assuming certain rates of return on investment of
such reserve funds. If the assumed rates of return are not realized because of
changes in interest rate levels or for other reasons, the actual cash flow for
scheduled payments of principal and interest on the bonds may be inadequate. The
financing of multi-family housing projects is affected by a variety of factors,
including satisfactory completion of construction within cost constraints, the
achievement and maintainance of a sufficient level of occupancy, sound
management of the developments, timely and adequate increases in rents to cover
increases in operating expenses, including taxes, utility rates and maintenance
costs, changes in applicable laws and governmental regulations and social and
economic trends.
Electric utilities face problems in financing large construction programs in an
inflationary period, cost increases and delay occasioned by environmental
considerations (particularly with respect to nuclear facilities), difficulty in
obtaining fuel at reasonable prices, the cost of competing fuel sources,
difficulty in obtaining sufficient rate increases and other regulatory problems,
the effect of energy conservation and difficulty of the capital market to absorb
utility debt.
Health care facilities include life care facilities, nursing homes and
hospitals. Life care facilities are alternative forms of long-term housing for
the elderly which offer residents the independence of condominium lifestyle and,
if needed, the comprehensive care of nursing home services. Bonds to finance
these facilities have been issued by various state industrial development
authorities. Since the bonds are secured only by the revenues of each facility
and not by state or local government tax payments, they are subject to a wide
variety of risks. Primarily, the projects must maintain adequate occupancy
levels to be able to provide revenues adequate to maintain debt service
payments. Moreover, in the case of life care facilities, since a portion of
housing, medical care and other services may be financed by an initial deposit,
there may be risk if the facility does not maintain adequate financial reserves
to secure estimated actuarial liabilities. The ability of management to
accurately forecast inflationary cost pressures weighs importantly in this
process. The facilities may also be affected by regulatory cost restrictions
applied to health care delivery in general, particularly state regulations or
changes in Medicare and Medicaid payments or qualifications, or restrictions
imposed by medical insurance companies. They may also face competition from
alternative health care or conventional housing facilities in the private or
public sector. Hospital bond ratings are often based on feasibility studies
which contain projections of expenses, revenues and occupancy levels. A
hospital's gross receipts and net income available to service its debt are
influenced by demand for hospital services, the ability of the hospital to
provide the services required, management capabilities, economic developments in
the service area, efforts by insurers and government agencies to limit rates and
expenses, confidence in the hospital, service area economic developments,
competition, availability and expense of malpractice insurance, Medicaid and
Medicare funding, and possible federal legislation limiting the rates of
increase of hospital charges.
Each Fund may also invest in bonds for industrial and other projects, such as
sewage or solid waste disposal or hazardous waste treatment facilities.
Financing for such projects will be subject to inflation and other general
economic factors as well as construction risks including labor problems,
difficulties with construction sites and the ability of contractors to meet
specifications in a timely manner. Because some of the materials, processes and
wastes involved in these projects may include hazardous components, there are
risks associated with their production, handling and disposal.
The net asset value of the shares of each Fund changes as the general levels of
interest rates fluctuate. When interest rates decline, the value of a portfolio
invested in fixed income securities can be expected to rise. Conversely, when
interest rates rise, the value of such a portfolio can be expected to decline.
Except for the policy identified above as fundamental, shareholder approval is
not required to change any of the foregoing investment policies, or any of the
policies discussed below.
ZERO COUPON AND DEFERRED INTEREST BONDS -- Municipal Obligations in which the
Funds may invest also include zero coupon bonds and deferred interest bonds.
Zero coupon bonds and deferred interest bonds are debt obligations which are
issued at a significant discount from face value. While zero coupon bonds do not
require the periodic payment of interest, deferred interest bonds provide for a
period of delay before the regular payment of interest begins. The discount
approximates the total amount of interest the bonds will accrue and compound
over the period until maturity or the first interest payment date at a rate of
interest reflecting the market rate of the security at the time of issuance.
Zero coupon bonds and deferred interest bonds benefit the issuer by mitigating
its need for cash to meet debt service, but also require a higher rate of return
to attract investors who are willing to defer receipt of such cash. Such
investments may experience greater volatility in market value than debt
obligations which make regular payments of interest. Each Fund will accrue
income on such investments for tax and accounting purposes, which is
distributable to shareholders. Since no cash is received at the time of accrual,
a Fund may be required to liquidate other portfolio securities to satisfy its
distribution obligations.
"WHEN-ISSUED" SECURITIES -- Some new issues of tax-exempt securities may be
purchased on a "when-issued" basis, which means that the obligations will be
delivered to a Fund at a future date usually beyond customary settlement time.
The commitment to purchase an obligation for which payment will be made on a
future date may be deemed a separate security. Although the amount of tax-exempt
securities for which there may be commitments to purchase on a "when-issued"
basis is not limited, it is expected that under normal circumstances not more
than 50% of the total assets of any Fund will be committed to such purchases. A
Fund does not pay for such obligations until received and does not start earning
interest on the obligations until the contractual settlement date. Each Fund has
established a segregated account consisting of cash, short-term money market
instruments or high quality debt securities equal to the amount of the
commitments on behalf of the Fund to purchase "when-issued" securities. For
additional information concerning the purchase of securities on a "when-issued"
basis, see the Statement of Additional Information.
INDEXED SECURITIES -- The Trust may invest in indexed securities whose value is
linked to foreign currencies, interest rates, commodities, indices or other
financial indicators. Most indexed securities are short to intermediate term
fixed income securities whose values at maturity or interest rates rise or fall
according to the change in one or more specified underlying instruments. Indexed
securities may be positively or negatively indexed (i.e., their value may
increase or decrease if the underlying instrument appreciates), and may have
return characteristics similar to direct investments in the underlying
instrument or to one or more options on the underlying instrument. Indexed
securities may be more volatile than the underlying instrument itself.
SWAPS AND RELATED TRANSACTIONS -- As one way of managing its exposure to
different types of investments, each Fund may enter into interest rate swaps and
other types of available swap agreements, such as caps, collars and floors.
Swaps involve the exchange by a Fund with another party of cash payments based
upon different interest rate indexes or other prices or rates. For example, in
the typical interest rate swap, a Fund might exchange a sequence of cash
payments based on a floating rate index for cash payments based on a fixed rate.
Payments made by both parties to a swap transaction are based on a principal
amount determined by the parties.
Each Fund may also purchase and sell caps, floors and collars. In a typical cap
or floor agreement, one party agrees to make payments only under specified
circumstances, usually in return for payment of a fee by the counterparty. For
example, the purchase of an interest rate cap entitles the buyer, to the extent
that a specified index exceeds a predetermined interest rate, to receive
payments of interest on a contractually-based principal amount from the
counterparty selling such interest rate cap. The sale of an interest rate floor
obligates the seller to make payments to the extent that a specified interest
rate falls below an agreed-upon level. A collar arrangement combines elements of
buying a cap and selling a floor.
Swap agreements will tend to shift a Fund investment exposure from one type of
investment to another. Caps and floors have an effect similar to buying or
writing options. Depending on how they are used, swap agreements may increase or
decrease the overall volatility of a Fund's investments and its share price and
yield.
Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risks assumed. As a
result, swaps can be highly volatile and may have a considerable impact on a
Fund's performance. Swap agreements are subject to risks related to the
counterparty's ability to perform, and may decline in value if the
counterparty's creditworthiness deteriorates. A Fund may also suffer losses if
it is unable to terminate outstanding swap agreements or reduce its exposure
through offsetting transactions.
Swaps, caps, floors and collars are highly specialized activities which involve
certain risks. See the Statement of Additional Information for further
discussion on, and the risks involved, in, these activities.
VARIABLE AND FLOATING RATE OBLIGATIONS -- The interest rates payable on certain
securities in which a Fund may invest are not fixed and may fluctuate based upon
changes in market rates. Variable rate obligations have an interest rate which
is adjusted at predesignated periods and interest on floating rate obligations
is adjusted whenever there is a change in the market rate of interest on which
the interest rate payable is based. For additional information concerning
variable and floating rate obligations, see the Statement of Additional
Information.
INVERSE FLOATING RATE OBLIGATIONS -- Each Fund may invest in so-called "inverse
floating rate obligations" or "residual interest" bonds or other obligations or
certificates relating thereto structured to have similar features. Such
obligations generally have floating or variable interest rates that move in the
opposite direction of short-term interest rates and generally increase or
decrease in value in response to changes in short-term interest rates at a rate
which is a multiple (approximately two times) of the rate at which fixed-rate
long-term tax-exempt securities increase or decrease in response to such
changes. As a result, such obligations have the effect of providing investment
leverage and may be more volatile than long-term fixed rate tax-exempt
obligations.
PARTICIPATION INTERESTS -- From time to time, a Fund may purchase from banks
participation interests in all or part of specific holdings of Municipal
Obligations. Each participation interest is backed by an irrevocable letter of
credit or guarantee of the selling bank. Participation interests will only be
purchased if, in the opinion of counsel, interest income on such interests will
be tax-exempt when distributed as dividends to shareholders of a Fund.
RESTRICTED SECURITIES -- Each Fund may also purchase securities that are not
registered under the Securities Act of 1933, as amended (the "1933 Act")
("restricted securities"), but can be offered and sold to "qualified
institutional buyers" under Rule 144A under the 1933 Act ("Rule 144A
securities"). The Trust's Board of Trustees determines, based upon a continuing
review of the trading markets for a specific Rule 144A security, whether such
security is illiquid and thus subject to a Fund's limitation on investing not
more than 15% of its net assets in illiquid investments, or liquid and thus not
subject to such limitation. The Board of Trustees has adopted guidelines and
delegated to the Adviser the daily function of determining and monitoring
liquidity of Rule 144A securities. The Board, however, will retain sufficient
oversight and be ultimately responsible for the determinations. The Board will
carefully monitor each Fund's investments in Rule 144A securities, focusing on
such important factors, among others, as valuation, liquidity and availability
of information. This investment practice could have the effect of increasing the
level of illiquidity in each Fund to the extent that qualified institutional
buyers become for a time uninterested in purchasing Rule 144A securities held in
a Fund's portfolio. Subject to the Funds' 15% limitation on investments in
illiquid investments, the Funds may also invest in restricted securities that
may not be sold under Rule 144A, which presents certain risks. As a result, the
Funds might not be able to sell these securities when the Adviser wishes to do
so, or might have to sell them at less than fair value. In addition, market
quotations are less readily available. Therefore, judgment may at times play a
greater role in valuing these securities than in the case of unrestricted
securities.
OPTIONS -- Each Fund may write (i.e., sell) "covered" put and call options on
fixed income securities subject to any applicable laws. Call options written by
a Fund give the holder the right to buy the underlying securities from the Fund
at a fixed exercise price up to a stated expiration date or, in the case of
certain options, on such date. Put options written by a Fund give the holder the
right to sell the underlying securities to the Fund during the term of the
option at a fixed exercise price up to a stated expiration date or, in the case
of certain options, on such date. Call options are "covered" by a Fund, for
example, when it owns the underlying securities, and put options are "covered"
by a Fund, for example, when it has established a segregated account of cash and
high grade government securities of the Fund which can be liquidated promptly to
satisfy any obligation of the Fund to purchase the underlying securities. Each
Fund may utilize other forms of cover as well, as described in the Statement of
Additional Information. Each Fund may also write straddles (combinations of puts
and calls on the same underlying security). Such transactions generate
additional premium income but also present increased risk. See the Statement of
Additional Information.
A Fund will receive a premium from writing a put or call option, which increases
the gross income of the Fund in the event the option expires unexercised or is
closed out at a profit. The amount of the premium will reflect, among other
things, the relationship of the exercise price to the market price and
volatility of the underlying security, the remaining term of the option, supply
and demand and interest rates. By writing a call option, a Fund limits its
opportunity to profit from any increase in the market value of the underlying
security above the exercise price of the option. By writing a put option, a Fund
assumes the risk that it may be required to purchase the underlying security for
an exercise price higher than its then-current market value, resulting in a
potential capital loss unless the security subsequently appreciates in value.
A Fund may terminate an option that it has written prior to its expiration by
entering into a closing purchase transaction in which it purchases an option
having the same terms as the option written. It is possible, however, that
illiquidity in the options markets may make it difficult from time to time for a
Fund to close out its written option positions.
A Fund may also purchase put or call options in anticipation of changes in
interest rates which may adversely affect the value of its portfolio or the
prices of securities that the Fund wants to purchase at a later date. The
premium paid for a put or call option plus any transaction costs will reduce the
benefit, if any, realized by a Fund upon exercise of the option, and, unless the
price of the underlying security changes sufficiently, the option may expire
without value.
A Fund may purchase detachable call options on municipal securities, which are
options issued by an issuer of the underlying municipal securities giving the
purchaser the right to purchase the securities at a fixed price, at a stated
time in the future, or in some cases, on a future date.
In addition, each Fund may purchase warrants on fixed income securities. A
warrant on a fixed income security is a long-dated call option conveying to the
holder of the warrant the right, but not the obligation, to purchase a fixed
income security of a specific description from the issuer on a certain date or
dates (the exercise date) at a fixed exercise price.
Each Fund may write and purchase options on securities only for hedging purposes
and not in an effort to increase current income. Options on securities,
including warrants, that are written or purchased by the Funds will be traded on
U.S. exchanges and over-the-counter.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS -- Each Fund may enter into
futures contracts on fixed income securities and on indices of fixed income
securities, including municipal bond indices, any other financial indices and
any index of fixed income securities which may become available for trading, and
on Eurodollar deposits, subject to any applicable laws ("Futures Contracts").
Each Fund may, subject to any applicable laws, purchase and write options on all
such Futures Contracts ("Options on Futures Contracts"). These investments will
be used to hedge against anticipated future changes in interest rates which
otherwise might either adversely affect the value of the portfolio securities of
a Fund or adversely affect the prices of long-term bonds which are intended to
be purchased for the Fund at a later date. Such transactions may also be entered
into for non-hedging purposes, to the extent permitted by applicable law.
Futures Contracts and Options on Futures Contracts entail risks. Although the
Trust believes that use of such contracts will benefit the Funds, if the
Adviser's investment judgment about the general direction of interest rates is
incorrect, the overall performance of a Fund may be poorer than if the Fund had
not entered into any such contract.
In order to assure that each Fund will not be deemed to be a "commodity pool"
for purposes of the Commodity Exchange Act, regulations of the Commodity Futures
Trading Commission (the "CFTC") require that each Fund enter into transactions
in Futures Contracts and Options on Futures Contracts only (i) for bona fide
hedging purposes (as defined in CFTC regulations), or (ii) for non-hedging
purposes, provided that the aggregate initial margin and premiums on such
non-hedging positions do not exceed 5% of the liquidation value of each Fund's
assets. In addition, each Fund must comply with the requirements of various
state securities laws in connection with such transactions.
Each Fund has adopted the additional policy that it will not enter into a
Futures Contract if, immediately thereafter, the value of securities and other
obligations underlying all such Fund's Futures Contracts would exceed 50% of the
value of the Fund's total assets. Moreover, a Fund will not purchase put and
call options on securities or on Futures Contracts if as a result more than 5%
of the total assets of the Fund would be invested in such options.
Futures Contracts and Options on Futures Contracts that are entered into by a
Fund will be traded on U.S. exchanges.
RISK FACTORS -- Although the Funds will enter into certain transactions in
options, Futures Contracts and Options on Futures Contracts for hedging
purposes, all subject to applicable laws, such transactions nevertheless involve
risks. For example, a lack of correlation between the instrument underlying an
option or Futures Contract and the assets being hedged, or unexpected adverse
price movements, could render a Fund's hedging strategy unsuccessful and could
result in losses. In addition, there can be no assurance that a liquid secondary
market will exist for any contract purchased or sold, and a Fund may be required
to maintain a position until exercise or expiration, which could result in
losses. Transactions in such instruments entered into for non-hedging purposes,
subject to applicable laws, involve greater risks and may result in losses which
are not offset by gains on other portfolio assets. The Statement of Additional
Information contains a further description of options, Futures Contracts and
Options on Futures Contracts, and a discussion of the risks related to
transactions therein.
Transactions in the foregoing instruments may be entered into by the Funds on
U.S. exchanges regulated by the SEC or the CFTC. Options on securities may also
be written or purchased in the over-the-counter market. Over-the-counter
transactions involve certain risks which may not be present in an exchange
environment.
Gains recognized from options and futures transactions engaged in by a Fund are
taxable to the Fund's shareholders when distributed to them.
CONCENTRATION IN STATE OBLIGATIONS -- RISKS; ADDITIONAL INFORMATION -- Because
each Fund will ordinarily invest 80% or more of its net assets in Municipal
Obligations issued by or on behalf of the State to which its name refers, each
Fund is more susceptible to factors affecting such State than is a comparable
municipal bond fund not concentrated in the obligations of issuers located in a
single state. It is also possible that there will not be sufficient availability
of suitable Municipal Obligations for each Fund to achieve its objective of
providing income and an investment exempt from state taxes. Investors should be
aware of certain additional information concerning investments in each State's
Municipal Obligations. For a discussion of this information, which does not
purport to be complete, see Appendix D.
PORTFOLIO TRADING -- Each Fund intends to fully manage its portfolio by buying
and selling securities, as well as holding securities to maturity. In managing
its portfolio, each Fund seeks to take advantage of market developments, yield
disparities and variations in the creditworthiness of issuers. For a description
of the strategies which may be used by the Funds in managing their portfolios,
which may include adjusting the average maturity of a Fund's portfolio in
anticipation of a change in interest rates, see the Statement of Additional
Information.
Distributions of gains, if any, realized from the sale of Municipal Obligations
or other securities are subject to federal income taxes and State personal
income taxes. See "Tax Status." The primary consideration in placing portfolio
security transactions with broker-dealers for execution is to obtain, and
maintain the availability of, execution at the most favorable prices and in the
most effective manner possible. Consistent with the foregoing primary
consideration, the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. (the "NASD"), and such other policies as the Trustees
may determine, the Adviser may consider sales of shares of each Fund and of the
other investment company clients of MFD as a factor in the selection of
broker-dealers to execute the portfolio transactions of any Fund. From time to
time, the Adviser may direct certain portfolio transactions to broker-dealer
firms which, in turn, have agreed to pay a portion of the Fund's operating
expenses (e.g., fees charged by the Custodian of the Fund's assets). For a
further discussion of portfolio transactions, see the Statement of Additional
Information. For the fiscal year ended March 31, 1995, the Florida, New York and
Texas Funds each had a portfolio turnover rate of over 100%; therefore,
transaction costs incurred by each Fund and the realized capital gains and
losses of each Fund may be greater than that of a fund with a lesser portfolio
turnover rate.
The Statement of Additional Information includes a listing of investment
restrictions which govern the investment policies of each Fund. A Fund's
investment limitations, policies and rating standards are generally adhered to
at the time of purchase or utilization of assets; a subsequent change in
circumstances will not be considered to result in a violation of policy.
Shareholder approval is not required to change the investment objective of any
Fund and a subsequent change in investment objective may result in the Fund
having an investment objective different from the objective which the
shareholder considered appropriate at the time of investment.
4. MANAGEMENT OF THE TRUST
INVESTMENT ADVISER -- The Trust's Board of Trustees provides broad supervision
over the affairs of each Fund. The Adviser is responsible for the management of
each Fund's assets and the officers of the Trust are responsible for its
operations. A majority of the Trustees are not affiliated with the Adviser.
The Adviser manages the assets of each Fund (other than the Arkansas,
California, Florida, Louisiana, Mississippi, Pennsylvania, Texas and Washington
Funds) pursuant to an Investment Advisory Agreement, dated August 24, 1984 (the
"Advisory Agreement"). The Adviser manages the assets of the Arkansas, Florida
and Texas Funds pursuant to separate Investment Advisory Agreements, each dated
February 1, 1992. The Adviser manages the assets of the Mississippi and
Washington Funds pursuant to separate Investment Advisory Agreements, each dated
August 1, 1992. The Adviser manages the assets of the Louisiana and Pennsylvania
Funds pursuant to separate Investment Advisory Agreements, each dated February
1, 1993. The Adviser manages the assets of the California Fund pursuant to an
Investment Advisory Agreement dated September 1, 1993. The Adviser provides
investment advisory and administrative services with respect to each Fund, as
well as office facilities and overall administrative services for the Trust.
The portfolio manager for each Fund is as follows:
<TABLE>
<CAPTION>
YEAR BECAME
PORTFOLIO MANAGER FUND PORTFOLIO MANAGER YEAR JOINED MFS
----------------- ---- ----------------- ---------------
<S> <C> <C> <C>
David B. Smith ..................California 1993 1988
Massachusetts 1993
Virginia 1993
Washington 1993
West Virginia 1994
David R. King ...................Alabama 1994 1985
Arkansas 1994
Maryland 1994
Pennsylvania 1994
South Carolina 1994
Tennessee 1994
Geoffrey L. Schechter* ..........Florida 1993 1993
Georgia 1993
Louisiana 1993
Mississippi 1993
New York 1993
North Carolina 1993
Texas 1994
</TABLE>
Messrs. Smith, King and Schechter, Vice Presidents of the Trust, are also Vice
Presidents of the Adviser.
*Prior to joining MFS in 1993, Mr. Schechter was a Senior Investment Analyst
at Liberty Mutual Insurance Company.
Subject to such policies as the Trustees may determine, the Adviser makes
investment decisions for each Fund. For these services and facilities, the
Adviser receives a management fee from the Trust on behalf of each Fund computed
and paid monthly at an annual rate equal to 0.55% of each Fund's average daily
net assets on an annualized basis for the Fund's then-current fiscal year. The
Adviser voluntarily reduced the management fee with respect to the Florida and
Mississippi Funds to 0.45% and 0.35%, respectively, of each Fund's average daily
net assets to be increased by 0.05% each calendar quarter commencing July 1,
1995 until such fee reaches 0.55% of each Fund's average daily net assets. The
Adviser has voluntarily reduced its management fee with respect to the
California, Louisiana, Pennsylvania, Texas and Washington Funds to 0.40%, 0.20%,
0.10%, 0.20% and 0.20%, respectively, of each Fund's average daily net assets
for an indefinite period of time. These fee reductions may be rescinded by the
Adviser at any time without notice to shareholders. See "Expenses" below.
For the Trust's fiscal year ended March 31, 1995, MFS received fees under the
Advisory Agreements with respect to the Funds in the following amounts: Alabama
Fund, $474,038; Arkansas Fund, $1,093,773; California Fund, $1,746,273; Florida
Fund, $599,093; Georgia Fund, $477,819; Louisiana Fund, $93,993; Maryland Fund,
$889,796; Massachusetts Fund, $1,495,879; Mississippi Fund, $478,963; New York
Fund, $894,326; North Carolina Fund, $2,592,068; Pennsylvania Fund, $119,253;
South Carolina Fund, $1,001,540; Tennessee Fund, $692,926; Texas Fund, $112,189;
Virginia Fund, $2,504,233; Washington Fund, $101,091; and West Virginia Fund,
$741,684. For the Trust's fiscal year ended March 31, 1995, MFS voluntarily
reduced its fees under the Advisory Agreements with respect to the following
Funds in the following amounts: Arkansas Fund, $152,542; California Fund,
$476,700; Florida Fund, $248,214; Louisiana Fund, $90,451; Mississippi Fund,
$283,718; New York Fund, $21,059; Pennsylvania Fund, $117,301; Texas Fund,
$108,347; and Washington Fund, $97,720. See "Expenses" below.
MFS also serves as investment adviser to each of the other MFS Funds and to
MFS/Sun Life Series Trust, MFS(R) Municipal Income Trust, MFS Multimarket Income
Trust, MFS Government Markets Income Trust, MFS Intermediate Income Trust, MFS
Charter Income Trust, MFS Special Value Trust, MFS Institutional Trust, MFS
Union Standard Trust, MFS Variable Insurance Trust, Sun Growth Variable Annuity
Fund, Inc. and seven variable accounts, each of which is a registered investment
company established by Sun Life Assurance Company of Canada (U.S.) ("Sun Life of
Canada (U.S.)") in connection with the sale of Compass-2 and Compass-3
combination fixed/variable annuity contracts. MFS and its wholly owned
subsidiary, MFS Asset Management, Inc., provide investment advice to substantial
private clients.
MFS is America's oldest mutual fund organization. MFS and its predecessor
organizations have a history of money management dating from 1924 and the
founding of the first mutual fund in the United States, Massachusetts Investors
Trust. Net assets under management of the MFS organization were approximately
$35.4 billion on behalf of approximately 1.7 million investor accounts as of
April 28, 1995. As of such date, the MFS organization managed approximately
$19.0 billion of assets in fixed income securities and fixed income securities
of MFS Asset Management, Inc., including approximately $6.5 billion of assets in
municipal securities. MFS is a wholly owned subsidiary of Sun Life of Canada
(U.S.) which in turn is a wholly owned subsidiary of Sun Life Assurance Company
of Canada ("Sun Life"). The Directors of MFS are A. Keith Brodkin, Jeffrey L.
Shames, Arnold D. Scott, John D. McNeil and John R. Gardner. Mr. Brodkin is the
Chairman, Mr. Shames is the President and Mr. Scott is the Secretary and a
Senior Executive Vice President of MFS. Messrs. McNeil and Gardner are the
Chairman and President, respectively, of Sun Life. Sun Life, a mutual life
insurance company, is one of the largest international life insurance companies
and has been operating in the United States since 1895. The executive officers
of MFS report to the Chairman of Sun Life.
A. Keith Brodkin, the Chairman and a Director of MFS, is the Chairman and
President of the Trust. Cynthia M. Brown, Robert A. Dennis, David R. King, David
B. Smith, Geoffrey L. Schechter, W. Thomas London, Stephen E. Cavan, James R.
Bordewick, Jr., and James O. Yost, all of whom are officers of MFS, are officers
of the Trust.
DISTRIBUTOR -- MFD, a wholly owned subsidiary of MFS, is the distributor of
shares of each Fund and also serves as distributor for each of the other MFS
Funds.
SHAREHOLDER SERVICING AGENT -- The Shareholder Servicing Agent, a wholly owned
subsidiary of MFS, performs transfer agency, certain dividend disbursing agency
and other services for the Trust.
5. INFORMATION CONCERNING SHARES OF THE TRUST
PURCHASES
Shares of each Fund may be purchased through any securities dealer, certain
banks or other financial institutions having selling agreements with MFD. Non-
securities dealer financial institutions will receive transaction fees that are
the same as commission fees to dealers. Securities dealers and other financial
institutions may also charge their customers fees relating to investments in the
Trust.
Each Fund currently offers Class A and Class B shares to the public. In
addition, the California Fund, the North Carolina Fund and the Virginia Fund
currently offer Class C shares to the public. These classes bear sales charges
and distribution fees in different forms and amounts as described below.
CLASS A SHARES: Class A shares are offered at net asset value per share plus an
initial sales charge (or CDSC in the case of certain purchases of $1 million or
more) as follows:
<TABLE>
<CAPTION>
SALES CHARGE* DEALER
AS A PERCENTAGE OF: ALLOWANCE
------------------------------- AS PERCENTAGE OF
AMOUNT OF NET AMOUNT AMOUNT OF
AMOUNT OF PURCHASE OFFERING PRICE INVESTED OFFERING PRICE
- ------------------ -------------- --------- --------------
<S> <C> <C> <C>
Less than $100,000 ...................................................... 4.75% 4.99% 4.00%
$100,000 or more but less than $250,000 ................................. 4.00 4.17 3.20
$250,000 or more but less than $500,000 ................................. 2.95 3.04 2.25
$500,000 or more but less than $1,000,000 ............................... 2.20 2.25 1.70
$1,000,000 or more ...................................................... None** None** See Below**
- ----------
* Because of rounding in the calculation of offering price, actual sales charges may be more or less than those calculated using
the percentages above.
**A CDSC may apply in certain instances. MFD (on behalf of the Fund) will pay a commission on purchases of $1 million or more.
(See below)
</TABLE>
Pursuant to a special arrangement, the dealer allowance as a percentage of
offering price for Class A shares of the California Fund and the New York Fund
is as follows:
SALES CHARGE DEALER ALLOWANCE
AS A PERCENTAGE AS A PERCENTAGE
OF AMOUNT OF OF AMOUNT OF
OFFERING PRICE OFFERING PRICE
-------------- --------------
4.75% 4.25%
4.00% 3.45%
2.95% 2.50%
2.20% 1.95%
This special arrangement may be revised or discontinued at any time without
notice to shareholders.
No sales charge is payable at the time of purchase of Class A shares on
investments of $1 million or more. However, a CDSC may be imposed on such
investments in the event of a share redemption within 12 months following the
share purchase, at the rate of 1% of the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital gain distributions) or
the total cost of such shares.
In determining whether a CDSC on such Class A shares is payable, and, if so, the
amount of the charge, it is assumed that shares not subject to the CDSC are the
first redeemed followed by other shares held for the longest period of time. All
investments made during a calendar month, regardless of when during the month
the investment occurred, will age one month on the last day of the month and
each subsequent month. Except as noted below, the CDSC on Class A shares will be
waived in the case of: (i) exchanges (except that if the shares acquired by
exchange were then redeemed within 12 months of the initial purchase (other than
in connection with subsequent exchanges to other MFS Funds), the charge would
not be waived); (ii) distributions to participants from a retirement plan
qualified under section 401(a) or 401(k) of the Code (a "Retirement Plan"), due
to: (a) a loan from the plan (repayments of loans, however, will constitute new
sales for purposes of assessing the CDSC); (b) "financial hardship" of the
participant in the plan, as that term is defined in Treasury Regulation Section
1.401(k)-1(d)(2), as amended from time to time; or (c) the death of a
participant in such plans; (iii) distributions from a 403(b) plan or an
Individual Retirement Account ("IRA") due to death, disability or attainment of
age 59 1/2; (iv) tax-free returns of excess contributions to an IRA; (v)
distributions by other employee benefit plans to pay benefits; and (vi) certain
involuntary redemptions and redemptions in connection with certain automatic
withdrawals from a qualified retirement plan. The CDSC on Class A shares will
not be waived, however, if the Retirement Plan withdraws from the Fund except if
that Retirement Plan has invested its assets in Class A shares of one or more of
the MFS Funds for more than 10 years from the later to occur of (i) January 1,
1993 or (ii) the date such Retirement Plan first invests its assets in Class A
shares of one or more of the MFS Funds, the CDSC on Class A shares will be
waived in the case of a redemption of all of the Retirement Plan's shares
(including shares of any other class) in all MFS Funds (i.e., all the assets of
the Retirement Plan invested in the MFS Funds are withdrawn), unless,
immediately prior to the redemption, the aggregate amount invested by the
Retirement Plan in Class A shares of the MFS Funds (excluding the reinvestment
of distributions) during the prior four year period equals 50% or more of the
total value of the Retirement Plan's assets in the MFS Funds, in which case the
CDSC will not be waived. The CDSC on Class A shares will be waived upon
redemption by a Retirement Plan where the redemption proceeds are used to pay
expenses of the Retirement Plan or certain expenses of participants under the
Retirement Plan (e.g., participant account fees), provided that the Retirement
Plan's sponsor subscribes to the MFS Fundamental 401(k) Plan(sm) or another
similar recordkeeping system made available by the Shareholder Servicing Agent.
The CDSC on Class A shares will be waived upon the transfer of registration from
shares held by a Retirement Plan through a single account maintained by the
Shareholder Servicing Agent to multiple Class A share accounts maintained by the
Shareholder Servicing Agent on behalf of individual participants in the
Retirement Plan, provided that the Retirement Plan's sponsor subscribes to the
MFS Fundamental 401(k) Plan(sm) or another similar recordkeeping system made
available by the Shareholder Servicing Agent. Any applicable CDSC will be
deferred upon an exchange of Class A shares for units of participation of the
MFS Fixed Fund (a bank collective investment fund) (the "Units"), and the CDSC
will be deducted from the redemption proceeds when such Units are subsequently
redeemed (assuming the CDSC is then payable). No CDSC will be assessed upon an
exchange of Units for Class A shares. For purposes of calculating the CDSC
payable upon redemption of Class A shares or Units acquired pursuant to one or
more exchanges, the period during which the Units are held will be aggregated
with the period during which the Class A shares are held. MFD shall receive all
CDSCs which it intends to apply for the benefit of the Fund.
The sales charge may vary depending on the number of shares of a Fund as well as
certain MFS Funds and other funds owned or being purchased, the existence of an
agreement to purchase additional shares during a 13-month period (or 36-month
period for purchases of $1 million or more) or other special purchase programs.
A description of the Right of Accumulation, Letter of Intent and the Group
Purchase privileges by which the sales charge may also be reduced is set forth
in "Shareholder Services" in the Statement of Additional Information. In
addition, MFD pays commissions to dealers who initiate and are responsible for
purchases of $1 million or more as follows: 1.00% on sales up to $5 million,
plus 0.25% on the amount in excess of $5 million. Purchases of $1 million or
more for each shareholder account will be aggregated over a 12-month period
(commencing from the date of the first such sale) for purposes of determining
the level of commissions to be paid during that period with respect to such
account.
Class A shares of each Fund may be sold at their net asset value to the officers
of the Trust, to any of the subsidiary companies of Sun Life, to eligible
Directors, officers, employees (including retired employees) and agents of MFS,
Sun Life or any of their subsidiary companies, to any trust, pension,
profit-sharing or any other benefit plan for such persons, to any trustees and
any retired trustees of any investment company for which MFD serves as
distributor or principal underwriter, and to certain family members of such
individuals and their spouses, provided such shares will not be resold except to
the Trust. Class A shares of each Fund may be sold at net asset value to any
employee, partner, officer or trustee of any sub-adviser to any MFS Fund and to
certain family members of such individuals and their spouses, or to any trust,
pension, profit-sharing or other retirement plan for the sole benefit of such
employee or representative, provided such shares will not be resold except to
the Fund. Class A shares of each Fund may also be sold at net asset value to any
employee or registered representative of any dealer or other financial
institution which has a sales agreement with MFD or its affiliates, to certain
family members of such employees or representatives and their spouses, or to any
trust, pension, profit-sharing or any other benefit plan for the sole benefit of
such employee or representative, as well as to clients of the MFS Asset
Management, Inc. Class A shares may be sold at net asset value, subject to
appropriate documentation, through a dealer where the amount invested represents
redemption proceeds from a registered open-end management investment company not
distributed or managed by MFD or its affiliates if: (i) the redeemed shares were
subject to an initial sales charge or a deferred sales charge (whether or not
actually imposed); (ii) such redemption has occurred no more than 90 days prior
to the purchase of Class A shares of the Fund; and (iii) the Fund, MFD or its
affiliates have not agreed with such company or its affiliates, formally or
informally, to sell Class A shares at net asset value or provide any other
incentive with respect to such redemption and sale. Class A shares of each Fund
may also be sold at net asset value where the amount invested represents
redemption proceeds from the MFS Fixed Fund. In addition, Class A shares of each
Fund may be sold at net asset value in connection with the acquisition or
liquidation of the assets of other investment companies or personal holding
companies. Insurance company separate accounts may also purchase Class A shares
of each Fund at their net asset value. Class A shares of the Fund may be
purchased at net asset value by retirement plans whose third party
administrators have entered into an administrative services agreement with MFD
or one or more of its affiliates to perform certain administrative services,
subject to certain operational requirements specified from time to time by MFD
or one or more of its affiliates. Class A shares of each Fund may be purchased
at net asset value through certain broker-dealers and other financial
institutions which have entered into an agreement with MFD, which includes a
requirement that such shares be sold for the benefit of clients participating in
a "wrap account" or a similar program under which such clients pay a fee to such
broker-dealer or other financial institution.
Class A shares of each Fund may be purchased at net asset value by certain
retirement plans subject to the Employee Retirement Income Security Act of 1974,
as amended, subject to the following:
(i) The sponsoring organization must demonstrate to the satisfaction of MFD
that either (a) the employer has at least 25 employees or (b) the aggregate
purchases by the retirement plan of Class A shares of the MFS Funds will be in
an amount of at least $250,000 within a reasonable period of time, as
determined by MFD in its sole discretion; and
(ii) a CDSC of 1% will be imposed on such purchases in the event of certain
redemption transactions within 12 months following such purchases.
Dealers who initiate and are responsible for purchases of Class A shares of a
Fund in this manner will be paid a commission by MFD, as follows: 1.00% on sales
up to $5 million, plus 0.25% on the amount in excess of $5 million; provided,
however, that MFD may pay a commission, on sales in excess of $5 million to
certain retirement plans, of 1.00% to certain dealers which, at MFD's
invitation, enter into an agreement with MFD in which the dealer agrees to
return any commission paid to it on the sale (or on a pro rata portion thereof)
if the shareholder redeems his or her shares within a period of time after
purchase as specified by MFD. Purchases of $1 million or more for each
shareholder account will be aggregated over a 12-month period (commencing from
the date of the first such purchase) for purposes of determining the level of
commissions to be paid during that period with respect to such account. Class A
shares of each Fund may be sold at net asset value through the automatic
reinvestment of Class A and Class B periodic distributions which constitute
required withdrawals from qualified retirement plans. Furthermore, Class A
shares of each Fund may be sold at net asset value through the automatic
reinvestment of distributions of dividends and capital gains of other MFS Funds
pursuant to the Distribution Investment Program (see "Shareholder Services" in
the Statement of Additional Information).
CLASS B SHARES: Class B shares of each Fund are offered at net asset value
without an initial sales charge but subject to a CDSC as follows:
YEAR OF CONTINGENT
REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE
-------------- --------------
First .............................................. 4%
Second ............................................. 4%
Third .............................................. 3%
Fourth ............................................. 3%
Fifth .............................................. 2%
Sixth .............................................. 1%
Seventh and following .............................. 0%
For Class B shares purchased prior to January 1, 1993, each Fund imposes a CDSC
as a percentage of original purchase price or redemption proceeds, as
applicable:
YEAR OF CONTINGENT
REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE
-------------- --------------
First .............................................. 6%
Second ............................................. 5%
Third .............................................. 4%
Fourth ............................................. 3%
Fifth .............................................. 2%
Sixth .............................................. 1%
Seventh and following .............................. 0%
No CDSC is paid upon an exchange of shares. For purposes of calculating the CDSC
upon redemption of shares acquired in an exchange, the purchase of shares
acquired in one or more exchanges is deemed to have occurred at the time of the
original purchase of the exchanged shares. See "Redemptions and Repurchases -
Contingent Deferred Sales Charge" below for further discussion of the CDSC.
The CDSC on Class B shares will be waived upon the death or disability (as
defined in section 72(m)(7) of the Code) of any investor, provided the account
is registered (i) in the case of a deceased individual, solely in the deceased
individual's name, (ii) in the case of a disabled individual, solely or jointly
in the disabled individual's name or (iii) in the name of a living trust for the
benefit of the deceased or disabled individual. The CDSC on Class B shares will
also be waived in the case of redemptions of shares of a Fund pursuant to a
systematic withdrawal plan. In addition, the CDSC on Class B shares will be
waived in the case of distributions from an IRA, SAR-SEP or any other retirement
plan qualified under section 401(a) or 403(b) of the Code due to death or
disability, or in the case of required minimum distributions from any such
retirement plan due to attainment of age 70 1/2. The CDSC on Class B shares will
be waived in the case of distributions from a Retirement Plan due to (i) returns
of excess contribution to the plan, (ii) retirement of a participant in the
plan, (iii) a loan from the plan (repayments of loans, however, will constitute
new sales for purposes of assessing the CDSC), (iv) "financial hardship" of the
participant in the plan, as that term is defined in Treasury Regulation Section
1.401(k)-1(d)(2), as amended from time to time, and (v) termination of
employment of the participant in the plan (excluding, however, a partial or
other termination of the plan). The CDSC on Class B shares will also be waived
upon redemptions by: (i) officers of the Trust, (ii) any of the subsidiary
companies of Sun Life, (iii) eligible Directors, officers, employees (including
retired employees) and agents of MFS, Sun Life or any of their subsidiary
companies, (iv) any trust for such persons, (v) any trustees and retired
trustees of any investment company for which MFD serves as distributor or
principal underwriter, and (vi) certain family members of such individuals and
their spouses, provided in each case that the shares will not be resold except
to the Fund. The CDSC on Class B shares will also be waived in the case of
redemptions by any employee or registered representative of any dealer or other
financial institution which has a sales agreement with MFD, by certain family
members of any such employee or representative and his or her spouse, by any
trust for the sole benefit of such employee or representative and by clients of
the MFS Asset Management, Inc. A Retirement Plan that has invested its assets in
Class B shares of one or more of the MFS Funds for more than 10 years from the
later to occur of (i) January 1, 1993 or (ii) the date the Retirement Plan first
invests its assets in Class B shares of one or more of the MFS Funds will have
the CDSC on Class B shares waived in the case of a redemption of all the
Retirement Plan's shares (including shares of any other class) in all MFS Funds
(i.e., all the assets of the Retirement Plan invested in the MFS Funds are
withdrawn), except that if, immediately prior to the redemption, the aggregate
amount invested by the Retirement Plan in Class B shares of the MFS Funds
(excluding the reinvestment of distributions) during the prior four year period
equals 50% or more of the total value of the Retirement Plan's assets in the MFS
Funds, then the CDSC will not be waived. The CDSC on Class B shares will be
waived upon redemption by a Retirement Plan where the redemption proceeds are
used to pay expenses of the Retirement Plan or certain expenses of participants
under the Retirement Plan (e.g., participant account fees), provided that the
Retirement Plan's sponsor subscribes to the MFS Fundamental 401(k) Plan(sm) or
another similar recordkeeping system made available by the Shareholder Servicing
Agent. The CDSC on Class B shares will be waived upon the transfer of
registration from shares held by a Retirement Plan through a single account
maintained by the Shareholder Servicing Agent to multiple Class B share
accounts, maintained by the Shareholder Servicing Agent on behalf of individual
participants in the Retirement Plan, provided that the Retirement Plan's sponsor
subscribes to the MFS Fundamental 401(k) Plan(sm) or another similar
recordkeeping system made available by the Shareholder Servicing Agent. The CDSC
on Class B shares may also be waived in connection with the acquisition or
liquidation of the assets of other investment companies or personal holding
companies.
CONVERSION OF CLASS B SHARES: Class B shares of each Fund that remain
outstanding for approximately eight years will convert to Class A shares of the
Fund. Shares purchased through the reinvestment of distributions paid in respect
of Class B shares will be treated as Class B shares for purposes of the payment
of the distribution and service fees under the Distribution Plan applicable to
Class B shares. However, for purposes of conversion to Class A shares, all
shares in a shareholder's account that were purchased through the reinvestment
of dividends and distributions paid in respect of Class B shares (and which have
not converted to Class A shares as provided in the following sentence) will be
held in a separate sub-account. Each time any Class B shares in the
shareholder's account (other than those in the sub-account) convert to Class A
shares, a portion of the Class B shares then in the sub-account will also
convert to Class A shares. The portion will be determined by the ratio that the
shareholder's Class B shares not acquired through reinvestment of dividends and
distributions that are converting to Class A shares bear to the shareholder's
total Class B shares not acquired through reinvestment. The conversion of Class
B shares to Class A shares is subject to the continuing availability of a ruling
from the Internal Revenue Service or an opinion of counsel that such conversion
will not constitute a taxable event for federal tax purposes. There can be no
assurance that such a ruling or opinion will be available, and the conversion of
Class B shares to Class A shares will not occur if such ruling or opinion is not
available. In such event, Class B shares would continue to be subject to higher
expenses than Class A shares for an indefinite period.
CLASS C SHARES: Class C shares of the California Fund, the North Carolina Fund
and the Virginia Fund are offered at net asset value without an initial sales
charge or a CDSC. Class C shares do not convert to any other class of shares.
The maximum investment in Class C shares that may be made is $5,000,000 per
transaction.
Class C shares are not currently available for purchase by any retirement plan
qualified under sections 401(a) or 403(b) of the Code if the retirement plan
and/or the sponsoring organization subscribe to the MFS FUNDamental 401(k) Plan
or another similar 401(a) or 403(b) recordkeeping program made available by the
Shareholder Servicing Agent.
GENERAL: Except as described below, the minimum initial investment is $1,000 per
account and the minimum additional investment is $50 per account. Accounts being
established for monthly automatic investments and under payroll savings programs
and tax-deferred retirement programs (other than IRAs) involving the submission
of investments by means of group remittal statements are subject to a $50
minimum on initial and additional investments per account. The minimum initial
investment for IRAs is $250 per account and the minimum additional investment is
$50 per account. Accounts being established for participation in the Automatic
Exchange Plan are subject to a $50 minimum on initial and additional investments
per account. There are also other limited exceptions to these minimums for
certain tax-deferred retirement programs. Any minimums may be changed at any
time at the discretion of MFD. The Trust reserves the right to cease offering
shares of any Fund at any time.
For shareholders who elect to participate in certain investment programs (e.g.,
the Automatic Investment Plan) or other shareholder services, MFD or its
affiliates may either (i) give a gift of nominal value, such as a hand-held
calculator, or (ii) make a nominal charitable contribution on their behalf.
Although all MFS Funds are generally available as an investment choice for
tax-deferred retirement programs, such as an IRA, municipal bond funds, such as
the Funds, may not be suitable for inclusion in such programs due to their
tax-exempt nature. A shareholder should consult his or her finanical or tax
adviser regarding any such investment.
A shareholder whose shares are held in the name of, or controlled by, an
investment dealer might not receive many of the privileges and services from the
Trust (such as Right of Accumulation, Letter of Intent and certain recordkeeping
services) that the Trust ordinarily provides.
Purchases and exchanges should be made for investment purposes only. The Trust
and MFD each reserve the right to reject any specific purchase order or to
restrict purchases by a particular purchaser (or group of related purchasers).
The Trust or MFD may reject or restrict any purchases of a Fund's shares by a
particular purchaser or group, for example, when such purchase is contrary to
the best interests of the Fund's other shareholders or otherwise would disrupt
the management of the Fund.
MFD may enter into an agreement with shareholders who intend to make exchanges
among certain classes of certain MFS Funds (as determined by MFD) which follow a
timing pattern, and with individuals or entities acting on such shareholders'
behalf (collectively, "market timers"), setting forth the terms, procedures and
restrictions with respect to such exchanges. In the absence of such an
agreement, it is the policy of the Fund and MFD to reject or restrict purchases
by market timers if (i) more than two exchange purchases are effected in a timed
account in the same calendar quarter or (ii) a purchase would result in shares
being held in timed accounts by market timers representing more than (x) one
percent of the Fund's net assets or (y) specified dollar amounts in the case of
certain MFS Funds which may include the Fund and which may change from time to
time. The Fund and MFD each reserve the right to request market timers to redeem
their shares at net asset value, less any applicable CDSC, if either of these
restrictions is violated.
Securities dealers and other financial institutions may receive different
compensation with respect to sales of Class A, Class B and Class C shares. In
some instances, promotional incentives to dealers may be offered only to certain
dealers who have sold or may sell significant amounts of Fund shares. From time
to time, MFD may pay dealers 100% of the applicable sales charge on sales of
Class A shares of certain specified MFS Funds sold by such dealer during a
specified sales period. In addition, MFD or its affiliates may, from time to
time, pay dealers an additional commission equal to 0.50% of the net asset value
of all the Class B shares of certain specified MFS Funds sold by such dealer
during a specified sales period. In addition, from time to time MFD, at its
expense, may provide additional commissions, compensation or promotional
incentives ("concessions") to dealers which sell shares of the Fund. The staff
of the SEC has indicated that dealers who receive more than 90% of the sales
charge may be considered underwriters. Such concessions provided by MFD may
include financial assistance to dealers in connection with preapproved
conferences or seminars, sales or training programs for invited registered
representatives, payment for travel expenses, including lodging, incurred by
registered representatives and members of their families or other invited guests
to various locations for such seminars or training programs, seminars for the
public, advertising and sales campaigns regarding one or more MFS Funds, and/or
other dealer-sponsored events. In some instances, these concessions may be
offered to dealers or only to certain dealers who have sold or may sell, during
specified periods, certain minimum amounts of shares of the Fund. From time to
time, MFD may make expense reimbursements for special training of a dealer's
registered representatives in group meetings or to help pay the expenses of
sales contests. Other concessions may be offered to the extent not prohibited by
the laws of any state or any self-regulatory agency, such as the NASD.
The Glass-Steagall Act prohibits national banks from engaging in the business of
underwriting, selling or distributing securities. Although the scope of the
prohibition has not been clearly defined, MFD believes that such Act should not
preclude banks from entering into agency agreements with MFD (as described
above). If, however, a bank were prohibited from so acting, the Trustees would
consider what actions, if any, would be necessary to continue to provide
efficient and effective shareholder services. It is not expected that
shareholders would suffer any adverse financial consequence as a result of these
occurrences. In addition, state laws on this issue may differ from the
interpretation of federal law expressed herein, and banks and financial
institutions may be required to register as broker-dealers pursuant to state
law.
EXCHANGES
Subject to the restrictions set forth below, some or all of the shares in an
account with any Fund for which payment has been received by the Fund (i.e., an
established account) may be exchanged for shares of the same class of another
Fund or any of the other MFS Funds (if available for sale) at net asset value;
however, shares of a Fund may be exchanged for shares of another State Fund only
by residents of such other State. In addition, Class C shares may be exchanged
for shares of MFS Money Market Fund at net asset value. Shares of one class may
not be exchanged for shares of any other class. Exchanges will be made only
after instructions in writing or by telephone (an "Exchange Request") are
received for an established account by the Shareholder Servicing Agent in proper
form (i.e., if in writing -- signed by the record owner(s) exactly as the shares
are registered; if by telephone -- proper account identification is given by the
dealer or shareholder of record) and each exchange must involve either shares
having an aggregate value of at least $1,000 ($50 in the case of retirement plan
participants whose sponsoring organizations subscribe to the MFS FUNDamental
401(k) Plan or another similar 401(k) recordkeeping system made available by the
Shareholder Servicing Agent) or all the shares in the account. If an Exchange
Request is received by the Shareholder Servicing Agent on any business day prior
to the close of regular trading on the New York Stock Exchange (the "Exchange"),
the exchange usually will occur on that day if all the restrictions set forth
above have been complied with at that time. No more than five exchanges may be
made in any one Exchange Request by telephone. Additional information concerning
this exchange privilege and prospectuses for any of the other MFS Funds may be
obtained from investment dealers or the Shareholder Servicing Agent. A
shareholder should read the prospectus of the other fund and consider the
differences in objectives and policies before making any exchange. For federal
and (generally) state income tax purposes, an exchange is treated as a sale of
the shares exchanged and, therefore, an exchange could result in a capital gain
or loss to the shareholder making the exchange. Exchanges by telephone are
automatically available to most non-retirement plan accounts and certain
retirement plan accounts. For further information regarding exchanges by
telephone, see "Redemptions by Telephone" below. The exchange privilege (or any
aspect of it) may be changed or discontinued and is subject to certain
limitations, including certain restrictions on purchases by market timers.
Special procedures, privileges and restrictions with respect to exchanges may
apply to market timers who enter into an agreement with MFD, as set forth in
such agreement (see "Purchases").
REDEMPTIONS AND REPURCHASES
A shareholder may withdraw all or any portion of the amount in his account on
any date on which a Fund is open for business by redeeming shares at their net
asset value or by selling such shares to the Fund through a dealer (a
repurchase). Certain purchases may, however, be subject to a CDSC in the event
of certain redemption transactions (see "Contingent Deferred Sales Charge"
below). For the convenience of shareholders, the Funds have arranged for
different procedures for redemption and repurchase. Since the net asset value of
shares of the account fluctuates, redemptions or repurchases, which are taxable
transactions, are likely to result in gains or losses to the shareholder. When a
shareholder withdraws an amount from his account, the shareholder is deemed to
have tendered for redemption a sufficient number of full and fractional shares
in his account to cover the amount withdrawn. The proceeds of a redemption or
repurchase will normally be available within seven days, except that for shares
purchased or received in exchange for shares purchased by check (including
certified checks or cashier's checks) payment of redemption proceeds may be
delayed for up to 15 days from the purchase date in an effort to assure that
such check has cleared. Payment of redemption proceeds may be delayed for up to
seven days from the redemption date if the Fund determines that such a delay
would be in the best interest of all its shareholders.
A. REDEMPTION BY MAIL -- Each shareholder has the right to redeem all or any
portion of the shares in his account by mailing or delivering to the Shareholder
Servicing Agent (see back cover for address) a stock power with a written
request for redemption, or a letter of instruction, together with the share
certificates for the shares (if any were issued) and all in "good order" for
transfer. "Good order" generally means that the stock power, written request for
redemption, letter of instruction or certificate must be endorsed by the record
owner(s) exactly as the shares are registered and the signature (s) must be
guaranteed in the manner set forth below under the caption "Signature
Guarantee." In addition, in some cases "good order" will require the furnishing
of additional documents. The Shareholder Servicing Agent may make certain de
minimis exceptions to the above requirements for redemption. Within seven days
after receipt of a redemption request by the Shareholder Servicing Agent in
"good order," the Trust will make payment in cash of the net asset value of the
shares next determined after such redemption request was received, reduced by
the amount of any applicable CDSC and the amount of any income tax required to
be withheld, except during any period in which the right of redemption is
suspended or date of payment is postponed because the Exchange is closed or
trading on the Exchange is restricted or, to the extent otherwise permitted by
the 1940 Act, if an emergency exists (See "Tax Status").
B. REDEMPTION BY TELEPHONE -- Each shareholder may redeem an amount from his
account by telephoning the Shareholder Servicing Agent toll-free at (800) 225-
2606. Shareholders wishing to avail themselves of this telephone redemption
privilege must so elect on their Account Application, designate thereon a
commercial bank and account number to receive the proceeds of such redemption,
and sign the Account Application Form with the signature(s) guaranteed in the
manner set forth below under the caption "Signature Guarantee." The proceeds of
such a redemption, reduced by the amount of any applicable CDSC described above
and the amount of any income tax required to be withheld, are mailed by check to
the designated account, without charge. As a special service, investors may
arrange to have proceeds in excess of $1,000 wired in federal funds to the
designated account. If a telephone redemption request is received by the
Shareholder Servicing Agent by the close of regular trading on the Exchange on
any business day, shares will be redeemed at the closing net asset value of the
Fund on that day. Subject to the conditions described in this section, proceeds
of a redemption are normally mailed or wired on the next business day following
the date of receipt of the order for redemption. The Shareholder Servicing Agent
will not be responsible for any losses resulting from unauthorized telephone
transactions if it follows reasonable procedures designed to verify the identity
of the caller. The Shareholder Servicing Agent will request personal or other
information from the caller, and will normally also record calls. Shareholders
should verify the accuracy of confirmation statements immediately after their
receipt.
C. REPURCHASE THROUGH A DEALER -- If a shareholder desires to sell his shares at
their net asset value through a securities dealer (a repurchase), the
shareholder can place a repurchase order with his dealer, who may charge the
shareholder a fee. Net asset value is calculated on the day the dealer places
the order with MFD, as the Fund's agent. IF THE DEALER RECEIVES THE
SHAREHOLDER'S ORDER PRIOR TO THE CLOSE OF REGULAR TRADING ON THE EXCHANGE AND
COMMUNICATES IT TO MFD ON THE SAME DAY BEFORE MFD CLOSES FOR BUSINESS, THE
SHAREHOLDER WILL RECEIVE THE NET ASSET VALUE CALCULATED ON THAT DAY REDUCED BY
THE AMOUNT OF ANY APPLICABLE CDSC AND THE AMOUNT OF ANY INCOME TAX REQUIRED TO
BE WITHHELD.
D. REDEMPTION BY CHECK -- Only Class A and Class C shares may be redeemed by
check. A shareholder owning Class A or Class C shares of a Fund may elect to
have a special account with State Street Bank and Trust Company (the "Bank") for
the purpose of redeeming Class A or Class C shares from his or her account by
check. The Bank will provide each Class A or Class C shareholder, upon request,
with forms of checks drawn on the Bank. Only shareholders having accounts in
which no share certificates have been issued will be permitted to redeem shares
by check. Checks may be made payable in any amount not less than $500.
Shareholders wishing to avail themselves of this check-writing privilege should
so request on their Account Application, must execute signature cards (for
additional information, see the Account Application) with the signatures
guaranteed in the manner set forth below under the caption "Signature
Guarantee," and must return any Class A or Class C share certificates issued to
them. Additional documentation will be required from corporations, partnerships,
fiduciaries or other such institutional investors. All checks must be signed by
the shareholder(s) of record exactly as the account is registered before the
Bank will honor them. The shareholders of joint accounts may authorize each
shareholder to redeem by check. The check may not draw on monthly dividends
which have been declared but not distributed. SHAREHOLDERS WHO PURCHASE CLASS A
AND CLASS C SHARES BY CHECK (INCLUDING CERTIFIED CHECKS OR CASHIER'S CHECKS) MAY
WRITE CHECKS AGAINST THOSE SHARES ONLY AFTER THEY HAVE BEEN ON THE FUND'S BOOKS
FOR 15 DAYS. WHEN SUCH A CHECK IS PRESENTED TO THE BANK FOR PAYMENT, A
SUFFICIENT NUMBER OF FULL AND FRACTIONAL SHARES WILL BE REDEEMED TO COVER THE
AMOUNT OF THE CHECK AND ANY APPLICABLE CDSC (IN THE CASE OF CLASS A SHARES) AND
THE AMOUNT OF ANY INCOME TAX REQUIRED TO BE WITHHELD. IF THE AMOUNT OF THE CHECK
PLUS ANY APPLICABLE CDSC AND THE AMOUNT OF ANY INCOME TAX REQUIRED TO BE
WITHHELD, IS GREATER THAN THE VALUE OF THE CLASS A OR CLASS C SHARES HELD IN THE
SHAREHOLDER'S ACCOUNT, THE CHECK WILL BE RETURNED UNPAID, AND THE SHAREHOLDER
MAY BE SUBJECT TO EXTRA CHARGES. TO AVOID DISHONOR OF CHECKS DUE TO FLUCTUATION
IN ACCOUNT VALUE, SHAREHOLDERS ARE ADVISED AGAINST REDEEMING ALL OR MOST OF
THEIR ACCOUNT BY CHECK. CHECKS SHOULD NOT BE USED TO CLOSE A FUND ACCOUNT
BECAUSE WHEN THE CHECK IS WRITTEN, THE SHAREHOLDER WILL NOT KNOW THE EXACT TOTAL
VALUE OF THE ACCOUNT ON THE DAY THE CHECK CLEARS. There is presently no charge
to the shareholder for the maintenance of this special account or for the
clearance of any checks, but each Fund and the Bank reserve the right to impose
such charges or to modify or terminate the redemption-by-check privilege at any
time.
GENERAL: Shareholders of each Fund who have redeemed their shares have a
one-time right to reinvest the redemption proceeds in the same class of shares
of any Fund or any other of the MFS Funds (if shares of such Fund are available
for sale) at net asset value (with a credit for any CDSC paid) within 90 days of
the redemption pursuant to the Reinstatement Privilege. If the shares credited
for any CDSC paid are then redeemed within six years of the initial purchase in
the case of Class B shares, or 12 months of the initial purchase in the case of
certain Class A share purchases, a CDSC will be imposed upon redemption. Such
purchases under the Reinstatement Privilege are subject to all limitations in
the Statement of Additional Information regarding this privilege.
Subject to the Trust's compliance with applicable regulations, each Fund
reserves the right to pay the redemption or repurchase price of shares of the
Fund, either totally or partially, by a distribution in kind of portfolio
securities (instead of cash). The securities so distributed would be valued at
the same amount as that assigned to them in calculating the net asset value for
the shares being sold. If a shareholder received a distribution-in-kind, the
shareholder could incur brokerage or transaction charges when converting the
securities to cash.
Due to the relatively high cost of maintaining small accounts, the Trust
reserves the right to redeem shares in any account for their then-current value
(which will be promptly paid to the shareholder) if at any time the total
investment in such account drops below $500 because of redemptions, except in
the case of accounts established for automatic investments and certain payroll
savings programs, Automatic Exchange Plan accounts and tax-deferred retirement
plans, for which there is a lower minimum investment requirement. (See
"Purchases" above.) Shareholders will be notified that the value of their
account is less than the minimum investment requirement and allowed 60 days to
make an additional investment before the redemption is processed. No CDSC will
be imposed with respect to such involuntary redemptions.
SIGNATURE GUARANTEE: In order to protect shareholders against fraud to the
greatest extent possible, each Fund requires in certain instances as indicated
above that the shareholder's signature be guaranteed. In these cases the
shareholder's signature must be guaranteed by an eligible bank, broker, dealer,
credit union, national securities exchange, registered securities association,
clearing agency or savings association. Signature guarantees shall be accepted
in accordance with policies established by the Shareholder Servicing Agent.
CONTINGENT DEFERRED SALES CHARGE: Investments in Class A or Class B shares
("Direct Purchases") will be subject to a CDSC for a period of 12 months (in the
case of purchases of $1 million or more of Class A shares) or six years (in the
case of purchases of Class B shares). Purchase of Class A shares made during a
calendar month, regardless of when during the month the investment occurred,
will age one month on the last day of the month and each subsequent month. Class
B shares purchased on or after January 1, 1993 will be aggregated on a calendar
month basis -- all transactions made during a calendar month, regardless of when
during the month they have occurred, will age one year at the close of business
on the last day of such month in the following calendar year and each subsequent
year. For Class B shares of a Fund purchased prior to January 1, 1993,
transactions will be aggregated on a calendar year basis -- all transactions
made during a calendar year, regardless of when during the year they have
occurred, will age one year at the close of business on December 31 of that year
and each subsequent year. At the time of a redemption, the amount by which the
value of a shareholder's account for a particular class represented by Direct
Purchases exceeds the sum of the six calendar year aggregations (12 months in
the case of purchases of $1 million or more of Class A shares) of Direct
Purchases may be redeemed without charge ("Free Amount"). Moreover, no CDSC is
ever assessed on additional shares acquired through the automatic reinvestment
of dividends or capital gain distributions ("Reinvested Shares").
Therefore, at the time of redemption of shares of a particular class, (i) any
Free Amount is not subject to the CDSC and (ii) the amount of redemption equal
to the then-current value of Reinvested Shares is not subject to the CDSC, but
(iii) any amount of the redemption in excess of the aggregate of the
then-current value of Reinvested Shares and the Free Amount is subject to a
CDSC. The CDSC will first be applied against the amount of Direct Purchases
which will result in any such charge being imposed at the lowest possible rate.
The CDSC to be imposed upon redemptions will be calculated as set forth in
"Purchases" above.
The applicability of a CDSC will be unaffected by exchanges or transfers of
registration, except that, with respect to transfers of registration to an IRA
rollover account, the CDSC will be waived if the shares being registered would
have been eligible for a CDSC waiver had they been redeemed.
DISTRIBUTION PLANS
The Trustees have adopted separate distribution plans for Class A, Class B and
Class C shares for each applicable Fund pursuant to Section 12(b) of the 1940
Act and Rule 12b-1 thereunder (the "Rule"), after having concluded that there is
a reasonable likelihood that the plans would benefit such Fund and its
shareholders.
CLASS A DISTRIBUTION PLAN. Each Fund's Class A Distribution Plan provides that
the Fund will pay MFD a distribution/service fee aggregating up to (but not
necessarily all of) 0.35% per annum of the average daily net assets attributable
to Class A shares of that Fund in order that MFD may pay expenses on behalf of
such Fund related to the distribution and servicing of Class A shares. Such
payments will commence, in the case of the California, Florida, Louisiana,
Mississippi, Texas and Washington Funds on such date or dates as may be
determined from time to time by the Trustees of the Trust in their discretion.
For the Pennsylvania Fund, fees payable under the Class A Distribution Plan will
become payable pursuant to such Plan when net assets attributable to Class A
shares first equal or exceed $50 million. For the Arkansas Fund, the Trustees of
the Trust have implemented a 0.10% service fee under the Arkansas Fund's Class A
Distribution Plan; other fees payable under this Class A Distribution Plan will
become payable pursuant to this Plan on such date or dates as the Trustees of
the Trust may determine. The expenses to be paid by MFD on behalf of a Fund
include a service fee to securities dealers which enter into a sales agreement
with MFD of up to 0.25% per annum of that Fund's average daily net assets
attributable to Class A shares that are owned by investors for whom such
securities dealers is the holder or dealer of record. This fee is intended to be
partial consideration for all personal services and/or account maintenance
services rendered by the dealer with respect to Class A shares. MFD may from
time to time reduce the amount of the service fee paid for shares sold prior to
a certain date. MFD, as the Trust's distributor, will also retain a distribution
fee of 0.10% per annum of a Fund's average daily net assets attributable to
Class A shares as partial consideration for services performed and expenses
incurred in the performance of MFD's obligations under its distribution
agreement with the Trust. MFD has voluntarily waived its right to receive such
0.10% per annum fee under the Class A Distribution Plan with respect to the
Alabama, Georgia and New York Funds; this waiver may be discontinued by MFD at
any time without prior notice. In addition, to the extent that the aggregate of
the foregoing fees does not exceed 0.35% per annum of the average daily net
assets of a Fund attributable to Class A shares, each Fund is permitted to pay
other distribution-related expenses, including commissions to dealers and
payments to wholesalers employed by MFD for sales at or above a certain dollar
level. Service fees may be reduced for a securities dealer that is the holder or
dealer of record for an investor who owns shares of a Fund having an aggregate
net asset value at or above a certain dollar level. Dealers may from time to
time be required to meet certain criteria in order to receive service fees. MFD
or its affiliates are entitled to retain all service fees payable under the
Class A Distribution Plan for which there is no dealer of record or for which
qualification standards have not been met as partial consideration for personal
services and/or account maintenance services performed by MFD or its affiliates
for shareholder accounts. Certain banks and other financial institutions that
have selling agreements with MFD will receive service fees that are the same as
service fees to dealers. Fees payable under the Class A Distribution Plan are
charged to, and therefore reduce income allocated to, Class A shares.
CLASS B DISTRIBUTION PLAN. Each Fund's Class B Distribution Plan provides that
the Fund will pay MFD a daily distribution fee equal on an annual basis to 0.75%
of that Fund's average daily net assets attributable to Class B shares and will
pay MFD a service fee of up to 0.25% per annum of that Fund's average daily net
assets attributable to Class B shares (which MFD will in turn pay to securities
dealers which enter into a sales agreement with MFD at a rate of up to 0.25% per
annum of that Fund's average daily net assets attributable to Class B shares
owned by investors for whom that securities dealer is the holder or dealer of
record). This service fee is intended to be additional consideration for all
personal services and/or account maintenance services rendered by the dealer
with respect to Class B shares. MFD will pay commissions to dealers of 3.75% of
the purchase price of Class B shares purchased through dealers. MFD will also
advance to dealers the first year service fee at a rate equal to 0.25% of the
purchase price of such shares and, as compensation therefor, MFD may retain the
service fee paid by a Fund with respect to such shares for the first year after
purchase. Therefore, the total amount paid to a dealer upon the sale of shares
is 4.00% of the purchase price of the shares (commission rate of 3.75% plus
service fee equal to 0.25% of the purchase price). Dealers will become eligible
for additional service fees with respect to such shares commencing in the
thirteenth month following the purchase. Except in the case of the 0.25% per
annum first year service fee, service fees under a Fund's Class B Distribution
Plan will become payable for the California, Florida, Louisiana, Mississippi,
Pennsylvania, Texas and Washington Funds on such date or dates as the Trustees
of the Trust may determine. Except in the case of the 0.25% per annum first year
service fee, service fees payable under the Arkansas Fund's Class B Distribution
Plan have been established by the Trustees of the Trust at 0.10%, subject to
increase on such date or dates as the Trustees of the Trust may determine.
Dealers may from time to time be required to meet certain criteria in order to
receive service fees. MFD or its affiliates are entitled to retain all service
fees payable under the Class B Distribution Plan for which there is no dealer of
record or for which qualification standards have not been met as partial
consideration for personal services and/or account maintenance services
performed by MFD or its affiliates for shareholder accounts. The purpose of the
distribution payments to MFD under the Class B Distribution Plan is to
compensate MFD for its distribution services to each Fund. Since MFD's
compensation is not directly tied to its expenses, the amount of compensation
received by MFD during any year may be more or less than its actual expenses.
For this reason, this type of distribution fee arrangement is characterized by
the staff of the SEC as being of the "compensation" variety. However, the Funds
are not liable for any expenses incurred by MFD in excess of the amount of
compensation it receives. The expenses incurred by MFD, including commissions to
dealers, are likely to be greater than the distribution fees for the next
several years, but thereafter such expenses may be less than the amount of the
distribution fees. Certain banks and other financial institutions that have
selling agreements with MFD will receive agency transaction and service fees
that are the same as commissions and service fees to dealers. Fees payable under
the Class B Distribution Plan are charged to, and therefore reduce, income
allocated to Class B shares. The Class B Distribution Plan also provides that
MFD will receive all CDSCs attributable to Class B shares (see "Redemptions and
Repurchases" above), which do not reduce the distribution and service fees.
CLASS C DISTRIBUTION PLAN. Each Fund's Class C Distribution Plan (applicable to
California, North Carolina and Virginia Funds only) provides that the Fund will
pay MFD a distribution fee of up to 0.75% per annum of the Fund's average daily
net assets attributable to Class C shares and will pay MFD a service fee of up
to 0.25% per annum of the Fund's average daily net assets attributable to Class
C shares (which MFD in turn pays to securities dealers which enter into a sales
agreement with MFD at a rate of up to 0.25% per annum of the Fund's daily net
assets attributable to Class C shares owned by investors for whom that
securities dealer is the holder or dealer of record). The distribution/service
fees attributable to Class C shares are designed to permit an investor to
purchase such shares through a broker-dealer without the assessment of an
initial sales charge or a CDSC while allowing MFD to compensate broker-dealers
in connection with the sale of such shares. The service fee is intended to be
additional consideration for all personal services and/or account maintenance
services rendered with respect to Class C shares. MFD or its affiliates are
entitled to retain all service fees payable under the Class C Distribution Plan
with respect to accounts for which there is no dealer of record as partial
consideration for personal services and/or account maintenance services
performed by MFD or its affiliates for shareholder accounts. The purpose of the
distribution payments to MFD under the Class C Distribution Plan is to
compensate MFD for its distribution services to the Fund. Distribution payments
under the Plan will be used by MFD to pay securities dealers a distribution fee
in an amount equal on an annual basis to 0.75% of the Fund's average daily net
assets attributable to Class C shares owned by investors for whom that
securities dealer is the holder or dealer of record. (Therefore, the total
amount of distribution/service fees paid to a dealer on an annual basis is 1.00%
of the Fund's average daily net assets attributable to Class C shares owned by
investors for whom the securities dealer is the holder or dealer of record.) MFD
also pays expenses of printing prospectuses and reports used for sales purposes,
expenses with respect to the preparation and printing of sales literature and
other distribution related expenses, including, without limitation, the
compensation of personnel and all costs of travel, office expense and equipment.
Since MFD's compensation is not directly tied to its expenses, the amount of
compensation received by MFD during any year may be more or less than its actual
expenses. For this reason, this type of distribution fee arrangement is
characterized by the staff of the SEC as being of the "compensation" variety.
However, the Funds are not liable for any expenses incurred by MFD in excess of
the amount of compensation it receives. Certain banks and other financial
institutions that have agency agreements with MFD will receive agency
transaction and service fees that are the same as distribution fees and service
fees to dealers. Fees payable under the Class C Distribution Plan are charged
to, and therefore reduce, income allocated to Class C shares.
DISTRIBUTIONS
Each Fund intends to declare daily and pay to its shareholders substantially all
of its net investment income as dividends on a monthly basis. Dividends
generally are distributed on the first business day of the following month. In
addition, a Fund may make one or more distributions during the calendar year to
its shareholders from any long-term capital gains. Each Fund also may make one
or more distributions during the calendar year to its shareholders from
short-term capital gains. Shareholders may elect to receive dividends and
capital gain distributions in either cash or additional shares of the same class
with respect to which a distribution is made (see "Tax Status" and "Shareholder
Services -- Distribution Options" below). Distributions paid by each Fund with
respect to Class A shares will generally be greater than those paid with respect
to Class B and Class C shares because expenses attributable to Class B and Class
C shares will generally be higher.
TAX STATUS
FEDERAL INCOME TAXES -- Each Fund is treated as a separate entity for federal
income tax purposes. In order to minimize the taxes that the Funds would
otherwise be required to pay, each Fund has elected to be treated and intends to
qualify each year as a "regulated investment company" under Subchapter M of the
Code, and to make distributions to its shareholders in accordance with the
timing requirements imposed by the Code, it is expected that the Fund will not
be required to pay any entity level federal income or excise taxes.
Each Fund expects that the dividends it pays to its shareholders from interest
on Municipal Obligations will be exempt from federal income tax, because each
Fund intends to satisfy certain requirements of the Code. One such requirement
is that at the close of each quarter of its taxable year, at least 50% of the
value of the Fund's total assets consists of obligations whose interest is
exempt from federal income tax. Distributions of income from capital gains, from
investments in taxable securities and from certain other transactions including
options and futures transactions and transactions involving Municipal
Obligations purchased at a market discount will be taxable to shareholders,
whether distributed in cash or in additional shares. Shareholders may not have
to pay state or local taxes on dividends derived from interest on U.S.
government obligations, although such taxes generally would be due with respect
to capital gains realized on the disposition of such obligations. Investors
should consult with their tax advisers in this regard.
Shortly after the end of each calendar year, each Fund Shareholder will be sent
a statement setting forth the federal income tax status of all distributions for
the year, including the portion (if any) taxable as ordinary income; the portion
taxable as long term capital gains; the portion, if any, representing a return
of capital (which generally is free of current taxes but results in a basis
reduction); the portion exempt from federal income taxes as "exempt-interest
dividends"; the portion, if any, that is a tax preference item under the federal
alternative minimum tax; and the amount, if any, of federal income tax withheld.
Interest on indebtedness incurred by shareholders to purchase or carry shares of
a Fund will not be deductible for federal income tax purposes. Exempt-interest
dividends are taken into account in calculating the amount of social security
and railroad retirement benefits that may be subject to federal income tax.
Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by private activity bonds should
consult their tax advisers before purchasing shares in a Fund.
Current federal tax law limits the types and volume of bonds qualifying for the
federal income tax exemption of interest and makes interest on certain
tax-exempt bonds and distributions by a Fund of such interest a tax preference
item for purposes of the individual and corporate alternative minimum tax. In
addition, all exempt-interest dividends may affect a corporate shareholder's
alternative minimum tax liability.
Each Fund intends to withhold U.S. federal income tax at the rate of 30% on
taxable dividends and any other payments that are subject to such withholding
and are made to persons who are neither citizens nor residents of the U.S.,
regardless of whether a lower rate may be permitted under an applicable treaty.
Each Fund is also required in certain circumstances to apply backup withholding
of 31% of taxable dividends and redemption proceeds paid to any shareholder
(including a shareholder who is neither a citizen nor a resident of the U.S.)
who does not furnish to the Fund certain information and certifications or who
is otherwise subject to backup withholding. However, backup withholding will not
be applied to payments which have been subject to 30% withholding. Prospective
investors should read the Account Application for information regarding backup
withholding of federal income tax and should consult their own tax advisers as
to the tax consequences of an investment in a Fund.
STATE INCOME TAXES -- The Trust is organized as a Massachusetts business trust
and, under current law, neither the Trust nor any Fund is liable for any income
or franchise tax in The Commonwealth of Massachusetts as long as it qualifies as
a regulated investment company under the Code. Set forth below are brief
descriptions of the personal income tax status of an investment in the Funds
under tax laws currently in effect in the state for which the Fund is named. A
statement setting forth the state income tax status of each Fund's distributions
made during each calendar year will be sent to shareholders annually.
ALABAMA TAXES -- The Alabama Department of Revenue has advised the Trust that
under existing Alabama law as long as the Alabama Fund qualifies as a separate
"regulated investment company" under the Code, and provided the Fund is invested
in obligations the interest on which would be exempt from Alabama personal
income taxes if held directly by an individual shareholder (such as obligations
of Alabama or its political subdivisions, of the United States or of certain
territories or possessions of the United States), dividends received from the
Alabama Fund that represent interest received by the Alabama Fund on such
obligations will be exempt from Alabama personal income taxes. To the extent
that distributions by the Alabama Fund are derived from long-term or short-term
capital gains on such obligations, or from dividends or capital gains on other
types of obligations, such distributions will not be exempt from Alabama
personal income tax.
Capital gains or losses realized from a redemption, sale or exchange of shares
of the Alabama Fund by an Alabama resident will be taken into account for
Alabama personal income tax purposes.
Interest on indebtedness incurred (directly or indirectly) by a shareholder of
the Alabama Fund to purchase or carry shares of the Alabama Fund will not be
deductible for Alabama income tax purposes.
ARKANSAS TAXES -- On December 13, 1991, the Arkansas Department of Finance and
Administration issued a letter ruling to the Arkansas Fund providing that, under
the current terms of the Arkansas Fund's Prospectus, income distributions to
Arkansas Fund shareholders, to the extent such distributions represent interest
on obligations of the State of Arkansas or obligations of the United States or
its possessions, will be exempt from Arkansas income tax.
Capital gains or losses realized from transactions in the portfolio securities
of the Arkansas Fund and distributed to shareholders and the capital gains and
losses realized by shareholders from redemptions, sales or exchanges of shares
of the Arkansas Fund will be taken into account for Arkansas income tax
purposes.
CALIFORNIA TAXES -- The California Fund believes that under existing California
law, as long as at the end of each quarter of the California Fund's taxable year
the California Fund continues to qualify for the special federal income tax
treatment afforded regulated investment companies and at least 50% of the value
of the California Fund's assets consists of obligations that, if held by an
individual, would pay interest exempt from California taxation, shareholders of
the California Fund will be able to exclude from income, for California personal
income tax purposes, "California exempt-interest dividends" received from the
California Fund during that taxable year. A "California exempt-interest
dividend" is any dividend or portion thereof of the California Fund not
exceeding the interest received by the California Fund during the taxable year
on obligations that, if held by an individual, would pay interest exempt from
California taxation (less certain direct and allocated expenses which include
amortization of acquisition premium) and so designated by written notice to
shareholders within 60 days after the close of that taxable year.
Distributions, other than "California exempt-interest dividends," by the
California Fund to California residents will be subject to California personal
income taxation. Gains realized by California residents from a redemption or
sale of shares of the California Fund will also be subject to California
personal income taxation. In general, California nonresidents, other than
certain dealers, will not be subject to California personal income taxation on
distributions by the California Fund or on gains from the redemption or sale of
shares of the California Fund, unless those shares have acquired a California
"business situs." (Such California nonresidents will, however, likely be subject
to other state or local income taxes on such distributions or gains, depending
on their residence.) Short-term capital losses realized by shareholders from a
redemption of shares of the California Fund within six months from the date of
their purchase will not be allowed for California personal income tax purposes
to the extent of any tax-exempt dividends received with respect to such shares
during such period. No deduction will be allowed for California personal income
tax purposes for interest on indebtedness incurred or continued to purchase or
carry shares of the California Fund for any taxable year of a shareholder during
which the California Fund distributes "California exempt-interest dividends."
A statement setting forth the amount of "California exempt-interest dividends"
distributed during each calendar year will be sent to shareholders annually.
FLORIDA TAXES -- Florida does not currently impose an income tax on individuals.
Thus, individual shareholders of the Florida Fund will not be subject to any
Florida state income tax on distributions received from the Florida Fund.
However, certain distributions will be taxable to corporate shareholders which
are subject to Florida corporate income tax.
Florida currently imposes an "intangibles tax" at the annual rate of 0.20% on
certain securities and other intangible assets owned by Florida residents.
Certain types of tax exempt securities of Florida issuers, U.S. Government
securities and tax exempt securities issued by certain U.S. territories and
possessions are exempt from this intangibles tax. Shares of the Florida Fund
will also be exempt from the Florida intangibles tax if the portfolio consists
exclusively of securities exempt from the intangibles tax on December 31 of the
year. If the portfolio consists of any assets on December 31 which are not so
exempt however, only the portion of the shares of the Florida Fund which relate
to securities issued by the United States and its possessions and territories
will be exempt from the Florida intangibles tax, and the remaining portion of
such shares will be fully subject to the intangibles tax, even if they partly
relate to Florida tax exempt securities.
GEORGIA TAXES -- Under existing laws, shareholders will not be subject to
Georgia income tax on distributions with respect to shares of the Georgia Fund
to the extent such distributions represent "exempt-interest dividends" for
federal income tax purposes that are attributable to interest-bearing
obligations issued by or on behalf of the State of Georgia or its political
subdivisions, or issued by territories or possessions of the United States (to
the extent federal law exempts interest on obligations of such territories or
possessions from state income taxation) which are held by the Georgia Fund.
Distributions, if any, derived from capital gain or other sources generally will
be taxable to shareholders of the Georgia Fund for Georgia income tax purposes.
Obligations of the State of Georgia and its political subdivisions and public
institutions are exempt from the Georgia intangible personal property tax.
Obligations issued by territories or possessions of the United States (to the
extent federal law exempts obligations of such territories or possessions from
state property taxation) are exempt by federal statute from taxes such as the
Georgia intangible personal property tax. It is likely, however, that the
Georgia intangible personal property tax applies at the rate of $.10 per $1,000
in value of shares of the Georgia Fund held by shareholders who are subject to
such tax.
LOUISIANA TAXES -- The Louisiana Fund is not subject to Louisiana income tax
except to the extent that obligations held by the Louisiana Fund, not including
tax-exempt obligations of the State of Louisiana, or its political or
governmental subdivisions, its governmental agencies or instrumentalities,
acquire a business situs within Louisiana.
Based upon a private ruling obtained from the Louisiana Department of Revenue
and Taxation (the "Department"), and subject to the current policies of the
Department, shareholders of the Louisiana Fund who are individuals and residents
of the State of Louisiana and who are otherwise subject to Louisiana income tax
will not be subject to Louisiana income tax on Louisiana Fund dividends to the
extent that such dividends are attributable to interest on tax-exempt
obligations of the State of Louisiana or its political or governmental
subdivisions, its governmental agencies or instrumentalities. To the extent that
distributions by the Louisiana Fund are attributable to sources other than those
described in the preceding sentence, such distributions, including but not
limited to long-term or short-term capital gains, will not be exempt from
Louisiana income tax.
Non-resident individuals maintaining their legal domicile other than in the
State of Louisiana will not be subject to Louisiana income tax on their
Louisiana Fund dividends.
To the extent a shareholder in the Louisiana Fund is a corporation otherwise
subject to the Louisiana corporation franchise tax, its investment in and
distributions from the Louisiana Fund will not be exempt but will be included in
its taxable capital in determining its Louisiana corporation franchise tax
liability.
The Louisiana Fund will notify its shareholders within 60 days after the close
of the year as to the interest derived from Louisiana obligations and exempt
from Louisiana income tax.
The Louisiana Fund's property will not be subject to Louisiana ad valorem taxes.
MARYLAND TAXES -- Holders of the Maryland Fund who are individuals,
corporations, estates or trusts and who are subject to Maryland state and local
income tax will not be subject to tax in Maryland on Maryland Fund dividends to
the extent such dividends (A) qualify as exempt-interest dividends of a
regulated investment company under Section 852(b)(5) of the Code which are
attributable to (i) interest on tax-exempt obligations of the State of Maryland
or its political subdivisions or authorities or (ii) interest on obligations of
the United States or an authority, commission, instrumentality, possession or
territory of the United States, or (B) are attributable to gain realized by the
Maryland Fund from the sale or exchange of bonds issued by Maryland or a
political subdivision of Maryland or of the United States or an authority,
commission or instrumentality of the United States.
To the extent that distributions of the Maryland Fund are attributable to
sources other than those described above, such as (i) interest on obligations
issued by states other than Maryland or (ii) income from repurchase contracts,
such distributions will not be exempt from Maryland state and local income
taxes. In addition, gain realized by a shareholder upon a redemption or exchange
of Maryland Fund shares will be subject to Maryland taxation.
In the event the Maryland Fund fails to qualify as a "regulated investment
company," the Maryland Fund would be subject to corporate Maryland income tax
and distributions would be taxable as ordinary income to the shareholders.
Maryland presently includes in taxable net income items of tax preferences as
defined in the Code. Interest paid on certain private activity bonds constitutes
a tax preference. Accordingly, subject to a threshold amount, 50% of any
distributions on the Maryland Fund attributable to such private activity bonds
will not be exempt from Maryland state and local income taxes.
Interest on indebtedness incurred (directly or indirectly) by a shareholder of
the Maryland Fund to purchase or carry shares of the Maryland Fund will not be
deductible for Maryland state and local income tax purposes to the extent such
interest is allocable to exempt-interest dividends.
MASSACHUSETTS TAXES -- Under existing Massachusetts law, as long as the
Massachusetts Fund qualifies as a separate "regulated investment company" under
the Code, (i) the Massachusetts Fund will not be liable for any income or
corporate excise tax in The Commonwealth of Massachusetts and (ii) shareholders
of the Massachusetts Fund who are subject to Massachusetts personal income
taxation will not be required to include in their Massachusetts gross income
that portion of dividends paid by the Fund which is identified in a written
notice mailed to its shareholders not later than 60 days after the close of the
Fund's tax year as (a) "exempt-interest dividends" directly attributable to
interest received by the Massachusetts Fund on obligations issued by The
Commonwealth of Massachusetts, its political subdivisions, or agencies or
instrumentalities of either of the foregoing, that is exempt from Massachusetts
taxation; (b) capital gain dividends directly attributable to gain from
obligations issued by The Commonwealth of Massachusetts, its political
subdivisions, or agencies or instrumentalities of either of the foregoing, that
is exempt from Massachusetts taxation; or (c) dividends attributable to interest
on obligations of the United States that are exempt from state taxation.
Any capital gains distributed by the Massachusetts Fund (except for cases in
which capital gains on an obligation are specifically exempted from income
taxation under the legislation authorizing issuance of the obligation) or gains
realized by the shareholder from a redemption or sale of shares of the
Massachusetts Fund, will be subject to Massachusetts personal income taxation.
MISSISSIPPI TAXES -- Interest received upon the obligations of the State of
Mississippi or political subdivisions thereof are exempt from income tax in the
State of Mississippi. A recently adopted Mississippi Income Tax Regulation
provides a pass-through of the tax-exempt character of interest received by a
regulated investment company, such as the Mississippi Fund, upon distribution to
its shareholders. Under the new Regulation, a taxpayer's pro rata portion of
interest dividends distributed by the Mississippi Fund is exempt from
Mississippi income tax to the extent that such pro rata portion represents
interest received by the Fund from governmental securities which would be exempt
for Mississippi income tax purposes if such governmental securities were
directly held by the taxpayer.
NEW YORK TAXES -- Under existing New York laws, shareholders will not be subject
to New York State nor New York City personal income taxes on New York Fund
dividends to the extent that such dividends qualify as "exempt-interest
dividends" under the Code and represent interest income attributable to
obligations of the State of New York and its political subdivisions (as well as
certain other obligations the interest on which is exempt from New York State
and New York City personal income taxes, such as, for example, certain
obligations of The Commonwealth of Puerto Rico). To the extent that New York
Fund distributions are derived from other income, including long-term or
short-term capital gains, such distributions will not be exempt from New York
State or New York City personal income tax.
Dividends on shares of the New York Fund are not excluded from net income in
determining New York State or New York City franchise taxes on corporations or
financial institutions.
Capital gains or losses realized by a shareholder from a redemption, sale or
exchange of shares of the New York Fund will be taken into account for New York
State personal income tax purposes, in the case of a New York State resident,
and for New York City personal income tax purposes, in the case of a resident of
New York City.
Interest on indebtedness incurred (directly or indirectly) by a shareholder of
the New York Fund to purchase or carry shares of the New York Fund will not be
deductible for New York State or New York City personal income tax purposes.
NORTH CAROLINA TAXES -- The North Carolina Department of Revenue has advised the
Trust that under existing North Carolina law, as long as the North Carolina Fund
qualifies as a separate "regulated investment company" under the Code and 50% or
more of the value of the total assets of the North Carolina Fund consists of
obligations whose interest is exempt from federal income tax, dividends received
from the North Carolina Fund that represent either (i) interest exempt from
federal income tax and received by the North Carolina Fund on obligations of
North Carolina or its political subdivisions; nonprofit educational institutions
organized or chartered under the laws of North Carolina; or Guam, Puerto Rico,
or the U.S. Virgin Islands including the governments thereof and their agencies,
instrumentalities and authorities, or (ii) interest received by the North
Carolina Fund on direct obligations of the United States will be exempt from
North Carolina personal income taxes. In the event the North Carolina Fund fails
to qualify as a separate "regulated investment company" or does not satisfy the
50% test, the foregoing exemption may be unavailable or substantially limited.
Any capital gains distributed by the North Carolina Fund (except for capital
gains attributable to the sale by the North Carolina Fund of an obligation the
profit from which is exempt by a North Carolina statute) or gains realized by
the shareholder from a redemption or sale of shares of the North Carolina Fund
will be subject to North Carolina personal income taxes.
Interest on indebtedness incurred (directly or indirectly) by a shareholder of
the North Carolina Fund to purchase or carry shares of the North Carolina Fund
generally will not be deductible for North Carolina income tax purposes.
PENNSYLVANIA TAXES -- Individual shareholders who are Pennsylvania residents
subject to the Pennsylvania personal income tax will not be subject to
Pennsylvania personal income tax on distributions of income and gains made by
the Fund which are attributable to obligations issued by the Commonwealth of
Pennsylvania and its political subdivisions, agencies and instrumentalities,
certain qualifying obligations of United States territories and possessions or
United States Government obligations, the interest and gains from which are
statutorily free from state taxation in the Commonwealth of Pennsylvania
("exempt obligations"). Capital gain distributions by the Fund will be subject
to Pennsylvania personal income tax.
Distributions attributable to most other sources will not be exempt from
Pennsylvania personal income tax.
Corporate shareholders who are subject to the Pennsylvania corporate net income
tax will not be subject to corporate net income tax on distributions of interest
made by the Pennsylvania Fund, provided such distributions are attributable to
obligations issued by the Commonwealth of Pennsylvania and its political
subdivisions, agencies and instrumentalities, and certain qualifying territories
and possessions of the United States, and further provided such distributions
are not included in such shareholder's Federal taxable income determined before
net operating loss carryovers and special deductions.
Shares of the Pennsylvania Fund which are held by individual shareholders who
are Pennsylvania residents and subject to the Pennsylvania county personal
property tax will be exempt from such tax to the extent that the Fund's
portfolio consists of exempt obligations on the annual assessment date. Further,
shares of the Fund which are held by individual shareholders who are residents
of the City of Pittsburgh or the School District of Pittsburgh, or both, will be
exempt from the personal property tax imposed by each such jurisdiction to the
extent that the Fund's portfolio consists of exempt obligations on the annual
assessment date. Corporations are not subject to Pennsylvania personal property
taxes.
In the case of individual shareholders who are residents of the City of
Philadelphia, distributions of interest derived from exempt obligations will not
be taxable for purposes of the Philadelphia School District Investment Net
Income Tax.
SOUTH CAROLINA TAXES -- Under existing South Carolina law, as long as the South
Carolina Fund qualifies as a separate "regulated investment company" under the
Code, shareholders of the South Carolina Fund will not be required to include in
their South Carolina gross income distributions from the South Carolina Fund to
the extent such distributions qualify as "exempt-interest dividends" as defined
in the Code, which are directly attributable to interest received by the South
Carolina Fund on tax-exempt obligations issued by the State of South Carolina or
its political subdivisions or the United States. In the event the South Carolina
Fund fails to qualify as a separate "regulated investment company," the
foregoing exemption may be unavailable or substantially limited.
Any capital gains distributed by the South Carolina Fund, or gains realized by a
shareholder from a redemption or sale of shares of the South Carolina Fund, will
be subject to South Carolina income taxation.
As intangible personal property, the shares of the South Carolina Fund are
exempt from any and all ad valorem taxation in South Carolina.
Interest on indebtedness incurred (directly or indirectly) by a shareholder of
the South Carolina Fund to purchase or carry shares of the South Carolina Fund
generally will not be deductible for South Carolina income tax purposes.
TENNESSEE TAXES -- Under existing Tennessee law, as long as the Tennessee Fund
qualifies as a separate "regulated investment company" under the Code, dividends
received from the Tennessee Fund will not be subject to the Tennessee individual
income tax, also known as the Hall Income Tax, to the extent that such dividends
represent income of the Tennessee Fund attributable to interest on (i) bonds or
securities of the United States Government or any agency or instrumentality
thereof, (ii) bonds of the State of Tennessee or any county, municipality, or
political subdivision thereof, including any agency, board, authority, or
commission, or (iii) bonds of Puerto Rico, United States Virgin Islands, or
Guam. In addition, the administrative position of the Tennessee Department of
Revenue is that dividends received from the Tennessee Fund will not be subject
to the Tennessee individual income tax to the extent that such dividends
represent income of the Tennessee Fund attributable to capital gains from the
sale, exchange, redemption, payment at maturity, or other disposition of such
bonds or securities.
Other distributions from the Tennessee Fund, including dividends attributable to
obligations of issuers in states other than Tennessee, will not be exempt from
the Tennessee individual income tax.
TEXAS TAXES -- The State of Texas currently imposes no income tax. Therefore, no
portion of any dividend received by an individual shareholder of the Texas Fund
in respect of his shares is subject to income taxation by the State or by any
political subdivision of the State. Furthermore, generally the shares are not
taxable under any property tax levied in the State; however, this exemption
under certain circumstances may not apply to insurance companies, savings and
loan associations, or certain transportation businesses (the extent of taxation
of intangible personal property owned by such entities being governed by
specific statutes). The "inheritance tax" imposed by the State upon certain
transfers of property of a deceased resident individual shareholder may be
measured in part upon the value of the shares included in the estate of such
shareholder.
The Fund is not subject to the state corporate franchise tax. However, with
respect to any corporate shareholder or limited liability company ("LLC")
shareholder of the Texas Fund (or any partnership shareholder of the Texas Fund
having corporate or LLC partners) which otherwise is subject to the state
corporate franchise tax, the shares of the Texas Fund held by the shareholder
will be taken into account in computing the "taxable capital" of the shareholder
allocated to the State, upon which such franchise tax may be measured. In
addition, such a corporate or LLC shareholder will likely be required to include
in its net taxable earned surplus, for purposes of the Texas franchise tax, all
or a portion of any gains on, or dividends which are includable in its gross
income for federal income tax purposes in respect of the shares. Certain
substantial amendments to the state corporate franchise tax were enacted in
1991. Because little authoritative judicial, legislative or administrative
interpretation of these amendments has issued, and there remain many unresolved
questions regarding their potential effect on corporate and LLC franchise
taxpayers, each corporation or LLC which is subject to the state franchise tax
(and each partnership having corporate or LLC partners which are subject to the
state franchise tax) and which is considering the purchase of shares of the
Texas Fund should consult its tax adviser regarding the effect of these
amendments.
The foregoing is a general, abbreviated summary of certain of the provisions of
the Texas statutes and administrative interpretations presently in effect as
they directly govern the taxation of shareholders of the Texas Fund. The
provisions are subject to change by legislative or administrative action, and
any such change may be retroactive with respect to Trust transactions.
VIRGINIA TAXES -- Under existing Virginia law, as long as the Virginia Fund
qualifies as a separate "regulated investment company" under the Code, and 50%
or more of the value of the total assets of the Virginia Fund consists of
obligations whose interest is exempt from federal income tax, dividends received
from the Virginia Fund that represent either (i) interest exempt from federal
income tax and received by the Virginia Fund on obligations of Virginia or its
political subdivisions or Guam, Puerto Rico, or the U.S. Virgin Islands or (ii)
interest received by the Virginia Fund on direct obligations of the United
States will be exempt from Virginia personal income taxes. In the event the
Virginia Fund fails to qualify as a separate "regulated investment company" or
does not satisfy the 50% test, the foregoing exemption may be unavailable or
substantially limited.
An individual shareholder of the Virginia Fund who is a Virginia resident will
recognize capital gains for Virginia income tax purposes to the same extent that
he would for federal income tax purposes when the Virginia Fund makes a capital
gain distribution or when the shareholder redeems or sells shares.
Interest on indebtedness incurred (directly or indirectly) by a shareholder of
the Virginia Fund to purchase or carry shares of the Virginia Fund generally
will not be deductible for Virginia income tax purposes.
WASHINGTON TAXES -- The State of Washington currently imposes no income tax.
Therefore, no portion of any dividend received by a shareholder of the
Washington Fund in respect of his shares is subject to income taxation by the
State of Washington or by any political subdivision of the State. Furthermore,
the shares are generally not taxable under any property tax levied in the State
of Washington. The State of Washington's inheritance tax imposed upon certain
transfers of property of a deceased resident individual shareholder may be
measured in part upon the value of the shares included in the estate of that
shareholder.
The State of Washington currently imposes an excise tax upon any person engaging
in business activity in Washington. This excise tax is measured by the gross
receipts of the taxpayer, but Washington law permits certain deductions.
Interest income paid on obligations of the State of Washington, its political
subdivisions, and its municipal corporations may be deducted for excise tax
purposes by any person. In addition, interest and dividend income from other
sources may generally be deducted by persons other than financial institutions
(i.e., banks, loan companies, securities or other financial businesses). Thus,
the dividends received by a shareholder (other than a financial institution) of
the Washington Fund will not be subject to Washington excise tax.
WEST VIRGINIA TAXES -- In 1993 the West Virginia Department of Tax and Revenue
issued Technical Assistance Advisory 93-002 which was declared to be of
precedential value. This Technical Assistance Advisory addresses liability for
West Virginia personal income tax on interest and dividend income received by
investors in regulated investment companies. Accordingly, under existing law, as
long as the West Virginia Fund qualifies as a separate "regulated investment
company" under the Code, that portion of exempt-interest dividends that
represents interest income received by the West Virginia Fund from obligations
of the United States and its possessions and interest or dividend income
received by the West Virginia Fund on obligations or securities of any
authority, commission or instrumentality of the United States or of the State of
West Virginia, which is exempt from West Virginia State income tax by federal or
West Virginia law, is exempt from West Virigina Personal Income Tax. This
exemption does not apply to any portion of interest income on obligations of any
state other than West Virginia, regardless of any exemption provided under
federal law. In the event the West Virginia Fund fails to qualify as a separate
"regulated investment company," the foregoing exemption may be unavailable or
substantially limited.
The Technical Assistance Advisory contains a more specific, although
nonexclusive, list of obligations and authorities which are exempt from
taxation. The Technical Assistance Advisory also confirms that interest on
indebtedness incurred (directly or indirectly) by a shareholder of the West
Virginia Fund to purchase or carry shares of the West Virginia Fund will not be
deductible for West Virginia income purposes.
NET ASSET VALUE
The net asset value per share of each class of each Fund is determined each day
during which the Exchange is open for trading. This determination is made once
each day as of the close of regular trading on the Exchange by deducting the
amount of the liabilities attributable to the class from the value of the assets
attributable to the class and dividing the difference by the number of shares of
the class outstanding. In determining such net asset value, the portfolio
securities of each Fund are valued on the basis of valuations furnished by a
pricing service, since such valuations are believed to reflect the fair value of
such securities, as described in the Statement of Additional Information. A
share's net asset value is effective for orders received by the dealer prior to
its calculation and received by MFD prior to the close of that business day.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
Each Fund has two classes of shares entitled Class A and Class B Shares of
Beneficial Interest (without par value). The California Fund, the North Carolina
Fund and the Virginia Fund also have a third class of shares entitled Class C
Shares of Beneficial Interest (without par value). The Trust presently has 19
series of shares and has reserved the right to create and issue additional
series and classes of shares. The shares of each class of each Fund participate
equally in the earnings, dividends and assets attributable to that class of
shares of the particular Fund. Shareholders are entitled to one vote for each
share held. Shares of each Fund generally vote separately, for example to
approve investment advisory agreements, but shares of all Funds vote together,
including shares of other series of the Trust, to the extent required under the
1940 Act, in the election of Trustees and selection of accountants.
Additionally, each class of shares of a Fund will vote separately on any
material increases in the fees under its Distribution Plan or on any other
matter that affects solely its class of shares, but will otherwise vote together
with all other classes of shares of the Fund on all other matters. The Trust
does not intend to hold annual shareholder meetings. The Declaration of Trust
provides that a Trustee may be removed from office in certain instances (see
"Description of Shares, Voting Rights and Liabilities" in the Statement of
Additional Information).
Each share of a class of each Fund represents an equal proportionate interest in
that Fund with each other class share, subject to the liabilities of the
particular class. Shares have no pre-emptive or conversion rights (except as set
forth above in "Purchases -- Conversion of Class B Shares"). Shares are fully
paid and non-assessable. Should a Fund be liquidated, shareholders of each class
of that Fund are entitled to share pro rata in the net assets attributable to
that class available for distribution to shareholders. Shares will remain on
deposit with the Shareholder Servicing Agent and certificates will not be issued
except in connection with pledges and assignments and in certain other limited
circumstances.
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance (e.g., fidelity bonding and errors and omissions insurance) existed
and the Trust itself was unable to meet its obligations.
PERFORMANCE INFORMATION
From time to time, the Trust will provide yield, tax-equivalent yield, current
distribution rate and total rate of return quotations for each class of shares
of each Fund and may also quote fund rankings in the relevant fund category from
various sources, such as the Lipper Analytical Services, Inc. and Wiesenberger
Investment Companies Service. Yield and tax-equivalent yield quotations are
based on the annualized net investment income per share of each class of a Fund
over a 30-day period stated as a percent of the maximum public offering price of
shares of that class on the last day of that period. The yield calculation for
Class B shares assumes no CDSC is paid. The current distribution rate for each
class is generally based upon the total amount of dividends per share paid by
the Fund to shareholders of that class during the past 12 months and is computed
by dividing the amount of such dividends by the maximum public offering price of
that class at the end of such period. Current distribution rate calculations for
Class B shares assume no CDSC is paid. The current distribution rate differs
from the yield and tax-equivalent yield calculations because it may include
distributions to shareholders from sources other than dividends and interest,
such as premium income from option writing, short-term capital gains, and return
of invested capital, and is calculated over a different period of time. Total
rate of return quotations reflect the average annual percentage change over
stated periods in the value of an investment in a class of shares of a Fund made
at the maximum public offering price of the shares of that class with all
dividends reinvested and which, if quoted for periods of six years or less, will
give effect to the imposition of the CDSC assessed upon redemptions of Class B
shares. Such total rate of return quotations may be accompanied by quotations
which do not reflect the reduction in value of the initial investment due to the
sales charge or the deduction of the CDSC, and which will thus be higher. Each
Fund's yield, tax-equivalent yield and total rate of return quotations are
based on historical performance and are not intended to indicate future
performance. Yield and tax-equivalent yield reflect only net portfolio income
allocable to a class as of a stated period of time, and current distribution
rate reflects only the rate of distributions paid by a Fund over a stated period
of time, while total rate of return reflects all components of investment return
over a stated period of time. All performance quotations for a Fund may from
time to time be used in advertisements, shareholder reports or other
communications to shareholders. For a discussion of the manner in which the
Trust will calculate yield, tax-equivalent yield, current distribution rate and
total rate of return, see the Statement of Additional Information. For further
information about each Fund's performance for the fiscal year ended March 31,
1995, please see the Trust's Annual Report. A copy of the Annual Report may be
obtained without charge by contacting the Shareholder Servicing Agent (see back
cover for address and phone number). In addition to information provided in
shareholder reports, the Trust may, in its discretion, from time to time, make a
list of all or a portion of a Fund's holdings available to investors upon
request.
EXPENSES
The Trust pays the compensation of the Trustees who are not officers of the
Adviser and all the Trust's expenses (other than those assumed by MFS or MFD),
including: all fees paid under the Investment Advisory Agreements and
Distribution Plans; governmental fees; interest charges; taxes (if any);
membership dues in the Investment Company Institute allocable to the Trust; fees
and expenses of independent auditors and of legal counsel; expenses of
preparing, printing and mailing share certificates, periodic reports, notices
and proxy statements to shareholders and to governmental officers and
commissions; brokerage and other expenses connected with the execution,
recording and settlement of portfolio security transactions; insurance premiums;
fees and expenses of State Street Bank and Trust Company, the Trust's Custodian,
for all services to the Trust, including safekeeping of funds and securities and
maintaining required books and accounts; fees and expenses of MFS Service
Center, Inc., the Shareholder Servicing Agent, and of any registrar or dividend
disbursing agent of the Trust; expenses of repurchasing and redeeming shares and
servicing shareholder accounts; expenses of calculating the net asset value of
the shares of each Fund; and expenses of shareholder meetings. Expenses relating
to the issuance, registration and qualification of shares of each Fund and the
preparation, printing and mailing of prospectuses for such purposes are borne by
the Trust except that its Distribution Agreement with MFD, as the Trust's
distributor, requires MFD to pay for prospectuses which are to be used for sales
to prospective investors. Expenses of the Trust which are not attributable to a
specific Fund are allocated among the Funds in a manner believed by management
of the Trust to be fair and equitable. The Adviser has agreed to pay the
foregoing expenses for the Louisiana, Mississippi, Pennsylvania, Texas and
Washington Funds (except for the fees paid under the Advisory Agreements and any
Distribution Plan) until the dates specified below, and to pay the expenses
after August 23, 1984 relating to the organization of the Trust, all subject to
reimbursement by such Funds and the Trust, as applicable. To accomplish such
reimbursement, the Adviser is entitled to receive an expense reimbursement fee
from each such Fund in addition to the management fees, computed and paid
monthly at the annual rate of 0.40% of the average daily net assets of the Fund
for its then-current fiscal year, with a limitation that immediately after any
such payment the aggregate expenses of each such Fund, including the management
fee but excluding any Distribution Plan fees, will not exceed .95% of its
average daily net assets. MFS has voluntarily reduced its expense reimbursement
fee to 0.00% for an indefinite period beginning with the commencement of
operations of each such Fund. This fee reduction may be rescinded by the Adviser
at any time without notice to shareholders. The expense reimbursement and fee
agreement terminates for each such Fund on the earlier of either the date on
which the payments made thereunder by such Fund equal the prior payment of such
reimbursable expenses by the Adviser or December 31, 2001 (in the case of the
Mississippi, Texas and Washington Funds), and December 31, 2002, (in the case of
the Louisiana and Pennsylvania Funds).
6. SHAREHOLDER SERVICES
Shareholders with questions concerning the shareholder services described below
or concerning other aspects of the Trust should contact the Shareholder
Servicing Agent (see back cover for address and phone number).
ACCOUNT AND CONFIRMATION STATEMENTS -- Each shareholder of each Fund will
receive confirmation statements showing the transaction activity in his account.
Cancelled checks, if any, will be sent to shareholders monthly. Each shareholder
will receive an annual statement of the federal income tax and the state
personal income tax status of reportable distributions made by the Fund during
the calendar year (see "Tax Status").
DISTRIBUTION OPTIONS -- The following options are available to all accounts
(except Systematic Withdrawal Plan accounts ) and may be changed as often as
desired by notifying the Shareholder Servicing Agent:
-- Dividends and capital gain distributions reinvested in additional shares
of that Fund. This option will be assigned if no other option is
specified.
-- Dividends in cash; capital gain distributions reinvested in additional
shares of that Fund.
-- Dividends and capital gain distributions in cash.
Reinvestments (net of any tax withholding) of dividends and capital gain
distributions will be made in additional full and fractional shares of that Fund
at the net asset value in effect at the close of business on the last business
day of the month. Dividends and capital gain distributions in amounts less than
$10 will automatically be reinvested in additional shares of the Fund. If a
shareholder has elected to receive dividends and/or capital gain distributions
in cash and the postal or other delivery service is unable to deliver checks to
the shareholder's address of record, such shareholder's distribution option will
automatically be converted to having all dividends and other distributions
reinvested in additional shares. Any request to change a distribution option
must be received by the Shareholder Servicing Agent a reasonable time prior to
the last business day of the month for a dividend or distribution in order to be
effective for that dividend or distribution. No interest will accrue on amounts
represented by uncashed distribution or redemption checks.
INVESTMENT AND WITHDRAWAL PROGRAMS -- For the convenience of shareholders, the
Trust makes available the following programs designed to enable shareholders to
add to their investment in an account with the Trust or withdraw from it with a
minimum of paper work. The programs involve no extra charge to shareholders
(other than a sales charge in the case of certain Class A share purchases) and
may be changed or discontinued at any time by a shareholder or the Trust.
LETTER OF INTENT: If a shareholder (other than group purchases as described
in the Statement of Additional Information) anticipates purchasing $100,000 or
more of Class A shares of a Fund alone or in combination with Class B or Class C
Shares of the Fund or any of the classes of the other MFS Funds or MFS Fixed
Fund (a bank collective investment fund) within a 13-month period (or 36-month
period for purchases of $1 million or more), the shareholder may obtain such
shares at the same reduced sales charge as though the total quantity were
invested in one lump sum, subject to escrow agreements and the appointment of an
attorney for redemptions from the escrow amount if the intended purchases are
not completed, by completing the Letter of Intent section of the Account
Application.
RIGHT OF ACCUMULATION: A shareholder qualifies for cumulative quantity
discounts on purchases of Class A shares when his new investment, together with
the current offering price value of all holdings of all classes of shares of
that shareholder in the MFS Funds, reaches a discount level.
DISTRIBUTION INVESTMENT PROGRAM: Shares of a particular class of a Fund may
be sold at net asset value (and without any applicable CDSC) through the
automatic reinvestment of dividend and capital gain distributions from the same
class of another MFS Fund. Furthermore, distributions made by a Fund may be
automatically invested at net asset value (and without any applicable CDSC) in
shares of the same class of another MFS Fund, if shares of such Fund are
available for sale.
SYSTEMATIC WITHDRAWAL PLAN: A shareholder may direct the Shareholder
Servicing Agent to send him (or anyone he designates) periodic payments based
upon the value of his account. Each payment under a Systematic Withdrawal Plan
(a "SWP") must be at least $100, except in certain limited circumstances. The
aggregate withdrawals of Class B shares in any year pursuant to a SWP will not
be subject to a CDSC and generally are limited to 10% of the value of the
account at the time of the establishment of the SWP. The CDSC will not be waived
in the case of SWP redemptions of Class A shares which are subject to a CDSC.
DOLLAR COST AVERAGING PROGRAMS --
AUTOMATIC INVESTMENT PLAN: Cash investments of $50 or more may be made
through a shareholder's checking account twice monthly, monthly or quarterly.
Required forms are available from the Shareholder Servicing Agent or investment
dealers.
AUTOMATIC EXCHANGE PLAN: Shareholders having account balances of at least
$5,000 in any MFS Fund may exchange their shares for the same class of shares of
the other MFS Funds, and in the case of Class C shares, for shares of MFS Money
Market Fund, under the Automatic Exchange Plan, a dollar cost averaging program.
The Automatic Exchange Plan provides for automatic monthly or quarterly
exchanges of funds from the shareholder's account in an MFS Fund for investment
in the same class of other MFS Funds selected by the shareholder provided such
shares are available for sale. Under the Automatic Exchange Plan, exchanges of
at least $50 each may be made to up to four different funds. A shareholder
should consider the objectives and policies of a fund and review its prospectus
before electing to exchange money into such fund through the Automatic Exchange
Plan. No transaction fee is imposed in connection with exchange transactions
under the Automatic Exchange Plan. However, exchanges from MFS Money Market
Fund, MFS Government Money Market Fund or Class A shares of MFS Cash Reserve
Fund will be subject to any applicable sales charge. For federal and (generally)
state income tax purposes, an exchange is treated as a sale of the shares
exchanged and, therefore, could result in a capital gain or loss to the
shareholder making the exchange. See the Statement of Additional Information for
further information concerning the Automatic Exchange Plan. Investors should
consult their tax advisers for information regarding the potential capital gain
and loss consequences of transactions under the Automatic Exchange Plan.
Because a dollar cost averaging program involves periodic purchases of shares
regardless of fluctuating share offering prices, a shareholder should consider
his financial ability to continue his purchases through periods of low price
levels. Maintaining a dollar cost averaging program concurrently with a
withdrawal program could be disadvantageous because of the sales charges
included in share purchases in the case of Class A shares and because of
assessement of the CDSC for certain share redemptions in the case of Class A
shares.
TAX-DEFERRED RETIREMENT PLANS -- Except as noted under "Purchases -- Class C
Shares," shares of the Funds may be purchased by all types of tax-deferred
retirement plans, including IRAs, SEP-IRA plans, 401(k) plans, 403(b) plans and
other corporate pension and profit-sharing plans. Investors should consult with
their tax advisers before establishing any of the tax-deferred retirement plans
described above.
----------------
The Trust's Statement of Additional Information, dated June 1, 1995 contains
more detailed information about the Trust and the Funds, including, but not
limited to, information related to (i) each Fund's investment objective,
policies and restrictions; (ii) the Trust's Trustees, officers and investment
adviser; (iii) portfolio transactions; (iv) the method used to calculate
performance quotations of each of the Funds; (v) the Class A, Class B and Class
C Distribution Plans; (vi) various services and privileges provided by the Trust
for the benefit of the shareholders of each of the Funds; (vii) determination of
net asset value of shares of each of the Funds; and (viii) certain voting rights
of shareholders of each of the Funds.
<PAGE>
APPENDIX A
TAX EQUIVALENT YIELD TABLES
(RATES FOR 1995 UNDER FEDERAL AND STATE INCOME TAX LAWS)
The tables below show the approximate taxable bond yields which are equivalent
to tax-exempt bond yields, for the ranges indicated, under federal and,
respectively, Alabama, Arkansas, California, Georgia, Louisiana, Maryland,
Massachusetts, Mississippi, New York, North Carolina, Pennsylvania, South
Carolina, Tennessee, Virginia and West Virginia personal income tax laws that
apply to 1995. The States of Florida, Texas and Washington do not currently
impose an income tax on individuals. Such yields will differ under the laws
applicable to subsequent years. Separate calculations, showing the applicable
taxable income brackets, are provided for investors who file joint returns and
for those investors who file individual returns. In each table, the effective
marginal income tax rate will be increased if personal exemptions are phased out
(for the phase out period only) and if a portion of itemized deductions is
disallowed. This increase in the marginal rates, if applicable, will cause a
corresponding increase in the equivalent taxable yields.
<TABLE>
<CAPTION>
ALABAMA
1995 TAX YEAR
- --------------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME<F1>
- ---------------------------------- INCOME TAX-EXEMPT YIELD AVERAGE COMBINED
SINGLE JOINT TAX ------------------------------------------------ FEDERAL STATE FED. & ST.
1995<F3> 1995<F3> BRACKET<F2> 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% RATE RATE RATE<F3>
- ---------------- ---------------- ----------- ------------------------------------------------ ------- -------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 23,350 19.10% 3.71% 4.94% 6.18% 7.42% 8.65% 9.89% 0.15 0.048290 0.1910
$ 0- 39,000 19.08 3.71 4.94 6.18 7.41 8.65 9.89 0.15 0.047950 0.1908
$ 23,350- 56,550 $ 39,000- 94,250 31.60 4.39 5.85 7.31 8.77 10.23 11.70 0.28 0.050000 0.3160
$ 56,550-117,950 $ 94,250-143,600 34.45 4.58 6.10 7.63 9.15 10.68 12.20 0.31 0.050000 0.3445
$117,950-256,500 $143,600-256,500 39.20 4.93 6.58 8.22 9.87 11.51 13.16 0.36 0.050000 0.3920
$256,500 & over $256,500 & over 42.62 5.23 6.97 8.71 10.46 12.20 13.94 0.396 0.050000 0.4262
<FN>
<F1> Net amount subject to Federal and Alabama personal income tax after deductions and exemptions.
<F2> Effective combined federal and state tax bracket. State rate based on the average state rate for the federal tax bracket.
<F3> Combined Federal and Alabama rate assumes itemization of state tax deduction.
</FN>
<CAPTION>
ARKANSAS
1995 TAX YEAR
- --------------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME<F1>
- ---------------------------------- INCOME TAX-EXEMPT YIELD AVERAGE COMBINED
SINGLE JOINT TAX ------------------------------------------------ FEDERAL STATE FED. & ST.
1995<F3> 1995<F3> BRACKET<F2> 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% RATE RATE RATE<F3>
- ---------------- ---------------- ----------- ------------------------------------------------ ------- -------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 23,350 18.57% 3.68% 4.91% 6.14% 7.37% 8.60% 9.82% 0.15 0.042015 0.1857
$ 0- 39,000 19.49 3.73 4.97 6.21 7.45 8.69 9.94 0.15 0.052822 0.1949
$ 23,350- 56,550 33.00 4.48 5.97 7.46 8.96 10.45 11.94 0.28 0.069503 0.3300
$ 39,000- 94,250 33.04 4.48 5.97 7.47 8.96 10.45 11.95 0.28 0.070000 0.3304
$ 56,550-117,950 $ 94,250-143,600 35.83 4.68 6.23 7.79 9.35 10.91 12.47 0.31 0.070000 0.3583
$117,950-256,500 $143,600-256,500 40.48 5.04 6.72 8.40 10.08 11.76 13.44 0.36 0.070000 0.4048
$256,500 & over $256,500 & over 43.83 5.34 7.12 8.90 10.68 12.46 14.24 0.396 0.070000 0.4383
<FN>
<F1> Net amount subject to Federal and Arkansas personal income tax after deductions and exemptions.
<F2> Effective combined federal and state tax bracket. State rate based on the average state rate for the federal tax bracket.
<F3> Combined Federal and Arkansas rate assumes itemization of state tax deduction.
</FN>
<PAGE>
<CAPTION>
CALIFORNIA
1995 TAX YEAR
- --------------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME<F1>
- ---------------------------------- INCOME TAX-EXEMPT YIELD AVERAGE COMBINED
SINGLE JOINT TAX ------------------------------------------------ FEDERAL STATE FED. & ST.
1995<F4> 1995<F4> BRACKET<F2> 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% RATE RATE RATE<F3>
- ---------------- ---------------- ----------- ------------------------------------------------ ------- -------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 23,350 17.83% 3.65% 4.87% 6.08% 7.30% 8.52% 9.74% 0.15 0.033263 0.1783
$ 0- 39,000 17.38 3.63 4.84 6.05 7.26 8.47 9.68 0.15 0.027984 0.1738
$ 23,350- 56,550 34.43 4.58 6.10 7.63 9.15 10.68 12.20 0.28 0.089305 0.3443
$ 39,000- 94,250 34.05 4.55 6.07 7.58 9.10 10.61 12.13 0.28 0.083961 0.3405
$ 56,550-117,950 37.50 4.80 6.40 8.00 9.60 11.20 12.80 0.31 0.094195 0.3750
$ 94,250-143,600 37.42 4.79 6.39 7.99 9.59 11.19 12.78 0.31 0.093000 0.3742
$117,950-256,500 42.59 5.23 6.97 8.71 10.45 12.19 13.93 0.36 0.103000 0.4259
$143,600-256,500 42.12 5.18 6.91 8.64 10.37 12.09 13.82 0.36 0.095578 0.4212
$256,500-429,858 45.64 5.52 7.36 9.20 11.04 12.88 14.72 0.396 0.100000 0.4564
$256,500 & over $429,858 & over 46.24 5.58 7.44 9.30 11.16 13.02 14.88 0.396 0.110000 0.4624
<FN>
<F1> Net amount subject to Federal and California personal income tax after deductions and exemptions.
<F2> Effective combined federal and state tax bracket. State rate based on the average state rate for the federal tax bracket.
<F3> Combined Federal and California rate assumes itemization of state tax deduction.
<F4> California tax rates are based on 1994 information, since at this time 1995 information is not available.
</FN>
<CAPTION>
FLORIDA
1995 TAX YEAR
- ------------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME<F1>
- ------------------------------------------ INCOME TAX-EXEMPT YIELD
SINGLE JOINT TAX --------------------------------------------------------- FEDERAL
1995<F3> 1995<F3> BRACKET 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% RATE
- ------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 23,350 $ 0- 39,000 15.00% 3.53% 4.71% 5.88% 7.06% 8.24% 9.41% 0.15
$ 23,350- 56,550 $ 39,000- 94,250 28.00 4.17 5.56 6.94 8.33 9.72 11.11 0.28
$ 56,550-117,950 $ 94,250-143,600 31.00 4.35 5.80 7.25 8.70 10.14 11.59 0.31
$117,950-256,500 $143,600-256,500 36.00 4.69 6.25 7.81 9.38 10.94 12.50 0.36
$256,500 & over $256,500 & over 39.60 4.97 6.62 8.28 9.93 11.59 13.25 0.396
<FN>
<F1> Net amount subject to Federal personal income tax after deductions and exemptions.
</FN>
</TABLE>
<TABLE>
<CAPTION>
GEORGIA
1995 TAX YEAR
- --------------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME<F1>
- ---------------------------------- INCOME TAX-EXEMPT YIELD AVERAGE COMBINED
SINGLE JOINT TAX ------------------------------------------------ FEDERAL STATE FED. & ST.
1995<F3> 1995<F3> BRACKET<F2> 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% RATE RATE RATE<F3>
- ---------------- ---------------- ----------- ------------------------------------------------ ------- -------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 23,350 19.41% 3.72% 4.96% 6.20% 7.45% 8.69% 9.93% 0.15 0.051854 0.1941
$ 0- 39,000 19.53 3.73 4.97 6.21 7.46 8.70 9.94 0.15 0.053333 0.1953
$ 23,350- 56,550 $ 39,000- 94,250 32.32 4.43 5.91 7.39 8.87 10.34 11.82 0.28 0.060000 0.3232
$ 56,550-117,950 $ 94,250-143,600 35.14 4.63 6.17 7.71 9.25 10.79 12.33 0.31 0.060000 0.3514
$117,950-256,500 $143,600-256,500 39.84 4.99 6.65 8.31 9.97 11.64 13.30 0.36 0.060000 0.3984
$256,500 & over $256,500 & over 43.22 5.28 7.04 8.81 10.57 12.33 14.09 0.396 0.060000 0.4322
<FN>
<F1> Net amount subject to Federal and Louisiana personal income tax after deductions and exemptions.
<F2> Effective combined federal and state tax bracket. State rate based on the average state rate for the federal tax bracket.
<F3> Combined Federal and Georgia rate assumes itemization of state tax deduction.
</FN>
<PAGE>
<CAPTION>
LOUISIANA
1995 TAX YEAR
- --------------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME<F1>
- ---------------------------------- INCOME TAX-EXEMPT YIELD AVERAGE COMBINED
SINGLE JOINT TAX ------------------------------------------------ FEDERAL STATE FED. & ST.
1995 1995 BRACKET<F2> 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% RATE RATE RATE<F3>
- ---------------- ---------------- ----------- ------------------------------------------------ ------- -------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 23,350 17.67% 3.64% 4.86% 6.07% 7.29% 8.50% 9.72% 0.15 0.031434 0.1767
$ 0- 39,000 17.96 3.66 4.88 6.09 7.31 8.53 9.75 0.15 0.034871 0.1796
$ 23,350- 56,550 31.16 4.36 5.81 7.26 8.72 10.17 11.62 0.28 0.043946 0.3116
$ 39,000- 94,250 32.03 4.41 5.88 7.36 8.83 10.30 11.77 0.28 0.056018 0.3203
$ 56,550-117,950 $ 94,250-143,600 35.14 4.63 6.17 7.71 9.25 10.79 12.33 0.31 0.060000 0.3514
$117,950-256,500 $143,600-256,500 39.84 4.99 6.65 8.31 9.97 11.64 13.30 0.36 0.060000 0.3984
$256,500 & over $256,500 & over 43.22 5.28 7.04 8.81 10.57 12.33 14.09 0.396 0.060000 0.4322
<FN>
<F1> Net amount subject to Federal and Louisiana personal income tax after deductions and exemptions.
<F2> Effective combined federal and state tax bracket. State rate based on the average state rate for the federal tax bracket.
<F3> Combined Federal and Louisiana rate assumes itemization of state tax deduction.
</FN>
<CAPTION>
MARYLAND
1995 TAX YEAR
- --------------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME<F1>
- ---------------------------------- INCOME TAX-EXEMPT YIELD AVERAGE COMBINED
SINGLE JOINT TAX ------------------------------------------------ FEDERAL STATE FED. & ST.
1995 1995 BRACKET<F2> 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% RATE RATE RATE<F3>
- ---------------- ---------------- ----------- ------------------------------------------------ ------- -------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 23,350 19.03% 3.71% 4.94% 6.18% 7.41% 8.65% 9.88% 0.15 0.047430 0.1903
$ 0- 39,000 19.12 3.71 4.95 6.18 7.42 8.65 9.89 0.15 0.048461 0.1912
$ 23,350- 56,550 $ 39,000- 94,250 31.60 4.39 5.85 7.31 8.77 10.23 11.70 0.28 0.050000 0.3160
$ 56,550-117,950 $ 94,250-143,600 34.45 4.58 6.10 7.63 9.15 10.68 12.20 0.31 0.050000 0.3445
$117,950-256,500 $143,600-256,500 39.20 4.93 6.58 8.22 9.87 11.51 13.16 0.36 0.050000 0.3920
$256,500 & Over $256,500 & Over 42.62 5.23 6.97 8.71 10.46 12.20 13.94 0.396 0.050000 0.4262
<FN>
<F1> Net amount subject to Federal and Maryland personal income tax after deductions and exemptions.
<F2> Effective combined federal and state tax bracket. State rate based on the average state rate for the federal tax bracket.
<F3> Combined Federal and Maryland rate assumes itemization of state tax deduction.
</FN>
<CAPTION>
MASSACHUSETTS
1995 TAX YEAR
- --------------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME<F1>
- ---------------------------------- INCOME TAX-EXEMPT YIELD AVERAGE COMBINED
SINGLE JOINT TAX ------------------------------------------------ FEDERAL STATE FED. & ST.
1995 1995 BRACKET<F2> 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% RATE RATE RATE<F3>
- ---------------- ---------------- ----------- ------------------------------------------------ ------- -------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 23,350 $ 0- 39,000 25.20% 4.01% 5.35% 6.68% 8.02% 9.36% 10.70% 0.15 0.120000 0.2520
$ 23,350- 56,550 $ 39,000- 94,250 36.64 4.73 6.31 7.89 9.47 11.05 12.63 0.28 0.120000 0.3664
$ 56,550-117,950 $ 94,250-143,600 39.28 4.94 6.59 8.23 9.88 11.53 13.18 0.31 0.120000 0.3928
$117,950-256,500 $143,600-256,500 43.68 5.33 7.10 8.88 10.65 12.43 14.20 0.36 0.120000 0.4368
$256,500 & over $256,500 & over 46.85 5.64 7.53 9.41 11.29 13.17 15.05 0.396 0.120000 0.4685
<FN>
<F1> Net amount subject to Federal and Massachusetts personal income tax after deductions and exemptions.
<F2> Effective combined federal and state tax bracket. State rate based on the average state rate for the federal tax bracket.
<F3> Combined Federal and Massachusetts rate assumes itemization of state tax deduction.
</FN>
<PAGE>
<CAPTION>
MISSISSIPPI
1995 TAX YEAR
- --------------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME<F1>
- ---------------------------------- INCOME TAX-EXEMPT YIELD AVERAGE COMBINED
SINGLE JOINT TAX ------------------------------------------------ FEDERAL STATE FED. & ST.
1995 1995 BRACKET<F2> 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% RATE RATE RATE<F3>
- ---------------- ---------------- ----------- ------------------------------------------------ ------- -------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 23,350 18.70% 3.69% 4.92% 6.15% 7.38% 8.61% 9.84% 0.15 0.043575 0.1870
$ 0- 39,000 18.92 3.70 4.93 6.17 7.40 8.63 9.87 0.15 0.046153 0.1892
$ 23,350- 56,550 $ 39,000- 94,250 31.60 4.39 5.85 7.31 8.77 10.23 11.70 0.28 0.050000 0.3160
$ 56,550-117,950 $ 94,250-143,600 34.45 4.58 6.10 7.63 9.15 10.68 12.20 0.31 0.050000 0.3445
$117,950-256,500 $143,600-256,500 39.20 4.93 6.58 8.22 9.87 11.51 13.16 0.36 0.050000 0.3920
$256,500 & over $256,000 & over 42.62 5.23 6.97 8.71 10.46 12.20 13.94 0.396 0.050000 0.4262
<FN>
<F1> Net amount subject to Federal and Mississippi personal income tax after deductions and exemptions.
<F2> Effective combined federal and state tax bracket. State rate based on the average state rate for the federal tax bracket.
<F3> Combined Federal and Mississippi rate assumes itemization of state tax deduction.
</FN>
<CAPTION>
NEW YORK STATE RESIDENTS (EXCEPT NEW YORK CITY RESIDENTS)
1995 TAX YEAR
- --------------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME<F1>
- ---------------------------------- INCOME TAX-EXEMPT YIELD AVERAGE COMBINED
SINGLE JOINT TAX ------------------------------------------------ FEDERAL STATE FED. & ST.
1995 1995 BRACKET<F2> 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% RATE RATE RATE
- ---------------- ---------------- ----------- ------------------------------------------------ ------- -------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 23,350 20.40% 3.77% 5.03% 6.28% 7.54% 8.79% 10.05% 0.15 0.063496 0.204
$ 0- 39,000 20.19 3.76 5.01 6.26 7.52 8.77 10.02 0.15 0.061041 0.2019
$ 23,350- 56,550 33.47 4.51 6.01 7.52 9.02 10.52 12.02 0.28 0.075938 0.3347
$ 39,000- 94,250 33.47 4.51 6.01 7.52 9.02 10.52 12.02 0.28 0.075938 0.3347
$ 56,550-117,950 36.24 4.71 6.27 7.84 9.41 10.98 12.55 0.31 0.075938 0.3624
$ 94,250-143,600 36.24 4.71 6.27 7.84 9.41 10.98 12.55 0.31 0.075938 0.3624
$117,950-256,500 $143,600-256,500 40.86 5.07 6.76 8.45 10.15 11.84 13.53 0.36 0.075938 0.4086
$256,500 & over $256,500 & over 44.19 5.38 7.17 8.96 10.75 12.54 14.33 0.396 0.075938 0.4419
<FN>
<F1> Net amount subject to Federal and New York personal income tax after deductions and exemptions.
<F2> Effective combined federal and state tax bracket. State rate based on the average state rate for the federal tax bracket.
</FN>
<CAPTION>
NEW YORK -- NEW YORK CITY RESIDENTS ONLY
1995 TAX YEAR
- -----------------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME<F1> TAX-EXEMPT YIELD AVERAGE AVERAGE COMBINED
- ----------------------------------- INCOME<F2> ----------------------------- AVERAGE AVERAGE NYC ADD'L FED.
SINGLE JOINT TAX FED. STATE CITY SUR- SUR- & ST.
1995 1995 BRACKET 3.0 4.0 5.0 6.0% 7.0% 8.0% RATE RATE RATE CHARGE CHARGE RATE
- -----------------------------------------------------------------------------------------------------------------------------------
$ 0- 23,350 23.45% 3.92% 5.23% 6.53% 7.84% 9.14% 10.45% 0.15 0.063496 0.028053 0.003408 0.004405 0.2345
$ 0- 39,000 23.19 3.91 5.21 6.51 7.81 9.11 10.42 0.15 0.061041 0.027669 0.003340 0.004341 0.2319
$ 23,350- 56,550 36.64 4.73 6.31 7.89 9.47 11.05 12.63 0.28 0.075938 0.033475 0.005120 0.005403 0.3664
$ 39,000- 94,250 36.63 4.73 6.31 7.89 9.47 11.05 12.62 0.28 0.075938 0.033446 0.005143 0.005402 0.3663
$ 56,550-117,950 39.31 4.94 6.59 8.24 9.89 11.53 13.18 0.31 0.075938 0.033972 0.005100 0.005470 0.3931
$ 94,250-143,600 39.30 4.94 6.59 8.24 9.88 11.53 13.18 0.31 0.075938 0.033861 0.005100 0.005455 0.393
$117,950-256,500 $143,600-256,500 43.71 5.33 7.11 8.88 10.66 12.44 14.21 0.36 0.075938 0.034000 0.005100 0.005474 0.4371
$256,500 & over $256,500 & over 46.88 5.65 7.53 9.41 11.30 13.18 15.06 0.396 0.075938 0.034000 0.005100 0.005474 0.4688
<FN>
<F1> Net amount subject to Federal and New York personal income tax after deductions and exemptions.
<F2> Effective combined federal and state tax bracket. State rate based on the average state rate for the federal tax bracket.
</FN>
<PAGE>
<CAPTION>
NORTH CAROLINA
1995 TAX YEAR
- --------------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME<F1>
- ---------------------------------- INCOME TAX-EXEMPT YIELD AVERAGE COMBINED
SINGLE JOINT TAX ------------------------------------------------ FEDERAL STATE FED. & ST.
1995 1995 BRACKET<F2> 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% RATE RATE RATE<F3>
- ---------------- ---------------- ----------- ------------------------------------------------ ------- -------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 23,350 20.49% 3.77% 5.03% 6.29% 7.55% 8.80% 10.06% 0.15 0.064537 0.2049
$ 0- 39,000 20.49 3.77 5.03 6.29 7.55 8.80 10.06 0.15 0.064550 0.2049
$ 23,350- 56,550 $ 39,000- 94,250 33.04 4.48 5.97 7.47 8.96 10.45 11.95 0.28 0.070000 0.3304
$ 56,550-117,950 36.31 4.71 6.28 7.85 9.42 10.99 12.56 0.31 0.076915 0.3631
$ 94,250-143,600 36.27 4.71 6.28 7.85 9.41 10.98 12.55 0.31 0.076319 0.3627
$117,950-256,500 $143,600-256,500 40.96 5.08 6.78 8.47 10.16 11.86 13.55 0.36 0.077500 0.4096
$256,500 & over $256,500 & over 44.28 5.38 7.18 8.97 10.77 12.56 14.36 0.396 0.077500 0.4428
<FN>
<F1> Net amount subject to Federal and North Carolina personal income tax after deductions and exemptions.
<F2> Effective combined federal and state tax bracket. State rate based on the average state rate for the federal tax bracket.
<F3> Combined Federal and North Carolina rate assumes itemization of state tax deduction.
</FN>
<CAPTION>
PENNSYLVANIA
1995 TAX YEAR
- --------------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME<F1>
- ---------------------------------- INCOME TAX-EXEMPT YIELD AVERAGE COMBINED
SINGLE JOINT TAX ------------------------------------------------ FEDERAL STATE FED. & ST.
1995<F4> 1995<F4> BRACKET<F2> 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% RATE RATE RATE<F3>
- ---------------- ---------------- ----------- ------------------------------------------------ ------- -------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 23,350 $ 0- 39,000 17.38% 3.63% 4.84% 6.05% 7.26% 8.47% 9.68% 0.15 0.028000 0.1738
$ 23,350- 56,550 $ 39,000- 94,250 30.02 4.29 5.72 7.14 8.57 10.00 11.43 0.28 0.028000 0.3002
$ 56,550-117,950 $ 94,250-143,600 32.93 4.47 5.96 7.45 8.95 10.44 11.93 0.31 0.028000 0.3293
$117,950-256,500 $143,600-256,500 37.79 4.82 6.43 8.04 9.64 11.25 12.86 0.36 0.028000 0.3779
$256,500 & over $256,500 & over 41.29 5.11 6.81 8.52 10.22 11.92 13.63 0.396 0.028000 0.4129
<FN>
<F1> Net amount subject to Federal and Pennsylvania personal income tax after deductions and exemptions.
<F2> Effective combined federal and state tax bracket. State rate based on the average rate for the federal tax bracket.
<F3> Combined federal and Pennsylvania rate assumes itemization of state tax deduction.
<F4> Pennsylvania tax rates and brackets are based on 1994 information, since at this time 1995 information is not available.
</FN>
<CAPTION>
SOUTH CAROLINA
1995 TAX YEAR
- --------------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME<F1>
- ---------------------------------- INCOME TAX-EXEMPT YIELD AVERAGE COMBINED
SINGLE JOINT TAX ------------------------------------------------ FEDERAL STATE FED. & ST.
1995 1995 BRACKET<F2> 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% RATE RATE RATE<F3>
- ---------------- ---------------- ----------- ------------------------------------------------ ------- -------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 23,350 19.78% 3.74% 4.99% 6.23% 7.48% 8.73% 9.97% 0.15 0.056213 0.1978
$ 0- 39,000 20.25 3.76 5.02 6.27 7.52 8.78 10.03 0.15 0.061746 0.2025
$ 23,350- 56,550 $ 39,000- 94,250 33.04 4.48 5.97 7.47 8.96 10.45 11.95 0.28 0.070000 0.3304
$ 56,550-117,950 $ 94,250-143,600 35.83 4.68 6.23 7.79 9.35 10.91 12.47 0.31 0.070000 0.3583
$117,950-256,500 $143,600-256,500 40.48 5.04 6.72 8.40 10.08 11.76 13.44 0.36 0.070000 0.4048
$256,500 & over $256,500 & over 43.83 5.34 7.12 8.90 10.68 12.46 14.24 0.396 0.070000 0.4383
<FN>
<F1> Net amount subject to Federal and South Carolina personal income tax after deductions and exemptions.
<F2> Effective combined federal and state tax bracket. State rate based on the average state rate for the federal tax bracket.
<F3> Combined Federal and South Carolina rate assumes itemization of state tax deduction.
</FN>
<PAGE>
<CAPTION>
TENNESSEE
1995 TAX YEAR
- --------------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME<F1>
- ---------------------------------- INCOME TAX-EXEMPT YIELD AVERAGE COMBINED
SINGLE JOINT TAX ------------------------------------------------ FEDERAL STATE FED. & ST.
1995 1995 BRACKET<F2> 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% RATE RATE RATE<F3>
- ---------------- ---------------- ----------- ------------------------------------------------ ------- -------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 23,350 $ 0- 39,000 20.10% 3.75% 5.01% 6.26% 7.51% 8.76% 10.01% 0.15 0.060000 0.2010
$ 23,350- 56,550 $ 39,000- 94,250 32.32 4.43 5.91 7.39 8.87 10.34 11.82 0.28 0.060000 0.3232
$ 56,550-117,950 $ 94,250-143,600 35.14 4.63 6.17 7.71 9.25 10.79 12.33 0.31 0.060000 0.3514
$117,950-256,500 $143,600-256,500 39.84 4.99 6.65 8.31 9.97 11.64 13.30 0.36 0.060000 0.3984
$256,500 & over $256,500 & over 43.22 5.28 7.04 8.81 10.57 12.33 14.09 0.396 0.060000 0.4322
<FN>
<F1> Net amount subject to Federal and Tennessee personal income tax after deductions and exemptions.
<F2> Effective combined federal and state tax bracket. State rate based on the average state rate for the federal tax bracket.
<F3> Combined Federal and Tennessee rate assumes itemization of state tax deduction.
</FN>
<CAPTION>
TEXAS
1995 TAX YEAR
- ------------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME<F1>
- ------------------------------------------ INCOME TAX-EXEMPT YIELD
SINGLE JOINT TAX --------------------------------------------------------- FEDERAL
1995 1995 BRACKET 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% RATE
- ------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 23,350 $ 0- 39,000 15.00% 3.53% 4.71% 5.88% 7.06% 8.24% 9.41% 0.15
$ 23,350- 56,550 $ 39,000- 94,250 28.00 4.17 5.56 6.94 8.33 9.72 11.11 0.28
$ 56,550-117,950 $ 94,250-143,600 31.00 4.35 5.80 7.25 8.70 10.14 11.59 0.31
$117,950-256,500 $143,600-256,500 36.00 4.69 6.25 7.81 9.38 10.94 12.50 0.36
$256,500 & over $256,500 & over 39.60 4.97 6.62 8.28 9.93 11.59 13.25 0.396
<FN>
<F1> Net amount subject to Federal personal income tax after deductions and exemptions.
</FN>
<CAPTION>
VIRGINIA
1995 TAX YEAR
- --------------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME<F1>
- ---------------------------------- INCOME TAX-EXEMPT YIELD AVERAGE COMBINED
SINGLE JOINT TAX ------------------------------------------------ FEDERAL STATE FED. & ST.
1995 1995 BRACKET<F2> 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% RATE RATE RATE<F3>
- ---------------- ---------------- ----------- ------------------------------------------------ ------- -------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 23,350 18.95% 3.70% 4.94% 6.17% 7.40% 8.64% 9.87% 0.15 0.046471 0.1895
$ 0- 39,000 19.33 3.72 4.96 6.20 7.44 8.68 9.92 0.15 0.050897 0.1933
$ 23,350- 56,550 $ 39,000- 94,250 32.14 4.42 5.89 7.37 8.84 10.32 11.79 0.28 0.057500 0.3214
$ 56,550-117,950 $ 94,250-143,600 34.97 4.61 6.15 7.69 9.23 10.76 12.30 0.31 0.057500 0.3497
$117,950-256,500 $143,600-256,500 39.68 4.97 6.63 8.29 9.95 11.60 13.26 0.36 0.057500 0.3968
$256,500 & over $256,500 & over 43.07 5.27 7.03 8.78 10.54 12.30 14.05 0.396 0.057500 0.4307
<FN>
<F1> Net amount subject to Federal and Virginia personal income tax after deductions and exemptions.
<F2> Effective combined federal and state tax bracket. State rate based on the average state rate for the federal tax bracket.
<F3> Combined Federal and Virginia rate assumes itemization of state tax deduction.
</FN>
<CAPTION>
WASHINGTON
1995 TAX YEAR
- ------------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME<F1>
- ------------------------------------------ INCOME TAX-EXEMPT YIELD
SINGLE JOINT TAX --------------------------------------------------------- FEDERAL
1995 1995 BRACKET 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% RATE
- ------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 23,350 $ 0- 39,000 15.00% 3.53% 4.71% 5.88% 7.06% 8.24% 9.41% 0.15
$ 23,350- 56,550 $ 39,000- 94,250 28.00 4.17 5.56 6.94 8.33 9.72 11.11 0.28
$ 56,550-117,950 $ 94,250-143,600 31.00 4.35 5.80 7.25 8.70 10.14 11.59 0.31
$117,950-256,500 $143,600-256,500 36.00 4.69 6.25 7.81 9.38 10.94 12.50 0.36
$256,500 & over $256,500 & over 39.60 4.97 6.62 8.28 9.93 11.59 13.25 0.396
<FN>
<F1> Net amount subject to Federal income tax after deductions and exemptions.
</FN>
<PAGE>
<CAPTION>
WEST VIRGINIA
1995 TAX YEAR
- --------------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME<F1>
- ---------------------------------- INCOME TAX-EXEMPT YIELD AVERAGE COMBINED
SINGLE JOINT TAX ------------------------------------------------ FEDERAL STATE FED. & ST.
1995 1995 BRACKET<F2> 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% RATE RATE RATE<F3>
- ---------------- ---------------- ----------- ------------------------------------------------ ------- -------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 23,350 18.04% 3.66% 4.88% 6.10% 7.32% 8.54% 9.76% 0.15 0.035716 0.1804
$ 0- 39,000 18.33 3.67 4.90 6.12 7.35 8.57 9.80 0.15 0.039230 0.1833
$ 23,350- 56,550 31.76 4.40 5.86 7.32 8.79 10.26 11.72 0.28 0.052229 0.3176
$ 39,000- 94,250 32.52 4.45 5.93 7.41 8.89 10.37 11.86 0.28 0.062828 0.3252
$ 56,550-117,950 35.47 4.65 6.20 7.75 9.30 10.85 12.40 0.31 0.064720 0.3547
$ 94,250-143,600 35.49 4.65 6.20 7.75 9.30 10.85 12.40 0.31 0.065000 0.3549
$117,950-256,500 $143,600-256,500 40.16 5.01 6.68 8.36 10.03 11.70 13.37 0.36 0.065000 0.4016
$256,500 & over $256,500 & over 43.53 5.31 7.08 8.85 10.63 12.40 14.17 0.396 0.065000 0.4353
<FN>
<F1> Net amount subject to Federal and West Virginia personal income tax after deductions and exemptions.
<F2> Effective combined federal and state tax bracket. State rate based on the average state rate for the federal tax bracket.
<F3> Combined Federal and West Virginia rate assumes itemization of state tax deduction.
</FN>
</TABLE>
<PAGE>
APPENDIX B
DESCRIPTION OF MUNICIPAL OBLIGATIONS AND RATINGS
Municipal Obligations include bonds, notes and commercial paper issued by or on
behalf of states, territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies or
instrumentalities, the interest on which is exempt from federal income taxes
(without regard to whether the interest thereon is also exempt from the personal
income taxes of any state). Municipal Obligation bonds are issued to obtain
funds for various public purposes, including the construction of a wide range of
public facilities such as bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer works. Other public
purposes for which Municipal Obligation bonds may be issued include refunding
outstanding obligations, obtaining funds for general operating expenses, and
obtaining funds to loan to other public institutions and facilities. In
addition, certain types of industrial development bonds (referred to under
current tax law as private activity bonds), are issued by or on behalf of public
authorities to obtain funds to provide privately-operated housing facilities,
airport, mass transit or port facilities, sewage disposal, solid waste disposal
or hazardous waste treatment or disposal facilities and certain local facilities
for water supply, gas or electricity. Such obligations are included within the
term Municipal Obligations if the interest paid thereon qualifies as exempt from
federal income tax. Other types of industrial development bonds, the proceeds of
which are used for the construction, equipment, repair or improvement of
privately operated industrial or commercial facilities, may constitute Municipal
Obligations, although the current federal tax laws place substantial limitations
on the size of such issues.
The two principal classifications of Municipal Obligation bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its good faith, credit and taxing power for the payment of
principal and interest. The payment of the principal of and interest on such
bonds may be dependent upon an appropriation by the issuer's legislative body.
The characteristics and enforcement of general obligation bonds vary according
to the law applicable to the particular issuer. Revenue bonds are payable only
from the revenues derived from a particular facility or class of facilities or,
in some cases, from the proceeds of a special excise or other specific revenue
source. Industrial development bonds which are Municipal Obligations are in most
cases revenue bonds and do not generally constitute the pledge of the credit of
the issuer of such bonds. Municipal Bonds also include participations in
municipal leases. These are undivided interests in a portion of an obligation in
the form of a lease or installment purchase which is issued by state and local
governments to acquire equipment and facilities. Municipal leases frequently
have special risks not normally associated with general obligation or revenue
bonds. Leases and installment purchase or conditional sale contracts (which
normally provide for title to the leased asset to pass eventually to the
governmental issuer) have evolved as a means for governmental issuers to acquire
property and equipment without meeting the constitutional and statutory
requirements for the issuance of debt. The debt-issuance limitations are deemed
to be inapplicable because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly or
other periodic basis. Although the obligations will be secured by the leased
equipment or facilities, the disposition of the property in the event of
non-appropriation or foreclosure might, in some cases, prove difficult. In light
of these concerns, the Trust has adopted and follows procedures for determining
whether municipal lease securities purchased by the Trust are liquid and for
monitoring the liquidity of municipal lease securities held in the Trust's
portfolio. The procedures require that a number of factors be used in evaluating
the liquidity of a municipal lease security, including the frequency of trades
and quotes for the security, the number of dealers willing to purchase or sell
the security and the number of other potential purchasers, the willingness of
dealers to undertake to make a market in the security, the nature of the market
place in which the security trades, the credit quality of the security, and
other factors which the Adviser may deem relevant. There are, of course,
variations in the security of Municipal Obligations, both within a particular
classification and between classifications, depending on numerous factors.
Municipal Obligation notes generally are used to provide for short-term capital
needs and generally have maturities of one year or less. Municipal Obligation
notes include:
1. TAX ANTICIPATION NOTES. Tax Anticipation Notes are issued to finance working
capital needs of municipalities. Generally, they are issued in anticipation of
various tax revenues, such as income, sales, use and business taxes, and are
payable from these specific future taxes.
2. REVENUE ANTICIPATION NOTES. Revenue Anticipation Notes are issued in
expectation of receipt of other kinds of revenue, such as federal revenues
available under Federal Revenue Sharing Programs.
3. BOND ANTICIPATION NOTES. Bond Anticipation Notes are issued to provide
interim financing until long-term bond financing can be arranged. In most cases,
the long-term bonds then provide the money for the repayment of the Notes.
Issues of commercial paper typically represent short-term, unsecured, negotiable
promissory notes. These obligations are issued by agencies of state and local
governments to finance seasonal working capital needs of municipalities or to
provide interim construction financing and are paid from general revenues of
municipalities or are refinanced with long-term debt. In most cases, Municipal
Obligation commercial paper is backed by letters of credit, lending agreements,
note repurchase agreements or other credit facility agreements offered by banks
or other institutions.
The yields on Municipal Obligations are dependent on a variety of factors,
including general market conditions, supply and demand and general conditions of
the Municipal Obligation market, size of a particular offering, the maturity of
the obligation and rating (if any) of the issue.
DESCRIPTION OF RATINGS+
The ratings of Moody's Investors Service, Inc., Standard & Poor's Ratings Group,
Fitch Investors Service, Inc. and Duff & Phelps Credit Rating Co. represent
their opinions as to the quality of various debt obligations. It should be
emphasized, however, that ratings are not absolute standards of quality.
Consequently, Municipal Obligations with the same maturity, coupon and rating
may have different yields while Municipal Obligations of the same maturity and
coupon with different ratings may have the same yield.
+The ratings indicated herein are believed to be the most recent ratings
available at the date of this Prospectus for the securities listed. Ratings
are generally given to securities at the time of issuance. While the rating
agencies may from time to time revise such ratings, they undertake no
obligation to do so, and the ratings indicated do not necessarily represent
ratings which will be given to these securities on the date of the Trust's
fiscal year end.
DESCRIPTION OF LONG-TERM DEBT RATINGS
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not rated
as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not published
in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
NOTE: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols Aa1,
A1, Baa1, Ba1 and B1.
STANDARD & POOR'S RATINGS GROUP
AAA: Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A: Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated "BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Debt rated "BB", "B", "CCC", "CC" and "C" is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligations. "BB" indicates the
least degree of speculation and "C" the highest. While such debt will likely
have some quality and protective characteristics, these are outweighed by large
uncertainties or large exposures to adverse conditions.
BB: Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
B: Debt rated "B" has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The "B" rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied "BB" or "BB-"
rating.
CCC: Debt rated "CCC" has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.
CC: The rating "CC" is typically applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC" rating.
C: The rating "C" is typically applied to debt subordinated to senior debt which
is assigned an actual or implied "CCC-" debt rating. The "C" rating may be used
to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
CI: The rating "CI" is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The "D" rating also will be used upon the
filing of a bankruptcy petition if debt service payment is jeopardized.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
FITCH INVESTORS SERVICE, INC.
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeble events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA." Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.
PLUS (+) OR MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within a rating category. Plus and
minus signs, however, are not used in the "AAA" category.
NR: Indicates that Fitch does not rate the specific issue.
DUFF & PHELPS CREDIT RATING CO.
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeble events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA." Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "D-1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
PLUS (+) OR MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within a rating category. Plus and
minus signs, however, are not used in the "AAA" category.
NR: Indicates that Duff & Phelps does not rate the specific issue.
DESCRIPTION OF RATINGS OF STATE AND MUNICIPAL NOTES
MOODY'S INVESTORS SERVICE, INC.
Moody's ratings for state and municipal short-term obligations will be
designated MOODY'S INVESTMENT GRADE ("MIG"). Such ratings recognize the
differences between short-term credit risk and long-term risk. Factors affecting
the liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk,
long-term secular trends for example, may be less important over the short run.
Symbols used will be as follows:
MIG-1/VMIG-1 -- This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG-2/VMIG-2 -- This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
STANDARD & POOR'S RATINGS GROUP
A Standard & Poor's note rating reflects the liquidity concerns and market-
access risks unique to notes. Notes due in three years or less will likely
receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in making
that assessment.
- -- Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
- -- Source of Payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1 -- Strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given
a plus (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of
the notes.
SP-3 -- Speculative capacity to pay principal and interest.
FITCH SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+".
F-2: Good Credit Quality. Issues assigned this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as for
issues assigned "F-1+" and "F-1" ratings.
F-3: Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse changes could cause these securities to be rated below
investment grade.
F-5: Weak Credit Quality. Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are vulnerable
to near-term adverse changes in financial and economic conditions.
D: Default. Issues assigned this rating are in actual or imminent payment
default.
LOC: The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
DUFF & PHELPS SHORT-TERM RATINGS
D-1+:Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
outstanding and safety is just below risk-free U.S. Treasury short-term
obligations.
D-1: Very high certainty of timely payment. Liquidity factors are excellent and
supported by good fundamental protection factors. Risk factors are minor.
D-1-: High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.
D-2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
D-3: Satisfactory liquidity and other protection factors qualify issues as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
D-4: Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service. Operating factors and market access
may be subject to a high degree of variation.
D-5: Issuer failed to meet scheduled principal and/or interest payments.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC.
Moody's commercial paper ratings are opinions of the ability of issuers to repay
punctually senior debt obligations not having an original maturity in excess of
one year. Moody's two highest commercial paper rating categories are as follows:
"Prime-1" -- Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term senior debt obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
-- Leading market positions in well established industries.
-- High rates of return on funds employed.
-- Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
-- Well established access to a range of financial markets and assured
sources of alternate liquidity.
"Prime-2" -- Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term senior debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
STANDARD & POOR'S RATINGS GROUP
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. S&P's two highest commercial paper rating categories are as follows:
A-1 -- This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2 -- Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
DESCRIPTION OF OTHER INVESTMENTS
U.S. GOVERNMENT OBLIGATIONS -- are issued by the Treasury or agencies,
authorities or instrumentalities of the U.S. Government and include bills,
certificates of indebtedness, notes, and bonds. Agencies, authorities and
instrumentalities of the U.S. Government are established under the authority of
an act of Congress and include, but are not limited to, the Government National
Mortgage Association ("GNMA"), the Tennessee Valley Authority, the Bank for
Cooperatives, the Farmers Home Administration, Federal Home Loan Banks ("FHLB"),
Federal Intermediate Credit Banks, Federal Land Banks, and the Federal National
Mortgage Association ("FNMA").
Some of the foregoing obligations, such as Treasury bills and GNMA pass-through
certificates, are supported by the full faith and credit of the United States;
others, such as securities of FHLB, by the right of the issuer to borrow from
the U.S. Treasury; still others, such as bonds issued by the Student Loan
Marketing Association, are supported only by the credit of the instrumentality.
No assurance can be given that the U.S. Government will provide financial
support to instrumentalities sponsored by the U.S. Government as it is not
obligated by law, in certain instances, to do so.
CERTIFICATES OF DEPOSIT -- are certificates issued against funds deposited
in a commercial bank, are for a definite period of time, earn a specified rate
of return, and are normally negotiable.
BANKERS' ACCEPTANCES -- are short-term credit instruments used to finance
the import, export, transfer or storage of goods. They are termed "accepted"
when a bank guarantees their payment at maturity.
COMMERCIAL PAPER -- refers to promissory notes issued by corporations in
order to finance their short-term credit needs.
REPURCHASE AGREEMENTS -- are agreements pursuant to which the Trust, on
behalf of a Fund, acquires securities subject to the seller's agreement to
repurchase at a specified time and price. The Trust's position during the entire
term of the repurchase agreement will be fully collateralized. If the seller
becomes subject to a proceeding under the bankruptcy laws or its assets are
otherwise subject to a stay order, the Trust's right to liquidate the securities
may be restricted (during which time the value of the securities could decline).
As discussed in the Statement of Additional Information, the Trust has adopted
certain procedures intended to minimize any risk.
<PAGE>
APPENDIX C
PORTFOLIO COMPOSITION CHARTS
The table below shows the percentages of each Fund's assets at March 31, 1995,
invested in bonds assigned to the various rating categories by S&P, Moody's
(provided only for bonds not rated by S&P), Fitch (provided only for bonds not
rated by S&P or Moody's) and Duff & Phelps Credit Rating Co. (provided only for
bonds not rated by S&P, Moody's or Fitch) and in unrated bonds determined by MFS
to be of comparable quality. For a split rated bond, the S&P rating is used, and
when an S&P rating is unavailable, secondary sources are selected in the
following order: Moody's, Fitch, Duff & Phelps.
<TABLE>
<CAPTION>
FLORIDA FUND:
UNRATED SECURITIES
RATING RATED BONDS OF COMPARABLE QUALITY TOTAL
- ------ ----------- --------------------- -----
<S> <C> <C> <C>
AAA/Aaa 46.46% 0.00% 46.46%
AA/Aa 18.98% 0.00% 18.98%
A/A 13.19% 0.00% 13.19%
BBB/Baa 14.78% 0.00% 14.78%
BB/Ba 0.00% 5.13% 5.13%
B/B 0.00% 0.52% 0.52%
CCC/Caa 0.00% 0.00% 0.00%
CC/Ca 0.00% 0.00% 0.00%
C/C 0.00% 0.00% 0.00%
D 0.00% 0.00% 0.00%
Other 0.94%
------ ------ ------
Total: 93.41% 5.65% 100.00%
</TABLE>
<TABLE>
<CAPTION>
GEORGIA FUND:
UNRATED SECURITIES
RATING RATED BONDS OF COMPARABLE QUALITY TOTAL
- ------ ----------- --------------------- -----
<S> <C> <C> <C>
AAA/Aaa 36.64% 3.29% 39.93%
AA/Aa 31.53% 1.12% 32.65%
A/A 8.45% 1.21% 9.66%
BBB/Baa 6.05% 2.51% 8.56%
BB/Ba 1.90% 1.94% 3.84%
B/B 2.29% 1.58% 3.87%
CCC/Caa 0.00% 0.00% 0.00%
CC/Ca 0.00% 0.00% 0.00%
C/C 0.00% 0.00% 0.00%
D 0.00% 0.00% 0.00%
Other 1.49%
------ ------ ------
Total: 86.84% 11.67% 100.00%
</TABLE>
<TABLE>
<CAPTION>
LOUISIANA FUND:
UNRATED SECURITIES
RATING RATED BONDS OF COMPARABLE QUALITY TOTAL
- ------ ----------- --------------------- -----
<S> <C> <C> <C>
AAA/Aaa 54.68% 0.00% 54.68%
AA/Aa 4.57% 0.00% 4.57%
A/A 17.49% 0.00% 17.49%
BBB/Baa 4.64% 0.00% 4.64%
BB/Ba 5.34% 5.30% 10.65%
B/B 0.00% 0.00% 0.00%
CCC/Caa 0.00% 0.00% 0.00%
CC/Ca 0.00% 0.00% 0.00%
C/C 0.00% 0.00% 0.00%
D 0.00% 0.00% 0.00%
Other 7.97%
------ ------ ------
Total: 86.73% 5.30% 100.00%
</TABLE>
<TABLE>
<CAPTION>
MASSACHUSETTS FUND:
UNRATED SECURITIES
RATING RATED BONDS OF COMPARABLE QUALITY TOTAL
- ------ ----------- --------------------- -----
<S> <C> <C> <C>
AAA/Aaa 31.53% 1.49% 33.02%
AA/Aa 6.89% 0.35% 7.25%
A/A 36.92% 0.90% 37.82%
BBB/Baa 6.74% 5.50% 12.23%
BB/Ba 1.08% 1.56% 2.64%
B/B 0.00% 6.16% 6.16%
CCC/Caa 0.00% 0.00% 0.00%
CC/Ca 0.00% 0.00% 0.00%
C/C 0.00% 0.00% 0.00%
D 0.00% 0.15% 0.15%
Other 0.72%
------ ------ ------
Total: 83.17% 16.12% 100.00%
</TABLE>
<TABLE>
<CAPTION>
VIRGINIA FUND:
UNRATED SECURITIES
RATING RATED BONDS OF COMPARABLE QUALITY TOTAL
- ------ ----------- --------------------- -----
<S> <C> <C> <C>
AAA/Aaa 32.10% 1.18% 33.28%
AA/Aa 35.83% 0.00% 35.83%
A/A 17.25% 1.06% 18.32%
BBB/Baa 3.20% 1.49% 4.68%
BB/Ba 0.24% 5.53% 5.78%
B/B 0.00% 0.62% 0.62%
CCC/Caa 0.00% 0.00% 0.00%
CC/Ca 0.00% 0.00% 0.00%
C/C 0.00% 0.00% 0.00%
D 0.00% 0.00% 0.00%
Other 1.49%
------ ------ ------
Total: 88.62% 9.89% 100.00%
</TABLE>
<TABLE>
<CAPTION>
WEST VIRGINIA FUND:
UNRATED SECURITIES
RATING RATED BONDS OF COMPARABLE QUALITY TOTAL
- ------ ----------- --------------------- -----
<S> <C> <C> <C>
AAA/Aaa 48.96% 0.00% 48.96%
AA/Aa 3.53% 0.75% 4.27%
A/A 24.04% 0.29% 24.33%
BBB/Baa 12.35% 0.38% 12.73%
BB/Ba 4.96% 0.00% 4.96%
B/B 0.00% 3.44% 3.44%
CCC/Caa 0.00% 0.00% 0.00%
CC/Ca 0.00% 0.00% 0.00%
C/C 0.00% 0.00% 0.00%
D 0.00% 0.00% 0.00%
Other 1.31%
------ ------ ------
Total: 93.83% 4.85% 100.00%
</TABLE>
These charts do not necessarily indicate what the composition a Fund's portfolio
will be in subsequent years. Rather, a Fund's investment objective, policies and
restrictions indicate the extent to which the Fund may purchase securities in
the various categories.
<PAGE>
APPENDIX D
ADDITIONAL INFORMATION CONCERNING THE STATE FUNDS
The following discussion regarding certain economic, financial and legal matters
pertaining to the relevant States and their governments is drawn primarily from
official statements relating to securities offerings of those States and other
publicly available documents, dated as of various dates prior to the date of
this Prospectus, and do not purport to be complete descriptions. Discussions
regarding the financial condition of a particular State government may not be
relevant to Municipal Obligations issued by political subdivisions of that
State. Moreover, the general economic conditions discussed may or may not affect
issuers of the obligations of these States. None of the information is relevant
to any tax-exempt securities issued by territories and possessions of the United
States or the District of Columbia or their political subdivisions, agencies or
instrumentalities.
ALABAMA FUND
Alabama's economy has experienced a major trend toward industrialization over
the last two decades. By 1990, manufacturing accounted for 40% of Alabama's Real
Gross State Product (the total value of goods and services produced in Alabama).
During the 1960's and 1970's, the State's industrial base became more
diversified and balanced, moving away from primary textiles (including apparel),
chemicals, rubber and plastics. Since the early 1980's, modernization of
existing facilities and an increase in direct foreign investments in the State
has made the manufacturing sector more competitive in domestic and international
markets.
Among the leading manufacturing industries have been pulp and paper and
chemicals, the development and growth of which have been made possible by
abundant rainfall and a high pulpwood growth rate. In recent years Alabama has
ranked as the fifth largest producer of timber in the nation. Alabama has fresh
water availability of twenty times present usage. The State's growing chemical
industry has been the natural complement of production of wood pulp and paper.
Mining, oil and gas production, textiles and apparel, rubber and plastics,
printing and publishing, steel, machinery and service industries are also
important to Alabama's economy. Coal mining is by far the most important mining
activity.
In recent years, the importance of service industries to the State's economy has
increased significantly. The major service industries in the State are the
general healthcare industries, most notably represented by the University of
Alabama medical complex in Birmingham, and the high technology research and
development industries concentrated in the Huntsville area. The financial,
insurance and real estate sectors have also shown strong growth over the last
several years.
The economy in the State of Alabama significantly recovered from the recession
of the early 1980's. Since 1983, the State has recovered and moved forward
faster than the national average. The Alabama Development Office (ADO) reported
as of December 31, 1992, that for the sixth consecutive year more than $2
billion was expended in Alabama for new and expanded industries.
Despite the economic expansion that has taken place, the State is suffering
along with the rest of the nation through the recent downturn in the economy.
Growth in overall tax revenues was only about 3.4% from fiscal 1991 to 1992.
Corporate income tax receipts declined slightly from 1991 to 1992. However,
State tax collections are up about 8.9% for the nine month period ending June
30, 1993, as compared to the same period for fiscal 1992, indicating an economic
recovery is in progress. Individual income tax receipts and sales tax receipts
for the same nine month period increased 8.0% and 7.3%, respectively.
Real Gross State Product (RGSP) is a comprehensive measure of economic
performance for the State of Alabama. Alabama's RGSP is defined as the total
value of all final goods and services produced in the State in constant dollar
terms. Hence, changes in RGSP reflect changes in final output. From 1986-1992,
RGSP originating in manufacturing increased by 16% while RGSP originating in all
the non-manufacturing sectors grew by 13%.
There was a significant decrease in unemployment in the period 1985-1989 due to
the economic recovery from the recession of the early 1980's. Since 1989
unemployment rates have come down more gradually due to the general nationwide
reduction in activity and employment in the industrial sector. At the end of
November 1992, the State unemployment rate was 7.3% compared to the national
average of 7.4%.
An adverse decision in the cases of Alabama Coalition for Equity, Inc., et al.
v. Hunt, et al., could have a substantial adverse effect on the State's
financial position.
In Alabama Coalition for Equity, Inc., et al. v. Hunt, et al., filed on May 3,
1990, in the Circuit Court of Montgomery County, the plaintiffs have alleged
that the State of Alabama's public school funding structure is unconstitutional
under the United States Constitution and the Alabama State Constitution. The
plaintiffs sought inter alia, an injunction prohibiting the State of Alabama
from implementing or maintaining any public school fund system perpetuating the
current funding structure; a ruling requiring the State of Alabama to maintain a
constitutional public school funding structure; and the payment of the
plaintiffs' attorneys' fees.
On August 13, 1991, the court granted partial summary judgment to the plaintiffs
on the constitutionality of amendment 111, Section 256, of the Alabama
Constitution. The court ruled that this provision violated the Equal Protection
Clause of the Fourteenth Amendment to the United States Constitution. On
December 3, 1993, the court made final its Remedy Order which found the entire
educational system of the State of Alabama to be unconstitutional. The court
held that all school children have a right to attend school in a liberal system
of public schools required to be provided by the State. The trial court intends
to conduct further hearings on the implementation of its Remedy Order. The
Remedy Order has been appealed to the Alabama Supreme Court by intervenors.
Should the trial court's decision be upheld, the State may be required to expend
substantial amounts on implementation of and compliance with the Order.
ARKANSAS FUND
During the past two decades, Arkansas' economic base has shifted from
agriculture to light manufacturing. The State is now moving toward a heavier
manufacturing base involving more sophisticated processes and products such as
electrical machinery, transportation equipment, fabricated metals and
electronics. Arkansas now has a higher percentage of workers involved in
manufacturing than the national average. The diversification of economic
interests has lessened the State's cyclical sensitivity to the impact of any
single sector.
Arkansas' diversified economic base is also reflected in the distribution of the
State's employment among the manufacturing, trade, service and governmental
sectors. During the past decade, there have been gains in the services and
wholesale and retail trade sectors. However, the civilian unemployment rate in
Arkansas has exceeded the national average during each year since 1978.
Manufacturing continues to be a leading component of Arkansas' economy.
Manufacturing contributes over 25% of the total wage and salary component of
personal income. There is an almost equal division between durable and
nondurable goods. Non-manufacturing and non-agricultural goods provide a
balanced proportion of the overall economy and tend to insulate the State's
economy from any adverse economic conditions which affect manufacturing.
Agriculture is a significant and historical component of Arkansas' economy. Over
40% of the land in Arkansas is devoted to agriculture. Arkansas ranks first in
the nation in rice production, first in commercial broilers and fourth in
cotton.
Arkansas ranks first in the nation in the production of bauxite and bromine. The
State has significant natural gas and oil production in its west, central and
southern regions. There is also increased activity in the coal mining fields of
western Arkansas.
CALIFORNIA FUND
Certain of the securities in the California Fund's portfolio may be obligations
of issuers which rely in whole or in part, directly or indirectly, on ad valorem
real property taxes as a source of revenue. Article XIIIA of the California
Constitution, adopted in 1978, limits ad valorem taxes on real property, and
restricts the ability of taxing entities to increase real property tax revenues.
At the time of adoption of Article XIIIA, the State General Fund had a
substantial surplus. Following the adoption of Article XIIIA, legislation was
adopted which provided for a one-time distribution of a portion of the State's
General Fund surplus to local public agencies, the reallocation of property tax
and other revenue to such agencies, and the State's assumption of certain
obligations theretofore paid out of local funds. The surplus in the General Fund
was depleted and the State ended fiscal 1982-1983 with a General Fund deficit.
Although a surplus in the General Fund was subsequently reestablished, in recent
years the State has again been operating at a substantial deficit.
Since the start of fiscal 1990-1991, the State has faced the worst economic,
fiscal, and budgetary conditions since the 1930s. The State ended fiscal years
1990-1991, 1991-1992, 1992-1993 and 1993-1994 with multibillion dollar deficits.
The State's two-year budget plan for fiscals 1994-1995 and 1995-1996 projects
that a $1 billion deficit will be carried over into fiscal 1995-1996 and that
the State's deficit will be eliminated by the end of fiscal 1995-1996. In
January 1995, the State's nonpartisan legislative analyst reported that the
State's two-year budget plan had fallen out of balance by $2 billion because it
was based on the questionable assumption that the State would receive federal
aid which has failed to materialize. The State's legislative analyst reported a
number of additional major budget risks, including pending budget-related
litigation and the State's reliance on future federal appropriations. In
addition, the State's budget relies on legislation that requires
across-the-board spending cuts, which could disrupt State operations in fiscal
1995-1996 if California revenues are lower than anticipated and a significant
budget shortfall develops. The State's ability to raise revenues and to reduce
expenditures to the extent necessary to balance the budget for any year depends,
among other things, upon the State's economic health and the accuracy of the
State's revenue predictions, as well as the impact of budgetary restrictions
imposed by voter-passed initiatives.
The financial difficulties experienced by the State and other issuers of
California municipal securities in recent years have resulted in the credit
ratings of certain of their obligations being downgraded significantly by the
major rating agencies. There can be no assurance that credit ratings on
securities in the California Fund's portfolio will not be further downgraded.
Article XIIIB of the California Constitution, originally adopted in 1979, limits
significantly spending by state government and by "local government" (defined as
"any city, county, city and county, school district, special district,
authority, or other political subdivision of or within the state"). One of the
exclusions from these limitations for any entity of government is the debt
service costs of bonds existing or legally authorized as of January 1, 1979, or
thereafter approved by the voters. Although Article XIIIB states that it shall
not "be construed to impair the ability of the state or of any local government
to meet its obligations with respect to existing or future bonded indebtedness,"
concern has been expressed with respect to the combined effect of such
constitutionally imposed limits on the ability of California state and local
governments to utilize bond financing. For fiscal 1986-1987, Article XIIIB
spending limits required the State to return over $1 billion in unexpected
revenues to taxpayers. Article XIIIB was modified substantially by Propositions
98 and 111 of 1988 and 1990, respectively. Proposition 111 relaxed Article XIIIB
spending limits and revised Proposition 98, which, as revised, may require
approximately 40% of the State's General Fund budget and 50% of revenues
collected in excess of the State spending limit to be spent on public schools
and community colleges. Such guaranteed spending is often cited as one of the
causes of the State's recurring budget problems.
In December 1994, Orange County, California filed for protection from creditors
under federal bankruptcy law. In February 1995, the federal bankruptcy court
ruled that the bankruptcy filing relieved Orange County of its obligation to
set-aside funds for repayment of its outstanding tax and revenue anticipation
notes. The California Fund does not hold any Orange County obligations. However,
the Orange County bankruptcy and the bankruptcy court's ruling could potentially
seriously affect the credit quality of other California municipal obligations.
Budget deficits in recent years have depleted the State's available cash
resources and the State has become increasingly dependent on external cash
borrowings to meet its cash needs. In July 1994, the State issued an
unprecedented $7 billion of short-term instruments consisting of $3 billion of
revenue anticipation notes due June 28, 1995 and $4 billion of revenue
anticipation warrants due April 25, 1996. The difference between revenue
anticipation notes and revenue anticipation warrants is that revenue
anticipation notes must be paid back in the same fiscal year in which they are
issued and revenue anticipation warrants can be issued and redeemed in different
fiscal years. California is authorized to borrow funds by issuing such notes or
warrants or other short-term instruments under legislation passed in 1983. All
required payments on such instruments issued by California have been timely
made. Since 1983, California has consistently issued revenue anticipation notes.
The State had not issued revenue anticipation warrants (other than $400 million
of revenue anticipation warrants issued in 1982) until 1992 but has since issued
revenue anticipation warrants four times. In addition, a two month delay that
took place in enacting the State's budget for fiscal 1992-1993 resulted in the
State's issuance of registered warrants (promissory notes with no specific
maturity) to suppliers and other State-payees. Such registered warrants had not
been issued by the State since the 1930s. It is not presently possible to
determine the extent to which California will issue additional revenue
anticipation warrants, additional short-term interest-bearing notes or other
instruments in future fiscal years.
Because of the complex nature of Articles XIIIA and XIIIB, the possible
ambiguities and inconsistencies in their respective terms, and the applicability
of their respective exemptions and exceptions and the impossibility of
predicting future appropriations, it is not presently possible to determine the
impact of Article XIIIA or Article XIIIB or any implementing or related
legislation on the securities in the Fund's portfolio or the ability of State or
local governments to pay the interest on, or repay the principal of, such
securities. Article XIIIA and its implementing and related legislation have been
subject to legal challenges based on various State and federal constitutional
grounds. In 1979, the California Supreme Court held unconstitutional as an
impairment of contract that part of legislation distributing a portion of the
State's General Fund surplus to local public agencies which purported to
eliminate certain cost of living salary increases provided for by agreement with
certain local public agency employees. With that exception, to date the courts
either have upheld the constitutionality of Article XIIIA and its implementing
and related legislation or have interpreted them in such a manner as to avoid
the necessity for a direct determination of constitutional issues. In June 1992,
the U.S. Supreme Court upheld the constitutionality of Article XIIIA. However,
Articles XIIIA and XIIIB and their respective implementing and related
legislation may be subject to continuing or future legal challenges. It is not
presently possible to predict the outcome of any such litigation with respect to
the ultimate scope, impact or constitutionality of either Article XIIIA or
Article XIIIB, or their respective implementing or related legislation, or the
impact of any such determinations upon State agencies and local governments, or
upon the abilities of such entities to pay the interest on, or repay the
principal of, the securities in the California Fund's portfolio.
FLORIDA FUND
The following information as to certain Florida considerations is given to
investors in view of the Florida Fund's policy of concentrating its investments
in Florida issuers. This information is derived from sources that are generally
available to investors and believed to be accurate. This information constitutes
only a summary, does not purport to be a complete description and has not been
independently verified.
Florida's financial operations are considerably different than most other states
because, under the State's constitution, there is no state income tax on
individuals. A constitutional amendment would be necessary to impose an income
tax on individuals. The lack of an income tax exposes total State tax
collections to more volatility than would otherwise be the case and, in the
event of an economic downswing, could affect the State's ability to pay
principal and interest in a timely manner.
Florida imposes an income tax on corporate income allocable to the State, as
well as an ad valorem tax on intangible personal property, sales and use taxes
and other miscellaneous taxes. These taxes are a major source of funds to meet
State expenses, including repayment of, and interest on, obligations of the
State.
Overall, State general revenue collections from taxes as of April 1995 fell
$97.7 million short of the estimate for the fiscal year. Sources falling under
estimate included sales tax collections, which were $44.1 million under
estimate, the corporate income tax, which was $32.9 million under estimate, and
documentary stamp tax collections, which fell short both in total collections
($9.3 million under estimate) and in the portion transferred to general revenue
($4.8 million under estimate). The estimates for sales tax and the documentary
stamp tax were revised downward at the March 1995 general revenue estimating
conference. Severance taxes as of April 1995 are not being allocated to general
revenue because this source is repaying a loan from the Non-Mandatory Land
Reclamation Trust Fund.
In 1993, Florida's constitution was amended to limit the annual growth in the
assessed valuation of residential property, which, over time, could constrain
growth in property taxes, a major source of revenue for local governments.
Florida has historically experienced substantial population increases as a
result of migration to Florida from other areas of the United States and from
foreign countries. Migration to Florida has topped 55 thousand in each of the
last 5 quarters for which data is available. As a result of population growth,
the state may experience a need for additional revenues to meet increased
burdens on the various public and social services provided by the State.
Florida's ability to obtain increased revenues to meet these burdens will be
dependent in part upon the State's ability to foster business and economic
growth. The State's business and economic growth could be restricted by the
natural limitations of environmental resources and the State's ability to
finance adequate public facilities such as roads and schools.
Florida's economy has been experiencing modest growth. In the fourth quarter of
1994, sectors that showed the strongest growth were retail trade, food and
related products, manufacturing, business services, health care and State and
local government.
The estimated 1994 annual average unemployment rate in Florida was 6.6%, which
was slightly above the average rate for the last 10 years, but down from a 7.0%
average in 1993. For March 1995, Florida's unemployment rate stood at 4.4%.
However, much of the gain since December has resulted from persons dropping out
of the labor force.
Despite increases in other sectors of its economy, Florida remains heavily
dependent on tourism. Florida's vacation industry is susceptible to negative
information, as was shown in 1994 when information regarding crime against
tourists in Florida had a negative impact on the industry.
Recent increases in mortgage loan rates may lead to a slowdown in Florida
housing starts.
Consumer confidence in Florida fell by two points to 91 in December 1994. This
was in contrast to the improvement in national consumer sentiment following the
change in control in Congress.
GEORGIA FUND
Since 1973, the State's long-term debt obligations have been issued in the form
of general obligation debt or guaranteed revenue debt. The State may incur
guaranteed revenue debt by guaranteeing the payment of certain revenue
obligations issued by an instrumentality of the State. Prior to 1973, all of the
State's long-term debt obligations were issued by ten separate State authorities
and secured by lease rental agreements between such authorities and various
State departments and agencies ("Authority Lease Obligations"). The Georgia
Constitution since 1973 has prohibited further Authority Lease Obligations. The
Georgia Constitution prohibits the incurring of any general obligation debt or
guaranteed revenue debt if the highest aggregate annual debt service requirement
for the then-current year or any subsequent fiscal year for outstanding general
obligation debt and guaranteed revenue debt, including the proposed debt, and
the highest aggregate annual payments for the then-current year of any
subsequent fiscal year of the State for all remaining Authority Lease
Obligations, exceed 10% of the total revenue receipts, less refunds, of the
State treasury in the fiscal year immediately preceding the year in which any
such debt is to be incurred. As of March 1995, the total indebtedness of the
State of Georgia consisting of general obligation debt, guaranteed revenue debt
and remaining Authority Lease Obligations totalled $4,369,310,000 and the
highest aggregate annual payment for such debt equalled 5.38% of fiscal year
1994 State treasury receipts.
The Georgia Constitution also permits the State to incur public debt to supply a
temporary deficit in the State treasury in any fiscal year created by a delay in
collecting the taxes of that year. Such debt must not exceed, in the aggregate,
5% of the total revenue receipts, less refunds, of the State treasury in the
fiscal year immediately preceding the year in which such debt is incurred. The
debt incurred must be repaid on or before the last day of the fiscal year in
which it is to be incurred out of the taxes levied for that fiscal year. No such
debt may be incurred in any fiscal year if there is then outstanding unpaid debt
from any previous fiscal year which was incurred to supply a temporary deficit
in the State treasury. No such short-term debt has been incurred under this
provision since the inception of the constitutional authority permitting it.
Virtually all of debt obligations of the State of Georgia and its counties,
municipalities and other political subdivisions and public authorities are
required by law to be validated and confirmed in a judicial proceeding prior to
issuance.
The State operates on a fiscal year beginning July 1 and ending June 30. Revenue
collections of $9,409,526,943 for the fiscal year 1994 showed an increase of
12.74% over collections for the similar period in the previous fiscal year.
Based on data of the Georgia Department of Revenue for fiscal year 1994, income
tax receipts and sales tax receipts of the State for fiscal year 1994 comprised
approximately 44% and 35%, respectively, of the total State tax revenues.
The unemployment rate of the civilian labor force in the State as of November
1994 was 5.6% according to data provided by the Georgia Department of Labor. The
Metropolitan Atlanta area, which is the largest employment center in the area
comprised of Georgia and its five bordering states and which accounts for
approximately 42% of the State's population, has for some time enjoyed a lower
rate of unemployment than the State considered as a whole. In descending order,
wholesale and retail trade, financing insurance and retail services,
manufacturing, government and transportation comprise the largest source of
employment within the State.
Moody's Investors Service, Inc., Standard & Poor's Ratings Group and Fitch
Investors Service, Inc. have given outstanding State of Georgia debt ratings of
"Aaa", "AA+" and "AAA", respectively. In April of 1995, Standard & Poor's
revised its outlook on Georgia's $5.2 billion of outstanding general obligation
bonds to positive from stable. The rating agency cited the State's economic
expansion, population growth, and corporate relocations in explaining its
outlook revision. The rating agency said recent financial statistics rank
Georgia among the top five states nationally in employment and population growth
and said that increased State spending on education, particularly in the area of
technical schools, has stimulated job growth in environmental technology,
biotechnology and telecommunications industries, and has encouraged businesses
to relocate to Georgia.
Several lawsuits were filed against the State of Georgia asserting that the
decision in Davis v. Michigan Department of Treasury, 489 U.S. 803 (1989),
invalidated Georgia's tax treatment of federal retirement benefits for years
prior to 1989. On December 6, 1994, the U.S. Supreme Court reversed the Georgia
Supreme Court's decision in Reich v. Collins, 263 Ga. 602 (1993), which had
determined that the plaintiff federal retiree was not entitled to a refund of
taxes paid on federal retirement pension benefits for tax years before 1989. The
plaintiff had sought refunds under the U.S. Supreme Court's decision in Davis.
The U.S. Supreme Court in Reich remanded the case to the Georgia Supreme Court
for "the provision of meaningful backward-looking relief consistent with due
process and the McKesson line of cases." On February 1, 1995, the Governor
signed H.B. 90 into law, which provides for the payment of refunds to federal
retirees who timely filed claims for any of the tax years 1985 through 1988,
inclusive. The total amount payable is estimated at approximately $110 million,
to be paid in four roughly equal annual installments beginning on or before
October 15, 1995. Based on this legislation, it is anticipated that Reich will
shortly be dismissed.
Age International, Inc. v. State and Age International, Inc. v. Miller are two
suits (one for refund and one for declaratory and injunctive relief) which have
been filed against the State of Georgia by foreign producers of alcoholic
beverages seeking $96,000,000 in refunds of alcohol import taxes. These claims
constitute 99% of all such taxes paid during the preceding three years. In
addition, the claimants have filed administrative claims for an additional
$23,000,000 for apparently later time periods. These cases encompass all known
or anticipated claims for refund of such type within the apparently applicable
statute of limitations. The two Age cases are still pending in the trial court.
The Age declaratory/injunctive relief case was dismissed by the District Court.
That dismissal was affirmed by the Eleventh Circuit Court of Appeals, and
plaintiffs have filed a motion for rehearing which is pending.
The case of Board of Public Education for Savannah/Chatham County v. State of
Georgia is based on the local school board's claim that the State finance the
major portion of the costs of its desegregation program. The Savannah Board
originally requested restitution in the amount of $30,000,000, but the Federal
District Court set forth a formula which would require a State payment in the
amount of approximately $8,900,000. Plaintiffs, dissatisfied with the
apportionment of desegregation costs between State and county and an adverse
ruling on the State funding formula for transportation costs, have appealed to
the United States Eleventh Circuit Court of Appeals. The State has filed a
responsive cross-appeal on the ground that there is no basis for any liability.
Subsequently, the parties agreed to a settlement, which had been submitted to
the Court for approval. The proposed settlement calls for the State to pay the
amount awarded to the plaintiff and to offer an option regarding future funding
methodology for pupil transportation.
A similar complaint has been filed by DeKalb County. The plaintiffs sought
approximately $67,500,000 in restitution. The Federal District Court ruled that
the State's funding formula for pupil transportation (which the District Court
in the Savannah/Chatham County case upheld) was contrary to State law. This
ruling would require a State payment of a state law funding entitlement in the
amount of approximately $34,000,000 computed through June 30, 1994. Motions to
reconsider and amend the Court's judgment were filed by both parties. The
State's motion was granted, in part, which reduced the required State payment to
approximately $28,000,000. Notices of appeals to the Eleventh Circuit Court of
Appeals have been filed. There are approximately five other school districts
which might file similar claims.
Leslie K. Johnsen v. Collins. Plaintiff in this case has filed suit in federal
district and state superior courts challenging the constitutionality of
Georgia's transfer fee (often referred to as "impact fee") by asserting that the
fee violates the commerce clause, due process, equal protection and privilege
and immunity provisions of the United States Constitution. Plaintiff seeks to
prohibit the State from further collections and to require the State to return
to her and those similarly situated all fees previously collected. From May 1992
to February 1994, the State has collected $20,006,834. The State continues to
collect approximately $500,000 to $600,000 per month.
Daniel W. Tedder v. Marcus E. Collins, Sr., is a class action suit challenging
the validity of a Georgia Department of Revenue regulation issued in July 1992
which resulted in enforcement of sales tax collections on sales of used
transportation equipment, most notably sales of used cars where neither party is
engaged in the regular sale of used cars. The trial court declared the
regulation invalid. Approximately $30,000,000 of tax on such sales was collected
before the regulation was rescinded and collection ceased. Accordingly, refund
claims of up to $30,000,000 plus interest could be sought. Approximately
$21,900,000 in refunds have been paid.
Many factors affect and could have an adverse impact on the financial condition
of the State and other issuers of long-term debt obligations which may be held
in the portfolio of the Georgia Fund, including national, social, environmental,
economic and political policies and conditions, many of which are not within the
control of the State or such issuers. It is not possible to predict whether or
to what extent those factors may affect the State and other issuers of long-term
debt obligations which may be held in the portfolio of the Georgia Fund and the
impact thereof on the ability of such issuers to meet payment obligations.
LOUISIANA FUND
Under Louisiana law, certain bonds and obligations constitute general
obligations of the State of Louisiana or are backed by the full faith and credit
of the State of Louisiana, and certain bonds and obligations do not or are not.
The Louisiana Fund invests in both types of obligations.
The Bond Security and Redemption Fund of the State of Louisiana secures all
general obligation bonds of the State of Louisiana issued pursuant to Article
VII, Sections 6(A) and 6(B) of the Constitution of Louisiana and those bonds
issued by State agencies or instrumentalities which are backed by the State's
full faith and credit, pari passu. Article VII, Section 9(B) of the State
Constitution gives constitutional status to the Bond Security and Redemption
Fund and further provides that, subject to contractual obligations existing on
the effective date of the Constitution (January 1, 1975), all State money
deposited in the State Treasury is to be credited to the Bond Security and
Redemption Fund, except money received as the result of grants or donations or
other forms of assistance when the terms and conditions thereof or of agreements
pertaining thereto require otherwise. This section further requires that in each
fiscal year an amount be allocated from the Bond Security and Redemption Fund
sufficient to pay all obligations that are secured by the full faith and credit
of the State and that become due and payable within the current fiscal year,
including principal, interest, premiums, sinking or reserve funds or other
requirements. Under the administrative procedures of the State Treasurer's
office, debt service requirements falling due each month are set aside in the
Bond Security and Redemption Fund during the immediately preceding and current
month, followed by monthly transfers of excess funds to the State's general and
other funds.
Any bonds issued by the State of Louisiana other than general obligation bonds,
or any bonds issued by the State of Louisiana or any other issuer that are not
backed by the full faith and credit of the State of Louisiana are not entitled
to the benefits of the Bond Security and Redemption Fund.
The legislature has limited its ability to authorize certain debt and the State
Bond Commission's ability to issue certain bonds. The legislature may not
authorize general obligation bonds or other general obligations secured by the
full faith and credit of the State if the amount of authorized but unissued debt
plus the amount of outstanding debt exceeds twice the average annual revenues of
the Bond Security and Redemption Fund for the last three fiscal years completed
prior to such authorization. This debt limitation is not applicable to or shall
not include the authorization of refunding bonds secured by the full faith and
credit of the State, or to authorized or outstanding bond anticipation notes.
Bond anticipation notes are issued in anticipation of the sale of duly
authorized bonds or to fund capital improvements. The State Bond Commission may
not issue general obligation bonds or other general obligations secured by the
full faith and credit of the State at any time when the highest annual debt
service requirement for the current or any subsequent fiscal years for such
debt, including the debt service on such bonds or other obligations then
proposed to be sold by the State Bond Commission, exceeds 10% of the average
annual revenues of the Bond Security and Redemption Fund for the last three
fiscal years completed prior to such issuance. The annual revenues of the Bond
Security and Redemption Fund for the three fiscal years ended June 30, 1992,
1993 and 1994, were respectively: $5,136,845,000, $5,994,856,000, and
$6,040,601,000. This debt limitation is not applicable to the issuance or sale
by the State Bond Commission of refunding bonds secured by the full faith and
credit of the State of Louisiana or to bond anticipation notes. However, in
calculating the annual debt service requirements in any fiscal year, included is
the debt service on refunding bonds and excluded is the debt service
requirements on the prior issues of bonds refunded by the refunding bonds.
The State Bond Commission may also issue and sell revenue anticipation notes to
avoid temporary cash flow deficits. These notes are payable from anticipated
cash, as reflected in the most recent official forecast of the Revenue
Estimating Conference. Unless issued in accordance with the provisions of
Article VII, Section 6(A) of the State Constitution, the notes do not constitute
a full faith and credit obligation of the State.
The foregoing limitations on indebtedness imposed upon the legislature and the
State Bond Commission do not apply to obligations that are not general
obligations of the State of Louisiana or that are not backed by the full faith
and credit of the State of Louisiana.
Although the manner in which the Bond Security and Redemption Fund operates is
intended to adequately fund all obligations that are general obligations of the
State, or that are secured by the full faith and credit of the State, there can
be no assurance that particular bond issues will not be adversely affected by
expected budget gaps. During the period from fiscal year 1981-82 through fiscal
year 1991-92, the State experienced operating budget deficits in eight of the
ten fiscal years. Exacerbating the operating deficit problem was the highly
dependent nature of the State's budget on mineral revenues and in particular,
the dramatic fluctuations in oil prices over the past decade. Furthermore, a
significant component of Louisiana's annual budget burden arises out of its debt
service obligations which are the highest per capita of any of the 14 southern
states. According to the 1990 United States Census Bureau, Louisiana had a $226
per capita debt service interest payment, compared with $39 per capita in
Mississippi and $28 per capita in the State of Texas. Other factors attributing
to Louisiana's budget gap are the decline in mineral revenues, weak sales tax
collections, expiration of certain taxes, increases in certain tax credits and
the prior utilization of one time monies to balance earlier state budgets.
These same conditions could adversely affect bonds that are not general
obligations of the State or that are not entitled to the full faith and credit
of the State and that therefore are not secured by the Bond Security and
Redemption Fund. Examples of these bonds include general obligation parish bond
issues, revenue bonds issued by the State of Louisiana or a parish or other
political subdivision or agency, and industry development bonds. Revenue bonds
are payable only from revenues derived from a specific facility or revenue
source. Industrial development bonds are generally secured solely by the
revenues derived from payments made by the industrial user. With respect to
bonds issued by local political subdivisions or agencies, because the 64
parishes within the State of Louisiana are subject to their own revenue and
expenditure problems, current and long-term adverse developments affecting their
revenue sources and their general economy may have a detrimental impact on such
bonds. Similarly, current adverse developments affecting Louisiana's state and
local economy could have a detrimental impact on revenue bonds and industrial
development bonds.
MARYLAND FUND
The State's total expenditures for the fiscal years ending June 30, 1992, June
30, 1993 and June 30, 1994 were $11.585 billion, $11.786 billion and $12.351
billion, respectively. As of February 24, 1995, it was estimated that total
expenditures for fiscal year 1995 would be $13.834 billion. The State's General
Fund, representing approximately 54% - 60% of each year's total budget, had a
surplus on a budgetary basis of $55 thousand in fiscal year 1991, a deficit of
$56 million in fiscal year 1992 and a surplus of $11 million in fiscal year
1993. The Governor of Maryland reduced fiscal year 1993 appropriations by
approximately $56 million to offset the fiscal year 1992 deficit. The State
Constitution mandates a balanced budget.
In April 1994, the General Assembly approved the $13.343 billion 1995 fiscal
year budget. The budget includes $2.6 billion in aid to local governments
(reflecting a $102.4 million increase in funding over 1994 that provides for
substantial increases in education, health and police aid), and $104.8 million
in general fund deficiency appropriations for fiscal year 1994, of which $60.5
million is a legislatively mandated appropriation to the Revenue Stabilization
Account of the State Reserve Fund. The Revenue Stabilization Account was
established in 1986 to retain State revenues for future needs and to reduce the
need for future tax increases. The 1995 budget does not include any proposed
expenditures dependent on additional revenue from new or broad-based taxes. When
the 1995 budget was enacted, it was estimated that the general fund surplus on a
budgetary basis at June 30, 1994, would be approximately $9.7 million. As of
February 24, 1995 it is estimated that the general fund surplus on a budgetary
basis at June 30, 1995, will be $76.9 million.
In January 1995, the Governor submitted his proposed fiscal year 1996 budget to
the General Assembly. The budget includes $2.8 billion in aid to local
governments (reflecting a $161 million increase over 1995 that provides
substantial increases in education, health and police aid), and $142.1 million
in general fund deficiency appropriations for fiscal year 1995, of which $60
million is an appropriation to the Revenue Stabilization Account of the State
Reserve Fund. As of February 24, 1995 it is estimated that the general fund
surplus on a budgetary basis at June 30, 1996 will be $176.8 thousand. In
addition, it is estimated that the balance in the Revenue Stabilization Account
of the State Reserve Fund at June 30, 1996 will be $511.7 million.
The public indebtedness of Maryland is divided into three basic types. The State
issues general obligation bonds for capital improvements and for various
State-sponsored projects. The Department of Transportation of Maryland issues
limited special obligations bonds for transportation purposes payable primarily
from specific, fixed-rate excise taxes and other revenues related mainly to
highway use. Certain authorities issue obligations solely from specific non-tax
enterprise fund revenues and for which the State has no liability and has given
no moral obligation assurance.
While the factors mentioned above indicate that Maryland and its
instrumentalities are addressing the economic concerns and issues and, overall,
are in satisfactory economic health, there can, of course, be no assurance that
this will continue or that particular Maryland Municipal Obligations may not be
adversely affected by changes in State or local economic or political
conditions.
MASSACHUSETTS FUND
Investments in Massachusetts Municipal Obligations may be affected by a variety
of factors, including the general economic health of the state and local
governments and the availability of federal funding.
Commonwealth spending exceeded revenues in each of the five fiscal years
commencing fiscal year 1987. In particular, from 1987 to 1990, spending in five
major expenditure categories -- Medicaid, debt service, public assistance, group
health insurance and transit subsidies -- grew at rates in excess of the rate of
inflation for the comparable period. In addition, the Commonwealth's tax
revenues during this period repeatedly failed to meet official forecasts. For
the budgeted funds, operating losses in fiscal years 1987 and 1988 of $349
million and $370 million, respectively, were covered by surplus carried forward
from prior years. The operating losses in fiscal years 1989 and 1990, which
totalled $672 million and $1.25 billion, respectively, were covered primarily
through deficit borrowings. During the period, fund balances in the budgeted
operating funds declined from an opening balance of $1.17 billion in fiscal year
1987 to an ending balance of negative $1.1 billion in fiscal year 1990. Fiscal
1991 and 1992 ended with positive fund balances of $237.1 million and $549.4
million, respectively. Fiscal 1993 ended with positive fund balances of $562.5
million.
Standard & Poor's and Moody's have upgraded their ratings of long-term bonds
issued by the Commonwealth to A+ and A1, respectively. The budgetary
difficulties of the Commonwealth are likely to affect the bond ratings and
credit standing of its public authorities and municipalities as well. These
difficulties could affect adversely the market values and marketability of, or
possibly even result in default in payment on, outstanding obligations issued by
the Commonwealth or its public authorities or municipalities.
The Commonwealth is also experiencing an economic slowdown. Earlier in the
1980s, revenue growth and expenditure increases occurred in the context of a
strong performance by the Commonwealth's and the region's economy. However,
since 1988, economic performance has slowed significantly, particularly in the
construction, real estate, financial and manufacturing sectors (including high
technology), with especially adverse results in 1990 and the first half of 1991.
In 1990, for the first time since 1979, the Commonwealth's unemployment rate
significantly exceeded the national average. As of December 1994, the
Commonwealth's unemployment rate was 5.7%, as compared to a national average of
5.4%. Increases in unemployment claims have reduced the balances in the
Commonwealth's unemployment compensation trust fund. In addition, the
Commonwealth's per capita personal income is growing at a rate lower than the
national average.
In fiscal year 1994, which ended June 30, 1994, the revenues of the budgeted
operating funds of the Commonwealth increased by approximately 5.7% over the
prior fiscal year, to approximately $15.550 billion. Expenditures also
increased, by 5.6% over the prior year, to approximately $15.523 billion. As a
result, in fiscal year 1994 the Commonwealth experienced a surplus of revenues
and other sources over expenditures of approximately $26.8 million. The
Commonwealth ended fiscal year 1994 with a positive closing fund balance of
$589.3 million.
On July 10, 1994 the Governor signed the Commonwealth's budget for fiscal year
1995. Budgeted revenues and other sources in fiscal 1995 are currently estimated
by the Executive Office for Administration and Finance to be approximately
$16.360 billion, including estimated tax revenues in the amount of $11.179
billion, an increase of $572 million over tax revenues in fiscal year 1994. It
is estimated that fiscal 1995 budgeted expenditures will be $16.449 billion.
In Massachusetts the tax on personal property and real estate is virtually the
only source of tax revenues available to cities and towns to meet local costs.
"Proposition 2 1/2," an initiative petition adopted by the voters of the
Commonwealth in November 1980, limits the power of Massachusetts cities and
towns and certain tax-supported districts and public agencies to raise revenue
from property taxes to support their operations, including the payment of
certain debt service. Proposition 2 1/2 required many cities and towns to reduce
their property tax levies to a stated percentage of the full and fair cash value
of their taxable real estate and personal property, and it limits the amount by
which the total property taxes assessed by all cities and towns might increase
from year to year.
The reductions in local revenues and anticipated reductions in local personnel
and services resulting from Proposition 2 1/2 created strong demand for
substantial increases in state-funded local aid, which increased significantly
in fiscal years 1982 through 1986. The effect of this increase in local aid was
to shift a major part of the impact of Proposition 2 1/2 to the Commonwealth,
but this did not require an increase in Massachusetts state taxes. The recent
difficulties summarized above have resulted in a substantial reduction in local
aid from the Commonwealth and delays in the payment of local aid. These
reductions and delays may create financial difficulties for certain
municipalities. It is estimated that fiscal 1995 expenditures for direct local
aid will be $2.984 billion, an increase of approximately 9.4% above the fiscal
1994 level.
Limitations on Commonwealth tax revenues have been established both by
legislation enacted in 1986 and by public approval of an initiative petition in
1986. The two measures are inconsistent in several respects, including the
methods of calculating the limits and the exclusions from the limits. The
initiative petition, which took effect in 1986, contains no exclusion for debt
service on Municipal Obligations of the Commonwealth. Commonwealth tax revenues
in fiscal years 1990 through 1994 were lower than the limit set by either the
initiative petition or the legislative enactment. The Executive Office for
Administration and Finance of the Commonwealth has estimated that Commonwealth
tax revenues will not reach the limit imposed by either the initiative petition
or the legislative enactment in fiscal years 1995 and 1996.
The aggregate unfunded actuarial liabilities of the pension systems of the
Commonwealth and the unfunded liability for the Commonwealth related to local
retirement systems are significant -- estimated to be approximately $9.651
billion as of January 1, 1993, on the basis of certain actuarial assumptions
regarding, among other things, future investment earnings and annual inflation
rates, wage increases and cost of living increases. No assurance can be given
that these assumptions will be realized. As of December 31, 1994, the
Commonwealth's state pension reserve was approximately $4.925 billion. The
legislature adopted a comprehensive pension bill addressing the issue in January
1988, which requires the Commonwealth, beginning in fiscal 1989, to fund future
pension liabilities currently and amortize the Commonwealth's unfunded
liabilities over 40 years, in accordance with funding schedules proposed by the
Secretary of Administration and Finance and approved by new legislation.
MISSISSIPPI FUND
In September 1993 Mississippi's unemployment rate fell considerably to 5.2%. The
growth rate of State product for the year is estimated to have been 5.8%, and
accelerated to 6.9% in 1994. Mississippi continued to close the per capita
income gap between the State and the average for the country. Per capita incomes
increased 4.6% in 1993.
Approximately 27,400 new jobs were created in 1993, with half of that growth due
to the gaming industry. Total employment in Mississippi is estimated to have
increased by 3% in 1994. In the U.S. as a whole, total employment grew more
slowly at 2.8%. Manufacturing accounts for 23% of employment in Mississippi but
considerably less in total U.S. employment. In Mississippi, about 56% of
manufacturing employment is in durable goods, with the remainder in nondurable
goods. Mississippi's employment growth is expected to continue in such sectors
as services, finance, insurance, real estate and construction.
The Mississippi economy is outpacing the rest of the nation, with growth rates
of income and employment well above the national average. U.S. News and World
Report (11/8/93) ranked Mississippi number one in the nation, based on six
indicators of economic health. The strength of Mississippi's economy is evident
by the 9.8% rise in the corporate profits during 1992, a similar growth rate for
1993, and strong growth in 1994 due to further expansion of the gaming industry.
U.S. News and World Report (11/7/94) continued to rank Mississippi in the top
ten states for economic growth with its number eight ranking for the past year.
In recent years, the State has successfully expanded its economy through
technology-based research and education, and the Mississippi banking system has
exhibited strength and stability over the past several years, a period
characterized by a growing number of bank failures nationwide.
The gaming industry started up in Mississippi in August 1992, and as of November
1993 it had already become a $500 million industry, providing more than 12,000
jobs in direct employment and contributing over $60 million in State and local
tax revenues annually. By December 1994 employment in the gaming industry
stabilized at 28,000 jobs.
While the number of workers involved directly in agriculture has declined, it
remains a significant factor in the State's economy. Cotton was the number one
producer of farm income in 1990, poultry and eggs were second while forestry was
third. Research and promotion have provided the State with a number of new
farming alternatives. The production of catfish, poultry, rice, blueberries and
muscadines have grown dramatically in recent years. Timber continues to be
Mississippi's largest natural resource, with the State leading the nation in the
number of tree farms. Of Mississippi's total land area 56% (approximately 17
million acres) is classified as commercial forest.
All or part of 20 states and 136 metropolitan areas lie within 550 miles of
Mississippi. Mississippi is in an excellent location to service this market area
with four interstate highways, which provide access in every direction, 19
railroads, including four of the nation's largest carriers, and seven commercial
airports. International and domestic waterborne commerce is served by
Mississippi's nine major ports.
The population of the State is estimated to be 2,660,000. The population
increased an estimated 2.1% from 1980-1990; however, population projections
suggest a more dramatic growth in the 1990's. The projected increase is 7.7% for
a total population of 2,770,802. Mississippi has a relatively young population,
with 29% of its total population below 18 years of age.
Employment in the service industries rose 7% during 1993, and in 1994, the
employment in service industries continued its growth at a rate of 9.1%. Having
the most rapid growth of any sector, the service sector has now surpassed
manufacturing as the leading employer in the State, employing 31% of the total
non-agricultural employment. The other large employment sectors are government,
retail trade and construction. The leading employer by product category remains
the apparel industry, followed by food, furniture and fixtures, and lumber.
Although its importance has declined, agriculture continues to contribute
significantly to the State's economy. With the diversification into livestock,
soybeans, aquaculture, rice and other alternative crops, there is now less
dependence on cotton as the major crop.
Total personal income in Mississippi increased 5.8% in 1994 compared to a 5.9%
increase in the U.S. over the same period. Manufacturing, services and
government employment comprise the largest components of earned personal income
in Mississippi. Mississippi continues to rank 50th among the 50 states in per
capita total personal income. However, between 1970 and 1990, per capita total
personal income in Mississippi increased at a compound annual rate of 8.8% while
U.S. per capita total personal income increased at an 8.4% compound annual rate.
In the State of Mississippi, all State indebtedness must be authorized by
legislation governing the specific programs or projects to be financed. Such
debt may include short- and long-term indebtedness, self-supporting general
obligation bonds, highway bonds and other types of indebtedness. The amount of
bonded indebtedness that may be incurred by the State or any of its direct
agencies is limited by the Mississippi Constitution to an amount equal to one
and one-half times the sum of all revenue collected by the State during any one
of the preceding four fiscal years, whichever year may be higher.
For the fiscal year ended June 30, 1992, State General Fund receipts were
budgeted at approximately $2,000,397,000 and State General Fund Disbursements
were budgeted at approximately $1,999,675,700, and State Special Fund Receipts
and Disbursements were estimated to be approximately $3.47 million and $3.52
million, respectively. With the rise in industry, employment and the gaming
industry, the State General Fund receipts are increasing rapidly. For the fiscal
years ended June 30, 1993 and June 30, 1994, General Fund receipts had increased
to approximately $2,082,000,000 and $2,335,400,000, respectively.
NEW YORK FUND
The fiscal stability of New York State is related, at least in part, to the
fiscal stability of its localities and authorities. Various State agencies,
authorities and localities have issued large amounts of bonds and notes either
guaranteed or supported by the State through lease-purchase arrangements, other
contractual arrangements or moral obligation provisions. While debt service is
normally paid out of revenues generated by projects of such State agencies,
authorities and localities, the State has had to provide special assistance in
recent years, in some cases of a recurring nature, to enable such agencies,
authorities and localities to meet their financial obligations and, in some
cases, to prevent or cure defaults. To the extent State agencies and local
governments require State assistance to meet their financial obligations, the
ability of the State to meet its own obligations as they become due or to obtain
additional financing could be adversely affected.
Constitutional challenges to State laws have limited the amount of taxes which
political subdivisions can impose on real property, which may have an adverse
effect on the ability of issuers to pay obligations supported by such taxes. A
variety of additional court actions have been brought against the State and
certain agencies and municipalities relating to financings, amount of real
estate tax, use of tax revenues and other matters, which could adversely affect
the ability of the State or such agencies or municipalities to pay their
obligations.
Both the State and New York City face potential economic problems which could
seriously affect the ability of both the State and City to meet their respective
financial obligations. The City has had to face greater competition from other
major cities and the State economy has grown more slowly than that of the nation
as a whole, in part as a result of international and national trends beyond the
State's or City's control. Moreover, the current high level of New York State
and New York City taxes limits the ability of the State and the City to impose
higher taxes in the event of future difficulties. The federal and State
governments have proposed various programs to alleviate these trends but no
immediate reversal can be expected.
New York is the second most populous state in the nation and has a relatively
high level of personal wealth. The State's economy is diverse with a
comparatively large share of the nation's finance, insurance, transportation,
communications and services employment, and a comparatively small share of the
nation's farming and mining activity. The State's location and its excellent air
transport facilities and natural harbors have made it an important link in
international commerce. The State has a declining proportion of its workforce
engaged in manufacturing, and an increasing proportion engaged in service
industries. This transition reflects a national trend.
Although industry and commerce are broadly spread across the State, particular
activities are concentrated in certain areas. Westchester County is headquarters
for several major corporations. Buffalo's economy relies on heavy industry.
Rochester leads the nation in the manufacture of photographic and optical
equipment. Syracuse and the Utica-Rome area produce machinery and transportation
equipment. The Albany-Troy-Schenectady area is a governmental center and
produces electrical products. Binghamton is the original site of the
International Business Machines Corporation and continues to have a
concentration of employment in computer and other high technology manufacturing.
New York City, which is the most populous city in the State and nation and is
the center of the nation's largest metropolitan area, accounts for approximately
41% of both the State's population and personal income. It is headquarters for
the nation's securities business, six of the ten largest commercial banks in the
nation, five of the ten largest diversified financial institutions, four of the
ten largest life insurance companies and five of the nation's 50 largest
industrial corporations (five others of which have headquarters elsewhere in the
State). In addition, the City houses the home offices of the three major radio
and television broadcasting networks, most of the national magazines and a
substantial portion of the nation's book publishers. The City also retains
leadership in the design and manufacture of men's and women's apparel.
The State has historically been one of the wealthiest states in the nation. For
decades, however, the State has grown more slowly than the nation as a whole,
gradually eroding its relative economic affluence. Statewide, urban centers have
experienced significant changes involving migration of the more affluent to the
suburbs and an influx of generally less affluent residents. Regionally, the
older Northeast cities have suffered because of the relative success that the
South and the West have had in attracting people and business. The City has also
had to face greater competition as other major cities have developed financial
and business capabilities which make them less dependent on the specialized
services traditionally available almost exclusively in the City.
During calendar years 1982 and 1983 the State's economy in most respects
performed better than that of the nation. However, in the calendar years 1984
through 1991, the State's rate of economic expansion was somewhat slower than
that of the nation. The unemployment rate in the State dipped below the national
rate in the second half of 1981 and remained lower until 1991. The total
employment growth rate in the State has been below the national average since
1984. Total personal income in the State has risen slightly faster than the
national average every year since 1983, with the exception of 1984, 1985, 1990
and 1991. Overall economic activity declined less than that of the nation as a
whole during the 1982-1983 recession. In the 1991-1992 recession, however, the
State and the rest of the Northeast was more heavily impacted.
The State has for many years had a very high State and local tax burden relative
to other states. The State and its localities have used these taxes to develop
and maintain their transportation networks, public schools and colleges, public
health systems, other social services and recreational facilities. Despite these
benefits, the burden of State and local taxation, in combination with the many
other causes of regional economic dislocation, may have contributed to the
decisions of some businesses and individuals to relocate outside, or not locate
within, the State.
NORTH CAROLINA FUND
General obligations of a city, town or county in North Carolina are payable from
the general revenues of the entity, including ad valorem tax revenues on
property within the jurisdiction. Revenue bonds issued by North Carolina
political subdivisions include (1) revenue bonds payable exclusively from
revenue-producing governmental enterprises and (2) industrial revenue bonds,
college and hospital revenue bonds and other "private activity bonds" which are
essentially non-governmental debt issues and which are payable exclusively by
private entities such as non-profit organizations and business concerns of all
sizes. State and local governments have no obligation to provide for payment of
such private activity bonds and in many cases would be legally prohibited from
doing so. The value of such private activity bonds may be affected by a wide
variety of factors relevant to particular localities or industries, including
economic developments outside of North Carolina.
Section 23-48 of the North Carolina General Statutes appears to permit any city,
town, school district, county or other taxing district to avail itself of the
provisions of Chapter 9 of the United States Bankruptcy Code, but only with the
consent of the Local Government Commission of the State and of the holders of
such percentage or percentages of the indebtedness of the issuer as may be
required by the Bankruptcy Code (if any such consent is required). Thus,
although limitations apply, in certain circumstances political subdivisions
might be able to seek the protection of the Bankruptcy Code.
STATE BUDGET AND REVENUES. The North Carolina State Constitution requires that
the total expenditures of the State for the fiscal period covered by each budget
not exceed the total of receipts during the fiscal period and the surplus
remaining in the State Treasury at the beginning of the period. The State's
fiscal year runs from July 1st through June 30th.
In 1990 and 1991 the State had difficulty meeting its budget projections. The
General Assembly responded by enacting a number of new taxes and fees to
generate additional revenue and reduce allowable departmental operating
expenditure and continuation funding. The spending reductions were based on
recommendations from the Governor, the Government Performance Audit Committee
and selected reductions identified by the General Assembly.
The State, like the nation, has experienced economic recovery since 1991.
Apparently due to both increased tax and fee revenue and the previously enacted
spending reductions, the State had a budget surplus of approximately $887
million at the end of fiscal 1993-94. After review of the 1994-95 continuation
budget adopted in 1993, the General Assembly approved spending expansion funds,
in part to restore certain employee salaries to budgeted levels, which amounts
had been deferred to balance the budgets in 1989-1993, and to authorize funding
for new initiatives for economic development, education, human services and
environmental programs. (The cutback in funding for infrastructure and social
development projects had been cited by agencies rating State obligations,
following the 1991 reductions, as cause for concern about the long-term
consequences of those reductions on the economy of the State and the State's
fiscal prospects).
Based on projected growth in State tax and fee revenues, the General Fund
balance forecast for the end of the 1994-95 fiscal year is approximately $310
million.
It is unclear what effect these developments at the State level may have on the
value of the Debt Obligations in the North Carolina Fund.
The State is subject to claims by classes of plaintiffs asserting a right to a
refund of taxes paid under State statutes that allegedly discriminated against
federal retirees and armed services personnel in a manner that was
unconstitutional based on the decision by the United States Supreme Court in a
1989 Michigan case involving a similar law, Davis v. Michigan Department of
Treasury ("Davis"). At the time of that decision, State income tax law exempted
retirement income paid by North Carolina State and local governments but did not
exempt retirement income paid by the federal government to its former employees.
Also, State tax law at the time provided a deduction for certain income earned
by members of the North Carolina National Guard, but did not provide a similar
deduction for members of the federal armed services.
Following the Davis decision, the North Carolina legislature amended the tax
laws to provide identical retirement income exclusions for former state and
federal employees (effective for 1989), and repealed the deduction given to
members of the State National Guard. In addition, the amendments authorized a
special tax credit for federal retirees equal to the taxes paid on their
nonexcluded federal pensions in 1988 (to be taken over a three year period
beginning with returns for 1990).
Subsequent to Davis, the North Carolina plaintiffs brought an action in federal
court against the North Carolina Department of Revenue and certain officials of
the State alleging that the collection of the taxes under the prior North
Carolina tax statutes was prohibited by the state and federal constitutions, and
also violated civil rights protections under 42 U.S.C. (S) 1983, a federal
statute prohibiting discriminatory taxation of the compensation of certain
federal employees (4 U.S.C. (S) 111), and the principle of intergovernmental tax
immunity. The plaintiffs sought injunctive relief requiring the State to provide
refunds of the illegally collected taxes paid on federal retirement or military
pay for the years 1985-88 (covering the asserted 3 year limitations period),
plus interest. Swanson, et al. v. Powers, et al. (United States District Court
for the Eastern District of North Carolina, No. 89-282-CIV-5-H) ("Swanson
Federal"). The individual plaintiffs in Swanson Federal also brought an action
in North Carolina state court seeking refunds of the illegal taxes. Swanson, et
al. v. State of North Carolina, et al. (Wake County, North Carolina Superior
Court, No. 90 CVS 3127) ("Swanson State").
The amounts claimed by federal retirees in the Swanson actions have not been
precisely calculated. Plaintiffs have asserted that the plaintiff class contains
about 100,000 taxpayers; the State estimated that as of June 30, 1994, the
claims (including interest) would then aggregate approximately $280 million.
In 1991, the North Carolina Supreme Court in Swanson State affirmed a decision
in favor of the State, holding that the U.S. Supreme Court decision in Davis was
not to have retroactive effect. Review was granted by the United States Supreme
Court and the case subsequently was remanded to the North Carolina Supreme Court
for reconsideration in light of the U.S. Supreme Court's 1993 holding in Harper
v. Virginia Department of Taxation ("Harper"). In Harper, which also involved
the disparate income tax treatment under Virginia law of retired state and
federal employees and the question of retroactive application of Davis, the U.S.
Supreme Court held that The Commonwealth of Virginia must provide "meaningful
backward-looking relief" to the plaintiffs if the Commonwealth did not have a
pre-deprivation process adequate to satisfy due process requirements. Harper was
remanded to the Supreme Court of Virginia to determine whether a remedy was
required and, if so, what form it would take.
Similarly, Swanson State was remanded for reconsideration of whether the North
Carolina tax laws satisfied the due process requirements of the federal
constitution and, if not, what remedy was to be provided by the State.
On remand, the North Carolina Supreme Court held in early 1994 that the
plaintiffs in Swanson State were procedurally barred from recovering refunds
because they did not comply with the State's statutory post-payment refund
demand procedure. The plaintiffs contended unsuccessfully that the post-payment
demand requirement did not meet the requirements of the federal constitution, in
light of the Harper decision, for "meaningful backward-looking relief."
Plaintiffs in Swanson State petitioned the U.S. Supreme court for review of the
most recent North Carolina Supreme Court decision. In December 1994, the Court
denied certiorari to the Swanson State plaintiffs. At the same time the Court
issued a decision in Reich v. Collins, a Georgia case involving similar claims,
finding for the plaintiff taxpayers, but the effect of the Reich decision on the
claims of the Swanson State plaintiffs is uncertain. It is yet undetermined
whether North Carolina offers pre-deprivation procedures (payment and protest
within a specified time period) or post-deprivation remedies (tax credits
especially tailored to these claims) adequate to satisfy constitutional
requirements, and plaintiffs in Swanson State have petitioned the North Carolina
Supreme Court for a rehearing of its last decision in the case.
Following Harper, the plaintiffs in Swanson Federal again requested an
injunction requiring refunds. (Although the federal and state cases are
independent, the refund claims apparently would lead to only a single recovery
of taxes deemed unlawfully collected.) In May 1994, the U.S. District Court
granted the State's motion to dismiss all but one claim made by the plaintiffs,
declaring that those claims were precluded by the 1994 North Carolina Supreme
Court decision in Swanson State. Plaintiffs in Swanson Federal asserted that
relief should have been granted because of the effect of the federal District
Court's 1990 opinion in Swanson Federal denying the defendants' motion that the
federal Tax Injunction Act precluded the plaintiffs' claims, in which the court
found that the statutory post-payment remedy for refund of unlawful taxes was
not "plain, speedy and efficient," as required by that law. Swanson Federal,
1990 WL 545 761 (E.D.N.C.), rev'd, 937 F.2d 965 (1991), cert. denied, 112 S. Ct.
871 (1992). In its May 1994 decision, the federal court rejected that assertion
and held that its finding regarding the federal Tax Injunction Act was
jurisdictional only and was not a determination that the statutory remedy
violated the due process clause.
The plaintiffs' claim that was not dismissed with prejudice in the recent
District Court order asserts that the State continued an unlawful
discrimination, contrary to the requirements of 4 U.S.C. (S) 111 and the
doctrine of intergovernmental tax immunity, by increasing benefits to State
retirees (in order to offset the effect of the deletion of the preferential
State retirement income exemption) as part of the bill that equalized the income
exclusion for State and federal retirement payments. The claim is based on a
holding of similar effect in Sheehy v. Public Employees Retirement Div., 864 P.
2d 762 (Mont. 1993). In its May 1994 order, the District Court allowed the
plaintiffs to dismiss the Sheehy claim without prejudice. Therefore, plaintiffs
could assert those claims in another action; apparently, the relief would
require providing federal retirees with tax refunds or other payments equal to
the allegedly discriminatory payments made to State retirees since 1989. The
court noted that those claims will be subject to the statutory post-deprivation
procedural requirements, and that a challenge to the legality of the remedial
statute would be precluded under the scope of the court's order dismissing the
other claims. However, the court granted plaintiffs' motion to dismiss the
Sheehy claims without prejudice because the record did not show whether the
plaintiffs had complied with the statutory requirements. The plaintiffs in
Swanson State have appealed the District Court decision to the United States
Court of Appeals and a hearing is scheduled for March 1995.
Several states involved in similar suits have reached settlements. Expressions
of interest in settlement of the claims in Swanson by both the plaintiffs and
State officials have been reported in the press, but no prediction can be made
of the likelihood or amount of settlement. Although the recent improvements in
the economy and fiscal condition of the State might better enable the State to
satisfy an adverse decision without significant consequences to the State's
fiscal condition or governmental functions, because the amount of the potential
liability has not been fixed and because of the potential that adverse fiscal or
economic e developments could cause a more negative result on the State if a
large amount must be paid, no assurance can be given that the impact of the
Swanson cases, if the plaintiffs ultimately succeed will not have an adverse
impact on the Debt Obligations.
State and local government retirees also filed a class action suit in 1990 as a
result of the repeal of the income tax exemptions for state and local government
retirement benefits. The original suit was dismissed after the North Carolina
Supreme Court ruled in 1991 that the plaintiffs had failed to comply with state
law requirements for challenging unconstitutional taxes and the United States
Supreme Court denied review. In 1992, many of the same plaintiffs filed a new
lawsuit alleging essentially the same claims, including breach of contract,
unconstitutional impairment of contract rights by the State in taxing benefits
that were allegedly promised to be tax-exempt and violation of several state
constitutional provisions. The North Carolina Attorney General's Office
estimates that the amount in controversy is approximately $40-$45 million
annually for the tax years 1989 through 1992.
The case is now pending in state court.
Other litigation against the State include the following. None of the cases, in
the reported opinion of the Department of the Treasurer, would have a material
adverse affect on the State's ability to meet its obligations.
Leandro et al v. State of North Carolina and State Board of Education - In May
1994, students and boards of education in five counties in the State filed suit
in state court requesting a declaration that the public education system of
North Carolina, including its system of funding, violates the State constitution
by failing to provide adequate or substantially equal educational opportunities
and denying due process of law and violates various statutes relating to public
education. The suit is similar to a number of suits in other states, some of
which resulted in holdings that the respective systems of public education
funding were unconstitutional under the applicable state law. The defendants in
such suit have filed a motion to dismiss, but no answer to the complaint, and no
pretrial discovery has taken place.
Francisco Case - In August 1994, a class action lawsuit was filed in state court
against the Superintendent of Public Instruction and the State Board of
Education on behalf of a class of parents and their children who are
characterized as limited English proficient. The complaint alleges that the
State has failed to provide funding for the education of these students and has
failed to supervise local school systems in administering programs for them. The
complaint does not allege an amount in controversy, but asks the Court to order
the defendants to fund a comprehensive program to ensure equal educational
opportunities for children with limited English proficiency.
Faulkenburg v. Teachers' and State Employees' Retirement System, Peele v.
Teachers' and State Employees' Retirement System, and Woodard v. Local
Governmental Employees' Retirement System - Plaintiffs are disability retirees
who brought class actions in state court challenging changes in the formula for
payment of disability retirement benefits and claiming impairment of contract
rights, breach of fiduciary duty, violation of other federal constitutional
rights, and violation of state constitutional and statutory rights. The State
estimates that the cost in damages and higher prospective benefit payments to
plaintiffs and class members would probably amount to $50 million or more in
Faulkenburg, $50 million or more in Peele, and $15 million or more in Woodard,
all ultimately payable, at least initially, from the retirement systems funds.
Upon review in Faulkenburg, the North Carolina Court of Appeals and Supreme
Court have held that claims made in Faulkenburg substantially similar to those
in Peele and Woodard, for breach of fiduciary duty and violation of federal
constitutional rights brought under the federal Civil Rights Act either do not
state a cause of action or are otherwise barred by the statute of limitations.
In 1994 plaintiffs took voluntary dismissals of their claims for impairment of
contract rights in violation of the United States Constitution and filed new
actions in federal court asserting the same claims along with claims for
violation of constitutional rights in the taxation of retirement benefits. The
remaining state court claims in all cases are scheduled to be heard in North
Carolina in October 1994.
Fulton Case - The State's intangible personal property tax which recently was
repealed but had been levied on certain shares of stock has been challenged by
the plaintiff on grounds that it violated the Commerce Clause of the United
States Constitution by discriminating against stock issued by corporations that
do all or part of their business outside the State. The plaintiff in the action
is a North Carolina corporation that does all or part of its business outside
the State. The plaintiff seeks to invalidate the tax in its entirety and to
recover tax paid on the value of its shares in other corporations. The North
Carolina Court of Appeals invalidated the taxable percentage deduction and
excised it from the statute beginning with the 1994 tax year. The effect of this
ruling is to increase collections by rendering all stock taxable on 100% of its
value. The State and the plaintiff have sought further appellate review, and the
case is pending before the North Carolina Supreme Court. Moreover, on April 18,
1995, the North Carolina General Assembly repealed the State's intangible
personal property tax effective January 1, 1995.
GENERAL. The population of the State has increased 13% from 1980, from 5,880,095
to 6,647,351 as reported by the 1990 federal census and the State rose from
twelfth to tenth in population. The State's estimate of population as of June
30, 1994 is 7,023,663. Notwithstanding its rank in population size, North
Carolina is primarily a rural state, having only five municipalities with
populations in excess of 100,000.
The labor force has undergone significant change during recent years as the
State has moved from an agricultural to a service and goods producing economy.
Those persons displaced by farm mechanization and farm consolidations have, in
large measure, sought and found employment in other pursuits. Due to the wide
dispersion of non-agricultural employment, the people have been able to
maintain, to a large extent, their rural habitation practices. During the period
1980 to 1994, the State labor force grew about 25% (from 2,855,200 to
3,560,000). Per capita income during the period 1980 to 1993 grew from $7,999 to
$18,702, an increase of 133.8%.
The current economic profile of the State consists of a combination of industry,
agriculture and tourism. As of June 1994, the State was reported to rank tenth
among the states in non-agricultural employment and eighth in manufacturing
employment. Employment indicators have varied somewhat in the annual periods
since June of 1990, but have demonstrated an upward trend since 1991. The
following table reflects the fluctuations in certain key employment categories.
<TABLE>
<CAPTION>
CATEGORY (ALL SEASONALLY
ADJUSTED) JUNE 1990 JUNE 1991 JUNE 1992 JUNE 1993 JUNE 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Civilian Labor Force 3,312,000 3,228,000 3,495,000 3,504,000 3,560,000
Nonagricultural Employment 3,129,000 3,059,000 3,135,000 3,203,400 3,358,700
Goods Producing Occupations
(mining, construction
and manufacturing) 1,023,100 973,600 980,800 993,600 1,021,500
Service Occupations 2,106,300 2,085,400 2,154,200 2,209,800 2,337,200
Wholesale/Retail Occupations 732,500 704,100 715,100 723,200 749,000
Government Employees 496,400 496,700 513,400 515,400 554,600
Miscellaneous Services 587,300 596,300 638,300 676,900 731,900
Agricultural Employment 58,900 88,700 102,800 88,400 53,000
</TABLE>
The seasonally adjusted unemployment rate in January 1995 was estimated to be
3.8% of the labor force (down from 4.0% in January 1994), as compared with 5.7%
nationwide (down from 6.7% in January 1994).
As of 1993, the State was tenth in the nation in gross agricultural income, of
which nearly the entire amount (approximately $5.3 billion) was from
commodities. According to the State Commissioner of Agriculture, in 1993 the
State ranked first in the nation in the production of flue-cured tobacco, total
tobacco, turkeys and sweet potatoes; second in the value of poultry and eggs,
hog production, trout and the production of cucumbers for pickles; fourth in
commercial broilers, blueberries and peanuts; sixth in burley tobacco and net
farm income.
The diversity of agriculture in North Carolina and a continuing push in
marketing efforts have protected farm income from some of the wide variations
that have been experienced in other states where most of the agricultural
economy is dependent on a small number of agricultural commodities. North
Carolina is the third most diversified agricultural state in the nation.
Tobacco production is the leading source of agricultural income in the State,
accounting for 20% of gross agricultural income. Tobacco farming in North
Carolina has been and is expected to continue to be affected by major Federal
legislation and regulatory measures regarding tobacco production and marketing
and by international competition. Measures adverse to tobacco farming could have
negative effects on farm income and the North Carolina economy generally. The
poultry industry provides nearly 34% of gross agricultural income. The pork
industry has been expanding and accounted for 17% of gross agricultural income
in 1993.
The number of farms has been decreasing; in 1994 there were approximately 58,000
farms in the State (down from approximately 72,000 in 1987, a decrease of about
19% in seven years). However, a strong agribusiness sector supports farmers with
farm inputs (fertilizer, insecticide, pesticide and farm machinery) and
processing of commodities produced by farmers (vegetable canning and cigarette
manufacturing).
The State Department of Commerce, Travel and Tourism Division reports that in
1993 more than $8.3 billion was spent on tourism in the State. The Department
estimates that two-thirds of total expenditures came from out-of-state
travelers, and that approximately 250,000 people were employed in tourism-
related jobs.
BOND RATINGS. Currently, Moody's rates North Carolina general obligation bonds
as Aaa and Standard & Poor's rates such bonds as AAA. Standard & Poor's also
reaffirmed its stable outlook for the State in October 1993.
Standard & Poor's reports that North Carolina's rating reflects the State's
strong economic characteristics, sound financial performance, and low debt
levels.
PENNSYLVANIA FUND
STATE ECONOMY. Pennsylvania has been historically identified as a heavy-
industry state although that reputation has changed recently as the industrial
composition of the Commonwealth diversified when the coal, steel and railroad
industries began to decline. The major new sources of growth in the Commonwealth
are in the service sector, including trade, medical and the health services,
education and financial institutions. The Commonwealth's agricultural industries
are also an important component of its economic structure, accounting for more
than $3.6 billion in crop and livestock products annually while agribusiness and
food related industries support $39 billion in economic activity annually.
Employment within the Commonwealth increased steadily from 1984 to 1990. From
1991 to 1994, employment in the Commonwealth declined 1.2 percent. The growth in
employment experienced in the Commonwealth during such periods is comparable to
the growth in employment in the Middle Atlantic region of the United States.
Non-manufacturing employment in the Commonwealth has increased steadily since
1980 to its 1993 level of 81.6 percent of total Commonwealth employment.
Manufacturing, which contributed 18.4 percent of 1993 non-agricultural
employment, has fallen behind both the services sector and the trade sector as
the largest single source of employment within the Commonwealth. In 1993, the
services sector accounted for 29.9 percent of all non-agricultural employment in
the Commonwealth while the trade sector accounted for 22.4 percent.
The Commonwealth recently experienced a slowdown in its economy. Moreover,
economic strengths and weaknesses vary in different parts of the Commonwealth.
In general, heavy industry and manufacturing have been facing increasing
competition from foreign producers. During 1993, the annual average unemployment
rate in the Commonwealth was 7.0 percent compared to 6.8 percent for the United
States. For April 1995 the unadjusted unemployment rate was 6.0 percent in the
Commonwealth and 5.6 percent in the United States, while the seasonally adjusted
unemployment rate for the Commonwealth was 5.8 percent and for the United States
was 5.8 percent.
STATE BUDGET. The Commonwealth operates under an annual budget that is
formulated and submitted for legislative approval by the Governor each February.
The Pennsylvania Constitution requires that the Governor's budget proposal
consist of three parts: (i) a balanced operating budget setting forth proposed
expenditures and estimated revenues from all sources and, if estimated revenues
and available surplus are less than proposed expenditures, recommending specific
additional sources of revenue sufficient to pay the deficiency; (ii) a capital
budget setting forth proposed expenditures to be financed from the proceeds of
obligations of the Commonwealth or its agencies or from operating funds; and
(iii) a financial plan for not less than the succeeding five fiscal years, that
includes for each year projected operating expenditures and estimated revenues
and projected expenditures for capital projects. The General Assembly may add,
change or delete any items in the budget prepared by the Governor, but the
Governor retains veto power over the individual appropriations passed by the
legislature. The Commonwealth's fiscal year begins on July 1 and ends on June
30.
All funds received by the Commonwealth are subject to appropriation in specific
amounts by the General Assembly or by executive authorization by the Governor.
Total appropriations enacted by the General Assembly may not exceed the ensuing
year's estimated revenues, plus (less) the unappropriated fund balance (deficit)
of the preceding year, except for constitutionally authorized debt service
payments. Appropriations from the principal operating funds of the Commonwealth
(the General Fund, the Motor License Fund and the State Lottery Fund) are
generally made for one fiscal year and are returned to the unappropriated
surplus of the fund if not spent or encumbered by the end of the fiscal year.
The Constitution specifies that a surplus of operating funds at the end of a
fiscal year must be appropriated for the ensuing year.
Pennsylvania uses the "fund" method of accounting for receipts and
disbursements. For purposes of government accounting, a "fund" is an independent
fiscal and accounting entity with a self-balancing set of accounts, recording
cash and/or other resources together with all related liabilities and equities
that are segregated for the purpose of carrying on specific activities or
attaining certain objectives in accordance with the fund's special regulations,
restrictions or limitations. In the Commonwealth, over 150 funds have been
established by legislative enactment or in certain cases by administrative
action for the purpose of recording the receipt and disbursement of money's
received by the Commonwealth. Annual budgets are adopted each fiscal year for
the principal operating funds of the Commonwealth and several other special
revenue funds. Expenditures and encumbrances against these funds may only be
made pursuant to appropriation measures enacted by the General Assembly and
approved by the Governor. The General Fund, the Commonwealth's largest fund,
receives all tax revenues, non-tax revenues and federal grants and entitlements
that are not specified by law to be deposited elsewhere. The majority of the
Commonwealth's operating and administrative expenses are payable from the
General Fund. Debt service on all bond indebtedness of the Commonwealth, except
that issued for highway purposes or for the benefit of other special revenue
funds, is payable from the General Fund.
Financial information for the principal operating funds of the Commonwealth are
maintained on a budgetary basis of accounting, which is used for the purpose of
ensuring compliance with the enacted operating budget. The Commonwealth also
prepares annual financial statements in accordance with generally accepted
accounting principles ("GAAP"). Budgetary basis financial reports are based on a
modified cash basis of accounting as opposed to a modified accrual basis of
accounting prescribed by GAAP. Financial information is adjusted at fiscal
year-end to reflect appropriate accruals for financial reporting in conformity
with GAAP.
RECENT FINANCIAL RESULTS. From fiscal 1984, when the Commonwealth first prepared
its financial statements on a GAAP basis, through fiscal 1989, the Commonwealth
reported a positive unreserved-undesignated fund balance for its governmental
fund types at each fiscal year end. Slowing economic growth during 1990, leading
to a national economic recession beginning in fiscal 1991, reduced revenue
growth and increased expenditures and contributed to negative
unreserved-undesignated fund balances at the end of the 1990 and 1991 fiscal
years. The negative unreserved-undesignated fund balance was due largely to
operating deficits in the General Fund and the State Lottery Fund during those
fiscal years. Actions taken during fiscal 1992 to bring the General Fund back
into balance, including tax increases and expenditure restraints, resulted in a
$1.1 billion reduction to the unreserved-undesignated fund deficit for combined
governmental fund types at June 30, 1993, as a result of a $420.4 million
increase in the balance. These gains were produced by continued efforts to
control expenditure growth. The Combined Balance Sheet as of June 30, 1993,
showed total fund balance and other credits for the total governmental fund
types of $1,959.9 million, a $732.1 million increase from the balance at June
30, 1992. During fiscal 1993, total assets increased by $1,296.7 million to
$7,096.4 million, while liabilities increased $564.6 million to $5,136.5
million.
FISCAL 1991 FINANCIAL RESULTS. The Commonwealth experienced a $453.6 million
General Fund deficit as of the end of its 1991 fiscal year. The deficit
reflected higher than budgeted expenditures, below-estimate economic activity
and growth rates of economic indicators and total tax revenue shortfalls below
those assumed in the enacted budget. Rising demands on State programs caused by
the economic recession, particularly for medical assistance and cash assistance
programs, and the increased costs of special education programs and correction
facilities and programs, contributed to increased expenditures in fiscal 1991,
while tax revenues for the 1991 fiscal year were severely affected by the
economic recession. Total corporation tax receipts and sales and use tax
receipts during fiscal 1991 were, respectively, 7.3 percent and 0.9 percent
below amounts collected during fiscal 1990. Personal income tax receipts also
were affected by the recession but not to the extent of the other major General
Fund taxes, increasing only 2.0 percent over fiscal 1990 collections. A number
of actions were taken throughout the fiscal year by the Commonwealth to mitigate
the effects of the recession on budget revenues and expenditures. The
Commonwealth initiated a number of cost-saving measures, including the firing of
2,000 state employees, deferral of paychecks and reduction of funds to state
universities, which resulted in approximately $871 million cost savings.
FISCAL 1992 FINANCIAL RESULTS. Actions taken during fiscal 1992 to bring the
General Fund budget back into balance, including tax increases and expenditure
restraints resulted in a $1.1 billion reduction for the unreserved-undesignated
fund deficit for combined governmental fund types and a return to a positive
fund balance. Total General Fund revenues for fiscal 1992 were $14,516.8 million
which is approximately 22 percent higher than fiscal 1991 revenues of $11,877.3
million due in large part to tax increases. The increased revenues funded
substantial increases in education, social services and corrections programs. As
a result of the tax increases and certain appropriation lapses, fiscal 1992
ended with an $8.8 million surplus after having started the year with an
unappropriated General Fund balance deficit of $453.6 million.
FISCAL 1993 FINANCIAL RESULTS. Fiscal 1993 closed with revenues higher than
anticipated and expenditures approximately as projected, resulting in an ending
unappropriated balance surplus of $242.3 million. A deduction in the personal
income tax rate in July 1992 and the one-time receipt of revenues from
retroactive corporate tax increases in fiscal 1992 were responsible, in part,
for the low growth in fiscal 1993.
FISCAL 1994 FINANCIAL RESULTS. Commonwealth revenues during the 1994 fiscal year
totaled $15,210.7 million, $38.6 million above the fiscal year estimate, and 3.9
percent over Commonwealth revenues during the 1993 fiscal year. The sales tax
was an important contributor to the higher than estimated revenues. The strength
of collections from the sales tax offset the lower than budgeted performance of
the personal income tax that ended the 1994 fiscal year $74.4 million below
estimate. The shortfall in the personal income tax was largely due to shortfalls
in income not subject to withholding such as interest, dividends and other
income. Expenditures, excluding pooled financing expenditures and net of all
fiscal 1994 appropriation lapses, totaled $14,934.4 million representing a 7.2
percent increase over fiscal 1993 expenditures. Medical assistance and prison
spending contributed to the rate of spending growth for the 1994 fiscal year.
The Commonwealth maintained an operating balance on a budgetary basis for fiscal
1994 producing a fiscal year ending unappropriated surplus of $335.8 million.
FISCAL 1995 BUDGET. On June 16, 1994, the Governor signed a $15.7 billion
General Fund budget, an increase of over 3.9 percent from the fiscal 1994
budget. A substantial amount of the increase is targeted for medical assistance
expenditures, reform of the State-funded public assistance program and education
subsidies to local school districts. The budget also includes tax reductions
totaling an estimated $166.4 million benefiting principally low income families
and corporations. The fiscal 1995 budget projects a $4 million fiscal year-end
unappropriated surplus.
FISCAL 1996 BUDGET. For the fiscal year ended June 30, 1996, the Governor
proposed a $16.1 billion General Fund budget, an increase of approximately 2.7
percent from the fiscal 1995 budget. Areas targeted for the largest budgetary
increases are medical assistance and basic education. In addition, the Governor
proposed accelerating corporate net income tax rate reductions, eliminating the
inheritance tax paid by a surviving spouse on jointly owned property, and making
other business tax reductions.
DEBT LIMITS AND OUTSTANDING DEBT. The Pennsylvania Constitution permits the
issuance of the following types of debt: (i) debt to suppress insurrection or
rehabilitate areas affected by disaster; (ii) electorate approved debt; (iii)
debt for capital projects subject to an aggregate outstanding debt limit of 1.75
times the annual average tax revenues of the preceding five fiscal years; and
(iv) tax anticipation notes payable in the fiscal year of issuance.
Under the Pennsylvania Fiscal Code, the Auditor General is required to certify
to the Governor and the General Assembly certain information regarding the
Commonwealth's indebtedness. According to the February 28, 1995 Auditor General
certificate, the average annual tax revenues deposited in all funds in the five
fiscal years ended June 30, 1994 was approximately $16.5 billion, and,
therefore, the net debt limitation for the 1995 fiscal year is $28.8 billion.
Outstanding net debt totaled $4.0 billion at June 30, 1994, approximately equal
to the net debt at June 30, 1993. At February 28, 1995, the amount of debt
authorized by law to be issued, but not yet incurred, was $16.7 billion.
DEBT RATINGS. All outstanding general obligation bonds of the Commonwealth are
rated AA- by S&P and A1 by Moody's.
CITY OF PHILADELPHIA. The City of Philadelphia (the "City" or "Philadelphia") is
the largest city in the Commonwealth. Philadelphia experienced a series of
general fund deficits for fiscal years 1988 through 1992 which have culminated
in the City's present serious financial difficulties. In its 1992 Comprehensive
Annual Financial Report, Philadelphia reported a cumulative general fund deficit
of $71.4 million for fiscal year 1992.
In June 1991, the Pennsylvania legislature established the Pennsylvania
Intergovernmental Cooperation Authority ("PICA"), a five-member board which
oversees the fiscal affairs of the City of Philadelphia. The legislation
empowers PICA to issue notes and bonds on behalf of Philadelphia, and also
authorizes Philadelphia to levy a one-percent sales tax the proceeds of which
would be used to pay off the bonds. In return for PICA's fiscal assistance,
Philadelphia is required, among other things, to establish five-year financial
plans that include balanced annual budgets. Under the legislation, if
Philadelphia does not comply with such requirements, PICA may withhold bond
revenues and certain State funding.
At this time, the City is operating under a five-year fiscal plan approved by
PICA on April 6, 1992. Full implementation of the five-year plan was delayed due
to labor negotiations that were not completed until October 1992, three months
after the expiration of the old labor contracts. The terms of the new labor
contracts are estimated to cost approximately $144.4 million more than what was
budgeted in the original five-year plan. An amended five-year plan was approved
by PICA in May 1993. The Mayor's latest update of the five-year financial plan
was approved by PICA on May 2, 1994.
As of November 17, 1994, PICA had issued $1,296.7 million of its Special Tax
Revenue Bonds. In accordance with the enabling legislation, PICA was guaranteed
a percentage of the wage tax revenue expected to be collected from Philadelphia
residents to permit repayment of the bonds.
In January 1993, Philadelphia anticipated a cumulative general fund budget
deficit of $57 million for the 1993 fiscal year. In response to the anticipated
deficit, the Mayor unveiled a financial plan eliminating the budget deficit for
the 1993 budget year through significant service cuts that included a plan to
privatize certain city-provided services. Due to an upsurge in tax receipts,
cost-cutting and additional PICA borrowings, Philadelphia completed the 1993
fiscal year with a balanced general fund budget. The audit findings for fiscal
year 1993 show a cumulative general fund surplus of approximately $3 million for
the fiscal year ended June 30, 1993.
In January 1994, the Mayor proposed a $2.3 billion City general fund budget that
included no tax increases, no significant service cuts and a series of modest
health and welfare program increases. At that time, the Mayor also unveiled a
$2.2 billion program (the "Philadelphia Economic Stimulus Program") designed to
stimulate Philadelphia's economy and stop the loss of 1,000 jobs a month. In its
1994 Comprehensive Annual Financial Report, Philadelphia reported a cumulative
general fund surplus of approximately $15.4 million for the fiscal year ended
June 30, 1994.
S&P's rating on Philadelphia's general obligation bonds is "BB." Moody's
rating is currently "Baa."
LITIGATION. The Commonwealth is a party to numerous lawsuits in which an adverse
final decision could materially affect the Commonwealth's governmental
operations and consequently its ability to pay debt service on its obligations.
The Commonwealth also faces tort claims made possible by the limited waiver of
sovereign immunity effected by Act 152, approved September 28, 1978, as amended.
SOUTH CAROLINA FUND
The South Carolina Constitution requires the General Assembly to provide a
balanced budget and requires that if there be a deficit, such deficit shall be
provided for in the succeeding fiscal year. The State Constitution also provides
that the State Budget and Control Board may, if a deficit appears likely, effect
such reductions in appropriations as may be necessary to prevent a deficit. At
the November 1984 general election there was approved a constitutional amendment
providing that annual increases in State appropriations may not exceed the
average growth rate of the economy of the State and that the annual increases in
the number of State employees may not exceed the average growth of the
population of the State. The State Constitution also establishes a General
Reserve Fund to be maintained in an amount equal to 4% of General Fund revenue
for the latest fiscal year. Despite the efforts of the State Budget and Control
Board, deficits were experienced in the fiscal years ending June 30, 1981, 1982,
1985 and 1986. All deficits have been funded out of the General Reserve Fund.
For the fiscal years ending June 30, 1983 and 1984, the State had cash
surpluses.
At the November 1988 general election there was approved a constitutional
amendment reducing from 4% to 3% the amount of General Fund revenue which must
be kept in the General Reserve Fund, and removing the provisions requiring a
special vote to adjust this percentage. The amendment also created a Capital
Reserve Fund equal to 2% of General Fund revenue. Before March 1 of each year,
the Capital Reserve Fund must be used to offset mid-year budget reductions
before mandating cuts in operating appropriations, and after March 1, the
Capital Reserve Fund may be appropriated by a special vote in separate
legislation by the General Assembly to finance in cash previously authorized
capital improvement bond projects, retire bond principal or interest on bonds
previously issued, and for capital improvements or other nonrecurring purposes
which must be ranked in order of priority of expenditure. Monies in the Capital
Reserve Fund not appropriated or any appropriation for a particular project or
item which has been reduced due to application of the monies to year-end
deficit, must go back to the General Fund.
For the fiscal year ended June 30, 1989, the State had a surplus of
$129,788,135. At June 30, 1989, the balance in the General Fund was $87,999,428.
Because of anticipated revenue shortfalls for the fiscal year 1989-1990, the
State Budget and Control Board committed $42.4 million of the $58.7 million
Capital Reserve Fund in April 1990. Lack of sufficient funding at year-end
resulted in an additional use of $4.5 million from the Capital Reserve Fund.
After the above reductions, the State had a fiscal year 1989-90 surplus of
$13,159,892 which was used to fund supplemental appropriations $1,325,000 and
the Capital Reserve Fund at $11,834,892. At June 30, 1990, the balance in the
General Reserve Fund was $94,114,351.
During fiscal year 1990-1991, the State Budget and Control Board approved
mid-year budget changes in November 1990 and again in February 1991, to offset
lower revenue estimates. Those changes included committing the Capital Reserve
Fund appropriation and reducing agency appropriations in an additional amount
necessary to offset (together with automatic expenditure reductions that are
tied to revenue levels) what would otherwise be a projected deficit of
approximately $132.6 million. In May 1991, the Budget and Control Board,
responding to April revenue figures and unofficial estimates indicating an
additional shortfall of $30 to $50 million, ordered an immediate freeze on all
personnel activities, from hiring to promotions; a freeze on purchasing, with
limited exceptions; and an indefinite halt to new contracts and contract
renewals. The Board also asked the General Assembly for the power to furlough
government workers periodically during the next fiscal year.
In the past, the State's budgetary accounting principles allowed revenue to be
recorded only when the State received the related cash. On July 30, 1991, the
Budget and Control Board approved a change in this principle for sales tax
revenue beginning with the fiscal year ended June 30, 1991. The Board's
resolution requires that sales taxes collected by merchants in June and received
by the State in July be reported as revenue in June rather than in July. This
change resulted in a $5.2 million decrease in reported 1990-1991 sales tax
revenue and a one-time $83.1 million addition to fund balance. The one-time
adjustment increases the Fund balance to the level it would be if the new
principle had been in effect in years before 1990-1991. Following such action,
the year-end balance in the General Reserve Fund was $33.4 million.
On July 26, 1991, the Board of Economic Advisors advised the Budget and Control
Board that it projected a revenue shortfall of $148 million for the fiscal year
1991-1992 budget of $3.581 billion. In response, the Budget and Control Board
eliminated the 2% Capital Reserve Fund appropriation of $65.9 million and
reduced other expenditures across the board by 3%. On February 10, 1992, the
Board of Economic Advisers advised the Budget and Control Board that it had
revised its estimate of revenues for the current fiscal year downward by an
additional $55 million. At its February 11, 1992 meeting, the Budget and Control
Board responded by imposing an additional 1% across the board reduction of
expenditures (except with respect to approximately $10 million for certain
agencies). At its February 13, 1992 meeting, the Budget and Control Board
restored a portion of the 1% reduction to four education-related agencies
totalling approximately $5.7 million. These expenditure reduction measures, when
coupled with revenue increases projected by the Budget and Control Board,
resulted in an estimated balance of approximately $1.4 million in the General
Fund for the fiscal year 1991-1992. Despite such actions, expenditures exceeded
revenues by $38.2 million and, as required by the South Carolina Constitution,
such amount was withdrawn from the General Reserve Fund to cover the shortfall.
On August 22, 1992, the Budget and Control Board adopted a plan to reduce
appropriations under the 1992 Appropriations Act because of revenue shortfall
projections of approximately $200 million for the 1992-1993 fiscal year. These
reductions were based on the rate of growth in each agency's budget over the
past year. On September 15, 1992, the Supreme Court of South Carolina enjoined
the Budget and Control Board from implementing its proposed plan for budget
reductions on the grounds that the Board had authority to make budget reductions
only across the board based on total appropriations. In response to this
decision, the Board instituted a 4% across the board reduction. On November 10,
1992, the Budget and Control Board permanently reduced the $88.1 million in
appropriations which were set aside on September 15, 1992. This action along
with improved actual revenue collections created a budgetary surplus of
approximately $101 million.
For the Fiscal Year ended June 30, 1994, the State had a budgetary surplus of
$273.48 million. The General Assembly has to date designated application of much
of this surplus, including a transfer to the Capital Reserve Fund in the amount
of $66.83 million and $146.15 million of supplemental appropriations for fiscal
year 1993-1994. The Governor has vetoed $16.41 of these supplemental
appropriations. There remains $22.37 million undesignated surplus to be
addressed by the General Assembly in the 1995 session. A bill presently pending
before the Senate would designate this surplus in connection with a plan to
reduce residential property taxes.
South Carolina is primarily a manufacturing state. In 1994, nearly one-quarter
of all jobs in the State were in the manufacturing industry, compared to fifteen
percent nationally. While the textile industry is still the major industrial
employer in the State, since 1950 the State's economy has undergone a gradual
transition. The economic base of the State has diversified as the trade and
service sectors developed and with the added development of the durable goods
manufacturing industries, South Carolina's economy now resembles more closely
that of the United States.
Personal income in South Carolina grew five and four-tenths percent (5.4%)
during the third quarter of 1994 compared to income growth of six and three-
tenths percent (6.3%) nationwide. During all of 1993 personal income grew at an
average annual rate of five and one-tenths percent (5.1%) in South Carolina.
During the same period the nation's income grew four and four-tenths percent
(4.4%) and personal income in the Southeast region grew five and seven-tenths
percent (5.7%). Over the last five (5) years (1988-1993) personal income in
South Carolina rose at a compounded annual rate of six and three-tenths percent
(6.3%), matching the annual income growth for the Southeast region, and
outpacing the five and seven-tenths percent (5.7%) growth in the United States
in the same period.
Through January 1995, the State's economy has added 36,100 jobs compared to the
same period in 1994, employment in the State increased two and four-tenths
percent (2.4%) while the rate of employment growth in the United States was two
and six-tenths percent (2.6%). Monthly unemployment rates in the State have
equaled or been above comparable national rates during 1994. The unemployment
rate for January 1995, the latest month available for South Carolina was the
same as the nation's rate at five and seven-tenths percent (5.7%).
TENNESSEE FUND
In 1978, the voters of the State of Tennessee approved an amendment to the State
Constitution requiring that (1) the total expenditures of the State for any
fiscal year shall not exceed the State's revenues and reserves, including the
proceeds of debt obligations issued to finance capital expenditures and (2) in
no year shall the rate of growth of appropriations from State tax revenues
exceed the estimated rate of growth of the State's economy. No debt obligation
may be authorized for the current operation of any State service or program
unless repaid within the fiscal year of issuance.
In response to public demand for better public education throughout the State,
the 1992 Tennessee General Assembly temporarily raised the State sales tax by
one-half of one percent to 6%, effective April 1, 1992. This increase became
permanent as a result of the 1993 legislative session. This increase establishes
the maximum total State and local sales tax rate at 8.75%. Although the issue of
instituting a State income tax is still being discussed by legislators, most
political observers in Tennessee doubt such a proposal will be passed within the
next two-three years.
The Tennessee economy generally tends to rise and fall in a roughly parallel
manner with the U.S. economy. Like the U.S. economy, the Tennessee economy
entered recession in the last half of 1990 and continued throughout 1991 and
into 1992 as the Tennessee index of leading economic indicators trended downward
throughout the period. The Tennessee economy gained strength during the latter
part of 1992 and this renewed vitality steadily continued through 1993 and 1994.
Current indicators are for the State to enjoy a year of moderate gains in 1995.
Tennessee Department of Revenue collections for the first six months of 1994
increased to approximately $2.85 billion, an increase of approximately $40
million over the comparable period for 1993. Projected revenue collections for
fiscal year ending June 30, 1994 were approximately $5.28 billion, and actual
collections for the fiscal year were approximately $5.50 billion, approximately
$220 million above such projections and $280 million or 5.3% above 1993 fiscal
year-end figures. State revenue collections for the last six months of 1994 were
approximately as follows: July--$488 million, August--$426 million,
September--$441 million, October--$476 million, November--$407 million and
December--$416 million. These figures represent the following percentage change
over figures for the same months in 1993: July (7.8%), August (-3.0%), September
(3.0%), October (.2%), November (-1.0%) and December (-1.0%). By June 30, 1994,
the State's rainy-day fund was approximately $101 million.
Tennessee taxable sales were approximately $44.16 billion in 1991, approximately
$46.97 billion in 1992 and approximately $50.66 billion in 1993, representing
percentage increases of approximately 1.4%, 6.4%, and 7.9%, respectively, over
the previous year's total. Tennessee taxable sales for calendar year 1994 were
approximately $55.34 billion which represents an approximate 9.2% increase over
1993 taxable sales figures.
The Tennessee index of leading economic indicators acts as a signal of the
health of the State's economy six to nine months ahead. In 1994, monthly figures
for the leading index rose in February (7.5%), March (20.8%), May (2.1%), June
(7.2%), August (11.7%), November (4.8%), and declined in January (7.3%), April
(10.6%), July (5.8%), and October (2.9%), as compared to the previous month's
figures. November and December 1994 figures are unavailable at present.
The Tennessee index of coincident economic indicators which gauges current
economic conditions throughout the State has steadily risen each quarter since
the third calendar quarter of 1991. November and December 1993 coincident
economic indicators rose approximately 8.3% and 6.1%, respectively, over the
previous month. For calendar year 1994 the coincident index rose approximately
6.1% over 1993 figures, while 1993 figures increased approximately 4.2% over
1992 figures, and 1992 figures showed a 2.3% increase over 1991 figures.
Current data indicate that seasonally-adjusted personal income in Tennessee has
grown approximately $4.6 billion from the fourth calendar quarter of 1992 to the
fourth calendar quarter of 1993 with the following quarterly changes as compared
to the same quarter of the previous year: first quarter 1993 (6.4%), second
quarter 1993 (6.3%), third quarter 1993 (6.5%), fourth quarter 1993 (5.0%).
Personal income figures for the three years ending December 31, 1991, 1992 and
1993 increased approximately 5.0%, 8.4% and 6.0%, respectively, over personal
income figures for the preceding year. Figures for 1994 currently are
unavailable. Since 1983 Tennessee's per capita income has increased
approximately 87.1% to $18,434, compared to the national per capita income of
$20,817 which translates into a ten-year increase of approximately 70.3%. For
the year ended June 30, 1993, however, Tennessee still led the nation in
household bankruptcy filings (1 in every 49) with a rate twice the national
average (1 in 102).
Historically, the Tennessee economy has been characterized by a slightly greater
concentration in manufacturing employment than the U.S. as a whole. The
Tennessee economy is, however, undergoing a structural change through the
increase in service sector employment. Service sector employment has climbed
steadily since 1960, increasing its share of overall State employment from 13.0%
to 24.3% in 1993. Over the same period, employment in durable goods
manufacturing has been flat and employment in the nondurable goods manufacturing
sector actually has declined. Tennessee non-agricultural employment has grown in
the period from 1991 to 1994 from approximately 2.18 million persons to
approximately 2.42 million persons. Non-agricultural employment in Tennessee is
relatively uniformly diversified with approximately 22% in the manufacturing
sector, approximately 23% in the wholesale and retail sector, approximately 24%
in the service sector and approximately 16% in government.
Manufacturing employment is one component of non-agricultural employment.
Tennessee manufacturing employment averaged approximately 503,000 persons in
1991, 515,000 persons in 1992, 529,000 persons in 1993 and 538,000 persons in
1994 with the 1992, 1993 and 1994 figures representing percentage increases of
approximately 2.4%, 2.7% and 1.9%, respectively, over the previous year's
average.
Tennessee's unemployment rate stood at 5.3% for December 1993, dropped to 4.6%
as of July 1994, and dropped further to 4.0% as of December 1994 which is its
lowest level in over six years. By December 1993, only one Tennessee county had
an unemployment rate over 10% for the first time since 1974. Average annual
unemployment in Tennessee has steadily decreased from 6.6% in 1991 to 6.4% in
1992 to 5.7% in 1993 and to 4.8% in 1994. The Tennessee Department of Employment
Security has projected minimum growth of approximately 23% in Tennessee's total
employment by the year 2005, with an increase of approximately 550,000 - 600,000
new jobs as compared to the projection for national employment growth of 20.5%
over the same period.
Tennessee's population increased 6.2% from 1980 to 1990, less than the national
increase of 10.2% for the same period. In December 1994 the State's population
reached approximately 5.2 million. A U.S. census study projects that Tennessee
will be the fifth most popular destination for new residents coming from other
states during the period from 1990 - 2020. Population growth in Tennessee is
expected to come mostly in the major metropolitan areas over the next 10-15
years. The overall State population is expected to grow 5.5% between 1990 and
2000, then 4.6% for the period between 2000 and 2010. Greatest growth is
expected to occur in the Nashville MSA, and the largest population decline is
expected in the rural counties of northwest Tennessee. This declining rate of
the rural population, coupled with the structural changes in the Tennessee
economy and the increased competition from domestic and international trading
partners, comprise three trends that are likely to influence the State's
long-term outlook.
TEXAS FUND
The State of Texas is the second largest by size among the states of the United
States. Texas is the third largest state by population, based upon the 1990
census undertaken by the U.S. Census Bureau. However, recent 1995 projections by
the U.S. Census Bureau indicate that Texas is now the second largest state by
population, behind only California. The average annual population growth rate
for the State between 1980 and 1990 was approximately 1.8%.
The Texas output accounts for about 7% of the total output of the United States.
Long identified with the oil and gas industry, in fiscal 1994 these businesses
accounted for only approximately 11% of the State's gross product. The service
industry (composed of health, business, private education, engineering,
consulting and personal services) continues to be the major source of job growth
(by numbers) in Texas, although the construction industry had the highest job
growth rate among all major industries in Texas during fiscal 1994. Further,
manufacturing job growth continues to be significant to the State's future
growth.
Employment in the State increased steadily through the 1970's and the early
1980's. The precipitous decline in oil prices in early 1986 and changes in the
Federal income tax laws affecting real estate resulted in a weaker Texas economy
in general. However, by early 1987 the Texas economy had moved into a period of
recovery; economic expansion has continued since 1988. Based upon information
gathered by the U.S. Bureau of Labor Statistics, Texas nonfarm wage and salary
employment reached an all-time high of 7.89 million jobs in February 1995. At
the same time, the jobless rate has fallen from a peak of approximately 11% in
the summer of 1986 to about 6.3% in the middle of 1990 to a current rate of
approximately 5% as of February 1995.
The State does not levy any property tax for general revenue purposes; however,
such taxes are an important source of revenue for local political subdivisions
in the State. The total property tax levied by all taxing jurisdications
(counties, cities, school districts and special districts) reached approximately
$14.6 billion in 1993, including approximately $2.3 billion levied by cities,
$2.1 billion levied by counties, approximately $8.7 billion levied by school
districts and approximately $1.5 billion levied by special districts. The total
value of taxable property in the State amounted to approximately $621 billion in
1993, according to State records.
During the past five years, the primary sources of the State's revenues have
been sales taxes and federal grants. In 1993, federal receipts supplanted sales
taxes as the State's largest revenue source. In 1994, federal receipts were
again the State's largest revenue source, accounting for approximately 28.7% of
total revenue during fiscal year 1994. Sales taxes were the State's second
largest revenue source, accounting for 26.7% of State revenues during fiscal
year 1994. Licenses, fees and permits became the third largest revenue source,
accounting for 8.6% of the total State revenue during fiscal year 1994. The
motor fuel tax became the State's fourth largest revenue source, accounting for
approximately 5.9% of the total revenue during fiscal year 1994, while interest
and investment income fell to being the State's fifth largest revenue source,
accounting for approximately 4.6% of the total revenue. The State also imposes
motor vehicle, oil and gas severance and other taxes. The State does not impose
any personal or corporate income tax (although it does impose a corporate
franchise tax measured, in part, by the net earned surplus of the corporation).
In each of the past five years the State has ended the year with a cash surplus
in the consolidated General Revenue Fund: at the end of fiscal year 1990, that
surplus was $767 million; at the end of fiscal year 1991, that surplus was
$1,005 billion; at the end of fiscal year 1992, that surplus was $609 million;
at the end of fiscal year 1993, that surplus was $1.623 billion; and at the end
of the most recent fiscal year 1994, that surplus was $2.225 billion.
Except as specifically authorized, the Constitution generally prohibits the
creation of debt by or on behalf of the State; further, the Constitution
prohibits the lending or pledging of the credit of the State in any manner to or
in support of the payment of liabilities of any person (including
municipalities). For purposes of this limitation, "debt" generally comprises
obligations which are payable over a period extending beyond the end of the
current budget period and out of monies other than funds available or expected
to become available during that budget period. However, "debt" does not include
revenue bonds which are not payable from tax sources (or the payment of which is
subject to appropriation).
At various times, the voters of the State, by adoption of constitutional
amendments, have authorized the issuance of debt of the State, including general
obligation bonds backed by the full faith and credit of the State. As of August
31, 1994, such general obligation bonds were outstanding in the principal amount
of approximately $3.965 billion.
In addition to the issuance of general obligation bonds, certain state agencies
have the authority to issue revenue bonds indirectly payable from funds
appropriated from the General Revenue Fund. Further, additional State programs
may be financed with revenue bonds or similar obligations payable from revenues
generated by the specific programs authorized, and not from the general revenues
of the State or its taxing power.
The State is a party to various legal proceedings relating to its operations and
governmental functions; the Texas Attorney General has rendered opinions with
respect to recent State bond issues that, none of such proceedings, if decided
adversely to the State, would have a material adverse effect on the financial
condition of the State.
Over the past several years, the State Legislature has passed several public
education financing systems, all but the most recent of which were declared
unconstitutional. In 1991, the Legislature approved an appropriations bill
funding public education at a level of $16,038 billion for the 1992-93 biennium
under a school finance bill that was passed in 1990. On January 30, 1992, the
Texas Supreme Court held that the public school finance system enacted in 1990
levies an unconstitutional ad valorem tax; however, the Texas Supreme Court also
held that its decision will not adversely affect the validity, incontestability,
obligation of payment or source of payment of any bonds issued by Texas school
districts for authorized purposes prior to June 1, 1993, the distribution to
school districts of State and federal funds before June 1, 1993, in accordance
with present procedures and laws, or the assessment and collection after June 1,
1993, of any taxes or other revenues levied or imposed for or pledged to the
payment of any bonds issued or debt incurred prior to June 1, 1993. On July 7,
1992, a trial judge denied a request to appoint a court master to develop an
alternative school finance plan in the event the Texas Legislature failed to
develop a plan by June 1, 1993. In its 1993 regular session, the Legislature
adopted legislation, including a call for an electoral referendum to approve the
amendment of the State Constitution; that referendum was held on May 1, 1993, at
which time the constitutional amendment was defeated. The Legislature
subsequently passed SB7, which directed that the State's wealthiest school
districts choose from among various alternatives at sharing their wealth with
poorer districts. Upon review, the trial court upheld the constitutionality of
SB7, but required that the Legislature provide for the maintenance and efficient
funding of school facilities. On appeal, the Texas Supreme Court held on January
31, 1995, that SB7 is constitutional in all respects. Although a number of
parties requested a rehearing of the Court's ruling, it appears highly unlikely
that the Texas Supreme Court will reverse its ruling.
VIRGINIA FUND
The Constitution of Virginia limits the ability of the Commonwealth to create
debt. An amendment to the Constitution requiring a balanced budget was approved
by the voters on November 6, 1984.
General obligations of cities, towns or counties are payable from the general
revenues of the entity, including ad valorem tax revenues on property within the
jurisdiction. The obligation to levy taxes could be enforced by mandamus, but
such a remedy may be impracticable and difficult to enforce. Under the Code of
Virginia, a holder of any general obligation bond in default may file an
affidavit setting forth such default with the Governor. If, after investigating,
the Governor determines that such default exists, he is directed to order the
State Comptroller to withhold State funds appropriated and payable to the entity
and apply the amount so withheld to unpaid principal and interest.
The economy of The Commonwealth of Virginia is based primarily on manufacturing,
the government sector, agriculture, mining and tourism.
The Commonwealth has maintained a high level of fiscal stability for many years
due in large part to conservative financial operations and diverse sources of
revenue. No significant new taxes or increases in the scope or amount of
existing taxes were passed at the 1994 session of the General Assembly.
In Davis v. Michigan (decided March 28, 1989), the United States Supreme Court
ruled unconstitutional Michigan's statute exempting from state income tax the
retirement benefits paid by the state or local governments and not exempting
retirement benefits paid by the federal government. At the time of this ruling,
under legislation subsequently amended in 1989 to provide uniform exemptions for
all pensioners, Virginia exempted state and local but not federal government
benefits. Several suits for refunds, some with multiple plaintiffs, were filed.
A state trial court ruling in favor of the Commonwealth was affirmed by the
Virginia Supreme Court on March 1, 1991, but on June 28, 1991, the decision of
the Virginia Supreme Court was vacated by the United States Supreme Court and
the case was remanded to the Virginia Supreme Court for reconsideration in light
of an intervening United States Supreme Court decision on retroactive
application of decisional constitutional law. On November 8, 1991, Virginia
Supreme Court affirmed its March 1, 1991 ruling denying refunds. On June 18,
1993, the United States Supreme Court reversed the November 8, 1991 ruling of
the Virginia Supreme Court and remanded the case to the Virginia Supreme Court
for further proceedings consistent with the opinion of the United States Supreme
Court. On July 30, 1993, the Virginia Supreme Court remanded the case to the
trial court for consideration of means of relief. On January 7, 1994, the trial
court denied refunds and an appeal is currently pending in the Virginia Supreme
Court. The estimated maximum potential financial impact on the Commonwealth of
claims for refunds by all federal pensioners is approximately $707.5 million,
including interest through December 31, 1993.
On July 13, 1994, the Governor signed into law emergency legislation,
reauthorized on February 28, 1995, providing for payments to federal pensioners
totalling $340 million over a five-year period ending March 31, 1999, in
settlement of this litigation. Pensioners who accept the settlement must release
the Commonwealth from all claims based on taxation of federal retirement
benefits during 1985 - 1988 and dismiss all related lawsuits to which they are
parties. Payments for years subsequent to 1994 are subject to future
appropriation. A significant number of federal pensioners opted out of the
settlement proposed by this legislation, necessitating its reauthorization in
1995, and there can be no assurance that it will result in release of the
pensioners' claims and dismissal of their lawsuits.
WASHINGTON FUND
Based on the U.S. Census Bureau's 1990 census, the State of Washington is the
18th largest of the 50 states by population. The State is the 20th largest by
land area. From 1980 to 1990, the State's population increased at an average
annual rate of 1.8% while the United States' population grew at an annual rate
of 1.1% over the same period. In 1993, the State population continued its growth
with an annualized rate of 1.8%.
Seattle, the State's largest city, is situated on the Puget Sound and is part of
the strong international trade, manufacturing, high technology and business
service corridor which extends from Everett to Tacoma. The Pacific Coast-Puget
Sound region of the State includes 75% of the population, the major portion of
industrial activity and the major part of the State's forests which are
important to the timber and paper industries. The balance of the State includes
agricultural areas primarily devoted to grain, apple and other fruit orchards,
and dairy operations.
The State possesses an extensive transportation system and related facilities.
Seattle is the commercial center for the State and is the site of a major
international airport. Two full facility seaports are located in Seattle and
Tacoma. Seattle-Tacoma International Airport has scheduled passenger service by
10 major/national, 4 regional/commuter and 6 foreign flag carriers. Nationally,
Sea-Tac is ranked twentieth in passenger traffic volume and fifteenth in air
cargo volume. In addition to cargo carried by passenger airlines, 14 all-cargo
airlines serve the airport. The ports of Seattle and Tacoma serve as one of the
three major gateways for marine commerce into the United States from the Pacific
Rim, and each rank among the top 20 ports in the world based upon volume of
containerized cargo shipped.
The State is also served by the federal interstate highway system, including
Interstate-5, a north-south corridor, and Interstate-90, an east-west corridor
for which Seattle is the western terminus. Union Pacific and Burlington Northern
railroads as well as Amtrak passenger lines provide rail service to the State,
while trucking systems provide direct overland shipping throughout the United
States and Canada.
The availability and quality of educational institutions and opportunities are
important in stimulating economic growth and development. Skilled human capital
is the foundation of the State's economic strength, providing the basis for a
technologically dynamic and industrially diverse State economy. The
concentration of technical, engineering, managerial, scientific and other
professional skills within the State's workforce is due in part to the State's
excellent state-supported higher education system which consists of two major
universities, four regional universities, and a system of community colleges for
higher education. In addition, the State has 18 private colleges. Seattle ranks
among the top five cities in the United States in the percentage of citizens
with a college education.
The economic base of the State includes manufacturing and service industries, as
well as agricultural and timber production. Overall, during 1987 through 1993,
employment within the State experienced growth in manufacturing as well as
non-manufacturing industries. Sectors in which growth has exceeded comparable
figures reported in the United States include durable and non-durable goods,
manufacturing, services and government. The Boeing Company, the State's largest
employer, is a preeminent aircraft manufacturer. Boeing exerts a significant
impact on overall State production, employment and labor earnings.
In recent years the State's economy has experienced diversification with
employment in the trade and service sectors representing an increasing portion
of total employment relative to the manufacturing sector. The State's rate of
economic growth, as measured by employment, was 2.0% in 1992, 1.3% in 1993, 2.5%
in 1994, and 2.6% in 1995. Comparable rates for the U.S. were 0.3% in 1992, 1.8%
in 1993, 2.6% in 1994, and 2.6% in 1995. Nationwide, employment growth is
expected to decrease in 1996 and 1997 to 1.8% and 1.7%, respectively. The
State's growth, hampered by reductions in aerospace, is expected to be 1.8% in
1996 and 2.6% in 1997.
International trade plays an important role in the State's employment base, as
one in six jobs in the State is related to international trade. The State,
particularly the Puget Sound corridor, is a trade center for the Northwest and
the State of Alaska. Seattle-Tacoma International Airport is the focus of the
region's air traffic and trade, primarily to and from the Far East.
Approximately 70% of the cargo passing through the Ports of Seattle and Tacoma
has an ultimate destination outside of the Pacific Northwest. Therefore, trade
levels depend largely on national and world economic conditions, rather than
local economic conditions. In 1993, primary exports by value which were
transported through the ports of Seattle and Tacoma included hides, industrial
equipment, manufactured paper, grains and cereals, and frozen fish. Top imports
included wearing apparel, office machines, data processing equipment, electric
equipment and telephone and telephone installation equipment.
The State's manufacturing base includes aircraft manufacture, which comprised
approximately 27.2% of total manufacturing in 1994. The aerospace industry
currently represents approximately 8% of all taxable business income generated
in the State. As of January 1995, Boeing employed approximately 82,000 people
state-wide, primarily at several locations in western Washington. While the
primary activity of Boeing is the manufacture of commercial aircraft, Boeing has
played leading roles in U.S. aerospace and military missile programs and has
undertaken a broad program of diversification activities including Boeing
Computer Services. In 1994, Boeing had $21.924 billion in sales and net earnings
of $856 million, and a backlog of orders totalling $66.3 billion.
In February 1995, Boeing announced that it will reduce production of its 737 and
767 model jetliners because of the continuing financial difficulties of the
airline industry, which has resulted in order delays and cancellations.
Production of the 767 line will increase from three to four planes per month in
April 1995, but will decline to 3.5 by year-end. The 747 will continue to be
built at a rate of two planes per month through 1995 and increase to three
planes per month by the end of 1996. Model 777 orders currently total 147, with
production of three planes per month expected to commence in 1995. The 737 line
will be reduced from 8.5 to seven planes per month and the 757 production of
four planes per month will continue. Associated with the reduced production are
job cutbacks equal to approximately 6% of Boeing's total workforce of 117,331.
It is anticipated that Boeing will lay off approximately 7,000 employees in
1995, 6,500 of whom are employed in Washington.
The State ranks fourth among all states in the percentage of its workforce
employed in technology-related industries and ranks third among the largest
software development centers. The State is the home of approximately 1,000
advanced technology firms. Nearly 50% of these firms are computer-related
businesses. Microsoft, headquartered in Redmond, Washington, is the largest
microcomputer software company in the world. Several biotechnical firms located
in the State have attained international acclaim for their research and
development. The State's universities and research institutions serve as
catalysts in expansion of high-tech industries. Other factors supporting growth
in this area include the State's existing industry base, well-trained labor
force, relatively low-cost power, and transportation access.
The highest employment growth in the State between 1981 and the present occurred
in the services sector, although the rate of growth has shown small but
consistent decline since 1990, from 7% to 3.5% forecast for 1994. As the
business, legal and financial center of the State, Seattle ranks ninth in the
country in the number of downtown hotel rooms (7,600 rooms in 50 hotels and
motels). The Washington State Convention and Trade Center is a major convention
facility with capacity for events involving as many as 11,000 people. The
State's natural attractions include the Olympic and Cascade Mountain Ranges, Mt.
Rainier, Mt. St. Helens National Volcanic Monument, Puget Sound and the ocean
beaches. Tourists also enjoy the State's wineries. Seven of the ten largest wine
producers in the Pacific Northwest are located in the State.
Agriculture combined with food processing is Washington's most important
industry. Although Washington produces a variety of agricultural products, its
major products are wheat, milk, apples and cattle. The value of agricultural
production was $2.6 billion in 1992. Growth in agricultural production,
including potatoes and hay, was an integral factor in the State's economic
growth in the late 1980's and early 1990's.
Natural forests cover more than 40% of the State's land area. Forest products
rank second behind aerospace in value of total production. The forest products
industry represents 2.6% of non-farm employment. The Weyerhaeuser Company is the
largest employer. Productivity in the State's forest products industry increased
steadily from 1980 to 1990; however, since 1991 recessionary influences have
resulted in a production decline. A continued decline in overall production
during the next few years is expected due to federally imposed limitations on
the harvest of old-growth timber and the inability to maintain the recent record
levels of production increases. During this period there has been a decline in
unemployment in certain regions, but the impact is not expected to significantly
affect the State's overall economic performance.
In 1993, employment in the finance, insurance and real estate areas was
estimated to represent 5.4% of the State's wage and salary employment. This
compares to an estimated level of 6.1% for the nation as a whole. Annual growth
in this employment area since 1987 has averaged 2.3% (compared to 1.3% for the
United States as a whole).
On a combined basis employment in the government sector represents approximately
19% of all wage and salary employment in the State. Seattle serves as the home
to several regional offices of federal government agencies and the State
receives an above average share of defense expenditures. Employment in the
government sector has expanded in the State since 1987 at a more rapid pace than
in the United States as a whole. State and local government employment has
increased at a faster pace than employment by the federal government. Employment
in the federal government had 73,400 jobs in 1992 and was projected to have
69,100 jobs in 1994.
The Legislature passed a 1993-95 Operating Budget which contained $650 million
in general tax increases, $163 million in other revenues, $700 million in
program and administrative reductions, and $622 million in fund shifts (such as
to federal funding sources). The 1994 Supplemental Operating Budget included $48
million in tax cuts, an $11 million revenue increase from a variety of sources
and $168 million in additional expenditures, many of which represent one-time
investments.
On December 19, 1994, the Governor announced his recommendations for a 1995
Supplemental Budget. The 1995 Supplemental Budget makes adjustments to
expenditure authority for State agencies for the remainder of the 1993-1995
biennium. These budget adjustments reflect the most recent enrollment and
caseload estimates and address significant unexpected expenses, including
extraordinary costs of $48 million incurred in one of the worst forest fire
years since 1970. In addition to these revisions, the Governor also proposed
several one-time expenditures, most notably set-aside and the investment of $127
million in preparation for payment of debt service on currently authorized
capital bonds coming due in the 1995-1997 biennium. Interest gained on the
investment of those funds until the payment dates will also be used to meet debt
service costs. The entire 1995 supplemental recommendation is for an additional
$163 million in General Fund expenditures, increasing total expenditures to
$16.44 billion.
The Governor's proposed 1995-97 operating budget includes a recommendation for
$17.9 billion in General Fund expenditures and holds expenditures within the
limitations prescribed by Initiative 601. The proposed budget reduces the number
of FTE positions in State government. The Governor's proposal also includes a
package of tax incentives for economic development that will reduce State
revenues by $223 million, and emphasizes public safety and children's issues
through the Governor's Smart on Crime Initiative and the continuation of the
State's education reform effort. The proposed budget also includes a cost of
living salary adjustment for teachers and State employees and for vendors
providing public services. In January 1995, the State Legislature convened in
its 1995 Regular Session, but did not act on the budget. Immediately following
the Regular Session, a Special Session was convened to consider the Governor's
1995 budget proposal and his proposed 1995-97 spending plan. In its
deliberations, the Legislature may modify the Governor's budgets by increasing
or decreasing proposed expenditures and by increasing or decreasing the revenue
package proposed to support the budget.
Initiative 62 became law on January 1, 1980. The purpose of Initiative 62 was to
prohibit State tax revenue growth from exceeding the growth rate of State
personal income. Fiscal year 1995 will be the last year that revenue collections
will be subject to Initiative 62. Under Initiative 62, State tax revenue growth
is limited so that it does not exceed the growth rate of State personal income
averaged over a three-year period. State tax revenues, as defined, represent
about one-half of all revenues coming to the State or roughly 97% of General
Fund-State revenues. The State may not impose on local governments
responsibility for new programs or increased levels of service under existing
programs without providing the financing to pay for the added services. The
proportion of State tax revenues which consist of direct State appropriations to
local governments cannot be decreased below the proportion appropriated in the
1997 Biennium. To date, State revenue increases have remained substantially
below these limits.
Initiative 601, which became law in November 1993, limits increases in General
Fund-State expenditures to the average rate of population and inflation growth.
This initiative will replace the limitations described in the preceding
paragraph effective July 1, 1995, and sets forth a series of guidelines for
limiting tax and expenditure increases and stabilizing long-range budget
planning. It establishes a procedure for computing a fiscal year growth factor
based on a lagged, three-year average of population and inflation growth. This
growth factor is used to determine a State spending limit for programs and
expenditures supported by the General Fund. Two new reserve funds (the Emergency
Reserve Fund and Education Construction Fund) are created for depositing
revenues in excess of the spending limit and the current Budget Stabilization
Account is abolished. Restrictions are placed on the addition or transfer of
functions to local government unless there is reimbursement. Two provisions of
Initiative 601 are currently applicable: the requirement for legislative
approval of fee increases beyond the fiscal year growth factor, and restriction
on new taxes being imposed without voter approval. At the beginning of Fiscal
Year 1996, the requirement for voter approval of new tax measures expires. Taxes
can then be enacted with a two-thirds majority of both houses of the legislature
if resulting General Fund-State expenditures do not exceed the spending limit.
Voter approval will continue to be required to exceed the spending limit.
WEST VIRGINIA FUND
West Virginia's economy is heavily dependent upon the coal mining industry. A
reduction in the demand of certain types of coal has had an adverse impact upon
the industry and upon the economy of the State. Notwithstanding the importance
of the coal mining industry on the West Virginia economy, West Virginia's
economy has come to benefit from a developing tourism industry. Tourism,
directly and indirectly, accounts for a large portion of the West Virginia
economy. The Governor's Office and the State Legislature have placed great
emphasis upon developing the tourism industry in the State and the Legislature
has enacted a number of statutes designed to foster the growth in tourism.
Real and personal property has recently been reappraised on a statewide basis
for ad valorem property tax purposes which has generally increased property tax
revenues.
Data compiled by the State of West Virginia Bureau of Employment Programs
indicates that unemployment in West Virginia during 1994 (annual average) was
8.9 percent. This represents the lowest annual rate since 1990.
In July of 1993 the West Virginia Supreme Court of Appeals ruled in the matter
of William S. E. Winkler and Diane Hickle v. State of West Virginia School
Building Authority et. al., 434 S.E. 2d 420 (W. Va 1993), that revenue bonds
authorized under the School Building Authority Act violated Section 4 of Article
X of the West Virginia Constitution in that such bonds create without voter
approval financial obligations of the State which must be satisfied by the State
legislature out of the State's general revenue funds. The Court's opinion
invalidated approximately $160 million in proposed new bonds to be issued by the
School Building Authority (SBA). In 1994, the State Legislature created a new
method of funding the SBA bonds by allocating monies from West Virginia Lottery
profits. This method was approved by the Court in Marockie v. Wagoner, 446 S.E
2d 680 (W. Va. 1994).
West Virginia's economy should be enhanced by the West Virginia Highway System
Improvements Initiative which is anticipated to involve the expenditure of
approximately $4.62 billion of federal and State funds over the next several
years to construct new roadways in the State. However, one highway project,
known as "Corridor H," has received considerable opposition in its final
approval process. Federally funded construction of several federal
administrative facilities in the State is also expected to enhance the State's
economy.
In March of 1994, the West Virginia Supreme Court of Appeals issued its opinion
in Booth v. Sims, -- S.E.2d --, No. 22464 (March 24, 1995) which will likely
affect various State pension plans. In this case the Court ruled that the State
Legislature could not reduce the state troopers' retirement annual cost of
living adjustment. The Legislature had approved such reductions in 1994 due to
concerns regarding the actuarial soundness of the troopers' pension plan. The
Court found the Legislature's reduction of benefits unconstitutional as applied
to troopers which have participated in the plan long enough to have
detrimentally relied on expected pension benefits. State lawmakers speculate
that the Court's ruling may affect the State's budget by restricting the
Legislature's ability to amend State pension plans which are inadequately
funded.
In 1995, the State Legislature substantially reformed the State's workers'
compensation program. The reform, aimed primarily at enforcing employers'
premium obligations and strengthening requirements for permanent total
disability awards, is intended to decrease the program's unfunded liability and
make the State's business climate more attractive.
<PAGE>
Investment Adviser Shareholder Servicing Agent
Massachusetts Financial Services Company MFS Service Center, Inc.
500 Boylston Street 500 Boylston Street
Boston, MA 02116 Boston, MA 02116
(617) 954-5000 Toll-free: (800) 225-2606
Distributor Mailing Address:
MFS Fund Distributors, Inc. P.O. Box 2281
500 Boylston Street Boston, MA 02107-9906
Boston, MA 02116
(617) 954-5000 Independent Accountants
Deloitte & Touche LLP
Custodian and Dividend Disbursing Agent 125 Summer Street
State Street Bank and Trust Company Boston, MA 02110
225 Franklin Street
Boston, MA 02110
<TABLE>
<S> <C> <C> <C>
MFS(R) ALABAMA MUNICIPAL BOND FUND MFS(R) NEW YORK MUNICIPAL BOND FUND
MFS(R) ARKANSAS MUNICIPAL BOND FUND MFS(R) NORTH CAROLINA MUNICIPAL BOND FUND
MFS(R) CALIFORNIA MUNICIPAL BOND FUND MFS(R) PENNSYLVANIA MUNICIPAL BOND FUND
MFS(R) FLORIDA MUNICIPAL BOND FUND MFS(R) SOUTH CAROLINA MUNICIPAL BOND FUND
MFS(R) GEORGIA MUNICIPAL BOND FUND MFS(R) TENNESSEE MUNICIPAL BOND FUND
MFS(R) LOUISIANA MUNICIPAL BOND FUND MFS(R) TEXAS MUNICIPAL BOND FUND
MFS(R) MARYLAND MUNICIPAL BOND FUND MFS(R) VIRGINIA MUNICIPAL BOND FUND
MFS(R) MASSACHUSETTS MUNICIPAL BOND FUND MFS(R) WASHINGTON MUNICIPAL BOND FUND
MFS(R) MISSISSIPPI MUNICIPAL BOND FUND MFS(R) WEST VIRGINIA MUNICIPAL BOND FUND
</TABLE>
<PAGE>
[Logo]
THE FIRST NAME IN MUTUAL FUNDS
500 BOYLSTON STREET
BOSTON, MA 02116 MST-1 6/95/146.5M
[LOGO: M F S]
THE FIRST NAME IN MUTUAL FUNDS
MFS(R) MUNICIPAL STATEMENT OF
SERIES TRUST ADDITIONAL INFORMATION
(A Member of the MFS Family of Funds(R)) June 1, 1995
- ------------------------------------------------------------------------------
Page
----
1 The Trust ...................................................... 2
2. Investment Objective, Policies and Restrictions ............... 2
3. Performance Information ....................................... 9
4. Determination of Public Offering Price and Net Asset Value;
Valuation of Portfolio Securities ........................... 10
5. Management of the Trust ....................................... 10
Trustees .................................................... 10
Officers .................................................... 11
Investment Adviser .......................................... 13
Custodian ................................................... 15
Shareholder Servicing Agent ................................. 15
Distributor ................................................. 15
6. Taxation ...................................................... 16
7. Shareholder Services .......................................... 17
8. Description of Shares, Voting Rights and Liabilities .......... 20
9. Portfolio Transactions ........................................ 20
10. Distribution Plans ............................................ 21
11. Independent Accountants and Financial Statements .............. 22
Appendix A -- Performance Results and Quotations .............. A-1
Appendix B -- Sales Charges ................................... B-1
Appendix C -- Amounts Paid Under the Distribution Plans ....... C-1
Appendix D -- Trustee Compensation Table ...................... D-1
MFS MUNICIPAL SERIES TRUST
500 Boylston Street, Boston, Massachusetts 02116
(617) 954-5000
This Statement of Additional Information sets forth information which may be of
interest to investors but which is not necessarily included in the Trust's
Prospectus dated June 1, 1995. This Statement of Additional Information should
be read in conjunction with the Prospectus, a copy of which may be obtained
without charge by contacting the Shareholder Servicing Agent (see last page for
address and phone number).
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY A
CURRENT PROSPECTUS.
<PAGE>
1. THE TRUST
MFS Municipal Series Trust (the "Trust") is an open-end management investment
company which was organized as a business trust under the laws of The
Commonwealth of Massachusetts in 1984. On August 27, 1993, the Trust changed its
name from "MFS Multi-State Municipal Bond Trust." On August 3, 1992 the Trust
changed its name from "MFS Managed Multi-State Municipal Bond Trust." The Trust
was known as "MFS Managed Multi-State Tax-Exempt Trust" until its name was
changed effective August 12, 1988. The Trust presently consists of 19 separate
series, including: the Alabama Fund, the Arkansas Fund, the California Fund, the
Florida Fund, the Georgia Fund, the Louisiana Fund, the Maryland Fund, the
Massachusetts Fund, the Mississippi Fund, the New York Fund, the North Carolina
Fund, the Pennsylvania Fund, the South Carolina Fund, the Tennessee Fund, the
Texas Fund, the Virginia Fund, the Washington Fund and the West Virginia Fund,
each of which is referred to as a "Fund." Shares of MFS Municipal Income Fund,
the nineteenth series of the Trust, are offered and sold pursuant to a separate
prospectus and statement of additional information. The California Fund was
organized as a series of the Trust on June 3, 1993. Prior thereto, the
California Fund was organized as a separate Massachusetts business trust.
Massachusetts Financial Services Company, a Delaware corporation ("MFS" or the
"Adviser"), is the Trust's investment adviser. References in this Statement of
Additional Information to the "Prospectus" are to the Prospectus dated June 1,
1995.
2. INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVE -- The investment objective of each Fund is to provide
current income exempt from federal income taxes and from the personal income
taxes, if any, of the State to which its name refers. There can be no assurance
that any Fund will achieve its investment objective. Shareholder approval is not
required to change the investment objective of any Fund.
INVESTMENT POLICIES -- As a fundamental policy, each Fund seeks to achieve its
investment objective by investing its assets primarily (i.e., at least 80% of
its assets under normal conditions) in municipal bonds and notes and other debt
instruments the interest on which is exempt from federal income taxes and from
the personal income taxes, if any, of the State to which its name refers. These
obligations are issued primarily by such States, their political subdivisions,
municipalities, agencies, instrumentalities or public authorities. Each Fund may
purchase municipal bonds the interest on which may be subject to an alternative
minimum tax. The investment policies of the Funds are described in detail in the
Prospectus.
"WHEN-ISSUED" SECURITIES: As described in the Prospectus under "Investment
Objective and Policies," each Fund may purchase new issues of tax-exempt
securities on a "when-issued" basis. In order to invest the Funds' assets
immediately, while awaiting delivery of securities purchased on a "when- issued"
basis, short-term obligations that offer same day settlement and earnings will
normally be purchased. Although short-term investments will normally be in
tax-exempt securities, short-term taxable securities may be purchased if
suitable short-term tax-exempt securities are not available. When a commitment
to purchase a security on a "when-issued" basis is made, procedures are
established consistent with the General Statement of Policy of the Securities
and Exchange Commission (the "SEC") concerning such purchases. Since that policy
currently recommends that an amount of the Funds' assets equal to the amount of
the purchase be held aside or segregated to be used to pay for the commitment,
cash, short-term money market instruments or high quality debt securities
sufficient to cover any commitments are always expected to be available.
However, although it is not intended that such purchases would be made for
speculative purposes, purchases of securities on a "when-issued" basis may
involve more risk than other types of purchases. For example, when the time
comes to pay for a "when-issued" security, portfolio securities of the Fund may
have to be sold in order for the Fund to meet its payment obligations, and a
sale of securities to meet such obligations carries with it a potential for the
realization of capital gain, which is not tax-exempt. Also, if it is necessary
to sell the "when-issued" security before delivery, the Fund may incur a loss
because of market fluctuations since the time the commitment to purchase the
"when-issued" security was made. Moreover, any gain resulting from any such sale
would not be tax-exempt. Additionally, because of market fluctuations between
the time of commitment to purchase and the date of purchase, the "when-issued"
security may have a lesser (or greater) value at the time of purchase than the
Fund's payment obligations with respect to the security.
INDEXED SECURITIES: Each Fund may purchase securities whose prices are indexed
to the prices of other securities, securities indices or other financial
indicators. Indexed securities typically, but not always, are debt securities or
deposits whose value at maturity or coupon rate is determined by reference to a
specific instrument or statistic.
The performance of indexed securities depends to a great extent on the
performance of the security or other instrument to which they are indexed, and
may also be influenced by interest rate changes in the U.S. and abroad. At the
same time, indexed securities are subject to the credit risks associated with
the issuer of the security, and their values may decline substantially if the
issuer's creditworthiness deteriorates. Recent issuers of indexed securities
have included banks, corporations, and certain U.S. government agencies.
SWAPS AND RELATED TRANSACTIONS: Each Fund may enter into interest rate swaps and
other types of available swap agreements, such as caps, collars and floors.
Swap agreements may be individually negotitated and structured to include
exposure to a variety of different types of investments or market factors.
Depending on their structure, swap agreements may increase or decrease a Fund's
exposure to long or short-term interest rates (in the U.S. or abroad), corporate
borrowing rates, or other factors such as securities prices or inflation rates.
Swap agreements can take many different forms and are known by a variety of
names. A Fund is not limited to any particular form or variety of swap agreement
if MFS determines it is consistent with the Fund's investment objective and
policies.
Each Fund will maintain cash or appropriate liquid assets with its custodian to
cover its current obligations under swap transactions. If a Fund enters into a
swap agreement on a net basis (i.e., the two payment streams are netted out,
with the Fund receiving or paying, as the case may be, only the net amount of
the two payments), the Fund will maintain cash or liquid assets with its
Custodian with a daily value at least equal to the excess, if any, of the Fund's
accrued obligations under the swap agreement over the accrued amount the Fund is
entitled to receive under the agreement. If the Fund enters into a swap
agreement on other than a net basis, it will maintain cash or liquid assets with
a value equal to the full amount of the Fund's accrued obligations under the
agreement.
The most significant factor in the performance of swaps, caps, floors and
collars is the change in the specific interest rate or other factor that
determines the amount of payments to be made under the arrangement. If MFS is
incorrect in its forecasts of such factors, the investment performance of the
Fund would be less than what it would have been if these investment techniques
had not been used. If a swap agreement calls for payments by the Fund, the Fund
must be prepared to make such payments when due. In addition, if the
counterparty's creditworthiness declined, the value of the swap agreement would
be likely to decline, potentially resulting in losses. If the counterparty
defaults, the Fund's risk of loss consists of the net amount of payments that
the Fund is contractually entitled to receive. The Fund anticipates that it will
be able to eliminate or reduce its exposure under these arrangements by
assignment or other disposition or by entering into an offsetting agreement with
the same or another counterparty.
REPURCHASE AGREEMENTS: Each Fund may enter into repurchase agreements with
sellers who are member firms or a subsidiary thereof of the New York Stock
Exchange (the "Exchange") or members of the Federal Reserve System, recognized
primary U.S. Government securities dealers or institutions which the Adviser has
determined to be of comparable creditworthiness. The securities that a Fund
purchases and holds through its agent are U.S. Government securities, the values
of which are equal to or greater than the repurchase price agreed to be paid by
the seller. The repurchase price may be higher than the purchase price, the
difference being income to the Fund, or the purchase and repurchase prices may
be the same, with interest at a standard rate due to the Fund together with the
repurchase price on repurchase. In either case, the income to the Fund is
unrelated to the interest rate on the U.S. Government securities.
The repurchase agreement provides that in the event the seller fails to pay the
price agreed upon on the agreed upon delivery date or upon demand, as the case
may be, the Fund will have the right to liquidate the securities. If, at the
time the Fund is contractually entitled to exercise its right to liquidate the
securities, the seller is subject to a proceeding under the bankruptcy laws or
its assets are otherwise subject to a stay order, the Fund's exercise of its
right to liquidate the securities may be delayed and result in certain losses
and costs to the Fund. The Fund has adopted and follows procedures which are
intended to minimize the risks of repurchase agreements. For example, the Fund
only enters into repurchase agreements after the Adviser has determined that the
seller is creditworthy, and the Adviser monitors that seller's creditworthiness
on an ongoing basis. Moreover, under such agreements, the value of the
securities (which are marked to market every business day) is required to be
greater than the repurchase price, and the Fund has the right to make margin
calls at any time if the value of the securities falls below the agreed upon
margin.
VARIABLE AND FLOATING RATE OBLIGATIONS: Investments in floating or variable rate
securities normally will involve industrial development or revenue bonds which
provide that the rate of interest is set as a specific percentage of a
designated base rate, such as rates on Treasury Bonds or Bills or the prime rate
at a major commercial bank, and that a bondholder can demand payment of the
obligations on behalf of the Fund on short notice at par plus accrued interest,
which amount may be more or less than the amount the bondholder paid for them.
The maturity of floating or variable rate obligations (including participation
interests therein) is deemed to be the longer of (i) the notice period required
before the Fund is entitled to receive payment of the obligation upon demand or
(ii) the period remaining until the obligation's next interest rate adjustment.
If not redeemed by the Fund through the demand feature, the obligations mature
on a specified date which may range up to thirty years from the date of
issuance.
INVERSE FLOATING RATE OBLIGATIONS: Each Fund may invest in so called "inverse
floating rate obligations" or "residual interest bonds" or other obligations or
certificates relating thereto structured to have similar features. In creating
such an obligation, a municipality issues a certain amount of debt and pays a
fixed interest rate. Half of the debt is issued as variable rate short-term
obligations, the interest rate of which is reset at short intervals, typically
35 days. The other half of the debt is issued as inverse floating rate
obligations, the interest rate of which is calculated based on the difference
between a multiple of (approximately two times) the interest paid by the issuer
and the interest paid on the short-term obligation. Under usual circumstances,
the holder of the inverse floating rate obligation can generally purchase an
equal principal amount of the short-term obligation and link the two obligations
in order to create long-term fixed-rate bonds. Because the interest rate on the
inverse floating rate obligation is determined by subtracting the short-term
rate from a fixed amount, the interest rate will decrease as the short-term rate
increases and will increase as the short-term rate decreases. The magnitude of
increases and decreases in the market value of inverse floating rate obligations
may be approximately twice as large as the comparable change in the market value
of an equal principal amount of long-term bonds which bear interest at the rate
paid by the issuer and have similar credit quality, redemption and maturity
provisions.
OPTIONS: Each Fund may, subject to any applicable laws, write covered put and
call options and purchase put and call options on fixed income securities that
are traded on U.S. securities exchanges and over-the-counter on behalf of the
Fund only for hedging purposes. Call options written by the Funds give the
holder the right to buy the underlying securities from the Fund at a fixed
exercise price; put options written by the Fund give the holder the right to
sell the underlying securities to the Fund at a fixed exercise price. A call
option written by a Fund is "covered" if the Fund owns the underlying security
covered by the call on the Fund or has an absolute and immediate right to
acquire that security without additional cash consideration (or for additional
cash consideration held in a segregated account by its custodian) on behalf of a
Fund upon conversion or exchange of other securities held in its portfolio. A
call option is also covered if the Fund holds a call on the same security and in
the same principal amount as the call written where the exercise price of the
call held (a) is equal to or less than the exercise price of the call written or
(b) is greater than the exercise price of the call written if the difference is
maintained by the Fund in cash or high grade government securities in a
segregated account with its custodian. A put option written by a Fund is
"covered" if the Fund maintains in a segregated account with its custodian cash
or high grade government securities with a value equal to the exercise price, or
else holds a put on the same security and in the same principal amount as the
put written where the exercise price of the put held is equal to or greater than
the exercise price of the put written or less than the exercise price of the put
written if the difference is maintained by the Fund in cash or high grade
government securities in a segregated account with its custodian. Put and call
options written by a Fund may also be covered in such other manner as may be in
accordance with the requirements of the exchange on which, or the counterparty
with which, the option is traded, and applicable laws and regulations. The
writer of an option may have no control over when the underlying securities must
be sold, in the case of a call option, or purchased, in the case of a put
option, since with regard to certain options, the writer may be assigned an
exercise notice at any time prior to the termination of the obligation.
Effecting a closing transaction in the case of a written call option will permit
the Fund to write another call option on the underlying security with either a
different exercise price or expiration date or both, or in the case of a written
put option will permit the Fund to write another put option to the extent that
the exercise price thereof is secured by deposited cash or short-term
securities. Such transactions permit a Fund to generate additional premiums,
which will partially offset declines in the value of portfolio securities or
increases in the cost of securities to be acquired for that Fund. Also,
effecting a closing transaction will permit the cash or proceeds from the
concurrent sale of any securities subject to the option to be used for other
Fund investments. If a Fund desires to sell a particular security on which it
has written a call option, it will effect a closing transaction for that Fund
prior to or concurrent with the sale of the security.
A Fund will realize a profit from a closing transaction if the price of the
transaction is less than the premium received from writing the option or is more
than the premium paid to purchase the option; a Fund will realize a loss from a
closing transaction if the price of the transaction is more than the premium
received from writing the option or is less than the premium paid to purchase
the option. Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security, any
loss resulting from the closing out of a call option is likely to be offset in
whole or in part by appreciation of the underlying security owned by the Fund.
An option position may be closed out only where there exists a secondary market
for an option of the same series. If a secondary market does not exist, it might
not be possible to effect closing transactions in particular options with the
result a Fund would have to exercise the options in order to realize any profit.
If the Fund is unable to effect a closing purchase transaction in a secondary
market, it will not be able to sell the underlying security until the option
expires or it delivers the underlying security upon exercise. Reasons for the
absence of a liquid secondary market include the following: (i) there may be
insufficient trading interest in certain options; (ii) restrictions may be
imposed by a national securities exchange on opening transactions or closing
transactions or both; (iii) trading halts, suspensions or other restrictions may
be imposed with respect to particular classes or series of options or underlying
securities; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation (the "OCC") may not at all times be adequate to handle
current trading volume; or (vi) one or more exchanges could, for economic or
other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that exchange (or in that class or series of options)
would cease to exist, although outstanding options on that exchange that had
been issued by the OCC as a result of trades on that exchange would continue to
be exercisable in accordance with their terms.
A Fund may write options in connection with buy-and-write transactions; that is,
the Fund may purchase a security and then write a call option against that
security. The exercise price of the call the Fund determines to write will
depend upon the expected price movement of the underlying security. The exercise
price of a call option may be below ("in-the-money"), equal to ("at- the-money")
or above ("out-of-the-money") the current value of the underlying security at
the time the option is written. If the call options are exercised in such
transactions, the Fund's maximum gain will be the premium received by it for
writing the option, adjusted upwards or downwards by the difference between the
Fund's purchase price of the security and the exercise price. If the options are
not exercised and the price of the underlying security declines, the amount of
such decline will be offset in part, or entirely, by the premium received.
The writing of covered put options is similar in terms of risk/return
characteristics to buy-and-write transactions. Put options may be used by a Fund
in the same market environments that call options are used in equivalent
buy-and-write transactions.
A Fund may write combinations of put and call options on the same security, a
practice known as a "straddle." By writing a straddle, the Fund undertakes a
simultaneous obligation to sell and purchase the same security in the event that
one of the options is exercised. If the price of the security subsequently rises
sufficiently above the exercise price to cover the amount of the premium and
transaction costs, the call will likely be exercised and the Fund will be
required to sell the underlying security at a below market price. This loss may
be offset, however, in whole or in part, by the premiums received on the writing
of the two options. Conversely, if the price of the security declines by a
sufficient amount, the put will likely be exercised. The writing of straddles
will likely be effective, therefore, only where the price of a security remains
stable and neither the call nor the put is exercised. In an instance where one
of the options is exercised, the loss on the purchase or sale of the underlying
security may exceed the amount of the premiums received.
A Fund may purchase put options to hedge against a decline in the value of the
Fund's portfolio. By using put options in this way, the Fund will reduce any
profit it might otherwise have realized in the underlying security by the amount
of the premium paid for the put option and by transaction costs.
A Fund may purchase call options to hedge against an increase in the price of
securities that the Fund anticipates purchasing for the Fund's portfolio in the
future. The premium paid for the call option plus any transaction costs will
reduce the benefit, if any, realized by the Fund, upon exercise of the option,
and, unless the price of the underlying security rises sufficiently, the option
may expire worthless to the Fund. The Fund may also purchase put and call
options for hedging and non-hedging purposes.
A Fund may purchase detachable call options on municipal securities, which are
options issued by an issuer of the underlying municipal securities giving the
purchaser the right to purchase the securities at a fixed price, up to a stated
time in the future or, in some cases, on a future date. A Fund may purchase
detachable call options either in connection with its purchase of the underlying
municipal securities or in separate transactions unrelated to purchases of the
underlying municipal securities. In general, however, a Fund will only purchase
detachable call options that are issued at the same time as the underlying
municipal securities. A Fund may or may not purchase the underlying municipal
securities. Because detachable call options may be long term instruments, their
value could be subject to greater volatility and, if the Fund seeks to sell an
option it has purchased, it could sustain a loss of all or a portion of the
amount paid to purchase the option. In this regard, detachable call options have
only recently been introduced and there is not yet an established market for the
sale of such instruments. In addition, depending on changes in the value of the
underlying municipal security, it may not be profitable for the Fund to exercise
an option it has purchased. In that event, the Fund will lose the amount of the
purchase price paid for the option.
The staff of the SEC has taken the position that purchased over-the-counter
options and assets used to cover written over-the-counter options are illiquid
and, therefore, together with other illiquid securities held by a Fund, cannot
exceed 15% of the Fund's assets. Although the Adviser disagrees with this
position, the Adviser intends to limit each Fund's writing of over-the-counter
options in accordance with the following procedure. Except as provided below,
each Fund intends to write over-the-counter options only with primary U.S.
Government securities dealers recognized by the Federal Reserve Bank of New
York. Also, the contracts each Fund has in place with such primary dealers will
provide that the Fund has the absolute right to repurchase an option it writes
at any time at a price which represents the fair market value, as determined in
good faith through negotiation between the parties, but which in no event will
exceed a price determined pursuant to a formula in the contract. Although the
specific formula may vary between contracts with different primary dealers, the
formula will generally be based on a multiple of the premium received by the
Fund for writing the option, plus the amount, if any, of the option's intrinsic
value (i.e., the amount that the option is in-the-money). The formula may also
include a factor to account for the difference between the price of the security
and the strike price of the option if the option is written out-of-the-money.
Each Fund will treat all or a portion of the formula amount as illiquid for
purposes of the 15% test imposed by the SEC staff. Each Fund may also write
over-the-counter options with non-primary dealers and will treat the assets used
to cover these options as illiquid for purposes of such 15% test.
FUTURES CONTRACTS: Each Fund intends to enter into Futures Contracts for hedging
purposes and for non-hedging purposes, to the extent permitted by applicable
law. A Futures Contract is a bilateral agreement providing for the purchase and
sale for future delivery of a fixed income security, a contract for the purchase
or sale for future delivery of Eurodollar deposits or a futures contract based
on municipal bond or other financial indices, including any index of fixed
income securities ("Futures Contract"). A "sale" of a Futures Contract means a
contractual obligation to deliver the securities called for by the contract at a
specified price on a specified date. A "purchase" of a Futures Contract means a
contractual obligation to acquire the securities called for by the contract at a
specified price on a specified date. Futures Contracts have been designed by
exchanges which have been designated as "contract markets" by the Commodity
Futures Trading Commission (the "CFTC"), and must be executed through a futures
commission merchant, or brokerage firm, which is a member of the relevant
contract market. Presently, Futures Contracts are based on such debt securities
as long-term U.S. Treasury Bonds, Treasury Notes, three-month U.S. Treasury
Bills and bank certificates of deposit and on an index of municipal bonds and
Eurodollar deposits. Existing contract markets include the Chicago Board of
Trade and the International Monetary Market of the Chicago Mercantile Exchange.
Futures Contracts are traded on these markets, and, through their clearing
corporations, the exchanges guarantee performance of the contracts as between
the clearing members of the exchange.
At the same time a Futures Contract is purchased or sold for a Fund, the Fund
must allocate cash or securities as a deposit payment ("initial deposit"). The
initial deposit varies but may be as low as 5% or less of the value of the
contract. Daily thereafter, the Futures Contract is valued on a marked-to-
market basis and the Fund may be required to pay or receive additional
"variation margin," based on any decline or increase in the contract's value.
At the time of delivery of securities pursuant to a Futures Contract based on
fixed income securities, adjustments are made to recognize differences in value
arising from the delivery of securities with a different interest rate from that
specified in the contract. In some (but not many) cases, securities called for
by a Futures Contract may not have been issued when the contract was written.
A Futures Contract based on an index of securities, such as a municipal bond
index Futures Contract, provides for a cash payment equal to the amount, if any,
by which the value of the index at maturity is above or below the value of the
index at the time the contract was entered into, times a fixed index
"multiplier." The index underlying such a Futures Contract is generally a broad
based index of securities designed to reflect movements in the relevant market
as a whole. The index assigns weighted values to the securities included in the
index and its composition is changed periodically. In addition, Futures
Contracts on Eurodollar deposits also provide for the payment and acceptance of
a cash settlement, based on changes in the value of the underlying instrument.
Although Futures Contracts call for the actual delivery or acquisition of
securities or, in the case of Futures Contracts based on an index, the making or
acceptance of a cash settlement at a specified future time, the contractual
obligation is usually fulfilled before such date by buying or selling, as the
case may be, on a commodities exchange, an identical Futures Contract calling
for settlement in the same month, subject to the availability of a liquid
secondary market. A Fund incurs brokerage fees when the Trust purchases and
sells Futures Contracts for it.
The purpose of the purchase or sale of a Futures Contract entered into for
hedging purposes, in the case of a portfolio such as that of each of the Funds
which holds or intends to acquire long-term fixed income securities, is to
attempt to protect the Funds from fluctuations in interest rates without
actually buying or selling long-term fixed income securities. For example, if a
Fund owns long-term bonds, and interest rates were expected to increase, the
Fund might enter into Futures Contracts for the sale of debt securities. Such a
sale would have much the same effect as selling an equivalent value of the
long-term bonds owned by the Fund. If interest rates did increase, the value of
the debt securities in the portfolio would decline, but the value of the Futures
Contracts would increase at approximately the same rate, thereby keeping the net
asset value of the Fund from declining as much as it otherwise would have. The
Fund could accomplish similar results by selling bonds with long maturities
investing in bonds with short maturities when interest rates are expected to
increase. However, the use of Futures Contracts as an investment technique
allows the Fund to maintain a hedging position without having to sell its
portfolio securities.
Similarly, when it is expected that interest rates may decline, Futures
Contracts may be purchased to attempt to hedge against anticipated purchases of
long-term bonds at higher prices. Since the fluctuations in the value of Futures
Contracts should be similar to that of long-term bonds, a Fund could take
advantage of the anticipated rise in the value of long-term bonds without
actually buying them until the market had stabilized. At that time, the Futures
Contracts could be liquidated and the Fund could then buy long-term bonds on the
cash market. To the extent a Fund enters into Futures Contracts for this
purpose, the assets in the segregated asset account maintained to cover the
Fund's obligations with respect to such Futures Contracts, on behalf of the
Fund, will consist of cash or short-term money market instruments from its
portfolio in an amount equal to the difference between the fluctuating market
value of such Futures Contracts and the aggregate value of the initial and
variation margin payments made by the Fund, with respect to such Futures
Contracts. The Funds also may enter into transactions in Futures Contracts for
non-hedging purposes, to the extent permitted by applicable law.
The ordinary spreads between prices in the cash and futures markets, due to
differences in the natures of those markets, are subject to distortions. First,
all participants in the futures market are subject to initial deposit and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close out Futures Contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
cause temporary price distortions. Due to the possibility of distortion, a
correct forecast of general interest rate trends by the Adviser may still not
result in a successful transaction.
In addition, Futures Contracts entail risks. Although each Fund believes that
use of such Contracts will benefit the Fund, if the Adviser's investment
judgment about the general direction of interest rates is incorrect, the Fund's
overall performance would be poorer than if it had not entered into any such
Contract. For example, if a Fund has hedged against the possibility of an
increase in interest rates which would adversely affect the price of bonds held
in its portfolio and interest rates decrease instead, the Fund will lose part or
all of the benefit of the increased value of its bonds which it has hedged
because it will have offsetting losses in its futures positions. In addition, in
such situations, if the Fund has insufficient cash, it may have to sell bonds
from its portfolio to meet daily variation margin requirements. Such sales of
bonds may be, but will not necessarily be, at increased prices which reflect the
rising market. The Fund may have to sell securities at a time when it may be
disadvantageous to do so. Transactions entered into for non-hedging purposes
involve greater risk and could result in losses which are not offset by gains on
other portfolio assets.
OPTIONS ON FUTURES CONTRACTS: Each Fund, subject to any applicable laws, may
purchase and write options on Futures Contracts ("Options on Futures Contracts")
for hedging purposes and for non-hedging purposes. An Option on a Futures
Contract provides the holder with the right to enter into a "long" position in
the underlying Futures Contract (i.e., a purchase of the Futures Contract), in
the case of a call option, or a "short" position in the underlying Futures
Contract (i.e., a sale of the Futures Contract), in the case of a put option, at
a fixed exercise price up to a stated expiration date or, in the case of certain
options, on such date. Such Options on Futures Contracts will be traded on
contract markets regulated by the CFTC. Depending on the pricing of the option
compared to either the price of the Futures Contract upon which it is based or
the price of the underlying debt securities, it may or may not be less risky
than ownership of the Futures Contract or underlying debt securities. As with
the purchase of Futures Contracts, when a Fund's portfolio is not fully invested
the Fund may purchase a call Option on a Futures Contract on behalf of that Fund
to hedge against a market advance due to declining interest rates.
The writing of a call Option on a Futures Contract by a Fund may constitute a
partial hedge against declining prices of the securities which are deliverable
upon exercise of the Futures Contract. If the futures price at expiration of the
option is below the exercise price, the Fund will retain the full amount of the
option premium which provides a partial hedge against any decline that may have
occurred in the Fund portfolio holdings. The writing of a put Option on a
Futures Contract may constitute a partial hedge against increasing prices of the
securities which are deliverable upon exercise of the Futures Contract. If the
futures price at expiration of the options is higher than the exercise price,
the Fund will retain the full amount of the option premium, less related
transaction costs, which provides a partial hedge against any increase in the
price of securities which the Fund intends to purchase. If a put or call option
the Fund has written is exercised, the Fund may incur a loss which will be
reduced by the amount of the premium it receives, less related transaction
costs. Depending on the degree of correlation between changes in the value of
the portfolio securities of a Fund and changes in the value of its futures
positions, the Fund's losses from existing Options on Futures Contracts, may to
some extent be reduced or increased by changes in the value of the Fund's
portfolio securities. The writer of an Option on a Futures Contract is subject
to the requirement of initial and variation margin payments.
Each Fund may cover the writing of call Options on Futures Contracts (a) through
purchases of the underlying Futures Contract, (b) through ownership of the
security or securities included in the index underlying the Futures Contract, or
(c) through the holding of a call on the same Futures Contract and in the same
principal amount as the call written where the exercise price of the call held
(i) is equal to or less than the exercise price of the call written or (ii) is
greater than the exercise price of the call written if the difference is
maintained by the Fund in cash, cash equivalents or U.S. Treasury securities in
a segregated account with its custodian. The Trust may cover the writing of put
Options on Futures Contracts on behalf of a Fund (a) through sales of the
underlying Futures Contract, (b) through segregation of cash, cash equivalents
or U.S. Treasury securities in an amount equal to the value of the security or
index underlying the Futures Contract, or (c) through the holding of a put on
the same Futures Contract and in the same principal amount as the put written
where the exercise price of the put held is (i) equal to or greater than the
exercise price of the put written or (ii) less than the exercise price of the
put written if the difference is maintained by the Fund in cash, cash
equivalents or U.S. Treasury securities in a segregated account with its
custodian. Put and call Options on Futures Contracts written by a Fund may also
be covered in such other manner as may be in accordance with the requirements of
the exchange on which they are traded and applicable laws and regulations.
Each Fund may purchase a put option on a Futures Contract to hedge its
portfolio. Purchases of such put options will therefore be made for the same
types of purposes as protective put options on portfolio securities. A Fund will
purchase a put option on a Futures Contract to hedge the Fund's portfolio
against the risk of rising interest rates.
The amount of risk a Fund assumes when it purchases an Option on a Futures
Contract is the premium paid for the option plus related transaction costs,
although in order to realize a profit it may be necessary to exercise the option
and close out the underlying Futures Contract, subject to the risks of futures
trading described herein. In addition to the correlation risks discussed above,
the purchase of an option also entails the risk that changes in the value of the
underlying Futures Contract will not be fully reflected in the value of the
option purchased. The writing of an Option on a Futures Contract, however,
involves all of the risks of futures trading, including the requirement to make
initial and variation margin payments. Transactions in Options on Futures
Contracts entered into for non-hedging purposes involve greater risk and could
result in losses which are not offset by gains on other portfolio assets.
ADDITIONAL RISKS OF OPTIONS ON SECURITIES, FUTURES CONTRACTS AND OPTIONS ON
FUTURES CONTRACTS: Various additional risks exist with respect to the trading of
options, Futures Contracts and Options on Futures Contracts. For example, a
Fund's ability effectively to hedge all or a portion of its portfolio through
transactions in such instruments will depend on the degree to which price
movements in the underlying index or instrument correlate with price movements
in the relevant portion of the Fund's portfolio. The trading of Futures
Contracts and options entails the additional risk of imperfect correlation
between movements in the Futures or option price and the price of the underlying
index or obligation, while the writing of options also entails the risk of
imperfect correlation between securities used to cover options written and the
securities underlying such options. The anticipated spread between the prices
may be distorted because of various factors, which are set forth under
"Investment Objective, Policies and Restrictions -- Futures Contracts."
Transactions in options, Futures Contracts and Options on Futures Contracts
entered into for non-hedging purposes involve greater risk and may result in
losses which are not offset by gains on other portfolio assets.
A Fund's ability to engage in options and futures strategies will also depend on
the availability of liquid markets in such instruments. "Options" above sets
forth certain reasons why a liquid secondary market may not exist. Transactions
in these instruments are also subject to the risk of brokerage firm or clearing
house insolvencies.
The liquidity of a secondary market in a Futures Contract or option thereon may
be adversely affected by "daily price fluctuation limits," established by
exchanges, which limit the amount of fluctuation in the price of a contract
during a single trading day and prohibit trading beyond such limit, which could
make it difficult or impossible to establish or liquidate positions. In
addition, the exchanges on which futures and options are traded may impose
limitations governing the maximum number of positions on the same side of the
market and involving the same underlying instruments which may be held by a
single investor, whether acting alone or in concert with others (regardless of
whether such contracts are held on the same or different exchanges or held or
written in one or more accounts or through one or more brokers.)
Options on securities may be traded over-the-counter. In an over-the-counter
trading environment, many of the protections afforded to exchange participants
will not be available. For example, there are no clearing house performance
guarantees. In addition, there are no daily price fluctuation limits, and
adverse market movements could therefore continue to an unlimited extent over a
period of time. Although the purchaser of an option cannot lose more than the
amount of the premium plus related transaction costs, this entire amount could
be lost.
In order to assure that the Funds will not be deemed to be a "commodity pool"
for purposes of the Commodity Exchange Act, regulations of the CFTC require that
the Fund enter into transactions in Futures Contracts and Options on Futures
Contracts only (i) for bona fide hedging purposes (as defined in CFTC
regulations), or (ii) for non-hedging purposes, provided that the aggregate
initial margin and premiums on such non-hedging positions does not exceed 5% of
the liquidation value of the Fund's assets. In addition, the Funds must comply
with the requirements of various state securities laws in connection with such
transactions. Neither of the restrictions would be changed by the Trust's Board
of Trustees without considering the policies and concerns of the various federal
and state regulatory agencies.
PORTFOLIO TRADING: The Funds intend to fully manage their portfolios by buying
and selling securities, as well as by holding securities to maturity. In
managing the portfolio of each Fund, the Trust seeks to take advantage of market
developments, yield disparities and variations in the creditworthiness of
issuers, which may include use of the following strategies:
(1) shortening the average maturity of a Fund's portfolio in anticipation of
a rise in interest rates so as to minimize depreciation of principal;
(2) lengthening the average maturity of its portfolio in anticipation of a
decline in interest rates so as to maximize tax-exempt yield;
(3) selling one type of debt security (e.g., revenue bonds) and buying
another (e.g., general obligation bonds) when disparities arise in the
relative values of each; and
(4) changing from one debt security to an essentially similar debt security
when their respective yields are distorted due to market factors.
Distribution of gains, if any, realized from the sale of Municipal Obligations
(as defined in the Prospectus) or other securities are subject to federal income
taxes and state personal income taxes. (See "Taxation" in this Statement of
Additional Information and "Tax Status" in the Prospectus.) The Trust cannot
predict the annual portfolio turnover rate for any Fund, but it is anticipated
that the annual turnover rate of a Fund generally should not exceed 200%
(excluding turnover of obligations having a maturity of one year or less). A
200% annual turnover rate would occur, for example, if all the securities in a
Fund's portfolio (excluding short-term obligations) were replaced twice in a
period of a year. A high turnover rate may involve greater expenses to a Fund.
SPECIAL FACTORS AFFECTING INVESTORS IN STATE OBLIGATIONS: Investors should be
aware of special factors affecting investments in each State's Municipal
Obligations. For a discussion of these special factors, which does not purport
to be complete, see Appendix D to the Prospectus which pertains to the relevant
Fund.
INVESTMENT RESTRICTIONS -- The Trust has adopted the following restrictions
which apply to each of the Funds and which cannot be changed with respect to any
Fund without the approval of the holders of a majority of the shares of that
Fund (which, as used in this Statement of Additional Information, means the
lesser of (i) more than 50% of the outstanding shares of that Fund (or the Trust
or class, as applicable) or (ii) 67% or more of the outstanding shares of that
Fund (or the Trust or class, as applicable) present at a meeting at which
holders of more than 50% of the Fund's outstanding shares (or the Trust or
class, as applicable) are represented in person or by proxy).
The Trust may not, on behalf of any Fund:
(1) borrow money or pledge, mortgage or hypothecate assets of the Fund,
except that as a temporary measure for extraordinary or emergency purposes it
may borrow in an amount not to exceed 1/3 of the current value of the net
assets of the Fund, including the amount borrowed, and may pledge, mortgage or
hypothecate not more than 1/3 of such assets to secure such borrowings (it is
intended that the Trust would borrow money on behalf of a Fund only from banks
and only to accommodate requests for the repurchase of shares of the Fund
while effecting an orderly liquidation of portfolio securities) (for the
purpose of this restriction, collateral arrangements with respect to options,
Futures Contracts and Options on Futures Contracts and payment of initial and
variation margin in connection therewith are not considered a pledge of
assets). (For additional related restrictions, see clause (i) under the
caption "State and Federal Restrictions" below);
(2) purchase any security or evidence of interest therein on margin, except
that the Trust may obtain such short-term credit on behalf of a Fund as may be
necessary for the clearance of purchases and sales of securities and except
that the Trust may make deposits on behalf of a Fund on margin in connection
with Options, Futures Contracts and Options on Futures Contracts;
(3) purchase or sell any put or call option or any combination thereof,
provided that this shall not prevent the purchase, ownership, holding or sale
of Futures or the writing (in the case of each Fund except the California
Fund), purchasing and selling of puts, calls or combination thereof with
respect to securities and Futures Contracts;
(4) underwrite securities issued by other persons except insofar as the
Trust may technically be deemed an underwriter under the Securities Act of
1933 in selling a portfolio security;
(5) make loans to other persons except by purchase of debt instruments
consistent with a Fund's investment policies or except through the use of
repurchase agreements or the purchase of short-term obligations and provided
that not more than 10% of a Fund's total assets will be invested in repurchase
agreements maturing in more than seven days;
(6) purchase or sell real estate (including limited partnership interests
but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity contracts
(except in connection with Futures Contracts, Options on Futures Contracts
and, in the case of each Fund except the California Fund, options) in the
ordinary course of business (the Trust reserves the freedom of action to hold
for a Fund's portfolio and to sell real estate acquired as a result of that
Fund's ownership of securities);
(7) purchase securities of any issuer if such purchase at the time thereof
would cause more than 10% of the voting securities of such issuer to be held
by any Fund; or
(8) issue any senior security (as that term is defined in the Investment
Company Act of 1940 (the "1940 Act")) if such issuance is specifically
prohibited by the 1940 Act or the rules and regulations promulgated
thereunder.
For purposes of the investment restrictions described above and the state and
federal restrictions described below, the issuer of a tax-exempt security is
deemed to be the entity (public or private) ultimately responsible for the
payment of the principal of and interest on the security.
As a non-fundamental policy, each Fund will not knowingly invest in illiquid
securities including securities subject to legal or contractual restrictions on
resale or for which there is no readily available market (e.g., trading in the
security is suspended, or, in the case of unlisted securities, where no market
exists) if more than 15% of the Fund's assets (taken at market value) would be
invested in such securities. Securities that are not registered under the
Securities Act of 1933, as amended, and sold in reliance on Rule 144A
thereunder, but are determined to be liquid by the Trust's Board of Trustees (or
its delegee), will not be subject to this 15% limitation.
In addition, the Trust has adopted the following operating policy for each Fund
which is not fundamental and which may be changed without shareholder approval.
The Trust may enter into repurchase agreements (a purchase of and a simultaneous
commitment to resell a security at an agreed upon price on an agreed upon date)
on behalf of a Fund (other than the California Fund) only with member banks of
the Federal Reserve System and broker-dealers and only for U.S. Government
securities. The Trust may enter into repurchase agreements on behalf of the
California Fund with a vendor, which is usually a member bank of the Federal
Reserve or a member firm (or a subsidiary thereof) of the Exchange, and only for
U.S. Government securities. If the vendor of a repurchase agreement fails to pay
the sum agreed to on the agreed upon delivery date, the Trust would have the
right to sell the U.S. Government securities for that Fund, but might incur a
loss in so doing and in certain cases may not be permitted to sell the U.S.
Government securities. As noted in paragraph (5) above, the Trust may not invest
more than 10% of the total assets of any Fund in repurchase agreements maturing
in more than seven days.
STATE AND FEDERAL RESTRICTIONS: In order to comply with certain federal and
state statutes and regulatory policies, as a matter of operating policy of the
Trust, the Trust will not, on behalf of: (i) any Fund borrow money for any
purpose in excess of 10% of the Fund's total assets (taken at cost) (moreover,
the Trust will not purchase any securities for the portfolio of the Fund at any
time at which borrowings exceed 5% of the Fund's total assets (taken at market
value)); (ii) any Fund (except the California Fund) invest more than 5% of the
Fund's total assets at the time of investment in unsecured obligations of
issuers which, including predecessors, controlling persons, general partners and
guarantors, have a record of less than three years' continuous business
operation or relevant business experience; (iii) any Fund (except the California
Fund) purchase or retain in the Fund's portfolio any securities of an issuer any
of whose officers, directors, trustees or security holders is an officer or
Trustee of the Trust, or is a member, partner, officer or Director of the
Adviser if, after the purchase of the securities of such issuer, one or more of
such persons owns beneficially more than 1/2 of 1% of the shares or securities,
or both, of such issuer and such persons owning more than 1/2 of 1% of such
shares or securities together own beneficially more than 5% of such shares or
securities, or both; (iv) any Fund sell any security which the Fund does not own
unless by virtue of its ownership of other securities the Fund has at the time
of sale a right to obtain securities, without payment of further consideration,
equivalent in kind and amount to the securities sold and provided that if such
right is conditional the sale is made upon the same conditions; (v) any Fund
invest for the purpose of exercising control or management; (vi) any Fund
purchase securities issued by any registered investment company except by
purchase in the open market where no commission or profit to a sponsor or dealer
results from such purchase other than the customary broker's commission, or
except when such purchase, though not made in the open market, is part of a plan
of merger or consolidation; provided, however, that the Trust will not purchase
on behalf of any Fund the securities of any registered investment company if
such purchase at the time thereof would cause more than 10% of the total assets
of the Fund (taken at the greater of cost or market value) to be invested in the
securities of such issuers or would cause more than 3% of the outstanding voting
securities of any such issuer to be held by the Fund; and provided, further,
that the Trust shall not purchase on behalf of any Fund securities issued by any
open-end investment company; (vii) any Fund (except the California Fund) invest
more than 15% of the Fund's total assets (taken at the greater of cost or market
value) in unmarketable securities (included under the 15% limit on investments
in illiquid securities are OTC options, repurchase agreements maturing in more
than seven days and unmarketable securities) or; (viii) any Fund (except the
California Fund) purchase securities (other than bonds, notes, and obligations
issued or guaranteed by the United States or any agency or instrumentality of
the United States, which may be purchased without limitation) if as a result, at
the close of any quarter in the Trust's taxable year, more than 25% of a Fund's
total assets would be invested in securities of any one issuer. In addition, the
Trust will not on behalf of the California Fund: (i) pledge, mortgage or
hypothecate for any purpose in excess of 15% of such Fund's net assets (taken at
market value); or (ii) invest more than 10% of such Fund's total assets (taken
at the greater of cost or market value) in securities that are not readily
marketable. These policies are not fundamental and may be changed by the Trust
with respect to any Fund without shareholder approval in response to changes in
the various state and federal requirements.
PERCENTAGE AND RATING RESTRICTIONS: Except for Investment Restriction (1), these
investment restrictions are adhered to at the time of purchase or utilization of
assets; a subsequent change in circumstances will not be considered to result in
a violation of policy.
3. PERFORMANCE INFORMATION
TOTAL RATE OF RETURN: The Trust will calculate the total rate of return for each
class of shares of a Fund for certain periods by determining the average annual
compounded rates of return over those periods that would cause an investment of
$1,000 (made with all distributions reinvested and reflecting the contingent
deferred sales charge (the "CDSC") or maximum offering price) to reach the value
of that investment at the end of the periods. The Trust may also calculate on
behalf of each class of shares of a Fund (i) a total rate of return, which is
not reduced by the CDSC (4% maximum) and therefore may result in a higher rate
of return, (ii) a total rate of return assuming an initial account value of
$1,000, which will result in a higher rate of return since the value of the
initial account will not be reduced by the sales charge applicable to Class A
shares (4.75% maximum), and/or (iii) total rates of return which represent
aggregate performance over a period or year-by-year performance, and which may
or may not reflect the effect of the maximum or other sales charge or CDSC.
Total rate of return quotations for each Class of each Fund are presented in
Appendix A attached hereto under the heading "Performance Quotations."
PERFORMANCE RESULTS: The performance results presented in Appendix A attached
hereto under the heading "Performance Results" assume an initial investment of
$10,000 in Class A shares and cover the period from the initial public offering
date of Class A shares, as indicated, to December 31, 1994. It has been assumed
that dividends and capital gain distributions for each Fund were reinvested in
additional shares. These performance results, as well as any yield,
tax-equivalent yield, current distribution rate or total rate of return
quotation provided by the Trust, on behalf of a Fund, and presented in Appendix
A, should not be considered as representative of the performance of the Fund in
the future since the net asset value and public offering price of shares of the
Fund will vary based not only on the type, quality and maturities of the
securities held in the Fund's portfolio, but also on changes in the current
value of such securities and on changes in the expenses of the Fund. These
factors and possible differences in the methods used to calculate performance
quotations should be considered when comparing performance quotations of a Fund
to performance quotations published for other investment companies or other
investment vehicles. Total rate of return reflects the performance of both
principal and income. Current net asset value and account balance information
may be obtained by calling 1-800-MFS-TALK (637-8255).
YIELD: Any yield quotation for a class of shares of a Fund is based on the
annualized net investment income per share of the Fund attributable to that
class over a 30-day period. The yield for a class of shares of a Fund is
calculated by dividing the net investment income per share allocated to that
class earned during the period by the maximum offering price per share of that
class of shares on the last day of that period. The resulting figure is then
annualized. Net investment income per share of a class is determined by dividing
(i) the dividends and interest earned by the Fund allocated to that class during
the period, minus accrued expenses of that class for the period, by (ii) the
average number of shares of the class entitled to receive dividends during the
period multiplied by the maximum offering price per share on the last day of the
period. The yield calculations for Class A shares assume a maximum sales charge
of 4.75%. The yield calculations for Class B shares assume no CDSC is paid.
Yield quotations for each class of each Fund are presented in Appendix A
attached hereto under the heading "Performance Quotations."
TAX-EQUIVALENT YIELD: The tax-equivalent yield for a class of shares of a Fund
is calculated by determining the rate of return that would have to be achieved
on a fully taxable investment in such shares to produce the after-tax equivalent
of the yield of that class. In calculating tax-equivalent yield, a Fund assumes
certain federal tax brackets for shareholders and does not take into account
state taxes. Tax-equivalent yield quotations for each class of each Fund are
presented in Appendix A attached hereto under the heading "Performance
Quotations."
CURRENT DISTRIBUTION RATE: Yield, which is calculated according to a formula
prescribed by the SEC, is not indicative of the amounts which were or will be
paid to the Fund's shareholders. Amounts paid to shareholders of each class are
reflected in the quoted "current distribution rate" for that class. The current
distribution rate for a class is computed by dividing the total amount of
dividends per share paid by the Fund to shareholders of that class during the
past 12 months by the maximum public offering price of that class at the end of
such period. Under certain circumstances, such as when there has been a change
in the amount of dividend payout, or a fundamental change in investment
policies, it might be appropriate to annualize the dividends paid over the
period such policies were in effect, rather than using the dividends during the
past 12 months. The current distribution rate differs from the yield computation
because it may include distributions to shareholders from sources other than
dividends and interest, such as premium income from option writing, short-term
capital gains and return of invested capital, and is calculated over a different
period of time. The Fund's current distribution rate calculation for Class A
shares assumes a maximum sales charge of 4.75%. The Fund's current distribution
rate calculation for Class B shares assumes no CDSC is paid. Current
distribution rate quotations for each class of each Fund are presented in
Appendix A attached hereto under the heading "Performance Quotations."
GENERAL: From time to time each Fund may, as appropriate, quote Fund rankings or
reprint all or a portion of evaluations of fund performance and operations
appearing in various independent publications, including but not limited to the
following: Money, Fortune, U.S. News and World Report, Kiplinger's Personal
Finance, The Wall Street Journal, Barron's, Investors Business Daily, Newsweek,
Financial World, Financial Planning, Investment Advisor, USA Today, Pensions and
Investments, SmartMoney, Forbes, Global Finance, Registered Representative,
Institutional Investor, the Investment Company Institute, Johnson's Charts,
Morningstar, Lipper Analytical Services, Inc., CDA Wiesenberger, Shearson Lehman
and Salomon Bros. Indices, Ibbotson, Business Week, Lowry Associates, Media
General, Investment Company Data, The New York Times, Your Money, Strangers
Investment Advisor, Financial Planning on Wall Street, Standard and Poor's,
Individual Investor, The 100 Best Mutual Funds You Can Buy, by Gordon K.
Williamson, Consumer Price Index, and Sanford C. Bernstein & Co. Fund
performance may also be compared to the performance of other mutual funds
tracked by financial or business publications or periodicals.
The Fund may also quote evaluations mentioned in independent radio or television
broadcasts.
From time to time the Fund may use charts and graphs to illustrate the past
performance of various indices such as those mentioned above and illustrations
using hypothetical rates of return to illustrate the effects of compounding and
tax-deferral.
The Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging. In such a program, an investor
invests a fixed dollar amount in a fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against a loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals.
MFS FIRSTS: MFS has a long history of innovations.
-- 1924 -- Massachusetts Investors Trust is established
as the first open-end mutual fund in America.
- -- 1924 -- Massachusetts Investors Trust is the first
mutual fund to make full public disclosure of its
operations in shareholder reports.
-- 1932 -- One of the first internal research departments is
established to provide in-house analytical capability for an
investment management firm.
-- 1933 -- Massachusetts Investors Trust is the first mutual fund
to register under the Securities Act of 1933 ("Truth in
Securities Act" or "Full Disclosure
Act").
-- 1936 -- Massachusetts Investors Trust is the first mutual fund
to allow shareholders take capital gain distributions either in
additional shares or in cash.
-- 1976 -- MFS Municipal Bond Fund is among the first municipal
bond funds established.
- -- 1979 -- Spectrum becomes the first combination fixed/ variable
annuity with no initial sales charge.
-- 1981 -- MFS World Governments Fund is established as America's
first globally diversified fixed-income mutual fund.
-- 1984 -- MFS Municipal High Income Fund is the first mutual fund
to seek high tax-free income from lower- rated municipal
securities.
-- 1986 -- MFS Managed Sectors Fund becomes the first mutual fund
to target and shift investments among industry sectors for
shareholders.
-- 1986 -- MFS Municipal Income Trust is the first closed-end,
high-yield municipal bond fund traded on the New York Stock
Exchange.
-- 1987 -- MFS Multimarket Income Trust is the first closed-end,
multimarket high income fund listed on the New York Stock
Exchange.
- -- 1989 -- MFS Regatta becomes America's first non-qualified
market-value-adjusted fixed/variable annuity.
-- 1990 -- MFS World Total Return Fund is the first global
balanced fund.
- -- 1993 -- MFS World Growth Fund is the first global
emerging markets fund to offer the expertise of two
sub-advisors.
- -- 1993 -- MFS becomes money manager of MFS Union Standard
Trust, the first Trust to invest in companies deemed to
be union-friendly by an Advisory Board of senior labor
officials, senior managers of companies with
significant labor contracts, academics and other
national labor leaders or experts.
4. DETERMINATION OF PUBLIC OFFERING PRICE AND NET ASSET VALUE; VALUATION OF
PORTFOLIO SECURITIES
Descriptions of the manner in which the shares of the State Funds are offered to
the public, including the methods used in determining the public offering price
of shares in each Fund, appear in the Prospectus under the heading "Purchases."
The net asset value per share of each class of shares of each Fund is determined
each day during which the Exchange is open for trading. (As of the date of this
Statement of Additional Information, the Exchange is open for trading every
weekday except for the following holidays or the days on which they are
observed: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.) This
determination is made once during each such day as of the close of regular
trading on the Exchange by deducting the amount of the liabilities attributable
to a class from the value of the assets attributable to the class and dividing
the difference by the number of shares of the class outstanding. As described in
the Prospectus, debt securities (other than short-term obligations) in each
Fund's portfolio are valued on the basis of valuations furnished by a pricing
service since such valuations are believed to reflect the fair value of such
securities. In making such valuations, the pricing service utilizes both
dealer-supplied valuations and electronic data processing techniques which take
into account appropriate factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data, without exclusive reliance upon
quoted prices or exchange or over-the-counter prices, since such valuations are
believed to reflect more accurately the fair value of such securities. Use of
the pricing service has been approved by the Board of Trustees. Short-term
obligations with a remaining maturity in excess of 60 days will be valued based
upon dealer supplied valuations. Other short-term obligations are valued at
amortized cost, which constitutes fair value as determined by the Board of
Trustees. Positions in listed options, Options on Futures Contracts and Futures
Contracts will normally be valued at the closing settlement price on the
commodities exchange on which they are primarily traded. Portfolio securities
(other than short-term obligations) for which there are no such valuations are
valued at fair value as determined in good faith by or at the direction of the
Board of Trustees.
5. MANAGEMENT OF THE TRUST
The Trust's Board of Trustees provides broad supervision over the affairs of the
Trust. The Adviser is responsible for the investment management of the portfolio
of each Fund, and the officers of the Trust are responsible for its operations.
The Trustees and officers are listed below, together with their principal
occupations during the past five years. (Their titles may have varied during
that period.)
TRUSTEES
A. KEITH BRODKIN,* Chairman and President
Massachusetts Financial Services Company, Chairman
RICHARD B. BAILEY*
Private Investor; Massachusetts Financial Services Company, former Chairman
(until September 30, 1991)
MARSHALL N. COHAN
Private Investor
Address: 2524 Bedford Mews Drive, Wellington, Florida
LAWRENCE H. COHN, M.D.
Brigham and Women's Hospital, Chief of Cardiac Surgery; Harvard Medical
School, Professor of Surgery.
Address: 75 Francis Street, Boston, Massachusetts
THE HON. SIR J. DAVID GIBBONS, KBE
Edmund Gibbons Limited, Chief Executive Officer; Bank of NT Butterfield & Son
Limited, Chairman.
Address: 21 Reid Street, Hamilton, Bermuda HM 12
ABBY M. O'NEILL
Private Investor; Rockefeller Financial Services, Inc. (investment advisers),
Director
Address: Room 5600, 30 Rockefeller Plaza, New York, New York
WALTER E. ROBB, III
Benchmark Advisors, Inc. (financial consultants), President and Treasurer
Address: 110 Broad Street, Boston, Massachusetts
ARNOLD D. SCOTT*
Massachusetts Financial Services Company, Senior Executive Vice President and
Secretary
JEFFREY L. SHAMES*
Massachusetts Financial Services Company, President
J. DALE SHERRATT
Insight Resources, Inc. (acquisition planning specialists), President
Address: One Liberty Square, Boston, Massachusetts
WARD SMITH
NACCO Industries (holding company), Chairman (prior to June, 1994); Sundstrand
Corporation (diversified mechanical manufacturer), Director
Address: 5875 Landerbrook Drive, Mayfield Heights, Ohio
OFFICERS
CYNTHIA M. BROWN,* Vice President
Massachusetts Financial Services Company, Vice President -- Investments
ROBERT A. DENNIS,* Vice President -- Investments
Massachusetts Financial Services Company, Senior Vice President
GEOFFREY L. SCHECHTER,* Vice President
Massachusetts Financial Services Company, Vice President (since June, 1993);
Liberty Mutual Insurance Company, Senior Investment Analyst (prior to June,
1993)
DAVID R. KING,* Vice President
Massachusetts Financial Services Company, Vice President
DAVID B. SMITH,* Vice President
Massachusetts Financial Services Company, Vice President
W. THOMAS LONDON,* Treasurer
Massachusetts Financial Services Company, Senior Vice President
STEPHEN E. CAVAN,* Secretary and Clerk
Massachusetts Financial Services Company, Senior Vice President, General
Counsel and Assistant Secretary
JAMES O. YOST,* Assistant Treasurer
Massachusetts Financial Services Company, Vice President
JAMES R. BORDEWICK, JR.,* Assistant Secretary and Assistant Clerk
Massachusetts Financial Services Company, Vice President and Associate General
Counsel (since September 1990); Associated with a major law firm (prior to
August 1990)
- ----------
*"Interested persons" (as defined in the 1940 Act) of the Adviser, whose address
is 500 Boylston Street, Boston, Massachusetts 02116.
Each Trustee and officer holds comparable positions with certain MFS affiliates
or with certain other funds of which MFS or a subsidiary of MFS is the
investment adviser or distributor. Mr. Brodkin, the Chairman of MFD, Messrs.
Scott and Shames, Directors of MFD, and Mr. Cavan, the Secretary of MFD, hold
similar positions with certain other MFS affiliates. Mr. Bailey is a Director of
Sun Life Assurance Company of Canada (U.S.) ("Sun Life of Canada (U.S.)"), the
corporate parent of MFS.
The Trust pays, on behalf of the Funds, the compensation of non-interested
Trustees and Mr. Bailey (who currently receive a fee for each Fund, except
California, of $735 per year plus $59 per meeting and committee meeting attended
and $1,250 per year plus $225 per meeting and committee meetings attended for
the California Fund, together with out-of-pocket expenses, as incurred) and has
adopted a retirement plan for non-interested Trustees and Mr. Bailey. Under this
plan, a Trustee will retire upon reaching age 75 and if the Trustee has
completed at least five years of service, he would be entitled to annual
payments during his lifetime of up to 50% of such Trustee's average annual
compensation (based on the three years prior to his retirement) depending on his
length of service. A Trustee may also retire prior to age 75 and receive reduced
payments if he has completed at least five years of service. Under the plan, a
Trustee (or his beneficiaries) will also receive benefits for a period of time
in the event the Trustee is disabled or dies. These benefits will also be based
on the Trustee's average annual compensation and length of service. There is no
retirement plan provided by the Trust for the interested Trustees (except Mr.
Bailey). The Trust will accrue compensation expenses each year to cover current
year's service and amortize past service cost.
Set forth in Appendix D hereto is certain information concerning the cash
compensation paid to non-interested Trustees and Mr. Bailey and benefits
accrued, and estimated benefits payable, under the retirement plan.
As of May 1, 1995, officers and Trustees of the Trust owned less than 1% of the
outstanding shares of any class of any Fund of the Trust.
Listed in the chart below are the name, address and percentage of ownership of
each person who owns of record or is known by the Trust to own of record or
beneficially five percent or more of any class of any Fund's outstanding
securities as of May 1, 1995.
<PAGE>
FUND NUMBER % OF
OWNER & ADDRESS AND CLASS OF SHARES CLASS
- --------------- --------- --------- -----
Merrill Lynch Pierce Fenner & Smith, Inc., Alabama 2,130,228 26.15
P.O. Box 45286, Jacksonville, Florida Class A
Merrill Lynch Pierce Fenner & Smith, Inc., Alabama 149,284 34.06
P.O. Box 45286, Jacksonville, Florida Class B
Margaret Evans, Alabama 29,918 6.83
Sherwood, Tennessee Class B
Merrill Lynch Pierce Fenner & Smith, Inc., Arkansas 4,049,100 20.94
P.O. Box 45286, Jacksonville, Florida Class A
Stephens Inc. for the Exclusive Benefit of Arkansas 1,464,435 7.57
our Customers, Class A
P.O. Box 34127,
Little Rock, Arkansas
Merrill Lynch Pierce Fenner & Smith, Inc., Arkansas 180,231 23.47
P.O. Box 45286, Jacksonville, Florida Class B
Merrill Lynch Pierce Fenner & Smith, Inc., California 5,849,404 11.72
P.O. Box 45286, Jacksonville, Florida Class A
Merrill Lynch Pierce Fenner & Smith, Inc., California 1,116,232 20.40
P.O. Box 45286, Jacksonville, Florida Class B
Merrill Lynch Pierce Fenner & Smith, Inc., California 335,512 48.39
P.O. Box 45286, Jacksonville, Florida Class C
Audrey Cummings, TTEE, FBO Audrey Cummings California 38,076 5.49
Trust, Bakersfield, California Class C
Robert W. Nesbitt & California 37,233 5.37
Ellen K. Nesbitt, TTEES Class C
of the Revocable Trust, DTD,
Shingle Springs, California
Merrill Lynch Pierce Fenner & Smith, Inc., Florida 1,456,378 15.60
P.O. Box 45286, Jacksonville, Florida Class A
Merrill Lynch Pierce Fenner & Smith, Inc., Florida 183,954 13.88
P.O. Box 45286, Jacksonville, Florida Class B
Merrill Lynch Pierce Fenner & Smith, Inc., Georgia 545,582 7.61
P.O. Box 45286, Jacksonville, Florida Class A
Merrill Lynch Pierce Fenner & Smith, Inc., Georgia 89,442 10.44
P.O. Box 45286, Jacksonville, Florida Class B
Merrill Lynch Pierce Fenner & Smith, Inc., Louisiana 146,152 7.89
P.O. Box 45286, Jacksonville, Florida Class A
Bill G. Halley, Farmerville, Louisiana 110,432 5.96
Louisiana Class A
Edwin K. Hunter, Louisiana 23,429 7.64
Lake Charles, Louisiana Class B
J. C. Bradford & Co., Custodian FBO Alan Louisiana 32,289 10.52
C. Fernbaugh, Nashville, Tennessee Class B
Merrill Lynch Pierce Fenner & Smith, Inc., Louisiana 44,662 14.56
P.O. Box 45286, Jacksonville, Florida Class B
Merrill Lynch Pierce Fenner & Smith, Inc., Maryland 1,355,734 10.30
P.O. Box 45286, Jacksonville, Florida Class A
Merrill Lynch Pierce Fenner & Smith, Inc., Maryland 112,794 10.82
P.O. Box 45286, Jacksonville, Florida Class B
Merrill Lynch Pierce Fenner & Smith, Inc., Massachusetts 3,900,317 16.32
P.O. Box 45286, Jacksonville, Florida Class A
Merrill Lynch Pierce Fenner & Smith, Inc., Mississippi 1,294,435 14.81
P.O. Box 45286, Jacksonville, Florida Class A
Merrill Lynch Pierce Fenner & Smith, Inc., Mississippi 264,118 25.26
P.O. Box 45286, Jacksonville, Florida Class B
Merrill Lynch Pierce Fenner & Smith, Inc., New York 1,227,708 8.79
P.O. Box 45286, Jacksonville, Florida Class A
BHC Securities, Inc., New York 1,244,587 8.91
100 N. 20th Street, Class A
Philadelphia, Pennsylvania
Smith Barney Shearson, Inc., North Carolina 122,205 17.15
388 Greenwich Street, Class C
New York, New York
Smith Barney Shearson, Inc., North Carolina 40,735 5.72
388 Greenwich Street, Class C
New York, New York
Smith Barney, Inc., North Carolina 40,453 5.68
388 Greenwich Street, Class C
New York, New York
William B. Nivison, North Carolina 38,161 5.35
Mildred L. Nivison, Class C
Ten. Com.,
Raleigh, North Carolina
Merrill Lynch Pierce Fenner & Smith, Inc., North Carolina 71,359 10.01
P.O. Box 45286, Jacksonville, Florida Class C
R & R Investment Assoc., Pennsylvania 136,730 7.85
1062 E. Lancaster Ave., Class A
Rosemont, Pennsylvania
Merrill Lynch Pierce Fenner & Smith, Inc., South Carolina 1,190,412 8.29
P.O. Box 45286, Jacksonville, Florida Class A
Merrill Lynch Pierce Fenner & Smith, Inc., South Carolina 132,496 11.98
P.O. Box 45286, Jacksonville, Florida Class B
Merrill Lynch Pierce Fenner & Smith, Inc., Tennessee 1,167,996 10.19
P.O. Box 45286, Jacksonville, Florida Class A
Merrill Lynch Pierce Fenner & Smith, Inc., Tennessee 188,360 18.84
P.O. Box 45286, Jacksonville, Florida Class B
Merrill Lynch Pierce Fenner & Smith, Inc., Texas 128,769 7.22
P.O. Box 45286, Jacksonville, Florida Class A
Alfreda M. Taylor, Texas 97,320 5.46
Friendswood, Texas Class A
Wes-Tex Telecommunications Texas 308,054 17.28
Inc., P.O. Box 1329, Class A
W. Loop 214, Stanton, Texas
Prudential Securities FBO, Texas 17,245 7.23
Clem Lyons, Class B
San Antonio, Texas
PaineWebber for the benefit of Texas 20,828 8.73
Bianca Van Der Zee, Class B
Pearland, Texas
PaineWebber for the benefit of Texas 29,842 12.51
Nancy Casey Kelly TTEE, Class B
The Nancy Casey Kelly Rev
TR DTD, Sugar Land, Texas
Prudential Securities FBO Texas 13,966 5.86
Dixie M. Hill TTEE, Class B
The Hill Surviving Spouses Trust UA DTD,
Arlington, Texas
Merrill Lynch Pierce Fenner & Smith, Inc., Texas 17,006 7.13
P.O. Box 45286, Class B
Jacksonville, Florida
Mary L. Barbee & Jane Texas 11,932 5.00
Swanson Shelton, JTWROS, Class B
Dallas, Texas
Merrill Lynch Pierce Fenner & Smith, Inc., Virginia 2,871,408 7.40
P.O. Box 45286, Jacksonville, Florida Class A
Merrill Lynch Pierce Fenner & Smith, Inc., Virginia 422,440 20.71
P.O. Box 45286, Jacksonville, Florida Class B
Robert E. Hawkins, Virginia 16,021 7.41
Lynchburg, Virginia Class C
Merrill Lynch Pierce Fenner & Smith, Inc., Virginia 14,310 6.62
P.O. Box 45286, Jacksonville, Florida Class C
Merrill Lynch Pierce Fenner & Smith, Inc., Washington 109,321 6.83
P.O. Box 45286, Jacksonville, Florida Class A
Esther M. Austin, Washington 14,607 5.25
Seattle, Washington Class B
Merrill Lynch Pierce Fenner & Smith, Inc., Washington 16,652 5.99
P.O. Box 45286, Jacksonville, Florida Class B
Merrill Lynch Pierce Fenner & Smith, Inc., West Virginia 704,496 6.18
P.O. Box 45286, Jacksonville, Florida Class A
The Declaration of Trust provides that the Trust will indemnify its Trustees and
officers against liabilities and expenses incurred in connection with litigation
in which they may be involved because of their offices with the Trust, unless,
as to liabilities to the Trust or its shareholders, it is finally adjudicated
that they engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in their offices, or with respect to
any matter, unless it is adjudicated that they did not act in good faith in the
reasonable belief that their actions were in the best interests of the Trust. In
the case of settlement, such indemnification will not be provided unless it has
been determined by a court or other body approving the settlement or other
disposition or by a reasonable determination pursuant to the Declaration of
Trust, that such officers or Trustees have not engaged in willful misfeasance,
bad faith, gross negligence or reckless disregard of their duties.
INVESTMENT ADVISER
MFS and its predecessor organizations have a history of money management dating
from 1924. MFS is a wholly owned subsidiary of Sun Life of Canada (U.S.) which
in turn is a wholly owned subsidiary of Sun Life Assurance Company of Canada
("Sun Life"). The Prospectus contains information with respect to the management
of the Adviser and to the investment companies for which MFS serves as
investment adviser.
The Adviser manages each Fund (except the Arkansas, California, Florida,
Louisiana, Mississippi, Pennsylvania, Texas and Washington Funds) pursuant to an
Investment Advisory Agreement, dated as of August 24, 1984 (the "Advisory
Agreement"). The Adviser manages the Arkansas, Florida, and Texas Funds pursuant
to separate Investment Advisory Agreements, each dated as of February 1, 1992.
The Advisor manages the Mississippi and Washington Funds pursuant to separate
Investment Advisory Agreements each dated August 1, 1992. The Adviser manages
the Louisiania and Pennsylvania Funds pursuant to separate Investment Advisory
Agreements each dated February 1, 1993. The Adviser manages the California Fund
pursuant to an Investment Advisory Agreement dated August 1, 1993. The Adviser
provides each Fund with overall investment advisory and administrative services,
and general office facilities and administrative services for the Trust. Subject
to such policies as the Trustees may determine, the Adviser makes investment
decisions for each Fund. For these services and facilities the Adviser receives
a management fee from each Fund computed and paid monthly at the annual rate of
0.55% of the average daily net assets of the Fund for its then-current fiscal
year. The Adviser has voluntarily reduced the management fee for an indefinite
period with respect to each of the Arkansas, California, Florida, Louisiana,
Mississippi, New York, Pennsylvania, Texas and Washington Funds. See "Management
of the Trust -- Investment Adviser" in the Prospectus.
For the Trust's fiscal year ended March 31, 1995, the two month fiscal period
ended March 31, 1994, and the fiscal year ended January 31, 1994, MFS received
the following aggregate fees and MFS waived the following fees, in whole or in
part, for the same periods:
For the fiscal year ended March 31, 1995:
ADVISORY FEES ADVISORY FEES
RECEIVED BY WAIVED BY
FUND MFS MFS
- ---- ------------- -------------
Alabama ...................................... $ 474,038 $
Arkansas ..................................... 1,093,773 152,542
California ................................... 1,746,273 476,700
Florida ...................................... 599,093 248,214
Georgia ...................................... 477,819 --
Louisiana .................................... 93,993 90,451
Maryland ..................................... 889,796 --
Massachusetts ................................ 1,495,879 --
Mississippi .................................. 478,963 283,718
New York ..................................... 894,326 21,059
North Carolina ............................... 2,592,068 --
Pennsylvania ................................. 119,253 117,301
South Carolina ............................... 1,001,540 --
Tennessee .................................... 692,926 --
Texas ........................................ 112,189 108,347
Virginia ..................................... 2,504,233 --
Washington ................................... 101,091 97,720
West Virginia ................................ 741,684 --
For the fiscal period February 1, 1994 through March 31, 1994:
ADVISORY FEES ADVISORY FEES
RECEIVED BY WAIVED BY
FUND MFS MFS
- ---- ------------- -------------
Alabama ...................................... $ 82,020 $ --
Arkansas ..................................... 191,959 69,078
California ................................... 337,471 90,679
Florida ...................................... 115,310 72,967
Georgia ...................................... 90,581 --
Louisiana .................................... 13,719 13,719
Maryland ..................................... 163,573 --
Massachusetts ................................ 277,734 --
Mississippi .................................. 81,092 66,782
New York ..................................... 168,692 30,263
North Carolina ............................... 468,812 --
Pennsylvania ................................. 16,281 16,281
South Carolina ............................... 177,741 --
Tennessee .................................... 117,055 --
Texas ........................................ 18,072 18,072
Virginia ..................................... 447,605 --
Washington ................................... 18,911 18,911
West Virginia ................................ 133,458 --
For the fiscal year ended January 31, 1994:
ADVISORY FEES ADVISORY FEES
RECEIVED BY WAIVED BY
FUND MFS MFS
- ---- ------------- -------------
Alabama ...................................... $ 439,235 $ --
Arkansas ..................................... 940,077 502,194
California ................................... 1,641,620 585,888
Florida ...................................... 552,640 444,758
Georgia ...................................... 449,179 --
Louisiana .................................... 54,035 54,035
Maryland ..................................... 903,650 --
Massachusetts ................................ 1,591,974 --
Mississippi .................................. 367,101 349,609
New York ..................................... 916,193 340,615
North Carolina ............................... 2,501,986 --
Pennsylvania ................................. 56,065 56,065
South Carolina ............................... 947,476 --
Tennessee .................................... 627,398 --
Texas ........................................ 75,954 75,954
Virginia ..................................... 2,459,087 --
Washington ................................... 80,180 80,180
West Virginia ................................ 728,874 --
See "Expenses" in the Prospectus.
The Adviser pays the compensation of the officers of the Trust and of any
Trustee who is an officer of MFS. The Adviser furnishes at its own expense all
necessary administrative services, office space, equipment, clerical personnel,
investment advisory facilities, and all executive and supervisory personnel
necessary for managing the investments of the Funds, effecting the portfolio
transactions of the Funds and, in general, administering the Trust's affairs
(with the exception of the services, facilities and personnel provided by the
Shareholder Servicing Agent or the Custodian, see below). See "Expenses" in the
Prospectus for a description of expenses paid by the Trust and reimbursement
arrangements in effect between the Adviser and the Trust.
The Advisory Agreements will remain in effect until August 1, 1995 and will
continue in effect thereafter with respect to any Fund only if such continuance
is specifically approved at least annually by the Trustees or by vote of the
holders of a majority of the shares of that Fund (as defined in "Investment
Restrictions" above) and, in either case, by a majority of the Trustees who are
not parties to the Advisory Agreement or interested persons of any such party.
The Advisory Agreements terminate automatically if they are assigned and may be
terminated without penalty by vote of the holders of a majority of the shares of
that Fund (as defined in "Investment Restrictions") or by either party on not
more than 60 days' nor less than 30 days' written notice. The Advisory
Agreements provide that if MFS ceases to serve as the Adviser for each Fund of
the Trust, the Trust will change its name so as to delete the term "MFS." The
Advisory Agreements further provide that MFS may render similar services to
others and may permit investment company clients in addition to the Trust to use
the term "MFS" in their names. The Advisory Agreements also provide that neither
the Adviser nor its personnel shall be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in the execution and management of the Trust, except for wilful
misfeasance, bad faith or gross negligence in the performance of its or their
duties or by reason of reckless disregard of its or their obligations and duties
under the Advisory Agreements.
CUSTODIAN
State Street Bank and Trust Company (the "Custodian") is the custodian 555of the
Trust's assets. The Custodian's responsibilities include safekeeping and
controlling the Trust's cash and securities, handling the receipt and delivery
of securities, determining income and collecting interest and dividends on the
Trust's investments, maintaining books of original entry for portfolio and fund
accounting and other required books and accounts, and calculating the daily net
asset value of each class of shares of each Fund. The Custodian does not
determine the investment policies of the Trust or decide which securities the
Trust will buy or sell. The Trust may, however, invest in securities of the
Custodian and may deal with the Custodian as principal in securities
transactions. The Custodian also serves as the dividend disbursing agent of the
Trust. The Custodian has contracted with the Adviser for the Adviser to perform
certain accounting functions related to options transactions for which the
Adviser receives remuneration on a cost basis.
SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc., a wholly owned subsidiary of MFS (the "Shareholder
Servicing Agent"), is the Trust's shareholder servicing agent, pursuant to a
Shareholder Servicing Agent Agreement, effective August 1, 1985 (the "Agency
Agreement") with the Trust. The Shareholder Servicing Agent's responsibilities
under the Agency Agreement include administering and performing transfer agent
functions and the keeping of records, in connection with the issuance, transfer
and redemption of each class of shares of each Fund. For these services, the
Shareholder Servicing Agent will receive a fee based on the net assets of each
class of shares of each Fund, computed and paid monthly. In addition, the
Shareholder Servicing Agent will be reimbursed by the Trust for certain expenses
incurred by the Shareholder Servicing Agent on behalf of the Trust. For the year
ended March 31, 1995, each Fund paid the Shareholder Servicing Agent the
following amounts under the Agency Agreement for services rendered to each such
Fund:
FUND AMOUNT PAID
- ---- -----------
Alabama ................................................... $131,514
Arkansas .................................................. 302,736
California ................................................ 493,795
Florida ................................................... 170,197
Georgia ................................................... 136,075
Louisiana ................................................. 27,086
Maryland .................................................. 249,148
Massachusetts ............................................. 412,494
Mississippi ............................................... 136,017
New York .................................................. 250,514
North Carolina ............................................ 721,648
Pennsylvania .............................................. 36,951
South Carolina ............................................ 280,509
Tennessee ................................................. 194,404
Texas ..................................................... 31,884
Virginia .................................................. 695,642
Washington ................................................ 29,224
West Virginia ............................................. 206,898
State Street Bank and Trust Company, the dividend and distribution disbursing
agent of the Trust, has contracted with the Shareholder Servicing Agent to
administer and perform certain dividend and distribution disbursing functions
for the Trust.
DISTRIBUTOR
MFD, a wholly owned subsidiary of MFS, serves as the distributor for the
continuous offering of shares of each Fund pursuant to a Distribution Agreement
dated January 1, 1995 (the "Distribution Agreement") with the Trust. Prior to
January 1, 1995, MFS Financial Services, Inc. ("FSI"), another wholly owned
subsidiary of MFS, was the Fund's distributor. Where this Statement of
Additional Information refers to MFD in relation to the receipt or payment of
money with respect to a period or periods prior to January 1, 1995, such
reference shall be deemed to include FSI, as the predecessor in interest to MFD.
CLASS A SHARES: MFD acts as agent in selling shares of the Trust to dealers. The
public offering price of Class A shares of each Fund is their net asset value
next computed after the sale plus a sales charge which varies based upon the
quantity purchased. The public offering price of Class A shares of each Fund is
calculated by dividing the net asset value of a Class A share of such Fund by
the difference (expressed as a decimal) between 100% and the sales charge
percentage of offering price applicable to the purchase (see "Purchases" in the
Prospectus). The sales charge scale set forth in the Prospectus applies to
purchases of Class A shares of each Fund alone or in combination with shares of
all classes of certain other funds in the MFS Family of Funds (the "MFS Funds")
and other funds (as noted under Right of Accumulation) by any person, including
members of a family unit (e.g., husband, wife and minor children) and bona fide
trustees, and also applies to purchases made under the Right of Accumulation or
a Letter of Intent (see "Investment and Withdrawal Programs" below). A group
might qualify to obtain quantity sales charge discounts (see "Investment and
Withdrawal Programs" in this Statement of Additional Information).
Class A shares of each Fund may be sold at their net asset value to certain
persons and in certain instances, as described in the Prospectus. Such sales are
made without a sales charge to promote good will with employees and others with
whom MFS, MFD and/or the Trust have business relationships, and because the
sales effort, if any, involved in making such sales is negligible.
MFD allows discounts to dealers (which are alike for all dealers) from the
applicable public offering price of the Class A shares. Dealer allowances
expressed as a percentage of offering price for all offering prices are set
forth in the Prospectus (see "Purchases" in the Prospectus). The commission paid
to the distributor is the difference between the total amount invested and the
sum of (a) the net proceeds to a Fund and (b) the dealer commission. Because of
rounding in the computation of offering price, the portion of the sales charge
paid to the distributor may vary and the total sales charge may be more or less
than the sales charge calculated using the sales charge expressed as a
percentage of offering price or as a percentage of the net amount invested as
listed in the Prospectus. In the case of the maximum sales charge, the dealer
retains 4% and MFD retains approximately 3/4 of 1% of the public offering price.
In addition, MFD pays a commission on purchases of $1 million or more as
described in the Prospectus.
CLASS B AND CLASS C SHARES: MFD acts as agent in selling Class B and Class C
shares of the Trust to dealers. The public offering price of Class B and Class C
shares is their net asset value next computed after the sale (see "Purchases" in
the Prospectus).
GENERAL: On occasion, MFD may obtain brokers loans from various banks, including
the custodian banks for the MFS Funds, to facilitate the settlement of sales of
shares of the Fund to dealers. MFD may benefit from its temporary holding of
funds paid to it by investment dealers for the purchase of Fund shares. Neither
MFD nor dealers are permitted to delay placing orders to benefit themselves by a
price change.
See Appendix B attached hereto for information regarding the amount of sales
charges received by MFD, dealers, banks and certain other financial
institutions.
The Distribution Agreement will remain in effect until August 1, 1996 and will
continue in effect thereafter only if such continuance is specifically approved
at least annually by the Board of Trustees or by vote of a majority of the
applicable Fund's shares and, in either case, by a majority of the Trustees who
are not parties to the Distribution Agreement or interested persons of any such
party. The Distribution Agreement terminates automatically if it is assigned and
may be terminated without penalty by either party on not more than 60 days' nor
less than 30 days' notice.
6. TAXATION
Each Fund has elected to be treated and intends to qualify each year as a
separate "regulated investment company" under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), by meeting all applicable
requirements of Subchapter M, including the requirements as to the nature of the
Fund's gross income, the amount of its distributions (as a percentage of both
overall income and tax-exempt income) and the composition and holding period of
its portfolio assets. Because each Fund intends to distribute all of its net
investment income and net realized capital gains to shareholders in accordance
with the timing requirements imposed by the Code, it is not expected that any
Fund will be required to pay any federal income or excise taxes. If any Fund
should fail to qualify as a "regulated investment company" in any year, such
Fund would incur a regular corporate federal income tax upon its taxable income
and Fund distributions would generally be taxable as ordinary dividend income to
the shareholders.
That part of a Fund's net investment income which is attributable to interest
from tax-exempt securities and which is distributed to shareholders will be
designated by the Trust as an "exempt-interest dividend" under the Code and will
generally be exempt from federal income tax in the hands of shareholders so long
as at least 50% of the total value of the Fund's assets consists of tax-exempt
securities at the close of each quarter of the Fund's taxable year.
Distributions of tax exempt interest earned from certain securities may,
however, be treated as a tax preference item for purposes of the alternative
minimum tax, and all exempt-interest dividends may increase a corporate
shareholder's alternative minimum tax. The percentage of income designated as
tax-exempt will be applied uniformly to all distributions by a Fund during each
fiscal year and may differ from the actual tax-exempt percentage for any
particular month. Shareholders are required to report exempt-interest dividends
received from the Fund on their federal income tax returns.
A Fund may also recognize some net investment income that is not tax-exempt from
investments in taxable securities and from certain securities (including
Municipal Obligations) purchased at a market discount, as well as capital gains
and losses as a result of the disposition of securities and from certain options
and futures transactions. Shareholders of any such Fund will have to pay federal
income taxes on the non-exempt interest dividends and capital gain distributions
they receive from the Fund; however, the Funds do not expect that the
non-tax-exempt portion of their net investment income, if any, will be
substantial.
That portion of net investment income distributions not designated as tax-exempt
and any distributions from net short-term capital gains (whether paid in cash or
in additional shares) are taxable to shareholders as ordinary income.
Distributions from net capital gains (i.e., the excess of net long-term capital
gains over net short-term capital losses) are taxable to shareholders as
long-term capital gains for federal income tax purposes without regard to the
length of time shareholders have owned their shares. Distributions will be
treated in the same manner for Federal income tax purposes whether paid in cash
or additional shares. No portion of a Fund's distributions will qualify for the
dividends received deduction. For Federal income tax purposes, dividends, if
any, declared in October, November or December as of a record date in such a
month and paid the following January will be treated as if received by
shareholders on December 31 of the year in which the dividends are declared.
Any distribution of net capital gains or net short-term capital gains will have
the effect of reducing the per share net asset value of shares in a Fund by the
amount of the distribution. Shareholders purchasing shares shortly before the
record date of any such distribution may thus pay the full price for the shares
and then effectively receive a portion of the purchase price back as a taxable
distribution.
In general, any gain or loss realized upon a taxable disposition of shares of a
Fund by a shareholder that holds such shares as a capital asset will be treated
as long-term capital gain or loss if the shares have been held for more than
twelve months and otherwise as short-term capital gain or loss. However, any
loss realized upon a disposition of shares held for six months or less will be
disallowed to the extent of any exempt-interest dividends received with respect
to those shares and, if not disallowed, any such loss will be treated as a
long-term capital loss to the extent of any distributions of net capital gain
made with respect to those shares. Any loss realized upon a redemption of shares
may also be disallowed under rules relating to wash sales. Gain may be increased
(or loss reduced) upon a redemption of Class A shares of a Fund within 90 days
after their purchase followed by any purchase (including purchases by exchange
or by reinvestment) without payment of an additional sales charge of Class A
shares of any Fund or of another MFS Fund (or any other shares of an MFS Fund
generally sold subject to a sales charge).
The Trust's current dividend and accounting policies may affect the amount,
timing and character of distributions to shareholders, and may under certain
circumstances make an economic return of capital taxable to shareholders. Any
investment in zero coupon securities, securities calling for deferred interest
and certain securities purchased at a market discount will cause a Fund to
realize income prior to the receipt of cash payments with respect to these
securities. In order to distribute this income, the Fund may be required to
liquidate portfolio securities that it might otherwise have continued to hold,
potentially resulting in additional taxable gain or loss to the Fund.
The Funds' transactions in options, Futures Contracts and Forward Contracts will
be subject to special tax rules that may affect the amount, timing, and
character of Fund income and distributions to shareholders. For example, certain
positions held by a Fund on the last business day of each taxable year will be
marked to market (i.e., treated as if closed out) on such day, and any gain or
loss associated with the positions will be treated as 60% long-term and 40%
short-term capital gain or loss. Certain positions held by a fund that
substantially diminish its risk of loss with respect to other positions on its
portfolio may constitute "straddles" and may be subject to special tax rules
that would cause deferral of Fund losses, adjustments in the holding periods of
Fund securities, and conversion of short-term into long-term capital losses.
Certain tax elections exist for straddles which may alter the effects of these
rules. Each Fund will limit its activities in options, Futures Contracts, and
Forward Contracts to the extent necessary to meet the requirements of Subchapter
M of the Code.
Interest on indebtedness incurred or continued by a shareholder to purchase or
carry shares of a Fund is not deductible for federal income tax purposes.
Exempt-interest dividends are taken into account in calculating the amount of
social security and railroad retirement benefits that may be subject to federal
income tax. Entities or persons who are "substantial users" (or persons related
to "substantial users") of facilities financed by certain private activity bonds
should consult their tax advisers before purchasing shares of a Fund.
"Substantial user" is defined generally as including a "non-exempt person" who
regularly uses in its trade or business a part of a facility financed from the
proceeds of certain private activity bonds.
Federal income tax information will be reported to shareholders annually, as
described under "Tax Status" in the Prospectus and under "Shareholder Services
- -- Account and Confirmation Statements" below. Shareholders are required to
report their receipt of tax-exempt distributions on their federal income tax
returns.
Dividends and certain other payments to persons who are not citizens or
residents of the United States or U.S. entities ("Non-U.S. Persons") are
generally subject to U.S. tax withholding at the rate of 30%. The Trust intends
to withhold tax at the rate of 30% on taxable dividends and other payments made
to Non-U.S. Persons that are subject to such withholding regardless of whether a
lower treaty rate may be permitted. Any amounts over- withheld may be recovered
by such persons by filing a claim for refund with the U.S. Internal Revenue
Service within the time period applicable to such claims. The Trust is also
required in certain circumstances to apply backup withholding of 31% of taxable
dividends and redemption proceeds paid to any shareholder (including a Non-U.S.
Person) who does not furnish to the Trust certain information and certifications
or who is otherwise subject to backup withholding. However, backup withholding
will not be applied to payments which have been subject to 30% withholding.
Distributions received from the Trust by Non-U.S. Persons may also be subject to
tax under the laws of their own jurisdiction.
The Trust is organized as a Massachusetts business trust, and each Fund will not
be subject to any Massachusetts income or excise taxes so long as it qualifies
as a regulated investment company under the Code.
Fund distributions that are derived from interest on obligations of the U.S.
Government and certain of its agencies and instrumentalities (but generally not
from capital gains realized upon the disposition of such obligations) may be
exempt from state and local taxes. Each Fund intends to advise shareholders of
the extent, if any, to which its distributions consist of such interest.
Shareholders are urged to consult their tax advisers regarding the possible
exclusion of such portion of their dividends for state and local income tax
purposes as well as regarding the tax consequences of an investment in any Fund.
7. SHAREHOLDER SERVICES
INVESTMENT AND WITHDRAWAL PROGRAMS -- The Trust makes available the following
programs designed to enable shareholders to add to their investment or withdraw
from it with a minimum of paper work. These are described below and, in certain
cases, in the Prospectus. The programs involve no extra charge to shareholders
(other than a sales charge in the case of certain Class A share purchases) and
may be changed or discontinued at any time by a shareholder or the Trust.
LETTER OF INTENT: If a shareholder (other than a group purchaser described
below) anticipates purchasing $100,000 or more of Class A shares of a Fund alone
or in combination with shares of any class of other MFS Funds or MFS Fixed Fund
(a bank collective investment fund) within a 13-month period (or a 36-month
period in the case of purchases of $1 million or more), the shareholder may
obtain Class A shares of such Fund at the same reduced sales charge as though
the total quantity were invested in one lump sum by completing the Letter of
Intent section of the Account Application or filing a separate Letter of Intent
application (available from the Shareholder Servicing Agent) within 90 days of
the commencement of purchases. Subject to acceptance by MFD and the conditions
mentioned below, each purchase of Class A shares will be made at a public
offering price applicable to a single transaction of the dollar amount specified
in the Letter of Intent application. The shareholder or his dealer must inform
MFD that the Letter of Intent is in effect each time shares are purchased. The
shareholder makes no commitment to purchase additional shares, but if his
purchases within 13 months (or 36 months in the case of purchases of $1 million
or more) plus the value of shares credited toward completion of the Letter of
Intent do not total the sum specified, he will pay the increased amount of the
sales charge as described below. Instructions for issuance of shares in the name
of a person other than the person signing the Letter of Intent application must
be accompanied by a written statement from the dealer stating that the shares
were paid for by the person signing such Letter. Neither income dividends nor
capital gain distributions taken in additional shares will apply toward the
completion of the Letter of Intent. Dividends and distributions of other MFS
Funds automatically reinvested in shares of a Fund pursuant to the Distribution
Investment Program will also not apply toward completion of the Letter of
Intent.
Out of the shareholder's initial purchase (or subsequent purchases if
necessary), 5% of the dollar amount specified in the Letter of Intent
application shall be held in escrow by the Shareholder Servicing Agent in the
form of shares registered in the shareholder's name. All income dividends and
capital gain distributions on escrowed shares will be paid to the shareholder or
to his order. When the minimum investment so specified is completed (either
prior to or by the end of the 13-month (or 36-month period, as applicable), the
shareholder will be notified and the escrowed shares will be released.
If the intended investment is not completed, the Shareholder Servicing Agent
will redeem an appropriate number of the escrowed shares in order to realize
such difference. Shares remaining after any such redemption will be released by
the Shareholder Servicing Agent. By completing and signing the Account
Application or separate Letter of Intent application, the shareholder
irrevocably appoints the Shareholder Servicing Agent his attorney to surrender
for redemption any or all escrowed shares with full power of substitution in the
premises.
RIGHT OF ACCUMULATION: A shareholder qualifies for cumulative quantity
discounts on the purchase of Class A shares when his new investment, together
with the current offering price value of all holdings of all classes of shares
of that shareholder in the MFS Funds or MFS Fixed Fund (a bank collective
investment fund) reaches a discount level. See "Purchases" in the Prospectus for
the sales charges on quantity discounts. For example, if a shareholder owns
shares with a current offering price value of $75,000 and purchases an
additional $25,000 of Class A shares of a Fund, the sales charge for the $25,000
purchase would be at the rate of 4% (the rate applicable to single transactions
of $100,000). A shareholder must provide the Shareholder Servicing Agent (or his
investment dealer must provide MFD) with information to verify that the quantity
sales charge discount is applicable at the time the investment is made.
DISTRIBUTION INVESTMENT PROGRAM: Distributions of net investment income and
capital gains made by a Fund with respect to a particular class of shares may be
automatically invested in the same class of shares of one of the other MFS Funds
if shares of the fund are available for sale. Such investments will be subject
to additional purchase minimums. Distributions will be invested at net asset
value (exclusive of any sales charge) and will not be subject to any CDSC.
Distributions will be invested at the close of business on the payable date for
the distribution. A shareholder considering the Distribution Investment Option
should obtain and read the prospectus of the other fund and consider the
differences in objectives and policies before making any investment.
SYSTEMATIC WITHDRAWAL PLAN: A shareholder may direct the Shareholder Servicing
Agent to send him (or anyone he designates) regular periodic payments based upon
the value of his account. Each payment under a Systematic Withdrawal Plan
("SWP") must be at least $100, except in certain limited circumstances. The
aggregate withdrawals of Class B shares in any year pursuant to a SWP generally
are limited to 10% of the value of the account at the time of the establishment
of the SWP. SWP payments are drawn from the proceeds of the redemption of shares
held in the shareholder's account (which would be a return of principal and, if
reflecting a gain, would be taxable). Redemptions of Class B shares will be made
in the following order: (i) any "Free Amount"; (ii) to the extent necessary, any
"Reinvested Shares"; (iii) to the extent necessary, the "Direct Purchase"
subject to the lowest CDSC (as such terms are defined in "Contingent Deferred
Sales Charge" in the Prospectus). The CDSC will be waived in the case of
redemptions of Class B shares pursuant to a SWP, but will not be waived in the
case of SWP redemptions of Class A shares which are subject to the CDSC. To the
extent that redemptions for such periodic withdrawals exceed dividend income
reinvested in the account, such redemptions will reduce and may eventually
exhaust the number of shares in the shareholder's account. All dividends and
capital gain distributions for an account with a SWP will be reinvested in
additional full and fractional shares of a Fund at the net asset value in effect
at the close of business on the last day of the month for such distributions. To
initiate this service, shares generally having an aggregate value of at least
$5,000 either must be held on deposit by, or certificates for such shares must
be deposited with, the Shareholder Servicing Agent. With respect to Class A
shares, maintaining a withdrawal plan concurrently with an investment program
would be disadvantageous because of the sales charges included in share
purchases and the imposition of a CDSC on certain redemptions. The shareholder
may deposit into the account additional shares of a Fund, change the payee or
change the dollar amount of each payment. The Shareholder Servicing Agent may
charge the account for services rendered and expenses incurred beyond those
normally assumed by the Trust with respect to the liquidation of shares. No
charge is currently assessed against the account, but one could be instituted by
the Shareholder Servicing Agent on 60 days' notice in writing to the shareholder
in the event that the Trust ceases to assume the cost of these services. The
Trust may terminate any SWP for an account if the value of the account falls
below $5,000 as a result of share redemptions (other than as a result of a SWP)
or an exchange of shares of a Fund for shares of another MFS Fund. Any SWP may
be terminated at any time by either the shareholder or the Trust.
AUTOMATIC EXCHANGE PLAN: Shareholders having account balances of at least
$5,000 in any MFS Fund may exchange their shares for the same class of shares of
the other MFS Funds and in the case of Class C shares for shares of MFS Money
Market Fund under the Automatic Exchange Plan. The Automatic Exchange Plan
provides for automatic exchanges of funds from the shareholder's account in an
MFS Fund for investment in the same class of shares of other MFS Funds selected
by the shareholder. Under the Automatic Exchange Plan, exchanges of at least $50
each may be made to up to four different funds effective on the seventh day of
each month or of every third month, depending whether monthly or quarterly
exchanges are elected by the shareholder. If the seventh day of the month is not
a business day, the transaction will be processed on the next business day.
Generally, the initial exchange will occur after receipt and processing by the
Shareholder Servicing Agent of an application in good order. Exchanges will
continue to be made from a shareholder's account in any MFS Fund as long as the
balance of the account is sufficient to complete the exchanges. Additional
payments made to a shareholder's account will extend the period that exchanges
will continue to be made under the Automatic Exchange Plan. However, if
additional payments are added to an account subject to the Automatic Exchange
Plan shortly before an exchange is scheduled, such funds may not be available
for exchanges until the following month; therefore, care should be used to avoid
inadvertently terminating the Automatic Exchange Plan through exhaustion of the
account balance.
No transaction fee for exchanges will be charged in connection with the
Automatic Exchange Plan. However, exchanges of shares of MFS Money Market Fund,
MFS Government Money Market Fund and Class A shares of MFS Cash Reserve Fund
will be subject to any applicable sales charge. Changes in amounts to be
exchanged to each fund, the funds to which exchanges are to be made and the
timing of transfers (monthly or quarterly), or termination of a shareholder's
participation in the Automatic Exchange Plan will be made after instructions in
writing or by telephone (an "Exchange Change Request") are received by the
Shareholder Servicing Agent in proper form (i.e., if in writing --signed by the
record owner(s) exactly as shares are registered; if by telephone -- proper
account identification is given by the dealer or shareholder of record). Each
Exchange Change Request (other than termination of participation in the program)
must involve at least $50. Generally, if an Exchange Change Request is received
by telephone or in writing before the close of business on the last business day
of a month, the Exchange Change Request will be effective for the following
month's exchange.
A shareholder's right to make additional investments in any of the MFS Funds, to
make exchanges of shares from one MFS Fund to another and to withdraw from an
MFS Fund, as well as a shareholder's other rights and privileges are not
affected by a shareholder's participation in the Automatic Exchange Plan.
The Automatic Exchange Plan is part of the Exchange Privilege. For additional
information regarding Automatic Exchange Plan, including the treatment of any
CDSC, see "Exchange Privilege" below.
INVEST BY MAIL: Additional investments of $50 or more may be made at any time
by mailing a check payable to the Trust directly to the Shareholder Servicing
Agent. The shareholder's account number and the name of his investment dealer
must be included with each investment.
GROUP PURCHASES: A bona fide group and all its members may be treated as a
single purchaser and, under the Right of Accumulation (but not a Letter of
Intent) obtain quantity sales charge discounts on the purchase of Class A shares
if the group (1) gives its endorsement or authorization to the investment
program so it may be used by the investment dealer to facilitate solicitation of
the membership, thus effecting economies of sales effort; (2) has been in
existence for at least six months and has a legitimate purpose other than to
purchase mutual fund shares at a discount; (3) is not a group of individuals
whose sole organizational nexus is as credit cardholders of a company,
policyholders of an insurance company, customers of a bank or broker-dealer,
clients of an investment adviser or other similar groups; and (4) agrees to
provide certification of membership of those members investing money in the MFS
Funds upon the request of MFD.
REINSTATEMENT PRIVILEGE: Shareholders of each Fund and shareholders of the
other MFS Funds (except the MFS Money Market Fund, MFS Government Money Market
Fund and holders of Class A shares of MFS Cash Reserve Fund in the case where
shares of such funds are acquired through direct purchase or reinvested
dividends) who have redeemed their shares have a one-time right to reinvest the
redemption proceeds in the same class of shares of any of the MFS Funds (if
shares of the fund are available for sale) at net asset value (without a sales
charge) and, if applicable, with credit for any CDSC paid. In the case of shares
reinvested in the MFS Money Market Fund, MFS Government Money Market Fund and
Class A shares of MFS Cash Reserve Fund, the shareholder has the right to
exchange such shares for shares of another MFS Fund at net asset value pursuant
to the exchange privilege described below. Such a reinvestment must be made
within 90 days of the redemption and is limited to the amount of the redemption
proceeds. If the shares credited for any CDSC paid are then redeemed within six
years of the initial purchase in the case of Class B shares or 12 months of the
initial purchase in the case of Class A shares, such CDSC will be imposed upon
redemption. Although redemptions and repurchases of shares are taxable events, a
reinvestment within a certain period of time in the same fund may be considered
a "wash sale" and may result in the inability to recognize currently all or a
portion of any loss realized on the original redemption for federal income tax
purposes. Please see your tax adviser for further information.
EXCHANGE PRIVILEGE: Subject to the requirements set forth below, some or all
of the shares of any Fund for which payment has been received by the Fund (i.e.
an established account) may be exchanged for shares of the same class of any
other Fund or any of the other MFS Funds (if available for sale), at their net
asset value. In addition, Class C shares may be exchanged for shares of MFS
Money Market Fund at net asset value. Exchanges will be made only after
instructions in writing or by telephone (an "Exchange Request") are received for
an established account by the Shareholder Servicing Agent.
Each Exchange Request must be in proper form (i.e., if in writing, signed by the
record owner(s) exactly as the shares are registered; if by telephone -- proper
account identification is given by the dealer or shareholder of record), and
each exchange must involve either shares having an aggregate value of at least
$1,000 (except that the minimum is $50 for accounts of retirement plan
participants whose sponsoring organizations subscribe to the MFS FUNDamental
401(k) Plan or another similar 401(k) recordkeeping system made available by the
Shareholder Servicing Agent) or all the shares in the account. Each exchange
involves the redemption of the shares of the Fund to be exchanged and the
purchase at net asset value (i.e., without a sales charge) of the shares of the
same class of the other Fund or the other MFS Fund. Any gain or loss on the
redemption of the shares exchanged is reportable on the shareholder's federal
income tax return, unless both the shares received and the shares surrendered in
the exchange are held in a tax-deferred retirement plan or other tax-exempt
account. If the Exchange Request is received by the Shareholder Servicing Agent
on any business day prior to the close of regular trading on the Exchange, the
exchange usually will occur on that day if all the restrictions set forth above
have been complied with at that time. However, payment of the redemption
proceeds by the Trust, and thus the purchase of shares of the other MFS Fund,
may be delayed for up to seven days if the Trust determines that such a delay
would be in the best interest of all its shareholders. Investment dealers which
have satisfied criteria established by MFD may also communicate a shareholder's
Exchange Request to MFD by facsimile subject to the restrictions set forth
above. No more than five exchange requests may be made in any one telephone
Exchange Request.
No CDSC is imposed on exchanges among the MFS Funds, although liability for the
CDSC is carried forward to the exchanged shares. For purposes of calculating the
CDSC upon redemption of shares acquired in an exchange, the purchase of shares
acquired in one or more exchanges is deemed to have occurred at the time of the
original purchase of the exchanged shares.
Additional information with respect to any of the MFS Funds, including a copy of
its current prospectus, may be obtained from investment dealers, or the
Shareholder Servicing Agent. A shareholder considering an exchange should obtain
and read the prospectus of the other MFS Fund and consider the differences in
objectives and policies before making any exchange. Shareholders of the other
MFS Funds (except the MFS Money Market Fund, MFS Government Money Market Fund
and Class A shares of MFS Cash Reserve Fund for shares acquired through direct
purchase and dividends reinvested prior to June 1, 1992) have the right to
exchange their shares for shares of any Fund, subject to the conditions, if any,
set forth in their respective prospectuses. In addition, unitholders of the MFS
Fixed Fund (a bank collective investment fund) have the right to exchange their
units (except units acquired through direct purchases) for shares of the Fund,
subject to the conditions, if any, imposed upon such unitholders by the MFS
Fixed Fund.
Any state income tax advantages for investment in shares of each Fund may only
benefit residents of such states. Investors should consult with their own tax
advisers to be sure this is an appropriate investment, based on their residency
and each state's income tax laws.
The exchange privilege (or any aspect of it) may be changed or discontinued and
is subject to certain limitations (see "Purchases" in the Prospectus).
TAX-DEFERRED RETIREMENT PLANS -- Except as noted below, shares of the Fund may
be purchased by all types of tax-deferred retirement plans. MFD makes available
through investment dealers plans and/or custody agreements for the following:
Individual Retirement Accounts (IRAs) (for individuals and their non- employed
spouses who desire to make limited contributions to a tax-deferred retirement
program and, if eligible, to receive a federal income tax deduction for
amounts contributed);
Simplified Employee Pension (SEP-IRA) Plans;
Retirement Plans qualified under Section 401(k) of the Internal Revenue Code
of 1986, as amended;
403(b) Plans (deferred compensation arrangements for employees of public
school systems and certain non-profit organizations); and
Certain other qualified pension and profit-sharing plans.
The plan documents and forms provided by MFD designate a trustee or custodian
(unless another trustee or custodian is designated by the individual or group
establishing the plan) and contain specific information about the plans. Each
plan provides that dividends and distributions will be reinvested automatically.
For further details with respect to any plan, including fees charged by the
trustee, custodian or MFD, tax consequences and redemption information, see the
specific documents for that plan. Plan documents other than those provided by
MFD may be used to establish any of the plans described above. Third party
administrative services, available for some corporate plans, may limit or delay
the processing of transactions.
Investors should consult with their tax advisers before establishing any of the
tax-deferred retirement plans described above.
Class C shares are not currently available for purchase by any retirement plan
qualified under Internal Revenue Code section 401(a) or 403(b) if the retirement
plan and/or the sponsoring organization subscribe to the MFS FUNDamental 401(k)
Plan or another similar 401(a) or 403(b) recordkeeping program made available by
the Shareholder Servicing Agent.
8. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust presently has 19 series of shares and has reserved the right to create
additional series of shares. In addition to the Funds described in this
Statement of Additional Information, the Trust offers shares of MFS Municipal
Income Fund pursuant to a separate prospectus and statement of additional
information. Each share of a class of a series represents an equal proportionate
interest in that series with each other share of that series subject to any
expenses attributable to that class. The shares of a class of each series
participate equally in the earnings, dividends and assets of the particular
series subject to any expenses attributable to that class. Shares have no
pre-emptive or conversion rights (except as set forth in "Purchases --
Conversion to Class B Shares" in the Prospectus). Shares when issued are fully
paid and non-assessable. Shareholders are entitled to one vote for each share
held and may vote in the election of Trustees and on other matters submitted to
meetings of shareholders. Although Trustees are not elected annually by the
shareholders, shareholders have under certain circumstances the right to remove
one or more Trustees. Shareholders of each series would be entitled to share pro
rata in the net assets of that series available for distribution to shareholders
should the Trust or that series be liquidated. Any series may be terminated (i)
upon the merger or consolidation of the series with another organization or upon
the sale of all or substantially all of its assets to another open-end
management investment company, if approved by the vote of the holders of
two-thirds of the outstanding shares of the series, except that if the Trustees
recommend such merger, consolidation or sale of assets, the approval by vote of
the holders of a majority of the shares of the series (as defined in "Investment
Restrictions" above) will be sufficient, or (ii) upon liquidation and
distribution of the assets of the series, if approved by the vote of the holders
of a majority of the shares of the series (as defined in "Investment
Restrictions" above) or by the Trustees. Unless each series is so terminated,
the Trust will continue indefinitely.
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, the Trust's Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Trust and provides for
indemnification and reimbursement of expenses out of the Trust property for any
shareholder held personally liable for the obligations of the Trust. The Trust's
Declaration of Trust also provides that it shall maintain appropriate insurance
(for example, fidelity bonding and errors and omissions insurance) for the
protection of the Trust, its shareholders, Trustees, officers, employees and
agents covering possible tort and other liabilities. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which both inadequate insurance existed and the
Trust itself was unable to meet its obligations.
The Trust's Declaration of Trust further provides that obligations of the Trust
are not binding upon the Trustees individually but only upon the property of the
Trust and that the Trustees will not be liable for any action or failure to act,
but nothing in the Declaration of Trust protects a Trustee against any liability
to which he would otherwise be subject by reason of wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office.
9. PORTFOLIO TRANSACTIONS
Specific decisions to purchase or sell securities for each Fund are made by a
portfolio committee consisting of employees of the Adviser who are appointed and
supervised by its senior officers. Changes in the Funds' investments are
reviewed by the Board of Trustees. The portfolio committee or any of its members
may serve other Funds and other clients of the Adviser or any subsidiary of the
Adviser in a similar capacity.
The primary consideration in placing portfolio security transactions is
execution at the most favorable prices. The Adviser has complete freedom as to
the markets in and broker-dealers through which it seeks this result. Municipal
Obligations and other debt securities are traded principally in the
over-the-counter market on a net basis through dealers acting for their own
account and not as brokers. The cost of securities purchased from underwriters
includes an underwriter's commission or concession, and the prices at which
securities are purchased and sold from and to dealers include a dealer's mark-up
or mark-down. Securities firms may receive brokerage commissions on transactions
involving futures. The Adviser attempts to negotiate with underwriters to
decrease the commission or concession for the benefit of the Fund. The Adviser
normally seeks to deal directly with the primary market makers unless, in its
opinion, better prices are available elsewhere. Securities firms or futures
commission merchants may receive brokerage commissions on transactions involving
Futures Contracts or Options on Futures Contracts. Consistent with the foregoing
primary consideration, the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and such other policies as the Trustees may determine,
the Adviser may consider sales of shares of each Fund and of the other
investment company clients of MFD as a factor in the selection of broker-dealers
to execute the Trust's portfolio transactions. Also, subject to the requirement
of seeking execution at the best available price, securities may, as authorized
by the Advisory Agreement, be bought from or sold to dealers who have furnished
statistical, research and other information or services to the Adviser.
In certain instances there may be securities which are suitable for a Fund as
well as that of another Fund or one or more other clients of the Adviser or any
subsidiary of the Adviser. Investment decisions for the Trust and for such other
clients are made with a view to achieving their respective investment
objectives. It may develop that the same investment decision is made for more
than one client or that a particular security is bought or sold for only one
client even though it might be held by, or bought or sold for, other clients.
Likewise, a particular security may be bought for one or more clients when one
or more other clients are selling that same security. Some simultaneous
transactions are inevitable when several clients receive investment advice from
the same investment adviser, particularly when the same security is suitable for
the investment objectives of more than one client. When two or more clients are
simultaneously engaged in the purchase or sale of the same security, the
securities are allocated among clients in a manner believed to be equitable to
each. It is recognized that in some cases this system could have a detrimental
effect on the price or volume of the security as far as any Fund is concerned.
In some cases, however, it is believed that the ability of a Fund to participate
in volume transactions will produce better executions for the Fund.
10. DISTRIBUTION PLANS
The Trustees have adopted a Distribution Plan for each of Class A, Class B and
Class C shares (the "Distribution Plans") pursuant to Section 12(b) of the 1940
Act and Rule 12b-1 thereunder (the "Rule") after having concluded that there is
a reasonable likelihood that each Distribution Plan would benefit the applicable
Funds and the respective classes of shareholders. The Distribution Plans are
designed to promote sales, thereby increasing the net assets of each Fund. Such
an increase may reduce the expense ratio to the extent the Fund's fixed costs
are spread over a larger net asset base. Also, an increase in net assets may
lessen the adverse effects that could result were the Fund required to liquidate
portfolio securities to meet redemptions. There is, however, no assurance that
the net assets of a Fund will increase or that the other benefits referred to
above will be realized.
Each Distribution Plan is described below. Appendix C attached hereto contains
information concerning amounts paid with respect to each class of each Fund
under the Distribution Plans for the fiscal year ended March 31, 1995.
CLASS A DISTRIBUTION PLAN: Each Class A Distribution Plan provides that the Fund
will pay MFD up to (but not necessarily all of) an aggregate of 0.35% per annum
of the average daily net assets attributable to the Class A shares of a Fund in
order that MFD may pay expenses on behalf of that Fund related to the
distribution and servicing of its Class A shares. The expenses to be paid by MFD
on behalf of each Fund include a service fee to securities dealers which enter
into a sales agreement with MFD of up to 0.25% per annum of the portion of the
Fund's average daily net assets attributable to the Class A shares owned by
investors for whom that securities dealer is the holder or dealer of record.
These payments are partial consideration for personal services and/or account
maintenance performed by such dealers with respect to Class A shares. MFD may
from time to time reduce the amount of the service fee paid for shares sold
prior to a certain date. Service fees may be reduced for a securities dealer
that is the holder or dealer of record for an investor who owns shares of a Fund
having a net asset value at or above a certain dollar level. No service fee will
be paid (i) to any securities dealer who is the holder or dealer of record for
investors who own Class A shares having an aggregate net asset value less than
$750,000, or such other amount as may be determined from time to time (MFD,
however, may waive this minimum amount requirement from time to time if the
dealer satisfies certain criteria), or (ii) to any insurance company which has
entered into an agreement with the Trust and MFD that permits such insurance
company to purchase shares from a Fund at their net asset value in connection
with annuity agreements issued in connection with the insurance company's
separate accounts. MFD may also retain a distribution fee of 0.10% per annum of
a Fund's average daily net assets attributable to Class A shares. Any remaining
funds may be used to pay for other distribution related expenses as described in
the Prospectus. MFD has voluntarily waived all or a portion of the fee payable
under the Class A Distribution Plan for certain Funds and payments under the
Class A Distribution Plan have not commenced for certain Funds (see
"Distribution Plans" in the Prospectus). MFD or its affiliates are entitled to
retain all service fees payable under each Class A Distribution Plan for which
there is no dealer of record or for which qualification standards have not been
met as partial consideration for personal services and/or account maintenance
services performed by MFD or its affiliates for shareholder accounts. Certain
banks and other financial institutions that have agency agreements with MFD will
receive agency transaction and service fees that are the same as commissions and
service fees to dealers.
CLASS B DISTRIBUTION PLAN: Each Class B Distribution Plan provides that the Fund
shall pay MFD a daily distribution fee equal on an annual basis to 0.75% of the
Fund's average daily net assets attributable to Class B shares and will pay MFD
a service fee of up to 0.25% per annum of the Fund's average daily net assets
attributable to Class B shares (which MFD will in turn pay to securities dealers
which enter into a sales agreement with MFD at a rate of up to 0.25% per annum
of the Fund's average daily net assets attributable to Class B shares owned by
investors for whom that securities dealer is the holder or dealer of record).
The first year service fee will be paid as noted below. This service fee is
intended to be additional consideration for all personal services and/or account
maintenance services rendered by the dealer with respect to Class B shares. MFD
will advance to dealers the first year service fee at a rate equal to 0.25% of
the amount invested. As compensation therefor, MFD may retain the service fee
paid by a Fund with respect to such shares for the first year after purchase.
Dealers will become eligible for additional service fees with respect to such
shares commencing in the thirteenth month following purchase. Except in the case
of the first year service fee, no service fee will be paid to any securities
dealer who is the holder or dealer of record for investors who own Class B
shares having an aggregate net asset value of less than $750,000 or such other
amount as may be determined from time to time by MFD. MFD, however, may waive
this minimum amount requirement from time to time if the dealer satisfies
certain criteria. Dealers may from time to time be required to meet certain
other criteria in order to receive service fees. MFD has voluntarily waived all
or a portion of the service fee payable under the Class B Distribution Plan for
certain Funds (see "Distribution Plans" in the Prospectus). MFD or its
affiliates are entitled to retain all service fees payable under the Class B
Distribution Plans for which there is no dealer of record or for which
qualification standards have not been met as partial consideration for personal
services and/or account maintenance services performed by MFD or its affiliates
for shareholder accounts.
The purpose of distribution payments to MFD under each Class B Distribution Plan
is to compensate MFD for its distribution services to the Funds. MFD pays
commissions to dealers as well as expenses of printing prospectuses and reports
used for sales purposes, expenses with respect to the preparation and printing
of sales literature and other distribution related expenses, including, without
limitation, the cost necessary to provide distribution- related services,
personnel, travel and office expenses and equipment. Each Class B Distribution
Plan also provides that MFD will receive all CDSCs attributable to Class B
shares (see "Distribution Plans" and "Purchases" in the Prospectus).
CLASS C DISTRIBUTION PLAN: Each Class C Distribution Plan (applicable to the
California, North Carolina and Virginia Funds only) provides that the Fund will
pay MFD a distribution fee of up to 0.75% per annum of the Fund's average daily
net assets attributable to Class C shares and will pay MFD a service fee of up
to 0.25% per annum of the Fund's average daily net assets attibutable to Class C
shares (which MFD will in turn pay to securities dealers which enter into a
sales agreement with MFD at a rate of up to 0.25% per annum of the Fund's daily
net assets attributable to Class C shares owned by investors for whom that
securities dealer is the holder or dealer of record).
The distribution/service fees attributable to Class C shares are designed to
permit an investor to purchase such shares through a broker-dealer without the
assessment of an initial sales charge or a CDSC while allowing MFD to compensate
broker-dealers in connection with the sale of such shares.
The service fee is intended to be additional consideration for all personal
services and/or account maintenance services rendered by the dealer with respect
to Class C shares. MFD or its affiliates are entitled to retain all service fees
payable under the Class C Distribution Plan with respect to accounts for which
there is no dealer of record as partial consideration for personal services
and/or account maintenance services performed by MFD or its affiliates for
shareholder accounts.
The purpose of the distribution payments to MFD under the Class C Distribution
Plan is to compensate MFD for its distribution services to the Fund.
Distribution payments under the Plan will be used by MFD to pay securities
dealers a distribution fee in an amount equal on an annual basis to 0.75% of the
Fund's average daily net assets attributable to Class C shares owned by
investors for whom a securities dealer is the holder or dealer of record.
(Therefore, the total amount of distribution/service fees paid to a dealer on an
annual basis is 1.00% of the Fund's average daily net assets attributable to
Class C shares owned by investors for whom the securities dealer is the holder
or dealer of record.) MFD also pays expenses of printing prospectuses and
reports used for sales purposes, expenses with respect to the preparation and
printing of sales literature and other distribution-related expenses, including,
without limitation, the compensation of personnel and all costs of travel,
office expense and equipment. Since MFD's compensation is not directly tied to
its expenses, the amount of compensation received by MFD during any year may be
more or less than its actual expenses. For this reason, this type of
distribution fee arrangement is characterized by the staff of the SEC as being
of the "compensation" variety. However, the Fund is not liable for any expenses
incurred by MFD in excess of the amount of compensation it receives. Certain
banks and other financial institutions that have agency agreements with MFD will
receive agency transaction and service fees that are the same as distribution
and service fees to dealers. Fees payable under the Class C Distribution Plan
are charged to, and therefore reduce, income allocated to Class C shares.
GENERAL: Each of the Distribution Plans will remain in effect until August 1,
1995, and will continue in effect thereafter only if such continuance is
specifically approved at least annually by vote of both the Trustees and a
majority of the Trustees who are not "interested persons" or financially
interested parties to such Plan ("Distribution Plan Qualified Trustees"). Each
of the Distribution Plans also requires that the Trust and MFD each shall
provide to the Trustees, and the Trustees shall review, at least quarterly, a
written report of the amounts expended (and purposes therefor) under such Plan.
Each of the Distribution Plans may be terminated at any time by vote of a
majority of the Distribution Plan Qualified Trustees or by vote of the holders
of a majority of the respective class of the Fund's shares (as defined in
"Investment Restrictions"). All agreements relating to any of the Distribution
Plans entered into between the Trust or MFD and other organizations must be
approved by the Board of Trustees, including a majority of the Distribution Plan
Qualified Trustees. Agreements under any of the Distribution Plans must be in
writing, will be terminated automatically if assigned, and may be terminated at
any time without payment of any penalty, by vote of a majority of the
Distribution Plan Qualified Trustees or by vote of the holders of a majority of
the respective class of the Fund's shares. None of the Distribution Plans may be
amended to increase materially the amount of permitted distribution expenses
without the approval of a majority of the respective class of the Fund's shares
(as defined in "Investment Restrictions") or may be materially amended in any
case without a vote of the Trustees and a majority of the Distribution Plan
Qualified Trustees. The selection and nomination of Distribution Plan Qualified
Trustees shall be committed to the discretion of the non-interested Trustees
then in office. No Trustee who is not an "interested person" has any financial
interest in any of the Distribution Plans or in any related agreement.
11. INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
Deloitte & Touche LLP are the Trust's independent certified public accountants.
For each Fund, the Portfolios of Investments at March 31, 1995, the Statements
of Assets and Liabilities at March 31, 1995, the Statements of Operations for
the year ended March 31, 1995, the Statements of Changes in Net Assets for the
year ended January 31, 1994, the two-month period ended March 31, 1994 and for
the year ended March 31, 1995, the Financial Highlights for each of the ten
years in the period ended March 31, 1995, the Notes to Financial Statements and
the Reports of Independent Auditors, each of which is included in the Annual
Reports to shareholders of the Trust, are incorporated by reference into this
Statement of Additional Information and have been so incorporated in reliance
upon the report of Deloitte & Touche LLP, independent certified public
accountants, as experts in accounting and auditing.
<PAGE>
APPENDIX A
PERFORMANCE RESULTS AND QUOTATIONS
The performance results and quotations below should not be considered as
representative of the performance of any Fund in the future since the net asset
value and public offering price of shares of the Funds will vary. See
"Performance Information" in the Statement of Additional Information.
PERFORMANCE RESULTS
CLASS A SHARES
VALUE OF VALUE OF VALUE OF
INITIAL $10,000 CAPITAL GAIN REINVESTED TOTAL
YEAR ENDED INVESTMENT DISTRIBUTIONS DIVIDENDS VALUE
- ---------- --------------- ------------- ---------- -----
ALABAMA FUND
December 31, 1990(1) $ 9,620 $ 0 $ 516 $10,136
December 31, 1991 9,990 66 1,270 11,326
December 31, 1992 10,250 81 1,996 12,327
December 31, 1993 10,920 110 2,848 13,878
December 31, 1994 9,840 130 3,250 13,220
ARKANSAS FUND
December 31, 1992(2) $ 9,780 $ 0 $ 549 $10,329
December 31, 1993 10,400 2 1,209 11,611
December 31, 1994 9,200 49 1,659 10,908
CALIFORNIA FUND
December 31, 1985(3) $ 9,320 $ 0 $ 225 $ 9,545
December 31, 1986 10,520 45 1,006 11,571
December 31, 1987 9,760 68 1,622 11,450
December 31, 1988 10,160 71 2,462 12,693
December 31, 1989 10,480 73 3,389 13,942
December 31, 1990 10,460 73 4,304 14,837
December 31, 1991 10,940 125 5,603 16,668
December 31, 1992 11,200 151 6,840 18,191
December 31, 1993 11,820 229 8,483 20,532
December 31, 1994 10,260 215 8,402 18,877
FLORIDA FUND
December 31, 1992(2) $ 9,800 $ 0 $ 547 $10,347
December 31, 1993 10,540 25 1,321 11,887
December 31, 1994 9,020 96 1,727 10,843
GEORGIA FUND
December 31, 1988(4) $ 9,690 $ 0 $ 211 $ 9,901
December 31, 1989 9,860 20 919 10,799
December 31, 1990 9,790 44 1,638 11,472
December 31, 1991 10,270 78 2,539 12,887
December 31, 1992 10,480 80 3,373 13,933
December 31, 1993 11,210 86 4,425 15,721
December 31, 1994 9,860 121 4,659 14,640
LOUISIANA FUND
December 31, 1993(5) $10,050 $ 0 $ 517 $10,567
December 31, 1994 8,710 44 1,028 9,782
MARYLAND FUND
December 31, 1985 $ 9,990 $ 66 $ 875 $10,931
December 31, 1986 10,857 72 1,813 12,742
December 31, 1987 10,167 86 2,482 12,735
December 31, 1988 10,552 90 3,468 14,110
December 31, 1989 10,788 102 4,489 15,379
December 31, 1990 10,749 112 5,491 16,352
December 31, 1991 11,084 149 6,864 18,097
December 31, 1992 11,163 175 8,064 19,402
December 31, 1993 11,568 286 9,564 21,418
December 31, 1994 10,246 328 9,533 20,107
MASSACHUSETTS FUND
December 31, 1985(6) $10,080 $ 0 $ 426 $10,506
December 31, 1986 11,020 11 1,326 12,357
December 31, 1987 10,280 12 2,033 12,325
December 31, 1988 10,590 12 3,003 13,605
December 31, 1989 10,690 12 3,993 14,695
December 31, 1990 10,630 12 5,008 15,650
December 31, 1991 11,110 13 6,466 17,589
December 31, 1992 11,310 13 7,762 19,085
December 31, 1993 11,660 309 9,254 21,223
December 31, 1994 10,340 328 9,357 20,025
MISSISSIPPI FUND
December 31, 1992(7) $ 9,290 $ 0 $ 205 $ 9,495
December 31, 1993 9,930 0 812 10,742
December 31, 1994 8,660 28 1,287 9,975
NEW YORK FUND
December 31, 1988(4) $ 9,740 $ 0 $ 189 $ 9,929
December 31, 1989 9,910 80 904 10,894
December 31, 1990 9,820 80 1,652 11,552
December 31, 1991 10,370 148 2,612 13,130
December 31, 1992 10,670 194 3,558 14,422
December 31, 1993 11,270 248 4,813 16,331
December 31, 1994 9,970 290 5,067 15,327
NORTH CAROLINA FUND
December 31, 1985 $10,532 $ 47 $ 894 $11,473
December 31, 1986 11,359 235 1,861 13,455
December 31, 1987 10,630 220 2,600 13,450
December 31, 1988 10,906 226 3,626 14,758
December 31, 1989 11,152 231 4,720 16,103
December 31, 1990 11,064 304 5,756 17,124
December 31, 1991 11,428 396 7,179 19,003
December 31, 1992 11,536 399 8,404 20,339
December 31, 1993 12,108 429 9,994 22,531
December 31, 1994 10,660 554 9,887 21,101
PENNSYLVANIA FUND
December 31, 1993(5) $10,050 $ 0 $ 488 $10,538
December 31, 1994 8,780 36 979 9,795
SOUTH CAROLINA FUND
December 31, 1985 $10,324 $ 13 $ 909 $11,246
December 31, 1986 11,161 46 1,886 13,093
December 31, 1987 10,659 97 2,704 13,460
December 31, 1988 11,023 100 3,808 14,931
December 31, 1989 11,279 103 4,907 16,289
December 31, 1990 11,210 182 5,937 17,329
December 31, 1991 11,624 267 7,382 19,273
December 31, 1992 11,751 348 8,631 20,730
December 31, 1993 12,460 393 10,319 23,172
December 31, 1994 11,062 497 10,301 21,860
TENNESSEE FUND
December 31, 1988(8) $ 9,650 $ 0 $ 117 $ 9,767
December 31, 1989 9,900 0 821 10,721
December 31, 1990 9,850 20 1,531 11,401
December 31, 1991 10,140 82 2,379 12,601
December 31, 1992 10,320 103 3,198 13,621
December 31, 1993 10,840 108 4,141 15,089
December 31, 1994 9,840 113 4,520 14,473
TEXAS FUND
December 31, 1992(2) $ 9,930 $ 0 $ 533 $10,463
December 31, 1993 10,750 0 1,270 12,020
December 31, 1994 9,330 69 1,753 11,152
VIRGINIA FUND
December 31, 1985 $10,227 $ 11 $ 866 $11,104
December 31, 1986 10,999 16 1,799 12,814
December 31, 1987 10,356 92 2,525 12,973
December 31, 1988 10,741 95 3,586 14,422
December 31, 1989 10,989 97 4,690 15,776
December 31, 1990 10,979 97 5,772 16,848
December 31, 1991 11,374 101 7,221 18,696
December 31, 1992 11,493 108 8,481 20,082
December 31, 1993 11,859 435 9,988 22,282
December 31, 1994 10,425 474 9,896 20,795
WASHINGTON FUND
December 31, 1992(9) $ 9,450 $ 0 $ 193 $ 9,643
December 31, 1993 10,170 10 889 11,069
December 31, 1994 9,020 17 1,397 10,434
WEST VIRGINIA FUND
December 31, 1985 $10,227 $ 12 $ 923 $11,162
December 31, 1986 10,990 50 1,936 12,976
December 31, 1987 10,148 146 2,685 12,979
December 31, 1988 10,514 151 3,819 14,484
December 31, 1989 10,742 155 4,926 15,823
December 31, 1990 10,762 155 6,015 16,932
December 31, 1991 11,138 174 7,476 18,788
December 31, 1992 11,297 185 8,779 20,261
December 31, 1993 11,851 345 10,474 22,670
December 31, 1994 10,603 336 10,529 21,468
- ---------------
(1) Based on initial investment made on February 1, 1990, the initial public
offering date of Class A shares.
(2) Based on initial investment made on February 3, 1992, the initial public
offering date of Class A shares.
(3) Based on initial investment made on June 18, 1985, the initial public
offering date of the predecessor of Class A shares.
(4) Based on initial investment made on June 6, 1988, the initial public
offering date of Class A shares.
(5) Based on initial investment made on February 1, 1993, the initial public
offering date of Class A shares.
(6) Based on initial investment made on April 9, 1985, the initial public
offering date of Class A shares.
(7) Based on initial investment made on August 6, 1992, the initial public
offering date of Class A shares.
(8) Based on initial investment made on August 12, 1988, the initial public
offering date of Class A shares.
(9) Based on initial investment made on August 7, 1992, the initial public
offering date of Class A shares.
EXPLANATORY NOTES:
The results in the table assume that income dividends and capital gain
distributions were invested in additional shares. The results also assume that
the initial investment in Class A shares was reduced by the current maximum
applicable sales charge. No adjustment has been made for any income taxes, if
any, payable by shareholders.
<PAGE>
PERFORMANCE QUOTATIONS
All performance quotations are for the period ending March 31, 1995.
<TABLE>
<CAPTION>
ACTUAL
TAX EQUIVALENT TAX EQUIVALENT
AVERAGE ANNUAL TOTAL RETURNS ACTUAL 30-DAY YIELD 30-DAY YIELD
---------------------------- 30-DAY 30-DAY (INCLUDING (WITHOUT
10 YEAR YIELD YIELD ANY WAIVERS) ANY WAIVERS
OR (INCLUDING (WITHOUT --------------- -------------- CURRENT
LIFE OF ANY ANY DISTRIBUTION
FUND 1 YEAR 5 YEAR FUND WAIVERS) WAIVERS) TAX BRACKETS: TAX BRACKETS: RATE
- -------------------------------- ------ ------ ------- --------- -------- ---------------- -------------- ------------
28% 321% 28% 31%
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alabama Fund Class A
with sales charge ............. 1.48% 7.07% 6.87(1)% 4.92% 4.83% 6.83% 7.13% 6.71% 7.00% 5.05%
Alabama Fund Class A
without sales charge .......... 6.51 8.12 7.88(1)
Alabama Fund Class B
with CDSC ..................... 1.64 -1.26(2)
Alabama Fund Class B
without CDSC .................. 5.64 1.16(2) 4.36 6.06 6.32 4.49
Arkansas Fund Class A
with sales charge .... ....... 0.90 4.85(3) 5.27 7.32 7.64 5.20
Arkansas Fund Class A
without sales charge .......... 5.90 6.48(3)
Arkansas Fund Class B
with CDSC ..................... 0.69 -2.59(2)
Arkansas Fund Class B
without CDSC .................. -0.20(2)
4.67 4.46 6.19 6.46 4.39
California Fund Class A
with sales charge ............. -0.08 6.60 7.45(4) 5.40 5.25 7.50 7.83 7.29 7.61 5.41
California Fund Class A
without sales charge .......... 4.85 7.64 7.99(4)
California Fund Class B
with CDSC ..................... -0.22 -3.81(2)
California Fund Class B
without CDSC .................. 3.73 -1.47(2) 4.56 4.40 6.33 6.61 6.11 6.38 4.63
California Fund Class C ........ 3.79 -2.03(5) 4.68 4.53 6.50 6.78 6.29 6.57 4.68
Florida Fund Class A
with sales charge ............. 1.05 5.10(3) 5.29 5.15 7.35 7.67 7.15 7.46 5.33
Florida Fund Class A
without sales charge .......... 6.07 6.74(3)
Florida Fund Class B
with CDSC ..................... 1.07 -3.64(2)
Florida Fund Class B
without CDSC .................. 5.06 -1.31(2) 4.45 4.30 6.18 6.45 5.97 6.23 4.54
Georgia Fund Class A
with sales charge ............. 0.61 6.49 6.72(6) 4.92 4.82 6.83 7.13 6.69 6.99 5.14
Georgia Fund Class A
without sales charge .......... 5.65 7.53 7.48(6)
Georgia Fund Class B
with CDSC ..................... 0.89 -2.94(2)
Georgia Fund Class B
without CDSC .................. -0.56(2)
4.88 4.34 6.03 6.29 4.58
Louisiana Fund Class A
with sales charge ............. 2.09 2.46(7) 5.87 5.19 8.15 8.51 7.21 7.52 5.76
Louisiana Fund Class A
without sales charge .......... 7.18 4.78(7)
Louisiana Fund Class B
with CDSC ..................... 2.01 -2.50(2)
Louisiana Fund Class B
without CDSC .................. 6.01 -0.14(2) 5.15 4.44 7.15 7.46 6.17 6.43 5.07
Maryland Fund Class A
with sales charge ............. 1.84 5.83 7.61(8) 4.91 6.82 7.12 5.13
Maryland Fund Class A
without sales charge .......... 6.51 6.86 8.14(8)
Maryland Fund Class B
with CDSC ..................... 1.75 -2.37(2)
Maryland Fund Class B
without CDSC .................. 5.75 0.00(2) 4.42 6.14 6.41 4.68
Massachusetts Fund Class A
with sales charge ............. 0.89 6.59 7.87(9) 5.33 7.40 7.72 5.48
Massachusetts Fund Class A
without sales charge .......... 5.89 7.63 8.40(9)
Massachusetts Fund Class B
with CDSC ..................... 1.15 -1.92(2)
Massachusetts Fund Class B
without CDSC .................. 5.13 0.42(2) 4.82 6.69 6.99 5.21
Mississippi Fund Class A
with sales charge ............. 1.03 2.58(10) 5.70 5.07 7.92 8.26 7.04 7.35 5.68
Mississippi Fund Class A
without sales charge .......... 6.08 4.48(10)
Mississippi Fund Class B
with CDSC ..................... -2.51(2)
1.15
Mississippi Fund Class B
without CDSC .................. 5.14 -0.14(2) 4.96 4.30 6.89 7.19 5.97 6.23 4.97
New York Fund Class A
with sales charge ............. 1.03 7.54 7.47(6) 5.12 5.03 7.11 7.42 6.99 7.29 5.13
New York Fund Class A
without sales charge .......... 6.03 8.59 8.24(6)
New York Fund Class B
with CDSC ..................... 1.17 -2.26(2)
New York Fund Class B
without CDSC .................. 5.17 0.10(2) 4.51 6.26 6.54 4.57
North Carolina Fund Class A
with sales charge ............. 0.86 5.88 8.08(8) 4.97 6.90 7.20 5.03
North Carolina Fund Class A
without sales charge .......... 5.86 6.91 8.61(8)
North Carolina Fund Class B
with CDSC ..................... 1.21 -2.28(2)
North Carolina Fund Class B
without CDSC .................. 5.20 0.10(2) 4.43 6.15 6.42 4.56
North Carolina Fund Class C .... 5.18 -0.40(5) 4.58 6.36 6.64 4.64
Pennsylvania Fund Class A
with sales charge ............. 2.97 2.37(7) 5.82 5.04 8.08 8.43 7.00 7.30 5.54
Pennsylvania Fund Class A
without sales charge .......... 8.14 4.71(7)
Pennsylvania Fund Class B
with CDSC ..................... -2.45(2)
3.07
Pennsylvania Fund Class B
without CDSC .................. 7.07 -0.07(2) 5.00 4.19 6.94 7.25 5.82 6.07 4.83
South Carolina Fund Class A
with sales charge ............. 1.84 6.38 8.51(8) 4.87 6.76 7.06 5.01
South Carolina Fund Class A
without sales charge .......... 6.93 7.42 9.04(8)
South Carolina Fund Class B
with CDSC ..................... 2.26 -1.62(2)
South Carolina Fund Class B
without CDSC .................. 6.26 0.78(2) 4.37 6.07 6.33 4.55
Texas Fund Class A
with sales charge ............. 2.34 6.06(3) 5.65 4.97 7.58 8.19 6.90 7.20 5.70
Texas Fund Class A
without sales charge .......... 7.42 7.71(3)
Texas Fund Class B
with CDSC ..................... 2.35 -2.22(2)
Texas Fund Class B
without CDSC .................. 6.35 0.15(2) 4.88 4.17 6.78 7.07 5.79 6.04 4.99
Virginia Fund Class A
with sales charge ............. 0.61 5.96 7.88(8) 5.07 7.04 7.35 5.26
Virginia Fund Class A
without sales charge .......... 5.67 6.99 8.40(8)
Virginia Fund Class B
with CDSC ..................... 0.93 -2.63(2)
Virginia Fund Class B
without CDSC .................. 4.91 -0.27(2) 4.56 6.33 6.61 4.81
Virginia Fund Class C .......... 4.85 -0.98(5) 4.58 6.36 6.64 4.86
Washington Fund Class A
with sales charge ............. 4.62 4.60(12) 5.95 5.24 8.26 8.62 7.28 7.59 5.65
Washington Fund Class A
without sales charge .......... 9.80 6.54(12)
Washington Fund Class B
with CDSC ..................... 4.72 -1.29(2)
Washington Fund Class B
without CDSC .................. 8.72 1.10(2) 4.95 4.24 6.88 7.17 5.89 6.14 4.96
West Virginia Fund Class A
with sales charge ............. 1.01 6.45 8.27(8) 5.43 7.54 7.87 5.25
West Virginia Fund Class A
without sales charge .......... 6.07 7.49 8.79(8)
West Virginia Fund Class B
with CDSC ..................... 1.30 -1.95(2)
West Virginia Fund Class B
without CDSC .................. 5.30 0.43(2) 4.92 6.83 7.13 4.79
- ---------------
(1)From the initial public offering date of Class A shares on February 1, 1990.
(2)From the initial public offering date of Class B shares on September 7, 1993.
(3)From the initial public offering date of Class A shares on February 3, 1992.
(4)From the initial public offering date of Class A shares on June 18, 1985.
(5)From the initial public offering date of Class C shares on January 3, 1994.
(6)From the initial public offering date of Class A shares on June 6, 1988.
(7)From the initial public offering date of Class A shares on February 1, 1993.
(8)For the 10-year period ended March 31, 1994.
(9)From the initial public offering date of Class A shares on April 9, 1985.
(10)From the initial public offering date of Class A shares on August 6, 1992.
(11)From the initial public offering date of Class A shares on August 12, 1988.
(12)From the initial public offering date of Class A shares on August 7, 1992.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APPENDIX B
SALES CHARGES
CLASS A
CDSC CDSC CDSC CDSC CLASS A SALES CDSC
IMPOSED ON IMPOSED ON IMPOSED ON IMPOSED ON SALES CHARGES CLASS A CLASS A IMPOSED ON
REDEMPTION REDEMPTION REDEMPTION REDEMPTION CHARGES RECEIVED GROSS FUND REDEMPTION
OF CLASS B OF CLASS B OF CLASS B OF CLASS A RECEIVED BY SALES ASSETS OF CLASS A
SHARES SHARES SHARES SHARES BY MFD DEALERS(1) CHARGES SOLD SHARES
12 MONTHS 2 MONTHS 9/7/93 12 MONTHS 12 MONTHS 12 MONTHS 12 MONTHS 12 MONTHS 2 MONTHS
ENDED ENDED THRU ENDED ENDED ENDED ENDED ENDED ENDED
FUND 3/31/95 3/31/94 1/31/94 3/31/95 3/31/95 3/31/95 3/31/95 3/31/95 3/31/94
- ------------------------ ---------- ---------- ---------- ---------- --------- ---------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alabama Fund Class A ... $ 4 $ 29,302 $158,463 $187,765 $ 9,763,525 $ --
Alabama Fund Class B ... $22,060 $ -- $ 39
Arkansas Fund Class A .. 2,159 100,116 470,358 570,574 29,001,659 --
Arkansas Fund Class B .. 12,360 -- 4,730
California Fund
Class A ............... 15,182 74,444 575,987 650,431 34,477,254 15,406
California Fund
Class B ............... 137,206 6,816 7,146
Califiornia Fund
Class C ...............
Florida Fund Class A ... 4,332 44,219 249,572 293,791 14,166,753 9,651
Florida Fund Class B ... 26,736 1,154 939
Georgia Fund Class A ... 2,683 39,551 209,120 248,671 10,440,522 11
Georgia Fund Class B ... 22,152 1,044 393
Louisiana Fund
Class A ............... -- 23,685 116,745 140,430 5,144,775 --
Louisiana Fund
Class B ............... 4,920 157 9,891
Maryland Fund
Class A ............... -- 45,665 219,460 265,125 11,534,129 --
Maryland Fund
Class B ............... 28,095 2,127 2,407
Massachusetts Fund
Class A ............... -- 53,182 248,636 301,818 19,252,318 --
Massachusetts Fund
Class B ............... 31,362 -- 753
Mississippi Fund
Class A ............... 1,770 53,458 257,984 311,442 16,656,129 18
Mississippi Fund
Class B ............... 14,243 -- 212
New York Fund Class A .. 6,408 35,466 298,728 334,194 16,810,290 8
New York Fund Class B .. 37,704 864 --
North Carolina
Fund Class A .......... 70 137,516 646,626 784,142 39,754,173 --
North Carolina
Fund Class B .......... 61,014 1,075 2,001
North Carolina
Fund Class C ..........
Pennsylvania Fund
Class A ............... -- 14,379 98,601 112,980 3,547,968 --
Pennsylvania Fund
Class B ............... 10,091 367 --
South Carolina Fund
Class A ............... 7,826 61,952 306,738 368,690 18,559,628 7,349
South Carolina Fund
Class B ............... 32,652 996 --
Tennessee Fund
Class A ............... -- 41,320 250,702 292,022 16,571,914 --
Tennessee Fund
Class B ............... 13,716 193 1,775
Texas Fund Class A ..... 3,008 6,637 43,734 50,371 3,962,255 --
Texas Fund Class B ..... 10,470 77 316
Virginia Fund Class A .. -- 128,244 606,377 734,621 33,148,823 11
Virginia Fund Class B .. 56,011 492 417
Virginia Fund Class C ..
Washington Fund
Class A ............... 18,268 8,434 56,429 64,863 3,229,845 --
Washington Fund
Class B ............... 7,867 -- 2,004
West Virginia Fund
Class A ............... 4 57,411 269,466 326,877 13,277,508 --
West Virginia Fund
Class B ............... 24,295 5,141 6,028
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLASS A CLASS A
CLASS A SALES CDSC CLASS A SALES
SALES CHARGES CLASS A CLASS A IMPOSED ON SALES CHARGES CLASS A CLASS A
CHARGES RECEIVED GROSS FUND REDEMPTION CHARGES RECEIVED GROSS FUND
RECEIVED BY SALES ASSETS OF CLASS A RECEIVED BY SALES ASSETS
BY MFD DEALERS(1) CHARGES SOLD SHARES BY MFD DEALERS(1) CHARGES SOLD
2 MONTHS 2 MONTHS 2 MONTHS 2 MONTHS 12 MONTHS 12 MONTHS 12 MONTHS 12 MONTHS 12 MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
FUND 3/31/94 3/31/94 3/31/94 3/31/94 1/31/94 1/31/94 1/31/94 1/31/94 1/31/94
- ------------------------- -------- ---------- -------- ----------- ---------- --------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alabama Fund Class A .... $ 4,832 $ 42,687 $ 47,519 $ 1,979,807 $ 73 $ 91,928 $ 558,082 $ 650,010 $22,229,059
Alabama Fund Class B ....
Arkansas Fund
Class A ................ 54,626 264,736 319,362 8,560,653 3 455,067 2,809,535 3,264,602 80,468,316
Arkansas Fund
Class B ................
California Fund
Class A(2) ............. 31,401 223,591 254,992 13,687,013 55,328 231,916 1,967,665 2,199,581 114,935,752
California Fund
Class B(2) .............
California Fund
Class C(2) .............
Florida Fund Class A .... 16,273 77,536 93,809 4,747,434 10,737 219,779 1,359,226 1,579,005 52,007,077
Florida Fund Class B ....
Georgia Fund Class A .... 5,841 72,895 78,736 2,414,807 366 89,931 573,488 663,419 29,940,646
Georgia Fund Class B ....
Louisiana Fund Class A .. 2,786 35,310 38,096 1,151,793 -- 40,802 422,946 463,748 13,166,947
Louisiana Fund Class B ..
Maryland Fund Class A ... 27,087 124,584 151,671 5,026,959 162 161,689 1,043,078 1,204,767 35,398,730
Maryland Fund Class B ...
Massachusetts Fund
Class A ................ 14,908 72,264 87,172 8,435,106 9,456 128,547 811,164 939,711 40,161,491
Massachusetts Fund
Class B ................
Mississippi Fund
Class A ................ 23,926 112,398 136,324 4,200,243 2,460 217,195 1,368,892 1,586,087 43,993,195
Mississippi Fund
Class B ................
New York Fund Class A ... 9,743 71,967 81,710 2,829,617 129 170,823 1,592,278 1,763,101 57,532,037
New York Fund Class B ...
North Carolina Fund
Class A ................ 40,207 193,342 233,549 10,070,734 989 421,999 2,666,700 3,088,699 106,750,838
North Carolina Fund
Class B ................
North Carolina Fund
Class C ................
Pennsylvania Fund
Class A ................ 4,503 58,026 62,529 1,471,869 -- 39,557 466,418 505,975 12,814,354
Pennsylvania Fund
Class B ................
South Carolina Fund
Class A ................ 15,264 75,005 90,269 4,197,995 39,579 184,187 1,120,745 1,304,932 48,658,649
South Carolina Fund
Class B ................
Tennessee Fund Class A .. 9,709 85,685 95,394 2,965,078 -- 113,280 681,131 794,411 23,309,416
Tennessee Fund Class B ..
Texas Fund Class A ...... 4,740 32,386 37,126 1,041,980 -- 36,054 221,631 257,685 9,215,825
Texas Fund Class B ......
Virginia Fund Class A ... 42,219 201,549 243,768 9,166,205 12 380,623 2,323,173 2,703,796 90,094,203
Virginia Fund Class B ...
Virginia Fund Class C ...
Washington Fund Class A . 3,709 49,313 53,022 1,237,325 -- 44,300 289,144 333,444 9,944,597
Washington Fund Class B .
West Virginia Fund
Class A ................ 19,219 94,048 113,267 3,223,240 77 160,768 1,036,761 1,197,529 31,951,976
West Virginia Fund
Class B ................
- ---------------
(1) Includes dealers, banks and other financial institutions.
(2) The information relating to the period ended 1/31/94 was for an 11-month period.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APPENDIX C
AMOUNTS PAID UNDER THE DISTRIBUTION PLANS
TOTAL
PAID(3)
UNDER % OF AVG. AMOUNT AMOUNT AMOUNT
DISTRIBUTION DAILY NET WAIVED BY PAID AMOUNT PAID RETAINED
FUND PLAN(1) ASSETS MFD TO MFD TO DEALERS(2) BY MFD
- --------------------------------------- ------------ --------- --------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Alabama Fund Class A .................. $ 207,415 0.25% $ 82,488 -- $ 199,938 $ 7,477
Alabama Fund Class B .................. 37,007 1.00 -- 27,755 8,725 527
Arkansas Fund Class A ................. -- -- -- -- -- --
Arkansas Fund Class B ................. 67,664 1.00 -- 50,748 16,916 --
California Fund Class A ............... -- -- -- -- -- --
California Fund Class B ............... 248,272 1.00 -- 186,204 62,068 --
California Fund Class C ............... 30,591 1.00 -- 22,943 5,867 1,781
Florida Fund Class A .................. -- -- -- -- -- --
Florida Fund Class B .................. 100,045 1.00 -- 75,034 25,012 --
Georgia Fund Class A .................. 199,759 0.25 79,714 -- 192,686 7,073
Georgia Fund Class B .................. 76,623 1.00 -- 57,460 18,801 362
Louisiana Fund Class A ................ -- -- -- -- -- --
Louisiana Fund Class B ................ 21,147 1.00 -- 15,849 5,298 --
Maryland Fund Class A ................. 533,850 0.35 -- 152,529 360,637 20,684
Maryland Fund Class B ................. 92,525 1.00 69,393 69,393 22,434 697
Massachusetts Fund Class A ............ 929,292 0.35 -- 265,512 580,490 83,290
Massachusetts Fund Class B ............ 64,659 1.00 -- 48,494 15,749 416
Mississippi Fund Class A .............. -- -- -- -- -- --
Mississippi Fund Class B .............. 79,585 1.00 -- 59,689 19,896 --
New York Fund Class A ................. 383,142 0.25 152,969 -- 363,311 19,831
New York Fund Class B ................. 95,837 1.00 -- 71,878 22,458 1,501
North Carolina Fund Class A ........... 1,547,366 0.35 -- 442,104 1,076,520 28,742
North Carolina Fund Class B ........... 210,286 1.00 -- 157,715 51,835 736
North Carolina Fund Class C ........... 81,518 1.00 -- 61,139 16,526 3,853
Pennsylvania Fund Class A ............. -- -- -- -- -- --
Pennsylvania Fund Class B ............. 62,617 1.00 -- 46,963 15,655 --
South Carolina Fund Class A ........... 596,846 0.35 -- 170,522 412,127 14,196
South Carolina Fund Class B ........... 115,719 1.00 -- 86,788 27,875 1,055
Tennessee Fund Class A ................ 413,832 0.35 -- 118,238 287,248 8,346
Tennessee Fund Class B ................ 77,488 1.00 -- 58,116 18,802 570
Texas Fund Class A .................... -- -- -- -- -- --
Texas Fund Class B .................... 18,839 1.00 -- 14,123 4,716 --
Virginia Fund Class A ................. 1,509,114 0.35 -- 431,175 1,047,278 30,661
Virginia Fund Class B ................. 180,844 1.00 -- 135,633 44,297 914
Virginia Fund Class C ................. 60,554 1.00 -- 45,416 13,192 1,946
Washington Fund Class A ............... -- -- -- -- -- --
Washington Fund Class B ............... 24,013 1.00 -- 18,010 6,003 --
West Virginia Fund Class A ............ 446,892 0.35 -- 127,026 309,054 10,812
West Virginia Fund Class B ............ 74,360 1.00 -- 55,770 18,379 211
- ---------------
(1) Amounts paid under the Class A Distribution Plan for the 12 months ended March 31, 1995.
(2) Includes securities dealers, certain banks and other financial institutions.
(3) For the Alabama, Georgia and New York Funds, MFD is currently waiving the .10% distribution fee for an indefinite period.
</TABLE>
<PAGE>
APPENDIX D
TRUSTEE
COMPENSATION TABLE
The following is information for each Fund concerning the cash compensation
paid to non-interested Trustees and Mr. Bailey and benefits accrued, and
estimated benefits payable, under the retirement plan.
RETIREMENT
TRUSTEE BENEFIT TOTAL
FEES ACCRUED AS ESTIMATED TRUSTEE FEES
FROM PART OF EACH CREDITED FROM FUNDS
EACH FUND'S YEARS OF AND
TRUSTEE FUND(1) EXPENSES(1) SERVICE(2) FUND COMPLEX(3)
- ----------------------- ------- ------------ ---------- -----------------
Marshall N. Cohan ..... $1,441 $839 17 $147,274
J. David Gibbons ...... 1,323 437 13 132,024
Walter E. Robb, III ... 1,441 827 17 147,274
Richard B. Bailey ..... 1,265 212 10 226,221
Ward Smith ............ 1,441 147 13 147,274
Abby M. O'Neill ....... 1,265 126 10 125,924
Dr. Lawrence Cohn ..... 1,324 66 18 133,524
J. Dale Sherratt ...... 1,441 72 20 147,274
- ---------------
(1) For fiscal year ended March 31, 1995.
(2) Based on normal retirement age of 75.
(3) For calendar year ended 1994. All Trustees served as Trustee of 36 funds
within the MFS Fund complex (having aggregate net assets at December 31,
1994, of approximately $9.7 million) except Mr. Bailey, who served as
Trustee of 56 funds within the MFS Fund complex (having aggregate net assets
at December 31, 1994, of approximately $24.5 million).
ESTIMATED ANNUAL BENEFITS PAYABLE BY EACH FUND UPON RETIREMENT(4)
YEARS OF SERVICE
AVERAGE ------------------------------------------------------
TRUSTEE FEES 3 5 7 10 OR MORE
--------------------------------------------------------------------------
$1,200 $180 $300 $420 $600
1,280 192 320 448 640
1,360 204 340 476 680
1,440 216 360 504 720
1,520 228 380 532 760
1,600 240 400 560 800
(4) Other funds in the MFS Fund complex provide similar retirement benefits to
the Trustees.
<PAGE>
<PAGE>
[LOGO] M F S ANNUAL REPORT FOR
THE FIRST NAME IN MUTUAL FUNDS YEAR ENDED
MARCH 31, 1995
MFS(R) MUNICIPAL SERIES TRUST
FOR THE STATES OF: FLORIDA, GEORGIA, MARYLAND, MASSACHUSETTS, NEW YORK,
NORTH CAROLINA, PENNSYLVANIA, SOUTH CAROLINA, VIRGINIA AND WEST VIRGINIA.
[GRAPHIC OMITTED: An 8 1/2" x 11" photo of a highway.]
<PAGE>
MFS(R) MUNICIPAL SERIES TRUST
TRUSTEES
A. Keith Brodkin*
Chairman and President
Richard B. Bailey*
Private Investor;
Former Chairman and Director (until 1991),
Massachusetts Financial Services Company
Marshall N. Cohan
Private Investor
Lawrence H. Cohn, M.D.
Chief of Cardiac Surgery, Brigham and
Women's Hospital; Professor of Surgery,
Harvard Medical School
The Hon. Sir J. David Gibbons, KBE
Chief Executive Officer, Edmund Gibbons Ltd.;
Chairman, Bank of N.T. Butterfield & Son Ltd.
Abby M. O'Neill
Private Investor;
Director, Rockefeller Financial Services, Inc.
(Investment Advisers)
Walter E. Robb, III
President and Treasurer,
Benchmark Advisors, Inc.
(Corporate Financial Consultants)
Arnold D. Scott*
Senior Executive Vice President
and Secretary, Massachusetts Financial Services Company
Jeffrey L. Shames*
President and Chief Equity Officer,
Massachusetts Financial Services Company
J. Dale Sherratt
President, Insight Resources, Inc.
(Acquisition Planning Specialists)
Ward Smith
Former Chairman (until 1994),
NACCO Industries;
Director, Sundstrand Corporation
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116-3741
PORTFOLIO MANAGERS
David R. King*
Geoffrey L. Schechter*
David B. Smith*
TREASURER
W. Thomas London*
ASSISTANT TREASURER
James O. Yost*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
CUSTODIAN
State Street Bank and Trust Company
AUDITORS
Deloitte & Touche LLP
INVESTOR INFORMATION
For MFS stock and bond market outlooks,
call toll free: 1-800-637-4458 anytime from
a touch-tone telephone.
For information on MFS mutual funds,
call your financial adviser or, for an information
kit, call toll free: 1-800-637-2929 any business
day from 9 a.m. to 5 p.m. Eastern time
(or leave a message anytime).
INVESTOR SERVICE
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
For general information, call toll free:
1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
For service to speech- or hearing-impaired,
call toll free: 1-800-637-6576 any business
day from 9 a.m. to 5 p.m. Eastern time.
(To use this service, your phone must be
equipped with a Telecommunications Device
for the Deaf.)
For share prices, account balances and
exchanges, call toll free: 1-800-MFS-TALK
(1-800-637-8255) anytime from a touch-tone
telephone.
- -------------------------------------------
TOP-RATED SERVICE
[SEAL] MFS was rated first when securities
firms evaluated the quality of
service they receive from 40
mutual fund companies. MFS got
high marks for answering calls
quickly, processing transactions
accurately and sending statements
out on time.
(Source: 1994 DALBAR Survey)
- -------------------------------------------
Cover photo: Through their wide range of
investments, MFS mutual funds help you
share in America's growth.
*Affiliated with the Investment Adviser
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
During the fiscal year ended March 31, 1995, all classes of shares of the
individual state Funds available within the Trust enjoyed positive total
returns. For the most part, these returns underperformed the +7.43% return of
the Lehman Brothers Municipal Bond Index (the Lehman Index), an unmanaged index
of national municipal bond investments rated Baa or higher. However, although
this index is considered the benchmark for performance of municipal bonds, it is
comprised of municipal bonds issued nationwide, while each of the Funds in the
Trust is limited to investing in the bonds of a particular state. Because
individual indices for municipal bonds do not exist for all states, we have
provided on the following pages a discussion of each Fund's performance relative
to the Lehman Index.
Economic Environment
The economic expansion, entering its fifth year, gained firmer underpinnings
in 1994 as employers significantly stepped up hiring levels. Increased
employment, stronger capital spending by businesses, and strengthening overseas
economies resulted in 4.1% real (adjusted for inflation) gross domestic product
growth last year. Interest rates rose substantially over the past year, which
should help restrain, but not curtail, the economic expansion. Based on sound
economic fundamentals both here and abroad, we expect the business expansion to
continue well into 1995. However, recent data, including a March rise in the
unemployment rate and the first decline in industrial production in six months,
indicate the increased likelihood of a deceleration in the economy.
Despite a stronger economy, inflation at the consumer level has remained
relatively benign at 2.7% in 1994, the fourth straight year of 3.0% or less. Due
to a prolonged period of below-trend-line growth and continued pressure on
corporations to emphasize effective cost controls, wage growth and unit labor
costs have remained subdued. However, as the economy has exhibited continuing
strength, various industrial commodity prices have been rising substantially
faster than consumer prices. Nevertheless, businesses have had difficulty
passing these price increases on to the consumer. With the economy continuing to
expand, we expect some upward movement in inflation from below 3% to the 3 1/2%
range.
Municipal Bond Market
Municipal bond investors experienced unusual volatility during the fiscal
year ended March 31, 1995, with long-term yields rising 100 basis points through
mid-November, then retracing to finish the fiscal year unchanged. The municipal
market was battered during the first half of the fiscal year by rising
inflationary fears spurred by strong economic growth, and by heavy selling by
tax-exempt mutual funds. However, the market began to improve in December, when
inflation fears subsided and market participants focused on the reduction in
municipal supply. During 1994, new-issue supply declined 44% from 1993's record
level and was down an additional 46% during the first three months of this year.
This reduction in supply, combined with historically heavy bond calls and
redemptions, should result in an unprecedented two consecutive years of fewer
bonds outstanding.
We believe municipals continue to represent good value based on our forecast
of stable to lower long-term interest rates, and that they should provide
attractive after-tax returns relative to alternative fixed-income investments.
Portfolio Strategy
While the portfolio structure of each individual Fund of the Trust will vary
according to both the supply of bonds within each state as well as to the
political and economic environment, each Fund is managed in a similar style.
From a near-term perspective, we have increased the duration (a measure of
interest rate sensitivity) of each Fund in order to benefit more fully from the
recent trend of declining interest rates. Additionally, each portfolio remains
fully invested in an effort to maintain dividends at as high a rate as is
consistent with our prospectus guidelines.
Longer term, we continue to emphasize call protection in order to enhance
shareholder value by enabling the portfolios to sustain their tax-exempt
distribution rates, and to provide opportunities for price appreciation during
periods when rates decline. Additionally, the downgrading of Washington, D.C. to
below investment grade, and the bankruptcy filing by Orange County, California
have demonstrated clearly the importance of fundamental credit analysis. We
continue to monitor closely the changing environment for electric utilities and
hospitals. Another sector which bears watching is multi-family housing due to
recent changes in HUD policies regarding housing assistance programs. As always,
we will look for opportunities to reduce our exposure to declining credits where
appropriate.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
A. Keith Brodkin David R. King, Geoffrey L. Schechter and David B. Smith
Chairman and President Portfolio Managers
April 17, 1995
<PAGE>
The performance of shares of the individual state Funds listed below includes
the reinvestment of distributions but excludes the effects of any sales charges.
Each Fund's results have been compared to the Lehman Index.
The portfolio of each Fund will tend to be structured in similar fashion with
respect to maturity and coupon and sector distribution, reflecting our views on
interest rates, credit quality and financing trends. However, each Fund's
performance will differ because of supply/demand and credit quality conditions,
which vary from state to state.
FLORIDA
The Fund's total returns during the fiscal year ended March 31, 1995 of +6.07%
on Class A shares and +5.06% on Class B shares underperformed the +7.43% return
of the Lehman Index. The primary reason for the underperformance was the
defensive posture adopted by the Fund during the bond market sell-off in 1994,
as we reduced duration (interest rate sensitivity) and increased the coupon
structure. While this strategy proved beneficial during the first half of the
fiscal year, it caused the Fund to lag the market during the rally experienced
in the first quarter of 1995.
GEORGIA
The Fund's total returns during the fiscal year ended March 31, 1995 of +5.65%
on Class A shares and +4.88% on Class B shares underperformed the +7.43% return
of the Lehman Index. The primary reason for the underperformance was the
defensive posture adopted by the Fund during the bond market sell-off in 1994,
as we reduced duration (interest rate sensitivity) and increased the coupon
structure. While this strategy proved beneficial during the first half of the
fiscal year, it caused the Fund to lag the market during the rally experienced
in the first quarter of 1995.
MARYLAND
During the past 12 months, the +6.51% total return on Class A shares of the Fund
was slightly below the +7.43% return of the Lehman Index. Class B shares had a
total return of +5.75% over the same period. The Fund's underperformance
relative to the Lehman Index was attributable to a duration that was shorter
than that of the index for the first quarter of 1995, when the market rallied
sharply. We believe the Fund presently is well-balanced, and we will continue to
adjust duration for 1995 based on our interest rate outlook.
MASSACHUSETTS
During the fiscal year ended March 31, 1995, Class A shares of the Fund, which
provided a total return of +5.89%, and Class B shares, which returned +5.13%,
underperformed the +7.43% return of the Lehman Index. The Fund's structure,
weighted toward higher-coupon bonds, reduced its interest rate volatility during
the period. This strategy worked in its favor during the first eight months of
the fiscal year when general market interest rates were rising. However, it
caused the Fund to underperform in the rally which has occurred during the past
four months.
As the Massachusetts economy continues to improve, the Fund has benefited from
its exposure to the commonwealth's general obligation debt, to the debt of its
agencies, and to the Massachusetts Water Resources Authority. The Fund also
increased its health care exposure by adding to holdings of pre-eminent
institutions such as Brigham & Women's Hospital and New England Deaconess
Hospital, both of which have remained strong regional providers in spite of the
uncertainty and market discount assigned to providers during the health care
reform debate. The Fund did have a few high-coupon bonds called away during the
period, which cannot be replaced in the current interest rate environment.
NEW YORK
The Fund's total returns during the fiscal year ended March 31, 1995 of +6.03%
on Class A shares and +5.17% on Class B shares underperformed the +7.43% return
of the Lehman Index. The primary reason for the underperformance was the
defensive posture adopted by the Fund during the bond market sell-off in 1994,
as we reduced duration (interest rate sensitivity) and increased the coupon
structure. While this strategy proved beneficial for the Fund during the first
half of the fiscal year, it caused the Fund to lag the market during the rally
experienced in the first quarter of 1995.
<PAGE>
NORTH CAROLINA
During the fiscal year ended March 31, 1995, the Fund's total returns of +5.86%
on Class A shares, +5.20% on Class B shares and +5.18% on Class C shares
underperformed the +7.43% return of the Lehman Index. The primary reason for the
underperformance was the defensive posture adopted by the Fund during the bond
market sell-off in 1994, as we reduced duration (interest rate sensitivity) and
increased the coupon structure. While this strategy proved beneficial for the
Fund during the first half of the fiscal year, it caused the Fund to lag the
market during the rally experienced in the first quarter of 1995.
PENNSYLVANIA
During the 12 months ended March 31, 1995, the Fund's Class A share total return
of +8.14% outperformed the +7.43% return of the Lehman Index, while Class B
shares, which returned +7.07%, slightly underperformed the Lehman Index. The
Fund's results were caused by good coupon structure, which enabled it to perform
reasonably well during last year's sell-off and allowed good appreciation during
this year's rally.
VIRGINIA
The Fund's total returns for the 12 months ended March 31, 1995 of +5.67% for
Class A shares, +4.91% for Class B shares and +4.85% for Class C shares,
underperformed the +7.43% return of the Lehman Index. During this period of
interest rate volatility, the Fund took a defensive posture by emphasizing bonds
with higher coupons and distributable income, and by de- emphasizing
market-discount bonds. This strategy worked to the Fund's advantage during the
first eight months of the fiscal year, but to its disadvantage over the last
four months when market-discount bonds substantially outperformed
income-oriented issues.
WEST VIRGINIA
During the fiscal year ended March 31, 1995, the Fund underperformed the Lehman
Index, with Class A shares providing a total return of +6.07% and Class B shares
+5.30%. The lack of new issuance in the state (-56% year-over-year), and the
scarce amount of block-sized secondary-market activity, caused the structure of
the portfolio to remain largely the same during the reporting period. Value was
added as we purchased relatively cheap secondary-market insurance for exisiting
positions, resulting in a net increase in the value of those holdings. In
addition, because interest rates rose over much of the period, we hedged the
portfolio with Treasury bond futures to preserve principal. While the Fund did
participate in the recent rally in the market, it underperformed the Lehman
Index due to its relatively more defensive posture.
PORTFOLIO MANAGER PROFILES
A graduate of the University of New Hampshire and the Babson College Graduate
School of Business Administration, David King began his career at MFS in 1985 as
a member of the Fixed Income Department and was named Assistant Vice President -
Investments in 1987. In 1988 he was named Vice President - Investments. Mr. King
is a Chartered Financial Analyst and currently has portfolio management
responsibility for the Maryland, Pennsylvania and South Carolina Funds.
Geoff Schechter joined MFS in 1993 as an Investment Officer in the Fixed Income
Department. A graduate of the University of Texas and the Boston University
Graduate School of Business Administration, he was named Assistant Vice
President - Investments in 1994, Vice President - Investments in 1995 and
currently has portfolio management responsibilities for the Florida, Georgia,
New York and North Carolina Funds. Mr. Schechter is a Certified Public
Accountant and a Chartered Financial Analyst.
A graduate of Union College and the Babson College Graduate School of Business
Administration, David Smith began his career at MFS in 1988 as a Senior Treasury
Analyst in the Corporate Treasury Department. He was named Research Analyst in
the Fixed Income Department in 1989, Investment Officer in 1990, Assistant Vice
President - Investments in 1991 and Vice President - Investments in 1993. Mr.
Smith is a Chartered Financial Analyst and currently has portfolio management
responsibilities for the Massachusetts, Virginia and West Virginia Funds.
<PAGE>
OBJECTIVE AND POLICIES
The investment objective of each state Fund is to provide current income exempt
from federal income taxes and from the personal income taxes, if any, of the
state to which the Fund's name relates.
Each state Fund seeks to achieve its investment objective by investing its
assets primarily in municipal debt instruments, the interest on which is exempt
from federal income taxes and from the personal income taxes, if any, of the
state to which the Fund's name relates. Generally, each state Fund will invest
at least two-thirds of its assets in tax-exempt securities in the three highest
grades (A or above) of recognized rating agencies or comparable unrated
securities. Each state Fund may also enter into options and futures transactions
and purchase securities on a "when-issued" basis.
PERFORMANCE
The following information illustrates the growth of a hypothetical $10,000
investment for each Fund's Class A shares during the periods indicated in
comparison to various market indicators. Fund results reflect the deduction of
the 4.75% maximum sales charge; benchmark comparisons are unmanaged and do not
reflect any fees or expenses. You cannot invest in an index.
All results reflect the reinvestment of all dividends and capital gains. Please
note that effective September 7, 1993, Class B shares were offered and on
January 3, 1994, Class C shares were offered for certain Funds. Information on
the performance of these classes of shares appears on the following pages.
<PAGE>
MFS FLORIDA MUNICIPAL BOND FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (For the period from February 3,
1992 to March 31, 1995)
Line graph representing the growth of a $10,000 investment for the
period from February 3, 1992 to March 31, 1995. The graph is scaled
from $9,000 to $14,000 in $1,000 segments. The years are marked from
1992 to 1995. There are three lines drawn to scale. One is a solid
line representing MFS Florida Fund (Class A), a second line of short
dashes represents the Lehman Brothers Municipal Bond Index, and a third
line of long dashes represents the Consumer Price Index.
MFS Florida Fund (Class A) $11,701
Lehman Brothers Municipal Bond Index $12,377
Consumer Price Index $10,963
<TABLE>
<S> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS 2/03/92* -
1 Year 3 Years 5 Years 3/31/95
- -----------------------------------------------------------------------------------------------------------------------------
MFS Florida Municipal Bond Fund (Class A) including 4.75% sales charge +1.05% +5.51% -- +5.10%
- -----------------------------------------------------------------------------------------------------------------------------
MFS Florida Municipal Bond Fund (Class A) at net asset value +6.07% +7.24% -- +6.74%
- -----------------------------------------------------------------------------------------------------------------------------
MFS Florida Municipal Bond Fund (Class B) with CDSC+ +1.07% -- -- -3.64%**
- -----------------------------------------------------------------------------------------------------------------------------
MFS Florida Municipal Bond Fund (Class B) without CDSC +5.06% -- -- -1.31%**
- -----------------------------------------------------------------------------------------------------------------------------
Average Florida tax-exempt municipal bond fund +6.67%(58) +7.37%(21) -- +6.97%(19)
- -----------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index +7.43% +7.34% -- +6.97%
- -----------------------------------------------------------------------------------------------------------------------------
Consumer Price Index +2.85% +2.82% -- +2.95%
- -----------------------------------------------------------------------------------------------------------------------------
*Commencement of offering of Class A shares. Benchmark comparisons are from February 1, 1992.
+These returns reflect the current maximum Class B contingent deferred sales charge (CDSC) of 4%.
**For the period from the commencement of offering of Class B shares, September 7, 1993 to March 31, 1995.
</TABLE>
<PAGE>
MFS GEORGIA MUNICIPAL BOND FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (For the period from July 1, 1988 to
March 31, 1995)
Line graph representing the growth of a $10,000 investment for the
period from July 1, 1988 to March 31, 1995. The graph is scaled from
$8,000 to $18,000 in $2,000 segments. The years are marked from 1989
to 1995. There are three lines drawn to scale. One is a solid line
representing MFS Georgia Fund (Class A), a second line of short dashes
represents the Lehman Brothers Municipal Bond Index, and a third line of
long dashes represents the Consumer Price Index.
MFS Georgia Fund (Class A) $15,595
Lehman Brothers Municipal Bond Index $17,276
Consumer Price Index $12,831
<TABLE>
<S> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS 6/06/88* -
1 Year 3 Years 5 Years 3/31/95
- -----------------------------------------------------------------------------------------------------------------------------
MFS Georgia Municipal Bond Fund (Class A) including 4.75% sales charge +0.61% +4.81% +6.49% +6.72%
- -----------------------------------------------------------------------------------------------------------------------------
MFS Georgia Municipal Bond Fund (Class A) at net asset value +5.65% +6.53% +7.53% +7.48%
- -----------------------------------------------------------------------------------------------------------------------------
MFS Georgia Municipal Bond Fund (Class B) with CDSC+ +0.89% -- -- -2.94%**
- -----------------------------------------------------------------------------------------------------------------------------
MFS Georgia Municipal Bond Fund (Class B) without CDSC +4.88% -- -- -0.56%**
- -----------------------------------------------------------------------------------------------------------------------------
Average Georgia tax-exempt municipal bond fund +6.33%(22) +6.68%(7) +7.47%(6) +7.91%(5)
- -----------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index +7.43% +7.34% +8.24% +8.56%
- -----------------------------------------------------------------------------------------------------------------------------
Consumer Price Index +2.85% +2.82% +3.30% +3.78%
- -----------------------------------------------------------------------------------------------------------------------------
*Commencement of offering of Class A shares. Benchmark comparisons are from June 1, 1988.
+These returns reflect the current maximum Class B CDSC of 4%.
**For the period from the commencement of offering of Class B shares, September 7, 1993 to March 31, 1995.
</TABLE>
<PAGE>
MFS MARYLAND MUNICIPAL BOND FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (For the 10-Year Period Ended March
31, 1995)
Line graph representing the growth of a $10,000 investment for the
10-year period ended March 31, 1995. The graph is scaled from $5,000
to $30,000 in $5,000 segments. The years are marked from 1985 to 1995.
There are three lines drawn to scale. One is a solid line representing
MFS Maryland Fund (Class A), a second line of short dashes represents
the Lehman Brothers Municipal Bond Index, and a third line of long dashes
represents the Consumer Price Index.
MFS Maryland Fund (Class A) $20,829
Lehman Brothers Municipal Bond Index $25,456
Consumer Price Index $14,227
<TABLE>
<S> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS
1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------------------------------------------------------------------------------
MFS Maryland Municipal Bond Fund (Class A) including 4.75% sales charge +1.48% +4.04% +5.83% +7.61%
- -----------------------------------------------------------------------------------------------------------------------------
MFS Maryland Municipal Bond Fund (Class A) at net asset value +6.51% +5.74% +6.86% +8.14%
- -----------------------------------------------------------------------------------------------------------------------------
MFS Maryland Municipal Bond Fund (Class B) with CDSC+ +1.75% -- -- -2.37%**
- -----------------------------------------------------------------------------------------------------------------------------
MFS Maryland Municipal Bond Fund (Class B) without CDSC +5.75% -- -- 0.00%**
- -----------------------------------------------------------------------------------------------------------------------------
Average Maryland tax-exempt municipal bond fund +6.17%(23) +6.69%(13) +7.34%(8) +7.76%(2)
- -----------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index +7.43% +7.34% +8.24% +9.79%
- -----------------------------------------------------------------------------------------------------------------------------
Consumer Price Index +2.85% +2.82% +3.30% +3.59%
- -----------------------------------------------------------------------------------------------------------------------------
+These returns reflect the current maximum Class B CDSC of 4%.
**For the period from the commencement of offering of Class B shares, September 7, 1993 to March 31, 1995.
</TABLE>
<PAGE>
MFS MASSACHUSETTS MUNICIPAL BOND FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (For the period from May 1, 1985 to
March 31, 1995)
Line graph representing the growth of a $10,000 investment for the
period from May 1, 1985 to March 31, 1995. The graph is scaled from
$5,000 to $30,000 in $5,000 segments. The years are marked from 1986
to 1995. There are three lines drawn to scale. One is a solid line
representing MFS Massachusetts Fund (Class A), a second line of short
dashes represents the Lehman Brothers Municipal Bond Index, and a third
line of long dashes represents the Consumer Price Index.
MFS Massachusetts Fund (Class A) $21,266
Lehman Brothers Municipal Bond Index $24,557
Consumer Price Index $14,169
<TABLE>
<S> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS 4/09/85* -
1 Year 3 Years 5 Years 3/31/95
- -----------------------------------------------------------------------------------------------------------------------------
MFS Massachusetts Municipal Bond Fund (Class A) including 4.75% sales charge +0.89% +4.82% +6.59% +7.87%
- -----------------------------------------------------------------------------------------------------------------------------
MFS Massachusetts Municipal Bond Fund (Class A) at net asset value +5.89% +6.54% +7.63% +8.40%
- -----------------------------------------------------------------------------------------------------------------------------
MFS Massachusetts Municipal Bond Fund (Class B) with CDSC+ +1.15% -- -- -1.92%**
- -----------------------------------------------------------------------------------------------------------------------------
MFS Massachusetts Municipal Bond Fund (Class B) without CDSC +5.13% -- -- +0.42%**
- -----------------------------------------------------------------------------------------------------------------------------
Average Massachusetts tax-exempt municipal bond fund +6.36%(39) +7.14%(22) +7.97%(18) +8.55%(5)
- -----------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index +7.43% +7.34% +8.24% +9.79%
- -----------------------------------------------------------------------------------------------------------------------------
Consumer Price Index +2.85% +2.82% +3.30% +3.59%
- -----------------------------------------------------------------------------------------------------------------------------
*Commencement of offering of Class A shares. Benchmark comparisons are from April 1, 1985.
+These returns reflect the current maximum Class B CDSC of 4%.
**For the period from the commencement of offering of Class B shares, September 7, 1993 to March 31, 1995.
</TABLE>
<PAGE>
MFS NEW YORK MUNICIPAL BOND FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (For the period from July 1, 1988 to
March 31, 1995)
Line graph representing the growth of a $10,000 investment for the
period from July 1, 1988 to March 31, 1995. The graph is scaled from
$8,000 to $18,000 in $2,000 segments. The years are marked from 1989
to 1995. There are three lines drawn to scale. One is a solid line
representing MFS New York Fund (Class A), a second line of short
dashes represents the Lehman Brothers Municipal Bond Index, and a third
line of long dashes represents the Consumer Price Index.
MFS New York Fund (Class A) $16,362
Lehman Brothers Municipal Bond Index $17,276
Consumer Price Index $12,831
<TABLE>
<S> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS 6/06/88* -
1 Year 3 Years 5 Years 3/31/95
- -----------------------------------------------------------------------------------------------------------------------------
MFS New York Municipal Bond Fund (Class A) including 4.75% sales charge +1.03% +5.83% +7.54% +7.47%
- -----------------------------------------------------------------------------------------------------------------------------
MFS New York Municipal Bond Fund (Class A) at net asset value +6.03% +7.56% +8.59% +8.24%
- -----------------------------------------------------------------------------------------------------------------------------
MFS New York Municipal Bond Fund (Class B) with CDSC+ +1.17% -- -- -2.26%**
- -----------------------------------------------------------------------------------------------------------------------------
MFS New York Municipal Bond Fund (Class B) without CDSC +5.17% -- -- +0.10%**
- -----------------------------------------------------------------------------------------------------------------------------
Average New York tax-exempt municipal bond fund +5.20%(70) +6.98%(47) +7.93%(37) +8.14%(31)
- -----------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index +7.43% +7.34% +8.24% +8.56%
- -----------------------------------------------------------------------------------------------------------------------------
Consumer Price Index +2.85% +2.82% +3.30% +3.78%
- -----------------------------------------------------------------------------------------------------------------------------
*Commencement of offering of Class A shares. Benchmark comparisons are from June 1, 1988.
+These returns reflect the current maximum Class B CDSC of 4%.
**For the period from the commencement of offering of Class B shares, September 7, 1993 to March 31, 1995.
</TABLE>
<PAGE>
MFS NORTH CAROLINA MUNICIPAL BOND FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (For the 10-Year Period Ended March
31, 1995)
Line graph representing the growth of a $10,000 investment for the
10-year period ended March 31, 1995. The graph is scaled from $5,000
to $30,000 in $5,000 segments. The years are marked from 1985 to 1995.
There are three lines drawn to scale. One is a solid line representing
MFS North Carolina Fund (Class A), a second line of short dashes
represents the Lehman Brothers Municipal Bond Index, and a third line of
long dashes represents the Consumer Price Index.
MFS North Carolina Fund (Class A) $21,750
Lehman Brothers Municipal Bond Index $25,456
Consumer Price Index $14,227
<TABLE>
<S> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS
1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------------------------------------------------------------------------------
MFS North Carolina Municipal Bond Fund (Class A) including 4.75% sales charge +0.86% +4.42% +5.88% +8.08%
- -----------------------------------------------------------------------------------------------------------------------------
MFS North Carolina Municipal Bond Fund (Class A) at net asset value +5.86% +6.13% +6.91% +8.61%
- -----------------------------------------------------------------------------------------------------------------------------
MFS North Carolina Municipal Bond Fund (Class B) with CDSC+ +1.21% -- -- -2.28%**
- -----------------------------------------------------------------------------------------------------------------------------
MFS North Carolina Municipal Bond Fund (Class B) without CDSC +5.20% -- -- +0.10%**
- -----------------------------------------------------------------------------------------------------------------------------
MFS North Carolina Municipal Bond Fund (Class C) +5.18% -- -- -0.40%***
- -----------------------------------------------------------------------------------------------------------------------------
Average North Carolina tax-exempt municipal bond fund +6.35%(26) +6.60%(8) +7.27%(5) +8.28%(2)
- -----------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index +7.43% +7.34% +8.24% +9.79%
- -----------------------------------------------------------------------------------------------------------------------------
Consumer Price Index +2.85% +2.82% +3.30% +3.59%
- -----------------------------------------------------------------------------------------------------------------------------
+These returns reflect the current maximum Class B CDSC of 4%.
**For the period from the commencement of offering of Class B shares, September 7, 1993 to March 31, 1995.
***For the period from the commencement of offering of Class C shares, January 3, 1994 to March 31, 1995.
</TABLE>
<PAGE>
MFS PENNSYLVANIA MUNICIPAL BOND FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (For the period from February 1,
1993 to March 31, 1995)
Line graph representing the growth of a $10,000 investment for the
period from February 1, 1993 to March 31, 1995. The graph is scaled
from $9,500 to $12,000 in $500 segments. The years are marked from
1993 to 1995. There are three lines drawn to scale. One is a solid
line representing MFS Pennsylvania Fund (Class A), a second line of
short dashes represents the Lehman Brothers Municipal Bond Index, and a
third line of long dashes represents the Consumer Price Index.
MFS Pennsylvania Fund (Class A) $10,519
Lehman Brothers Municipal Bond Index $11,269
Consumer Price Index $10,617
<TABLE>
<S> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS 2/01/93* -
1 Year 3 Years 5 Years 3/31/95
- -----------------------------------------------------------------------------------------------------------------------------
MFS Pennsylvania Municipal Bond Fund (Class A) including 4.75% sales charge +2.97% -- -- +2.37%
- -----------------------------------------------------------------------------------------------------------------------------
MFS Pennsylvania Municipal Bond Fund (Class A) at net asset value +8.14% -- -- +4.71%
- -----------------------------------------------------------------------------------------------------------------------------
MFS Pennsylvania Municipal Bond Fund (Class B) with CDSC+ +3.07% -- -- -2.45%**
- -----------------------------------------------------------------------------------------------------------------------------
MFS Pennsylvania Municipal Bond Fund (Class B) without CDSC +7.07% -- -- -0.07%**
- -----------------------------------------------------------------------------------------------------------------------------
Average Pennsylvania tax-exempt municipal bond fund +6.39%(47) -- -- +5.33%(29)
- -----------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index +7.43% -- -- +5.67%
- -----------------------------------------------------------------------------------------------------------------------------
Consumer Price Index +2.85% -- -- +2.80%
- -----------------------------------------------------------------------------------------------------------------------------
*Commencement of offering of Class A shares.
+These returns reflect the current maximum Class B CDSC of 4%.
**For the period from the commencement of offering of Class B shares, September 7, 1993 to March 31, 1995.
</TABLE>
<PAGE>
MFS SOUTH CAROLINA MUNICIPAL BOND FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (For the 10-Year Period Ended March
31, 1995)
Line graph representing the growth of a $10,000 investment for the
10-year period ended March 31, 1995. The graph is scaled from $5,000
to $30,000 in $5,000 segments. The years are marked from 1985 to 1995.
There are three lines drawn to scale. One is a solid line representing
MFS South Carolina Fund (Class A), a second line of short dashes
represents the Lehman Brothers Municipal Bond Index, and a third line of
long dashes represents the Consumer Price Index.
MFS South Carolina Fund (Class A) $22,630
Lehman Brothers Municipal Bond Index $25,456
Consumer Price Index $14,227
<TABLE>
<S> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS
1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------------------------------------------------------------------------------
MFS South Carolina Municipal Bond Fund (Class A) including 4.75% sales charge +1.84% +4.94% +6.38% +8.51%
- -----------------------------------------------------------------------------------------------------------------------------
MFS South Carolina Municipal Bond Fund (Class A) at net asset value +6.93% +6.66% +7.42% +9.04%
- -----------------------------------------------------------------------------------------------------------------------------
MFS South Carolina Municipal Bond Fund (Class B) with CDSC+ +2.26% -- -- -1.62%**
- -----------------------------------------------------------------------------------------------------------------------------
MFS South Carolina Municipal Bond Fund (Class B) without CDSC +6.26% -- -- +0.78%**
- -----------------------------------------------------------------------------------------------------------------------------
Average South Carolina tax-exempt municipal bond fund +6.64%(13) +6.82%(3) +7.46%(2) +9.04%(1)
- -----------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index +7.43% +7.34% +8.24% +9.79%
- -----------------------------------------------------------------------------------------------------------------------------
Consumer Price Index +2.85% +2.82% +3.30% +3.59%
- -----------------------------------------------------------------------------------------------------------------------------
+These returns reflect the current maximum Class B CDSC of 4%.
**For the period from the commencement of offering of Class B shares, September 7, 1993 to March 31, 1995.
</TABLE>
<PAGE>
MFS VIRGINIA MUNICIPAL BOND FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (For the 10-Year Period Ended March
31, 1995)
Line graph representing the growth of a $10,000 investment for the
10-year period ended March 31, 1995. The graph is scaled from $5,000
to $30,000 in $5,000 segments. The years are marked from 1985 to 1995.
There are three lines drawn to scale. One is a solid line representing
MFS Virginia Fund (Class A), a second line of short dashes represents
the Lehman Brothers Municipal Bond Index, and a third line of long dashes
represents the Consumer Price Index.
MFS Virginia Fund (Class A) $21,339
Lehman Brothers Municipal Bond Index $25,456
Consumer Price Index $14,227
<TABLE>
<S> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS
1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------------------------------------------------------------------------------
MFS Virginia Municipal Bond Fund (Class A) including 4.75% sales charge +0.61% +4.21% +5.96% +7.88%
- -----------------------------------------------------------------------------------------------------------------------------
MFS Virginia Municipal Bond Fund (Class A) at net asset value +5.67% +5.91% +6.99% +8.40%
- -----------------------------------------------------------------------------------------------------------------------------
MFS Virginia Municipal Bond Fund (Class B) with CDSC+ +0.93% -- -- -2.63%**
- -----------------------------------------------------------------------------------------------------------------------------
MFS Virginia Municipal Bond Fund (Class B) without CDSC +4.91% -- -- -0.27%**
- -----------------------------------------------------------------------------------------------------------------------------
MFS Virginia Municipal Bond Fund (Class C) +4.85% -- -- -0.98%***
- -----------------------------------------------------------------------------------------------------------------------------
Average Virginia tax-exempt municipal bond fund +6.28%(24) +6.93%(12) +7.39%(5) +8.40%(1)
- -----------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index +7.43% +7.34% +8.24% +9.79%
- -----------------------------------------------------------------------------------------------------------------------------
Consumer Price Index +2.85% +2.82% +3.30% +3.59%
- -----------------------------------------------------------------------------------------------------------------------------
+These returns reflect the current maximum Class B CDSC of 4%.
**For the period from the commencement of offering of Class B shares, September 7, 1993 to March 31, 1995.
***For the period from the commencement of offering of Class C shares, January 3, 1994 to March 31, 1995.
</TABLE>
<PAGE>
MFS WEST VIRGINIA MUNICIPAL BOND FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (For the 10-Year Period Ended March
31, 1995)
Line graph representing the growth of a $10,000 investment for the
10-year period ended March 31, 1995. The graph is scaled from $5,000
to $30,000 in $5,000 segments. The years are marked from 1985 to 1995.
There are three lines drawn to scale. One is a solid line representing
MFS West Virginai Fund (Class A), a second line of short dashes
represents the Lehman Brothers Municipal Bond Index, and a third line of
long dashes represents the Consumer Price Index.
MFS west Virginai Fund (Class A) $22,131
Lehman Brothers Municipal Bond Index $25,456
Consumer Price Index $14,227
<TABLE>
<S> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS
1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------------------------------------------------------------------------------
MFS West Virginia Municipal Bond Fund (Class A) including 4.75% sales charge +1.01% +4.81% +6.45% +8.27%
- -----------------------------------------------------------------------------------------------------------------------------
MFS West Virginia Municipal Bond Fund (Class A) at net asset value +6.07% +6.53% +7.49% +8.79%
- -----------------------------------------------------------------------------------------------------------------------------
MFS West Virginia Municipal Bond Fund (Class B) with CDSC+ +1.30% -- -- -1.95%**
- -----------------------------------------------------------------------------------------------------------------------------
MFS West Virginia Municipal Bond Fund (Class B) without CDSC +5.30% -- -- +0.43%**
- -----------------------------------------------------------------------------------------------------------------------------
Average other state tax-exempt municipal bond fund +5.79%(39) +6.56%(11) +7.10%(6) +8.79%(1)
- -----------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index +7.43% +7.34% +8.24% +9.79%
- -----------------------------------------------------------------------------------------------------------------------------
Consumer Price Index +2.85% +2.82% +3.30% +3.59%
- -----------------------------------------------------------------------------------------------------------------------------
+These returns reflect the current maximum Class B CDSC of 4%.
**For the period from the commencement of offering of Class B shares, September 7, 1993 to March 31, 1995.
</TABLE>
<PAGE>
In the tables on the previous pages, we have included the average annual total
returns of state tax-exempt funds (including the Funds) tracked by Lipper
Analytical Services, Inc. (an independent firm which reports mutual fund
performance) for the applicable time periods ended March 31, 1995. The number of
funds in each state tax-exempt category is noted parenthetically next to each
respective return. Because these returns do not reflect any applicable sales
charge, we have also included the Funds' results at net asset value (no sales
charge) for comparison. The Consumer Price Index is a popular measure of change
in prices. All results are historical and, therefore, are not an indication of
future results. The principal value and income return of an investment in a
mutual fund will vary with changes in market conditions, and shares, when
redeemed, may be worth more or less than their original cost. All Fund results
reflect the applicable expense subsidy which is explained in the Notes to
Financial Statements. Had the subsidy not been in effect, the results would have
been less favorable. The subsidy may be rescinded by MFS at any time.
<TABLE>
<CAPTION>
FEDERAL INCOME TAX INFORMATION ON DISTRIBUTIONS (For the year ended March 31, 1995)
Sources of Distributions Paid++ New North South West
Florida Georgia Maryland Massachusetts York Carolina Pennsylvania Carolina Virginia Virginia
Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
(Class A) $0.53950 $0.55850 $0.59000 $0.64200 $0.56671 $0.60350 $0.53950 $0.62450 $0.61200 $0.61850
(Class B) $0.43832 $0.47325 $0.51171 $0.56419 $0.48112 $0.52151 $0.44763 $0.53976 $0.53212 $0.53780
(Class C) -- -- -- -- -- $0.52955 -- -- $0.54043 --
Short-term capital gains:
(Class A) $0.02286 $0.00583 $0.00151 $0.00218 $0.01698 $0.01768 $0.02106 $0.01806 $0.02036 $0.00240
(Class B) $0.02286 $0.00583 $0.00151 $0.00218 $0.01698 $0.01768 $0.02106 $0.01806 $0.02036 $0.00240
(Class C) -- -- -- -- -- $0.01768 -- -- $0.02036 --
Long-term capital gains
(Class A, Class B
and Class C) $0.04616 $0.02789 $0.00846 $0.02836 $0.03429 $0.08238 $0.01498 $0.06043 $0.03093 $0.12230
Record date: 6/02/94
Payable date: 6/10/94
Long-term capital gains
(Class A, Class B
and Class C) -- -- $0.02947 -- -- -- -- $0.01032 -- --
Record date: 12/02/94
Payable date: 12/12/94
++Estimated at time of report.
</TABLE>
TAX FORM SUMMARY
In January 1995, shareholders were mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1994.
EXEMPT-INTEREST DIVIDENDS
For federal income tax purposes, 99% of the total dividends paid by each Fund
from net investment income during the year ended March 31, 1995 is designated as
an exempt-interest dividend.
<PAGE>
PORTFOLIO OF INVESTMENTS - March 31, 1995
MFS FLORIDA MUNICIPAL BOND FUND
Municipal Bonds - 97.0%
- ----------------------------------------------------------------------------
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------
General Obligation - 5.6%
AA Florida Board of Education, Capital Outlay,
9.125s, 2014 $2,600 $ 3,569,462
AA Palm Beach County, FL, 6.5s, 2010 2,000 2,139,700
------------
$ 5,709,162
- ----------------------------------------------------------------------------
State and Local Appropriation - 3.0%
AAA Bay County, FL, School Board, Certificates
of Participation, AMBAC, 6.75s, 2012 $1,000 $ 1,081,400
AAA Palm Beach County, FL, School Board,
Certificates of Participation, AMBAC,
6.375s, 2015 2,000 2,045,080
------------
$ 3,126,480
- ----------------------------------------------------------------------------
Refunded and Special Obligation - 5.8%
AAA Broward County, FL, School District,
7.125s, 2008 $ 250 $ 273,918
AAA Dade County, FL, School District, 7.375s,
2008 1,000 1,109,770
AAA Florida Board of Education, Capital Outlay,
9.125s, 2014 400 537,816
AAA Florida Board of Education, Capital Outlay,
7.25s, 2023 510 569,394
AAA Florida Turnpike Authority Rev., AMBAC,
7.125s, 2018 1,250 1,405,412
AAA Gainesville, FL, Utility Systems Rev.,
AMBAC, 7.25s, 2013 500 547,335
AAA Orange County, FL, Tourist Development Tax
Rev., AMBAC, 7.25s, 2010 500 560,995
AAA Puerto Rico Highway & Transportation
Authority, Highway Rev., 6.625s, 2018 100 111,123
A Puerto Rico Public Buildings Authority,
6.875s, 2021 740 833,440
------------
$ 5,949,203
- ----------------------------------------------------------------------------
Federally Guaranteed Housing Revenue - 0.1%
NR Dade County, FL, Housing Finance Authority,
7s, 2024 $ 75 $ 77,281
- ----------------------------------------------------------------------------
Single Family Housing Revenue - 1.0%
AAA Dade County, FL, Housing Finance Authority,
6.95s, 2012 $1,000 $ 1,041,030
- ----------------------------------------------------------------------------
Multi-Family Housing Revenue - 1.5%
NR Florida Housing Finance Agency (Southlake
Apartments), 8.7s, 2021 $1,500 $ 1,509,360
- ----------------------------------------------------------------------------
Insured Health Care Revenue - 13.9%
AAA Brevard County, FL, Health Facilities
Authority Rev. (Holmes Regional Medical),
MBIA-IBC, 5.75s, 2013 $2,000 $ 1,948,600
AAA Brevard County, FL, Health Facilities
Authority Rev. (Wuesthoff Memorial),
MBIA, 6.5s, 2007 1,000 1,057,250
AAA Brevard County, FL, Health Facilities
Authority Rev. (Wuesthoff Memorial), MBIA-
IBC, 7.2s, 2013 1,000 1,073,670
AAA Charlotte County, FL, Public Facilities
Authority Rev. (Bon Secours), FSA,
7.538s, 2027++ 2,500 2,468,325
AAA Hillsborough County, FL, Industrial
Development Authority (University
Community Hospital), MBIA, 5.75s, 2014 2,000 1,938,300
AAA Hillsborough County, FL, Industrial
Development Authority (University
Community Hospital), MBIA, 6.5s, 2019 1,000 1,058,250
AAA Jacksonville, FL, Hospital Rev. (Baptist
Medical), MBIA, 7.3s, 2019 1,900 2,031,898
AAA Jacksonville, FL, Hospital Rev. (University
Medical Center, Inc.), Connie Lee, 6.6s, 2013 500 518,935
AAA Tallahassee, FL, Health Facilities Rev.
(Tallahassee Memorial Regional Medical),
MBIA, 6.625s, 2013 1,000 1,068,690
AAA Tampa, FL, Allegany Health System (St.
Joseph Hospital), MBIA, 6.5s, 2023 1,000 1,044,390
------------
$ 14,208,308
- ----------------------------------------------------------------------------
Health Care Revenue - 9.9%
NR Brevard County, FL, Health Facilities
Authority Rev. (Friendly Village),
9.25s, 2012 $ 375 $ 384,019
BBB+ Escambia County, FL, Health Facilities
Authority (Baptist Hospital), 6s, 2014 2,500 2,287,075
BBB+ Escambia County, FL, Health Facilities
Authority (Baptist Hospital & Baptist
Manor), 6.75s, 2014 1,000 997,480
NR Jacksonville, FL, Health Facilities
Authority, Industrial Development Rev.
(Cypress Village), 7s, 2014 1,250 1,248,450
NR Jacksonville, FL, Health Facilities
Authority, Industrial Development Rev.
(National Benevolent Assn./Cypress),
6.4s, 2016 1,475 1,716,467
NR Orange County, FL, Industrial Development
Authority Rev. (Friendly Village),
9.25s, 2012 335 347,318
A- Palm Beach County, FL, Health Facilities
Authority Rev. (Good Samaritan Health
System), 6.3s, 2022 2,750 2,704,213
NR St. Petersburg, FL, Health Facilities Rev.
(Swanholm Nursing), 10s, 2022 490 522,418
------------
$ 10,207,440
- ----------------------------------------------------------------------------
Electric and Gas Utility Revenue - 29.2%
AAA Charlotte County, FL, Utility Systems Rev.,
FGIC, 5.25s, 2021 $2,000 $ 1,780,320
AAA Charlotte County, FL, Utility Systems Rev.,
FGIC, 6.875s, 2021 500 538,700
AAA Escambia County, FL, Utilities District,
Utility Systems Rev., FGIC, 6.25s, 2015 1,500 1,539,225
AA Gainesville, FL, Utility Systems Rev.,
5.5s, 2013 5,000 4,738,100
AA- Hillsborough County, FL, Industrial
Development Authority, Pollution Control
Rev. (Tampa Electric Co.), 8s, 2022 3,000 3,480,210
AA Jacksonville, FL, Electric Authority Rev.
(St. Johns River Power), 5.5s, 2013 1,000 951,920
AA Jacksonville, FL, Electric Authority Rev.
(St. Johns River Power), 5.5s, 2014 1,000 951,660
AAA Kissimmee, FL, Utilities Authority,
Electric Systems Rev., FGIC, 5.25s, 2018 1,500 1,352,145
AA- Lakeland, FL, Electric & Water Rev.,
0s, 2011 5,000 1,892,850
AA- Lakeland, FL, Electric & Water Rev.,
0s, 2012 3,000 1,056,210
BBB- Martin County, FL, Industrial Development
Authority (Indiantown Cogeneration
Project), 7.875s, 2025 3,625 3,868,708
AA- Orlando, FL, Utilities Commission, Water &
Electric Rev., 6.75s, 2017 250 278,295
NR Palm Beach County, FL, Industrial
Development Rev. (Osceola Power Project),
6.85s, 2014 3,000 2,890,920
A- Puerto Rico Electric Power Authority Rev.,
6.125s, 2008 2,400 2,428,224
A- Puerto Rico Electric Power Authority Rev.,
7s, 2011 240 256,354
AAA Puerto Rico Electric Power Authority Rev.,
FSA, 6s, 2016 2,000 1,997,260
------------
$ 30,001,101
- ----------------------------------------------------------------------------
Water and Sewer Utility Revenue - 6.3%
AAA Bradenton, FL, Utility System Rev., FGIC,
0s, 2007 $ 600 $ 297,810
AAA Bradenton, FL, Utility System Rev., FGIC,
0s, 2008 1,000 461,340
AAA Miramar, FL, Wastewater Improvement, FGIC,
6.75s, 2016 1,500 1,606,425
A Puerto Rico Aqueduct & Sewer Authority,
7.875s, 2017 1,000 1,086,750
AAA Seminole, FL, Water & Sewer Improvement
Rev., MBIA, 6s, 2019 3,000 2,988,570
------------
$ 6,440,895
- ----------------------------------------------------------------------------
Turnpike Revenue - 5.0%
AAA Florida Turnpike Authority Rev., FGIC, 5s,
2013 $2,000 $ 1,783,520
A- Orlando & Orange County, FL, Expressway
Rev., 5.95s, 2023 3,500 3,370,220
------------
$ 5,153,740
- ----------------------------------------------------------------------------
Airport and Port Revenue - 1.9%
AAA Dade County, FL, Aviation Rev., MBIA,
5.75s, 2015 $2,000 $ 1,911,720
- ----------------------------------------------------------------------------
Sales and Excise Tax Revenue - 6.6%
AAA Broward County, FL, Tourist Development
Rev. (Convention Center), AMBAC,
5.625s, 2013 $1,805 $ 1,735,525
AAA Jacksonville, FL, Capital Improvement
(Gator Bowl), AMBAC, 5.5s, 2014 2,000 1,898,880
AAA Jacksonville, FL, Excise Tax Rev., FGIC,
0s, 2010 1,000 391,970
AAA Jacksonville, FL, Excise Tax Rev., FGIC,
0s, 2011 1,000 366,020
AAA Lee County, FL, Capital Improvement Rev.,
MBIA, 0s, 2012 2,000 696,980
A Puerto Rico Highway & Transportation
Authority Rev., 6.625s, 2018 1,000 1,027,450
AAA Sunrise, FL, Public Facilities Rev., MBIA,
0s, 2020 3,100 656,673
------------
$ 6,773,498
- ----------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 4.5%
BBB Escambia County, FL, Pollution Control Rev.
(Champion International Corp.), 6.95s,
2007 $2,500 $ 2,590,825
BBB Escambia County, FL, Pollution Control Rev.
(Champion International Corp.), 6.8s,
2012 1,000 1,026,910
BBB Escambia County, FL, Pollution Control Rev.
(Champion International Corp.), 6.9s,
2022 1,000 1,017,030
------------
$ 4,634,765
- ----------------------------------------------------------------------------
Other - 2.7%
AAA Gainesville, FL, Entitlement Rev., AMBAC,
5.5s, 2017 $1,250 $ 1,176,389
A Hillsborough County, FL, Capital
Improvement Rev., 6.75s, 2022 1,500 1,564,920
------------
$ 2,741,309
- ------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $95,734,249) $ 99,485,292
- ------------------------------------------------------------------------------
Floating Rate Demand Note - 0.1%
- ------------------------------------------------------------------------------
Hillsborough County, FL, Pollution Control
Rev. (Tampa Electric Co.), due 5/15/18,
at Identified Cost $ 100 $ 100,000
- ----------------------------------------------------------------------------
Total Investments (Identified Cost, $95,834,249) $ 99,585,292
Other Assets, Less Liabilities - 2.9% 2,975,619
- ----------------------------------------------------------------------------
Net Assets - 100.0% $102,560,911
- ----------------------------------------------------------------------------
++Inverse floating rate security.
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - March 31, 1995
MFS GEORGIA MUNICIPAL BOND FUND
Municipal Bonds - 96.9%
- ----------------------------------------------------------------------------
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------
General Obligation - 13.9%
AA Atlanta, GA, 5.6s, 2018 $2,800 $ 2,638,832
AA+ DeKalb County, GA, Health Facilities,
5.5s, 2020 1,500 1,416,690
AA Fulton County, GA, School District,
6.375s, 2010 2,000 2,134,760
AA Fulton County, GA, School District,
6.375s, 2012 1,000 1,067,210
AA+ State of Georgia, 5.25s, 2009 1,500 1,449,630
AA+ State of Georgia, 5s, 2010 1,000 934,560
AA+ State of Georgia, 5.25s, 2011 1,500 1,446,195
NR Territory of Virgin Islands, 7.75s, 2006 440 483,305
-----------
$11,571,182
- ----------------------------------------------------------------------------
State and Local Appropriation - 4.0%
AA Fulton County, GA, Building Authority Rev.
(Judicial Center Project), 0s, 2011 $3,000 $ 1,165,380
AA Fulton County, GA, Building Authority Rev.
(Judicial Center Project), 0s, 2012 6,015 2,182,483
-----------
$ 3,347,863
- ----------------------------------------------------------------------------
Refunded and Special Obligation - 4.9%
AA+ DeKalb County, GA, 7.5s, 2020 $ 780 $ 873,545
AAA Fulton County, GA, School District,
7.625s, 2017 500 543,125
NR Hogansville, GA, Combined Public Utility
Systems Rev., 9s, 2015 2,200 2,635,754
-----------
$ 4,052,424
- ----------------------------------------------------------------------------
Single Family Housing Revenue - 3.1%
AAA DeKalb County, GA, Housing Authority,
Single Family Rev., GNMA, 7.75s, 2022 $ 495 $ 513,454
AA+ Georgia Housing & Finance Authority Rev.,
6.5s, 2011 465 473,802
AA+ Georgia Residential Finance Authority, Home
Ownership Mortgage, 8s, 2020 420 446,510
AA+ Georgia Residential Finance Authority,
Single Family Insured Mortgage,
8.25s, 2019 290 306,449
AA+ Georgia Residential Finance Authority,
Single Family Insured Mortgage,
8.375s, 2019 400 422,684
AA+ Georgia Residential Finance Authority,
Single Family Insured Mortgage,
7.25s, 2021 365 383,440
AAA Puerto Rico Housing Finance Corp., Single
Family Mortgage, GNMA, 7.8s, 2021 40 41,946
-----------
$ 2,588,285
- ----------------------------------------------------------------------------
Multi-Family Housing Revenue - 6.6%
A Cobb County, GA, Housing Authority Rev.
(Signature Place Project), 6.875s, 2017 $3,000 $ 3,043,560
NR Hinesville, GA, Leased Housing Corp. Rev.
(Baytree Apartments), 6.7s, 2017 900 921,816
AAA St. Mary's, GA, Housing Authority
(Cumberland Oaks Apartments), FHA,
7.375s, 2022 1,470 1,548,454
-----------
$ 5,513,830
- ----------------------------------------------------------------------------
Insured Health Care Revenue - 7.7%
AAA Albany-Dougherty County, GA, Hospital
Authority Rev. (Phoebe Putney Memorial
Hospital, Inc.), AMBAC, 5s, 2020 $1,000 $ 848,440
AAA Macon-Bibb County, GA, Hospital Authority
Rev. (Memorial Medical Center), FGIC,
5.25s, 2011 1,000 928,180
AAA Marietta, GA, Development Authority Rev.
(Life College, Inc.), CGIC, 7.2s, 2009 1,250 1,342,138
AAA Marietta, GA, Development Authority Rev.
(Life College, Inc.), CGIC, 7.25s, 2019 1,000 1,063,060
AAA Medical Center Hospital Authority, GA
(Columbus Regional Healthcare System),
MBIA, 5s, 2013 1,500 1,335,705
AAA Medical Center Hospital Authority, GA
(Columbus Regional Healthcare System),
MBIA, 5s, 2018 1,000 864,980
-----------
$ 6,382,503
- ----------------------------------------------------------------------------
Health Care Revenue - 6.1%
NR Fulton County, GA, Residential Care
Facilities, Elderly Authority Rev.
(Lenbrook Square Foundation), 9.75s, 2017 $1,065 $ 1,102,818
NR Richmond County, GA, Development Authority,
Nursing Home Rev. (Beverly Enterprises),
8.75s, 2011 1,190 1,280,678
NR Royston, GA, Hospital Authority Rev. (Cobb
Health), 7.375s, 2014 1,565 1,561,291
BBB+ Savannah, GA, Hospital Authority Rev.
(Candler Hospital), 7s, 2011 1,100 1,097,085
-----------
$ 5,041,872
- ----------------------------------------------------------------------------
Electric and Gas Utility Revenue - 9.7%
AAA Appling County, GA, Development Authority
(Oglethorpe Power Corp.), MBIA,
7.15s, 2021 $1,400 $ 1,501,584
AAA Georgia Municipal Electric Authority, Power
Rev., BIG, 0s, 2008 2,500 1,180,350
AAA Georgia Municipal Electric Authority, Power
Rev., BIG, 0s, 2009 1,500 664,155
AAA Georgia Municipal Electric Authority, Power
Rev., AMBAC, 0s, 2013 1,675 565,145
A+ Georgia Municipal Electric Authority, Power
Rev., 5.68s, 2023##++ 3,450 2,845,111
AAA Georgia Municipal Electric Authority,
Special Obligation, MBIA, 6.5s, 2020 1,250 1,311,700
-----------
$ 8,068,045
- ----------------------------------------------------------------------------
Water and Sewer Utility Revenue - 17.5%
AA- Atlanta, GA, Water & Sewer Rev., 5s, 2015 $2,200 $ 1,937,606
NR Barnesville, GA, Water & Sewer Rev.,
6.9s, 2022 1,715 1,750,723
AAA Brunswick, GA, Water & Sewer Rev., MBIA,
6.1s, 2014 1,000 1,024,050
AAA Cartersville, GA, Water & Sewer Rev.,
AMBAC, 7.2s, 2012 2,225 2,390,540
AAA Columbia County, GA, Water & Sewer Rev.,
AMBAC, 6.9s, 2011 1,000 1,070,550
A+ Columbus, GA, Water & Sewer Rev.,
5.7s, 2020 1,250 1,172,400
AAA Douglasville-Douglas Counties, GA, Water &
Sewer Authority, AMBAC, 5.625s, 2015 1,800 1,733,526
AAA Fulton County, GA, Water & Sewer Rev.,
FGIC, 6.375s, 2014 3,250 3,442,010
-----------
$14,521,405
- ----------------------------------------------------------------------------
Airport and Port Revenue - 5.9%
AAA Atlanta, GA, Airport Facilities Rev., MBIA,
0s, 2010 $3,500 $ 1,431,430
AAA Atlanta, GA, Airport Facilities Rev., MBIA,
0s, 2010 6,000 2,453,880
A Atlanta, GA, Airport Facilities Rev.,
6.25s, 2021 500 493,640
BB Clayton County, GA, Development Authority,
Special Facilities Rev. (Delta Airlines
Project), 7.625s, 2020 500 508,780
-----------
$ 4,887,730
- ----------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 15.6%
NR Adel County, GA, Industrial Development
Authority, Pollution Control Rev.
(Weyerhaeuser Co.), 9s, 2006 $1,000 $ 1,000,000
BB Atlanta, GA, Special Purpose Facilities
Rev. (Delta Airlines Project), 7.9s, 2018 1,000 1,030,640
AAA Bibb County, GA, Pollution Control Rev.,
AMBAC, 6.25s, 2019 2,280 2,283,124
A Burke County, GA, Development Authority,
Pollution Control Rev. (Georgia Power Co./
Vogtle Project), 8.375s, 2017 1,000 1,080,520
AA- Cartersville, GA, Development Authority
Rev., Water & Wastewater Facilities
(Anheuser-Busch Cos., Inc.), 7.4s, 2010 500 567,260
B+ Effingham County, GA, Development
Authority, Pollution Control Rev. (Fort
Howard Corp.), 7.9s, 2005 1,750 1,832,565
NR Emanuel County, GA, Development Authority
(Figgie Properties Project), 7.95s, 2004 475 478,382
A+ Monroe County, GA, Development Authority,
Pollution Control Rev. (Oglethorpe Power
Corp.), 6.8s, 2012 1,000 1,051,810
AA- Savannah, GA, Economic Development
Authority, Industrial Development Rev.
(Hershey Foods Corp.), 6.6s, 2012 1,450 1,505,767
BBB Savannah, GA, Port Authority, Pollution
Control Rev. (Union Carbide Corp.),
7.55s, 2004 1,000 1,021,390
BBB Wayne County, GA, Solid Waste Rev.
(ITT-Rayonier, Inc.), 8s, 2015 1,000 1,094,580
-----------
$12,946,038
- ----------------------------------------------------------------------------
Other - 1.9%
AA- George L. Smith II/Georgia World Congress
Center Authority (Domed Stadium Project),
7.875s, 2020 $1,475 $ 1,579,592
- ------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $76,676,741) $80,500,769
- ------------------------------------------------------------------------------
Floating Rate Demand Note - 1.3%
- ------------------------------------------------------------------------------
Hospital Equipment Financing Authority, GA,
due 12/01/95, at Identified Cost $1,100 $ 1,100,000
- ------------------------------------------------------------------------------
Total Investments (Identified Cost, $77,776,741) $81,600,769
Other Assets, Less Liabilities - 1.8% 1,526,464
- ------------------------------------------------------------------------------
Net Assets - 100.0% $83,127,233
- ------------------------------------------------------------------------------
## SEC Rule 144A restriction.
++ Inverse floating rate security.
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - March 31, 1995
MFS MARYLAND MUNICIPAL BOND FUND
Municipal Bonds - 98.0%
- ----------------------------------------------------------------------------
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------
General Obligation - 13.5%
AA+ Anne Arundel County, MD, 4.9s, 2011 $1,005 $ 903,133
AA+ Baltimore County, MD, Metropolitan
District, 4.3s, 2004 1,000 917,590
AAA Baltimore, MD, Consolidated Public
Improvement, FGIC, 5.3s, 2009 700 658,518
AAA Baltimore, MD, Consolidated Public
Improvement, MBIA, 7s, 2009 1,000 1,131,280
A Baltimore, MD, Consolidated Public
Improvement, 7.15s, 2009 2,000 2,264,260
AAA Balitmore, MD, Consolidated Public
Improvement, FGIC, 5.3s, 2010 815 760,762
AAA Baltimore, MD, Consolidated Public
Improvement, FGIC, 5.375s, 2011 900 844,893
AAA Baltimore, MD, Consolidated Public
Improvement, FGIC, 5.375s, 2013 770 723,838
AA- Carroll County, MD, 5.2s, 2011 2,000 1,844,700
AA+ Howard County, MD, Metropolitan District,
0s, 2008 1,975 931,074
AAA Montgomery County, MD, Public Improvement,
0s, 2009 4,000 1,724,120
AA- Prince George's County, MD, 0s, 2007 5,110 2,484,738
AAA Prince George's County, MD, Public
Improvement, AMBAC, 5.5s, 2013 2,000 1,909,580
AAA State of Maryland, 9s, 1999 350 408,425
AA Washington Suburban Sanitation District,
MD, 5s, 2010 1,000 917,800
AA Washington Suburban Sanitation District,
MD, 5s, 2011 1,815 1,651,015
AA Washington Suburban Sanitation District,
MD, 6.1s, 2015 1,070 1,083,910
------------
$ 21,159,636
- ----------------------------------------------------------------------------
State and Local Appropriation - 15.2%
AAA Baltimore, MD, Certificates of
Participation, 5.25s, 2016 $2,000 $ 1,804,320
NR Calvert County, MD, Community Lease Rev.,
7.2s, 2010 750 812,565
AA+ Howard County, MD, Certificates of
Participation, 8.15s, 2021 450 574,245
AA+ Howard County, MD, Certificates of
Participation, "A", 8s, 2019 805 996,598
AA+ Howard County, MD, Certificates of
Participation, "B", 8s, 2019 385 476,634
AA+ Howard County, MD, Certificates of
Participation, "C", 8s, 2019 680 841,847
AAA Maryland Stadium Authority, Convention
Center Expansion, AMBAC, 5.875s, 2012 2,000 1,974,560
AA- Maryland Stadium Authority, Sports
Facilities Leasing Rev., 7.6s, 2019 2,580 2,815,322
AAA Prince George's County, MD, Certificates of
Participation, MBIA, 0s, 2005 2,495 1,426,217
AAA Prince George's County, MD, Certificates of
Participation, MBIA, 0s, 2006 2,490 1,333,071
AAA Prince George's County, MD, Certificates of
Participation, MBIA, 0s, 2011 3,675 1,407,635
AAA Prince George's County, MD, Industrial
Development Authority, MBIA, 0s, 2004 980 596,967
AAA Prince George's County, MD, Industrial
Development Authority, MBIA, 0s, 2006 1,800 963,666
AAA Prince George's County, MD, Industrial
Development Authority, MBIA, 0s, 2009 1,500 655,665
AAA Prince George's County, MD, Industrial
Development Authority, MBIA, 0s, 2010 2,730 1,117,608
AAA Prince George's County, MD, Industrial
Development Authority, MBIA, 0s, 2011 2,810 1,076,314
AAA Prince George's County, MD, Industrial
Development Authority, MBIA, 0s, 2012 2,480 895,379
AAA Prince George's County, MD, Industrial
Development Authority, MBIA, 5.25s, 2019 1,500 1,348,170
A Puerto Rico Public Buildings Authority,
5.385s, 2016 (Municipal Swap)(S) 3,000 2,614,650
------------
$ 23,731,433
- ----------------------------------------------------------------------------
Refunded and Special Obligation - 16.2%
AAA Baltimore, MD, Water Utility Rev., MBIA,
6.5s, 2020 $ 540 $ 576,839
AAA Cecil County, MD, 9.25s, 2003 230 240,026
AAA Commonwealth of Puerto Rico, Public
Improvement, 6.8s, 2021 1,500 1,682,640
AAA Government of Guam, Limited Obligation
Highway Rev., CGIC, 9.25s, 2005 550 563,403
AAA Howard County, MD, Metropolitan District,
7.15s, 2020 500 551,760
AAA Maryland Board of Trustees, College &
University Rev., 7.625s, 2012 1,730 1,801,708
AAA Maryland Health & Higher Education
Facilities Authority Rev. (Sinai Hospital/
Baltimore), AMBAC, 7s, 2019 2,000 2,212,860
AAA Maryland Health & Higher Education
Facilities Authority Rev. (University of
Maryland Medical System), FGIC, 7s, 2017 1,840 2,056,605
AAA Maryland Health & Higher Education
Facilities Authority Rev. (University of
Maryland Medical System), FGIC, 6.5s, 2021 1,000 1,076,610
AAA Maryland Transportation Authority,
Transportation Facilities Project Co.,
9s, 2015 4,800 4,950,720
AAA Montgomery County, MD, Rev. Authority,
Lease Rev. (Regional Indoor Swim Center
Project), 7.6s, 2008 750 819,840
AAA Morgan State University, MD, Academic &
Auxiliary Facilities & Fees Rev., MBIA,
0s, 2006 1,135 602,254
AAA Morgan State University, MD, Academic &
Auxiliary Facilities & Fees Rev., MBIA,
0s, 2008 1,400 659,428
NR Prince George's County, MD, Hospital Rev.
(Dimensions Health Corp.), 7.25s, 2017 2,000 2,284,960
AAA Puerto Rico Aqueduct & Sewer Authority,
10.25s, 2009 500 686,590
AAA Puerto Rico Electric Power Authority Rev.,
8s, 2008 500 558,630
AAA Puerto Rico Electric Power Authority Rev.,
9.125s, 2015 250 260,432
AAA Puerto Rico Industrial, Medical &
Environmental Pollution Control
Facilities, Finance Authority, FHA,
9.75s, 2025 450 466,830
AAA St. Mary's County, MD, 7.75s, 2016 2,050 2,193,357
AA Washington Suburban Sanitation District,
MD, 6.9s, 2013 1,045 1,161,403
------------
$ 25,406,895
- ----------------------------------------------------------------------------
Federally Guaranteed Housing Revenue - 1.5%
BBB Baltimore, MD, City Housing Corp. Rev.,
7.75s, 2009 $1,065 $ 1,104,713
AAA Baltimore, MD, City Housing Corp. Rev.,
FNMA, 7.25s, 2023 1,245 1,291,227
------------
$ 2,395,940
- ----------------------------------------------------------------------------
Single Family Housing Revenue - 7.2%
NR Maryland Community Development
Administration, 7.75s, 2009 $1,500 $ 1,561,410
NR Maryland Community Development
Administration, 7.7s, 2015 685 725,641
NR Maryland Community Development
Administration, 8.25s, 2017 1,300 1,372,475
NR Maryland Community Development
Administration, 7.625s, 2020 2,500 2,616,175
NR Maryland Community Development
Administration, 8.25s, 2020 500 530,520
NR Maryland Community Development
Administration, 6.75s, 2026 2,250 2,279,182
NR Maryland Community Development
Administration, 7.625s, 2029 985 1,028,301
NR Maryland Community Development
Administration, 7.85s, 2029 750 795,930
NR Montgomery County, MD, Housing
Opportunities Commission, 7.5s, 2017 370 391,852
------------
$ 11,301,486
- ----------------------------------------------------------------------------
Multi-Family Housing Revenue - 3.1%
NR Maryland Community Development
Administration, 7.375s, 2021 $ 425 $ 442,421
NR Maryland Community Development
Administration, 8.4s, 2029 1,320 1,383,294
NR Maryland Community Development
Administration, 7.5s, 2031 65 67,831
NR Maryland Community Development
Administration, 0s, 2032 11,605 649,184
NR Maryland Community Development
Administration, 7.8s, 2032 1,200 1,269,144
NR Montgomery County, MD, Housing
Opportunities Commission, 7.375s, 2032 1,045 1,084,303
------------
$ 4,896,177
- ----------------------------------------------------------------------------
Insured Health Care Revenue - 5.0%
AAA Maryland Health & Higher Education
Facilities Authority Rev. (Francis Scott
Key Medical Center), FGIC, 5s, 2013 $1,000 $ 893,810
AAA Maryland Health & Higher Education
Facilities Authority Rev. (Frederick
Memorial Hospital), FGIC, 5s, 2018 1,000 868,550
AAA Maryland Health & Higher Education
Facilities Authority Rev. (Mercy Medical
Center), AMBAC, 5.5s, 2022 1,000 925,670
AAA Maryland Health & Higher Education
Facilities Authority Rev. (Suburban
Hospital), FGIC, 5.125s, 2021 2,200 1,918,092
AAA Maryland Health & Higher Education
Facilities Authority Rev. (University of
Maryland), FGIC, 5s, 2020 2,000 1,715,820
AAA Maryland Industrial Development Finance
Authority, Economic Development Rev. (Bon
Secours), FSA, 7.338s, 2022++ 1,500 1,434,285
------------
$ 7,756,227
- ----------------------------------------------------------------------------
Health Care Revenue - 12.1%
NR Berlin, MD, Hospital Rev. (Atlantic General
Hospital), 8.375s, 2022 $1,385 $ 1,446,522
BBB- Maryland Health & Higher Education
Facilities Authority Rev. (Doctors
Community Hospital), 5.5s, 2024 2,000 1,548,460
NR Maryland Health & Higher Education
Facilities Authority Rev. (Francis Scott
Key), 5.625s, 2025 1,500 1,347,000
AA- Maryland Health & Higher Education
Facilities Authority Rev. (Johns Hopkins
Hospital), 0s, 2010 2,000 801,800
AA- Maryland Health & Higher Education
Facilities Authority Rev. (Johns Hopkins
Hospital), 5s, 2023 2,500 2,149,300
AA Maryland Health & Higher Education
Facilities Authority Rev. (Kaiser
Permanente Hospital), 9.125s, 2015 500 514,900
NR Maryland Health & Higher Education
Facilities Authority Rev. (Medlantic
Hospital Care Corp.), 8.375s, 2014 3,720 3,921,401
A Maryland Health & Higher Education
Facilities Authority Rev. (Peninsula
Regional Medical), 5s, 2023 1,000 808,930
AA- Maryland Industrial Development Financing
Authority (Holy Cross Health System
Corp.), 5.5s, 2015 1,000 914,330
NR Prince George's County, MD, Hospital Rev.
(Dimensions Health Corp.), 5.3s, 2024 3,500 2,916,550
NR Prince George's County, MD, Hospital Rev.
(Southeast Healthcare System),
6.375s, 2023 2,900 2,547,244
------------
$ 18,916,437
- ----------------------------------------------------------------------------
Electric and Gas Utility Revenue - 1.6%
A Calvert County, MD, Pollution Control Rev.
(Baltimore Gas & Electric Co.),
5.55s, 2014 $1,500 $ 1,409,805
A- Puerto Rico Electric Power Authority Rev.,
7s, 2011 1,000 1,068,140
------------
$ 2,477,945
- ----------------------------------------------------------------------------
Water and Sewer Utility Revenue - 1.7%
AAA Baltimore, MD, Wastewater Rev., MBIA,
6.92s, 2020++ $3,000 $ 2,733,270
- ----------------------------------------------------------------------------
Turnpike Revenue - 1.8%
A Commonwealth of Puerto Rico, Highway Rev.,
5.5s, 2019 $1,000 $ 904,490
AA Maryland Department of Transportation,
County Transit Rev., 4.8s, 2004 2,000 1,871,820
------------
$ 2,776,310
- ----------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 5.0%
NR Baltimore, MD, Industrial Rev. Board
(Weyerhaeuser Co.), 9s, 2006 $3,150 $ 3,274,866
AA Baltimore, MD, Port Facilities Rev. (E.I.
du Pont de Nemours & Co.), 6.5s, 2011 1,500 1,562,250
NR Maryland Industrial Development Finance
Authority, Economic Development Rev.,
9.875s, 2005 185 192,250
AAA Northeast Maryland, Waste Disposal
Authority (Harford County Resource
Recovery), MBIA, 7.2s, 2005 1,000 1,127,050
NR Northeast Maryland, Waste Disposal
Authority (Montgomery County Resource
Recovery), 6s, 2006 1,000 995,410
A Upper Potomac River Commission, MD,
Pollution Control Rev. (Westvaco Corp.),
10.5s, 2004 150 157,317
A Upper Potomac River Commission, MD,
Pollution Control Rev. (Westvaco Corp.),
9.125s, 2015 500 521,560
------------
$ 7,830,703
- ----------------------------------------------------------------------------
Universities - 0.8%
NR Maryland Health & Higher Education
Facilities Authority Rev. (Mt. St. Mary's
College), 6.5s, 2009 $ 794 $ 690,288
AA+ University of Maryland, Auxiliary
Facilities & Tuition Rev., 0s, 2004 1,000 599,290
------------
$ 1,289,578
- ----------------------------------------------------------------------------
Special Assessment District - 3.4%
NR Northeast Maryland, Waste Disposal
Authority (Montgomery County Resource
Recovery), 6.3s, 2016 $5,400 $ 5,244,912
- ----------------------------------------------------------------------------
Other - 9.9%
NR Maryland Energy Financing Administration,
Solid Waste Disposal Rev. (Hagerstown),
9s, 2016 $1,000 $ 998,870
BBB Maryland Health & Higher Education
Facilities Authority Rev. (Kennedy
Institute), 6.75s, 2022 500 491,330
BBB Maryland Industrial Development Finance
Authority (America Center for Physics),
6.625s, 2017 1,500 1,486,650
NR Maryland Industrial Development Finance
Authority (YMCA/Baltimore), 8s, 2012 2,825 2,873,082
NR Maryland Industrial Development Finance
Authority (YMCA/Baltimore), 8.25s, 2012 945 966,971
A Prince George's County, MD, 5.25s, 2013 4,500 3,964,455
AAA Washington, D.C., Metropolitan Area Transit
Authority, Gross Rev., FGIC, 5.125s, 2009 1,100 1,026,905
AAA Washington, D.C., Metropolitan Area Transit
Authority, Gross Rev., FGIC, 5.25s, 2014 4,000 3,654,960
------------
$ 15,463,223
- ------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $148,674,736) $153,380,172
- ------------------------------------------------------------------------------
Floating Rate Demand Note - 0.6%
- ------------------------------------------------------------------------------
Uinta County, WY, Pollution Control Rev.
(Chevron Corp.), due 8/15/20,
at Identified Cost $ 900 $ 900,000
- ----------------------------------------------------------------------------
Total Investments (Identified Cost, $149,574,736) $154,280,172
Other Assets, Less Liabilities - 1.4% 2,248,655
- ------------------------------------------------------------------------------
Net Assets - 100.0% $156,528,827
- ------------------------------------------------------------------------------
(S)Indexed security.
++ Inverse floating rate security.
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - March 31, 1995
MFS MASSACHUSETTS MUNICIPAL BOND FUND
Municipal Bonds - 97.3%
- ----------------------------------------------------------------------------
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------
Student Loan Revenue
NR Massachusetts Education Loan Authority,
9s, 2001 $ 140 $ 143,109
- ----------------------------------------------------------------------------
General Obligation - 10.3%
AAA Boston, MA, AMBAC, 6.5s, 2012 $ 2,000 $ 2,103,560
A+ Commonwealth of Massachusetts, 0s, 2004 10,000 5,956,100
AAA Commonwealth of Massachusetts, MBIA,
7.5s, 2004 2,850 3,305,088
A+ Commonwealth of Massachusetts, 0s, 2005 2,000 1,120,880
AAA Commonwealth of Massachusetts, FGIC,
0s, 2006 4,000 2,172,240
AAA Commonwealth of Massachusetts, AMBAC,
6.75s, 2009 2,500 2,681,675
AAA Commonwealth of Massachusetts, FGIC,
7s, 2009 1,250 1,410,500
A+ Commonwealth of Massachusetts, "A",
0s, 2005 2,000 1,141,340
AAA Gloucester, MA, AMBAC, 7s, 2009 225 240,286
AAA Gloucester, MA, AMBAC, 7s, 2010 215 229,607
AAA Haverhill, MA, FGIC, 7s, 2012 1,250 1,336,750
AAA Holyoke, MA, MBIA, 8s, 2001 1,700 1,957,499
AAA Holyoke, MA, MBIA, 8.1s, 2005 500 592,735
NR Holyoke, MA, Electric Rev., 8s, 2001 775 818,043
AAA Lawrence, MA, AMBAC, 9.75s, 2002 600 750,966
NR Lowell, MA, 8.4s, 2009 1,000 1,155,540
NR Northbridge, MA, 7.6s, 2001 325 357,468
AAA Princeton, MA, AMBAC, 7.25s, 2009 490 530,156
------------
$ 27,860,433
- ----------------------------------------------------------------------------
State and Local Appropriation - 8.6%
A+ Mass. Bay Transportation Authority,
5.5s, 2012 $ 5,000 $ 4,760,750
A+ Mass. Bay Transportation Authority,
6.2s, 2016 15,725 16,000,502
A+ Mass. Bay Transportation Authority,
5.875s, 2019 2,600 2,495,064
------------
$ 23,256,316
- ----------------------------------------------------------------------------
Refunded and Special Obligation - 20.8%
AAA Boston, MA, MBIA, 7.75s, 2008 $ 500 $ 553,005
A+ Commonwealth of Massachusetts, 6.875s, 2010 11,000 12,222,100
AAA Government of Guam, Limited Obligation
Highway Rev., CGIC, 9.25s, 2005 650 665,841
NR Holyoke, MA, 9.85s, 2008 400 456,548
NR Lowell, MA, 7.625s, 2010 4,875 5,613,270
AAA Mass. Bay Transportation Authority,
8.5s, 2014 3,000 3,430,920
AAA Mass. Bay Transportation Authority,
7.875s, 2021 1,500 1,736,130
AAA Mass. Federally Assisted Housing, HUD,
0s, 2023 4,285 802,281
NR Mass. Health & Education Facilities
Authority (Addison Gilbert Hospital),
9.25s, 2014 1,500 1,548,225
AA Mass. Health & Education Facilities
Authority (Children's Hospital),
7.75s, 2018 2,425 2,669,610
AAA Mass. Health & Education Facilities
Authority (Harvard Community Health),
AMBAC, 9.125s, 2017 4,250 4,385,320
AAA Mass. Health & Education Facilities
Authority (Harvard University),
8.5s, 2015 9,520 9,901,181
AAA Mass. Health & Education Facilities
Authority (Harvard University),
8.5s, 2016 2,500 2,600,100
NR Mass. Health & Education Facilities
Authority (Saint Elizabeth's Hospital),
7.75s, 2027 1,250 1,355,075
AAA Mass. Health & Education Facilities
Authority (South Shore Hospital), MBIA,
8.125s, 2017 1,070 1,167,680
NR Mass. Health & Education Facilities
Authority (Suffolk University), 8s, 2010 1,750 1,997,887
NR Mass. Health & Education Facilities
Authority (Youville Hospital), 9s, 2007 540 570,164
NR Mass. Health & Education Facilities
Authority (Youville Hospital), 9.1s, 2015 455 480,776
NR Mass. Industrial Finance Agency (Cape Cod
Health System), 8.5s, 2020 500 591,360
NR Mass. Industrial Finance Agency (Evanswood
Bethzatha Corp.), 9s, 2020 1,000 1,018,810
AAA Mass. Port Authority Rev., 12.75s, 2002 485 667,554
AAA Mass. Port Authority Rev., 13s, 2013 780 1,379,157
AAA Palmer, MA, AMBAC, 7.7s, 2010 500 571,670
------------
$ 56,384,664
- ----------------------------------------------------------------------------
Single Family Housing Revenue - 3.1%
A+ Mass. Housing Finance Agency, 9.5s, 2016 $ 1,590 $ 1,640,308
A+ Mass. Housing Finance Agency, 8.1s, 2020 2,420 2,538,991
A+ Mass. Housing Finance Agency, 8.1s, 2021 2,000 2,106,560
A+ Mass. Housing Finance Agency, 7.95s, 2023 1,000 1,054,680
A Mass. Housing Finance Agency, 7.5s, 2029 930 941,030
------------
$ 8,281,569
- ----------------------------------------------------------------------------
Multi-Family Housing Revenue - 4.2%
AAA Mass. Housing Finance Agency, AMBAC,
6.65s, 2019 $ 1,500 $ 1,511,400
AAA Mass. Housing Finance Agency, GNMA,
9.125s, 2020 490 511,555
BBB+ Mass. Housing Finance Agency, 8.4s, 2021 2,190 2,259,576
A+ Mass. Housing Finance Agency, 8.8s, 2021 1,995 2,078,311
AAA Mass. Housing Finance Agency, FNMA,
6.9s, 2025 1,700 1,764,294
AAA Mass. Housing Finance Agency, FNMA,
7.65s, 2028 1,430 1,493,006
BBB+ Mass. Housing Finance Agency, 8.2s, 2027 720 760,774
AAA Somerville, MA, Housing Authority Rev.
(Clarendon Hill), GNMA, 7.85s, 2010 1,000 1,080,710
------------
$ 11,459,626
- ----------------------------------------------------------------------------
Insured Health Care Revenue - 4.8%
AAA Mass. Health & Education Facilities
Authority (Beth Israel Hospital), AMBAC,
7.965s, 2025++ $ 4,000 $ 3,874,641
AAA Mass. Health & Education Facilities
Authority (Brigham & Women's Hospital),
MBIA, 6.75s, 2024 2,000 2,081,720
AAA Mass. Health & Education Facilities
Authority (Newton-Wellesley Hospital),
BIG, 8s, 2018 3,290 3,597,680
NR Mass. Health & Education Facilities
Authority (Youville Hospital), FHA,
6s, 2034 2,000 1,942,020
NR Mass. Industrial Finance Agency (Meadow
Green Nursing Home), FHA, 9.6s, 2027 1,475 1,564,916
------------
$ 13,060,977
- ----------------------------------------------------------------------------
Health Care Revenue - 16.3%
NR Boston, MA, Industrial Development Finance
Authority (Stonehedge Convalescent
Center), 10.75s, 2011 $ 805 $ 873,441
A Mass. Health & Education Facilities
Authority (Beth Israel Hospital), 7s, 2014 3,000 3,131,940
NR Mass. Health & Education Facilities
Authority (Central New England Health),
6.125s, 2013 2,200 1,897,544
A- Mass. Health & Education Facilities
Authority (Charlton Memorial Hospital),
7.25s, 2013 1,700 1,783,538
AA Mass. Health & Education Facilities
Authority (Children's Hospital),
6.125s, 2012 2,285 2,293,112
A Mass. Health & Education Facilities
Authority (Dana Farber Cancer), 5.5s, 2027 2,500 2,150,550
BBB Mass. Health & Education Facilities
Authority (Emerson Hospital), 8s, 2018 1,800 1,879,398
NR Mass. Health & Education Facilities
Authority (Fairview Extended Care
Facility), 10.25s, 2021 2,000 2,185,100
A- Mass. Health & Education Facilities
Authority (Jordan Hospital), 6.875s, 2022 2,150 2,152,731
BB Mass. Health & Education Facilities
Authority (Mass. Eye & Ear Infirmary),
7.375s, 2011 3,000 2,875,710
A Mass. Health & Education Facilities
Authority (New England Deaconess
Hospital), 6.875s, 2022 3,500 3,529,680
BBB Mass. Health & Education Facilities
Authority (Sisters of Providence Health
System), 6.5s, 2008 1,900 1,868,137
NR Mass. Industrial Finance Agency (Beverly
Enterprises), 8.375s, 2009 2,000 2,101,060
NR Mass. Industrial Finance Agency
(Continental Healthcare), 11.875s, 2015 5,525 5,747,602
NR Mass. Industrial Finance Agency (Evanswood
Bethzatha Corp.), 7.625s, 2014 1,200 1,201,584
NR Mass. Industrial Finance Agency (Martha's
Vineyard Long-Term Care), 9.25s, 2022 3,000 2,986,110
NR Mass. Industrial Finance Agency (Mass.
Biomedical Research), 0s, 2004 5,000 2,834,850
NR Mass. Industrial Finance Agency (Mass.
Biomedical Research), 0s, 2010 5,300 1,947,909
NR Mass. Industrial Finance Agency (Needham/
Hamilton House), 11s, 2010 800 817,232
------------
$ 44,257,228
- ----------------------------------------------------------------------------
Water and Sewer Utility Revenue - 7.2%
A Mass. Water Resources Authority, 5.5s, 2015 $ 7,000 $ 6,456,240
A Mass. Water Resources Authority, 6.5s, 2019 8,000 8,412,480
A Mass. Water Resources Authority, 5.5s, 2022 5,150 4,684,079
------------
$ 19,552,799
- ----------------------------------------------------------------------------
Turnpike Revenue - 3.3%
NR Mass. Industrial Finance Agency, Tunnel
Rev. (Mass. Turnpike), 9s, 2020 $ 8,310 $ 8,944,219
- ----------------------------------------------------------------------------
Airport and Port Revenue - 4.2%
AA- Mass. Port Authority Rev., 5s, 2015 $ 5,600 $ 4,923,408
AA- Mass. Port Authority Rev., 9.375s, 2015 1,520 1,567,576
AAA Mass. Port Authority Rev., FGIC, 7.5s, 2020 4,500 4,850,730
------------
$ 11,341,714
- ----------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 0.8%
NR Clinton, MA, Industrial Rev. Board (Zayre
Corp.), 8.5s, 2009 $ 793 $ 822,264
NR Mass. Industrial Finance Agency (Automatic
Data Processing, Inc.), 8.25s, 2019 900 927,594
NR Springfield, MA, Industrial Development
Finance Agency (Terminal Building),
10s, 2001 399 399,415
------------
$ 2,149,273
- ----------------------------------------------------------------------------
Universities - 8.6%
AAA Mass. Health & Education Facilities
Authority (Boston University), MBIA,
8.828s, 2031++ $ 5,000 $ 5,394,700
AA+ Mass. Health & Education Facilities
Authority (Wellesley College),
5.375s, 2019 3,440 3,146,155
A Mass. Health & Education Facilities
Authority (Wheaton College), 5.25s, 2019 2,335 2,044,946
AAA Mass. Industrial Finance Agency (Babson
College), MBIA, 5.75s, 2015 2,630 2,546,708
AAA Mass. Industrial Finance Agency (Brandeis
University), MBIA, 0s, 2004 1,000 600,400
AAA Mass. Industrial Finance Agency (Brandeis
University), MBIA, 0s, 2005 1,000 563,220
AAA Mass. Industrial Finance Agency (Brandeis
University), MBIA, 0s, 2009 1,000 425,310
AAA Mass. Industrial Finance Agency (Brandeis
University), MBIA, 0s, 2010 1,000 397,920
AAA Mass. Industrial Finance Agency (Brandeis
University), MBIA, 0s, 2011 500 185,970
NR Mass. Industrial Finance Agency (Curry
College), 8s, 2014 2,000 1,983,260
NR Mass. Industrial Finance Agency (Emerson
College), 8.9s, 2018 1,000 1,107,770
A+ Mass. Industrial Finance Agency (Holy
Cross), 6.45s, 2012 3,000 3,078,420
AA Mass. Industrial Finance Agency (Phillips
Academy), 5.375s, 2023 2,000 1,807,780
------------
$ 23,282,559
- ----------------------------------------------------------------------------
Other - 5.1%
NR Martha's Vineyard, MA, Land Bank,
8.125s, 2011 $ 4,200 $ 4,265,646
NR Mass. Health & Education Facilities
Authority (Learning Center for Deaf
Children), 9.25s, 2014 2,250 2,405,903
BBB Mass. Industrial Finance Agency (Dexter
School), 7.5s, 2011 1,720 1,812,261
BBB Mass. Industrial Finance Agency (Dexter
School), 7.5s, 2021 2,900 3,055,556
AAA Mass. Industrial Finance Agency (Jewish
Philanthropies), AMBAC, 6.375s, 2015 1,000 1,023,360
NR Nantucket Island, MA, Land Bank,
7.75s, 2020 1,200 1,336,092
------------
$ 13,898,818
- ----------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $249,937,712) $263,873,304
- ----------------------------------------------------------------------------
Floating Rate Demand Notes - 0.8%
- ----------------------------------------------------------------------------
Uinta County, WY, Pollution Control Rev.
(Chevron Corp.), due 8/15/20 $ 2,200 $ 2,200,000
Uinta County, WY, Pollution Control Rev.
(Chevron Corp.), due 12/01/22 100 100,000
- ----------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 2,300,000
- ----------------------------------------------------------------------------
Call Option Purchased - 0.1%
- ----------------------------------------------------------------------------
Principal Amount
of Contracts
Issuer/Expiration Date/Strike Price (000 Omitted)
- ----------------------------------------------------------------------------
Total Investments (Identified Cost, $252,369,112) $266,424,604
Other Assets, Less Liabilities - 1.8% 4,802,003
- ----------------------------------------------------------------------------
Net Assets - 100.0% $271,226,607
- ----------------------------------------------------------------------------
+ Restricted security.
++ Inverse floating rate security.
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - March 31, 1995
MFS NEW YORK MUNICIPAL BOND FUND
Municipal Bonds - 97.6%
- ----------------------------------------------------------------------------
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------
General Obligation - 9.7%
A- New York, NY, 7.2s, 2008 $1,000 $ 1,042,620
A- New York, NY, 7.3s, 2010 880 920,427
A- New York, NY, 7.3s, 2011 5,000 5,229,700
A- New York , NY, 5.6s, 2012 1,000 962,730
A- New York, NY, 7.375s, 2013 1,600 1,676,064
A- New York, NY, 8s, 2015 10 10,778
A- New York, NY, 8.25s, 2016 160 174,936
A- New York, NY, 8s, 2018 60 64,686
NR Oswego County, NY, 6.7s, 2009 1,000 1,081,830
AAA Port Byron, NY, Central School District,
AMBAC, 7.4s, 2012 500 590,460
AAA Port Byron, NY, Central School District,
AMBAC, 7.4s, 2013 500 593,515
AAA Port Byron, NY, Central School District,
AMBAC, 7.4s, 2014 500 596,405
AAA Port Byron, NY, Central School District,
AMBAC, 7.4s, 2015 500 595,765
NR Territory of Virgin Islands, 7.75s, 2006 440 483,305
AAA Washingtonville, NY, Central School
District, FGIC, 7.35s, 2008 550 639,843
AAA Washingtonville, NY, Central School
District, FGIC, 7.35s, 2009 550 638,489
------------
$ 15,301,553
- ----------------------------------------------------------------------------
State and Local Appropriation - 24.2%
BBB Metropolitan Transportation Authority, NY,
Services Contract, 7.375s, 2008 $2,000 $ 2,199,660
BBB Metropolitan Transportation Authority, NY,
Services Contract, 0s, 2009 7,500 3,003,975
BBB New York Dormitory Authority (City
University), 8.125s, 2008 1,500 1,671,855
BBB New York Dormitory Authority (City
University), 5.75s, 2012 3,000 2,811,930
BBB New York Dormitory Authority (City
University), 5.75s, 2013 1,250 1,169,238
BBB+ New York Dormitory Authority (State
University), 5.25s, 2013 2,495 2,201,314
BBB+ New York Dormitory Authority (State
University), 5.25s, 2015 4,000 3,503,080
BBB New York Housing Finance Agency,
5.875s, 2014 1,070 1,007,758
A New York Local Government Assistance Corp.,
5.375s, 2016 2,000 1,813,960
A New York Local Government Assistance Corp.,
5.5s, 2021 2,000 1,815,480
A New York Local Government Assistance Corp.,
5.5s, 2022 1,000 906,350
BBB New York Medical Care Facilities Finance
Agency (Huntington Hospital), 6.5s, 2014 1,250 1,222,425
BBB+ New York Medical Care Facilities Finance
Agency, Mental Health Services Facilities
Rev., 7.875s, 2008 245 267,831
AAA New York Medical Care Facilities Finance
Agency, Mental Health Services Facilities
Rev., FSA, 5.375s, 2014 1,000 910,780
BBB+ New York Medical Care Facilities Finance
Agency, Mental Health Services Facilities
Rev., 6.375s, 2014 2,340 2,330,383
BBB+ New York Medical Care Facilities Finance
Agency, Mental Health Services Facilities
Rev., 7.3s, 2021 250 264,542
AAA New York Medical Care Facilities Finance
Agency, Mental Health Services Facilities
Rev., FGIC, 5.25s, 2023 1,500 1,314,255
BBB New York Urban Development Capital Corp.
(Correctional Facilities), 5.75s, 2013 4,500 4,181,850
AAA New York Urban Development Capital Corp.,
Higher Education Technology Grants, MBIA,
5.75s, 2015 1,000 954,180
BBB New York Urban Development Capital Corp.,
State Facilities Rev., 5.5s, 2014 1,100 990,231
BBB New York Urban Development Capital Corp.,
State Facilities Rev., 7.5s, 2020 1,000 1,072,620
A Puerto Rico Public Buildings Authority,
5.385s, 2016 (Municipal Swap)(S) 2,000 1,743,100
NR Troy, NY, Certificates of Participation,
Recreational Facilities Rev., 9.75s, 2010 930 1,001,777
------------
$ 38,358,574
- ----------------------------------------------------------------------------
Refunded and Special Obligation - 11.6%
A- New York City Municipal Water & Sewer
Finance Authority, 7.375s, 2013 $2,000 $ 2,272,060
A- New York City Municipal Water & Sewer
Finance Authority, 7s, 2015 530 586,699
A- New York City Municipal Water & Sewer
Finance Authority, 7s, 2015 225 249,071
AAA New York Local Government Assistance Corp.,
7.25s, 2018 2,500 2,824,975
AA New York Medical Care Facilities Finance
Agency, 8.3s, 2022 515 571,804
AAA New York Medical Care Facilities Finance
Agency (Buffalo General Hospital), FHA,
7.7s, 2022 500 554,575
AAA New York Medical Care Facilities Finance
Agency (Long Island Hospital), 8.1s, 2022 1,500 1,661,775
AA New York Medical Care Facilities Finance
Agency (Presbyterian Hospital), 7.7s, 2009 750 857,467
AAA New York Medical Care Facilities Finance
Agency (St. Luke's Hospital), FHA,
7.45s, 2029 2,600 2,918,266
AAA New York Medical Care Facilities Finance
Agency, Mental Health Services Rev.,
7.875s, 2008 225 259,072
AAA New York Medical Care Facilities Finance
Agency, Mental Health Services Rev.,
7.875s, 2020 560 644,801
AAA New York Medical Care Facilities Finance
Agency, Mental Health Services Rev.,
7.3s, 2021 750 853,823
A- New York, NY, 8s, 2015 490 570,340
A- New York, NY, 8.25s, 2016 1,840 2,189,214
AAA Puerto Rico Aqueduct & Sewer Authority,
9s, 2009 250 321,992
AAA Triborough Bridge & Tunnel Authority, NY,
7.375s, 2016 1,000 1,113,000
------------
$ 18,448,934
- ----------------------------------------------------------------------------
Single Family Housing Revenue - 4.6%
AA New York City Housing Development Corp.
(South Bronx Cooperatives), 8.1s, 2023 $ 580 $ 609,725
NR New York Mortgage Agency Rev., 7.375s, 2011 1,295 1,369,929
NR New York Mortgage Agency Rev., 8s, 2011 820 887,240
NR New York Mortgage Agency Rev., 6.45s, 2017 2,355 2,371,626
NR New York Mortgage Agency Rev., 8s, 2021 330 355,667
NR New York Mortgage Agency Rev., 8s, 2022 555 596,836
NR New York Mortgage Agency Rev., 7.75s, 2023 1,000 1,066,620
------------
$ 7,257,643
- ----------------------------------------------------------------------------
Insured Health Care Revenue - 18.1%
AAA New York Dormitory Authority (St. Vincent's
Hospital), FHA, 7.375s, 2011 $2,500 $ 2,710,500
AAA New York Medical Care Facilities Finance
Agency (Hospital & Nursing Home), FHA,
5.75s, 2019 6,000 5,640,180
AA New York Medical Care Facilities Finance
Agency (Hospital & Nursing Home),
5.7s, 2033 1,225 1,111,063
AA New York Medical Care Facilities Finance
Agency (Montefiore Medical), 7.25s, 2009 3,195 3,397,084
AA New York Medical Care Facilities Finance
Agency (Montefiore Medical), 7.25s, 2024 1,750 1,854,458
AAA New York Medical Care Facilities Finance
Agency (New York Hospital), AMBAC,
6.5s, 2029 2,550 2,623,057
AAA New York Medical Care Facilities Finance
Agency (Presbyterian Hospital), FHA,
5.375s, 2025 3,945 3,480,082
AAA New York, NY, Health & Hospital Corp. Rev.,
AMBAC, 5.75s, 2022 8,325 7,910,248
------------
$ 28,726,672
- ----------------------------------------------------------------------------
Health Care Revenue - 1.5%
NR Albany, NY, Industrial Development
Authority, Civic Facilities Rev. (Albany
Medical Center), 8.25s, 2004 $2,250 $ 2,371,320
- ----------------------------------------------------------------------------
Electric and Gas Utility Revenue - 3.8%
A+ New York Energy Research & Development,
6.75s, 2027 $3,000 $ 3,030,000
AA New York Power Authority, 8s, 2017 380 413,649
NR Virgin Islands Water & Power Authority,
Electric Systems Rev., 7.4s, 2011 2,450 2,577,008
------------
$ 6,020,657
- ----------------------------------------------------------------------------
Water and Sewer Utility Revenue - 8.8%
A- New York City Municipal Water & Sewer
Finance Authority, 6s, 2010 $ 620 $ 620,998
A- New York City Municipal Water & Sewer
Finance Authority, 7.1s, 2012 2,000 2,130,940
A- New York City Municipal Water & Sewer
Finance Authority, 7s, 2015 745 785,632
A- New York City Municipal Water & Sewer
Finance Authority, 5.5s, 2020 750 679,845
A- New York City Municipal Water & Sewer
Finance Authority, 7.6s, 2020 470 505,057
A- New York Environmental Facilities Corp.,
Pollution Control Rev., 5.75s, 2010 4,235 4,233,518
A New York Environmental Facilities Corp.,
Pollution Control Rev., 6.875s, 2010 2,000 2,134,500
NR New York Environmental Facilities Corp.,
Water Facilities Rev. (American Water
Co.), 8.85s, 2015 2,500 2,766,900
------------
$ 13,857,390
- ----------------------------------------------------------------------------
Turnpike Revenue - 3.8%
AAA New York Turnpike Authority, FGIC, 6s, 2025 $3,250 $ 3,205,605
A+ Triborough Bridge & Tunnel Authority, NY,
5.5s, 2017 3,000 2,835,990
------------
$ 6,041,595
- ----------------------------------------------------------------------------
Airport and Port Revenue - 3.3%
A New York, NY, Industrial Development Agency
(Terminal One Group), 6s, 2019 $2,000 $ 1,893,280
AA- Port Authority, NY & NJ, 5.25s, 2014 3,705 3,389,038
------------
$ 5,282,318
- ----------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 2.7%
A+ Allegany County, NY, Industrial Development
Authority, Solid Waste Rev. (Atlantic
Richfield Co.), 6.625s, 2016 $1,000 $ 1,011,710
NR Fulton County, NY, Industrial Development
Agency (Crossroads Incubator), 8.75s, 2009 1,195 1,276,463
NR Monroe County, NY, Industrial Development
Agency (Weyerhaeuser Co.), 9s, 2006 1,000 1,034,740
BB+ New York City Industrial Development
Agency, Special Facilities Rev. (American
Airlines), 6.9s, 2024 1,000 1,005,950
------------
$ 4,328,863
- ----------------------------------------------------------------------------
Universities - 1.8%
AA New York Dormitory Authority (Cornell
University), 7.375s, 2020 $1,500 $ 1,628,340
AA New York Dormitory Authority (Menorah
Campus), 7.4s, 2031 1,100 1,191,190
------------
$ 2,819,530
- ----------------------------------------------------------------------------
Other - 3.7%
AA Battery Park City Authority, NY, Rev.,
5.7s, 2020 $4,000 $ 3,691,840
NR Dutchess, NY, Industrial Development
Agency, Civic Facilities Rev. (New York
Assn. for Retarded Children), 8.625s, 2016 1,145 1,209,418
BBB Virgin Islands Public Finance Authority,
Highway Rev., 7.7s, 2004 800 875,608
------------
$ 5,776,866
- ----------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $145,769,990) $154,591,915
- ----------------------------------------------------------------------------
Call Options Purchased - 0.2%
- ----------------------------------------------------------------------------
Principal Amount
of Contracts
Issuer/Expiration Date/Strike Price (000 Omitted)
- ----------------------------------------------------------------------------
Georgia Municipal Electric Authority/2003/102 $ 5 $ 125,650
North Carolina Eastern Municipal Power Agency/
2003/102 5 82,200
State of New Jersey, "D"/2003/102 2 152,300
- ----------------------------------------------------------------------------
Total Call Options Purchased (Premiums Paid, $555,000) $ 360,150
- ----------------------------------------------------------------------------
Total Investments (Identified Cost, $146,324,990) $154,952,065
Other Assets, Less Liabilities - 2.2% 3,529,393
- ----------------------------------------------------------------------------
Net Assets - 100.0% $158,481,458
- ----------------------------------------------------------------------------
(S) Indexed security.
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - March 31, 1995
MFS NORTH CAROLINA MUNICIPAL BOND FUND
Municipal Bonds - 98.0%
- ----------------------------------------------------------------------------
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------
General Obligation - 7.1%
AAA Charlotte, NC, Water & Sewer, 5.8s, 2013 $1,780 $ 1,791,392
AAA Charlotte, NC, Water & Sewer, 5.8s, 2014 5,050 5,054,696
AAA Charlotte, NC, Water & Sewer, 5.9s, 2019 2,000 2,015,200
A Commonwealth of Puerto Rico, 6.45s, 2017 2,300 2,348,461
AAA Commonwealth of Puerto Rico, FSA,
5.25s, 2018 1,815 1,641,014
AAA Durham, NC, 5.9s, 2013 2,400 2,458,152
AAA Durham, NC, 5.9s, 2014 2,400 2,446,152
AAA Greensboro, NC, 6.3s, 2011 4,165 4,356,923
BBB+ Hertford County, NC, 9.5s, 2000 100 105,415
BBB+ Hertford County, NC, 9.5s, 2001 100 105,366
BBB+ Hertford County, NC, 9.5s, 2002 100 105,316
AAA Lincoln County, NC, FGIC, 5.1s, 2009 1,170 1,110,693
AAA Mecklenburg County, NC, 5.5s, 2011 1,630 1,621,084
AAA Mecklenburg County, NC, 5.5s, 2012 1,750 1,730,645
AAA Mecklenburg County, NC, 5.5s, 2013 2,715 2,668,954
AA+ Orange County, NC, 5.5s, 2012 1,625 1,565,817
AA+ Orange County, NC, 5.5s, 2013 2,000 1,914,080
------------
$ 33,039,360
- ----------------------------------------------------------------------------
State and Local Appropriation - 14.3%
AA Charlotte, NC, Certificates of
Participation (Cityfair Parking
Facilities), 6.125s, 2010 $1,000 $ 1,007,090
AAA Charlotte, NC, Certificates of
Participation (Convention Facilities
Project), AMBAC, 0s, 2004 3,435 2,000,235
AAA Charlotte, NC, Certificates of
Participation (Convention Facilities
Project), AMBAC, 0s, 2005 4,810 2,645,789
AAA Charlotte, NC, Certificates of
Participation (Convention Facilities
Project), AMBAC, 0s, 2006 1,075 553,399
AAA Charlotte, NC, Certificates of
Participation (Convention Facilities
Project), AMBAC, 0s, 2008 3,000 1,341,990
AAA Charlotte, NC, Certificates of
Participation (Convention Facilities
Project), AMBAC, 5.25s, 2013 3,750 3,471,525
AAA Charlotte, NC, Certificates of
Participation (Convention Facilities
Project), AMBAC, 5.25s, 2020 7,450 6,713,195
AAA Charlotte, NC, Certificates of
Participation (Convention Facilities
Project), AMBAC, 5s, 2021 4,350 3,769,231
AA Charlotte, NC, Certificates of
Participation (Stadium Parking
Facilities), 6s, 2014 1,475 1,477,891
AAA Cumberland County, NC, Certificates of
Participation (Civic Center), AMBAC,
6.375s, 2010 1,100 1,149,643
AAA Cumberland County, NC, Certificates of
Participation (Civic Center), AMBAC,
0s, 2011 425 157,518
AAA Cumberland County, NC, Certificates of
Participation (Civic Center), AMBAC,
0s, 2013 1,000 323,050
AAA Dare County, NC, MBIA, 6.6s, 2006 2,100 2,245,278
AA Durham, NC, Certificates of Participation,
6.375s, 2012 3,970 4,097,754
AA Durham County, NC, Certificates of
Participation (Hospital & Office
Facilities), 5.875s, 2009 1,460 1,488,470
AA Durham County, NC, Certificates of
Participation (Hospital & Office
Facilities), 6s, 2014 1,000 1,008,360
AA Durham County, NC, Certificates of
Participation (Hospital & Office
Facilities), 6s, 2017 500 502,160
AA Durham, NC, Certificates of Participation
(New Durham Corp.), 6.875s, 2009 1,750 1,882,265
AAA Franklin County, NC, Certificates of
Participation (Jail & School Projects),
FGIC, 6.625s, 2014 2,000 2,092,880
AA Greensboro, NC, Certificates of
Participation (Coliseum Arena Project),
6.25s, 2011 2,180 2,209,016
AAA Harnett County, NC, Certificates of
Participation, AMBAC, 6.2s, 2006 1,000 1,054,760
AAA Harnett County, NC, Certificates of
Participation, AMBAC, 6.2s, 2009 2,500 2,576,200
BBB Puerto Rico Housing, Bank & Finance Agency,
7.5s, 2006 7,000 7,636,720
A Puerto Rico Public Buildings Authority,
5.5s, 2007 2,550 2,452,743
A Puerto Rico Public Buildings Authority,
5.385s, 2016 (Municipal Swap)(S) 6,500 5,665,075
AAA Scotland County, NC, Certificates of
Participation (Jail/Courthouse Project),
CGIC, 6.75s, 2011 1,000 1,057,260
AAA Thomasville, NC, Certificates of
Participation (City Hall), FSA, 6s, 2017 2,750 2,754,592
AAA Union County, NC, Certificates of
Participation, FSA, 6.375s, 2012 1,000 1,033,421
AA+ Winston-Salem, NC, Certificates of
Participation, 5s, 2011 2,000 1,817,360
------------
$ 66,184,870
- ----------------------------------------------------------------------------
Refunded and Special Obligation - 12.1%
NR Chapel Hill, NC, Parking Facilities Rev.
(Rosemary Street Project), 8.125s, 2013 $1,710 $ 1,983,959
NR Chapel Hill, NC, Parking Facilities Rev.
(Rosemary Street Project), 8.25s, 2023 3,305 3,854,522
AAA Charlotte, NC, Certificates of
Participation, AMBAC, 6.75s, 2021 4,250 4,714,440
AAA Charlotte-Mecklenberg, NC, Hospital
Authority, Health Care Systems Rev.,
8.25s, 2013 2,995 3,211,329
AAA Charlotte-Mecklenberg, NC, Hospital
Authority, Health Care Systems Rev.,
7.8s, 2018 1,280 1,423,514
AAA Charlotte-Mecklenberg, NC, Hospital
Authority, Health Care Systems Rev.,
8s, 2018 500 558,720
AAA Craven, NC, Regional Medical Authority,
MBIA, 7.2s, 2019 1,500 1,679,430
AAA Dare County, NC, School Bonds, MBIA,
6.9s, 2008 800 877,840
AAA Dare County, NC, School Bonds, MBIA,
6.9s, 2009 800 877,840
AAA Dare County, NC, School Bonds, MBIA,
6.9s, 2010 500 548,650
AAA North Carolina Eastern Municipal Power
Agency, 13s, 1998 3,000 3,623,460
A- North Carolina Eastern Municipal Power
Agency, 7.5s, 2010 2,595 3,047,127
AAA North Carolina Eastern Municipal Power
Agency, 7.75s, 2012 2,900 3,232,195
A- North Carolina Eastern Municipal Power
Agency, 5s, 2017 8,165 7,352,909
AAA North Carolina Medical Care Commission,
Hospital Rev. (Presbyterian Health
Services), 7.3s, 2015 1,000 1,124,360
AAA North Carolina Medical Care Commission,
Hospital Rev. (Presbyterian Health
Services), 7.375s, 2020 12,315 13,890,335
AAA North Carolina Municipal Power Agency, No.
1 Catawba Electric Rev., AMBAC,
7.625s, 2014 820 895,202
NR Pender County, NC, Certificates of
Participation (Pender County Prison),
7.6s, 2004 1,900 2,170,332
NR Pender County, NC, Certificates of
Participation (Pender County Prison),
7.7s, 2011 1,000 1,147,490
------------
$ 56,213,654
- ----------------------------------------------------------------------------
Single Family Housing Revenue - 4.6%
A+ North Carolina Housing Finance Agency,
10.375s, 2007 $ 75 $ 76,387
A+ North Carolina Housing Finance Agency,
6.7s, 2018 1,800 1,847,124
A+ North Carolina Housing Finance Agency,
8.125s, 2019 2,390 2,487,058
A+ North Carolina Housing Finance Agency,
7.7s, 2021 2,785 2,884,230
A+ North Carolina Housing Finance Agency,
7.8s, 2021 2,955 3,072,048
A+ North Carolina Housing Finance Agency,
7.85s, 2028 6,900 7,229,406
A+ North Carolina Housing Finance Agency,
7.6s, 2032 3,410 3,560,824
------------
$ 21,157,077
- ----------------------------------------------------------------------------
Multi-Family Housing Revenue - 4.1%
A Asheville, NC, Housing Authority (Asheville
Terrace Apartments), 7.1s, 2011 $5,000 $ 5,171,500
NR Charlotte, NC, Housing Authority (Merrywood
Senior Adult Project), 9.75s, 2019 6,710 6,441,600
AA North Carolina Housing Finance Agency,
6.9s, 2024 4,890 5,062,813
NR Salisbury, NC, Housing Corp., Inc. (Yadkin
Senior Citizens), 6.75s, 2022 2,180 2,194,235
------------
$ 18,870,148
- ----------------------------------------------------------------------------
Insured Health Care Revenue - 6.7%
AAA Craven, NC, Regional Medical Authority,
MBIA, 5.5s, 2023 $1,150 $ 1,067,545
AAA Cumberland County, NC, Hospital Facilities
Rev., MBIA, 0s, 2009 1,800 772,056
AAA Cumberland County, NC, Hospital Facilities
Rev. (Cumberland County Hospital), MBIA,
6s, 2017 4,000 4,014,080
AAA North Carolina Medical Care Commission,
Hospital Rev. (Alamance Health Services,
Inc.), FSA, 5.5s, 2024 3,000 2,740,050
AAA North Carolina Medical Care Commission,
Hospital Rev. (Moore Regional Hospital),
FGIC, 5.2s, 2013 6,750 6,087,420
AAA North Carolina Medical Care Commission,
Hospital Rev. (Moore Regional Hospital),
MBIA, 5s, 2018 3,800 3,239,196
AAA North Carolina Medical Care Commission,
Hospital Rev. (St. Joseph's Hospital),
AMBAC, 5.1s, 2014 1,550 1,384,103
AAA North Carolina Medical Care Commission,
Hospital Rev. (Wesley Long Community
Hospital), AMBAC, 5.25s, 2013 5,000 4,562,600
AAA Pitt County, NC, Hospital Rev. (Pitt
Memorial Hospital), MBIA, 6.75s, 2014 2,800 2,982,980
AAA Wake County, NC, Hospital Rev., MBIA,
5.125s, 2013 5,000 4,442,450
------------
$ 31,292,480
- ----------------------------------------------------------------------------
Health Care Revenue - 12.8%
AA Charlotte-Mecklenberg, NC, Hospital
Authority, Health Care Systems Rev.,
6.25s, 2020 $1,000 $ 1,012,150
AA- North Carolina Medical Care Commission,
Hospital Rev. (Baptist Hospital), 6s, 2022 2,725 2,703,445
AA North Carolina Medical Care Commission,
Hospital Rev. (Carolina Medical Project),
6s, 2021 19,000 18,729,440
AA North Carolina Medical Care Commission,
Hospital Rev. (Carolina Medicorp),
5.5s, 2015 2,185 2,021,715
A North Carolina Medical Care Commission,
Hospital Rev. (Gaston Health Care),
0s, 2007 500 229,710
A North Carolina Medical Care Commission,
Hospital Rev. (Gaston Health Care),
7.25s, 2019 1,400 1,463,420
NR North Carolina Medical Care Commission,
Hospital Rev. (Halifax Memorial Hospital),
6.75s, 2024 4,500 4,426,020
NR North Carolina Medical Care Commission,
Hospital Rev. (Memorial Mission Hospital),
9.1s, 2008 1,750 1,820,368
A- North Carolina Medical Care Commission,
Hospital Rev. (Mercy Hospital), 6.5s, 2015 1,650 1,609,311
A North Carolina Medical Care Commission,
Hospital Rev. (Moore Memorial Hospital),
9.1s, 1999 800 831,384
AA North Carolina Medical Care Commission,
Hospital Rev. (Presbyterian Health
Services), 5.5s, 2020 3,500 3,171,105
AA North Carolina Medical Care Commission,
Hospital Rev. (Presbyterian Hospital),
5.5s, 2014 8,850 8,208,198
A+ North Carolina Medical Care Commission,
Hospital Rev. (Rex Hospital), 6.25s, 2017 2,500 2,512,150
NR North Carolina Medical Care Commission,
Hospital Rev. (Valdese General Hospital),
8.75s, 2016 5,665 5,898,115
BBB Northern Hospital District, Surry County,
NC, Health Care Facilities Rev.,
7.875s, 2021 4,530 4,640,894
------------
$ 59,277,425
- ----------------------------------------------------------------------------
Electric and Gas Utility Revenue - 15.4%
A New Hanover County, NC, Industrial
Facilities Rev. (Carolina Power & Light
Co.), 6.9s, 2009 $1,000 $ 1,051,090
A- North Carolina Eastern Municipal Power
Agency, 6s, 2006 4,000 3,960,280
AAA North Carolina Eastern Municipal Power
Agency, AMBAC, 5.5s, 2007 2,040 2,006,095
A- North Carolina Eastern Municipal Power
Agency, 7s, 2007 5,000 5,297,350
A- North Carolina Eastern Municipal Power
Agency, 7.25s, 2007 5,000 5,421,800
A- North Carolina Eastern Municipal Power
Agency, 7s, 2008 1,815 1,920,960
A- North Carolina Eastern Municipal Power
Agency, 7.5s, 2010 3,005 3,319,203
AAA North Carolina Eastern Municipal Power
Agency, AMBAC, 6s, 2018 5,000 4,987,000
AAA North Carolina Eastern Municipal Power
Agency, FSA, 5.75s, 2019 2,500 2,384,600
AAA North Carolina Municipal Power Agency,
MBIA, 0s, 2009 10,000 4,463,300
AAA North Carolina Municipal Power Agency,
MBIA, 5s, 2018 2,500 2,141,650
AAA North Carolina Municipal Power Agency, No.
1 Catawba Electric Rev., MBIA, 0s, 2008 10,150 4,733,249
AAA North Carolina Municipal Power Agency, No.
1 Catawba Electric Rev., MBIA, 6s, 2011 5,000 5,074,800
AAA North Carolina Municipal Power Agency, No.
1 Catawba Electric Rev., MBIA, 5.47s, 2012++ 3,000 2,684,760
AAA North Carolina Municipal Power Agency, No.
1 Catawba Electric Rev., AMBAC,
7.625s, 2014 180 191,108
A North Carolina Municipal Power Agency, No.
1 Catawba Electric Rev., 5.75s, 2015 12,750 11,704,245
AAA North Carolina Municipal Power Agency, No.
1 Catawba Electric Rev., FSA, 6.2s, 2018 2,500 2,509,250
AAA Puerto Rico Electric Power Authority, FSA,
6s, 2016 5,500 5,492,465
A Wake County, NC, Industrial Facilities &
Pollution Control Financing Authority
Rev. (Carolina Power & Light Co.),
6.9s, 2009 2,000 2,102,180
------------
$ 71,445,385
- ----------------------------------------------------------------------------
Water and Sewer Utility Revenue - 3.0%
AAA Fayetteville, NC, Public Works Rev., FGIC,
7s, 2011 $ 2,000 $ 2,203,200
AAA Kanapolis, NC, Certificates of
Participation, MBIA, 7.375s, 2010 5,000 5,411,250
A Puerto Rico Aqueduct & Sewer Authority,
7.875s, 2017 2,000 2,173,500
AA+ Winston-Salem, NC, Water & Sewer Systems
Rev., 6.25s, 2012 4,000 4,123,040
------------
$ 13,910,990
- ----------------------------------------------------------------------------
Turnpike Revenue - 0.6%
A Puerto Rico Highway & Transportation
Authority, Highway Rev., 5.5s, 2015 $ 3,000 $ 2,768,670
- ----------------------------------------------------------------------------
Airport and Port Revenue - 1.4%
AAA Piedmont Triad Airport Authority, NC,
Airport Authority Rev., MBIA, 5s, 2016 $ 3,645 $ 3,193,822
BB+ Raleigh-Durham, NC, Airport Authority
(American Airlines), 9.625s, 2015 3,000 3,117,480
------------
$ 6,311,302
- ----------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 9.6%
NR Alamance County, NC, Industrial Facilities
& Pollution Control Finance Authority
(A.O. Smith Corp.), 7.375s, 2009 $ 1,000 $ 999,880
NR Chatham County, NC, Industrial Facilities &
Pollution Control Finance Authority
(Weyerhaeuser Co.), 9s, 2006 1,260 1,309,946
A Craven County, NC, Industrial Facilities &
Pollution Control Finance Authority
(Weyerhaeuser Co.), 6.35s, 2010 5,000 5,088,650
NR Gaston County, NC, Industrial Facilities &
Pollution Control Finance Authority
(Combustion Engineering, Inc.), 8.85s, 2015 1,000 1,130,740
BBB Halifax County, NC, Industrial Facilities &
Pollution Control Finance Authority
(Champion International Corp.), 8.15s, 2019 1,500 1,614,990
BBB Haywood County, NC, Industrial Facilities &
Pollution Control Finance Authority
(Champion International Corp.), 8.1s, 2009 2,500 2,683,700
BBB Haywood County, NC, Industrial Facilities &
Pollution Control Finance Authority
(Champion International Corp.), 5.5s, 2018 3,000 2,607,690
NR Henderson County, NC, Industrial Facilities
& Pollution Control Finance Authority
(Figgie International Real Estate), 8s, 2009 1,500 1,529,280
A Martin County, NC, Industrial Facilities &
Pollution Control Finance Authority
(Weyerhaeuser Co.), 6.375s, 2010 5,500 5,607,525
A Martin County, NC, Industrial Facilities &
Pollution Control Finance Authority
(Weyerhaeuser Co.), 7.25s, 2014 7,000 7,596,820
A Martin County, NC, Industrial Facilities &
Pollution Control Finance Authority
(Weyerhaeuser Co.), 6.8s, 2024 7,500 7,686,150
AAA Mecklenburg County, NC, Industrial
Facilities & Pollution Control Finance
Authority (Precision Steel), 7.75s, 2014 2,600 2,817,152
NR Surry County, NC, Industrial Facilities &
Pollution Control Finance Authority
(Weyerhaeuser Co.), 9.25s, 2002 1,500 1,830,855
NR Vance County, NC, Industrial Facilities &
Pollution Control Finance Authority
(Keunemetal Co.), 8.05s, 1995 833 835,010
NR Wake County, NC, Industrial Facilities &
Pollution Control Finance Authority
(Mallinckrodt), 6.75s, 2012 1,100 1,131,944
------------
$ 44,470,332
- ----------------------------------------------------------------------------
Universities - 5.4%
AAA Appalachian State University, NC, MBIA,
6.1s, 2014 $ 1,140 $ 1,154,090
AAA Appalachian State University, NC, MBIA,
6.125s, 2019 6,370 6,435,675
AA North Carolina Education Facilities Finance
Agency (Duke University), 6.75s, 2021 12,500 13,142,750
AA University of North Carolina (Chapel Hill),
0s, 2012 9,105 3,031,692
AA University of North Carolina (Chapel Hill),
0s, 2013 4,285 1,334,049
------------
$ 25,098,256
- ----------------------------------------------------------------------------
Other - 0.9%
NR Iredell, NC, Solid Waste Systems Rev.,
6.25s, 2012 $ 1,250 $ 1,266,550
A Puerto Rico Highway & Transportation
Authority Rev., 6.625s, 2018 2,715 2,789,528
------------
$ 4,056,078
- ----------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $434,699,614) $454,096,027
- ------------------------------------------------------------------------------
Floating Rate Demand Notes - 0.4%
- ------------------------------------------------------------------------------
Uinta County, WY, Pollution Control Rev.
(Chevron USA, Inc.), due 8/15/20 $ 1,500 $ 1,500,000
Wake County, NC, Industrial Facilities &
Pollution Control Rev. (Carolina Power &
Light Co.), due 3/01/17 600 600,000
- ----------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 2,100,000
- ----------------------------------------------------------------------------
Total Investments (Identified Cost, $436,799,614) $456,196,027
- -----------------------------------------------------------------------------
Other Assets, Less Liabilities - 1.6% 7,344,735
Net Assets - 100.0% $463,540,762
- ------------------------------------------------------------------------------
(S) Indexed security.
++ Inverse floating rate security.
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - March 31, 1995
MFS PENNSYLVANIA MUNICIPAL BOND FUND
Municipal Bonds - 96.9%
- ----------------------------------------------------------------------------
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------
General Obligation - 17.9%
AAA Central Bucks, PA, School District, MBIA,
5.4s, 2014 $ 250 $ 234,100
AAA Erie County, PA, FGIC, 5.5s, 2016 250 232,158
AAA Lehigh County, PA, FGIC, 5.125s, 2011 500 461,160
AAA Northeastern York County, PA, School
District, FGIC, 0s, 2012 415 151,786
AAA Oley Valley, PA, School District, 0s, 2011 810 315,519
AAA Penn-Trafford, PA, School District, MBIA,
5.85s, 2014 275 273,081
AAA Philadelphia, PA, School District, MBIA,
5.45s, 2004 500 498,970
A Southeastern Area, PA, Special Schools
Authority Rev., 0s, 2007 360 161,352
AAA Spring-Ford, PA, School District, AMBAC,
5.8s, 2012 250 248,335
AA- State of Pennsylvania, 5s, 2010 250 228,635
AA- State of Pennsylvania, 6.25s, 2010 300 314,679
AA- State of Pennsylvania, 5.375s, 2012 500 468,795
NR Upper Merion, PA, Area School District,
5.5s, 2016 250 235,865
AAA Warrington Township, PA, FGIC, 5.75s, 2020 500 479,910
------------
$ 4,304,345
- ----------------------------------------------------------------------------
State and Local Appropriation - 6.0%
AAA Philadelphia, PA, Municipal Authority Rev.,
FGIC, 5.625s, 2014 $ 600 $ 568,182
NR Philadelphia, PA, Municipal Authority Rev.,
8.625s, 2016 400 433,792
AAA State of Pennsylvania, Certificates of
Participation, AMBAC, 5.25s, 2010 250 230,405
AAA State of Pennsylvania, Certificates of
Participation, AMBAC, 5s, 2015 250 217,160
------------
$ 1,449,539
- ----------------------------------------------------------------------------
Refunded and Special Obligation - 9.4%
AA Allegheny County, PA, Sanitation Authority,
7.45s, 2009 $ 200 $ 218,924
AAA Bethlehem, PA, Water Authority, MBIA,
6.1s, 2018 500 529,545
AAA Philadelphia, PA, Gas Works Rev., 6s, 2013 645 633,732
AAA Puerto Rico Highway & Transportation
Authority, Highway Rev., 6.5s, 2022 250 275,928
AAA Puerto Rico Public Buildings Authority,
6.875s, 2021 250 281,567
AAA Schuylkill, PA, Redevelopment Authority
Rev., FGIC, 7s, 2007 300 325,791
------------
$ 2,265,487
- ----------------------------------------------------------------------------
Single Family Housing Revenue - 5.2%
AA Pennsylvania Housing Finance Authority,
6.75s, 2014 $ 500 $ 507,530
AA Pennsylvania Housing Finance Authority,
6.4s, 2016 500 497,005
AA Pennsylvania Housing Finance Authority,
6.65s, 2021 250 251,630
------------
$ 1,256,165
- ----------------------------------------------------------------------------
Multi-Family Housing Revenue - 0.9%
NR Montgomery, PA, Redevelopment Authority
(KBF Associates), 6.5s, 2025 $ 250 $ 223,135
- ----------------------------------------------------------------------------
Insured Health Care Revenue - 8.2%
AAA Butler County, PA, Hospital Authority,
Hospital Rev. (Butler Memorial Hospital),
FSA, 5.25s, 2016 $ 400 $ 365,052
AAA Dauphin County, PA, General Authority
Hospital Rev., MBIA, 5.8s, 2002 355 368,962
AAA Delaware County, PA, Authority Hospital
Rev. (Chester Medical Center), MBIA,
5.3s, 2020 500 445,980
AAA Lehigh County, PA, Hospital Rev. (Lehigh
Valley Hospital), MBIA, 7s, 2016 250 276,878
NR Philadelphia, PA, Hospitals & Higher
Education Facilities Authority, Hospital
Rev. (Agnes Medical Center), 7.25s, 2031 500 522,900
------------
$ 1,979,772
- ----------------------------------------------------------------------------
Health Care Revenue - 6.0%
AA- Chester County, PA, Health & Education
Facilities Authority (Main Line Health
System), 5.5s, 2015 $ 335 $ 305,600
AA Philadelphia, PA, Hospitals & Higher
Education Facilities Authority, Hospital
Rev. (Children's Hospital), 5.375s, 2014 500 451,155
A- Philadelphia, PA, Hospitals & Higher
Education Facilities Authority, Hospital
Rev. (Temple University Hospital),
6.625s, 2023 250 245,103
A Sewickley Valley, PA, Hospital Authority
Rev. (Sewickley Valley Hospital),
5.75s, 2016 500 451,855
------------
$ 1,453,713
- ----------------------------------------------------------------------------
Electric and Gas Utility Revenue - 4.9%
NR Pennsylvania Economic Development Financing
Authority (Northampton Generating),
6.5s, 2013 $ 250 $ 231,495
BBB Philadelphia, PA, Gas Works Rev.,
6.375s, 2014 500 496,300
BBB Philadelphia, PA, Gas Works Rev.,
5.25s, 2015 250 215,197
NR Schuylkill County, PA, Industrial
Development Authority, Resource Recovery
Rev., 6.5s, 2010 240 225,089
------------
$ 1,168,081
- ----------------------------------------------------------------------------
Water and Sewer Utility Revenue - 7.9%
AAA Bethlehem, PA, Authority, Water Rev., MBIA,
5.2s, 2021 $ 250 $ 220,540
AAA Highland, PA, Sewer & Water Rev., FSA,
5.35s, 2013 500 461,855
AAA Lancaster, PA, Sewer Authority, FGIC,
6.85s, 2011 250 260,862
AAA Meadville, PA, Area Water Authority, FSA,
5.125s, 2014 250 224,900
AAA Philadelphia, PA, Water & Wastewater Rev.,
FSA, 5.75s, 2013 300 287,196
AAA Philadelphia, PA, Water & Wastewater Rev.,
MBIA, 5.25s, 2023 500 437,615
------------
$ 1,892,968
- ----------------------------------------------------------------------------
Turnpike Revenue - 1.9%
A Commonwealth of Puerto Rico, Highway &
Transportation Authority, 5.5s, 2013 $ 500 $ 463,470
- ----------------------------------------------------------------------------
Airport and Port Revenue - 3.3%
AAA Allegheny County, PA, Airport Rev. (Greater
Pittsburgh International Airport), FGIC,
7.75s, 2019 $ 750 $ 791,212
- ----------------------------------------------------------------------------
Sales and Excise Tax Revenue - 2.0%
AAA Pennsylvania Intergovernmental Coop
Authority (City of Philadelphia Funding
Project), MBIA, 5.6s, 2015 $ 500 $ 476,095
- ----------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 5.2%
A- Erie County, PA, Industrial Development
Authority (International Paper Co.),
7.625s, 2018 $ 250 $ 269,777
NR Hampden, PA, Industrial Development
Authority, 5.75s, 2008 250 233,233
A New Morgan, PA, Industrial Development Rev.
(Morgan Landfill Co.), 6.5s, 2019 500 495,140
BBB- Pennsylvania Economic Development Rev.,
7.6s, 2020 250 263,472
------------
$ 1,261,622
- ----------------------------------------------------------------------------
Universities - 11.0%
AAA Allegheny County, PA, Higher Education
Building Authority Rev. (Community
College), CGIC, 5s, 2010 $ 500 $ 453,035
AAA Northampton County, PA, Higher Education
Authority Rev. (LaFayette College), FGIC,
5s, 2015 690 602,984
AAA Northampton County, PA, Higher Education
Authority Rev. (Lehigh University), MBIA,
5.75s, 2018 250 239,098
AA- Pennsylvania State University, 5.5s, 2016 500 467,175
AA- Pennsylvania State University, 5.1s, 2018 250 220,160
AAA State of Pennsylvania, Higher Education
Facilities Authority, 5.5s, 2020 250 231,030
AA- State of Pennsylvania, Higher Education
Facilities Authority (University of
Pennsylvania), 7s, 2008 400 447,976
------------
$ 2,661,458
- ----------------------------------------------------------------------------
Other - 7.1%
BBB- Pennsylvania Convention Center Authority,
6.75s, 2019 $ 250 $ 250,535
A State of Pennsylvania Finance Authority
Rev. (Municipal Capital Improvement
Program), 6.6s, 2009 500 518,215
AAA State of Pennsylvania, Industrial
Development Authority Rev., 7s, 2007 300 336,459
AAA State of Pennsylvania, Industrial
Development Authority Rev., AMBAC,
5.8s, 2009 400 402,096
AAA State of Pennsylvania, Industrial
Development Authority Rev., 6s, 2012 200 201,142
------------
$ 1,708,447
- ------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $23,188,488) $ 23,355,509
- ------------------------------------------------------------------------------
Floating Rate Demand Notes - 3.3%
- ------------------------------------------------------------------------------
Allegheny County, PA, Hospital Development
Authority Rev. (Presbyterian University
Hospital), due 3/01/20 $ 700 $ 700,000
Delaware County, PA, Industrial Development
Authority, Airport Facilities Rev.
(Parcel Service), due 12/01/15 100 100,000
- ----------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 800,000
- ----------------------------------------------------------------------------
Total Investments (Identified Cost, $23,988,488) $ 24,155,509
Other Assets, Less Liabilities - (0.2)% (46,451)
- ------------------------------------------------------------------------------
Net Assets - 100.0% $ 24,109,058
- ------------------------------------------------------------------------------
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - March 31, 1995
MFS SOUTH CAROLINA MUNICIPAL BOND FUND
Municipal Bonds - 96.7%
- ----------------------------------------------------------------------------
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------
General Obligation - 5.5%
AA Charleston County, SC, 5.5s, 2014 $2,250 $ 2,112,615
A Commonwealth of Puerto Rico, 5.25s, 2018 500 437,365
AAA Horry County, SC, School District, FSA,
4.8s, 2004 2,215 2,127,729
AA- North Charleston, SC, 5.875s, 2010 780 781,638
A Williamsburg County, SC, School District,
7.8s, 2003 200 208,706
A Williamsburg County, SC, School District,
7.9s, 2005 250 261,122
A Williamsburg County, SC, School District,
7.9s, 2006 275 287,111
A Williamsburg County, SC, School District,
7.9s, 2007 300 313,158
AAA York County, SC, AMBAC, 5s, 2011 3,940 3,549,704
------------
$ 10,079,148
- ----------------------------------------------------------------------------
State and Local Appropriation - 4.7%
AAA Berkeley County, SC, School District,
AMBAC, 6.3s, 2016 $1,800 $ 1,842,948
AAA Lexington County, SC, School District No.
1, Certificates of Participation (Gilbert
Middle School), MBIA, 6.65s, 2012 1,000 1,045,290
BBB+ Myrtle Beach, SC, Public Finance Corp.,
Certificates of Participation (Convention
Center), 6.875s, 2017 2,500 2,541,750
AAA North Charleston, SC, Certificates of
Participation (Coliseum), FGIC, 6s, 2016 1,355 1,354,133
NR Williamsburg County, SC, School District
Public Facilities Corp., Certificates of
Participation, 7.5s, 2006 175 169,696
NR Williamsburg County, SC, School District
Public Facilities Corp., Certificates of
Participation, 7.5s, 2007 190 183,950
NR Williamsburg County, SC, School District
Public Facilities Corp., Certificates of
Participation, 7.5s, 2008 205 198,184
NR Williamsburg County, SC, School District
Public Facilities Corp., Certificates of
Participation, 7.5s, 2009 220 212,399
NR Williamsburg County, SC, School District
Public Facilities Corp., Certificates of
Participation, 7.5s, 2012 270 251,397
NR Williamsburg County, SC, School District
Public Facilities Corp., Certificates of
Participation, 7.5s, 2014 315 292,247
NR Williamsburg County, SC, School District
Public Facilities Corp., Certificates of
Participation, 7.5s, 2018 635 585,794
------------
$ 8,677,788
- ----------------------------------------------------------------------------
Refunded and Special Obligation - 22.1%
NR Anderson County, SC, 7.75s, 2008 $ 500 $ 542,230
AA Charleston County, SC, 6.5s, 2011 1,315 1,426,683
AAA Charleston County, SC, Certificates of
Participation (Charleston Public
Facilities Corp.), MBIA, 7.1s, 2011 2,000 2,243,700
AA Columbia, SC, Waterworks & Sewer Rev.,
0s, 2004 1,500 936,000
AA Columbia, SC, Waterworks & Sewer Rev.,
0s, 2006 2,045 1,110,292
AA Commonwealth of Puerto Rico, Public
Improvement, 6.8s, 2021 425 476,748
AAA Greenville Hospital System, SC, Hospital
Facilities Rev., "A", FGIC, 7.8s, 2015 1,950 2,151,532
AAA Greenville Hospital System, SC, Hospital
Facilities Rev., "B", FGIC, 7.8s, 2015 1,500 1,655,025
AAA Greenwood County, SC, Hospital Rev. (Self
Memorial Hospital), BIG, 8.25s, 2007 500 550,300
AAA Greenwood County, SC, Hospital Rev. (Self
Memorial Hospital), BIG, 8.375s, 2017 1,000 1,103,490
AAA Laurens, SC, Utility Systems Rev., FGIC,
7.625s, 2018 1,100 1,210,572
AAA Lexington County, SC, School District No.
1, Certificates of Participation (White
Knoll Middle School), CGIC, 7.65s, 2009 1,400 1,560,902
AAA Myrtle Beach, SC, Water & Sewer Rev., MBIA,
6s, 2015 1,780 1,852,482
AAA Myrtle Beach, SC, Water & Sewer Rev., MBIA,
6s, 2020 1,750 1,821,260
AAA North Charleston, SC, Sewer Rev., MBIA,
7.75s, 2018 1,250 1,385,087
AAA Puerto Rico Aqueduct & Sewer Authority,
9s, 2009 750 965,977
AA Puerto Rico Highway & Transportation
Authority Rev., 6.625s, 2018 300 333,369
AA Richland County, SC, 6.25s, 2010 1,260 1,341,736
AAA Richland County, SC, Certificates of
Participation, FGIC, 0s, 2005 1,160 673,067
AAA Richland County, SC, Certificates of
Participation, FGIC, 0s, 2006 1,160 630,135
AAA Richland County, SC, Certificates of
Participation, FGIC, 0s, 2007 1,160 592,203
NR South Carolina Jobs, Economic Development
Authority (Carolina Hospital System
Project), 7.55s, 2022 2,000 2,312,860
AAA South Carolina Public Service Authority,
"B", 7.1s, 2021 2,000 2,246,020
AAA South Carolina Public Service Authority,
"C", 7.1s, 2021 1,220 1,370,072
AAA South Carolina Public Service Authority
(Santee Cooper), 6.625s, 2031 4,000 4,420,320
AAA South Carolina Public Service Authority,
Electric Rev., MBIA, 7.75s, 2015 3,155 3,294,767
AA- South Carolina Public Service Authority,
Electric Rev., 7.875s, 2021 650 678,886
A- Spartanburg County, SC, Hospital Facilities
Rev. (Mary Black Hospital), 8.25s, 2008 500 560,970
AAA York County, SC, School District No. 3,
MBIA, 7.5s, 2007 575 630,626
AAA York, SC, Water & Sewer Rev., AMBAC,
7.875s, 2013 620 660,567
------------
$ 40,737,878
- ----------------------------------------------------------------------------
Single Family Housing Revenue - 6.3%
AA South Carolina Housing Authority,
8.6s, 2019 $1,000 $ 1,050,160
AA South Carolina Housing Finance &
Development Authority, 7.55s, 2011 1,750 1,849,645
AA South Carolina Housing Finance &
Development Authority, 7.75s, 2022 2,650 2,791,086
AA South Carolina Housing Finance &
Development Authority, 7.8s, 2022 1,000 1,058,540
AA South Carolina Housing Finance &
Development Authority, 7.9s, 2032 4,610 4,901,767
------------
$ 11,651,198
- ----------------------------------------------------------------------------
Multi-Family Housing Revenue - 1.1%
AA South Carolina Housing Finance &
Development Authority (Fairway
Apartments), 7.625s, 2033 $1,985 $ 2,100,904
- ----------------------------------------------------------------------------
Insured Health Care Revenue - 8.1%
AAA Anderson County, SC, Hospital Facilities
Rev. (Anderson Area Medical Center, Inc.),
MBIA, 5.1s, 2006 $2,745 $ 2,613,953
AAA Anderson County, SC, Hospital Facilities
Rev. (Anderson Area Medical Center, Inc.),
MBIA, 5.25s, 2012 1,000 914,960
AAA Charleston County, SC, Hospital Rev.
(Bon Secours Health System Project), FSA,
5.625s, 2025 1,500 1,400,040
AAA Charleston County, SC, Hospital Rev.
(Medical Society Health Project), MBIA,
5.5s, 2019 2,550 2,338,426
AAA Charleston County, SC, Hospital Rev.
(Medical Society Health Project), MBIA,
5s, 2022 2,450 2,066,918
AAA Greenwood County, SC, Hospital Rev. (Self
Memorial Hospital), MBIA, 5.875s, 2017 1,000 970,210
AAA Pickens & Richland Counties, SC, Hospital
Rev. (Baptist Hospital), AMBAC,
5.75s, 2021 3,635 3,423,625
AAA Richland County, SC, Hospital Facilities
Rev. (Providence Hospital), CGIC,
5.25s, 2010 1,200 1,108,536
------------
$ 14,836,668
- ----------------------------------------------------------------------------
Health Care Revenue - 7.5%
NR Charleston County, SC, First Mortgage Rev.
(Driftwood Health Care), 12.5s, 2014 $2,115 $ 2,185,810
NR Greenville County, SC, First Mortgage Rev.
(Chestnut Hill), 10.125s, 2016 1,950 2,035,586
AA- Greenville Hospital System, SC, Hospital
Facilities Rev., 6s, 2020 5,400 5,111,802
NR Horry County, SC, Hospital Facilities Rev.
(Conway Hospital), 6.75s, 2012 4,500 4,483,575
------------
$ 13,816,773
- ----------------------------------------------------------------------------
Electric and Gas Utility Revenue - 10.8%
A Colleton & Dorchester Counties, SC,
Pollution Control Rev., 6.6s, 2014 $3,000 $ 3,056,520
A Fairfield County, SC, Pollution Control
Rev. (South Carolina Electric Co.),
6.5s, 2014 1,250 1,290,938
AAA Piedmont Municipal Power Agency, SC,
Electric Rev., FGIC, 6.25s, 2021 4,600 4,780,550
AAA Piedmont Municipal Power Agency, SC,
Electric Rev., FGIC, 5s, 2022 2,300 1,951,987
A- Puerto Rico Electric Power Authority,
5.5s, 2020 1,000 901,690
AAA South Carolina Public Service Authority,
6.64s, 2013++ 3,000 2,656,620
AAA South Carolina Public Service Authority,
MBIA, 5.5s, 2021 1,430 1,318,231
AAA South Carolina Public Service Authority,
FGIC, 5.875s, 2023 4,000 3,885,280
------------
$ 19,841,816
- ----------------------------------------------------------------------------
Water and Sewer Utility Revenue - 14.8%
AAA Cayce, SC, Waterworks & Sewer Rev., AMBAC,
5.25s, 2015 $1,500 $ 1,354,155
AA- Charleston County, SC, Waterworks & Sewer
Rev., 6s, 2012 2,500 2,516,850
AAA Charleston County, SC, Waterworks & Sewer
Rev., MBIA, 5s, 2022 3,150 2,699,046
AA Columbia, SC, Waterworks & Sewer Rev.,
0s, 2005 2,245 1,298,867
AA Columbia, SC, Waterworks & Sewer Rev.,
0s, 2006 9,330 5,052,289
AA Columbia, SC, Waterworks & Sewer Rev.,
5.375s, 2012 3,500 3,286,780
NR Laurens County, SC, Water & Sewer
Commission, Sewer System Rev., 5.5s, 2014 1,080 985,003
AAA Myrtle Beach, SC, Water & Sewer Rev., MBIA,
5.5s, 2013 1,000 941,130
AAA Rock Hill, SC, Utility Systems Rev., AMBAC,
5s, 2020 1,285 1,106,899
A+ South Carolina Resources Authority (Local
Government Program), 7.25s, 2020 3,000 3,197,310
AAA St. Andrews, SC, Public Services District,
Sewer System Rev., FGIC, 7.75s, 2018 1,000 1,071,650
AAA Union, SC, Combined Public Utility System
Rev., FGIC, 5s, 2021 1,650 1,431,408
AAA Western Carolina Regional Sewer Authority,
AMBAC, 0s, 2007 4,400 2,230,492
------------
$ 27,171,879
- ----------------------------------------------------------------------------
Turnpike Revenue - 1.3%
A Commonwealth of Puerto Rico, Highway &
Tranportation Authority, 5.5s, 2013 $1,500 $ 1,390,410
A Commonwealth of Puerto Rico, Highway &
Transportation Authority, 5.5s, 2015 1,000 922,890
------------
$ 2,313,300
- ----------------------------------------------------------------------------
Airport and Port Revenue - 1.0%
AAA Charleston County, SC, Airport District,
MBIA, 5s, 2013 $2,000 $ 1,771,320
- ----------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 12.5%
NR Aiken County, SC, Industrial Rev.
(Kimberly-Clark Project), 8.92s, 2005 $ 300 $ 311,700
A+ Calhoun, SC, Solid Waste Disposal Rev.
(Eastman Kodak), 6.75s, 2017 1,000 1,049,460
A Charleston County, SC, Resource Recovery
Rev. (Foster Wheeler), 9.25s, 2010 1,750 1,927,100
BBB+ Chester County, SC, Industrial Rev.
(Springs Industries, Inc.), 7.35s, 2014 1,000 1,048,930
BBB+ Chester County, SC, Industrial Rev.
(Springs Industries, Inc.), 7.8s, 2014 1,025 1,097,529
AA- Darlington County, SC, Industrial
Development Rev. (Nucor Corp.),
5.75s, 2023 1,000 904,440
NR Fairfield County, SC, Industrial Rev. (Rite
Aid, Inc.), 7.9s, 2016 2,950 3,080,006
AA Florence County, SC, Pollution Control
Facility Rev. (E.I. du Pont de Nemours),
6.35s, 2022 1,000 1,019,980
NR Greenville County, SC, Industrial Rev.
(Kroger Co.), 7.85s, 2015 500 540,075
NR Lexington County, SC, Industrial Rev. (J.B.
White & Co.), 8s, 2005 700 740,978
A- Oconee County, SC, Pollution Control Rev.
(Duke Power Co.), 5.8s, 2014 2,975 2,971,966
A- Oconee County, SC, Pollution Control Rev.
(Duke Power Co.), 7.5s, 2017 1,000 1,096,650
A- Richland County, SC, Pollution Control Rev.
(Union Camp Corp.), 6.55s, 2020 1,800 1,844,262
A- Richland County, SC, Solid Waste Facilities
Rev. (Union Camp Corp.), 6.75s, 2022 2,000 2,046,600
AA- York County, SC, Industrial Rev. (Hoechst
Celanese), 5.7s, 2024 3,725 3,347,546
------------
$ 23,027,222
- ----------------------------------------------------------------------------
Universities - 0.6%
AAA Coastal Carolina University, 6.875s, 2026 $1,000 $ 1,062,340
- ----------------------------------------------------------------------------
Other - 0.4%
AAA Puerto Rico Telephone Authority Rev.,
AMBAC, 4.47s, 2004 (Interest Rate Swap)(S) $1,000 $ 823,820
- ------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $170,924,735) $177,912,054
- ------------------------------------------------------------------------------
Floating Rate Demand Notes - 1.7%
- ------------------------------------------------------------------------------
Uinta County, WY, Pollution Control Rev.
(Chevron Corp.), due 8/15/20 $2,400 $ 2,400,000
Uinta County, WY, Pollution Control Rev.
(Chevron Corp.), due 12/01/22 800 800,000
- ------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 3,200,000
- ------------------------------------------------------------------------------
Total Investments (Identified Cost, $174,124,735) $181,112,054
Other Assets, Less Liabilities - 1.6% 2,896,587
- ------------------------------------------------------------------------------
Net Assets - 100.0% $184,008,641
- ------------------------------------------------------------------------------
(S) Indexed security.
++ Inverse floating rate security.
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - March 31, 1995
MFS VIRGINIA MUNICIPAL BOND FUND
Municipal Bonds - 96.4%
- ----------------------------------------------------------------------------
S&P Bond Principal
Rating Amount
(Unaudited) Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------
General Obligation - 8.7%
AA Chesapeake, VA, Public Improvement,
5.25s, 2008 $ 3,300 $ 3,161,268
AAA Fairfax County, VA, 5.375s, 2009 3,000 2,922,060
AAA Fairfax County, VA, 5.2s, 2012 3,150 2,948,684
NR Lebanon, VA, 7.6s, 2005 375 384,915
NR Lebanon, VA, 7.75s, 2010 310 318,993
AA- Newport News, VA, 4.95s, 2007 2,670 2,485,957
AA Norfolk, VA, 5.5s, 2011 3,140 3,029,660
AA- Portsmouth, VA, 6.375s, 2012 1,555 1,603,298
AA Richmond, VA, 0s, 2006 1,000 538,330
AA Richmond, VA, 0s, 2006 2,500 1,345,825
AA Richmond, VA, 0s, 2007 5,280 2,653,200
AA Richmond, VA, 0s, 2008 2,000 942,120
AA Richmond, VA, 0s, 2008 5,270 2,470,207
AA Richmond, VA, 0s, 2009 5,175 2,219,609
AA Richmond, VA, 5.7s, 2016 2,000 1,898,100
AA Richmond, VA, 5.5s, 2022 2,000 1,822,780
AAA State of Virginia (Higher Educational
Institute), 0s, 1995 725 719,512
AAA State of Virginia (Higher Educational
Institute), 0s, 1996 1,000 947,490
AAA State of Virginia (Higher Educational
Institute), 0s, 1998 1,295 1,115,435
AAA State of Virginia (Higher Educational
Institute), 0s, 1999 1,300 1,063,049
AA State of Virginia, Public School Authority,
6.5s, 2013 1,875 1,962,788
A Suffolk, VA, 6.5s, 2006 1,250 1,309,000
AA Virginia Beach, VA, 5.45s, 2011 1,755 1,686,713
------------
$ 39,548,993
- ----------------------------------------------------------------------------
State and Local Appropriation - 5.5%
NR Chesterfield County, VA, Industrial
Development Authority, Public Facilities
Lease Rev. (Correctional Enterprises),
7.5s, 2008 $ 1,720 $ 1,726,777
AA Henrico County, VA, Industrial Development
Authority Rev., 6.5s, 2010 5,000 5,257,700
NR New Kent County, VA, Industrial Development
Authority, Public Facilities Lease Rev.
(New Kent County Courthouse), 7.5s, 2011 700 742,714
A Puerto Rico Public Buildings Authority,
5.385s, 2016 (Municipal Swap)(S) 6,500 5,665,075
AAA Virginia Public Building Authority, MBIA,
0s, 2007 13,305 6,626,023
AAA Virginia Public Building Authority, MBIA,
0s, 2008 10,650 4,947,564
------------
$ 24,965,853
- ----------------------------------------------------------------------------
Refunded and Special Obligation - 20.7%
NR Arlington County, VA, Industrial
Development Authority (Arlington
Hospital), 7.125s, 2021 $ 4,450 $ 5,013,993
AAA Bedford, VA, Electric Systems Rev., AMBAC,
8.875s, 2015 2,000 2,054,820
AAA Bedford, VA, Electric Systems Rev., AMBAC,
9s, 2025 1,000 1,027,700
NR Carroll County, VA, Solid Waste Authority
Rev., 7.5s, 2006 2,265 2,584,637
NR Chesapeake, VA, Certificates of
Participation, 7.75s, 2006 1,250 1,322,512
NR Chesapeake, VA, Industrial Development
Authority Rev. (Sentara Life Care Corp.),
10s, 2012 1,130 1,279,013
AA Chesapeake, VA, Public Improvement,
6.75s, 2008 2,500 2,715,375
AAA Chesterfield County, VA, Water & Sewer
Rev., FGIC, 9.125s, 2010 3,250 3,402,392
AAA Commonwealth of Puerto Rico, 7.9s, 2004 1,660 1,780,217
AAA Fairfax County, VA, Water Authority Rev.,
7.25s, 2027 3,090 3,428,417
AAA Frederick-Winchester, VA, Sewer System
Rev., AMBAC, 9.375s, 2015 1,500 1,580,970
AA- Hampton, VA, Public Improvement,
6.625s, 2010 1,500 1,618,605
AAA Henrico County, VA, Water & Sewer Rev.,
MBIA, 7.875s, 2013 3,500 3,693,900
AAA Nelson County, VA, Service Authority, Water
& Sewer Rev., FGIC, 7.875s, 2018 1,000 1,051,260
NR Newport News, VA, 6.5s, 2008 875 951,344
NR Newport News, VA, 6.5s, 2010 2,205 2,397,386
NR Newport News, VA, 6.5s, 2011 2,325 2,527,856
AA Norfolk, VA, Industrial Development
Authority (Sentara Hospital), 7.875s, 2008 1,000 1,113,050
AA Norfolk, VA, Industrial Development
Authority (Sentara Hospital), 7.9s, 2018 2,000 2,227,720
NR Norfolk, VA, Industrial Development
Authority (Sentara Life Care Corp.),
10s, 2012 4,320 4,889,678
AA- Portsmouth, VA, 6.9s, 2019 1,500 1,647,150
AAA Puerto Rico Aqueduct & Sewer Authority,
9s, 2009 4,150 5,345,075
AAA Puerto Rico Aqueduct & Sewer Authority,
10.25s, 2009 400 549,272
AAA Puerto Rico Electric Power Authority Rev.,
9.125s, 2015 1,500 1,562,595
AAA Puerto Rico Highway & Transportation
Authority, Highway Rev., 6.5s, 2022 1,750 1,931,493
AAA Puerto Rico Industrial, Medical &
Environmental Pollution Control Facilities
Finance Authority Rev., 9.75s, 2025 1,345 1,395,303
AAA Puerto Rico Public Buildings Authority,
8.875s, 2012 3,500 3,610,670
AAA Roanoke, VA, Industrial Development
Authority, Hospital Rev. (Memorial
Hospital), MBIA, 7.25s, 2010 1,750 1,956,185
A+ Roanoke, VA, Industrial Development
Authority, Hospital Rev. (Memorial
Hospital), 7.5s, 2020 1,245 1,405,854
NR Salem, VA, 8.65s, 2003 525 541,097
AAA Southeastern Public Service Authority, VA,
Solid Waste System Rev., 9.25s, 2015 2,750 2,960,898
AAA Southeastern Public Service Authority, VA,
Solid Waste System Rev., 10.5s, 2015 5,600 5,792,248
AAA State of Virginia, Public School Authority,
8.5s, 2009 500 541,490
AAA University of Virginia, Hospital Rev.,
9s, 2013 4,165 4,280,745
AAA Virginia Beach, VA, Certificates of
Participation (Judicial Center Project),
FGIC, 7.25s, 2010 4,955 5,552,474
A+ Virginia Beach, VA, Water & Sewer Rev.,
6.625s, 2017 2,400 2,627,784
NR Virginia College Building Authority
(Hampton University), 7.75s, 2014 750 835,973
AA Virginia Resources Authority, Water & Sewer
System Rev., 8.75s, 2003 500 616,115
AA Virginia Resources Authority, Water & Sewer
System Rev., 7.875s, 2018 800 888,872
NR Virginia Resources Authority, Water & Sewer
System Rev., 7.5s, 2020 1,180 1,306,590
AAA Virginia Transportation Board, Contract
Rev. (Route 28), 7.7s, 2008 2,175 2,387,846
------------
$ 94,396,574
- ----------------------------------------------------------------------------
Single Family Housing Revenue - 3.0%
AAA Puerto Rico Housing Finance Corp., GNMA,
7.8s, 2021 $ 45 $ 47,189
AAA Virginia Housing Development Authority,
FHA, 0s, 2010 560 125,390
NR Virginia Housing Development Authority,
6.02s, 2019++ 7,500 6,604,050
A+ Virginia Housing Development Authority,
7.1s, 2022 2,000 2,085,920
AA+ Virginia Housing Development Authority,
7.8s, 2028 2,000 2,109,020
AA+ Virginia Housing Development Authority,
0s, 2029 3,615 225,937
AA+ Virginia Housing Development Authority,
7.8s, 2038 2,500 2,622,500
------------
$ 13,820,006
- ----------------------------------------------------------------------------
Multi-Family Housing Revenue - 5.4%
NR Alexandria, VA, Redevelopment & Housing
Authority (Jefferson Village Apartments),
9s, 2018 $ 4,000 $ 4,114,520
NR Fairfax County, VA, Redevelopment & Housing
Authority (Little River Glen),
8.95s, 2020 3,880 3,990,890
AAA Harrisonburg, VA, Redevelopment & Housing
Authority (Battery Heights), GNMA,
7.375s, 2028 3,540 3,732,187
NR Norfolk, VA, Redevelopment & Housing
Authority (Dockside Apartments),
7.375s, 2028 2,000 2,114,400
NR Virginia Beach, VA, Development Authority
(Lake Point Associates Project),
12.125s, 2015 6,300 6,425,559
AA Virginia Housing Development Authority,
6.5s, 2013 2,300 2,310,327
AA Virginia Housing Development Authority,
5.875s, 2017 2,000 1,914,980
------------
$ 24,602,863
- ----------------------------------------------------------------------------
Insured Health Care Revenue - 6.0%
NR Albemarle County, VA, Industrial
Development Authority, First Mortgage
Rev., FHA, 8.9s, 2026 $ 2,150 $ 2,454,118
AAA Augusta County, VA, Industrial Development
Authority (Augusta Hospital Corp.), AMBAC,
5.125s, 2021 3,000 2,621,790
AAA Chesapeake, VA, Hospital Authority, First
Mortgage Rev. (Chesapeake General
Hospital), MBIA, 5.3s, 2008 1,500 1,436,025
AAA Danville, VA, Industrial Development
Authority (Danville Regional Medical
Center), FGIC, 6.5s, 2024 3,000 3,096,750
NR Front Royal-Warren County, VA, Industrial
Development Authority, FHA, 9.45s, 2024 1,000 1,099,050
AAA Henrico County, VA, Industrial Development
Authority Rev. (Bon Secours), FSA,
7.366s, 2027++ 8,700 8,301,366
AAA Peninsula Ports Authority, VA, Hospital
Facilities Rev. (Wittaker Memorial
Hospital), FHA, 8.7s, 2023 2,100 2,239,461
AAA Roanoke, VA, Industrial Development
Authority, Hospital Rev. (Roanoke Memorial
Hospital), MBIA, 6.125s, 2017 6,000 6,061,080
------------
$ 27,309,640
- ----------------------------------------------------------------------------
Health Care Revenue - 8.3%
NR Albemarle County, VA, Industrial
Development Authority (Martha Jefferson
Hospital), 5.5s, 2015 $ 2,000 $ 1,795,300
NR Albemarle County, VA, Industrial
Development Authority (Martha Jefferson
Hospital), 5.5s, 2020 1,000 876,020
NR Arlington County, VA, Industrial
Development Authority, Hospital Facilities
Rev. (Arlington Hospital), 5.3s, 2015 8,500 7,438,860
AA- Chesapeake, VA, Industrial Development
Authority (Sentara Life Care Corp.),
7.875s, 2008 1,000 1,098,200
AA- Chesapeake, VA, Industrial Development
Authority (Sentara Life Care Corp.),
8s, 2018 4,000 4,396,480
NR Fairfax, Fauquier & Loudoun Counties,VA,
Health Center Commission, Nursing Home
Rev., 9s, 2020 1,930 1,988,035
A+ Henrico County, VA, Industrial Development
Authority (St. John's Hospital),
8.875s, 2015 975 1,029,200
NR Hopewell County, VA, Hospital Authority
(John Randolph Hospital), 8.85s, 2013 4,760 4,887,711
A+ Lynchburg, VA, Industrial Development
Authority (Central Health, Inc.),
8.125s, 2016 1,400 1,516,060
NR Martinsville, VA, Industrial Development
Authority (Beverly Enterprises),
6.75s, 2004 1,230 1,157,455
AA- Norfolk, VA, Industrial Development
Authority (Sentara Life Corp.), "A",
7.875s, 2008 1,000 1,091,710
AA- Norfolk, VA, Industrial Development
Authority (Sentara Life Corp.), "A",
7.9s, 2018 2,000 2,134,700
BBB+ Peninsula Ports Authority, VA, Hospital
Facilities Rev. (Mary Immaculate
Hospital), 7.375s, 2017 3,000 3,080,760
A Suffolk, VA, Industrial Development
Authority (Louise Obici Memorial
Hospital), 7.875s, 2005 2,060 2,184,692
A+ Virginia Beach, VA, Hospital Facilities
Rev. (Virginia Beach General Hospital),
8.75s, 2017 2,875 3,206,372
------------
$ 37,881,555
- ----------------------------------------------------------------------------
Electric and Gas Utility Revenue - 3.8%
A+ Halifax County, VA, Industrial Rev.
Authority (Old Dominion Electric
Cooperative Project), 6s, 2022 $ 8,500 $ 8,135,265
AAA Southeastern Public Service Authority, VA,
Solid Waste System Rev., MBIA, 5.15s, 2009 3,000 2,805,990
A- Southeastern Public Service Authority, VA,
Solid Waste System Rev., 6s, 2017 6,750 6,354,248
------------
$ 17,295,503
- ----------------------------------------------------------------------------
Water and Sewer Utility Revenue - 8.6%
A+ Chesapeake, VA, Water & Sewer, 5.125s, 2021 $ 1,200 $ 1,031,352
AA Chesterfield County, VA, Water & Sewer
Rev., 0s, 2004 5,025 2,963,695
AA Chesterfield County, VA, Water & Sewer
Rev., 0s, 2005 4,815 2,660,094
AA Chesterfield County, VA, Water & Sewer
Rev., 0s, 2006 4,000 2,065,920
AA Chesterfield County, VA, Water & Sewer
Rev., 0s, 2007 6,000 2,909,160
AA Chesterfield County, VA, Water & Sewer
Rev., 0s, 2008 6,135 2,790,137
AA Chesterfield County, VA, Water & Sewer
Rev., 0s, 2009 6,135 2,597,927
AA Chesterfield County, VA, Water & Sewer
Rev., 0s, 2010 9,005 3,567,781
AA- Fairfax County, VA, Water Authority Rev.,
6s, 2022 11,400 11,250,432
AA- Fairfax County, VA, Water Authority Rev.,
5.75s, 2029 7,100 6,765,732
AA Virginia Resources Authority, Sewer Systems
Rev., 9.3s, 2005 250 260,800
AA Virginia Resources Authority, Water & Sewer
System Rev. (Campell Utilities & Service
Co.), 5.125s, 2013 500 438,900
------------
$ 39,301,930
- ----------------------------------------------------------------------------
Turnpike Revenue - 2.6%
AAA Chesapeake Bay, VA, Bridge & Tunnel
Authority, FGIC, 0s, 2005 $ 4,535 $ 2,543,273
AAA Chesapeake Bay, VA, Bridge & Tunnel
Authority, MBIA, 5.75s, 2025 4,000 3,781,280
AAA Richmond, VA, Metropolitan Authority, FGIC,
5.75s, 2022 2,000 1,897,180
AA State of Virginia, Transportation Board,
6.5s, 2018 3,500 3,637,900
------------
$ 11,859,633
- ----------------------------------------------------------------------------
Airport and Port Revenue - 6.5%
AAA Metropolitan Washington, D.C., Airport
Rev., MBIA, 6.625s, 2012 $ 3,000 $ 3,101,790
AA- Metropolitan Washington, D.C., Airport
Rev., 7.6s, 2014 5,030 5,480,034
AAA Metropolitan Washington, D.C., Airport
Rev., BIG, 8.2s, 2018 3,500 3,896,200
AAA Metropolitan Washington, D.C., Airport
Rev., MBIA, 5.75s, 2020 10,000 9,378,200
AA- Peninsula Airport Commission, VA,
7.3s, 2021 2,400 2,630,568
A+ Virginia Port Authority, 8.2s, 2008 4,500 4,974,120
------------
$ 29,460,912
- ----------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 4.0%
A- Halifax, VA, Industrial Development
Authority (Tandy Corp.), 8.25s, 2008 $ 3,500 $ 3,803,065
A+ Henrico County, VA, Industrial Development
Authority (St. Mary's Hospital), 7.5s, 2007 870 942,810
A- Isle Wight County, VA, Industrial
Development Authority (Union Camp Corp.),
6.55s, 2024 8,000 8,104,960
NR Lynchburg, VA, Industrial Development
Authority (Kroger Co.), 7.9s, 2011 1,000 1,074,420
NR Virginia Beach, VA, Development Authority
(Beverly Enterprises), 10s, 2010 1,400 1,564,528
BBB West Point, VA, Industrial Development
Authority (Chesapeake Corp.), 6.375s, 2019 2,600 2,487,290
------------
$ 17,977,073
- ----------------------------------------------------------------------------
Universities - 6.5%
A+ Albemarle County, VA, Industrial
Development Authority, Health Services
Rev. (University of Virginia Health
Services Foundation), 6.5s, 2022 $ 1,000 $ 997,480
A- Hampton Roads, VA, Medical College,
6.875s, 2016 2,000 2,076,860
A- Hampton Roads, VA, Medical College,
6.875s, 2016 1,500 1,557,645
NR Loudoun County, VA, Industrial Development
Authority, University Facilities Rev.
(George Washington University),
6.25s, 2012 2,710 2,742,005
NR Rockingham County, VA, Industrial
Development Authority Rev. (Bridgewater
College), 6s, 2023 6,610 6,071,484
AA+ University of Virginia, University Rev.,
5.375s, 2014 5,690 5,373,522
AA+ University of Virginia, University Rev.,
5.2s, 2015 2,000 1,822,580
AA+ University of Virginia, University Rev.,
5.375s, 2020 1,520 1,404,693
AA Virginia College Building Authority
(Washington & Lee University), 5.75s, 2019 5,000 4,866,950
BBB- Virginia College Building Authority,
Educational Facilities Rev. (Marymount
University), 7s, 2022 2,500 2,571,800
------------
$ 29,485,019
- ----------------------------------------------------------------------------
Other - 6.8%
NR Danville, VA, Industrial Development
Authority, Industrial Development Rev.
(Piedmont Mall), 8s, 2013 $ 3,180 $ 3,067,396
AA Fairfax County, VA, Economic Development
Authority Rev., 5.5s, 2014 9,250 8,736,163
AA Fairfax County, VA, Economic Development
Authority Rev., 5.5s, 2018 9,240 8,621,475
NR Pittsylvania County, VA, Industrial
Development Authority Rev., 7.5s, 2014 8,000 8,097,040
AA Virginia Public Building Authority,
5.4s, 2008 2,340 2,278,364
------------
$ 30,800,438
- ----------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $420,686,856) $438,705,992
- ----------------------------------------------------------------------------
Floating Rate Demand Notes - 1.9%
- ----------------------------------------------------------------------------
Peninsula Ports Authority, VA (Shell Oil
Co.), due 12/01/05 $ 7,700 $ 7,700,000
Uinta County, WY, Pollution Control Rev.
(Chevron Corp.), due 8/15/20 700 700,000
- ----------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 8,400,000
- ----------------------------------------------------------------------------
Call Options Purchased - 0.2%
- ----------------------------------------------------------------------------
Principal Amount
of Contracts
Issuer/Expiration Date/Strike Price (000 Omitted)
- ----------------------------------------------------------------------------
Georgia Municipal Electric Authority/2003/102 $ 20 $ 502,600
State of New Jersey, "D"/2003/102 5 380,750
- ----------------------------------------------------------------------------
Total Call Options Purchased (Premiums Paid, $576,800) $ 883,350
- ----------------------------------------------------------------------------
Total Investments (Identified Cost, $429,663,656) $447,989,342
Other Assets, Less Liabilities - 1.5% 7,005,023
- ----------------------------------------------------------------------------
Net Assets - 100.0% $454,994,365
- ----------------------------------------------------------------------------
(S) Indexed security.
++ Inverse floating rate security.
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - March 31, 1995
MFS WEST VIRGINIA MUNICIPAL BOND FUND
Municipal Bonds - 96.4%
- ----------------------------------------------------------------------------
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------
General Obligation - 7.1%
AAA Cabell, WV, Board of Education, MBIA, 6s,
2006 $ 500 $ 518,190
NR Charleston, WV, Public Improvement, 7.2s,
2008 1,240 1,401,770
NR Charleston, WV, Public Improvement, 7.2s,
2009 1,140 1,283,914
AAA Jefferson County, WV, Board of Education,
FGIC, 6.85s, 2009 1,680 1,838,474
AAA Monongalia County, WV, Board of Education,
MBIA, 7s, 2005 500 558,845
AAA Ohio County, WV, Board of Education, MBIA,
5.25s, 2018 1,180 1,090,662
AAA State of West Virginia, Water Development
Authority Rev., FSA, 6.2s, 2024 3,000 3,015,750
------------
$ 9,707,605
- ----------------------------------------------------------------------------
State and Local Appropriation - 7.2%
A Puerto Rico Public Buildings Authority,
5.385s, 2016 (Municipal
Swap)(S) $2,000 $ 1,743,100
AAA West Virginia Building Commission, Lease
Rev. (West Virginia Regional Jail), MBIA,
0s, 2007 3,150 1,540,823
AAA West Virginia Building Commission, Lease
Rev. (West Virginia Regional Jail), MBIA,
0s, 2008 3,050 1,389,275
AAA West Virginia Building Commission, Lease
Rev. (West Virginia Regional Jail), MBIA,
0s, 2009 2,500 1,056,875
AAA West Virginia Building Commission, Lease
Rev. (West Virginia Regional Jail), MBIA,
7s, 2015 1,000 1,068,360
A- West Virginia School Building Authority,
6.75s, 2015 3,000 3,154,290
------------
$ 9,952,723
- ----------------------------------------------------------------------------
Refunded and Special Obligation - 14.5%
BBB+ Charleston, WV, Parking Rev., 8.5s, 2006 $1,000 $ 1,062,890
AAA Kanawha County, WV, Building Commission
(St. Francis Hospital), 7.5s, 2007 275 320,441
AAA Monongalia County, WV, Hospital Rev. (West
Virginia University Hospitals, Inc.),
MBIA, 9.375s, 2018 2,245 2,308,578
AAA Puerto Rico Aqueduct & Sewer Authority,
9s, 2009 1,500 1,931,955
AAA Puerto Rico Electric Power Authority Rev.,
8s, 2008 1,000 1,117,260
AAA Puerto Rico Highway & Transportation
Authority, Highway Rev., 6.625s, 2018 400 444,492
AAA Puerto Rico Industrial, Medical &
Environmental Pollution Control Facilities
Finance Authority Rev., FHA, 9.75s, 2025 350 363,090
AAA South Charleston, WV, Hospital Rev.
(Herbert J. Thomas Memorial Hospital),
BIG, 8s, 2010 500 557,865
AAA West Virginia Hospital Finance Authority
(Monongalia General Hospital), BIG,
8.6s, 2017 1,000 1,082,090
AAA West Virginia Parkways, Economic
Development & Tourism Authority, FGIC,
0s, 2005 2,250 1,269,405
AAA West Virginia Parkways, Economic
Development & Tourism Authority, FGIC,
0s, 2006 2,500 1,319,300
AAA West Virginia Parkways, Economic
Development & Tourism Authority, FGIC,
0s, 2007 2,000 985,320
AAA West Virginia Parkways, Economic
Development & Tourism Authority, FGIC,
0s, 2008 610 285,480
AAA West Virginia Resources Recovery Authority,
Solid Waste Disposal Rev., BIG,
8.25s, 2009 700 742,903
AAA West Virginia Water Development Authority,
7.1s, 2009 250 284,530
BBB+ West Virginia Water Development Authority,
7.4s, 2019 750 851,468
BBB+ West Virginia Water Development Authority,
8.625s, 2028 750 850,868
BBB+ West Virginia Water Development Authority,
8.125s, 2029 1,750 1,957,095
AAA West Virginia Water Development Authority,
CGIC, 8.125s, 2029 2,015 2,260,507
------------
$ 19,995,537
- ----------------------------------------------------------------------------
Federally Guaranteed Housing Revenue - 0.6%
AAA Huntington, WV, Housing Corp., Multi-Family
Rev., FNMA, 7.5s, 2024 $ 800 $ 845,640
- ----------------------------------------------------------------------------
Single Family Housing Revenue - 10.0%
AAA Berkeley, Brookes & Fayette Counties, WV,
FGIC, 9.1s, 2011 $ 90 $ 92,488
NR Berkeley County, WV, Residential Mortgage
Rev., 7.875s, 2012 350 359,842
NR Charles Town, WV, Residential Mortgage
Rev., 6.2s, 2011 1,000 991,430
NR Mason County, WV, Rev., 0s, 2014 1,700 400,452
A+ West Virginia Housing Development Fund,
7.85s, 2014 890 932,916
A+ West Virginia Housing Development Fund,
0s, 2015 4,455 555,895
AA+ West Virginia Housing Development Fund,
7.95s, 2017 2,980 3,180,047
A+ West Virginia Housing Development Fund,
7.2s, 2018 5,000 5,158,400
A+ West Virginia Housing Development Fund,
7.2s, 2020 2,000 2,074,380
------------
$ 13,745,850
- ----------------------------------------------------------------------------
Multi-Family Housing Revenue - 0.4%
NR Webster County, WV, Housing Development
Rev. (Circlebrook), 6.35s, 2008 $ 555 $ 556,127
- ----------------------------------------------------------------------------
Insured Health Care Revenue - 7.7%
AAA Monongalia County, WV, Building Commission,
Hospital Rev. (Monongalia General
Hospital), MBIA, 6.625s, 2011 $1,000 $ 1,055,260
AAA West Virginia Hospital Finance Authority
(Cabell Huntington Hospital), AMBAC,
6.25s, 2019 4,000 4,035,000
AAA West Virginia Hospital Finance Authority
(West Virginia University Hospital,
Inc.), MBIA, 5s, 2016 3,250 2,866,240
AAA West Virginia Hospital Finance Authority
(West Virginia University Medical Corp.),
MBIA, 7.875s, 2007 1,500 1,620,105
AAA West Virginia Hospital Finance Authority
(West Virginia University Medical Corp.),
MBIA, 7.875s, 2018 1,000 1,083,260
------------
$ 10,659,865
- ----------------------------------------------------------------------------
Health Care Revenue - 8.5%
A- Berkeley County, WV, Building Commission,
Hospital Rev. (City Hospital Project),
6.5s, 2022 $2,500 $ 2,373,925
NR Hampshire County, WV, First Mortgage Rev.
(Romney Health Care), 9.5s, 2022 1,280 1,286,054
NR Monongalia County, WV, Health Facilities
Rev. (Beverly Enterprises, Inc.),
10s, 2007 910 1,009,272
NR Princeton, WV, Hospital Rev. (Princeton
Community Hospital), 6s, 2018 2,000 1,749,040
NR West Virginia Hospital Finance Authority
(Charleston Area Medical Center),
6.5s, 2023 2,000 2,007,620
NR West Virginia Hospital Finance Authority
(Teays Valley Haven Project), 10s, 2005 205 203,315
NR West Virginia Hospital Finance Authority
(Teays Valley Haven Project), 10s, 2015 3,025 3,081,265
------------
$ 11,710,491
- ----------------------------------------------------------------------------
Electric and Gas Utility Revenue - 5.2%
AAA Mason County, WV, Pollution Control Rev.
(Appalachian Power Co.), MBIA, 6.6s, 2022 $7,000 $ 7,189,630
- ----------------------------------------------------------------------------
Water and Sewer Utility Revenue - 5.9%
A Beckley, WV, Industrial Development Rev.
(Beckley Water Co.), 7s, 2017 $2,000 $ 2,073,520
AAA Charleston, WV, Sewer Rev., MBIA,
6.5s, 2017 2,260 2,349,428
AA Clarksburg, WV, Water Rev., 6.25s, 2019 1,000 988,790
AAA West Virginia Water Development Authority,
CGIC, 7.5s, 2009 1,100 1,188,198
BBB+ West Virginia Water Development Authority,
7.625s, 2009 500 533,960
AAA West Virginia Water Development Authority
(Loan Program No. 2), FSA, 5.75s, 2029 1,000 930,890
------------
$ 8,064,786
- ----------------------------------------------------------------------------
Turnpike Revenue - 1.9%
AAA West Virginia Parkways, Economic
Development & Tourism Authority, FGIC,
0s, 2006 $1,885 $ 995,525
AAA West Virginia Parkways, Economic
Development & Tourism Authority, FGIC,
7.068s, 2019++ 1,800 1,667,646
------------
$ 2,663,171
- ----------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 19.2%
B+ Harrison County, WV, Commercial Development
Rev. (K-Mart Corp.), 7.75s, 2009 $1,125 $ 1,194,953
NR Jackson County, WV, Pollution Control Rev.
(Kaiser Aluminum & Chemical Corp.),
6.5s, 2008 1,365 1,282,909
NR Kanawha County, WV, Commercial Development
Rev. (Kroger Co.), 8s, 2011 1,000 1,080,730
A Kanawha County, WV, Commercial Development
Rev. (May Department Stores Co.),
6.5s, 2003 3,000 3,162,930
BBB Kanawha County, WV, Pollution Control Rev.
(Union Carbide Corp.), 8s, 2020 2,000 2,159,980
BBB+ Marshall County, WV, Pollution Control Rev.
(Ohio Power Co.), 6.85s, 2022 3,150 3,314,021
AAA Marshall County, WV, Pollution Control Rev.
(Ohio Power Co.), MBIA, 6.85s, 2022 2,000 2,060,980
NR McDowell County, WV, Industrial Development
Rev. (War Telephone Co.), 13.5s, 2001 500 505,940
NR Monongalia County, WV, Commercial
Development Rev. (Kroger Co.), 7.7s, 2012 2,000 2,127,900
NR Ohio County, WV, Industrial Development
Rev. (Kroger Co.), 8.125s, 2011 2,000 2,169,100
NR Putnam County, WV, Industrial Development
Rev. (Rite Aid Corp.), 10.375s, 2002 590 609,818
AAA Putnam County, WV, Pollution Control Rev.
(Appalachian Power Co.), MBIA, 6.6s, 2019 3,200 3,309,568
A Raleigh County, WV, Commercial Development
Rev. (K-Mart Corp.), 6.05s, 2006 670 625,438
BBB South Charleston, WV, Pollution Control
Rev. (Union Carbide Corp.), 7.625s, 2005 2,500 2,759,925
------------
$ 26,364,192
- ----------------------------------------------------------------------------
Universities - 4.4%
AAA West Virginia University Rev. (West
Virginia University Dormitory Project),
AMBAC, 6s, 2012 $5,000 $ 5,001,100
AAA West Virginia University Rev. (West
Virginia University Dormitory Project),
MBIA, 6.75s, 2017 1,000 1,049,590
------------
$ 6,050,690
- ----------------------------------------------------------------------------
Other - 3.8%
BBB+ Charleston, WV, Parking Rev., 6s, 2013 $1,480 $ 1,410,395
A Puerto Rico Highway & Transportation
Authority Rev., 6.625s, 2018 1,600 1,643,920
NR West Virginia Hospital Finance Authority
(General Division Medical Building),
7.25s, 2014 2,000 2,104,600
------------
$ 5,158,915
- ------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $126,815,693) $132,665,222
- ----------------------------------------------------------------------------
Floating Rate Demand Note - 1.6%
- ----------------------------------------------------------------------------
Uinta County, WY, Pollution Control Rev.
(Chevron Corp.), due 8/15/20,
at Identified Cost $2,200 $ 2,200,000
- ----------------------------------------------------------------------------
Total Investments (Identified Cost, $129,015,693) $134,865,222
Other Assets, Less Liabilities - 2.0% 2,796,865
- ----------------------------------------------------------------------------
Net Assets - 100.0% $137,662,087
- ----------------------------------------------------------------------------
(S) Indexed security.
++ Inverse floating rate security.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
- ----------------------------------------------------------------------------------------------------------------------------------
Florida Georgia Maryland Massachusetts New York
March 31, 1995 Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments -
Identified cost $ 95,834,249 $ 77,776,741 $149,574,736 $252,369,112 $146,324,990
Unrealized appreciation 3,751,043 3,824,028 4,705,436 14,055,492 8,627,075
------------ ------------ ------------ ------------ ------------
Total, at value $ 99,585,292 $ 81,600,769 $154,280,172 $266,424,604 $154,952,065
Cash 27,207 78,045 75,821 63,289 --
Receivable for investments sold 998,917 1,717,625 248,825 3,166,164 9,458,964
Receivable for Fund shares sold 287,134 162,505 33,869 132,665 173,127
Interest receivable 2,110,580 1,389,013 2,634,956 4,820,314 2,701,264
Deferred organization expenses 3,996 -- -- -- --
Other assets 12,606 2,082 2,312 3,987 2,463
------------ ------------ ------------ ------------ ------------
Total assets $103,025,732 $ 84,950,039 $157,275,955 $274,611,023 $167,287,883
------------ ------------ ------------ ------------ ------------
Liabilities:
Cash overdraft $ -- $ -- $ -- $ -- $ 780,040
Distributions payable 293,346 167,946 306,024 728,203 271,687
Payable for investments purchased -- 1,434,644 -- 2,176,143 7,391,160
Payable for Fund shares reacquired 112,801 100,086 221,763 173,671 194,834
Payable to affiliates -
Management fee 1,127 1,257 2,367 4,096 2,394
Shareholder servicing agent fee 447 359 667 1,133 676
Distribution fee 344 45,745 91,020 162,651 92,667
Accrued expenses and other liabilities 56,756 72,769 125,287 138,519 72,967
------------ ------------ ------------ ------------ ------------
Total liabilities $ 464,821 $ 1,822,806 $ 747,128 $ 3,384,416 $ 8,806,425
------------ ------------ ------------ ------------ ------------
Net assets $102,560,911 $ 83,127,233 $156,528,827 $271,226,607 $158,481,458
------------ ------------ ------------ ------------ ------------
Net assets consist of:
Paid-in capital $106,806,530 $ 83,071,922 $155,033,431 $266,122,193 $156,925,818
Unrealized appreciation on investments 3,647,586 3,699,881 4,833,968 14,055,492 8,627,075
Accumulated net realized loss on investments (7,781,075) (3,447,226) (2,688,311) (7,916,486) (6,488,984)
Accumulated distributions in excess of net
investment income (112,130) (197,344) (650,261) (1,034,592) (582,451)
------------ ------------ ------------ ------------ ------------
Total $102,560,911 $ 83,127,233 $156,528,827 $271,226,607 $158,481,458
------------ ------------ ------------ ------------ ------------
Shares of beneficial interest outstanding:
Class A 9,360,814 7,188,288 13,290,287 24,222,800 13,971,589
Class B 1,319,480 839,376 1,021,654 800,021 1,132,905
------------ ------------ ------------ ------------ ------------
Total shares of beneficial interest
outstanding 10,680,294 8,027,664 14,311,941 25,022,821 15,104,494
------------ ------------ ------------ ------------ ------------
Net assets:
Class A $ 89,893,539 $ 74,432,319 $145,361,281 $262,551,080 $146,596,915
Class B 12,667,372 8,694,914 11,167,546 8,675,527 11,884,543
------------ ------------ ------------ ------------ ------------
Total net assets $102,560,911 $ 83,127,233 $156,528,827 $271,226,607 $158,481,458
------------ ------------ ------------ ------------ ------------
Class A shares:
Net asset value and redemption price per share
(net assets / shares of beneficial interest
outstanding) $ 9.60 $10.35 $10.94 $10.84 $10.49
------ ------ ------ ------ ------
Offering price per share (100/95.25 of net asset
value per share) $10.08 $10.87 $11.49 $11.38 $11.01
------ ------ ------ ------ ------
Class B shares:
Net asset value, offering price, and redemption
price per share
(net assets / shares of beneficial interest
outstanding) $ 9.60 $10.36 $10.93 $10.84 $10.49
------ ------ ------ ------ ------
On sales of $100,000 or more, the offering price of Class A shares is reduced. A contingent deferred sales charge may be imposed
on redemptions of Class A and Class B shares.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
- ----------------------------------------------------------------------------------------------------------------------------------
North South
Carolina Pennsylvania Carolina Virginia West Virginia
March 31, 1995 Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments -
Identified cost $436,799,614 $ 23,988,488 $174,124,735 $429,663,656 $129,015,693
Unrealized appreciation 19,396,413 167,021 6,987,319 18,325,686 5,849,529
----------- ----------- ----------- ----------- -----------
Total, at value $456,196,027 $ 24,155,509 $181,112,054 $447,989,342 $134,865,222
Cash -- 64,836 19,594 25,492 10,305
Receivable for investments sold 10,985,765 296,041 4,096,147 1,000,938 --
Receivable for Fund shares sold 737,023 44,607 332,431 667,566 368,028
Interest receivable 8,986,412 407,243 2,968,034 8,396,768 2,921,438
Deferred organization expenses -- 5,000 -- -- --
Other assets 6,588 218 2,519 6,329 1,879
----------- ----------- ----------- ----------- -----------
Total assets $476,911,815 $ 24,973,454 $188,530,779 $458,086,435 $138,166,872
----------- ----------- ----------- ----------- -----------
Liabilities:
Cash overdraft $ 941 $ -- $ -- $ -- $ --
Distributions payable 815,494 41,126 350,876 1,020,990 274,880
Payable for investments purchased 11,089,266 816,173 3,871,581 1,018,043 --
Payable for Fund shares reacquired 1,057,820 2,072 101,615 631,198 81,218
Payable for daily variation margin on open
futures contracts -- -- -- 26,764 --
Payable to affiliates -
Management fee 7,001 66 2,777 6,877 2,077
Shareholder servicing agent fee 1,960 -- 782 1,918 586
Distribution fee 269,114 212 105,448 268,092 79,047
Accrued expenses and other liabilities 129,457 4,747 89,059 118,188 66,977
----------- ----------- ----------- ----------- -----------
Total liabilities $ 13,371,053 $ 864,396 $ 4,522,138 $ 3,092,070 $ 504,785
----------- ----------- ----------- ----------- -----------
Net assets $463,540,762 $ 24,109,058 $184,008,641 $454,994,365 $137,662,087
----------- ----------- ----------- ----------- -----------
Net assets consist of:
Paid-in capital $460,649,353 $ 24,901,298 $179,919,932 $452,234,555 $135,298,503
Unrealized appreciation on investments 18,982,589 186,956 7,060,768 18,325,686 5,849,529
Accumulated net realized loss on investments (14,829,367) (987,725) (2,534,470) (14,044,752) (3,064,548)
Accumulated undistributed (distributions in
excess of) net investment income (1,261,813) 8,529 (437,589) (1,521,124) (421,397)
----------- ----------- ----------- ----------- -----------
Total $463,540,762 $ 24,109,058 $184,008,641 $454,994,365 $137,662,087
----------- ----------- ----------- ----------- -----------
Shares of beneficial interest outstanding:
Class A 37,574,407 1,767,105 14,420,464 38,844,026 11,383,817
Class B 2,300,324 828,652 1,093,134 1,985,433 896,441
Class C 713,949 -- -- 207,665 --
----------- ----------- ----------- ----------- -----------
Total shares of beneficial interest
outstanding 40,588,680 2,595,757 15,513,598 41,037,124 12,280,258
----------- ----------- ----------- ----------- -----------
Net assets:
Class A $429,131,382 $ 16,410,526 $171,044,585 $430,688,007 $127,616,182
Class B 26,260,399 7,698,532 12,964,056 22,006,806 10,045,905
Class C 8,148,981 -- -- 2,299,552 --
----------- ----------- ----------- ----------- -----------
Total net assets $463,540,762 $ 24,109,058 $184,008,641 $454,994,365 $137,662,087
----------- ----------- ----------- ----------- -----------
Class A shares:
Net asset value and redemption price per share
(net assets / shares of beneficial interest
outstanding) $11.42 $ 9.29 $11.86 $11.09 $11.21
----- ----- ----- ----- -----
Offering price per share (100/95.25 of net asset
value per share) $11.99 $ 9.75 $12.45 $11.64 $11.77
----- ----- ----- ----- -----
Class B shares:
Net asset value, offering price, and redemption
price per share
(net assets / shares of beneficial interest
outstanding) $11.42 $ 9.29 $11.86 $11.08 $11.21
----- ----- ----- ----- -----
Class C shares:
Net asset value, offering price, and redemption
price per share
(net assets / shares of beneficial interest $11.41 $ -- $ -- $11.07 $ --
----- ----- ----- ----- -----
On sales of $100,000 or more, the offering price of Class A shares is reduced. A contingent deferred sales charge may be imposed
on redemptions of Class A and Class B shares.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Operations
- ----------------------------------------------------------------------------------------------------------------------------------
Florida Georgia Maryland Massachusetts New York
Year Ended March 31, 1995 Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net investment income:
Interest $ 6,906,324 $ 5,786,024 $10,801,506 $19,544,403 $10,560,147
---------- ---------- ---------- ---------- ----------
Expenses -
Management fee $ 599,093 $ 477,819 $ 889,796 $ 1,495,879 $ 894,326
Trustees' compensation 13,435 15,279 16,078 16,249 14,973
Shareholder servicing agent fees (Class A) 148,187 119,220 228,793 398,269 229,430
Shareholder servicing agent fees (Class B) 22,010 16,855 20,355 14,225 21,084
Distribution and service fees (Class A) -- 279,473 533,850 929,292 536,111
Distribution and service fees (Class B) 100,045 76,623 92,525 64,659 95,837
Custodian fee 22,153 39,056 68,579 117,512 61,748
Printing 5,461 11,766 19,659 23,768 19,402
Postage 7,038 7,487 17,574 17,652 11,585
Auditing fees 29,794 31,741 28,068 29,468 41,793
Legal fees 4,074 3,033 4,547 3,036 1,459
Amortization of organization expenses 2,079 -- -- -- 1,080
Miscellaneous 60,596 61,727 109,638 122,119 65,269
---------- ---------- ---------- ---------- ----------
Total expenses $ 1,013,965 $ 1,140,079 $ 2,029,462 $ 3,232,128 $ 1,994,097
Reduction of expenses by investment adviser and
distributor (248,214) (79,714) -- -- (174,028)
---------- ---------- ---------- ---------- ----------
Net expenses $ 765,751 $ 1,060,365 $ 2,029,462 $ 3,232,128 $ 1,820,069
---------- ---------- ---------- ---------- ----------
Net investment income $ 6,140,573 $ 4,725,659 $ 8,772,044 $16,312,275 $ 8,740,078
---------- ---------- ---------- ---------- ----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $(7,494,601) $(2,896,869) $(1,887,336) $(8,247,504) $(5,784,110)
Futures contracts 78,647 (299,307) (36,095) 672,140 827,456
---------- ---------- ---------- ---------- ----------
Net realized loss on investments $(7,415,954) $(3,196,176) $(1,923,431) $(7,575,364) $(4,956,654)
---------- ---------- ---------- ---------- ----------
Change in unrealized appreciation (depreciation) -
Investments $ 7,938,620 $ 3,083,539 $ 2,836,791 $ 6,617,326 $ 6,122,638
Futures contracts (465,467) (374,434) (201,094) (332,948) (439,399)
---------- ---------- ---------- ---------- ----------
Net unrealized gain on investments $ 7,473,153 $ 2,709,105 $ 2,635,697 $ 6,284,378 $ 5,683,239
---------- ---------- ---------- ---------- ----------
Net realized and unrealized gain (loss) on
investments $ 57,199 $ (487,071) $ 712,266 $(1,290,986) $ 726,585
---------- ---------- ---------- ---------- ----------
Increase in net assets from operations $ 6,197,772 $ 4,238,588 $ 9,484,310 $15,021,289 $ 9,466,663
---------- ---------- ---------- ---------- ----------
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Operations
- ----------------------------------------------------------------------------------------------------------------------------------
North Carolina Pennsylvania South Carolina Virginia West Virginia
Year Ended March 31, 1995 Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net investment income:
Interest $ 30,821,338 $1,298,512 $11,928,530 $ 30,724,726 $ 9,180,565
---------- --------- ---------- ----------- ----------
Expenses -
Management fee $ 2,592,068 $ 119,253 $ 1,001,540 $ 2,504,233 $ 741,684
Trustees' compensation 16,451 13,470 16,088 16,088 16,114
Shareholder servicing agent fees (Class A) 663,157 23,196 255,051 646,763 190,539
Shareholder servicing agent fees (Class B) 46,263 13,755 25,458 39,786 16,359
Shareholder servicing agent fees (Class C) 12,228 -- -- 9,093 --
Distribution and service fees (Class A) 1,547,366 -- 596,846 1,509,114 446,892
Distribution and service fees (Class B) 210,286 62,617 115,719 180,844 74,360
Distribution and service fees (Class C) 81,518 -- -- 60,554 --
Custodian fee 186,294 1,842 72,952 181,233 50,134
Printing 59,703 4,569 22,668 53,155 19,090
Postage 31,912 5,339 12,651 39,500 10,529
Auditing fees 31,218 25,343 36,742 29,093 34,843
Legal fees 7,250 2,133 5,825 4,878 3,055
Amortization of organization expenses -- 1,756 -- -- --
Miscellaneous 193,280 49,675 82,340 182,450 60,246
---------- --------- ---------- ----------- ----------
Total expenses $ 5,678,994 $ 322,948 $ 2,243,880 $ 5,456,784 $ 1,663,845
Reduction of expenses by investment adviser and
distributor -- (258,379) -- -- --
---------- --------- ---------- ----------- ----------
Net expenses $ 5,678,994 $ 64,569 $ 2,243,880 $ 5,456,784 $ 1,663,845
---------- --------- ---------- ----------- ----------
Net investment income $ 25,142,344 $1,233,943 $ 9,684,650 $ 25,267,942 $ 7,516,720
---------- --------- ---------- ----------- ----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $(14,220,512) $ (820,943) $(2,090,704) $(13,509,607) $(3,225,777)
Futures contracts 997,319 (105,093) 16,788 (194,016) 365,224
---------- --------- ---------- ----------- ----------
Net realized loss on investments $(13,223,193) $ (926,036) $(2,073,916) $(13,703,623) $(2,860,553)
---------- --------- ---------- ----------- ----------
Change in unrealized appreciation (depreciation)
Investments $ 15,133,682 $1,354,564 $ 4,419,833 $ 12,894,739 $ 3,204,343
Futures contracts (1,360,167) (41,748) (115,480) (333,038) (199,823)
---------- --------- ---------- ----------- ----------
Net unrealized gain on investments $ 13,773,515 $1,312,816 $ 4,304,353 $ 12,561,701 $ 3,004,520
---------- --------- ---------- ----------- ----------
Net realized and unrealized gain (loss) on
investments $ 550,322 $ 386,780 $ 2,230,437 $ (1,141,922) $ 143,967
---------- --------- ---------- ----------- ----------
Increase in net assets from operations $ 25,692,666 $1,620,723 $11,915,087 $ 24,126,020 $ 7,660,687
---------- --------- ---------- ----------- ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Florida Georgia Maryland Massachusetts New York
Year Ended March 31, 1995 Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 6,140,573 $ 4,725,659 $ 8,772,044 $ 16,312,275 $ 8,740,078
Net realized loss on investments (7,415,954) (3,196,176) (1,923,431) (7,575,364) (4,956,654)
Net unrealized gain on investments 7,473,153 2,709,105 2,635,697 6,284,378 5,683,239
----------- ----------- ----------- ----------- -----------
Increase in net assets from operations $ 6,197,772 $ 4,238,588 $ 9,484,310 $ 15,021,289 $ 9,466,663
----------- ----------- ----------- ----------- -----------
Distributions declared to shareholders -
From net investment income (Class A) $ (5,649,584) $ (4,347,433) $ (8,333,922) $(15,941,100) $ (8,299,546)
From net investment income (Class B) (462,308) (355,084) (438,122) (341,011) (440,532)
From net realized gain on investments (Class A) (425,441) (44,822) -- (438,055) --
From net realized gain on investments (Class B) (36,769) (3,726) -- (8,649) --
In excess of net investment income (Class A) -- -- (34,518) -- (106,916)
In excess of net investment income (Class B) -- -- (1,815) -- (5,096)
In excess of net realized gain on investments
(Class A) (336,075) (231,782) (551,221) (334,517) (772,589)
In excess of net realized gain on investments
(Class B) (29,046) (19,268) (35,494) (6,605) (35,924)
----------- ----------- ----------- ----------- -----------
Total distributions declared to shareholders $ (6,939,223) $ (5,002,115) $ (9,395,092) $(17,069,937) $ (9,660,603)
----------- ----------- ----------- ----------- -----------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 67,775,415 $ 14,621,961 $ 14,962,711 $ 25,180,128 $ 78,439,130
Net asset value of shares issued to shareholders
in reinvestment of distributions 2,464,452 2,363,696 5,220,027 7,555,508 5,701,844
Cost of shares reacquired (83,511,284) (25,603,342) (31,511,548) (42,201,495) (94,352,331)
----------- ----------- ----------- ----------- -----------
Decrease in net assets from Fund share
transactions $(13,271,417) $ (8,617,685) $(11,328,810) $ (9,465,859) $(10,211,357)
----------- ----------- ----------- ----------- -----------
Total decrease in net assets $(14,012,868) $ (9,381,212) $(11,239,592) $(11,514,507) $(10,405,297)
Net assets:
At beginning of period 116,573,779 92,508,445 167,768,419 282,741,114 168,886,755
----------- ----------- ----------- ----------- -----------
At end of period $102,560,911 $ 83,127,233 $156,528,827 $271,226,607 $158,481,458
----------- ----------- ----------- ----------- -----------
Accumulated distributions in excess of net
investment income included in net assets at end
of period $ (112,130) $ (197,344) $ (650,261) $ (1,034,592) $ (582,451)
----------- ----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
North South
Carolina Pennsylvania Carolina Virginia West Virginia
Year Ended March 31, 1995 Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 25,142,344 $ 1,233,943 $ 9,684,650 $ 25,267,942 $ 7,516,720
Net realized loss on investments (13,223,193) (926,036) (2,073,916) (13,703,623) (2,860,553)
Net unrealized gain on investments 13,773,515 1,312,816 4,304,353 12,561,701 3,004,520
----------- ---------- ----------- ----------- -----------
Increase in net assets from operations $ 25,692,666 $ 1,620,723 $ 11,915,087 $ 24,126,020 $ 7,660,687
----------- ---------- ----------- ----------- -----------
Distributions declared to shareholders -
From net investment income (Class A) $(23,735,358) $ (918,914) $ (9,149,011) $(24,093,973) $ (7,131,736)
From net investment income (Class B) (973,317) (308,983) (535,639) (877,432) (360,160)
From net investment income (Class C) (383,161) -- -- (296,537) --
From net realized gain on investments (Class A) (2,495,977) (13,401) (887,817) (1,715,754) --
From net realized gain on investments (Class B) (103,677) (4,722) (54,897) (62,515) --
From net realized gain on investments (Class C) (43,596) -- -- (5,815) --
In excess of net investment income (Class A) -- -- (4,241) (70,576) --
In excess of net investment income (Class B) -- -- (248) (2,570) --
In excess of net investment income (Class C) -- -- -- (869) --
In excess of net realized gain on investments
(Class A) (1,516,684) (45,614) (433,734) (328,083) (170,490)
In excess of net realized gain on investments
(Class B) (62,999) (16,075) (26,820) (11,934) (8,251)
In excess of net realized gain on investments
(Class C) (26,491) -- -- (1,112) --
----------- ---------- ----------- ----------- -----------
Total distributions declared to shareholders $(29,341,260) $(1,307,709) $(11,092,407) $(27,467,170) $ (7,670,637)
----------- ---------- ----------- ----------- -----------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 54,114,282 $ 7,920,007 $ 21,068,556 $ 52,465,877 $ 14,859,231
Net asset value of shares issued to shareholders
in reinvestment of distributions 17,432,937 832,536 6,185,730 13,994,379 4,136,605
Cost of shares reacquired (87,206,798) (3,221,987) (27,469,733) (66,801,938) (17,506,211)
----------- ---------- ----------- ----------- -----------
Increase (decrease) in net assets from Fund
share transactions $(15,659,579) $ 5,530,556 $ (215,447) $ (341,682) $ 1,489,625
----------- ---------- ----------- ----------- -----------
Total increase (decrease) in net assets $(19,308,173) $ 5,843,570 $ 607,233 $ (3,682,832) $ 1,479,675
Net assets:
At beginning of period 482,848,935 18,265,488 183,401,408 458,677,197 136,182,412
----------- ---------- ----------- ----------- -----------
At end of period $463,540,762 $24,109,058 $184,008,641 $454,994,365 $137,662,087
----------- ---------- ----------- ----------- -----------
Accumulated undistributed (distributions in excess
of) net investment income included in net assets
at end of period $ (1,261,813) $ 8,529 $ (437,589) $ (1,521,124) $ (421,397)
----------- ---------- ----------- ----------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Florida Georgia Maryland Massachusetts New York
Year Ended March 31, 1994<F1> Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 1,041,913 $ 796,058 $ 1,469,464 $ 2,760,761 $ 1,505,625
Net realized gain (loss) on investments (186,980) (31,030) 112,977 (311,972) (1,543,247)
Net unrealized loss on investments (11,690,275) (8,100,490) (14,276,091) (21,787,632) (12,294,941)
----------- ----------- ----------- ----------- -----------
Decrease in net assets from operations $(10,835,342) $ (7,335,462) $(12,693,650) $(19,338,843) $(12,332,563)
----------- ----------- ----------- ----------- -----------
Distributions declared to shareholders -
From net investment income (Class A) $ (900,283) $ (555,677) $ (866,989) $ (1,689,972) $ (1,055,956)
From net investment income (Class B) (48,741) (40,573) (40,833) (35,550) (34,946)
In excess of net investment income (Class A) (134,544) (217,092) (610,058) (1,062,519) (465,777)
In excess of net investment income (Class B) (6,267) (3,394) (3,870) (2,237) (4,662)
----------- ----------- ----------- ----------- -----------
Total distributions declared to shareholders $ (1,089,835) $ (816,736) $ (1,521,750) $ (2,790,278) $ (1,561,341)
----------- ----------- ----------- ----------- -----------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 7,972,609 $ 4,392,117 $ 6,146,983 $ 8,531,385 $ 7,401,369
Net asset value of shares issued to shareholders
in reinvestment of distributions 361,332 300,728 818,641 1,183,011 842,694
Cost of shares reacquired (11,209,415) (4,205,696) (3,746,022) (9,929,487) (14,814,451)
----------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets from Fund
share transactions $ (2,875,474) $ 487,149 $ 3,219,602 $ (215,091) $ (6,570,388)
----------- ----------- ----------- ----------- -----------
Total decrease in net assets $(14,800,651) $ (7,665,049) $(10,995,798) $(22,344,212) $(20,464,292)
Net assets:
At beginning of period 131,374,430 100,173,494 178,764,217 305,085,326 189,351,047
----------- ----------- ----------- ----------- -----------
At end of period $116,573,779 $ 92,508,445 $167,768,419 $282,741,114 $168,886,755
----------- ----------- ----------- ----------- -----------
Accumulated distributions in excess of net
investment income included
in net assets at end of period $ (140,811) $ (220,486) $ (613,928) $ (1,064,756) $ (470,439)
----------- ----------- ----------- ----------- -----------
<FN>
<F1>For the two months ended March 31, 1994.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
North South
Carolina Pennsylvania Carolina Virginia West Virginia
Year Ended March 31, 1994<F1> Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 4,203,404 $ 151,666 $ 1,579,465 $ 4,177,932 $ 1,251,482
Net realized gain (loss) on investments 1,515,887 4,779 190,664 663,599 (97,707)
Net unrealized loss on investments (38,809,798) (1,837,746) (14,851,919) (38,366,885) (10,480,494)
------------- ------------- ------------- ------------- -------------
$ $ $ $ $
Decrease in net assets from operations (33,090,507) (1,681,301) (13,081,790) (33,525,354) (9,326,719)
------------- ------------- ------------- ------------- -------------
Distributions declared to shareholders -
From net investment income (Class A) $ (2,784,004) $ (126,697) $ (1,111,228) $ (2,609,189) $ (778,446)
From net investment income (Class B) (100,080) (27,938) (61,022) (89,058) (37,338)
From net investment income (Class C) (40,717) -- -- (10,232) --
In excess of net investment income (Class A) (1,306,778) -- (429,273) (1,444,664) (444,312)
In excess of net investment income (Class B) (4,647) (298) (3,827) (2,568) (1,909)
In excess of net investment income (Class C) (896) -- -- -- --
------------- ------------- ------------- ------------- -------------
Total distributions declared to shareholders $ (4,237,122) $ (154,933) $ (1,605,350) $ (4,155,711) $ (1,262,005)
------------- ------------- ------------- ------------- -------------
Fund share (principal) transactions -
Net asset value of shares issued to shareholders
in reinvestment of distributions 2,359,236 98,162 824,924 2,052,195 638,534
Cost of shares reacquired (10,590,746) (519,303) (4,612,283) (9,383,022) (3,760,396)
------------- ------------- ------------- ------------- -------------
Increase in net assets from Fund share
transactions $ 7,055,543 $ 2,713,821 $ 2,565,395 $ 5,315,060 $ 1,051,295
------------- ------------- ------------- ------------- -------------
Total increase (decrease) in net assets $(30,272,086) $ 877,587 $(12,121,745) $ 32,366,005) $ (9,537,429)
Net assets:
At beginning of period 513,121,021 17,387,901 195,523,153 491,043,202 145,719,841
------------- ------------- ------------- ------------- -------------
At end of period $482,848,935 $ 18,265,488 $183,401,408 $458,677,197 $136,182,412
------------- ------------- ------------- ------------- -------------
Accumulated undistributed (distributions in excess
of) net investment income included in net assets
at end of period $ (1,312,321) $ 2,483 $ (433,100) $ (1,447,109) $ (446,221)
------------- ------------- ------------- ------------- -------------
<FN>
<F1>For the two months ended March 31, 1994.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Florida Georgia Maryland Massachusetts New York
Year Ended January 31, 1994 Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 5,427,790 $ 4,153,287 $ 8,893,750 $ 16,518,127 $ 8,668,205
Net realized gain on investments 1,736,260 209,313 752,402 5,970,582 3,282,230
Net unrealized gain on investments 6,043,652 5,116,021 6,260,864 7,585,271 7,577,071
----------- ----------- ----------- ----------- -----------
Increase in net assets from operations $ 13,207,702 $ 9,478,621 $ 15,907,016 $ 30,073,980 $ 19,527,506
----------- ----------- ----------- ----------- -----------
Distributions declared to shareholders -
From net investment income (Class A) $ (5,381,618) $ (3,996,380) $ (8,501,900) $(15,813,609) $ (8,469,259)
From net investment income (Class B) (57,121) (46,306) (47,693) (41,940) (39,087)
From net realized gain on investments (Class A) (1,086,402) (64,945) (893,666) (4,944,048) (2,679,907)
From net realized gain on investments (Class B) (44,845) (2,565) (13,619) (43,883) (39,115)
In excess of net investment income (Class A) (89,928) (197,747) (559,628) (1,033,469) (411,930)
In excess of net investment income (Class B) (2,961) (2,061) (2,014) (1,770) (2,793)
In excess of net realized gain on investments
(Class A) -- -- (285,695) -- --
In excess of net realized gain on investments
(Class B) -- -- (5,447) -- --
----------- ----------- ----------- ----------- -----------
Total distributions declared to shareholders $ (6,662,875) $ (4,310,004) $(10,309,662) $(21,878,719) $(11,642,091)
----------- ----------- ----------- ----------- -----------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 78,036,466 $ 38,887,258 $ 38,166,091 $ 43,485,858 $ 68,527,297
Net asset value of shares issued to shareholders
in reinvestment of distributions 2,061,463 1,520,053 5,497,645 9,895,798 6,121,743
Cost of shares reacquired (29,597,409) (10,051,163) (16,291,085) (27,269,464) (28,931,917)
----------- ----------- ----------- ----------- -----------
Increase in net assets from Fund share
transactions $ 50,500,520 $ 30,356,148 $ 27,372,651 $ 26,112,192 $ 45,717,123
----------- ----------- ----------- ----------- -----------
Total increase in net assets $ 57,045,347 $ 35,524,765 $ 32,970,005 $ 34,307,453 $ 53,602,538
Net assets:
At beginning of period 74,329,083 64,648,729 145,794,212 270,777,873 135,748,509
----------- ----------- ----------- ----------- -----------
At end of period $131,374,430 $100,173,494 $178,764,217 $305,085,326 $189,351,047
----------- ----------- ----------- ----------- -----------
Accumulated distributions in excess of net
investment income included in net assets at end
of period $ (92,889) $ (199,808) $ (561,642) $ (1,035,239) $ (414,723)
----------- ----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
North South
Carolina Pennsylvania Carolina Virginia West Virginia
Year Ended January 31, 1994 Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 23,639,673 $ 534,114 $ 8,700,854 $ 24,004,702 $ 7,020,710
Net realized gain on investments 1,621,795 22,452 762,732 4,746,234 1,599,326
Net unrealized gain on investments 19,979,696 711,886 9,029,209 16,123,082 6,029,100
------------- ------------- ------------- ------------- -------------
Increase in net assets from operations $ 45,241,164 $ 1,268,452 $ 18,492,795 $ 44,874,018 $ 14,649,136
------------- ------------- ------------- ------------- -------------
Distributions declared to shareholders -
From net investment income (Class A) $(22,593,670) $ (499,013) $ (8,351,192) $(23,000,542) $ (6,693,640)
From net investment income (Class B) (111,740) (29,351) (65,754) (107,077) (40,005)
From net investment income (Class C) (2,176) -- -- (291) --
From net realized gain on investments (Class A) (441,976) (7,638) (179,941) (7,602,939) (1,373,948)
From net realized gain on investments (Class B) (6,972) (1,470) -- (52,284) (26,180)
In excess of net investment income (Class A) (1,275,110) -- (404,781) (1,466,322) (434,275)
In excess of net investment income (Class B) (3,178) -- (2,434) (2,976) (1,423)
In excess of net investment income (Class C) (315) -- -- (32) --
------------- ------------- ------------- ------------- -------------
Total distributions declared to shareholders $(24,435,137) $ (537,472) $(9,004,102) $(32,232,463) $(8,569,471)
------------- ------------- ------------- ------------- -------------
Fund share (principal) transactions -
Net asset value of shares issued to shareholders
in reinvestment of distributions 13,376,861 350,218 4,481,087 16,799,726 4,199,846
Cost of shares reacquired (37,081,742) (1,130,853) (19,060,786) (31,116,518) (13,930,081)
------------- ------------- ------------- ------------- -------------
Increase in net assets from Fund share
transactions $ 93,963,476 $ 16,656,921 $ 41,495,427 $ 78,705,570 $ 24,351,112
------------- ------------- ------------- ------------- -------------
Total increase in net assets $114,769,503 $ 17,387,901 $ 50,984,120 $ 91,347,125 $ 30,430,777
Net assets:
At beginning of period 398,351,518 -- 144,539,033 399,696,077 115,289,064
------------- ------------- ------------- ------------- -------------
At end of period $513,121,021 $ 17,387,901 $195,523,153 $491,043,202 $145,719,841
------------- ------------- ------------- ------------- -------------
Accumulated undistributed (distributions in excess
of) net investment income included in net assets
at end of period $ (1,278,603) $ 5,750 $ (407,215) $ (1,469,330) $ (435,698)
------------- ------------- ------------- ------------- -------------
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- -----------------------------------------------------------------------------------------------------------------------------------
Florida Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
March 31, January 31, March 31, January 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1994<F5> 1994 1993<F1> 1995 1994<F5> 1994<F2>
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Class B
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.65 $10.63 $ 9.89 $ 9.53 $ 9.64 $10.62 $10.69
------ ------ ------ ------ ------ ------ ------
Income from investment operations<F4> -
Net investment income<F8> $ 0.54 $ 0.09 $ 0.57 $ 0.58 $ 0.43 $ 0.07 $ 0.18
Net realized and unrealized gain (loss)
on investments 0.02 (0.98) 0.86 0.36 0.04 (0.98) 0.03
------ ------ ------ ------ ------ ------ ------
Total from investment operations $ 0.56 $(0.89) $ 1.43 $ 0.94 $ 0.47 $(0.91) $ 0.21
------ ------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income (0.54) (0.08) (0.57) (0.58) (0.44) (0.06) (0.17)
From net realized gain on investments (0.04) -- (0.11) -- (0.04) -- (0.10)
In excess of net investment income -- (0.01) (0.01) -- -- (0.01) (0.01)
In excess of net realized gain on
investments (0.03) -- -- -- (0.03) -- --
------ ------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.61) $(0.09) $(0.69) $(0.58) $(0.51) $(0.07) $(0.28)
------ ------ ------ ------ ------ ------ ------
Net asset value - end of period $ 9.60 $ 9.65 $10.63 $ 9.89 $ 9.60 $ 9.64 $10.62
------ ------ ------ ------ ------ ------ ------
Total return<F6> 6.07% (8.39)%<F4> 14.71% 10.28%<F3> 5.06% (8.55)%<F4> 4.87%<F3>
Ratios (to average net assets)/Supplemental
data<F8>:
Expenses 0.60% 0.77%<F3> 0.49% 0.05%<F3> 1.68% 1.82%<F3> 1.64%<F3>
Net investment income 5.75% 5.15%<F3> 5.42% 6.27%<F3> 4.63% 4.08%<F3> 3.82%<F3>
Portfolio turnover 131% 19% 53% 54% 131% 19% 53%
Net assets at end of period (000 omitted) $89,894 $108,579 $124,131 $74,329 $12,667 $7,995 $7,244
<FN>
<F1>For the period from the commencement of investment operations, February 3, 1992 to January 31, 1993.
<F2>For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F3>Annualized.
<F4>Unannualized.
<F5>For the two months ended March 31, 1994.
<F6>Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results would
have been lower.
<F7>Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
<F8>The investment adviser did not impose all or a portion of its advisory, distribution or expense reimbursement fees for the
periods indicated. If these fees had been incurred by the Fund, the net investment income per share and the ratios would
have been:
Net investment income $ 0.52 $ 0.08 $ 0.52 $ 0.51 $ 0.41 $ 0.06 $ 0.16
Ratios (to average net assets):
Expenses 0.83% 1.12%<F3> 0.93% 0.81%<F3> 1.91% 2.17%<F3> 2.09%<F3>
Net investment income 5.52% 4.80%<F3> 4.97% 5.51%<F3> 4.40% 3.72%<F3> 3.38%<F3>
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------------
Georgia Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
March 31, January 31, March 31, January 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1994<F5> 1994 1993 1992 1991 1990 1989<F1> 1995 1994<F5> 1994<F2>
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Class B
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -
beginning of period $10.38 $11.30 $10.57 $10.22 $ 9.83 $ 9.73 $ 9.73 $ 9.53 $10.38 $11.30 $11.26
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations<F7> -
Net investment
income<F8> $ 0.57 $ 0.09 $ 0.57 $ 0.58 $ 0.61 $ 0.63 $ 0.66 $ 0.32 $ 0.47 $ 0.07 $ 0.19
Net realized and
unrealized gain
(loss) on
investments -- (0.92) 0.75 0.38 0.46 0.12 0.02 0.14 0.02 (0.91) 0.05
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations $ 0.57 $(0.83) $ 1.32 $ 0.96 $ 1.07 $ 0.75 $ 0.68 $ 0.46 $ 0.49 $(0.84) $ 0.24
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions
declared to
shareholders -
From net investment
income $(0.56) $(0.06) $(0.55) $(0.60) $(0.66) $(0.63) $(0.66) $(0.26) $(0.47) $(0.07) $(0.18)
From net realized
gain on investments (0.01) -- (0.01) (0.01) (0.02) (0.02) (0.02) -- (0.01) -- (0.01)
In excess of net
investment income -- (0.03) (0.03) -- -- -- -- -- -- (0.01) (0.01)
In excess of net
realized gain on
investments (0.03 -- -- -- -- -- -- -- (0.03) -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions
declared to
shareholders $(0.60) $(0.09) $(0.59) $(0.61) $(0.68) $(0.65) $(0.68) $(0.26) $(0.51) $(0.08) $(0.20)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value -
end of period $10.35 $10.38 $11.30 $10.57 $10.22 $ 9.83 $ 9.73 $ 9.73 $10.36 $10.38 $11.30
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total return<F6> 5.65% (7.34)%<F4> 12.71% 9.56% 11.29% 8.06% 7.19% 7.57%<F3> 4.88% (7.47)%<F4> 5.34%<F3>
Ratios (to average
net assets)/
Supplemental data<F8>:
Expenses 1.14% 1.18%<F3> 1.21% 1.08% 0.99% 0.74% 0.42% 0.40%<F3> 1.96% 1.99%<F3> 1.97%<F3>
Net investment income 5.50% 5.05%<F3> 5.10% 5.75% 6.08% 6.46% 6.72% 6.18%<F3> 4.66% 4.17%<F3> 3.83%<F3>
Portfolio turnover 56% 5% 14% 27% 36% 71% 99% -- 56% 5% 14%
Net assets at end of
period (000 omitted) $74,432 $85,878 $94,407 $64,649 $47,869 $29,214 $12,628 $4,383 $8,695 $6,631 $5,766
<FN>
<F1>For the period from the commencement of investment operations, June 6, 1988
to January 31, 1989.
<F2>For the period from the commencement of offering of Class B shares,
September 7, 1993 to January 31, 1994.
<F3>Annualized.
<F4>Unannualized.
<F5>For the two months ended March 31, 1994.
<F6>Total returns for Class A shares do not include the applicable sales charge.
If the charge had been included, the results would have been lower.
<F7>Per share data for the periods beginning after January 31, 1994 are based on
average shares outstanding.
<F8>The investment adviser did not impose all or a portion of its advisory,
distribution or expense reimbursement fees for the periods indicated. If
these fees had been incurred by the Fund, the net investment income per
share and the ratios would have been:
Net investment
income $ 0.56 $ 0.09 $ 0.56 $ 0.57 $ 0.60 $ 0.59 $ 0.57 $ 0.29 -- -- $ 0.19
Ratios (to average
net assets):
Expenses 1.24% 1.28%<F3> 1.31% 1.18% 1.09% 1.11% 1.31% 1.07%<F3> -- -- 1.97%<F3>
Net investment
income 5.40% 4.95%<F3> 5.00% 5.65% 5.98% 6.09% 5.83% 5.51%<F3> -- -- 3.83%<F3>
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------------------------------
Maryland Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended
March 31, January 31,
- ----------------------------------------------------------------------------------------------------------------------------------
1995 1994<F4> 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.89 $11.81 $11.40 $11.20
------ ------ ------ ------
Income from investment operations<F6>-
Net investment income $ 0.59 $ 0.10 $ 0.62 $ 0.67
Net realized and unrealized gain (loss) on
investments 0.09 (0.92) 0.53 0.24
------ ------ ------ ------
Total from investment operations $ 0.68 $(0.82) $ 1.15 $ 0.91
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income<F8> $(0.59) $(0.06) $(0.61) $(0.69)
From net realized gain on investments -- -- (0.07) (0.02)
In excess of net investment income -- (0.04) (0.04) --
In excess of net realized gain on investments (0.04) -- (0.02) --
From paid-in capital -- -- -- --
------ ------ ------ ------
Total distributions declared to shareholders $(0.63) $(0.10) $(0.74) $(0.71)
------ ------ ------ ------
Net asset value - end of period $10.94 $10.89 $11.81 $11.40
------ ------ ------ ------
Total return<F5> 6.51% (6.96)%<F3> 10.27% 8.34%
Ratios (to average net assets)/Supplemental data:
Expenses 1.21% 1.23%<F2> 1.25% 1.14%
Net investment income 5.46% 4.97%<F2> 5.42% 6.13%
Portfolio turnover 31% 1% 25% 5%
Net assets at end of period (000 omitted) $145,361 $161,290 $173,419 $145,794
<CAPTION>
Financial Highlights - continued
----------------------------------------------------------------------------------------------------------------------------------
Maryland Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended
January 31, March 31, January 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1992 1991 1990 1989 1988 1987 1986 1995 1994<F4> 1994<F1>
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Class B
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.97 $10.79 $10.76 $10.62 $11.20 $10.44 $ 9.89 $10.88 $11.80 $11.88
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment operations<F6> -
Net investment income $ 0.70 $ 0.70 $ 0.69 $ 0.69 $ 0.68 $ 0.71 $ 0.81 $ 0.51 $ 0.08 $ 0.22
Net realized and unrealized gain (loss) on
investments 0.31 0.19 0.04 0.14 (0.57) 0.78 0.62 0.09 (0.91) (0.01)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations $ 1.01 $ 0.89 $ 0.73 $ 0.83 $ 0.11 $ 1.49 $ 1.43 $ 0.60 $(0.83) $ 0.21
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income<F8> $(0.76) $(0.70) $(0.69) $(0.69) $(0.67) $(0.73) $(0.82) $(0.51) $(0.08) $(0.21)
From net realized gain on investments (0.02) (0.01) (0.01) -- (0.01) -- (0.06) -- -- (0.05)
In excess of net investment income -- -- -- -- -- -- -- -- (0.01) (0.01)
In excess of net realized gain on
investments -- -- -- -- -- -- -- (0.04) -- (0.02)
From paid-in capital<F7> -- -- -- -- (0.01) -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.78) $(0.71) $(0.70) $(0.69) $(0.69) $(0.73) $(0.88) $(0.55) $(0.09) $(0.29)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value - end of period $11.20 $10.97 $10.79 $10.76 $10.62 $11.20 $10.44 $10.93 $10.88 $11.80
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total return<F5> 9.55% 8.51% 6.90% 8.15% 1.25% 14.86% 15.47% 5.75% (7.08)%<F3> 4.45%<F2>
Ratios (to average net assets)/Supplemental data:
Expenses 1.16% 1.17% 1.18% 1.14% 1.10% 1.10% 0.98% 1.93% 1.95%<F2> 1.81%<F2>
Net investment income 6.32% 6.45% 6.33% 6.52% 6.47% 6.60% 8.22% 4.73% 4.19%<F2> 4.23%<F2>
Portfolio turnover 9% 41% 58% 34% 13% 11% 26% 31% 1% 25%
Net assets at end of period (000 omitted) $119,120 $101,742 $93,175 $84,380 $79,906 $81,712 $33.818 $11,168 $6,478 $5,345
<FN>
<F1>For the period from the commencement of offering of Class B shares,
September 7, 1993 to January 31, 1994.
<F2>Annualized.
<F3>Unannualized.
<F4>For the two months ended March 31, 1994.
<F5>Total returns for Class A shares do not include the applicable sales charge.
If the charge had been included, the results would have been lower.
<F6>Per share data for the periods beginning after January 31, 1994 are based on
average shares outstanding.
<F7>For the year ended January 31, 1986, the per share distribution from paid-in
capital was $0.0005.
<F8>For the year ended March 31, 1995, includes distributions in excess of net
investment income of $0.003 on Class A and Class B shares.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------------------------------
Massachusetts Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended
March 31, January 31,
- ----------------------------------------------------------------------------------------------------------------------------------
1995 1994<F5> 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.90 $11.75 $11.41 $11.05
------ ------ ------ ------
Income from investment operations<F7>-
Net investment income $ 0.64 $ 0.11 $ 0.64 $ 0.68
Net realized and unrealized gain (loss) on
investments (0.03) (0.85) 0.58 0.39
------ ------ ------ ------
Total from investment operations $ 0.61 (0.74) $ 1.22 $ 1.07
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.64) $(0.07) $(0.64) $(0.71)
From net realized gain on investments (0.02) -- (0.20) --
In excess of net investment income -- (0.04) (0.04) --
In excess of net realized gain on investments (0.01) -- -- --
------ ------ ------ ------
Total distributions declared to shareholders $(0.67) $(0.11) $(0.88) $(0.71)
------ ------ ------ ------
Net asset value - end of period $10.84 $10.90 $11.75 $11.41
------ ------ ------ ------
Total return<F6> 5.89% (6.34)%<F4> 11.02% 10.03%
Ratios (to average net assets)/Supplemental data:
Expenses 1.17% 1.19%<F3> 1.19% 1.08%
Net investment income 6.01% 5.64%<F3> 5.71% 6.33%
Portfolio turnover 31% 4% 30% 32%
Net assets at end of period (000 omitted) $262,551 $277,748 $300,894 $270,778
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights - continued
----------------------------------------------------------------------------------------------------------------------------------
Massachusetts Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended
January 31, March 31, January 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1992 1991 1990 1989 1988 1987 1986<F1> 1995 1994<F5> 1994<F2>
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Class B
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -
beginning of period $10.68 $10.58 $10.65 $10.60 $11.25 $10.59 $ 9.52 $10.90 $11.75 $11.91
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations<F7> -
Net investment income $ 0.73 $ 0.71 $ 0.72 $ 0.72 $ 0.71 $ 0.74 $ 0.54 $ 0.55 $ 0.09 $ 0.23
Net realized and
unrealized gain (loss)
on investments 0.43 0.11 (0.07) 0.05 (0.65) 0.68 0.99 (0.02) (0.85) 0.04
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations $ 1.16 $ 0.82 $ 0.65 $ 0.77 $ 0.06 $ 1.42 $ 1.53 $ 0.53 $(0.76) $ 0.27
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions
declared to
shareholders -
From net investment
income $(0.78) $(0.72) $(0.72) $(0.72) $(0.71) $(0.75) $(0.46) $(0.56) $(0.09)<F8> $(0.22)
From net realized gain
on investments -- -- -- -- -- (0.01) -- (0.02) -- (0.20)
In excess of net
investment income<F8> -- -- -- -- -- -- -- -- -- (0.01)
In excess of net realized
gain on investments -- -- -- -- -- -- -- (0.01) -- --
From paid-in capital (0.01) -- -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions
declared to
shareholders $(0.79) $(0.72) $(0.72) $(0.72) $(0.71) $(0.76) $(0.46) $(0.59) $(0.09) $(0.43)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value -
end of period $11.05 $10.68 $10.58 $10.65 $10.60 $11.25 $10.59 $10.84 $10.90 $11.75
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total return<F6> 11.23% 8.12% 6.28% 7.65% 0.80% 14.10% 20.51%<F3> 5.13% (6.46)%<F4> 5.89%<F3>
Ratios (to average net
assets)/Supplemental data:
Expenses 1.06% 1.07% 1.10% 1.07% 1.04% 0.87% 0.86%<F3> 1.89% 1.91%<F3> 1.81%<F3>
Net investment income 6.65% 6.74% 6.75% 6.90% 6.79% 6.83% 7.82%<F3> 5.27% 4.89%<F3> 4.62%<F3>
Portfolio turnover 51% 43% 52% 26% 27% 7% 27% 31% 4% 30%
Net assets at end of
period (000 omitted) $239,311 $213,679 $215,381 $212,763 $224,219 $242,119 $94,575 $ 8,676 $4,993 $ 4,191
<FN>
<F1>For the period from the commencement of investment operations, April 9, 1985
to January 31, 1986.
<F2>For the period from the commencement of offering of Class B shares,
September 7, 1993 to January 31, 1994.
<F3>Annualized.
<F4>Unannualized.
<F5>For the two months ended March 31, 1994.
<F6>Total returns for Class A shares do not include the applicable sales charge.
If the charge had been included, the results would have been lower.
<F7>Per share data for the periods beginning after January 31, 1994 are based on
average shares outstanding.
<F8>For the year ended March 31, 1994, the per share distribution in excess of
net investment income was $0.0055.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------------
New York Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
March 31, January 31, March 31, January 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1994<F5> 1994 1993 1992 1991 1990 1989<F1> 1995 1994<F5> 1994<F2>
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Class B
- -----------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value -
beginning of period $ 10.50 $ 11.34 $ 10.78 $ 10.25 $ 9.90 $ 9.74 $ 9.79 $ 9.53 $ 10.50 $ 11.34 $ 11.46
------- ------- ------- ------- ------- ------- ------- ------ ------- ------- -------
Income from investment
operations<F4> -
Net investment income<F8> $ 0.56 $ 0.09 $ 0.59 $ 0.63 $ 0.65 $ 0.65 $ 0.68 $ 0.29 $ 0.47 $ 0.07 $ 0.18
Net realized and
unrealized gain
(loss) on investments 0.05 (0.84) 0.74 0.58 0.44 0.16 0.01 0.21 0.05 (0.83) 0.04
------- ------- ------- ------- ------- ------- ------- ------ ------- ------- -------
Total from investment
operations $ 0.61 $ (0.75) $ 1.33 $ 1.21 $ 1.09 $ 0.81 $ 0.69 $ 0.50 $ 0.52 $ (0.76) $ 0.22
------- ------- ------- ------- ------- ------- ------- ------ ------- ------- -------
Less distributions
declared to shareholders -
From net investment
income $(0.56) $(0.06) $ (0.57) $ (0.65) $ (0.69) $ (0.65) $ (0.67) $(0.24) $ (0.47) $ (0.07) $(0.18)
From net realized gain
on investment -- -- (0.17) (0.03) (0.05) -- (0.06) -- -- -- (0.15)
In excess of net
investment income (0.01) (0.03) (0.03) -- -- -- -- -- (0.01) (0.01) (0.01)
In excess of net realized
gain on investments (0.05) -- -- -- -- -- -- -- (0.05) -- --
From paid-in capital -- -- -- -- -- -- (0.01) -- -- -- --
------- ------ ------- ------- ------- ------- ------- ------ ------- ------- ------
Total distributions
declared to shareholders $ (0.62) $(0.09) $ (0.77) $ (0.68) $ (0.74) $ (0.65) $ (0.74) $(0.24) $ (0.53) $ (0.08) $(0.34)
------- ------ ------- ------- ------- ------- ------- ------ ------- ------- ------
Net asset value -
end of period $ 10.49 $10.50 $ 11.34 $ 10.78 $ 10.25 $ 9.90 $ 9.74 $ 9.79 $ 10.49 $ 10.50 $11.34
------- ------ ------- ------- ------- ------- ------- ------ ------- ------- ------
Total return<F6> 6.03% (6.58)%<F4> 12.69% 12.23% 11.42% 8.74% 7.33% 8.16%<F3> 5.17% (6.71)%<F4>5.20%<F3>
Ratios (to average
net assets)/
Supplemental data<F8>:
Expenses 1.07% 1.03%<F3> 0.93% 0.53% 0.65% 0.54% 0.40% 0.40%<F3> 1.89% 1.87%<F3>1.79%<F3>
Net investment income 5.43% 5.09%<F3> 5.21% 6.16% 6.44% 6.73% 6.88% 5.93%<F3> 4.58% 4.21%<F3>3.90%<F3>
Portfolio turnover 147% 15% 51% 61% 80% 188% 236% 32% 147% 15% 51%
Net assets at end
of period (000 omitted) $146,597 $162,621 $184,523 $135,749 $79,524 $37,385 $20,156 $6,412 $11,885 $6,265 $4,828
<PAGE>
<FN>
<F1>For the period from the commencement of investment operations, June 6, 1988 to January 31, 1989.
<F2>For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F3>Annualized.
<F4>Unannualized.
<F5>For the two months ended March 31, 1994.
<F6>Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F7>Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
<F8>The investment adviser did not impose all or a portion of its advisory, distribution or expense reimbursement fees for the
periods indicated. If these fees had been incurred by the Fund, the net investment income per share and the ratios would have
been:
Net investment income $ 0.55 $ 0.07 $ 0.56 $ 0.57 $ 0.60 $ 0.61 $ 0.59 $ 0.26 $ 0.47 $ 0.07 $ 0.17
Ratios (to average
net assets):
Expenses 1.18% 1.23%<F3> 1.23% 1.13% 1.16% 0.95% 1.32% 1.09%<F3> 1.91% 1.97%<F3>2.00%<F3>
Net investment
income 5.31% 4.88%<F3> 4.90% 5.56% 5.94% 6.33% 5.96% 5.24%<F3> 4.57% 4.11%<F3>3.69%<F3>
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------------
North Carolina Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended
March 31, January 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1994<F3> 1994 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -
beginning of period $ 11.48 $ 12.37 $ 11.80 $ 11.45 $ 11.30 $ 11.18 $ 11.15 $ 11.13
------- ------- ------- ------- ------- ------- ------- -------
Income from investment
operations<F3>-
Net investment income $ 0.61 $ 0.10 $ 0.64 $ 0.65 $ 0.70 $ 0.72 $ 0.73 $ 0.74
Net realized and
unrealized gain (loss)
on investments 0.03 (0.89) 0.58 0.37 0.26 0.17 0.03 0.02
------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations $ 0.64 (0.79) $ 1.22 $ 1.02 $ 0.96 $ 0.89 $ 0.76 $ 0.76
------- ------- ------- ------- ------- ------- ------- -------
Less distributions
declared to
shareholders -
From net investment
income $ (0.60) $ (0.07) $ (0.61) $ (0.67) $ (0.76) $ (0.72) $ (0.73) $ (0.74)
From net realized
gain on investments (0.06) -- (0.01) -- (0.01) (0.05) -- --
In excess of net
investment income -- (0.03) (0.03) -- -- -- -- --
In excess of net
realized gain on
investments (0.04) -- -- -- -- -- -- --
From paid-in capital<F6> -- -- -- -- (0.04) -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Total distributions
declared to
shareholders $ (0.70) $ (0.10) $ (0.65) $ (0.67) $ (0.81) $ (0.77) $ (0.73) $ (0.74)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value -
end of period $ 11.42 $ 11.48 $ 12.37 $ 11.80 $ 11.45 $ 11.30 $ 11.18 $ 11.15
======= ======= ======= ======= ======= ======= ======= =======
Total return<F4> 5.86% (6.39)%<F4> 10.59% 9.23% 8.82% 8.34% 6.97% 7.12%
Ratios (to average net
assets)/Supplemental data:
Expenses 1.16% 1.16%<F3> 1.19% 1.07% 1.09% 1.09% 1.12% 1.11%
Net investment income 5.38% 4.96%<F3> 5.21% 5.80% 6.17% 6.47% 6.48% 6.70%
Portfolio turnover 58% 2% 12% 2% 39% 44% 61% 25%
Net assets at end
of period (000 omitted) $429,131 $460,321 $495,158 $398,352 $312,466 $226,806 $175,101 $129,287
<PAGE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------------
North Carolina Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
January 31, March 31, January 31, March 31, January 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1988 1987 1998 1995 1994<F5> 1994<F1> 1995 1994<F5> 1994<F2>
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Class B Class C
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share
outstanding throughout
each period):
Net asset value -
beginning of period $11.82 $11.09 $10.01 $11.47 $12.36 $12.36 $11.47 $12.36 $12.24
------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations<F9> -
Net investment income $ 0.73 $ 0.75 $ 0.82 $ 0.52 $ 0.08 $ 0.22 $ 0.53 $ 0.10 $ 0.02
Net realized and
unrealized gain (loss)
on investments (0.69) 0.90 1.12 0.05 (0.89) 0.01 0.04 (0.90) 0.12
------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations $ 0.04 $ 1.65 $ 1.94 $ 0.57 $(0.81) $ 0.23 $ 0.57 $(0.80) $ 0.14
------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions declared
to shareholders -
From net investment
income<F7> $(0.73) $(0.76) $(0.82) $(0.52) $(0.08) $(0.21) $(0.53) $(0.09) $(0.02)
From net realized gain
on investments -- (0.16) (0.04) (0.06) -- (0.01) (0.06) -- --
In excess of net
investment income -- -- -- -- -- (0.01) -- -- --
In excess of net realized
gain on investments -- -- -- (0.04) -- -- (0.04) -- --
------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions
declared to
shareholders $(0.73) $(0.92) $(0.86) $(0.62) $(0.08) $(0.23) $(0.63) $(0.09) $(0.02)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value - end
of period $11.13 $11.82 $11.09 $11.42 $11.47 $12.36 $11.41 $11.47 $12.36
====== ====== ====== ====== ====== ====== ====== ====== ======
Total return<F8> 0.65% 15.76% 20.63% 5.20% (6.51)%<F4> 4.58%<F3> 5.18% (6.50)%<F4> 16.50%<F3>
Ratios (to average net
assets)/Supplemental data:
Expenses 1.08% 1.07% 0.90% 1.88% 1.88%<F3> 1.84%<F3> 1.81% 1.82%<F3> 1.44%<F3>
Net investment income 6.71% 6.63% 8.02% 4.64% 4.18%<F3> 4.03%<F3> 4.71% 4.25%<F3> 2.33%<F3>
Portfolio turnover 10% 10% 78% 58% 2% 12% 58% 2% 12%
Net assets at end of period
(000 omitted) $110,462 $105,668 $53,561 $26,260 $15,866 $13,379 $8,149 $6,661 $4,584
<FN>
<F1>For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F2>For the period from the commencement of offering of Class C shares, January 3, 1994 to January 31, 1994.
<F3>Annualized.
<F4>Unannualized.
<F5>For the two months ended March 31, 1994.
<F6>For the year ended January 31, 1991, the per share distribution from paid-in capital wa $0.0005.
<F7>Includes distributions in excess of net investment income of $0.004 and $0.002, respectively, for Class B and Class C shares
for the two months ended March 31, 1994 and $0.003 per share for Class C shares for the year ended January 31, 1994.
<F8>Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F9>Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights -- continued
- ----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
March 31, January 31, March 31, January 31,
- ----------------------------------------------------------------------------------------------------------------------------------
1995 1994<F5> 1994<F1> 1995 1994<F5> 1994<F2>
- ----------------------------------------------------------------------------------------------------------------------------------
Class A Class B
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout
each period):
Net asset value - beginning of period $ 9.15 $10.14 $ 9.53 $ 9.15 $10.15 $10.06
------ ------ ------ ------ ------ ------
Income from investment operations<F7> -
Net investment income<F9> $ 0.54 $ 0.09 $ 0.50 $ 0.45 $ 0.06 $ 0.17
Net realized and unrealized gain (loss) on
investments 0.18 (0.99) 0.62 0.18 (0.99) 0.10
------ ------ ------ ------ ------ ------
Total from investment operations $ 0.72 $(0.90) $ 1.12 $ 0.63 $(0.93) $ 0.27
Less distributions declared to shareholders -
From net investment income<F8> $(0.54) $(0.09) $(0.50) $(0.45) $(0.07) $(0.17)
From net realized gain on investments (0.01) -- (0.01) (0.01) -- (0.01)
In excess of net realized gain on investments (0.03) -- -- (0.03) -- --
------ ------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.58) $(0.09) $(0.51) $(0.49) $(0.07) $(0.18)
------ ------ ------ ------ ------ ------
Net asset value - end of period $ 9.29 $ 9.15 $10.14 $ 9.29 $ 9.15 $10.15
------ ------ ------ ------ ------ ------
Total return<F6> 8.14% (8.91)%<F4> 12.12% 7.07% (9.16)%<F4> 6.76%<F3>
Ratios (to average net assets)/Supplemental data<F9>:
Expenses 0.01% 0.00%<F3> 0.00%<F3> 1.01% 1.00%<F3> 1.00%<F3>
Net investment income 5.97% 5.43%<F3> 5.30%<F3> 4.96% 4.37%<F3> 4.22%<F3>
Portfolio turnover 49% 1% 10% 49% 1% 10%
Net assets at end of period (000 omitted) $16,411 $13,961 $13,987 $7,699 $4,304 $3,401
<FN>
<F1>For the period from the commencement of investment operations, February 1,
1993 to January 31, 1994.
<F2>For the period from the commencement of offering of Class B shares,
September 7, 1993 to January 31, 1994.
<F3>Annualized.
<F4>Unannualized.
<F5>For the two months ended March 31, 1994.
<F6>Total returns for Class A shares do not include the applicable sales charge.
If the charge had been included, the results would have been lower.
<F7>Per share data for the periods beginning after January 31, 1994 are based on
average shares outstanding.
<F8>For the two months ended March 31, 1994, Class B net investment income
includes distributions in excess of net investment income of less than
$0.001 per share.
<F9>The investment adviser did not impose all or a portion of its advisory,
distribution or expense reimbursement fees for the periods indicated. If
these fees had been incurred by the Fund, the net investment income per
share and the ratios would have been:
Net investment income $ 0.43 $ 0.06 $ 0.32 $ 0.34 $ 0.04 $ 0.05
Ratios (to average net assets):
Expenses 1.18% 1.84%<F3> 1.94%<F3> 2.26% 2.91%<F3> 2.50%<F3>
Net investment income 4.80% 3.60%<F3> 3.36%<F3> 3.72% 2.47%<F3> 1.29%<F3>
</TABLE>
See notes to financial statements
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------------------------------
South Carolina Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended
March 31, January 31,
- ----------------------------------------------------------------------------------------------------------------------------------
1995 1994<F4> 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $11.79 $12.74 $12.02 $11.74 $11.45 $11.30 $11.24
------ ------ ------ ------ ------ ------ ------
Income from investment operations<F8> -
Net investment income $ 0.63 $ 0.08 $ 0.63 $ 0.67 $ 0.70 $ 0.71 $ 0.72
Net realized and unrealized gain (loss) on
investments 0.15 (0.92) 0.74 0.34 0.40 0.21 0.06
------ ------ ------ ------ ------ ------ ------
Total from investment operations $ 0.78 $(0.84) $ 1.37 $ 1.01 $ 1.10 $ 0.92 $ 0.78
------ ------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.62) $(0.08) $(0.61) $(0.69) $(0.76) $(0.71) $(0.72)
From net realized gain on investments (0.06) -- (0.01) (0.04) (0.05) (0.06) --
In excess of net investment income -- (0.03) (0.03) -- -- -- --
In excess of net realized gain on investments (0.03) -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.71) $(0.11) $(0.65) $(0.73) $(0.81) $(0.77) $(0.72)
------ ------ ------ ------ ------ ------ ------
Net asset value - end of period $11.86 $11.79 $12.74 $12.02 $11.74 $11.45 $11.30
====== ====== ====== ====== ====== ====== ======
Total return<F7> 6.93% (6.65)%<F3> 11.69% 8.89% 9.95% 8.46% 7.13%
Ratios (to average net assets)/Supplemental data:
Expenses 1.19% 1.23%<F2> 1.22% 1.12% 1.15% 1.18% 1.21%
Net investment income 5.37% 5.09%<F2> 5.06% 5.74% 6.07% 6.30% 6.35%
Portfolio turnover 30% 4% 10% 11% 22% 47% 54%
Net assets at end of period (000 omitted) $171,045 $173,316 $187,307 $144,539 $101,434 $75,922 $57,675
<CAPTION>
Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------------------------------
South Carolina Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended
January 31, March 31, January 31,
- ----------------------------------------------------------------------------------------------------------------------------------
1989 1988 1987 1986 1995 1994<F4> 1994<F1>
- ---------------------------------------------------------------------------------------------------------------------------------
Class A Class B
- ---------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of period $11.14 $11.54 $10.89 $ 9.95 $11.78 $12.73 $12.67
------ ------ ------ ------ ------ ------ ------
Income from investment operations<F8> -
Net investment income $ 0.76 $ 0.77 $ 0.77 $ 0.84 $ 0.54 $ 0.08 $ 0.21
Net realized and unrealized gain
(loss) on investments 0.11 (0.36) 0.69 0.95 0.17 (0.94) 0.06
------ ------ ------ ------ ------ ------ ------
Total from investment operations $ 0.87 $ 0.41 $ 1.46 $ 1.79 $ 0.71 $(0.86) $ 0.27
------ ------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.77) $(0.77) $(0.78) $(0.84) $(0.54) $(0.08) $(0.20)
From net realized gain on investments -- -- (0.03) (0.01) (0.06) -- --
In excess of net investment income<F5> -- -- -- -- -- (0.01) (0.01)
In excess of net realized gain on investments -- -- -- -- (0.03) -- --
From paid-in capital<F6> -- (0.04) -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.77) $(0.81) $(0.81) $(0.85) $(0.63) $(0.09) $(0.21)
------ ------ ------ ------ ------ ------ ------
Net asset value - end of period $11.24 $11.14 $11.54 $10.89 $11.86 $11.78 $12.73
------ ------ ------ ------ ------ ------ ------
Total return<F7> 8.18% 3.92% 14.05% 19.13% 6.26% (6.77)%<F3> 5.47%<F2>
Ratios (to average net assets)/Supplemental data:
Expenses 0.97% 0.81% 0.99% 1.01% 1.90% 1.96%<F2> 1.90%<F2>
Net investment income 6.90% 7.07% 7.00% 8.26% 4.63% 4.29%<F2> 3.86%<F2>
Portfolio turnover 27% 12% 13% 28% 30% 4% 10%
Net assets at end of period (000 omitted) $45,391 $34,025 $27,978 $10,936 $12,964 $10,085 $ 8,217
<FN>
<F1>For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F2>Annualized.
<F3>Unannualized.
<F4>For the two months ended March 31, 1994.
<F5>For the year ended March 31, 1995, the Class B distribution in excess of net investment income was $.00436 per share.
<F6>For the year ended January 31, 1986, the per share distribution from paid-in capital was $0.00042.
<F7>Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results would
have been lower.
<F8>Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Virginia Fund
- ---------------------------------------------------------------------------------------------------------------------------------
Year
Ended Year Ended
March 31, January 31,
- ---------------------------------------------------------------------------------------------------------------------------------
1995 1994<F3> 1994 1993 1992 1991 1990 1989
- ---------------------------------------------------------------------------------------------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $11.15 $12.07 $11.72 $11.44 $11.16 $10.97 $10.91 $10.75
------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations<F5> -
Net investment income $ 0.56 $ 0.10 $ 0.65 $ 0.68 $ 0.71 $ 0.73 $ 0.73 $ 0.74
Net realized and unrealized gain (loss) on
investments 0.04 (0.92) 0.56 0.30 0.34 0.19 0.06 0.16
------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations $ 0.60 (0.82) $ 1.21 $ 0.98 $ 1.05 $ 0.92 $ 0.79 $ 0.90
------ ------ ------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income<F7> $(0.61) $(0.06) $(0.62) $(0.70) $(0.77) $(0.73) $(0.73) $(0.74)
From net realized gain on investments<F6> (0.04) -- (0.20) -- -- -- -- --
In excess of net investment income -- (0.04) (0.04) -- -- -- -- --
In excess of net realized gain on
investments (0.01) -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.66) $(0.10) $(0.86) $(0.70) $(0.77) $(0.73) $(0.73) $(0.74)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value - end of period $11.09 $11.15 $12.07 $11.72 $11.44 $11.16 $10.97 $10.91
====== ====== ====== ====== ====== ====== ====== ======
Total return<F4> 5.67% (6.80)%<F2> 10.67% 8.88% 9.76% 8.74% 7.46% 8.76%
Ratios (to average net assets)/Supplemental data:
Expenses 1.16% 1.17%<F1> 1.18% 1.08% 1.08% 1.11% 1.12% 1.09%
Net investment income 4.91% 5.33%<F1> 5.37% 6.02% 6.32% 6.64% 6.67% 6.91%
Portfolio turnover 27% 5% 22% 20% 13% 38% 41% 38%
Net assets at end of period (000 omitted) $430,688 $443,580 $479,333 $399,696 $328,664 $275,202 $240,553 $207,680
<FN>
<F1>Annualized.
<F2>Unannualized.
<F3>For the two months ended March 31, 1994.
<F4>Total returns for Class A shares do not include the applicable sales charge.
If the charge had been included, the results would have been lower.
<F5>Per share data for the periods beginning after January 31, 1994 are based on
average shares outstanding.
<F6>For the year ended January 31, 1993, the per share distribution from net
realized gain on investments was $0.00348.
<F7>For the year ended March 31, 1995, includes a distribution in excess of net
investment income of $0.002 on Class A shares.
</TABLE>
See notes to financial statements
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------------------------------
Virginia Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
January 31, March 31, January 31, March 31, January 31,
- ----------------------------------------------------------------------------------------------------------------------------------
1988 1987 1986 1995 1994<F5> 1994<F1> 1995 1994<F5> 1994<F2>
- ----------------------------------------------------------------------------------------------------------------------------------
Class A Class B Class C
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -
beginning of period $11.38 $10.78 $10.01 $11.14 $12.06 $12.14 $11.14 $12.06 $11.94
------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations<F9> -
Net investment income $ 0.72 $ 0.74 $ 0.81 $ 0.53 $ 0.09 $ 0.22 $ 0.56 $ 0.08 $ 0.02
Net realized and
unrealized gain
(loss) on investments (0.57) 0.61 0.77 (0.01) (0.92) 0.01 (0.04) (0.91) 0.12
------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations $ 0.15 $ 1.35 $ 1.58 $ 0.52 $(0.83) $ 0.23 $ 0.52 $(0.83) $ 0.14
------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions declared
to shareholders -
From net investment
income $(0.71) $(0.75) $(0.80) $(0.53)<F6>$(0.09)<F6> $(0.21) $(0.54)<F6> $(0.09) $(0.02)<F6>
From net realized gain
on investments (0.05) -- (0.01) (0.04) -- (0.09) (0.04) -- --
In excess of net
investment income -- -- -- -- -- (0.01) -- -- --
In excess of net realized
gain on investments -- -- -- (0.01) -- -- (0.01) -- --
From paid-in capital<F7> (0.02) -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions
declared to
shareholders $(0.78) $(0.75) $(0.81) $(0.58) $(0.09) $(0.31) $(0.59) $(0.09) $(0.02)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value -
end of period $10.75 $11.38 $10.78 $11.08 $11.14 $12.06 $11.07 $11.14 $12.06
------ ------ ------ ------ ------ ------ ------ ------ ------
Total return<F8> 1.61% 13.12% 16.82% 4.91% (6.92)%<F4> 4.93%<F3> 4.85% (6.91)%<F4> 17.05%<F3>
Ratios (to average net
assets)/Supplemental data:
Expenses 1.04% 1.02% 0.83% 1.88% 1.88%<F3> 1.82%<F3> 1.80% 1.82%<F3> 1.18%<F3>
Net investment income 6.75% 6.73% 8.89% 4.84% 4.52%<F3> 4.25%<F3> 4.90% 4.48%<F3> 1.79%<F3>
Portfolio turnover 11% 20% 23% 27% 5% 22% 27% 5% 22%
Net assets at end of period
(000 omitted) $192,104 $181,937 $85,706 $22,007 $13,337 $10,877 $ 2,300 $1,760 $ 833
<FN>
<F1>For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F2>For the period from the commencement of offering of Class C shares, January 3, 1994 to January 31, 1994.
<F3>Annualized.
<F4>Unannualized.
<F5>For the two months ended March 31, 1994.
<F6>Includes a distribution in excess of net investment income of $0.002 on Class B and Class C shares for the periods indicated.
<F7>For the years ended January 31, 1987 and 1986, the per share distributions from paid-in capital were $0.0005 and $0.0015,
respectively.
<F8>Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F9>Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------------------------------
West Virginia Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended
March 31, January 31,
- ----------------------------------------------------------------------------------------------------------------------------------
1995 1994<F4> 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $11.19 $12.06 $11.50 $11.20 $10.93 $10.72 $10.68
------ ------ ------ ------ ------ ------ ------
Income from investment operations<F8> -
Net investment income $ 0.62 $ 0.01 $ 0.64 $ 0.66 $ 0.70 $ 0.71 $ 0.71
Net realized and unrealized gain (loss) on
investments 0.03 (0.78) 0.69 0.34 0.34 0.21 0.04
------ ------ ------ ------ ------ ------ ------
Total from investment operations $ 0.65 $(0.77) $ 1.33 $ 1.00 $ 1.04 $ 0.92 $ 0.75
------ ------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.62) $(0.06) $(0.61) $(0.69) $(0.76) $(0.71) $(0.71)
From net realized gain on investments -- -- (0.12) (0.01) (0.01) -- --
In excess of net investment income -- (0.04) (0.04) -- -- -- --
In excess of net realized gain on investments (0.01) -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.63) $(0.10) $(0.77) $(0.70) $(0.77) $(0.71) $(0.71)
------ ------ ------ ------ ------ ------ ------
Net asset value - end of period $11.21 $11.19 $12.06 $11.50 $11.20 $10.93 $10.72
------ ------ ------ ------ ------ ------ ------
Total return<F3> 6.07% (6.37)%<F3> 11.80% 9.12% 9.84% 8.91% 7.26%
Ratios (to average net assets)/Supplemental data:
Expenses 1.19% 1.30%<F2> 1.24% 1.15% 1.17% 1.21% 1.22%
Net investment income 5.62% 5.36%<F2> 5.30% 5.97% 6.33% 6.59% 6.63%
Net assets at end of period (000 omitted) $127,616 $130,726 $141,190 $115,289 $80,440 $61,984 $52,398
<CAPTION>
Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------------------------------
West Virginia Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended
January 31, March 31, January 31,
- ----------------------------------------------------------------------------------------------------------------------------------
1989 1988 1987 1986 1995 1994<F4> 1994<F1>
- ----------------------------------------------------------------------------------------------------------------------------------
Class A Class B
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.51 $11.30 $10.77 $ 9.83 $11.19 $12.06 $12.13
------ ------ ------ ------ ------ ------ ------
Income from investment operations<F8> -
Net investment income $ 0.77 $ 0.77 $ 0.81 $ 0.84 $ 0.53 $ 0.01 $ 0.22
Net realized and unrealized gain (loss
on investments 0.18 (0.72) 0.56 0.96 0.04 (0.87) 0.05
------ ------ ------ ------ ------ ------ ------
Total from investment operations $ 0.95 $ 0.05 $ 1.37 $ 1.80 $ 0.57 $(0.86) $ 0.27
------ ------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.78) $(0.76) $(0.81) $(0.85) $(0.54) $(0.01) $(0.21)
From net realized gain on investments -- (0.02) (0.03) (0.01) -- -- (0.12)
In excess of net investment income<F5> -- -- -- -- -- -- (0.01)
In excess of net realized gain on investments -- -- -- -- (0.01) -- --
From paid-in capital<F6> -- (0.06) -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.78) $(0.84) $(0.84) $(0.86) $(0.55) $(0.01) $(0.34)
------ ------ ------ ------ ------ ------ ------
Net asset value - end of period $10.68 $10.51 $11.30 $10.77 $11.21 $11.19 $12.06
------ ------ ------ ------ ------ ------ ------
Total return<F7> 9.43% 0.76% 13.42% 19.42% 5.30% (6.48)%<F3> 5.59%<F2>
Ratios (to average net assets)/Supplemental data:
Expenses 0.86% 0.79% 0.87% 1.00% 1.91% 2.02%<F2> 1.89%<F2>
Net investment income 7.01% 7.32% 7.42% 8.40% 4.87% 4.56%<F2> 4.14%<F2>
Portfolio turnover 9% 11% 9% 24% 23% 2% 26%
Net assets at end of period (000 omitted) $43,026 $36,276 $34,436 $17,733 $10,046 $5,456 $4,530
<FN>
<F1>For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F2>Annualized.
<F3>Unannualized.
<F4>For the two months ended March 31, 1994.
<F5>For the year ended March 31, 1995, the Class B distribution in excess of net investment income was $0.00051 per share.
<F6>For the years ended January 31, 1987 and 1986, the per share distributions from paid-in capital were $0.0018 and $0.0005,
respectively.
<F7>Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results would
have been lower.
<F8>Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Municipal Series 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. The Trust presently consists of
nineteen Funds, as follows: MFS Municipal Income Fund, MFS Alabama Municipal
Bond Fund, MFS Arkansas Municipal Bond Fund, MFS California Municipal Bond Fund,
MFS Florida Municipal Bond Fund* (Florida Fund), MFS Georgia Municipal Bond
Fund* (Georgia Fund), MFS Louisiana Municipal Bond Fund, MFS Maryland Municipal
Bond Fund* (Maryland Fund), MFS Massachusetts Municipal Bond Fund*
(Massachusetts Fund), MFS Mississippi Municipal Bond 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, MFS Texas Municipal Bond Fund, MFS Virginia
Municipal Bond Fund* (Virginia Fund), MFS Washington Municipal Bond Fund, and
MFS West Virginia Municipal Bond Fund* (West Virginia Fund). Each Fund, except
MFS Municipal Income Fund, is non-diversified.
The Funds denoted with an asterisk above are included within these financial
statements.
During 1994, the Trust changed its fiscal year end from January 31 to March 31.
(2) Significant Accounting Policies
Investment Valuations - Debt securities (other than short-term obligations which
mature in 60 days or less), including listed issues, are valued on the basis of
valuations furnished by dealers or by a pricing service with consideration to
factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading characteristics
and other market data, without exclusive reliance upon exchange or
over-the-counter prices. Short-term obligations, which mature in 60 days or
less, are valued at amortized cost, which approximates value. Futures contracts,
options and options on futures contracts listed on commodities exchanges are
valued at closing settlement prices. Over-the- counter options are valued by
brokers through the use of a pricing model which takes into account closing bond
valuations, implied volatility and short-term repurchase rates. Securities for
which there are no such quotations or valuations are valued at fair value as
determined in good faith by or at the direction of the Trustees.
Repurchase Agreements - Each Fund may enter into repurchase agreements with
institutions that the Trust's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. Each Fund requires
that the securities purchased in a repurchase transaction be transferred to the
custodian in a manner sufficient to enable the Fund to obtain those securities
in the event of a default under the repurchase agreement. Each Fund monitors, on
a daily basis, the value of the securities transferred to ensure that the value,
including accrued interest, of the securities under each repurchase agreement is
greater than amounts owed to the Fund under each such repurchase agreement.
Deferred Organization Expenses - Costs incurred by a Fund in connection with its
organization have been deferred and are being amortized on a straight-line basis
over a five-year period beginning on the date of commencement of operations of
the Fund.
Written Options - Each Fund may write covered call or put options for which
premiums are received and are recorded as liabilities, and are subsequently
adjusted to the current value of the options written. Premiums received from
writing options which expire are treated as realized gains. Premiums received
from writing options which are exercised or are closed are offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
security purchased by the Fund. Each Fund, as writer of an option, may have no
control over whether the underlying securities may be sold (call) or purchased
(put) and, as a result, bears the market risk of an unfavorable change in the
price of the securities underlying the written option. In general, written call
options may serve as a partial hedge against decreases in value in the
underlying securities to the extent of the premium received. Written options may
also be used as a part of an income-producing strategy reflecting the view of
the Fund's management on the direction of interest rates.
Futures Contracts - Each Fund may enter into financial futures contracts for the
delayed delivery of securities or contracts based on financial indices at a
fixed price on a future date. In entering such contracts, each Fund is required
to deposit either in cash or securities an amount equal to a certain percentage
of the contract amount. Subsequent payments are made or received by the Fund
each day, depending on the daily fluctuations in the value of the underlying
security, and are recorded for financial statement purposes as unrealized gains
or losses by the Fund. Each Fund's investment in financial futures contracts is
designed to hedge against anticipated future changes in interest rates. Such
transactions may also be entered into for non-hedging purposes to the extent
permitted by applicable law. For example, interest rate futures may be used in
modifying the duration of the portfolio without incurring the additional
transaction costs involved in buying and selling the underlying securities.
Should interest rates move unexpectedly, each Fund may not achieve the
anticipated benefits of the financial futures contracts and may realize a loss.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount are amortized or accreted for both financial statement
and tax reporting purposes as required by federal income tax regulations.
Tax Matters and Distributions - The Trust's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net income,
including any net realized gain on investments. Accordingly, no provision for
federal income or excise tax is provided. Each Fund files a tax return annually
using tax accounting methods required under provisions of the Code which may
differ from generally accepted accounting principles, the basis on which these
financial statements are prepared. Accordingly, the amount of net investment
income and net realized gain reported on these financial statements may differ
from that reported on each Fund's tax return and, consequently, the character of
distributions to shareholders reported in the financial highlights may differ
from that reported to shareholders on Form 1099-DIV.
Distributions paid by each Fund from net interest received on tax-exempt
municipal bonds are not includable by shareholders as gross income for federal
income tax purposes because each Fund intends to meet certain requirements of
the Code applicable to regulated investment companies, which will enable each
Fund to pay exempt-interest dividends. That portion of such interest, if any,
earned on private activity bonds issued after August 7, 1986, may be considered
a tax preference item to shareholders. Distributions to shareholders are
recorded on the ex-dividend date.
Each Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a return of
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.
The temporary differences resulting in excess distributions from net investment
income or accumulated net realized gains, arose primarily from the differences
between book and tax accounting due to timing of distributions, losses deferred
for tax purposes and pension expense accruals. Net investment income, net
realized gains and net assets were not affected by this change.
Multiple Classes of Shares of Beneficial Interest - Each Fund offers both Class
A and Class B shares. Class B shares were first offered to the public on
September 7, 1993. Effective January 3, 1994, the North Carolina and Virginia
Funds began to offer Class C shares. The three classes of shares differ in their
respective shareholder servicing agent, distribution and service fees.
Shareholders of each class also bear certain expenses that pertain only to that
particular class. All shareholders bear the common expenses of the Fund pro rata
based on settled shares outstanding, without distinction between share classes.
Dividends are declared separately for each class. No class has preferential
dividend rights; differences in per share dividend rates are generally due to
differences in separate class expenses, including distribution and shareholder
service fees.
(3) Transactions with Affiliates
Investment Adviser - The Trust has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.55% of
each Fund's average daily net assets. The investment adviser voluntarily agreed
to reduce its fees with respect to the Florida Fund to 0.10% of average daily
net assets until October 1, 1993, to be increased by 0.05% each quarter
thereafter, not to exceed 0.55%; with respect to the New York Fund to 0.35% of
average daily net assets until October 1, 1993, to be increased by 0.05% each
quarter thereafter, not to exceed 0.55% of the Fund's average daily net assets;
and with respect to the Pennsylvania Fund to 0.10% of average daily net assets
effective as of March 1, 1995. For the year ended March 31, 1995, the investment
adviser did not impose $248,214, $21,059 and $117,301 of its fee in the case of
the Florida, New York and Pennsylvania Funds, respectively, which is reflected
as a reduction of expenses on the Statements of Operations.
Under an expense reimbursement agreement with MFS, MFS has agreed to pay all of
the operating expenses exclusive of management and distribution fees of the
Pennsylvania Fund until December 31, 2002 or the date upon which the expenses
attributable to the Fund are repaid. To accomplish the reimbursement, the Fund
will pay an expense reimbursement fee to MFS of 0.40% of average daily net
assets, with a limitation that immediately after any such payment that aggregate
expenses of the Fund, including the management fee but excluding any
distribution plan fees, will not exceed 0.95% of average daily net assets. MFS
voluntarily reduced, for an indefinite period, its expense reimbursement fee to
0% of average daily net assets, which amounted to $86,865 for the year ended
March 31, 1995.
To the extent that actual expenses are under the agreed-upon expense
limitations, the excess of the limitation over actual expenses will be applied
to amounts reimbursed by MFS in prior years. At March 31, 1995, unreimbursed
expenses owed to MFS were $182,357, of which $54,213 relates to the year ended
March 31, 1995.
The Trust pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Trust, all of whom receive
remuneration for their services to the Trust from MFS. Certain of the officers
and Trustees of the Trust are officers or directors of MFS, MFS Fund
Distributors, Inc. (MFD) and MFS Service Center, Inc. (MFSC). The Trust has an
unfunded defined benefit plan for all its independent Trustees. Included in
Trustees' compensation for the year ended March 31, 1995 is a net periodic
pension expense for each Fund, as follows:
<TABLE>
<CAPTION>
New North South West
Florida Georgia Maryland Massachusetts York Carolina Pennsylvania Carolina Virginia Virginia
Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$2,548 $4,347 $5,191 $5,308 $4,032 $5,510 $2,529 $5,146 $5,146 $5,174
</TABLE>
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$44,219, $39,551, $45,665, $53,182, $35,466, $137,516, $14,379, $61,952,
$128,244 and $57,411 as its portion of the sales charge on sales of Class A
shares of the Florida, Georgia, Maryland, Massachusetts, New York, North
Carolina, Pennsylvania, South Carolina, Virginia and West Virginia Funds,
respectively.
The Trustees have adopted separate distribution plans for Class A, Class B and
Class C shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as
follows:
The Class A Distribution Plan provides that each Fund will pay MFD up to 0.35%
of its average daily net assets attributable to Class A shares annually in order
that MFD may pay expenses on behalf of the Fund related to the distribution and
servicing of its shares. These expenses include a service fee to each securities
dealer that enters into a sales agreement with MFD of up to 0.25% of the Fund's
average daily net assets attributable to Class A shares which are attributable
to that securities dealer, a distribution fee to MFD of up to 0.10% of the
Fund's average daily net assets attributable to Class A shares, commissions to
dealers and payments to MFD wholesalers for sales at or above a certain dollar
level, and other such distribution-related expenses that are approved by the
Fund. MFD retains the service fee for accounts not attributable to a securities
dealer. The service fees retained amounted to $7,073, $20,684, $83,290, $19,831,
$28,742, $14,196, $30,661 and $10,812 for the Georgia, Maryland, Massachusetts,
New York, North Carolina, South Carolina, Virginia and West Virginia Funds,
respectively. MFD is currently waiving 0.10% of the distribution fee, which
amounted to $79,714 and $152,969, respectively, for the Georgia and New York
Funds for the year ended March 31, 1995. In the case of the Florida Fund,
payments under the distribution plan will commence on such a date to be
determined by the Trustees of the Trust. In the case of the Pennsylvania Fund,
payments under the distribution plan will commence when the net assets of the
Fund first equal or exceed $50,000,000.
Fees incurred under the distribution plan during the year ended March 31, 1995
attributable to Class A shares were:
<TABLE>
<CAPTION>
North South West
Georgia Maryland Massachusetts New York Carolina Carolina Virginia Virginia
Fund Fund Fund Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total fees
incurred under
the distribution
plan $279,473 $533,850 $929,292 $536,111 $1,547,366 $596,846 $1,509,114 $446,892
-------- -------- -------- -------- ---------- -------- ---------- --------
</TABLE>
The Class B and Class C Distribution Plans provide that the Funds will pay MFD a
monthly distribution fee, equal to 0.75% per annum, and a quarterly service fee
of up to 0.25% per annum, of the Fund's average daily net assets attributable to
Class B and Class C shares. MFD retains the service fee for accounts not
attributable to a securities dealer. For Class B, the service fees retained
amounted to $362, $697, $416, $1,501, $736, $1,055, $914 and $211 for the
Georgia, Maryland, Massachusetts, New York, North Carolina, South Carolina,
Virginia and West Virginia Funds. For Class C, the service fees retained
amounted to $3,853 and $1,946 for the North Carolina and Virginia Funds,
respectively. MFD will pay to securities dealers that enter into a sales
agreement with MFD, all or a portion of the service fee attributable to Class B
and Class C shares, and will pay to such securities dealers all of the
distribution fee attributable to Class C shares. The service fee is intended to
be additional consideration for services rendered by the dealer with respect to
Class B and Class C shares.
Fees incurred under the distribution plan during the year ended March 31, 1995
were 1.00% of average daily net assets attributable to Class B shares on an
annualized basis and amounted to the following:
<TABLE>
<CAPTION>
North South West
Florida Georgia Maryland Massachusetts New York Carolina Pennsylvania Carolina Virginia Virginia
Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total fees
incurred under
the distribution
plan $100,045 $76,623 $92,525 $64,659 $95,837 $210,286 $62,617 $115,719 $180,844 $74,360
-------- ------- ------- ------- ------- -------- ------- -------- -------- -------
</TABLE>
Fees incurred under the distribution plan during the year ended March 31, 1995
were 1.00% of average daily net assets attributable to Class C shares on an
annualized basis and amounted to the following:
North
Carolina Virginia
Fund Fund
- -------------------------------------
Total fees
incurred under
the distribution
plan $81,518 $60,554
------- -------
A contingent deferred sales charge is imposed on shareholder redemptions of
Class A shares, on purchases of $1 million or more, in the event of a
shareholder redemption within 12 months following the share purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of Class
B shares in the event of a shareholder redemption within six years of purchase.
MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the year ended March 31, 1995
on Class A and Class B shares were the following:
<TABLE>
<CAPTION>
North South West
Florida Georgia Maryland Massachusetts New York Carolina Pennsylvania Carolina Virginia Virginia
CDSC imposed Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $ 4,332 $ 2,683 $ -- $ -- $ 6,408 $ 70 $ -- $ 7,826 $ -- $ 4
Class B 26,736 22,152 28,095 31,362 37,704 61,014 10,091 32,652 56,011 24,295
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
$31,068 $24,835 $28,095 $31,362 $44,112 $61,084 $10,091 $40,478 $56,011 $24,299
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
</TABLE>
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earned
fees for its services as shareholder servicing agent for the year ended March
31, 1995, as specified below. The fee is calculated as a percentage of average
daily net assets of each class of shares at an effective annual rate of up to
0.15%, up to 0.22% and up to 0.15% attributable to Class A, Class B and Class C
shares, respectively.
<TABLE>
<CAPTION>
North South West
Florida Georgia Maryland Massachusetts New York Carolina Pennsylvania Carolina Virginia Virginia
Fee paid by Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $148,187 $119,220 $228,793 $398,269 $229,430 $663,157 $23,196 $255,051 $646,763 $190,539
Class B 22,010 16,855 20,355 14,225 21,084 46,263 13,755 25,458 39,786 16,359
Class C -- -- -- -- -- 12,228 -- -- 9,093 --
</TABLE>
<PAGE>
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions and short-term obligations, were as follows (000
omitted):
<TABLE>
<CAPTION>
North South West
Florida Georgia Maryland Massachusetts New York Carolina Pennsylvania Carolina Virginia Virginia
Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Purchases $136,602 $47,243 $38,388 $82,443 $225,075 $264,681 $15,889 $52,763 $132,961 $29,955
Sales 147,504 53,408 49,040 96,115 232,222 275,746 10,237 53,444 127,786 29,806
</TABLE>
The cost and unrealized appreciation or depreciation in value of the investments
owned by the Funds, as computed on a federal income tax basis, are as follows
(000 omitted):
<TABLE>
<CAPTION>
North South West
Florida Georgia Maryland Massachusetts New York Carolina Pennsylvania Carolina Virginia Virginia
Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aggregate cost $95,834 $77,777 $149,575 $252,369 $146,325 $437,829 $23,988 $174,172 $429,664 $129,016
------- ------- -------- -------- -------- -------- ------- -------- -------- --------
Gross unrealized
appreciation $ 4,015 $ 4,528 $ 7,386 $ 15,088 $ 9,200 $ 21,645 $ 573 $ 8,388 $ 21,799 $ 6,861
Gross unrealized
depreciation (264) (704) (2,681) (1,033) (573) (3,278) (406) (1,448) (3,473) (1,012)
------- ------- -------- -------- -------- -------- ------- -------- -------- --------
Net unrealized
appreciation $ 3,751 $ 3,824 $ 4,705 $ 14,055 $ 8,627 $ 18,367 $ 167 $ 6,940 $ 18,326 $ 5,849
------- ------- -------- -------- -------- -------- ------- -------- -------- --------
</TABLE>
At March 31, 1995, the following Funds, for federal income tax purposes, had
capital loss carryforwards which may be applied against any net taxable realized
gains of each succeeding year until the earlier of their utilization or
expiration.
<TABLE>
<CAPTION>
West
Florida Georgia Massachusetts New York Pennsylvania Virginia Virginia
Expiration Date Fund Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
March 31, 2002 $ -- $ -- $ -- $1,065,323 $ -- $ -- $ --
March 31, 2003 6,439,058 2,399,843 3,052,342 5,172,474 111,447 6,639,082 295,369
---------- ---------- ---------- ---------- -------- ---------- --------
Total $6,439,058 $2,399,843 $3,052,342 $6,237,797 $111,447 $6,639,082 $295,369
---------- ---------- ---------- ---------- -------- ---------- --------
</TABLE>
(5) Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares Florida Fund Georgia Fund Maryland Fund Massachusetts Fund New York Fund
------------------ ------------------ ------------------ ------------------ ------------------
Year Ended
March 31, 1995
(000 Omitted) Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 6,609 $ 61,425 1,076 $ 10,979 793 $ 8,524 1,947 $ 20,608 6,955 $ 71,200
Shares issued to
shareholders in
reinvestment of
distributions 233 2,203 210 2,148 461 4,949 689 7,371 527 5,440
Shares reacquired (8,730) (81,517) (2,370) (23,804) (2,777) (29,402) (3,891) (41,117) (9,004) (92,427)
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
Net decrease (1,888) $(17,889) (1,084) $(10,677) (1,523) $(15,929) (1,255) $(13,138) (1,522) $(15,787)
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
</TABLE>
<TABLE>
<CAPTION>
Two Months Ended
March 31, 1994
(000 Omitted) Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 631 $ 6,400 267 $ 2,924 373 $ 4,289 645 $ 7,388 508 $ 5,533
Shares issued to
shareholders in
reinvestment of
distributions 33 332 26 278 71 791 104 1,163 76 818
Shares reacquired (1,087) (11,122) (376) (4,116) (309) (3,496) (886) (9,925) (1,357) (14,790)
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
Net increase
(decrease) (423) $ (4,390) (83) $ (914) 135 $ 1,584 (137) $ (1,374) (773) $ (8,439)
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
</TABLE>
<TABLE>
<CAPTION>
Year Ended
January 31, 1994
(000 Omitted) Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 6,785 $ 70,646 3,020 $ 33,191 2,812 $ 32,808 3,359 $ 39,196 5,703 $ 63,751
Shares issued to
shareholders in
reinvestment of
distributions 193 2,008 136 1,496 466 5,451 848 9,846 543 6,069
Shares reacquired (2,819) (29,380) (914) (10,041) (1,388) (16,230) (2,321) (27,134) (2,573) (28,924)
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
Net increase 4,159 $ 43,274 2,242 $ 24,646 1,890 $ 22,029 1,886 $ 21,908 3,673 $ 40,896
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
</TABLE>
<TABLE>
<CAPTION>
North Carolina Fund Pennsylvania Fund South Carolina Fund Virginia Fund West Virginia Fund
------------------- ------------------ ------------------- ------------------ ------------------
Year Ended
March 31, 1995
(000 Omitted) Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 3,008 $ 33,720 438 $ 3,991 1,422 $ 16,607 2,822 $ 30,863 908 $ 10,025
Shares issued to
shareholders in
reinvestment of
distributions 1,457 16,419 72 652 502 5,842 1,219 13,336 355 3,917
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
Shares reacquired (7,002) (77,840) (269) (2,402) (2,209) (25,465) (4,988) (54,182) (1,557) (16,951)
Net increase
(decrease) (2,537) $(27,701) 241 $ 2,241 (285) $ (3,016) (947) $ (9,983) (294) $ (3,009)
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
Two Months Ended
March 31, 1994
(000 Omitted) Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
Shares sold 714 $ 8,584 189 $ 1,823 307 $ 3,770 660 $ 7,747 226 $ 2,649
Shares issued to
shareholders in
reinvestment of
distributions 193 2,271 9 85 65 790 176 2,003 54 616
Shares reacquired (833) (9,920) (51) (503) (373) (4,586) (767) (8,945) (308) (3,531)
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
Net increase
(decrease) 74 $ 935 147 $ 1,405 (1) $ (26) 69 $ 805 (28) $ (266)
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
</TABLE>
<TABLE>
<CAPTION>
Year Ended
January 31, 1994
(000 Omitted) Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 8,229 $ 99,737 1,457 $ 14,093 3,853 $ 47,933 6,766 $ 80,897 2,488 $ 29,466
Shares issued to
shareholders in
reinvestment of
distributions 1,092 13,288 34 336 356 4,450 1,400 16,705 350 4,157
Shares reacquired (3,035) (36,932) (112) (1,101) (1,524) (19,046) (2,559) (30,600) (1,160) (13,791)
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
Net increase 6,286 $ 76,093 1,379* $ 13,328* 2,685 $ 33,337 5,607 $ 67,002 1,678 $ 19,832
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
</TABLE>
<TABLE>
<CAPTION>
Class B Shares Florida Fund Georgia Fund Maryland Fund Massachusetts Fund New York Fund
------------------ ------------------ ------------------ ------------------ ------------------
Year Ended
March 31, 1995
(000 Omitted) Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 675 $ 6,350 358 $ 3,643 598 $ 6,438 428 $ 4,572 700 $ 7,239
Shares issued to
shareholders in
reinvestment of
distributions 28 262 21 216 25 271 17 184 25 262
Shares reacquired (213) (1,994) (178) (1,799) (197) (2,109) (103) (1,084) (190) (1,925)
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
Net increase 490 $ 4,618 201 $ 2,060 426 $ 4,600 342 $ 3,672 535 $ 5,576
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
</TABLE>
<TABLE>
<CAPTION>
Two Months Ended
March 31, 1994
(000 Omitted) Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 153 1,572 135 $ 1,468 162 $ 1,858 100 $ 1,143 171 $ 1,869
Shares issued to
shareholders in
reinvestment of
distributions 3 29 2 23 3 28 2 20 2 24
Shares reacquired (9) (87) (9) (90) (22) (250) (1) (4) (2) (24)
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
Net increase 147 $ 1,514 128 $ 1,401 143 $ 1,636 101 $ 1,159 171 $ 1,869
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
</TABLE>
<TABLE>
Year Ended
January 31, 1994
(000 Omitted)** Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 698 $ 7,390 509 $ 5,696 454 $ 5,358 364 $ 4,290 422 $ 4,776
Shares issued to
shareholders in
reinvestment of
distributions 5 53 2 24 4 46 4 50 5 52
Shares reacquired (21) (217) (1) (10) (5) (61) (12) (135) (1) (8)
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
Net increase 682 $ 7,226 510 $ 5,710 453 $ 5,343 356 $ 4,205 426 $ 4,820
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
</TABLE>
<TABLE>
<CAPTION>
North Carolina Fund Pennsylvania Fund South Carolina Fund Virginia Fund West Virginia Fund
------------------- ------------------ ------------------- ------------------ ------------------
Year Ended
March 31, 1995
(000 Omitted) Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 1,174 $ 13,233 428 $ 3,928 383 $ 4,461 918 $ 10,079 440 $ 4,834
Shares issued to
shareholders in
reinvestment of
distributions 71 795 20 181 30 344 37 408 20 220
Shares reacquired (328) (3,609) (90) (820) (175) (2,005) (166) (1,815) (51) (555)
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
Net increase 917 $ 10,419 358 $ 3,289 238 $ 2,800 789 $ 8,672 409 $ 4,499
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
</TABLE>
<TABLE>
<CAPTION>
Two Months Ended
March 31, 1994
(000 Omitted) Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 297 $ 3,550 135 $ 1,312 210 $ 2,583 313 $ 3,668 130 $ 1,524
Shares issued to
shareholders in
reinvestment of
distributions 6 75 1 13 3 35 4 43 2 23
Shares reacquired (2) (28) (2) (16) (2) (27) (22) (249) (20) (229)
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
Net increase 301 $ 3,597 134 $ 1,309 211 $ 2,591 295 $ 3,462 112 $ 1,318
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
</TABLE>
<TABLE>
<CAPTION>
Year Ended
January 31, 1994
(000 Omitted)** Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 1,087 $ 13,377 337 $ 3,345 644 $ 8,142 936 $ 11,282 384 $ 4,615
Shares issued to
shareholders in
reinvestment of
distributions 7 87 1 14 2 31 8 95 4 43
Shares reacquired (12) (150) (3) (29) (1) (15) (42) (500) (12) (139)
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
Net increase 1,082 $ 13,314 335 $ 3,330 645 $ 8,158 902 $ 10,877 376 $ 4,519
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
*For the period from the commencement of investment operations, February 1,
1993 to January 31, 1994.
**For the period from the commencement of offering of Class B shares, September
7, 1993 to January 31, 1994.
</TABLE>
Class C Shares
Year Ended North Carolina Fund Virginia Fund
March 31, 1995 ------------------- ------------------
(000 Omitted) Shares Amount Shares Amount
- ----------------------------------------------------------------
Shares sold 637 $7,160 1,049 $11,525
Shares issued to
shareholders in
reinvestment of
distributions 19 219 23 250
Shares reacquired (523) (5,757) (1,022) (10,805)
---- ------ ------ -------
Net increase 133 $1,622 50 $ 970
---- ------ ------ -------
Two Months Ended
March 31, 1994
(000 Omitted) Shares Amount Shares Amount
- ----------------------------------------------------------------
Shares sold 262 $3,153 104 $ 1,231
Shares issued to
shareholders in
reinvestment of
distributions 1 13 1 6
Shares reacquired (53) (642) (16) (189)
---- ------ ------ -------
Net increase 210 $2,524 89 $1,048
---- ------ ------ -------
Year Ended
January 31, 1994
(000 Omitted)*** Shares Amount Shares Amount
- ----------------------------------------------------------------
Shares sold 371 $4,555 70 $ 843
Shares issued to
shareholders in
reinvestment of
distributions 1 2 -- --
Shares reacquired (1) (1) (1) (16)
---- ------ ------ -------
Net increase 371 $4,556 69 $ 827
---- ------ ------ -------
***For the period from the commencement of offering of Class C shares, January
3, 1994 to January 31, 1994.
(6) Line of Credit
The Trust entered into an agreement which enables each of the Funds to
participate with other funds managed by MFS, or an affiliate of MFS, in an
unsecured line of credit with a bank which permits borrowings up to $350
million, collectively. Borrowings may be made to temporarily finance the
repurchase of Fund shares. Interest is charged to each Fund, based on its
borrowings, at a rate equal to the bank's base rate. In addition, a commitment
fee, based on the average daily unused portion of the line of credit, is
allocated among the participating Funds at the end of each quarter. The
commitment fee allocated to each of the Funds for the year ended March 31, 1995
ranged from $330 to $7,411.
(7) Financial Instruments
The Funds may trade financial instruments with off-balance sheet risk in the
normal course of their investing activities in order to manage exposure to
market risks such as interest rates. These financial instruments include written
options and futures contracts. The notional or contractual amounts of these
instruments represent the investment the Fund has in particular classes of
financial instruments and does not necessarily represent the amounts potentially
subject to risk. The measurement of the risks associated with these instruments
is meaningful only when all related and offsetting transactions are considered.
A summary of open futures contracts under these financial instruments at March
31, 1995 is as follows:
<TABLE>
<CAPTION>
Unrealized
Appreciation
Fund Description Expiration Contracts Position (Depreciation)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Florida Fund U.S. Treasury Bonds June 1995 50 Short $(103,457)
Georgia Fund U.S. Treasury Bonds June 1995 60 Short $(124,147)
Maryland Fund U.S. Treasury Bonds June 1995 245 Short $ 128,532
North Carolina Fund U.S. Treasury Bonds June 1995 200 Short $(413,824)
Pennsylvania Fund U.S. Treasury Bonds June 1995 38 Short $ 19,935
South Carolina Fund U.S. Treasury Bonds June 1995 140 Short $ 73,449
At March 31, 1995, each Fund had sufficient cash and/or securities to cover margin requirements on open futures contracts.
</TABLE>
The Trust also invests in indexed securities whose value may be linked to
interest rates, commodities, indices or other financial indicators. Indexed
securities are fixed-income securities whose proceeds at maturity (principal-
indexed securities) or interest rates (coupon-indexed securities) rise and fall
according to the change in one or more specified underlying instruments. Indexed
securities may be more volatile than the underlying instrument itself. A summary
of indexed securities held at March 31, 1995 is as follows:
<TABLE>
<CAPTION>
Principal Unrealized
Fund Description Index (000 Omitted) Value Depreciation
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maryland Fund Puerto Rico Public PSA Municipal Swap $3,000 $2,614,650 $(385,350)
Buildings Authority,
5.385s, 2016
New York Fund Puerto Rico Public PSA Municipal Swap $2,000 $1,743,100 $(256,900)
Buildings Authority,
5.385s, 2016
North Carolina Fund Puerto Rico Public PSA Municipal Swap $6,500 $5,655,075 $(834,925)
Buildings Authority,
5.385s, 2016
South Carolina Fund Puerto Rico Telephone Corp. Swap Rate Curve $1,000 $ 823,820 $(176,180)
Authority Rev.,
4.47s, 2004
Virginia Fund Puerto Rico Public PSA Municipal Swap $6,500 $5,655,075 $(834,925)
Buildings Authority,
5.385s, 2016
West Virginia Fund Puerto Rico Public PSA Municipal Swap $2,000 $1,743,100 $(256,900)
Buildings Authority,
5.385s, 2016
</TABLE>
(8) Restricted Securities
Each Fund may invest not more than 15% of its net assets in securities which are
subject to legal or contractual restrictions on resale. At March 31, 1995, the
Georgia Fund owned the following restricted security (constituting 3.42% of net
assets) which may not be publicly sold without registration under the Securities
Act of 1933. The Fund does not have the right to demand that such security be
registered. The value of this security is determined by valuations supplied by a
pricing service or broker. This security may be offered and sold to "qualified
institutional buyers" under Rule 144A of the 1933 Act.
<TABLE>
<CAPTION>
Date of Par Amount
Fund Description Acquisition (000 Omitted) Cost Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Georgia Fund Georgia Municipal Electric Authority, Power Rev., 5.68s, 2023 3/31/93 $3,450 $3,490,000 $2,845,111
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Municipal Series Trust:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of MFS Florida Municipal Bond Fund, MFS Georgia
Municipal Bond Fund, MFS Maryland Municipal Bond Fund, MFS Massachusetts
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 Virginia Municipal Bond Fund and MFS West Virginia
Municipal Bond Fund (portfolios of MFS Municipal Series Trust) as of March 31,
1995, the related statements of operations for the year then ended, the
statements of changes in net assets for the year ended March 31, 1995, the two
months ended March 31, 1994 and the year ended January 31, 1994, and the
financial highlights for the year ended March 31, 1995, the two months ended
March 31, 1994 and each of the years in the nine-year period ended January 31,
1994. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
March 31, 1995 by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of each of the
aforementioned Funds of MFS Municipal Series Trust at March 31, 1995, the
results of their operations, the changes in their net assets, and their
financial highlights for the respective stated periods in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
May 5, 1995
--------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
<PAGE>
MFS(R) MUNICIPAL -------------
SERIES TRUST [LOGO: NUMBER 1 VALUE BULK RATE
TOP RATED SERVICE] U.S. POSTAGE
PAID
500 Boylston Street PERMIT #55638
Boston, MA 02116 BOSTON, MA
-------------
MFS Florida Municipal Bond Fund
MFS Georgia Municipal Bond Fund
MFS Maryland Municipal Bond Fund
MFS Massachusetts 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 Virginia Municipal Bond Fund
MFS West Virginia Municipal Bond Fund
[LOGO: M F S
THE FIRST NAME IN MUTUAL FUNDS]
56/256
46/246
40/240
45/245
52/252
41/241/341
30/230
42/242
43/243/343
MST-2A 5/95 66M 44/244
<PAGE>
<PAGE>
[LOGO] M F S ANNUAL REPORT FOR
THE FIRST NAME IN MUTUAL FUNDS YEAR ENDED
MARCH 31, 1995
MFS(R) MUNICIPAL SERIES TRUST
FOR THE STATES OF: ALABAMA, ARKANSAS, CALIFORNIA,
LOUISIANA, MISSISSIPPI, TENNESSEE, TEXAS AND WASHINGTON
[GRAPHIC OMITTED: An 8 1/2" x 11" photo of a highway.]
<PAGE>
MFS(R) MUNICIPAL SERIES TRUST
TRUSTEES
A. Keith Brodkin*
Chairman and President
Richard B. Bailey*
Private Investor;
Former Chairman and Director (until 1991),
Massachusetts Financial Services Company
Marshall N. Cohan
Private Investor
Lawrence H. Cohn, M.D.
Chief of Cardiac Surgery, Brigham and
Women's Hospital; Professor of Surgery,
Harvard Medical School
The Hon. Sir J. David Gibbons, KBE
Chief Executive Officer, Edmund Gibbons Ltd.;
Chairman, Bank of N.T. Butterfield & Son Ltd.
Abby M. O'Neill
Private Investor;
Director, Rockefeller Financial Services, Inc.
(Investment Advisers)
Walter E. Robb, III
President and Treasurer,
Benchmark Advisors, Inc.
(Corporate Financial Consultants)
Arnold D. Scott*
Senior Executive Vice President and Secretary,
Massachusetts Financial Services Company
Jeffrey L. Shames*
President and Chief Equity Officer,
Massachusetts Financial Services Company
J. Dale Sherratt
President, Insight Resources, Inc.
(Acquisition Planning Specialists)
Ward Smith
Former Chairman (until 1994),
NACCO Industries;
Director, Sundstrand Corporation
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116-3741
PORTFOLIO MANAGERS
David R. King*
Geoffrey L. Schechter*
David B. Smith*
TREASURER
W. Thomas London*
ASSISTANT TREASURER
James O. Yost*
SECRETARY
Stephen E. Cavan*
ASSISTANT SECRETARY
James R. Bordewick, Jr.*
CUSTODIAN
State Street Bank and Trust Company
AUDITORS
Deloitte & Touche LLP
INVESTOR INFORMATION
For MFS stock and bond market outlooks,
call toll free: 1-800-637-4458 anytime from
a touch-tone telephone.
For information on MFS mutual funds,
call your financial adviser or, for an information
kit, call toll free: 1-800-637-2929 any business
day from 9 a.m. to 5 p.m. Eastern time
(or leave a message anytime).
INVESTOR SERVICE
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
For general information, call toll free:
1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
For service to speech- or hearing-impaired,
call toll free: 1-800-637-6576 any business
day from 9 a.m. to 5 p.m. Eastern time.
(To use this service, your phone must be
equipped with a Telecommunications Device
for the Deaf.)
For share prices, account balances and
exchanges, call toll free: 1-800-MFS-TALK
(1-800-637-8255) anytime from a touch-tone
telephone.
- -------------------------------------------
TOP-RATED SERVICE
[SEAL] MFS was rated first when securities
firms evaluated the quality of
service they receive from 40
mutual fund companies. MFS got
high marks for answering calls
quickly, processing transactions
accurately and sending statements
out on time.
(Source: 1994 DALBAR Survey)
- -------------------------------------------
Cover photo: Through their wide range of
investments, MFS mutual funds help you
share in America's growth.
*Affiliated with the Investment Adviser
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders:
During the fiscal year ended March 31, 1995, all classes of shares of the
individual state Funds available within the Trust enjoyed positive total
returns. For the most part, these returns underperformed the +7.43% return of
the Lehman Brothers Municipal Bond Index (the Lehman Index), an unmanaged index
of national municipal bond investments rated Baa or higher. However, although
this index is considered the benchmark for performance of municipal bonds, it is
comprised of municipal bonds issued nationwide, while each of the Funds in the
Trust is limited to investing in the bonds of a particular state. Because
individual indices for municipal bonds do not exist for all states, we have
provided on the following page a discussion of each Fund's performance relative
to the Lehman Index.
Economic Environment
The economic expansion, entering its fifth year, gained firmer underpinnings
in 1994 as employers significantly stepped up hiring levels. Increased
employment, stronger capital spending by businesses, and strengthening overseas
economies resulted in 4.1% real (adjusted for inflation) gross domestic product
growth last year. Interest rates rose substantially over the past year, which
should help restrain, but not curtail, the economic expansion. Based on sound
economic fundamentals both here and abroad, we expect the business expansion to
continue well into 1995. However, recent data, including a March rise in the
unemployment rate and the first decline in industrial production in six months,
indicate the increased likelihood of a deceleration in the economy.
Despite a stronger economy, inflation at the consumer level has remained
relatively benign at 2.7% in 1994, the fourth straight year of 3.0% or less. Due
to a prolonged period of below-trend-line growth and continued pressure on
corporations to emphasize effective cost controls, wage growth and unit labor
costs have remained subdued. However, as the economy has exhibited continuing
strength, various industrial commodity prices have been rising substantially
faster than consumer prices. Nevertheless, businesses have had difficulty
passing these price increases on to the consumer. With the economy continuing to
expand, we expect some upward movement in inflation from below 3% to the 3 1/2%
range.
Municipal Bond Market
Municipal bond investors experienced unusual volatility during the fiscal
year ended March 31, 1995, with long-term yields rising 100 basis points through
mid-November, then retracing to finish the fiscal year unchanged. The municipal
market was battered during the first half of the fiscal year by rising
inflationary fears spurred by strong economic growth, and by heavy selling by
tax-exempt mutual funds. However, the market began to improve in December, when
inflation fears subsided and market participants focused on the reduction in
municipal supply. During 1994, new-issue supply declined 44% from 1993's record
level and was down an additional 46% during the first three months of this year.
This reduction in supply, combined with historically heavy bond calls and
redemptions, should result in an unprecedented two consecutive years of fewer
bonds outstanding.
We believe municipals continue to represent good value based on our forecast
of stable to lower long-term interest rates, and that they should provide
attractive after-tax returns relative to alternative fixed-income investments.
Portfolio Strategy
While the portfolio structure of each individual Fund of the Trust will vary
according to both the supply of bonds within each state as well as to the
political and economic environment, each Fund is managed in a similar style.
From a near-term perspective, we have increased the duration (a measure of
interest rate sensitivity) of each Fund in order to benefit more fully from the
recent trend of declining interest rates. Additionally, each portfolio remains
fully invested in an effort to maintain dividends at as high a rate as is
consistent with our prospectus guidelines.
Longer term, we continue to emphasize call protection in order to enhance
shareholder value by enabling the portfolios to sustain their tax-exempt
distribution rates, and to provide opportunities for price appreciation during
periods when rates decline. Additionally, the downgrading of Washington, D.C. to
below investment grade, and the bankruptcy filing by Orange County, California
have demonstrated clearly the importance of fundamental credit analysis. We
continue to monitor closely the changing environment for electric utilities and
hospitals. Another sector which bears watching is multi-family housing due to
recent changes in HUD policies regarding housing assistance programs. As always,
we will look for opportunities to reduce our exposure to declining credits where
appropriate.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/A. Keith Brodkin /s/David R. King /s/Geoffrey L. Schechter /s/David B. Smith
A. Keith Brodkin David R. King, Geoffrey L. Schechter and David B. Smith
Chairman and President Portfolio Managers
April 17, 1995
The performance of shares of the individual state Funds listed on the following
page includes the reinvestment of distributions but excludes the effects of any
sales charges. Each Fund's results have been compared to the Lehman Index.
The portfolio of each Fund will tend to be structured in similar fashion with
respect to maturity and coupon and sector distribution, reflecting our views on
interest rates, credit quality and financing trends. However, each Fund's
performance will differ because of supply/demand and credit quality conditions,
which vary from state to state.
ALABAMA
For the fiscal year ended March 31, 1995, the total returns were +6.51% for
Class A shares and +5.64% for Class B shares. Both of these returns
underperformed the Lehman Index return of +7.43%. The primary reason for the
difference in the Fund's performance versus that of the Lehman Index was
attributable to our holdings in bonds with above- market coupons. While those
issues performed well relative to the market during calendar-year 1994, they
lagged the market during the rally that occurred during the first quarter of
1995.
ARKANSAS
During the 12 months ended March 31, 1995, Class A shares had a total return of
+5.90%, while Class B shares returned +4.67%. The difference in the Fund's
performance relative to the +7.43% return of the Lehman Index was attributable
to our holdings in bonds with above-market coupons. While those issues performed
well relative to the market during calendar-year 1994, they lagged the market
during the rally that occurred during the first quarter of 1995.
CALIFORNIA
The Fund's total returns for the fiscal year ended March 31, 1995 (+4.85% for
Class A shares, +3.73% for Class B shares and +3.79% for Class C shares)
underperformed the +7.43% return of the Lehman Index over the same period.
During the year, California investors were confronted not only with the
volatility of general market interest rates, but also with increased credit risk
manifested in the downgrading of the state's general obligation and agency debt,
the Orange County fall-out, the impact of regulatory changes in the utilities
industry and the uncertainty surrounding potential health care reform. We were
acutely credit-conscious during this period and increased the Fund's holdings of
insured and essential-purpose revenue bonds. We also reduced the Fund's exposure
to the electric utility, health care and state agency sectors. While this
emphasis on credit quality increased the interest rate sensitivity of the Fund
during a time of rising interest rates, it did allow us to reduce exposure to
downgrades and to have no direct exposure to Orange County or its investment
pool participants.
In addition to managing credit exposure, we reduced the Fund's interest rate
risk during the period by reducing its exposure to derivative securities, from a
high of about 5% of total assets to 1.3%, and by actively hedging its duration.
Although the unexpectedly sharp decline of interest rates from November 1994 to
March 31, 1995 caught the Fund defensively positioned, resulting in significant
underperformance during the recent rally, we believe that the changes made to
the portfolio during this period should add value going forward.
LOUISIANA
During the fiscal year ended March 31, 1995, the total returns of +7.18% for
Class A shares and +6.01% for Class B shares slightly underperformed the +7.43%
return of the Lehman Index. The underperformance was attributable to the
defensive posture which the Fund took during the year in an effort to protect
shareholders' capital. While this strategy benefited the Fund during the
sell-off in the bond market that occurred through November, it caused the Fund
to lag the market during the dramatic decline in interest rates during the first
quarter of 1995.
MISSISSIPPI
The Fund's total returns during the fiscal year ended March 31, 1995 of +6.08%
on Class A shares and +5.14% on Class B shares underperformed the +7.43% return
of the Lehman Index. The primary reason for the underperformance was the
defensive posture adopted by the Fund during the bond market sell-off in 1994,
as we reduced duration (interest rate sensitivity) and increased the coupon
structure in an effort to increase the dividend. While this strategy proved
beneficial during the first half of the fiscal year, it caused the Fund to lag
the market during the rally experienced in the first quarter of 1995.
TENNESSEE
For the fiscal year ended March 31, 1995, Class A shares provided a total return
of +5.86%, while Class B shares had a total return of +5.00%. Both returns
underperformed the +7.43% return of the Lehman Index. The difference in
performance was attributable to our holdings in bonds with above-market coupons,
which performed well relative to the market in calendar-year 1994, but lagged
the market during the first quarter of 1995.
TEXAS
During the fiscal year ended March 31, 1995, the total return of the Fund's
Class A shares, which was +7.42%, essentially matched that of the Lehman Index,
while Class B shares, which returned +6.35%, slightly underperformed the Lehman
Index. The Fund's results were attributable to a reasonably balanced coupon
structure which enabled the Fund to benefit from the rally experienced during
the first quarter of 1995, after having been defensively positioned during the
majority of 1994 in an effort to preserve shareholders' capital.
WASHINGTON
During the fiscal year ended March 31, 1995, both Class A shares, which had a
total return of +9.80%, and Class B shares, which returned +8.72%, outperformed
the +7.43% return of the Lehman Index. Throughout the period, the Fund was
positioned with a moderately long duration and a balanced coupon structure. This
strategy enabled the Fund to perform reasonably well during last year's sell-off
and also provided opportunities for appreciation during this year's rally.
PORTFOLIO MANAGER PROFILES
A graduate of the University of New Hampshire and the Babson College Graduate
School of Business Administration, David King began his career at MFS in 1985 as
a member of the Fixed Income Department and was named Assistant Vice President -
Investments in 1987. In 1988 he was named Vice President - Investments. Mr. King
is a Chartered Financial Analyst and currently has portfolio management
responsibility for the Alabama, Arkansas and Tennessee Funds.
Geoff Schechter joined MFS in 1993 as an Investment Officer in the Fixed Income
Department. A graduate of the University of Texas and the Boston University
Graduate School of Business Administration, he was named Assistant Vice
President - Investments in 1994, Vice President - Investments in 1995 and
currently has portfolio management responsibilities for the Louisiana,
Mississippi and Texas Funds. Mr. Schechter is a Certified Public Accountant and
a Chartered Financial Analyst.
A graduate of Union College and the Babson College Graduate School of Business
Administration, David Smith began his career at MFS in 1988 as a Senior Treasury
Analyst in the Corporate Treasury Department. He was named a Research Analyst in
the Fixed Income Department in 1989, Investment Officer in 1990, Assistant Vice
President - Investments in 1991 and Vice President - Investments in 1993. Mr.
Smith is a Chartered Financial Analyst and currently has portfolio management
responsibilities for the California and Washington Funds.
OBJECTIVE AND POLICIES
The investment objective for each state Fund is to provide current income exempt
from federal income taxes and from the personal income taxes, if any, of the
state to which the Fund's name relates.
Each state Fund seeks to achieve its investment objective by investing its
assets primarily in municipal debt instruments, the interest on which is exempt
from federal income taxes and from the personal income taxes, if any, of the
state to which the Fund's name relates. Generally, each state Fund will invest
at least two-thirds of its assets in tax-exempt securities in the three highest
grades (A or above) of recognized rating agencies or comparable unrated
securities. Each state Fund may also enter into options and futures transactions
and purchase securities on a "when-issued" basis.
PERFORMANCE
The following information illustrates the growth of a hypothetical $10,000
investment for each Fund's Class A shares during the periods indicated in
comparison to various market indicators. Fund results reflect the deduction of
the 4.75% maximum sales charge; benchmark comparisons are unmanaged and do not
reflect any fees or expenses. You cannot invest in an index.
All results reflect the reinvestment of all dividends and capital gains. Please
note that effective September 7, 1993, Class B shares were offered and on
January 3, 1994, Class C shares were offered for certain Funds. Information on
the performance of these classes of shares appears below and on the following
pages.
<PAGE>
MFS ALABAMA MUNICIPAL BOND FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from February 1, 1990 to March 31, 1995)
Line graph representing the growth of a $10,000 investment for the period from
February 1, 1990 to March 31, 1995. The graph is scaled from $8,000 to $18,000
in $2,000 segments. The years are marked from 1990 to 1995. There are three
lines drawn to scale. One is a solid line representing MFS Alabama Fund (Class
A), a second line of short dashes represents the Lehman Brothers Municipal Bond
Index, and a third line of long dashes represents the Consumer Price Index.
MFS Alabama Fund (Class A) $14,079
Lehman Brothers Municipal Bond Index $14,996
Consumer Price Index $11,884
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
2/01/90<F1> -
1 Year 3 Years 5 Years 3/31/95
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS Alabama Municipal Bond Fund (Class A) including 4.75% sales charge +1.48% +5.77% +7.07% +6.87%
- -------------------------------------------------------------------------------------------------------------------------
MFS Alabama Municipal Bond Fund (Class A) at net asset value +6.51% +7.50% +8.12% +7.88%
- -------------------------------------------------------------------------------------------------------------------------
MFS Alabama Municipal Bond Fund (Class B) with CDSC<F2> +1.64% -- -- -1.26%<F3>
- -------------------------------------------------------------------------------------------------------------------------
MFS Alabama Municipal Bond Fund (Class B) without CDSC +5.64% -- -- +1.16%<F3>
- -------------------------------------------------------------------------------------------------------------------------
Average Alabama tax-exempt municipal bond fund +6.23%(6) +7.38%(2) +7.92%(2) +7.83%(2)
- -------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index +7.43% +7.34% +8.24% +8.16%
- -------------------------------------------------------------------------------------------------------------------------
Consumer Price Index +2.85% +2.82% +3.30% +3.40%
- -------------------------------------------------------------------------------------------------------------------------
<FN>
<F1>Commencement of offering of Class A shares.
<F2>These returns reflect the current maximum Class B contingent deferred sales charge (CDSC) of 4%.
<F3>For the period from the commencement of offering of Class B shares, September 7, 1993 to March 31, 1995.
</TABLE>
<PAGE>
MFS ARKANSAS MUNICIPAL BOND FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from February 3, 1992 to March 31, 1995)
Line graph representing the growth of a $10,000 investment for the period from
February 3, 1992 to March 31, 1995. The graph is scaled from $9,000 to $14,000
in $1,000 segments. The years are marked from 1992 to 1995. There are three
lines drawn to scale. One is a solid line representing MFS Arkansas Fund (Class
A), a second line of short dashes represents the Consumer Price Index.
MFS Arkansas Fund (Class A) $11,611
Lehman Brothers Municipal Bond Index $12,377
Consumer Price Index $10,963
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
2/03/92<F1> -
1 Year 3 Years 5 Years 3/31/95
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS Arkansas Municipal Bond Fund (Class A) including 4.75% sales charge +0.90% +5.15% -- +4.85%
- -------------------------------------------------------------------------------------------------------------------------
MFS Arkansas Municipal Bond Fund (Class A) at net asset value +5.90% +6.87% -- +6.48%
- -------------------------------------------------------------------------------------------------------------------------
MFS Arkansas Municipal Bond Fund (Class B) with CDSC<F2> +0.69% -- -- -2.59%<F3>
- -------------------------------------------------------------------------------------------------------------------------
MFS Arkansas Municipal Bond Fund (Class B) without CDSC +4.67% -- -- -0.20%<F3>
- -------------------------------------------------------------------------------------------------------------------------
Average other state tax-exempt municipal bond fund +5.79%(39) +6.56%(11) -- +6.27%(11)
- -------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index +7.43% +7.34% -- +6.97%
- -------------------------------------------------------------------------------------------------------------------------
Consumer Price Index +2.85% +2.82% -- +2.95%
- -------------------------------------------------------------------------------------------------------------------------
<FN>
<F1>Commencement of offering of Class A shares. Benchmark comparisons are from February 1, 1992.
<F2>These returns reflect the current maximum CDSC of 4%.
<F3>For the period from the commencement of offering of Class B shares, September 7, 1993 to March 31, 1995.
</TABLE>
<PAGE>
MFS CALIFORNIA MUNICIPAL BOND FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from July 1, 1985 to March 31, 1995)
Line graph representing the growth of a $10,000 investment for the period from
July 1, 1985 to March 31, 1995. The graph is scaled from $5,000 to $30,000 in
$5,000 segments. The years are marked from 1986 to 1995. There are three lines
drawn to scale. One is a solid line representing MFS California Fund (Class A),
a second line of short dashes represents the Lehman Brothers Municipal Bond
Index, and a third line of long dashes represents Consumer Price Index.
MFS California Fund (Class A) $20,158
Lehman Brothers Municipal Bond Index $23,487
Consumer Price Index $14,072
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
2/03/92<F1> -
1 Year 3 Years 5 Years 3/31/95
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
MFS California Municipal Bond Fund (Class A) including 4.75% sales charge -0.08% +4.86% +6.6 +7.45%
- --------------------------------------------------------------------------------------------------------------------------
MFS California Municipal Bond Fund (Class A) at net asset value +4.85% +6.57% +7.64% +7.99%
- --------------------------------------------------------------------------------------------------------------------------
MFS California Municipal Bond Fund (Class B) with CDSC<F2> -0.22% -- -- -3.81%<F3>
- --------------------------------------------------------------------------------------------------------------------------
MFS California Municipal Bond Fund (Class B) without CDSC +3.73% -- -- -1.47%<F3>
- --------------------------------------------------------------------------------------------------------------------------
MFS California Municipal Bond Fund (Class C) +3.79% -- -- -2.03%<F4>
- --------------------------------------------------------------------------------------------------------------------------
Average California tax-exempt municipal bond fund +5.95%(82) +6.77%(55) +7.57%(44) +8.21%(17)
- --------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index +7.43% +7.34% +8.24% +9.15%
- --------------------------------------------------------------------------------------------------------------------------
Consumer Price Index +2.85% +2.82% +3.30% +3.57%
- --------------------------------------------------------------------------------------------------------------------------
<FN>
<F1>Commencement of offering of Class A shares. Benchmark comparisons are from July 1, 1985.
<F2>These returns reflect the current maximum CDSC of 4%.
<F3>For the period from the commencement of offering of Class B shares, September 7, 1993 to March 31, 1995.
<F4>For the period from the commencement of offering of Class C shares, January 3, 1994 to March 31, 1995.
</TABLE>
<PAGE>
MFS LOUISIANA MUNICIPAL BOND FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from February 1, 1993 to March 31, 1995)
Line graph representing the growth of a $10,000 investment for the period from
February 1, 1993 to March 31, 1995. The graph is scaled from $9,500 to $12,000
in $500 segments. The years are marked from 1993 to 1995. There are three lines
drawn to scale. One is a solid line representing MFS Louisiana Fund (Class A), a
second line of short dashes represents the Lehman Brothers Municipal Bond Index,
and a third line of long dashes represents Consumer Price Index.
MFS Louisiana Fund (Class A) $10,593
Lehman Brothers Municipal Bond Index $11,269
Consumer Price Index $10,617
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
2/01/93<F1> -
1 Year 3 Years 5 Years 3/31/95
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
MFS Louisiana Municipal Bond Fund (Class A) including 4.75% sales charge +2.09% -- -- +2.46%
- --------------------------------------------------------------------------------------------------------------------------
MFS Louisiana Municipal Bond Fund (Class A) at net asset value +7.18% -- -- +4.78%
- --------------------------------------------------------------------------------------------------------------------------
MFS Louisiana Municipal Bond Fund (Class B) with CDSC<F2> +2.01% -- -- -2.50%<F3>
- --------------------------------------------------------------------------------------------------------------------------
MFS Louisiana Municipal Bond Fund (Class B) without CDSC +6.01% -- -- -0.14%<F4>
- --------------------------------------------------------------------------------------------------------------------------
Average Louisiana tax-exempt municipal bond fund +6.09%(13) -- -- +4.90%(7)
- --------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index +7.43% -- -- +5.67%
- --------------------------------------------------------------------------------------------------------------------------
Consumer Price Index +2.85% -- -- +2.80%
- --------------------------------------------------------------------------------------------------------------------------
<FN>
<F1>Commencement of offering of Class A shares.
<F2>These returns reflect the current maximum Class B CDSC of 4%.
<F3>For the period from the commencement of offering of Class B shares, September 7, 1993 to March 31, 1995.
</TABLE>
<PAGE>
MFS MISSISSIPPI MUNICIPAL BOND FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from September 1, 1992 to March 31, 1995)
Line graph representing the growth of a $10,000 investment for the period from
September 1, 1992 to March 31, 1995. The graph is scaled from $9,500 to $14,000
in $1,000 segments. The years are marked from 1993 to 1995. There are three
lines drawn to scale. One is a solid line representing MFS Mississippi Fund
(Class A), a second line of short dashes represents the Lehman Brothers
Municipal Bond Index, and a third line of long dashes represents Consumer Price
Index.
MFS Mississippi Fund (Class A) $10,939
Lehman Brothers Municipal Bond Index $12,357
Consumer Price Index $11,169
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
2/01/93<F1> -
1 Year 3 Years 5 Years 3/31/95
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
MFS Mississippi Municipal Bond Fund (Class A) including 4.75% sales charge +1.03% -- -- +2.58%
- ---------------------------------------------------------------------------------------------------------------------------
MFS Mississippi Municipal Bond Fund (Class A) at net asset value +6.08% -- -- +4.48%
- ---------------------------------------------------------------------------------------------------------------------------
MFS Mississippi Municipal Bond Fund (Class B) with CDSC<F2> +1.15% -- -- -2.51%<F3>
- ---------------------------------------------------------------------------------------------------------------------------
MFS Mississippi Municipal Bond Fund (Class B) without CDSC +5.14% -- -- -0.14%<F3>
- ---------------------------------------------------------------------------------------------------------------------------
Average other state tax-exempt municipal bond fund +5.79%(39) -- -- +5.00%(14)
- ---------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index +7.43% -- -- +5.62%
- ---------------------------------------------------------------------------------------------------------------------------
Consumer Price Index +2.85% -- -- +2.84%
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
<F1>Commencement of offering of Class A shares. Benchmark comparisons are from August 1, 1992.
<F2>These returns reflect the current maximum Class B CDSC of 4%.
<F3>For the period from the commencement of offering of Class B shares, September 7, 1993 to March 31, 1995.
</TABLE>
<PAGE>
MFS TENNESSEE MUNICIPAL BOND FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from September 1, 1988 to March 31, 1995)
Line graph representing the growth of a $10,000 investment for the period from
September 1, 1988 to March 31, 1995. The graph is scaled from $8,000 to $18,000
in $2,000 segments. The years are marked from 1989 to 1995. There are three
lines drawn to scale. One is a solid line representing MFS Tennessee Fund (Class
A), a second line of short dashes represents the Lehman Brothers Municipal Bond
Index, and a third line of long dashes represents Consumer Price Index.
MFS Tennessee Fund (Class A) $15,347
Lehman Brothers Municipal Bond Index $17,149
Consumer Price Index $12,723
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
8/12/88<F1> -
1 Year 3 Years 5 Years 3/31/95
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
MFS Tennessee Municipal Bond Fund (Class A) including 4.75% sales charge +0.85% +4.78% +6.21% +6.66%
- --------------------------------------------------------------------------------------------------------------------------
MFS Tennessee Municipal Bond Fund (Class A) at net asset value +5.86% +6.49% +7.25% +7.44%
- --------------------------------------------------------------------------------------------------------------------------
MFS Tennessee Municipal Bond Fund (Class B) with CDSC<F2> +1.00% -- -- -1.40%<F3>
- --------------------------------------------------------------------------------------------------------------------------
MFS Tennessee Municipal Bond Fund (Class B) without CDSC +5.00% -- -- +1.02%<F3>
- --------------------------------------------------------------------------------------------------------------------------
Average Tennessee tax-exempt municipal bond fund +6.24%(14) +6.70%(2) +7.38%(2) +7.79%(2)
- --------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index +7.43% +7.34% +8.24% +8.54%
- --------------------------------------------------------------------------------------------------------------------------
Consumer Price Index +2.85% +2.82% +3.30% +3.73%
- --------------------------------------------------------------------------------------------------------------------------
<FN>
<F1>Commencement of offering of Class A shares. Benchmark comparisons are from September 1, 1988.
<F2>These returns reflect the current maximum Class B CDSC of 4%.
<F3>For the period from the commencement of offering of Class B shares, September 7, 1993 to March 31, 1995.
</TABLE>
<PAGE>
MFS TEXAS MUNICIPAL BOND FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from February 1, 1992 to March 31, 1995)
Line graph representing the growth of a $10,000 investment for the period from
February 1, 1992 to March 31, 1995. The graph is scaled from $9,000 to $14,000
in $1,000 segments. The years are marked from 1992 to 1995. There are three
lines drawn to scale. One is a solid line representing MFS Texas Fund (Class A),
a second line of short dashes represents the Lehman Brothers Municipal Bond
Index, and a third line of long dashes represents Consumer Price Index.
MFS Texas Fund (Class A) $12,039
Lehman Brothers Municipal Bond Index $12,377
Consumer Price Index $10,963
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
8/12/88<F1> -
1 Year 3 Years 5 Years 3/31/95
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
MFS Texas Municipal Bond Fund (Class A) including 4.75% sales charge +2.34% +6.38% -- +6.06%
- ---------------------------------------------------------------------------------------------------------------------------
MFS Texas Municipal Bond Fund (Class A) at net asset value +7.42% +8.12% -- +7.71%
- ---------------------------------------------------------------------------------------------------------------------------
MFS Texas Municipal Bond Fund (Class B) with CDSC<F2> +2.35% -- -- -2.22%<F3>
- ---------------------------------------------------------------------------------------------------------------------------
MFS Texas Municipal Bond Fund (Class B) without CDSC +6.35% -- -- +0.15%<F3>
- ---------------------------------------------------------------------------------------------------------------------------
Average Texas tax-exempt municipal bond fund +6.32%(21) +7.63%(10) -- +7.56%(7)
- ---------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index +7.43% +7.34% -- +6.97%
- ---------------------------------------------------------------------------------------------------------------------------
Consumer Price Index +2.85% +2.82% -- +2.95%
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
<F1>Commencement of offering of Class A shares. Benchmark comparisons are from February 1, 1992.
<F2>These returns reflect the current maximum Class B CDSC of 4%.
<F3>For the period from the commencement of offering of Class B shares, September 7, 1993 to March 31, 1995.
</TABLE>
<PAGE>
MFS WASHINGTON MUNICIPAL BOND FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from September 1, 1992 to March 31, 1995)
Line graph representing the growth of a $10,000 investment for the period from
September 1, 1992 to March 31, 1995. The graph is scaled from $9,000 to $14,000
in $1,000 segments. The years are marked from 1992 to 1995. There are three
lines drawn to scale. One is a solid line representing MFS Washington Fund
(Class A), a second line of short dashes represents the Lehman Brothers
Municipal Bond Index, and a third line of long dashes represents Consumer Price
Index.
MFS Washington Fund (Class A) $11,332
Lehman Brothers Municipal Bond Index $12,357
Consumer Price Index $11,169
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
8/07/92<F1> -
1 Year 3 Years 5 Years 3/31/95
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
MFS Washington Municipal Bond Fund (Class A) including 4.75% sales charge +4.62% -- -- +4.60%
- ---------------------------------------------------------------------------------------------------------------------------
MFS Washington Municipal Bond Fund (Class A) at net asset value +9.80% -- -- +6.54%
- ---------------------------------------------------------------------------------------------------------------------------
MFS Washington Municipal Bond Fund (Class B) with CDSC<F2> +4.72% -- -- -1.29%<F3>
- ---------------------------------------------------------------------------------------------------------------------------
MFS Washington Municipal Bond Fund (Class B) without CDSC +8.72% -- -- +1.10%<F3>
- ---------------------------------------------------------------------------------------------------------------------------
Average Washington tax-exempt municipal bond fund +6.76%(7) -- -- +5.58%(2)
- ---------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index +7.43% -- -- +5.62%
- ---------------------------------------------------------------------------------------------------------------------------
Consumer Price Index +2.85% -- -- +2.84%
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
<F1>Commencement of offering of Class A shares. Benchmark comparisons are from August 1, 1992.
<F2>These returns reflect the current maximum Class B CDSC of 4%.
<F3>For the period from the commencement of offering of Class B shares, September 7, 1993 to March 31, 1995.
</TABLE>
<PAGE>
In the above tables, we have included the average annual total returns of state
tax-exempt funds (including the Funds) tracked by Lipper Analytical Services,
Inc. (an independent firm which reports mutual fund performance) for the
applicable time periods ended March 31, 1995. The number of funds in each state
tax-exempt category is noted parenthetically next to each respective return.
Because these returns do not reflect any applicable sales charge, we have also
included the Funds' results at net asset value (no sales charge) for comparison.
The Consumer Price Index is a popular measure of change in prices. All results
are historical and, therefore, are not an indication of future results. The
principal value and income return of an investment in a mutual fund will vary
with changes in market conditions, and shares, when redeemed, may be worth more
or less than their original cost. All Fund results reflect the applicable
expense subsidy which is explained in the Notes to Financial Statements. Had the
subsidy not been in effect, the results would have been less favorable. The
subsidy may be rescinded by MFS at any time.
<TABLE>
<CAPTION>
FEDERAL INCOME TAX INFORMATION ON DISTRIBUTIONS (For the year ended March 31, 1995)
Alabama Arkansas California Louisiana Mississippi Tennessee Texas Washington
Sources of Distributions Paid<F1> Fund Fund Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Class A) $0.54750 $0.52800 $0.30751 $0.55725 $0.54699 $0.55600 $0.59250 $0.56750
(Class B) $0.46332 $0.42180 $0.24990 $0.46599 $0.45586 $0.48203 $0.49423 $0.47384
(Class C) -- -- $0.25335 -- -- -- -- --
Short-term capital gains:
(Class A) $0.02285 $0.01457 $0.00449 $0.02120 $0.01200 -- $0.02041 --
(Class B) $0.02285 $0.01457 $0.00449 $0.02120 $0.01200 -- $0.02041 --
(Class C) -- -- $0.00449 -- -- -- -- --
Long-term capital gains (Class A
and Class B) $0.00261 $0.00541 -- $0.01720 $0.01558 $0.01133 $0.04400 $0.00731
Record date: 6/01/94
Payable date: 6/10/94
Long-term capital gains (Class A
and Class B) -- $0.03140 -- $0.01328 -- -- -- --
Record date: 12/01/94
Payable date: 12/10/94
<FN>
<F1>Estimated at time of report.
</TABLE>
TAX FORM SUMMARY
In January 1995, shareholders were mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1994.
EXEMPT-INTEREST DIVIDENDS
For federal income tax purposes, 99% of the total dividends paid by each Fund
from net investment income during the year ended March 31, 1995 is designated as
an exempt-interest dividend.
<PAGE>
PORTFOLIO OF INVESTMENTS - MARCH 31, 1995
MFS ALABAMA MUNICIPAL BOND 95.9%
- ---------------------------------------------------------------------------
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------
General Obligation - 15.7%
AA Birmingham, AL, 5s, 2013 $1,000 $ 880,620
AA Birmingham, AL, 8s, 2015 1,150 1,254,201
AAA Covington County, AL, AMBAC, 5.5s, 2014 1,500 1,420,950
NR Cullman, AL, 6.5s, 2023 1,000 927,470
AAA Hoover, AL, Warrants, AMBAC, 5s, 2020 1,120 961,800
AAA Phoenix City, AL, MBIA, 6s, 2011 500 506,730
AAA Phoenix City, AL, MBIA, 6s, 2014 1,000 1,006,020
NR Shelby County, AL, Warrants, 7.4s, 2007 1,000 1,069,370
NR Shelby County, AL, Warrants, 7.7s, 2017 800 864,184
AAA Shelby County, AL, Warrants, MBIA, 0s,
2010 3,000 1,159,470
AAA Shelby County, AL, Warrants, MBIA, 0s,
2011 3,000 1,078,560
AA State of Alabama, 0s, 2002 500 338,640
AA State of Alabama, 0s, 2004 2,500 1,522,000
AA State of Alabama, 0s, 2006 1,165 608,654
AA State of Alabama, 7.1s, 2010 250 269,465
----------
$13,868,134
- ---------------------------------------------------------------------------
State and Local Appropriation - 4.7%
NR Alabama Building Renovation Finance
Authority Rev., 7.45s, 2011 $1,500 $ 1,641,420
AAA Birmingham-Jefferson, AL, Civic Center
Authority, MBIA, 5.5s, 2014 1,000 949,510
A Montgomery County, AL, Rev., Warrants
(Department of Human Resources Project),
7s, 2007 1,000 1,047,230
A Puerto Rico Public Buildings Authority,
5.6s, 2008 500 481,805
----------
$ 4,119,965
- ---------------------------------------------------------------------------
Refunded and Special Obligation - 12.0%
NR Alexander City, AL, Warrants, 0s, 2001 $1,000 $ 295,490
NR Alexander City, AL, Warrants, 0s, 2001 1,000 274,780
NR Alexander City, AL, Warrants, 0s, 2001 1,250 319,400
NR Birmingham, AL, 7.4s, 1999 1,000 1,100,220
AA Birmingham, AL, Historical Preservation
Authority (Kelly Ingram/Civil Rights),
7.2s, 2001 1,000 1,112,470
AA Birmingham, AL, Public Parks & Recreation
Board Rev. (Legion Park), 7.25s, 1999 400 440,160
NR Birmingham, AL, Waterworks & Sewer Board
Rev., 7.2s, 2000 500 550,375
BBB Gadsden East, AL, Medical Clinic Board
Rev. (Baptist Hospital), 7.8s, 2001 2,000 2,314,600
AAA Hoover, AL, Board of Education, AMBAC,
6.625s, 2001 1,000 1,090,750
NR Morgan County-Decatur, AL, Hospital Board
Rev., 7.875s, 1999 750 837,862
AAA Puerto Rico Highway & Transportation
Authority, Highway Rev., 6.5s, 2002 1,000 1,103,710
AAA University of Alabama, University Rev.,
MBIA, 7.1s, 2001 1,000 1,119,020
----------
$10,558,837
- ---------------------------------------------------------------------------
Single Family Housing Revenue - 5.9%
NR Alabama Housing Finance Authority,
FNMA, GNMA, 6.55s, 2014 $2,525 $ 2,542,245
AAA Alabama Housing Finance Authority,
GNMA, 7.4s, 2022 705 741,363
AAA Alabama Housing Finance Authority,
GNMA, 7.5s, 2022 470 490,003
AAA Alabama Housing Finance Authority,
GNMA, 7.6s, 2022 150 158,278
AAA Alabama Housing Finance Authority,
GNMA, 7.75s, 2022 475 503,642
AAA Alabama Housing Finance Authority,
GNMA, 7.9s, 2022 745 791,845
----------
$ 5,227,376
- ---------------------------------------------------------------------------
Multi-Family Housing Revenue - 2.1%
AAA Alabama Housing Finance Authority,
Residential Development Authority, FHA,
7.25s, 2023 $1,440 $ 1,492,905
AA Puerto Rico Housing Finance Corp.,
7.5S, 2015 355 376,044
----------
$ 1,868,949
- ---------------------------------------------------------------------------
Insured Health Care Revenue - 11.6%
AAA Birmingham Baptist Medical Center, AL,
Special Care Facilities, MBIA, 5.5s, 2013 $1,500 $ 1,405,710
AAA East AL, Health Care Authority Facilities
Rev., MBIA, 5.75s, 2013 1,000 965,650
AAA Huntsville, AL, Health Care Authority,
Health Care Facilities Rev., MBIA,
6.375s, 2022 3,500 3,551,940
AAA Morgan County-Decatur, AL, Hospital Board
Rev., Connie Lee, 6.1s, 2007 1,420 1,445,290
AAA University of Alabama Hospital Rev.,
MBIA, 5.5s, 2010 2,000 1,911,120
AAA University of South Alabama, Hospital
Auxiliary Rev., AMBAC, 5s, 2007 1,000 933,090
----------
$10,212,800
- ---------------------------------------------------------------------------
Health Care Revenue - 4.4%
BBB- Baldwin County, AL, Eastern Shore Health
Care Authority, Hospital Rev. (Thomas),
8.5s, 2016 $1,000 $ 1,074,390
A Montgomery, AL, Medical Clinic Board Rev.
(Jackson Hospital & Clinic), 7s, 2015 2,725 2,809,366
----------
$ 3,883,756
- ---------------------------------------------------------------------------
Electric and Gas Utility Revenue - 1.0%
AAA Marshall County, AL, Gas, MBIA, 5s, 2013 $1,000 $ 885,380
- ---------------------------------------------------------------------------
Water and Sewer Utility Revenue - 9.3%
BBB Alabama Water Pollution Control Authority,
7.75s, 2012 $ 975 $ 1,027,679
AAA Alabama Water Pollution Control Authority,
AMBAC, 5.5s, 2016 1,000 936,230
AAA Arab, AL, Waterworks Board, Water Rev.,
MBIA, 7.05s, 2016 1,000 1,063,900
AA Birmingham, AL, Waterworks & Sewer Board
Rev., 5.3s, 2014 1,000 918,420
BBB- Fairview, AL, Government Utility Services,
Corporate Water Rev., 8s, 2020 1,000 1,066,670
AAA Limestone County, AL, Water Authority
Rev., FGIC, 7.7s, 2019 900 982,566
AAA Limestone County, AL, Water Authority
Rev., FGIC, 5.25s, 2020 1,450 1,299,620
AAA Madison County, AL, Water,
AMBAC, 5.25s, 2014 1,000 910,560
----------
$ 8,205,645
- ---------------------------------------------------------------------------
Turnpike Revenue - 0.8%
A Puerto Rico Commonwealth, 5.25s, 2020 $ 800 $ 694,360
- ---------------------------------------------------------------------------
Airport and Port Revenue - 5.6%
AAA Alabama Docks Department, Docks Facilities
Rev., BIGI, 7.6s, 2012 $2,600 $ 2,782,312
NR Mobile, AL, Airport Authority,
7.375s, 2012 1,000 1,024,120
NR Mobile, AL, Airport Authority,
8.875s, 2015 1,000 1,093,770
----------
$ 4,900,202
- ---------------------------------------------------------------------------
Sales and Excise Tax Revenue - 0.3%
A Alabama Mental Health Finance Authority,
7.375s, 2008 $ 250 $ 268,565
- ---------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 12.0%
BBB- Butler, AL, Industrial Development Rev.,
8s, 2028 $1,000 $ 1,047,920
NR Camden, AL, Industrial Development Board,
Pollution Control Rev., 7.75s, 2009 500 535,735
BBB Courtland, AL, Industrial Development
Board, Solid Waste Disposal Rev.,
5.9s, 2017 1,000 924,650
BBB Courtland, AL, Industrial Development
Board, Solid Waste Disposal Rev.,
7.75s, 2020 1,485 1,573,223
AA Mobile, AL, Industrial Development Board
(Mobil), 6s, 2014 2,500 2,465,100
BBB Mobile, AL, Industrial Development Board,
Dock & Wharf Rev. (Ideal Basic, Inc.),
6.75s, 2004 270 269,954
BBB Mobile, AL, Industrial Development Board,
Dock & Wharf Rev. (Ideal Basic, Inc.),
6.875s, 2009 1,075 1,074,892
BBB+ Piedmont, AL, Industrial Development Board
(Springs Industries, Inc.), 8.25s, 2010 1,000 1,081,140
AA- Tarrant City, AL, Industrial Development
Board Rev. (Vulcan Materials Co.),
7.5s, 2011 1,500 1,623,690
----------
$10,596,304
- ---------------------------------------------------------------------------
Universities - 7.6%
AAA Alabama State Board of Education Rev.
(Shelton State Community College), MBIA,
6s, 2014 $1,000 $ 1,003,670
AAA Alabama State University Rev.,
MBIA, 5.7s, 2015 1,450 1,399,380
AAA Auburn University, AL, University Rev.,
MBIA, 5.25s, 2012 1,000 916,010
AAA Auburn University, AL, University Rev.,
MBIA, 5.25s, 2013 1,000 913,310
NR Homewood, AL, Educational Building
Authority Rev. (Samford University),
6.5s, 2016 1,000 1,030,640
AA- UAB Educational Foundation, AL, Student
Housing Rev., 5.35s, 2019 1,630 1,482,615
----------
$ 6,745,625
- ---------------------------------------------------------------------------
Indexed Security - 0.9%
AAA Puerto Rico Telephone Authority Rev., 7-
Year Swap, "M", AMBAC, 4.47s, 2004* $1,000 $ 823,820
- ---------------------------------------------------------------------------
Other - 2.0%
NR Birmingham, AL, Downtown Redevelopment
Authority (Social Security
Administration),
0s, 2010 $2,985 $ 1,758,353
- ---------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $80,383,768) $84,618,071
- ---------------------------------------------------------------------------
Floating Rate Demand Notes - 2.6%
- ---------------------------------------------------------------------------
A- Phoenix City, AL, Industrial Development
Board, due 2028 $1,200 $ 1,200,000
NR Uinta County, WY, Pollution Control Rev.
(Chevron), due 2020 1,100 1,100,000
- ---------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 2,300,000
- ---------------------------------------------------------------------------
Total Investments (Identified Cost, $82,683,768) $86,918,071
Other Assets, Less Liabilities - 1.5% 1,282,431
- ---------------------------------------------------------------------------
Net Assets - 100.0% $88,200,502
- ---------------------------------------------------------------------------
*Indexed security (see Note 7).
See notes to financial statements
<PAGE>
Portfolio of Investments - March 31, 1995
MFS ARKANSAS MUNICIPAL BOND
Municipal Bonds - 97.3%
- ---------------------------------------------------------------------------
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------
Student Loan Revenue - 1.3%
NR Arkansas Student Loan Authority Rev.,
7.15s, 2002 $ 1,000 $ 1,059,880
NR Arkansas Student Loan Authority Rev.,
6.75s, 2006 1,500 1,526,160
-----------
$ 2,586,040
- ---------------------------------------------------------------------------
General Obligation - 4.7%
AAA Mississippi County, AR, Community College
District, AMBAC, 6s, 2018 $ 1,650 $ 1,678,644
NR Northwest Arkansas Community College
District, 5.8s, 2012 1,000 999,890
A Puerto Rico Commonwealth Refunding,
6.45s, 2017 500 510,535
A Puerto Rico Commonwealth Refunding,
5.25s, 2018 2,000 1,749,460
AAA Pulaski County, AR, Special School
District,
FSA, 5.25s, 2013 3,495 3,223,788
AA State of Arkansas, Waste Disposal &
Pollution Control Rev., 6.25s, 2020 1,000 1,023,730
-----------
$ 9,186,047
- ---------------------------------------------------------------------------
State and Local Appropriation - 3.4%
AAA Arkansas Development Finance Authority
Correctional Facilities Rev., 7.125s, 2010 $ 2,000 $ 2,139,720
A Arkansas Development Finance Authority
Local Government Rev., 7.1s, 2008 2,440 2,639,641
NR Arkansas Development Finance Authority Rev.
(State Agencies Facilities), 5.875s, 2013 875 836,973
A Arkansas Development Finance Authority Rev.
(State Agencies Facilities), 5.875s, 2013 1,000 903,470
-----------
$ 6,519,804
- ---------------------------------------------------------------------------
Refunded and Special Obligation - 12.6%
AAA Arkansas Development Finance Authority,
Water Rev., MBIA, 7s, 2001 $ 2,900 $ 3,216,854
AAA Arkansas Development Finance Authority,
Water Rev., MBIA, 6.4s, 2002 3,495 3,788,440
AAA Arkansas Housing Development Agency Single
Family Mortgage Rev., 8.375s, 2010 800 970,408
AAA Arkansas Housing Development Agency Single
Family Mortgage Rev., 8.375s, 2011 1,000 1,215,710
A- Beaver Water District, AR, Benton &
Washington Counties, Water Rev.,
6.625s, 1999 500 540,985
A- Beaver Water District, AR, Benton &
Washington Counties, Water Rev.,
6.75s, 1999 1,750 1,902,355
AAA Harrison, AR, Residential Housing
Facilities Board, Single Family Mortgage
Rev., FGIC, 7.4s, 2011 4,000 4,484,400
AAA Puerto Rico Public Buildings Authority,
7.125s, 1998 1,500 1,631,865
AAA Sherwood, AR, Residential Housing
Facilities Board, Single Family Mortgage
Rev., 7.5s, 2010 1,250 1,415,838
NR State of Arkansas, Waste Disposal &
Pollution Control Rev., 6.25s, 2002 4,000 4,274,960
AA State of Arkansas, Water Resources
Development Authority, 6.375s, 2012 1,000 1,039,990
-----------
$ 24,481,805
- ---------------------------------------------------------------------------
Single Family Housing Revenue - 13.8%
NR Arkansas Development Finance Authority,
0s, 2011 $ 5,000 $ 1,577,450
AAA Arkansas Development Finance Authority,
Single Family Mortgage Rev., FNMA, GNMA,
5.65s, 2016 2,000 1,900,060
AAA Arkansas Development Finance Authority,
Single Family Mortgage Rev., FNMA, GNMA,
5.65s, 2016 1,000 950,030
AAA Arkansas Development Finance Authority,
Single Family Mortgage Rev., FNMA, GNMA,
6.7s, 2027 3,000 3,014,490
AAA Arkansas Development Finance Authority,
Single Family Mortgage Rev., GNMA,
7.4s, 2023 1,580 1,660,564
A+ Arkansas Housing Development Agency
Residential Mortgage Rev., 0s, 2015 33,000 3,744,510
NR Jefferson County, AR, Health Care &
Residential Facilities Board, 7.25s, 2011 1,000 1,027,080
NR Lonoke County, AR, Residential Housing
Facilities Board, 7.375s, 2011 418 430,661
NR Lonoke County, AR, Residential Housing
Facilities Board, 7.9s, 2011 1,186 1,294,394
NR Mississippi County, AR, Public Facilities
Board, Mortgage Rev., 7.2s, 2010 1,295 1,391,529
NR North Little Rock, AR, Residential Housing
Facilities Board, 0s, 2010 21,925 7,601,617
NR Pulaski County, AR, Public Facilities Board
Rev., FNMA, 0s, 2014 2,750 772,200
NR Saline County, AR, Residential Housing
Facilities Board, 7.875s, 2011 1,405 1,503,968
-----------
$ 26,868,553
- ---------------------------------------------------------------------------
Multi-Family Housing Revenue - 0.8%
NR Maumelle, AR, Housing Development Corp.,
7.875s, 2014 $ 1,000 $ 1,061,000
AAA West Memphis, AR, Public Facilities Board
Rev., AMBAC, 0s, 2011 1,090 399,649
-----------
$ 1,460,649
- ---------------------------------------------------------------------------
Insured Health Care Revenue - 6.1%
AAA Arkansas Development Finance Authority
(Sisters of Mercy), MBIA, 5s, 2013 $ 6,340 $ 5,616,986
AAA Arkansas Development Finance Authority
(Sisters of Mercy), MBIA, 5s, 2019 6,000 5,177,100
AAA Pulaski County, AR, Health Facilities Board
Rev. (Sisters of Charity/Nazareth), MBIA,
6s, 2012 1,000 1,018,370
-----------
$ 11,812,456
- ---------------------------------------------------------------------------
Health Care Revenue - 8.7%
NR Baxter County, AR, Hospital Rev.,
7.5s, 2021 $ 3,145 $ 3,296,809
A+ Little Rock, AR, Health Facilities Board,
Hospital Rev. (Baptist Medical Center),
6.9s, 2009 1,400 1,493,702
A+ Little Rock, AR, Health Facilities Board,
Hospital Rev. (Baptist Medical Center),
5.5s, 2015 1,400 1,258,390
A Little Rock, AR, Health Facilities Board,
Hospital Rev. (Baptist Medical Center),
7s, 2017 3,250 3,407,138
A- Pulaski County, AR, Hospital Rev. (Arkansas
Children's Hospital), 6.15s, 2017 7,750 7,503,472
-----------
$ 16,959,511
- ---------------------------------------------------------------------------
Electric and Gas Utility Revenue - 13.7%
BBB Independence County, AR, Pollution Control
Rev. (AR, P&L), 6.25s, 2021 $ 3,000 $ 2,954,340
AA- Jefferson County, AR, Pollution Control
Rev. (Arkansas Electric Cooperative),
6.125s, 2008 2,000 2,002,640
BBB Jefferson County, AR, Pollution Control
Rev. (Arkansas Electric Cooperative),
6.3s, 2018 1,050 1,045,989
AAA Jonesboro, AR, City Water & Light Plant,
Public Utilities Systems Rev., AMBAC,
5.375s, 2007 1,000 976,700
AAA Jonesboro, AR, City Water & Light Plant,
Public Utilities Systems Rev., AMBAC,
5.25s, 2013 3,210 3,013,066
AAA North Little Rock, AR, Electric Rev.,
MBIA, 6.5s, 2010 1,000 1,039,430
AAA North Little Rock, AR, Electric Rev.,
MBIA, 6.5s, 2010 2,000 2,133,420
AAA North Little Rock, AR, Electric Rev.,
MBIA, 6.5s, 2015 6,000 6,435,960
BBB Pope County, AR, Solid Waste Disposal Rev.
(Arkansas Power & Light Co.), 8s, 2020 1,780 1,971,884
AAA Pope County, AR, Solid Waste Disposal Rev.
(Arkansas Power & Light Co.), 8s, 2021 3,000 3,361,770
A- Puerto Rico Electric Power Authority Rev.,
5s, 2012 500 435,380
AAA West Memphis, AR, Public Utility Systems
Rev., MBIA, 6.6s, 2009 1,250 1,326,613
-----------
$ 26,697,192
- ---------------------------------------------------------------------------
Water and Sewer Utility Revenue - 13.2%
AAA Arkansas Development Finance Authority,
Water Rev., MBIA, 5s, 2012 $ 1,000 $ 905,880
AAA Arkansas Development Finance Authority,
Water Rev., MBIA, 5s, 2015 3,000 2,680,170
AAA Arkansas Development Finance Authority,
Water Rev., MBIA, 5.4s, 2015 2,500 2,348,550
AAA Beaver Water District, AR, Benton &
Washington Counties, Water Rev., MBIA,
5.75s, 2007 2,000 2,041,780
AAA Beaver Water District, AR, Benton &
Washington Counties, Water Rev., MBIA,
5.85s, 2008 2,000 2,041,560
NR El Dorado, AR, Water Rev., 6s, 2012 1,000 1,011,100
AAA Fort Smith, AR, Water & Sewer, MBIA,
5.7s, 2008 1,450 1,459,933
AAA Fort Smith, AR, Water & Sewer, MBIA,
6s, 2012 2,250 2,286,990
A Puerto Rico Aqueduct & Sewer Authority,
7.875s, 2017 1,000 1,086,750
AAA Russellville, AR, Water Systems Rev.,
AMBAC, 6.25s, 2012 2,365 2,439,947
NR South Sebastian County, AR, Water Users
Assn., 5.95s, 2016 3,175 3,169,951
NR South Sebastian County, AR, Water Users
Assn., 6.15s, 2023 1,000 1,008,080
AA State of Arkansas, Water Resources
Development Authority, 6.375s, 2021 1,000 1,031,020
AAA Texarkana, AR, Public Facilities Board,
Waterworks Facilities Rev., MBIA, 7s, 2007 2,000 2,117,320
-----------
$ 25,629,031
- ---------------------------------------------------------------------------
Turnpike Revenue - 0.9%
A Puerto Rico Commonwealth, 5.5s, 2019 $ 2,000 $ 1,808,980
- ---------------------------------------------------------------------------
Sales and Excise Tax Revenue - 2.9%
NR Little Rock, AR, Hotel & Restaurant Gross
Receipts Tax, 7.375s, 2015 $ 4,790 $ 5,588,253
- ---------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 10.2%
AA- Blytheville, AR, Solid Waste Recycling &
Sewerage Treatment Rev. (Nucor Corp.),
6.9s, 2021 $ 5,000 $ 5,192,800
AA- Blytheville, AR, Solid Waste Recycling &
Sewerage Treatment Rev. (Nucor Corp.),
6.375s, 2023 8,945 8,950,367
A- Camden, AR, Environmental, 7.625s, 2018 1,000 1,079,730
AA- Jonesboro, AR, Industrial Development Rev.
(Anheuser-Busch Co.), 6.5s, 2012 3,500 3,661,595
A- Pine Bluff, AR, Solid Waste Disposal Rev.
(International Paper Co.), 5.55s, 2017 1,050 944,034
-----------
$ 19,828,526
- ---------------------------------------------------------------------------
Universities - 2.4%
NR Henderson State University, Arkadelphia,
AR, 6.6s, 2017 $ 925 $ 946,821
NR University of Arkansas, University Rev.,
7.2s, 2010 2,500 2,708,200
NR University of Arkansas, University Rev.,
6.625s, 2012 1,075 1,113,754
-----------
$ 4,768,775
- ---------------------------------------------------------------------------
Indexed Securities - 2.6%
A Puerto Rico Public Buildings Authority,
GTD, Public Educational & Health, PSA
Fixed Rate, 5.385s, 2016* $ 2,000 $ 1,743,100
AAA Puerto Rico Telephone Authority Rev., 7-
Year Swap, "M", AMBAC, 4.47s, 2004* 4,000 3,295,280
-----------
$ 5,038,380
- ---------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $187,600,752) $189,234,002
- ---------------------------------------------------------------------------
Floating Rate Demand Notes - 1.2%
- ---------------------------------------------------------------------------
NR Uinta County, WY, Pollution Control Rev.
(Chevron), due 2020 $ 2,000 $ 2,000,000
NR Wake County, NC, Industrial Facilities &
Pollution Control Rev., due 2017 300 300,000
- ---------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 2,300,000
- ---------------------------------------------------------------------------
Short-Term Obligation - 0.3%
- ---------------------------------------------------------------------------
New York City, NY, Municipal Water Finance
Authority,
due 2022, at Amortized Cost and Value $ 500 $ 500,000
- ---------------------------------------------------------------------------
Total Investments (Identified Cost, $190,400,752) $192,034,002
Other Assets, Less Liabilities - 1.2% 2,302,092
- ---------------------------------------------------------------------------
Net Assets - 100.0% $194,336,094
- ---------------------------------------------------------------------------
*Indexed security (see Note 7).
See notes to financial statements
<PAGE>
Portfolio of Investments - March 31, 1995
MFS CALIFORNIA MUNICIPAL BOND FUND
Municipal Bonds - 97.4%
- ---------------------------------------------------------------------------
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------
General Obligation - 10.8%
AAA Metropolitan Water Distribution, Southern
California, 5.5s, 2010 $ 5,000 $ 4,792,150
AAA Metropolitan Water Distribution, Southern
California, 5.5s, 2010 1,000 958,430
AA- Palos Verdes, CA, Library District,
6.7s, 2016 1,250 1,285,337
AA- Santa Monica, CA, Malibu Unified School
District, 5.75s, 2018 1,475 1,405,690
NR State of California, 5.75s, 1996 4,000 4,044,240
A State of California, 10s, 2007 1,055 1,428,618
A State of California, 5.75s, 2023 2,415 2,250,297
AAA State of California, AMBAC, 7.2s, 2008 1,600 1,817,632
AAA State of California, AMBAC, 6.3s, 2010 6,000 6,269,880
AAA State of California, AMBAC, 7s, 2010 2,000 2,253,700
AAA State of California, AMBAC, 5.9s, 2025 2,000 1,931,980
AAA State of California, FGIC, 5.5s, 2015 1,330 1,245,612
AAA Walnut Valley, CA, AMBAC, 6s, 2011 1,600 1,616,128
AAA Walnut Valley, CA, MBIA, 0s, 2007 1,150 563,845
AAA Walnut Valley, CA, MBIA, 0s, 2008 1,125 514,057
AAA Walnut Valley, CA, MBIA, 0s, 2009 1,175 499,387
-----------
$ 32,876,983
- ---------------------------------------------------------------------------
State and Local Appropriation - 12.2%
AAA Banning, CA, Cetificates of
Participation, Water System Improvement,
8s, 2019 $ 1,000 $ 1,241,110
A- California Public Works Board, Lease
Rev., 6.75s, 2012 3,200 3,293,920
A- California Public Works Board, Lease Rev.
(Department of Corrections), 7.4s, 2010 5,000 5,658,000
NR Fortuna, Parlier & Susanville, CA,
Certificates of Participation, "B",
7.375s, 2017 930 957,807
AAA Grossmont, CA, Union High School
District, Certificates of Participation,
MBIA, 0s, 2006 6,000 3,086,100
AAA Los Angeles, CA, Convention & Exhibition
Center Authority, Certificates of
Participation, AMBAC, 0s, 2005 2,400 1,350,264
AAA Los Angeles County, CA, MBIA, 0s, 2013 3,380 1,083,053
A- Pomona, CA, Public Financing, 6.25s, 2010 4,020 3,971,720
A+ Riverside County, CA, Asset Leasing
Corp., "A", 6.25s, 2019 1,210 1,163,113
AAA Sacramento County, CA, Certificates of
Participation, MBIA, 5.5s, 2010 1,500 1,444,260
A- San Francisco, CA, City & County
Redevelopment Agency, Lease Rev.,
5.5s, 2018 13,000 11,294,920
AAA Visalia, CA, Unified School District,
Certificates of Participation, MBIA,
0s, 2005 4,655 2,581,849
-----------
$ 37,126,116
- ---------------------------------------------------------------------------
Refunded and Special Obligation - 19.4%
AAA Alhambra, CA, Insured Rev. (Atherton
Baptist Homes), "A", CHFC, 8.875s, 1995 $ 170 $ 174,894
NR California Educational Facilities
Authority Rev. (St. Mary's College),
7.5s, 2000 1,000 1,136,430
A+ California Health Facilities Financing
Authority (AIDS Hospice Foundation),
CHFC, 7.15s, 2000 3,110 3,430,703
NR California Health Facilities Financing
Authority (Brookside Hospital),
8.1s, 1997 1,000 1,098,240
AAA California Health Facilities Financing
Authority (Centinela Hospital Medical),
MBIA, 9.375s, 1995 150 156,086
NR California Health Facilities Financing
Authority (Daughters of Charity Queen
Angel), 9.25s, 1996 300 320,940
AA- California Health Facilities Financing
Authority (Mercy Health System),
9.125s, 1995 500 515,865
AAA California Health Facilities Financing
Authority (Methodist Hospital), CHFC,
9.2s, 1995 675 707,123
AA California Health Facilities Financing
Authority (St. Joseph Health System),
6.9s, 1999 1,000 1,089,810
AA- California Health Facilities Financing
Authority (St. Joseph Hospital),
6.75s, 2001 2,710 2,985,526
A California Health Facilities Financing
Authority (Valley Memorial Hospital),
7.9s, 1997 500 540,735
AAA California Health Facilities Financing
Authority Rev., AMBAC, 7.625s, 1998 1,205 1,335,465
AAA California Public Works Board, Lease Rev.
(University of California Projects),
6.6s, 2002 3,500 3,888,220
AAA Concord, CA, Redevelopment Agency, Tax
Allocation, 8s, 1998 1,810 2,016,449
AAA Concord, CA, Redevelopment Agency, Tax
Allocation (Central Concord), 8s, 1998 370 412,202
AAA Corona, CA, Certificates of Participation
(Corona Community Hospital), 8s, 2005 585 708,938
AAA Culver City, CA, Redevelopment Agency
(Slauson-Sepulveda), AMBAC, "B",
9.25s, 1995 190 199,095
AAA Inglewood, CA, Redevelopment Agency (La
Cienegna Redevelopment Project),
AMBAC, "B", 8.8s, 1995 400 418,152
A- Los Angeles, CA, Community Redevelopment
Agency (Central Business), 8.85s, 1995 225 231,602
AAA Los Angeles, CA, Convention & Exhibition
Center Authority, Certificates of
Participation, 7.375s, 1999 5,000 5,550,750
AAA Los Angeles, CA, Convention & Exhibition
Center Authority, Certificates of
Participation, 9s, 2005 1,900 2,479,044
AA Los Angeles, CA, Department of Water and
Power, Electric Plant Rev., 7.9s, 1998 1,000 1,104,660
A Los Angeles, CA, Wastewater System Rev.,
6.8s, 1999 500 544,405
AAA Los Angeles, CA, Wastewater System Rev.,
AMBAC, "B", 8.125s, 1997 2,500 2,753,500
AAA M-S-R Public Power Agency, CA (San Juan
Project Rev.), "B", 9.125s, 1995 100 103,187
AAA Northern California Power Agency, Public
Power Rev. (Hydro-Electric), 8s, 1998 290 318,089
AAA Oakland, CA, Redevelopment Agency,
Certificates of Participation,
9.25s, 1995 455 471,312
AAA Oakland, CA, Redevelopment Agency,
Certificates of Participation, AMBAC,
8.125s, 1997 750 813,563
AAA Ontario, CA, Redevelopment Authority, Tax
Allocation (Ontario Redevelopment),
FGIC, 8.75s, 1995 200 208,608
A- Pomona, CA, Public Financing Authority
Rev., "J", 7.875s, 2000 7,155 7,728,831
NR Pomona, CA, Single Family Mortgage Rev.,
FNMA, 7.375s, 2010 2,000 2,246,600
AAA Pomona, CA, Single Family Mortgage Rev.,
GNMA, 7.5s, 2000 2,000 2,357,260
AAA Puerto Rico Highway and Special
Obligation and Transport Authority,
Highway Rev., 6.5s, 2002 2,750 3,035,203
AAA Riverside, CA, Hospital Rev. (Riverside
Community Hospital), "A", 9.3s, 1995 300 314,445
AAA Sacramento, CA, Municipal Utility
District, Electric Rev., "W",
7.875s, 1998 2,500 2,786,300
AAA San Bernardino County, CA, Certificates
of Participation, 6.25s, 2001 2,000 2,133,800
AAA San Francisco, CA, Bay Area Rapid Transit
District, Sales Tax Rev., 9s, 1995 550 572,797
A Tracy, CA, Hospital Rev., Certificates of
Participation (Tracy Community),
8.625s, 1997 2,000 2,168,320
AAA Whittier, CA, Health Facilities Rev.
(Presbyterian Inter-Community Hospital),
MBIA, 9.5s, 1995 150 154,255
-----------
$ 59,211,404
- ---------------------------------------------------------------------------
Single Family Housing Revenue - 1.7%
AA- California Housing Finance Agency,
7.75s, 2010 $ 1,210 $ 1,280,119
AA- California Housing Finance Agency,
8.1s, 2016 2,500 2,597,800
AA- California Housing Finance Agency,
7.875s, 2031 205 217,497
A Riverside County, CA, 11.25s, 2014 4,014 509,029
AAA San Bernardino County, CA, Single Family
Mortgage Rev., GNMA, 7.65s, 2023 225 237,676
AAA Santa Ana, CA, Home Mortgage Rev., "A",
FGIC, 8.875s, 2017 15 15,864
AAA Southern California Home Finance
Authority, Single Family Mortgage Rev.,
GNMA, 7.625s, 2023 275 289,682
-----------
$ 5,147,667
- ---------------------------------------------------------------------------
Multi-Family Housing Revenue - 7.1%
A+ California Housing Finance Agency (Multi-
Unit Rental Housing), 6.7s, 2015 $ 2,750 $ 2,786,520
NR Escondido, CA, Community Development
Authority (Las Villas del Norte),
8.875s, 2005 4,495 4,434,273
AAA Palmdale, CA, Multi-Family Housing Rev.,
7.375s, 2024 1,000 1,071,890
BBB Thousand Oaks, CA, Redevelopment Agency
(Shadow Hills Project), 7s, 2021 8,900 9,108,616
A+ Yolo County, CA, Housing Authority
Mortgage Rev. (Walnut Park Apartments),
7.2s, 2033 4,150 4,332,724
-----------
$ 21,734,023
- ---------------------------------------------------------------------------
Insured Health Care Revenue - 6.3%
A Apple Valley, CA, Hospital Rev. (St.
Mary's Hospital), CHFC, 6.75s, 2012 $ 4,880 $ 4,958,763
A California Health Facilities Financing
Authority (American Baptist Homes West),
CHFC, 7.65s, 2014 4,420 4,643,519
AAA California Health Facilities Financing
Authority (Sutter Health), MBIA,
7s, 2009 1,000 1,053,720
AAA California Health Facilities Financing
Authority (Unihealth America), AMBAC,
7.625s, 2015 45 48,353
A California Statewide Communities
Development Corp., Certificates of
Participation, 6.75s, 2021 3,000 3,029,130
A+ California Statewide Communities
Development Authority, Certificates of
Participation, CHFC, 0s, 2007 6,645 2,859,543
A+ California Statewide Communities
Development Corp., Certificates of
Participation, CHFC, 0s, 2008 6,345 2,533,495
-----------
$ 19,126,523
- ---------------------------------------------------------------------------
Health Care Revenue - 7.4%
A California Health Facilities Financing
Authority (Good Samaritan), 6.6s, 2000 $ 1,300 $ 1,358,981
A California Health Facilities Financing
Authority (Good Samaritan), 6.65s, 2001 500 523,615
AA California Health Facilities Financing
Authority (Kaiser Permanente), 7s, 2018 1,000 1,032,660
AA California Statewide (St. Joseph's),
6.625s, 2021 4,205 4,295,996
NR Hemet Valley, CA, Hospital District,
8.25s, 2005 5,000 5,192,350
BBB Loma Linda, CA (Loma Linda University
Medical Center, Project B), 9s, 2012 460 482,765
AA Riverside, CA, Kaiser Permanente Rev.,
9s, 2015 750 783,338
A- San Joaquin County, CA, Certificates of
Participation (General Hospital),
6.625s, 2020 8,235 8,178,590
A- Stockton, CA, Hospital Rev. (St. Joseph
Hospital), "B", 9.4s, 2008 650 683,820
-----------
$ 22,532,115
- ---------------------------------------------------------------------------
Electric and Gas Utility Revenue - 4.1%
AA Los Angeles, CA, Department of Water and
Power, Electric Plant Rev., 9.2s, 2025 $ 190 $ 200,399
AA Los Angeles, CA, Department of Water and
Power, Electric Plant Rev., 8s, 2026 1,000 1,056,960
AA Los Angeles, CA, Department of Water and
Power, Electric Plant Rev., 7.25s, 2030 1,000 1,114,910
AA Los Angeles, CA, Department of Water and
Power, Electric Plant Rev., 7.1s, 2031 1,050 1,165,353
A+ Modesto, CA, Irrigation District,
Certificates of Participation (Geyser),
5s, 2017 4,300 3,582,115
A- Northern California Public Power
Refunding (Geothermal), "93A",
5.85s, 2010 1,000 954,970
NR Southern California Public Power
Authority (Southern Transmission
Project), 0s, 2005 8,000 4,482,000
-----------
$ 12,556,707
- ---------------------------------------------------------------------------
Water and Sewer Utility Revenue - 12.2%
AA California Department of Water Resources,
Central Valley Project Rev., 7s, 2012 $ 1,495 $ 1,666,551
AA California Department of Water Resources,
Central Valley Project Rev., 5.5s, 2022 3,510 3,190,836
AAA Contra Costa, CA, Water Rev., MBIA,
5.5s, 2019 4,000 3,687,080
AAA Fairfield-Suisun, CA, Sewer District
Rev., MBIA, 0s, 2006 2,080 1,112,904
AA Long Beach, CA, Water Rev., 6.125s, 2019 3,000 3,011,640
AAA Los Angeles, CA, Wastewater Refunding,
"93", MBIA, 5.7s, 2020 7,650 7,239,348
AAA Los Angeles, CA, Wastewater Refunding,
"93A", MBIA, 5.8s, 2021 3,000 2,875,290
AA Metropolitan Water District, Linked
Savers, RIBS, 5.75s, 2018 10,000 9,505,500
BBB+ Mojave, CA, Water Agency (Morongo Basin),
6.6s, 2022 1,400 1,391,096
AAA Redding, CA, Wastewater Rev., FGIC,
5.5s, 2018 1,500 1,393,155
AA San Francisco, CA, 0s, 2019 2,100 440,958
AAA West Sacramento, CA, Financing Authority
Rev., FGIC, 5.5s, 2024 1,685 1,543,308
-----------
$ 37,057,666
- ---------------------------------------------------------------------------
Airport and Port Revenue - 1.3%
AAA San Francisco, CA, City & County Airports
Commission, International Airport,
FGIC, 6.5s, 2019 $ 4,000 $ 4,070,560
- ---------------------------------------------------------------------------
Sales and Excise Tax Revenue - 2.6%
AAA Los Angeles County, CA, MBIA,
5.625s, 2018 $ 2,500 $ 2,347,175
AAA Los Angeles County, CA, MBIA,
5.75s, 2018 3,620 3,476,141
AAA South Orange County, CA, Financing
Authority, Special Tax Rev., MBIA,
6s, 2018 2,250 2,216,408
-----------
$ 8,039,724
- ---------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 2.0%
NR California Pollution Control Financing
Authority (Frito-Lay, Inc.),
6.375s, 2004 $ 1,025 $ 1,054,725
A California Pollution Control Financing
Authority (Pacific Gas & Electric Co.),
6.625s, 2009 1,000 1,035,920
A California Pollution Control Financing
Authority (Pacific Gas & Electric Co.),
5.85s, 2023 2,000 1,851,200
NR California Pollution Control Financing
Authority (U.S. Borax & Chemical Corp.),
8.75s, 2010 500 505,855
A+ San Diego, CA, Industrial Development
Rev. (San Diego Gas & Electric),
9.25s, 2020 1,500 1,550,085
-----------
$ 5,997,785
- ---------------------------------------------------------------------------
Universities - 1.8%
A- California State University Housing
System Rev., 6.75s, 2010 $ 1,705 $ 1,771,222
A- California State University Housing
System Rev., 6.75s, 2011 3,570 3,697,735
-----------
$ 5,468,957
- ---------------------------------------------------------------------------
Inverse Floater - 1.0%
AAA Sacramento, CA, Municipal Utility
District, Hospital Rev. (Desert
Hospital), FGIC, PSA Fixed Rate,
8.86s, 2020(S) $ 3,000 $ 3,128,220
- ---------------------------------------------------------------------------
Indexed Security - 0.2%
A Puerto Rico Public Buildings Authority,
GTD, Public Educational & Health, PSA
Fixed Rate, 5.385s, 2016* $ 1,000 $ 871,550
- ---------------------------------------------------------------------------
Other - 2.1%
AAA California Public Capital Improvements
Financing Authority Rev., BIGI,
8.1s, 2018 $ 1,920 $ 2,035,373
AAA Santa Margarita/Dana Point Authority
Rev., MBIA, 5.75s, 2020 2,575 2,452,842
AAA South Coast Air Quality Management
District, AMBAC, 0s, 2005 3,480 1,962,093
-----------
$ 6,450,308
- ---------------------------------------------------------------------------
Special Assessment District - 5.2%
AAA Anaheim, CA, Public Financing Authority
(Redevelopment Project Alpha), MBIA,
0s, 2005 $ 3,210 $ 1,776,703
AAA Brea, CA, Public Finance Authority, MBIA,
0s, 2005 2,235 1,260,138
AAA Brea, CA, Public Finance Authority, MBIA,
0s, 2006 3,415 1,801,583
AAA Concord, CA, Redevelopment Agency, Tax
Allocation, BIGI, 8s, 2018 40 44,079
AAA Pittsburgh, CA, Redevelopmental Agency,
FGIC, 5.5s, 2015 2,250 2,100,870
AAA San Marcos, CA, Publishing Facilities
Authority, CAP GTY, 5.5s, 2023 9,600 8,743,009
-----------
$ 15,726,382
- ---------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $287,388,608) $297,122,690
- ---------------------------------------------------------------------------
Floating Rate Demand Notes - 1.1%
- ---------------------------------------------------------------------------
A- California Pollution Control Financing
Authority (Shell Oil), due 2000 $ 1,100 $ 1,100,000
A- California Pollution Control Financing
Authority (Shell Oil), due 2008 100 100,000
A- California Pollution Control Financing
Authority (Shell Oil), due 2010 300 300,000
A- California Pollution Control Financing
Authority (Shell Oil), due 2011 200 200,000
A- California Pollution Control Financing
Authority (Shell Oil), DTC, due 2006 500 500,000
A- California Pollution Control Financing
Authority (Shell Oil), DTC, due 2007 100 100,000
AAA State of California, Health Facility (St.
Joseph Health System), due 2013 1,200 1,200,000
- ----------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 3,500,000
- ----------------------------------------------------------------------------
Call Option Purchased - 0.1%
- ---------------------------------------------------------------------------
Principal Amount
Issuer/Expiration Date/Strike Price of Contracts
- ---------------------------------------------------------------------------
State of New Jersey, GOB, "D"/February 2003/102
(Premium Paid, $255,000) $ 2,000 $ 152,300
- ---------------------------------------------------------------------------
Total Investments (Identified Cost, $291,143,608) $300,774,990
Other Assets, Less Liabilities - 1.4% 4,300,956
- ---------------------------------------------------------------------------
Net Assets - 100.0% $305,075,946
- ---------------------------------------------------------------------------
*Indexed security (see Note 7).
(S)Inverse floating rate security.
See notes to financial statements
<PAGE>
Portfolio of Investments - March 31, 1995
MFS LOUISIANA MUNICIPAL BOND FUND
Municipal Bonds - 90.1%
- ---------------------------------------------------------------------------
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------
General Obligation - 12.0%
AAA Monroe, LA, Special School District, MBIA,
5.75s, 2012 $ 500 $ 486,175
AAA New Orleans, LA, AMBAC, 0s, 2008 1,800 824,634
AAA New Orleans, LA, AMBAC, 0s, 2016 1,000 267,790
AAA State of Louisiana, AMBAC, 6.1s, 2011 250 254,305
AAA State of Louisiana, AMBAC, 6.5s, 2011 250 263,488
AAA State of Louisiana, MBIA, 5.625s, 2010 250 246,010
----------
$ 2,342,402
- ---------------------------------------------------------------------------
State and Local Appropriation - 3.3%
BBB Natchitoches Parish, LA, 7.2s, 2015 $ 650 $ 645,684
- ---------------------------------------------------------------------------
Refunded and Special Obligation - 1.4%
A Puerto Rico Public Buildings Authority,
6.875s, 2002 $ 250 $ 281,567
- ---------------------------------------------------------------------------
Single Family Housing Revenue - 4.5%
NR East Baton Rouge, LA, FNMA, GNMA,
6.8s, 2028 $ 500 $ 506,700
NR Jefferson Parish, LA, Home Mortgage
Authority, Single Family, GNMA, 6s, 2024 400 367,896
----------
$ 874,596
- ---------------------------------------------------------------------------
Insured Health Care Revenue - 11.7%
AAA Jefferson Parish, LA, Hospital Service
District No. 2, Hospital Rev., MBIA,
5.75s, 2016 $ 500 $ 477,495
AAA Louisiana Public Facilities Authority Rev.
(Medical Center of Louisiana), Connie Lee,
6.25s, 2010 400 406,440
AAA St. Tammany Parish, LA, Hospital Rev.,
Connie Lee, 6.125s, 2009 500 501,205
AAA St. Tammany Parish, LA, Hospital Rev.,
Connie Lee, 6.25s, 2014 500 502,215
AAA Tangipahoa Parish, LA, AMBAC,
6.125s, 2014 400 397,468
----------
$ 2,284,823
- ---------------------------------------------------------------------------
Health Care Revenue - 7.3%
A- St. Tammany Parish, LA, Hospital Service
District #1, Hospital Rev., 6.5s, 2017 $1,000 $ 952,220
NR Westside Habilitation Center, Cheneyville,
LA, 8.375s, 2013 500 478,185
----------
$ 1,430,405
- ---------------------------------------------------------------------------
Electric and Gas Utility Revenue - 8.9%
AAA Alexandria, LA, Utilities Rev., FGIC,
5.3s, 2012 $ 750 $ 691,170
BB+ Calcasieu Parish, Inc., 6.75s, 2012 800 770,968
AAA Natchitoches, LA, Utilities Rev., AMBAC,
5.375s, 2013 300 283,551
----------
$ 1,745,689
- ---------------------------------------------------------------------------
Water and Sewer Utility Revenue - 6.3%
AA- Louisiana Public Facilities Authority Rev.
(Baton Rouge Water Works Co.), 6.4s, 2010 $ 500 $ 511,825
AAA Terrebonne Parish, LA, Waterworks Rev.,
FGIC, 5.95s, 2012 730 723,554
----------
$ 1,235,379
- ---------------------------------------------------------------------------
Turnpike Revenue - 7.1%
AAA Greater New Orleans, LA, Expressway
Commission, Expressway Rev., MBIA,
5.5s, 2012 $ 400 $ 378,776
AAA Greater New Orleans, LA, MBIA,
6s, 2016 500 494,575
A- Mississippi River Bridge Authority,
6.75s, 2012 500 522,635
----------
$ 1,395,986
- ---------------------------------------------------------------------------
Sales and Excise Tax Revenue - 4.6%
AAA Louisiana Stadium & Exposition District,
FGIC, 5.75s, 2009 $ 400 $ 395,628
AAA Louisiana Stadium & Exposition District,
FGIC, 5.9s, 2012 240 237,624
AAA Regional Transit Authority, LA, Sales Tax
Rev., FGIC, 0s, 2012 800 265,768
----------
$ 899,020
- ---------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 15.1%
A- De Soto Parish, LA, Environmental,
7.7s, 2018 $ 750 $ 827,513
A Natchitoches Parish, LA, Solid Waste
Disposal Rev. (Williamette Industries),
5.875s, 2023 830 755,798
NR Port New Orleans, LA, 8.5s, 2014 500 522,140
BBB St. Charles Parish, LA, Environmental
Improvement Rev. (Louisiana Power),
6.875s, 2024 250 251,575
AAA St. Charles Parish, LA, Environmental
Improvement Rev. (Louisiana Power),
AMBAC, 6.875s, 2024 330 341,962
BB+ West Feliciana Parish, LA, 7.7s, 2014 250 256,700
----------
$ 2,955,688
- ---------------------------------------------------------------------------
Universities - 4.9%
AAA Louisiana State University & Agriculture,
FGIC, 5.75s, 2014 $1,000 $ 961,510
- ---------------------------------------------------------------------------
Other - 3.0%
AAA State of Louisiana, Public Finance
Authority (Our Lady of the Lake), FSA,
5.758s, 2021 $ 600 $ 577,387
- ---------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $17,362,299) $17,630,136
- ---------------------------------------------------------------------------
Floating Rate Demand Note - 1.5%
- ---------------------------------------------------------------------------
NR Uinta County, WY, Pollution Control Rev.
(Chevron), due 2020, at Identified Cost $ 300 $ 300,000
- ---------------------------------------------------------------------------
Total Investments (Identified Cost, $17,662,299) $17,930,136
Other Assets, Less Liabilities - 8.4% 1,642,165
- ---------------------------------------------------------------------------
Net Assets - 100.0% $19,572,301
- ---------------------------------------------------------------------------
See notes to financial statements
<PAGE>
Portfolio of Investments - March 31, 1995
MFS MISSISSIPPI MUNICIPAL BOND FUND
Municipal Bonds - 98.5%
- ---------------------------------------------------------------------------
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------
General Obligation - 14.8%
NR Adams County, MS, 6.2s, 2011 $ 525 $ 526,423
NR Adams County, MS, 6.2s, 2012 560 561,518
NR Gulfport, MS, 5s, 2011 1,085 991,050
AAA Hinds County, MS, MBIA, 6.25s, 2010 1,660 1,724,906
AAA Hinds County, MS, MBIA, 6.25s, 2011 1,285 1,330,630
BBB+ Jackson County, MS, Road Improvement,
6.5s, 2008 425 448,175
AAA Madison County, MS, School District,
AMBAC, 5s, 2012 1,155 1,034,568
AA- State of Mississippi, 5.1s, 2012 750 687,698
AA- State of Mississippi, 5.75s, 2013 3,895 3,846,585
AA- State of Mississippi, 6.75s, 2014 1,800 1,922,580
----------
$13,074,133
- ---------------------------------------------------------------------------
State and Local Appropriation - 15.9%
NR Hinds Community College, MS, District M
Conference and Training Center, 6.5s, 2014 $1,320 $ 1,302,484
NR Hinds County, MS, School District,
Certificates of Participation (Utica
Project), 7.25s, 2012 1,000 1,065,070
AAA Medical Center Educational Building Corp.,
MS (University of Mississippi Medical
Center), MBIA, 5.65s, 2009 2,000 1,925,940
AAA Medical Center Educational Building Corp.,
MS (University of Mississippi Medical
Center), MBIA, 5.9s, 2023 5,000 4,748,500
NR State of Mississippi, Certificates of
Participation (Rehabilitation Services),
5.9s, 2008 1,660 1,609,718
NR State of Mississippi, Certificates of
Participation (Rehabilitation Services),
6.1s, 2014 3,475 3,371,827
----------
$14,023,539
- ---------------------------------------------------------------------------
Refunded and Special Obligation - 5.6%
AAA Commonwealth of Puerto Rico, Public
Improvement, 6.8s, 2002 $1,500 $ 1,682,640
AAA Puerto Rico Highway & Transportation
Authority, Highway Rev., 6.625s, 2002 100 111,123
NR State of Mississippi, 6s, 2002 3,000 3,159,930
----------
$ 4,953,693
- ---------------------------------------------------------------------------
Single Family Housing Revenue - 2.9%
NR Mississippi Home Corp. Single Family Rev.,
GNMA, 6.5s, 2024 $2,650 $ 2,548,770
- ---------------------------------------------------------------------------
Multi-Family Housing Revenue - 4.3%
AAA Gulfport, MS, Community, FNMA, Oakview,
7.4s, 2025 $1,755 $ 1,849,998
AAA Jackson, MS, Elderly Housing Corp.,
Mortgage Rev. (Delhaven Manor), "C",
7.375s, 2024 2,000 2,038,500
----------
$ 3,888,498
- ---------------------------------------------------------------------------
Insured Health Care Revenue - 18.8%
AAA Gulfport, MS, Hospital Facilities, MBIA,
5.8s, 2007 $1,000 $ 992,590
AAA Gulfport, MS, Hospital Facilities, MBIA,
6.125s, 2015 2,500 2,503,625
AAA Gulfport, MS, Hospital Facilities, MBIA,
6.2s, 2018 1,000 1,003,450
AAA Hinds County, MS, Rev. (Methodist Hospital
& Rehabilitation Center), AMBAC,
5.6s, 2012 3,055 2,940,560
AAA Mississippi Hospital Equipment & Facilities
Authority Rev. (Baptist), 6.5s, 2010 1,190 1,235,898
AAA Mississippi Hospital Equipment & Facilities
Authority Rev. (Baptist), 6s, 2013 1,000 982,470
AAA Mississippi Hospital Equipment & Facilities
Authority Rev. (North Mississippi Health
Services), AMBAC, 5.25s, 2013 4,865 4,418,977
AAA Mississippi Hospital Equipment & Facilities
Authority Rev. (Rush Medical Foundation),
Connie Lee, 6.7s, 2018 2,500 2,568,000
----------
$16,645,570
- ---------------------------------------------------------------------------
Health Care Revenue - 4.5%
NR Adams County, MS, Hospital Rev. (Jefferson
Davis Memorial Hospital), 8s, 2016 $1,000 $ 1,048,250
NR Mississippi Hospital Equipment & Facilities
Authority Rev., 5.7s, 2023 1,000 876,450
NR Mississippi Hospital Equipment & Facilities
Authority Rev. (Magnolia Hospital),
7.375s, 2021 1,500 1,396,800
NR Mississippi Hospital Equipment & Facilities
Authority Rev. (Rankin Medical),
5.6s, 2019 735 646,932
----------
$ 3,968,432
- ---------------------------------------------------------------------------
Water and Sewer Utility Revenue - 12.5%
AAA Clarksdale, MS, Sewer & Wastewater
Treatment System Rev., MBIA, 6.1s, 2012 $1,885 $ 1,886,640
AAA Columbus, MS, Water & Sewer Rev., MBIA,
6.5s, 2013 1,000 1,047,780
AAA Gautier, MS, Utility District, Utility
Systems Rev., FGIC, 6.375s, 2012 1,500 1,537,395
AAA Gautier, MS, Utility District, Utility
Systems Rev., FGIC, 6.375s, 2019 1,300 1,323,439
AAA Harrison County, MS, Wastewater Management
District, Wastewater Treatment, FGIC,
6.5s, 2006 1,375 1,468,665
AAA Jackson, MS, Water & Sewer Systems Rev.,
MBIA, 5.4s, 2009 1,250 1,201,175
AAA Meridian, MS, Water & Sewer Rev.,
AMBAC, 6s, 2010 1,500 1,501,605
AAA Meridian, MS, Water & Sewer Rev.,
AMBAC, 6.2s, 2012 650 658,561
AAA Meridian, MS, Water & Sewer Rev.,
AMBAC, 6.2s, 2013 400 405,268
----------
$11,030,528
- ---------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 13.5%
A+ Jackson County, MS, Pollution Control Rev.
(Gulf Power Co.), 7.125s, 2021 $2,000 $ 2,044,740
A- Jackson County, MS, Solid Waste Disposal
Facilities Rev. (International Paper),
5.55s, 2017 1,300 1,161,693
A Lowndes County, MS, Solid Waste Disposal &
Pollution Control Rev. (Weyerhaeuser),
6.8s, 2022 4,250 4,519,068
BBB+ Mississippi Business Finance Corp. (Jackson
Municipal Airport/Airborne), 7.15s, 2007 985 1,015,850
A- Warren County, MS, Pollution Control Rev.
(International Paper), 6.6s, 2019 1,000 999,040
NR Warren County, MS, Pollution Control Rev.
(Mississippi Power & Light), 7s, 2022 1,000 1,011,230
NR Washington County, MS, Pollution Control
Rev. (Mississippi Power & Light), 7s, 2022 1,230 1,230,627
----------
$11,982,248
- ---------------------------------------------------------------------------
Indexed Security - 1.0%
A Puerto Rico Public Buildings Authority,
GTD, Public Educational & Health, PSA
Fixed Rate, 5.385s, 2016* $1,000 $ 871,550
- ---------------------------------------------------------------------------
Other - 4.7%
NR Jackson, MS, Redevelopment Authority, Urban
Renewal, 5.5s, 2006 $ 345 $ 331,124
NR Jackson, MS, Redevelopment Authority, Urban
Renewal, 5.625s, 2007 325 311,925
A Puerto Rico Highway & Transportation
Authority Rev., 6.625s, 2018 3,400 3,493,330
----------
$ 4,136,379
- ---------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $87,018,969) $87,123,340
- ---------------------------------------------------------------------------
Floating Rate Demand Notes - 0.9%
- ---------------------------------------------------------------------------
NR Jackson County, MS, Pollution Control Rev.
(Chevron), due 2016 $ 500 $ 500,000
NR Jackson County, MS, Pollution Control Rev.
(Chevron), due 2023 200 200,000
NR Uinta County, WY, Pollution Control Rev.
(Chevron), due 2020 100 100,000
- ---------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 800,000
- ---------------------------------------------------------------------------
Total Investments (Identified Cost, $87,818,969) $87,923,340
Other Assets, Less Liabilities - 0.6% 538,547
- ---------------------------------------------------------------------------
Net Assets - 100.0% $88,461,887
- ---------------------------------------------------------------------------
*Indexed security (see Note 7).
See notes to financial statements
<PAGE>
Portfolio of Investments - March 31, 1995
MFS TENNESSEE MUNICIPAL BOND FUND
Municipal Bonds - 96.8%
- ---------------------------------------------------------------------------
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------
General Obligation - 7.4%
A+ Chattanooga, TN, Public Improvement,
5.75s, 2017 $ 1,000 $ 996,160
AA Metropolitan Government of Nashville &
Davidson County, TN, 6.125s, 2014 1,000 1,014,350
AA Metropolitan Government of Nashville &
Davidson County, TN, 6.125s, 2019 3,255 3,290,284
AA+ Shelby County, TN, 5.1s, 2015 1,000 896,010
AA+ Shelby County, TN, 5.125s, 2015 1,000 898,900
AA+ Shelby County, TN, 5.125s, 2018 1,115 987,857
NR Territory of Virgin Islands, 7.75s, 2006 440 483,305
NR Williamson County, TN, Rural School
District, 5.8s, 2013 920 908,693
-----------
$ 9,475,559
- ---------------------------------------------------------------------------
State and Local Appropriation - 0.8%
AAA Gatlinburg, TN, Public Building Authority
(Gatlinburg Convention Center), AMBAC,
6.9s, 2012 $ 1,000 $ 1,062,150
- ---------------------------------------------------------------------------
Refunded and Special Obligation - 16.5%
AAA Bristol, TN, Health & Educational
Facilities Board Rev. (Bristol Memorial),
FGIC, 7s, 2001 $ 500 $ 556,630
AAA Bristol, TN, Health & Educational
Facilities Board Rev. (Bristol Memorial),
FGIC, 7s, 2001 250 278,315
AAA Gladeville, TN, Utility District,
Waterworks Rev., FGIC, 7.4s, 2000 500 556,925
AAA Knox County, TN, Health, Educational &
Housing Facilities Board (Fort Sanders),
MBIA, 8s, 2008 2,000 2,144,720
AAA Knox County, TN, Health, Educational &
Housing Facilities Board (Mercy Health),
AMBAC, 7.6s, 1999 3,500 3,885,105
NR Knox County, TN, Industrial Development
Board, 0s, 2016 8,325 1,890,275
NR Memphis, TN, Electric Systems Rev.,
6.75s, 2000 1,500 1,626,405
AAA Memphis-Shelby County, TN, Airport
Authority, MBIA, 8s, 2008 3,500 3,802,435
NR Mt. Juliet, TN, Public Building Authority
(Poplar Grove), 8.375s, 1999 1,430 1,620,390
NR New Tazewell, TN, Health, Educational &
Housing Facilities Board (Lincoln),
7.25s, 1997 2,000 2,131,960
AAA Puerto Rico Highway & Transportation
Authority Rev., 8.125s, 1998 670 751,050
AA+ Shelby County, TN, 6.5s, 1999 1,120 1,199,318
NR Wilson County, TN, Water & Wastewater
Authority, Waterworks Rev., 8s, 1999 500 561,140
-----------
$ 21,004,668
- ---------------------------------------------------------------------------
Single Family Housing Revenue - 12.2%
A Shelby County, TN, Single Family Mortgage
Rev., FHA, 0s, 2015 $10,000 $ 1,387,100
A+ Tennessee Housing Development Agency,
7.4s, 2016 425 443,560
A+ Tennessee Housing Development Agency,
8.25s, 2020 1,410 1,480,965
A+ Tennessee Housing Development Agency,
8.125s, 2021 8,985 9,390,763
A+ Tennessee Housing Development Agency,
7.65s, 2022 1,000 1,046,410
A+ Tennessee Housing Development Agency,
7.375s, 2023 1,000 1,046,620
A+ Tennessee Housing Development Agency,
7.125s, 2026 800 822,912
-----------
$ 15,618,330
- ---------------------------------------------------------------------------
Multi-Family Housing Revenue - 4.7%
AAA Franklin, TN, Industrial Development Rev.,
FHA, 6.75s, 2027 $ 1,000 $ 1,015,640
NR Jackson, TN, Health, Education & Housing
Facilities Board, FHA, 7.1s, 2028 1,610 1,665,593
AAA Metropolitan Government of Nashville &
Davidson County, TN, Health, Educational,
FHA, 7.25s, 2032 500 515,730
NR Metropolitan Government of Nashville &
Davidson County, TN, Industrial, FHA,
6.95s, 2026 1,000 1,030,610
A Metropolitan Government of Nashville &
Davidson County, TN, Industrial, FHA,
7.5s, 2029 695 732,405
A Metropolitan Government of Nashville &
Davidson County, TN, Industrial, FHA,
7.7s, 2029 1,000 1,054,450
-----------
$ 6,014,428
- ---------------------------------------------------------------------------
Insured Health Care Revenue - 9.4%
AAA Bristol, TN, Health & Educational
Facilities Board Rev. (Bristol Memorial),
FHA, 6.75s, 2010 $ 1,265 $ 1,375,156
AAA Bristol, TN, Health & Educational
Facilities (Bristol Memorial),
FHA, 8.87s, 2021 1,000 1,005,160
AAA Chattanooga-Hamilton County, TN, Hospital
Authority, FSA, 5.5s, 2013 2,000 1,880,300
AAA Johnson City, TN, Health Educational
Facilities Authority (Medical Center),
MBIA, OID, 5s, 2013 1,000 885,660
AAA Johnson City, TN, Health Educational
Facilities Authority, MBIA, 5.25s, 2016 2,625 2,363,550
AAA Knox County, TN, Health, Educational &
Housing, MBIA, 5.75s, 2011 1,500 1,484,190
AAA Knox County, TN, Health, Educational &
Housing Facilities Board, MBIA,
5.25s, 2023 2,375 2,077,626
AAA Shelby, TN, Health Educational & Finance
Authority Housing (Lebonhr), MBIA,
5.5s, 2019 1,000 920,690
-----------
$ 11,992,332
- ---------------------------------------------------------------------------
Health Care Revenue - 4.6%
NR Clarksville, TN, Hospital Rev. (Clarksville
Memorial Hospital), 6.375s, 2018 $ 1,000 $ 942,520
A- Cookeville, TN, Industrial Development
Board, Hospital Rev. (Cookeville General),
5.75s, 2010 2,000 1,785,240
NR Knox County, TN, Health, Educational &
Housing Facilities Board (Baptist East),
8.5s, 2004 1,410 1,482,107
NR Knox County, TN, Health, Educational &
Housing Facilities Board (Baptist East),
8.6s, 2016 710 743,051
BBB + Knox County, TN, Health, Educational &
Housing Facilities Board (East Tennessee
Children's), 6.5s, 2012 1,000 967,060
-----------
$ 5,919,978
- ---------------------------------------------------------------------------
Electric and Gas Utility Revenue - 0.8%
AA Knoxville, TN, Gas, 5.2s, 2011 $ 1,060 $ 962,363
- ---------------------------------------------------------------------------
Water and Sewer Utility Revenue - 19.6%
AA Memphis, TN, Sanitation Sewer & Water,
5.75s, 2014 $ 1,500 $ 1,470,540
AAA Metropolitan Government of Nashville &
Davidson County, TN, Water & Sewer Rev.,
FHA, 6.5s, 2010 1,000 1,074,550
AAA Metropolitan Government of Nashville &
Davidson County, TN, Water & Sewer Rev.,
FHA, 5.2s, 2013 2,000 1,838,440
AAA Metropolitan Government of Nashville &
Davidson County, TN, Water & Sewer Rev.,
FHA, 5.1s, 2016 3,585 3,200,258
NR Mt. Juliet, TN, Public Building Authority
(Cumberland), 7.55s, 2024 2,065 2,205,441
AAA Mt. Juliet, TN, Public Building Authority
(Hermitage), MBIA, 7.5s, 2009 300 322,344
AAA Mt. Juliet, TN, Public Building Authority
(Madison), MBIA, 7.7s, 2007 1,100 1,309,924
AAA Mt. Juliet, TN, Public Building Authority
(Madison), MBIA, 7.8s, 2019 3,500 4,074,000
NR Mt. Juliet, TN, Public Building Authority
(Milcroft), 7.55s, 2024 1,225 1,308,312
NR Mt. Juliet, TN, Public Building Authority
(New Market), 8.375s, 2024 570 614,859
NR Mt. Juliet, TN, Public Building Authority
(Tipton), 7.5s, 2004 380 409,796
NR Poplar Grove, TN, Utility District,
Waterworks Rev., 6.375s, 2011 500 507,040
AAA West Knox Utility District, Knox County,
TN, Water & Sewer Rev., MBIA, 0s, 2002 1,315 877,697
AAA West Knox Utility District, Knox County,
TN, Water & Sewer Rev., MBIA, 0s, 2003 1,045 656,124
AAA West Knox Utility District, Knox County,
TN, Water & Sewer Rev., MBIA, 0s, 2004 1,920 1,131,782
AAA West Knox Utility District, Knox County,
TN, Water & Sewer Rev., MBIA, 0s, 2005 1,920 1,060,512
AAA West Knox Utility District, Knox County,
TN, Water & Sewer Rev., MBIA, 0s, 2006 1,920 991,776
AAA West Knox Utility District, Knox County,
TN, Water & Sewer Rev., MBIA, 0s, 2007 1,920 925,690
NR Wilson County, TN, Water & Wastewater
Authority, 6s, 2014 1,000 966,870
-----------
$ 24,945,955
- ---------------------------------------------------------------------------
Turnpike Revenue - 0.7%
A Puerto Rico Highway & Transportation
Authority, Highway Rev., 5.5s, 2015 $ 1,000 $ 922,890
- ---------------------------------------------------------------------------
Sales and Excise Tax Revenue - 0.8%
A- Tennessee Local Development Authority Rev.
(Community Provider), 7s, 2021 $ 1,000 $ 1,049,590
- ---------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 14.3%
BBB Bristol, TN, Industrial Development (K-
Mart), 7.5s, 2008 $ 1,105 $ 1,167,421
AA Humphreys County, TN, Certificates of
Participation (DuPont), 6.7s, 2024 1,750 1,799,280
NR Knox County, TN, Industrial Development
Board (Kroger Co.), 8.1s, 2003 2,000 2,189,600
NR Lawrenceburg, TN, Industrial Development
Board (Tridon, Inc.), 9.625s, 2006 1,000 1,013,240
BBB + Maury County, TN, Industrial Development
Pollution Control Rev. (Saturn Corp.),
6.5s, 2024 1,500 1,463,445
BBB - McMinn County, TN, Industrial Development
Board, Pollution Control Rev. (Bowater),
7.625s, 2016 2,000 2,114,400
BBB Memphis-Shelby County, TN, Airport
Authority (Federal Express Corp.),
7.875s, 2009 2,755 2,983,334
BBB Memphis-Shelby County, TN, Airport
Authority (Federal Express Corp.),
6.2s, 2014 1,000 954,150
NR Metropolitan Government of Nashville &
Davidson County, TN, IDR (Wilson
Sporting), 7.75s, 2014 1,000 1,098,810
BB+ Metropolitan Nashville Airport Authority
(American Airlines, Inc.), 9.875s, 2005 2,500 2,598,000
A- Puerto Rico Industrial, Medical &
Environmental Pollution Control
Facilities, Finance Authority Rev. (Baxter
Travenol Laboratories), 8s, 2012 750 829,778
-----------
$ 18,211,458
- ---------------------------------------------------------------------------
Universities - 1.5%
AA Metropolitan Government of Nashville &
Davidson County, TN, Health, Educational &
Housing Facilities Board (Vanderbilt
University), 7.625s, 2016 $ 1,000 $ 1,071,700
AA Metropolitan Government of Nashville &
Davidson County, TN, Health, Educational &
Housing Facilities Board (Vanderbilt
University), 5.2s, 2018 1,000 887,630
-----------
$ 1,959,330
- ---------------------------------------------------------------------------
Inverse Floaters - 0.8%
AAA Metropolitan Government of Nashville &
Davidson County, Water & Sewer Rev., RIBS,
AMBAC, 7.668s, 2022(S) $ 1,000 $ 995,170
- ---------------------------------------------------------------------------
Indexed Securities - 2.7%
A Puerto Rico Public Buildings Authority,
GTD, Public Educational & Health, PSA
Fixed Rate, 5.385s, 2016* $ 2,000 $ 1,743,100
AAA Puerto Rico Telephone Authority Rev., 7-
Year Swap, "M", AMBAC, 4.47s, 2004* 2,000 1,647,640
-----------
$ 3,390,740
- ---------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $118,693,448) $123,524,941
- ---------------------------------------------------------------------------
Floating Rate Demand Notes - 2.0%
- ---------------------------------------------------------------------------
A- Sullivan County, TN, Industrial
Development, Pollution Control Rev.,
due 2016 $ 1,800 $ 1,800,000
NR Uinta County, WY, Pollution Control Rev.
(Chevron), due 2020 700 700,000
- ---------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 2,500,000
- ---------------------------------------------------------------------------
Call Option Purchased - 0.1%
- ---------------------------------------------------------------------------
Principal Amount
Issuer/Expiration Date/Strike Price of Contracts
- ---------------------------------------------------------------------------
State of New Jersey, GOB, "D"/February 2003/102
(Premium Paid, $125,600) $ 2,000 $ 152,300
- ---------------------------------------------------------------------------
Total Investments (Identified Cost, $121,319,048) $126,177,241
Other Assets, Less Liabilities - 1.1% 1,401,334
- ---------------------------------------------------------------------------
Net Assets - 100.0% $127,578,575
- ---------------------------------------------------------------------------
*Indexed security (see Note 7).
(S)Inverse floating rate security.
See notes to financial statements
<PAGE>
Portfolio of Investments - March 31, 1995
MFS TEXAS MUNICIPAL BOND FUND
Municipal Bonds - 97.9%
- ---------------------------------------------------------------------------
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------
General Obligation - 37.9%
NR Brenham, TX, Independent School District,
PSF, 5.25s, 2015 $1,110 $ 1,012,664
AAA Brownsville, TX, Public Improvement, AMBAC,
0s, 2011 250 95,812
AAA Clear Creek, TX, Independent School
District, PSF, 5.5s, 2014 1,000 942,710
AAA Garland, TX, Independent School District,
PSF, 5.5s, 2015 1,245 1,178,566
AAA Grapevine-Colleyville, TX, Independent
School District, PSF, 0s, 2014 530 162,816
NR La Grange, TX, Independent School District,
PSF, 4.875s, 2010 530 476,120
AAA Leander, TX, Independent School District,
PSF, 6s, 2018 1,000 997,410
NR Robstown, TX, Independent School District,
PSF, 0s, 2016 1,480 423,398
AA State of Texas, 6.8s, 2010 1,000 1,031,540
AAA Valwood, TX, Public Improvement Authority,
MBIA, 0s, 2005 500 276,375
NR Wylie, TX, Independent School District,
PSF, 6.9s, 2013 1,100 1,212,915
----------
$ 7,810,326
- ---------------------------------------------------------------------------
State and Local Appropriation - 8.6%
A- Texas National Research Laboratory
Commission Finance Corp., 7.1s, 2021 $ 200 $ 203,600
AAA State of Texas Public Finance Authority,
MBIA, 6.25s, 2009 1,000 1,048,970
AAA State of Texas Public Finance Authority,
Building Rev., MBIA, 0s, 2013 1,500 507,030
----------
$ 1,759,600
- ---------------------------------------------------------------------------
Refunded and Special Obligation - 5.2%
NR Arlington, TX, Permanent Improvement,
6.7s, 2002 $ 100 $ 108,744
AAA Coastal Water Authority, TX, Water
Conveyance Systems Rev., AMBAC,
6.25s, 2017 250 253,747
NR Mesquite, TX, Independent School District,
PSF, 6.2s, 2001 400 434,336
A Puerto Rico Public Buildings Authority,
6.875s, 2002 250 281,567
----------
$ 1,078,394
- ---------------------------------------------------------------------------
Single Family Housing Revenue - 3.1%
NR Midland, TX, Housing Finance Corp.,
8.15s, 2011 $ 359 $ 371,731
AA State of Texas, 7s, 2025 250 257,795
----------
$ 629,526
- ---------------------------------------------------------------------------
Insured Health Care Revenue - 17.1%
AAA Bexar County, TX, Health, MBIA, 6.5s, 2015 $ 500 $ 515,540
AAA Bexar County,TX, Health, MBIA, 6.75s, 2019 750 785,370
AAA North Central, TX, Health, MBIA,
5.75s, 2013 1,250 1,215,187
AAA Victoria County, TX, Health, AMBAC,
6.25s, 2016 1,000 1,012,670
----------
$ 3,528,767
- ---------------------------------------------------------------------------
Electric and Gas Utility Revenue - 4.3%
BBB Brazos River Authority, TX, Polloution
Control Rev. (Texas Utilities),
8.25s, 2019 $ 250 $ 268,710
AAA Brazos River Authority, TX, Rev. (Houston
Power & Light), AMBAC, 6.375s, 2012 250 256,752
AAA Texas Municipal Power Agency Rev.,
MBIA, 0s, 2016 1,350 363,028
----------
$ 888,490
- ---------------------------------------------------------------------------
Water and Sewer Utility Revenue - 9.3%
AAA Colorado River, TX, Municipal Water
District, Water Rev., AMBAC, 6.625s, 2021 $ 250 $ 268,720
AAA Houston, TX, Water & Sewer, AMBAC, 0s, 2010 2,000 789,200
AAA Texas Water Resources Finance Authority
Rev., AMBAC, 7.5s, 2013 800 852,824
----------
$ 1,910,744
- ---------------------------------------------------------------------------
Turnpike Revenue - 1.0%
A- Texas Turnpike Authority Rev. (North Dallas
Tollway), 7.125s, 2015 $ 200 $ 210,838
- ---------------------------------------------------------------------------
Airport and Port Revenue - 7.1%
BB+ Dallas-Fort Worth,TX (American Airlines),
7.5s, 2025 $1,200 $ 1,213,440
BB Dallas-Fort Worth, TX, International
Airport Facilities Improvement Corp. Rev.
(Delta Airlines), 7.125s, 2026 250 246,417
----------
$ 1,459,857
- ---------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 4.3%
BBB Angelina & Neches River Authority, TX,
Solid Waste Disposal Rev., 7.375s, 2015 $ 100 $ 104,922
BBB Gulf Coast Waste Disposal Authority, TX,
7.45s, 2026 100 105,024
BBB Gulf Coast Waste Disposal Authority, TX,
Solid Waste Disposal Rev., 7.25s, 2017 100 104,781
A Texas City, TX, Industrial Development
Corp. (ARCO Pipe Line), 7.375s, 2020 500 570,690
----------
$ 885,417
- ---------------------------------------------------------------------------
Total Investments (Identified Cost, $19,208,354) $20,161,959
Other Assets, Less Liabilities - 2.1% 428,946
- ---------------------------------------------------------------------------
Net Assets - 100.0% $20,590,905
- ---------------------------------------------------------------------------
See notes to financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS - March 31, 1995
MFS WASHINGTON MUNICIPAL BOND FUND
Municipal Bonds - 96.8%
- ---------------------------------------------------------------------------
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------
General Obligation - 29.7%
NR Cowlitz County, WA, School District No. 4,
6.7s, 2011 $ 150 $ 153,576
AA+ King County, WA, GO S'94A OID,
6.125s, 2012 500 504,975
AA King County, WA, School District No. 414,
6.125s, 2006 250 259,695
AA- King County, WA, School District No. 415,
5.55s, 2011 500 475,845
A+ Kitsap County, WA, 6.75s, 2011 410 429,799
AAA Lewis County, WA, 6.25s, 2012 250 254,987
AA+ Pike Place Market Preservation &
Development Authority, WA, Special
Obligation, 6.5s, 2017 185 189,214
AA+ Seattle, WA, 6.5s, 2012 170 175,197
A+ Seattle, WA, 5.65s, 2020 500 462,975
AA Spokane, WA, 6.125s, 2011 250 252,000
AA State of Washington, 0s, 2008 1,500 698,655
AA State of Washington, 6.75s, 2012 450 463,234
AA State of Washington, 6.4s, 2017 1,000 1,039,800
----------
$ 5,359,952
- ---------------------------------------------------------------------------
State and Local Appropriation - 2.5%
A+ Douglas County, WA, Public Utility District
No. 001, Wells Hydroelectric, 7.7s, 2008 $ 315 $ 357,210
A State of Washington, Certificates of
Participation (State Office Building),
6s, 2012 100 98,513
----------
$ 455,723
- ---------------------------------------------------------------------------
Refunded and Special Obligation - 5.1%
A+ Douglas County, WA, Public Utility District
No. 001, Wells Hydroelectric, 7.7s, 2000 $ 185 $ 210,732
AAA Puerto Rico Highway and Special Obligation
and Transport Authority, Highway Rev.,
6.5s, 2002 200 220,742
A Puerto Rico Public Buildings Authority,
6.875s, 2021 250 281,567
A+ Snohomish County, WA, Public Utility
District No. 1, Electric Rev., 6.8s, 2020 100 110,106
AA State of Washington, 6.7s, 2001 100 108,347
----------
$ 931,494
- ---------------------------------------------------------------------------
Multi-Family Housing Revenue - 1.4%
NR Bellingham, WA, Housing Authority Rev.
(Pacific Rim Project), 6.5s, 2022 $ 250 $ 250,690
- ---------------------------------------------------------------------------
Insured Health Care Revenue - 9.6%
AAA Washington Health Care Facilities Authority
Rev. (Allenmore Hospital), FGIC,
6.5s, 2013 $ 150 $ 152,348
AAA Washington Health Care Facilities Authority
Rev. (Franciscan Health/St. Claire), MBIA,
6.7s, 2021 250 259,253
AAA Washington Health Care Facilities Authority
Rev. (Group Health Cooperative/Puget
Sound), MBIA, 6.25s, 2021 250 250,413
AAA Washington Health Care Facilities Authority
Rev. (Multicare Medical Center/Tacoma),
FGIC, 5.75s, 2022 400 370,940
AAA Washington Health Care Facilities Authority
Rev. (Swedish Hospital Medical Center/
Seattle), FGIC, 6.3s, 2022 200 200,446
AAA Washington Health Care Facilities Authority
Rev. (Virginia Mason Group/Seattle), MBIA,
6.3s, 2017 500 504,805
----------
$ 1,738,205
- ---------------------------------------------------------------------------
Electric and Gas Utility Revenue - 25.8%
A+ Grant County, WA, Public, 6.375s, 2023 $1,000 $ 1,000,940
A+ Grant County, WA, Public Utility Distric
No. 2 (Wanapum Hydroelectric), 6.75s, 2023 255 261,576
AAA Snohomish County, WA, Public Utility
District No. 1, Electric Rev., FGIC,
5.5s, 2020 500 463,070
AAA Tacoma, WA, Electric Systems Rev.,
AMBAC, 5.5s, 2012 1,000 947,310
AA Washington Public Power Supply System,
Nuclear Project No.1 Rev., 7s, 2008 500 549,345
AA Washington Public Power Supply System,
Nuclear Project No. 2 Rev., 6s, 2012 500 483,170
AA Washington Public Power Supply System,
Nuclear Project No. 3 Rev., 0s, 2015 1,500 386,580
AA Washington Public Power Supply System,
Nuclear Project No. 3 Rev., 6.5s, 2018 100 100,431
AAA Washington Public Power Supply System,
Nuclear Project No. 3 Rev., MBIA,
7.125s, 2016 425 479,175
----------
$ 4,671,597
- ---------------------------------------------------------------------------
Water and Sewer Utility Revenue - 13.7%
AAA Richland, WA, Water & Sewer Rev., MBIA,
6.25s, 2012 $ 500 $ 503,860
AA Seattle, WA, Drainage & Wastewater Utility
Rev., 5.75s, 2022 635 603,815
AA- Seattle, WA, Municipality of Metropolitan
Seattle, Sewer Rev., 6.2s, 2032 500 490,085
AA Seattle, WA, Water Systems Rev., 5.5s, 2018 750 688,365
A- Soos Creek, WA, Water & Sewer District,
Water & Sewer Rev., 0s, 2010 200 77,138
A+ Vancouver, WA, Water & Sewer Rev.,
6.5s, 2012 100 104,039
----------
$ 2,467,302
- ---------------------------------------------------------------------------
Sales and Excise Tax Revenue - 0.6%
NR King County, WA, Housing Authority Rev.
(Spiritwood Manor), GNMA, 6.5s, 2012 $ 100 $ 100,986
- ---------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 8.4%
BBB Pilchuck Development Corp., WA (Tramco,
Inc.), 6s, 2023 $ 690 $ 609,042
A Port of Seattle, WA, Industrial Development
Corp. (Weyerhaeuser Co.), 5.6s, 2014 1,000 917,240
----------
$ 1,526,282
- ---------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $17,469,572) $17,502,231
- ---------------------------------------------------------------------------
Floating Rate Demand Note - 1.7%
- ---------------------------------------------------------------------------
NR Uinta County, WY, Pollution Control Rev.
(Chevron), due 2020, at Identified Cost $ 300 $ 300,000
- ---------------------------------------------------------------------------
Total Investments (Identified Cost, $17,769,572) $17,802,231
Other Assets, Less Liabilities - 1.5% 269,008
- ---------------------------------------------------------------------------
Net Assets - 100.0% $18,071,239
- ---------------------------------------------------------------------------
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------------------------------------------------------
Alabama Arkansas California Louisiana Mississippi Tennessee Texas Washington
March 31, 1995 Fund Fund Fund Fund Fund Fund Fund Fund
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments -
Identified cost $82,683,768 $190,400,752 $291,143,608 $17,662,299 $87,818,969 $121,319,048 $19,208,354 $17,769,572
Unrealized
appreciation 4,234,303 1,633,250 9,631,382 267,837 104,371 4,858,193 953,605 32,659
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Total, at value $86,918,071 $192,034,002 $300,774,990 $17,930,136 $87,923,340 $126,177,241 $20,161,959 $17,802,231
Cash 68,847 63,232 72,503 15,421 21,789 97,571 -- 65,018
Receivable for
investments sold 1,027,788 -- 1,062,031 1,410,694 1,018,362 181,818 234,410 --
Receivable for Fund
shares sold 135,156 150,965 582,274 225,156 263,156 411,888 91,972 1,566
Interest receivable 1,454,079 2,960,126 4,801,164 341,151 1,687,470 2,085,621 282,829 296,286
Deferred organization
expenses -- -- -- 6,969 8,334 -- 3,435 2,693
Other assets 1,161 6,994 4,871 187 1,146 1,638 255 266
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Total assets $89,605,102 195,215,319 $307,297,833 $19,929,714 $90,923,597 $128,955,777 $20,774,860 $18,168,060
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Liabilities:
Cash overdraft $ -- $ -- $ -- $ -- $ -- $ -- $ 138,294 $ --
Distributions payable 225,922 466,876 801,804 48,501 206,997 295,821 42,378 36,711
Payable for
investments
purchased 936,678 -- 949,781 302,046 2,237,191 412,198 -- --
Payable for Fund
shares reacquired 120,539 323,233 276,845 -- 7,838 491,721 -- 50,842
Payable for daily
variation margin
on closed futures
contracts -- -- 18,753 -- -- -- -- 6,691
Payable to
affiliates -
Management fee 1,332 2,936 3,353 107 728 1,927 113 100
Shareholder
servicing
agent fee 372 814 1,313 -- -- 544 -- --
Distribution fee 51,424 199 901 75 257 73,314 62 76
Accrued expenses and
other liabilities 68,333 85,167 169,137 6,684 8,699 101,677 3,108 2,401
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Total liabilities $ 1,404,600 $ 879,225 $ 2,221,887 $ 357,413 $ 2,461,710 $ 1,377,202 $ 183,955 $ 96,821
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Net assets $88,200,502 $194,336,094 $305,075,946 $19,572,301 $88,461,887 $127,578,575 $20,590,905 $18,071,239
=========== ============ ============ =========== =========== ============ =========== ===========
Net assets consist of:
Paid-in capital $84,988,837 $198,772,841 $310,089,338 $20,337,245 $92,187,686 $124,719,638 $21,192,333 $18,482,115
Unrealized
appreciation
(depreciation)
on investments 4,234,303 1,786,666 9,631,382 226,455 (19,776) 4,892,818 922,568 32,659
Accumulated net
realized loss
on investments (1,004,071) (5,902,391) (14,333,528) (1,008,526) (3,672,871) (1,805,579) (1,524,596) (448,296)
Accumulated
undistributed
(distributions in
excess of) net
investment income (18,567) (321,022) (311,246) 17,127 (33,152) (228,302) 600 4,761
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Total $88,200,502 $194,336,094 $305,075,946 $19,572,301 $88,461,887 $127,578,575 $20,590,905 $18,071,239
=========== ============ ============ =========== =========== ============ =========== ===========
Shares of beneficial
interest outstanding:
Class A 8,104,410 19,375,430 50,289,065 1,822,351 8,633,487 11,452,723 1,845,870 1,601,912
Class B 425,077 749,100 5,369,741 295,986 1,029,073 974,973 228,942 282,252
Class C -- -- 712,083 -- -- -- -- --
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Total shares
of beneficial
interest
outstanding 8,529,487 20,124,530 56,370,889 2,118,337 9,662,560 12,427,696 2,074,812 1,884,164
=========== ============ ============ =========== =========== ============ =========== ===========
Net assets:
Class A $83,804,867 $187,104,982 $272,161,170 $16,837,135 $79,033,292 $117,572,482 $18,317,785 $15,363,822
Class B 4,395,635 7,231,112 29,057,048 2,735,166 9,428,595 10,006,093 2,273,120 2,707,417
Class C -- -- 3,857,728 -- -- -- -- --
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Total net assets $88,200,502 $194,336,094 $305,075,946 $19,572,301 $88,461,887 $127,578,575 $20,590,905 $18,071,239
=========== ============ ============ =========== =========== ============ =========== ===========
Class A shares:
Net asset value and
redemption price per
share (net assets /
shares of beneficial
interest outstanding) $10.34 $ 9.66 $ 5.41 $ 9.24 $ 9.15 $10.27 $ 9.92 $ 9.59
====== ====== ====== ====== ====== ====== ====== ======
Offering price per
share (100/95.25 of
net asset value
per share) $10.86 $10.14 $ 5.68 $ 9.70 $ 9.61 $10.78 $10.41 $10.07
====== ====== ====== ====== ====== ====== ====== ======
Class B shares:
Net asset value,
offering price, and
redemption price per
share (net assets /
shares of beneficial
interest outstanding) $10.34 $ 9.65 $ 5.41 $ 9.24 $ 9.16 $10.26 $ 9.93 $ 9.59
====== ====== ====== ====== ====== ====== ====== ======
Class C shares:
Net asset value,
offering price, and
redemption price per
share (net assets /
shares of beneficial
interest outstanding) $ -- $ -- $ 5.42 $ -- $ -- $ -- $ -- $ --
====== ====== ====== ====== ====== ====== ====== ======
On sales of $100,000 or more, the offering price of Class A shares is reduced. A contingent deferred sales charge may be imposed on
redemptions of Class A and Class B shares.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Operations
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended Alabama Arkansas California Louisiana Mississippi Tennessee Texas Washington
March 31, 1995 Fund Fund Fund Fund Fund Fund Fund Fund
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net investment income:
Interest $ 5,701,782 $ 12,421,358 $ 20,605,991 $ 1,070,704 $ 5,405,579 $ 8,488,724 $ 1,258,387 $ 1,134,419
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Expenses -
Management fee $ 474,038 $ 1,093,773 $ 1,746,273 $ 93,993 $ 478,963 $ 692,926 $ 112,189 $ 101,091
Trustees'
compensation 14,727 13,335 41,169 13,470 15,585 15,009 13,594 12,226
Shareholder servicing
agent fees (Class A) 123,373 287,850 434,586 22,431 118,525 177,357 27,742 23,942
Shareholder servicing
agent fees (Class B) 8,141 14,886 54,620 4,655 17,492 17,047 4,142 5,282
Shareholder servicing
agent fees (Class C) -- -- 4,589 -- -- -- -- --
Distribution and
service fees
(Class A) 289,903 -- -- -- -- 413,832 -- --
Distribution and
service fees
(Class B) 37,007 67,664 248,272 21,147 79,585 77,488 18,838 24,013
Distribution and
service fees
(Class C) -- -- 30,592 -- -- -- -- --
Custodian fee 35,171 72,185 135,451 -- 38,379 67,918 1,039 438
Printing 12,318 25,605 34,604 3,580 29,462 17,286 4,120 6,730
Postage 5,965 8,389 21,632 2,140 8,644 9,534 3,289 4,067
Auditing fees 31,993 29,493 42,318 25,843 33,793 27,843 28,143 23,393
Legal fees 1,804 423 7,785 2,473 3,600 3,516 1,322 2,121
Amortization of
organization
expenses 3,229 2,244 -- 1,741 3,558 -- 1,868 1,149
Miscellaneous 66,911 90,843 157,667 37,642 68,339 72,617 41,376 52,105
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Total expenses $ 1,104,580 $ 1,706,690 $ 2,959,558 $ 229,115 $ 895,925 $ 1,592,373 $ 257,662 $ 256,557
Reduction of expenses
by investment
adviser and
distributor (82,488) (152,542) (476,700) (204,697) (620,712) -- (235,309) (229,452)
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Net expenses $ 1,022,092 $ 1,554,148 $ 2,482,858 $ 24,418 $ 275,213 $ 1,592,373 $ 22,353 $ 27,105
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Net investment
income $ 4,679,690 $ 10,867,210 $ 18,123,133 $ 1,046,286 $ 5,130,366 $ 6,896,351 $ 1,236,034 $ 1,107,314
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Realized and
unrealized gain
(loss) on
investments:
Realized gain (loss)
(identified cost
basis) -
Investment
transactions $ (842,153) $ (3,715,123) $(12,640,317) $ (827,903) $(3,066,576) $ (1,828,734) $(1,402,194) $ (682,332)
Futures contracts 121,465 (1,098,870) (590,239) (131,291) (354,340) 146,443 (58,963) 310,217
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Net realized loss
on investments $ (720,688) $ (4,813,993) $(13,230,556) $ (959,194) $(3,420,916) $ (1,682,291) $(1,461,157) $ (372,115)
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Change in unrealized
appreciation
(depreciation) -
Investments $ 1,647,211 $ 4,634,372 $ 9,419,721 $ 1,236,932 $ 3,481,213 $ 1,755,271 $ 1,716,481 $ 989,283
Futures contracts (239,563) (71,304) (839,987) (90,211) (374,434) (88,656) (93,247) (73,035)
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Net unrealized gain
on investments $ 1,407,648 $ 4,563,068 $ 8,579,734 $ 1,146,721 $ 3,106,779 $ 1,666,615 $ 1,623,234 $ 916,248
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Net realized and
unrealized gain
(loss) on
investments $ 686,960 $ (250,925) $ (4,650,822) $ 187,527 $ (314,137) $ (15,676) $ 162,077 $ 544,133
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Increase in net
assets from
operations $ 5,366,650 $ 10,616,285 $ 13,472,311 $ 1,233,813 $ 4,816,229 $ 6,880,675 $ 1,398,111 $ 1,651,447
=========== ============ ============ =========== =========== ============ =========== ===========
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended Alabama Arkansas California Louisiana Mississippi Tennessee Texas Washington
March 31, 1995 Fund Fund Fund Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets:
From operations -
Net investment income $ 4,679,690 $ 10,867,210 $ 18,123,133 $ 1,046,286 $ 5,130,366 $ 6,896,351 $ 1,236,034 $ 1,107,314
Net realized loss on
investments (720,688) (4,813,993) (13,230,556) (959,194) (3,420,916) (1,682,291) (1,461,157) (372,115)
Net unrealized gain
on investments 1,407,648 4,563,068 8,579,734 1,146,721 3,106,779 1,666,615 1,623,234 916,248
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Increase in net
assets from
operations $ 5,366,650 $ 10,616,285 $ 13,472,311 $ 1,233,813 $ 4,816,229 $ 6,880,675 $ 1,398,111 $ 1,651,447
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Distributions declared
to shareholders -
From net investment
income (Class A) $(4,455,164) $(10,558,798) $(16,697,698) $ (922,531) $(4,753,634) $ (6,505,625) $(1,132,237) $ (977,079)
From net investment
income (Class B) (169,047) (299,458) (1,163,387) (109,353) (398,325) (369,736) (95,908) (122,848)
From net investment
income (Class C) -- -- (145,036) -- -- -- -- --
In excess of net
investment income
(Class A) -- -- -- -- (30,589) -- -- --
In excess of net
investment income
(Class B) -- -- -- -- (2,563) -- -- --
From net realized
gain on investments
(Class A) -- -- -- (38,988) (14,334) (16,392) (62,387) --
From net realized
gain on investments
(Class B) -- -- -- (5,437) (1,273) (887) (4,944) --
In excess of net
realized gain on
investments (Class A) (208,081) (1,025,561) (252,101) (43,294) (231,411) (116,960) (58,780) (12,874)
In excess of net
realized gain on
investments (Class B) (8,165) (37,275) (20,873) (6,038) (20,544) (6,328) (4,659) (1,694)
In excess of net
realized gain on
investments (Class C) -- -- (2,849) -- -- -- -- --
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Total distributions
declared to
shareholders $(4,840,457) $(11,921,092) $(18,281,944) $(1,125,641) $(5,452,673) $ 7,015,928 $(1,358,915) $(1,114,495)
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Fund share (principal)
transactions -
Net proceeds from
sale of shares $12,406,978 $ 19,194,317 $ 77,112,097 $ 6,579,848 $22,690,809 $ 18,228,934 $ 5,266,676 $ 2,662,499
Net asset value of
shares issued to
shareholders in
reinvestment of
distributions 1,737,757 5,605,569 7,886,955 629,725 2,809,324 3,344,948 791,694 590,085
Cost of shares
reacquired (10,820,302) (30,096,110) (111,856,077) (2,755,026) (22,467,966) (16,270,748) (4,204,171) (5,624,138)
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Increase (decrease)
in net assets from
Fund share
transactions $ 3,324,433 $ (5,296,224) $(26,857,025) $ 4,454,547 $ 3,032,167 $ 5,303,134 $ 1,854,199 $(2,371,554)
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Total increase
(decrease) in
net assets $ 3,850,626 $ (6,601,031) $(31,666,658) $ 4,562,719 $ 2,395,723 $ 5,167,881 $ 1,893,395 $(1,834,602)
Net assets:
At beginning of
period 84,349,876 200,937,125 336,742,604 15,009,582 86,066,164 122,410,694 18,697,510 19,905,841
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
At end of period $88,200,502 $194,336,094 $305,075,946 $19,572,301 $88,461,887 $127,578,575 $20,590,905 $18,071,239
=========== ============ ============ =========== =========== ============ =========== ===========
Accumulated
undistributed
(distributions in
excess of) net
investment income
included in net assets
at end of period $ (18,567) $ (321,022) $ (587,069) $ 17,127 $ (33,152) $ (228,302) $ 600 $ 4,761
=========== ============ ============ =========== =========== ============ =========== ===========
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- ---------------------------------------------------------------------------------------------------------------------------------
Two Months Ended Alabama Arkansas California Louisiana Mississippi Tennessee Texas Washington
March 31, 1994 Fund Fund Fund Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets:
From operations -
Net investment income $ 742,930 $ 1,760,234 $ 3,193,864 $ 138,157 $ 816,978 $ 1,087,145 $ 182,698 $ 189,192
Net realized gain
(loss) on investments (218,380) (20,373) (976,424) 39,307 7,732 94,514 68,685 (65,318)
Net unrealized loss
on investments (5,633,075) (15,902,664) (28,853,607) (1,454,210) (7,417,766) (8,087,840) (1,911,784) (1,927,403)
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Decrease in net
assets from
operations $(5,108,525) $(14,162,803) $(26,636,167) $(1,276,746) $(6,593,056) $ (6,906,181) $(1,660,401) $(1,803,529)
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Distributions declared
to shareholders -
From net investment
income (Class A) $ (642,206) $ (1,439,155) $ (2,653,924) $ (129,131) $ (779,929) $ (790,324) $ (170,722) $ (177,648)
From net investment
income (Class B) (17,979) (36,688) (137,986) (11,054) (48,348) (22,485) (7,965) (12,167)
From net investment
income (Class C) -- -- (7,584) -- -- -- -- --
In excess of net
investment income
(Class A) (74,580) (328,710) (419,447) -- -- (250,457) (6,751) (1,973)
In excess of net
investment income
(Class B) -- (1,266) (8,601) -- (1,522) -- (538) (653)
In excess of net
investment income
(Class C) -- -- (210) -- -- -- -- --
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Total distributions
declared to
shareholders $ (734,765) $ (1,805,819) $ (3,227,752) $ (140,185) $ (829,799) $ (1,063,266) $ (185,976) $ (192,441)
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Fund share (principal)
transactions -
Net proceeds from
sale of shares $ 2,704,768 $ 9,384,274 $ 19,676,257 $ 1,611,118 $ 6,980,902 $ 4,465,521 $ 1,598,909 $ 1,727,976
Net asset value of
shares issued to
shareholders in
reinvestment of
distributions 181,462 818,684 1,275,275 80,378 400,986 473,801 102,408 101,972
Cost of shares
reacquired (2,305,866) (2,018,441) (31,041,059) (307,796) (4,338,205) (1,436,635) (1,101,058) (664,502)
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Increase (decrease)
in net assets from
Fund share
transactions $ 580,364 $ 8,184,517 $(10,089,527) $ 1,383,700 $ 3,043,683 $ 3,502,687 $ 600,259 $ 1,165,446
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Total decrease in
net assets $(5,262,926) $ (7,784,105) $(39,953,446) $ (33,231) $(4,379,172) $ (4,466,760) $(1,246,118) $ (830,524)
Net assets:
At beginning of period 89,612,802 208,721,230 376,696,050 15,042,813 90,445,336 126,877,454 19,943,628 20,736,365
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
At end of period $84,349,876 $200,937,125 $336,742,604 $15,009,582 $86,066,164 $122,410,964 $18,697,510 $19,905,841
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Accumulated
undistributed
(distributions in
excess of) net
investment income
included in net assets
at end of period $ (74,046) $ (329,976) $ (428,258) $ 2,725 $ 21,593 $ (249,292) $ (7,289) $ (2,626)
=========== ============ ============ =========== =========== ============ =========== ===========
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended Alabama Arkansas California Louisiana Mississippi Tennessee Texas Washington
January 31, 1994 Fund Fund Fund Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets:
From operations -
Net investment income $ 4,093,023 $ 9,049,640 $ 16,104,535 $ 528,534 $ 3,785,856 $ 5,988,734 $ 791,080 $ 823,862
Net realized gain on
investments 355,593 158,439 1,728,772 30,592 29,039 314,357 25,837 127,728
Net unrealized gain
on investments 4,630,945 9,452,611 6,269,162 533,944 3,900,962 5,637,130 993,292 919,736
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Increase in net
assets from
operations $ 9,079,561 $ 18,660,690 $ 24,102,469 $ 1,093,070 $ 7,715,857 $ 11,940,221 $ 1,810,209 $ 1,871,326
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Distributions declared
to shareholders -
From net investment
income (Class A) $(3,971,212) $ (8,969,014) $(15,677,655) $ (508,129) $(3,683,450) $ (5,699,354) $ (782,629) $ (808,437)
From net investment
income (Class B) (21,255) (43,862) (181,793) (15,652) (66,029) (38,741) (10,458) (15,592)
From net investment
income (Class C) -- -- (174) -- -- -- -- --
From net realized
gain on investments
(Class A) (289,469) (30,747) (3,880,957) (23,406) -- -- (22,456) (124,418)
From net realized
gain on investments
(Class B) (2,977) (472) (112,146) (2,068) -- -- (866) (6,837)
In excess of net
investment income
(Class A) (82,527) (283,037) (387,929) -- -- (274,002) (3,729) --
In excess of net
investment income
(Class B) -- (1,354) (6,394) -- -- -- (282) --
In excess of net
investment income
(Class C) -- -- (47) -- -- -- -- --
In excess of net
realized gain on
investments (Class A) -- (5,086) -- -- -- -- (1,304) --
In excess of net
realized gain on
investments (Class B) -- (103) -- -- -- -- (50) --
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Total distributions
declared to
shareholders $(4,367,440) $ (9,333,675) $(20,247,095) $ (549,255) $(3,749,479) $ (6,012,097) $ (821,774) $ (995,284)
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Fund share (principal)
transactions -
Net proceeds from sale
of shares $24,894,651 $ 82,745,126 $142,746,057 $15,436,731 $51,554,267 $ 26,902,090 $11,014,264 $11,380,038
Net asset value of
shares issued to
shareholders in
reinvestment of
distributions 966,178 4,144,147 7,883,784 320,926 1,862,922 2,655,325 423,123 455,552
Cost of shares
reacquired (8,638,316) (12,138,750) (49,967,989) (1,258,659) (8,150,342) (8,051,357) (967,568) (1,548,837)
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Increase in net
assets from Fund
share transactions $17,222,513 $ 74,750,523 $100,661,852 $14,498,998 $45,266,847 $ 21,506,058 $10,469,819 $10,286,753
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
Total increase in
net assets $21,934,634 $ 84,077,538 $104,517,226 $15,042,813 $49,233,225 $ 27,434,182 $11,458,254 $11,162,795
Net assets:
At beginning of period 67,678,168 124,643,692 272,178,824 -- 41,212,111 99,443,272 8,485,374 9,573,570
----------- ------------ ------------ ----------- ----------- ------------ ----------- -----------
At end of period $89,612,802 $208,721,230 $376,696,050 $15,042,813 $90,445,336 $126,877,454 $19,943,628 $20,736,365
=========== ============ ============ =========== =========== ============ =========== ===========
Accumulated
undistributed
(distributions in
excess of) net
investment income
included in net assets
at end of period
$ (82,211) $ (284,391) $ (394,370) $ 4,753 $ 34,414 $ (273,171) $ (4,011) $ 623
=========== ============ ============ =========== =========== ============ =========== ===========
*For the eleven months ended January 31, 1994.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights
- -----------------------------------------------------------------------------------------------------------------------------------
Alabama Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
March 31, January 31, March 31, January 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1994<F8> 1994 1993 1992 1991 1995 1994<F8> 1994<F1>
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Class B
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a
share outstanding
throughout each period):
Net asset value -
beginning of period $10.27 $10.98 $10.33 $ 9.95 $ 9.65 $ 9.53 $10.27 $10.98 $10.93
------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations<F7> -
Net investment income
(loss)<F5> $ 0.56 $ 0.09 $ 0.55 $ 0.56 $ 0.60 $ 0.59 $ 0.47 $ 0.08 $ 0.18
Net realized and
unrealized gain (loss)
on investments 0.09 (0.71) 0.69 0.41 0.41 0.08 0.09 (0.71) 0.07
------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations $ 0.65 $(0.62) $ 1.24 $ 0.97 $ 1.01 $ 0.67 $ 0.56 $(0.63) $ 0.25
------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions
declared to
shareholders -
From net investment
income $(0.55) $(0.08) $(0.54) $(0.58) $(0.65) $(0.55) $(0.46) $ (0.08) $(0.18)
From net realized gain
on investments -- -- (0.04) (0.01) (0.06) -- -- -- (0.02)
In excess of net
investment income<F2> -- (0.01) (0.01) -- -- -- -- -- --
In excess of net
realized gain on
investments (0.03) -- -- -- -- -- (0.03) -- --
------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions
declared to
shareholders $(0.58) $(0.09) $(0.59) $(0.59) $(0.71) $(0.55) $(0.49) $(0.08) $(0.20)
====== ====== ====== ====== ====== ====== ====== ====== ======
Net asset value -
end of period $10.34 $10.27 $10.98 $10.33 $ 9.95 $ 9.65 $10.34 $10.27 $10.98
====== ====== ====== ====== ====== ====== ====== ====== ======
Total return<F6> 6.51% (5.66)%<F4> 12.26% 10.08% 10.92% 7.31% 5.64% (5.79)%<F4> 2.29%<F4>
Ratios (to average net
assets)/Supplemental
data<F5>:
Expenses 1.15% 1.18%<F3> 1.21% 1.08% 0.95% 0.57%<F3> 1.97% 2.01%<F3> 1.98%<F3>
Net investment income 5.47% 5.17%<F3> 5.13% 5.79% 6.19% 6.63%<F3> 4.63% 4.30%<F3> 3.98%<F3>
Portfolio turnover 30% 4% 12% 17% 23% 64% 30% 4% 12%
Net assets at end of
period (000 omitted) $83,805 $81,501 $87,344 $67,678 $48,476 $22,076 $ 4,396 $ 2,849 $ 2,269
<F1> For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F2> Per share distributions in excess of net investment income for the year ended January 31, 1992 were $0.004.
<F3> Annualized.
<F4> Unannualized.
<F5> The investment adviser did not impose all or a portion of its advisory, distribution or expense reimbursement fees
for the periods indicated. If these fees had been incurred by the Fund, the net investment income per share and the
ratios would have been:
Net investment
income $ 0.55 $ 0.09 $ 0.54 $ 0.55 $ 0.59 $ 0.52 -- -- --
Ratios (to average
net assets):
Expenses 1.25% 1.28%<F3> 1.31% 1.18% 1.08% 1.33%<F3> -- -- --
Net investment
income 5.37% 5.07%<F3> 5.03% 5.69% 6.06% 5.87%<F3> -- -- --
<F6> Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
<F7> Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
<F8> For the two months ended March 31, 1994.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------------------------------
Arkansas Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
March 31, January 31, March 31, January 31,
- ----------------------------------------------------------------------------------------------------------------------------------
1995 1994<F5> 1994 1993<F1> 1995 1994<F5> 1994<F2>
- ----------------------------------------------------------------------------------------------------------------------------------
Class A Class B
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 9.69 $10.47 $ 9.88 $ 9.53 $ 9.69 $10.47 $10.42
------ ------ ------ ------ ------ ------ ------
Income from investment operations<F10> -
Net investment income<F8> $ 0.53 $ 0.09 $ 0.56 $ 0.58 $ 0.42 $ 0.07 $ 0.23
Net realized and unrealized gain
(loss) on investments 0.02 (0.77) 0.60 0.35 0.01 (0.78) (0.04)
------ ------ ------ ------ ------ ------ ------
Total from investment operations $ 0.55 $(0.68) $ 1.16 $ 0.93 $ 0.43 $(0.71) $ 0.19
------ ------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.53) $(0.08) $(0.55) $(0.58) $(0.42) $(0.07) $(0.14)
From net realized gain on investments<F3> -- -- -- -- -- -- --
In excess of net investment income<F4> -- (0.02) (0.02) -- -- -- --
In excess of net realized gain on investments (0.05) -- -- -- (0.05) -- --
------ ------ ------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.58) $(0.10) $(0.57) $(0.58) $(0.47) $(0.07) $(0.14)
------ ------ ------ ------ ------ ------ ------
Net asset value - end of period $ 9.66 $ 9.69 $10.47 $ 9.88 $ 9.65 $ 9.69 $10.47
====== ====== ====== ====== ====== ====== ======
Total return<F9> 5.90% (6.61)%<F7> 11.95% 10.11%<F7> 4.67% (6.81)%<F7> 2.18%<F7>
Ratios (to average net assets)/
Supplemental data<F8>:
Expenses 0.75% 0.75%<F6> 0.63% 0.16%<F6> 1.84% 1.82%<F6> 1.75%<F6>
Net investment income 5.51% 5.21%<F6> 5.30% 6.04%<F6> 4.40% 4.11%<F6> 3.87%<F6>
Portfolio turnover 24% 1% 3% 10% 24% 1% 3%
Net assets at end of period (000 omitted) $187,105 $195,042 $203,542 $124,644 $7,231 $5,895 $5,179
<FN>
<F1>For the period from the commencement of investment operations, February 3, 1992 to January 31, 1993.
<F2>For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F3>For the year ended January 31, 1994, the per share distributions from net realized gain on investments and in excess of net
realized gain on investments were $0.0016 and $0.0003, respectively, for both Class A and Class B shares.
<F4>Per share distributions in excess of net investment income for the two months ended March 31, 1994 and the year ended January
31, 1994, respectively, were $0.002 and $0.004 for Class B shares.
<F5>For the two months ended March 31, 1994.
<F6>Annualized.
<F7>Unannualized.
<F8>The investment adviser did not impose all or a portion of its advisory, distribution or expense reimbursement fees for the
periods indicated. If these fees had been incurred by the Fund, the net investment income per share and the ratios would
have been:
Net investment income $ 0.52 $ 0.09 $ 0.53 $ 0.52 $ 0.41 $ 0.07 $ 0.12
Ratios (to average net assets):
Expenses 0.82% 0.96%<F6> 0.91% 0.75%<F6> 1.91% 2.02%<F6> 3.44%<F6>
Net investment income 5.43% 5.01%<F6> 5.01% 5.45%<F6> 4.33% 3.91%<F6> 2.18%<F6>
<F9>Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results would
have been lower.
<F10>Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
Financial Highlights - continued
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
California Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended
March 31, January 31, February 28,
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1994<F8> 1994<F7> 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 5.47 $ 5.95 $ 5.88 $ 5.42 $ 5.26 $ 5.19
------ ------ ------ ------ ------ ------
Income from investment operations<F5>-
Net investment income<F3> $ 0.31 $ 0.05 $ 0.30 $ 0.34 $ 0.35 $ 0.33
Net realized and unrealized gain (loss) on investments (0.05) (0.48) 0.14 0.47 0.20 0.07
------ ------ ------ ------ ------ ------
Total from investment operations $ 0.26 $(0.43) $ 0.44 $ 0.81 $ 0.55 $ 0.40
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.31) $(0.04) $(0.29) $(0.34) $(0.37) $(0.33)
From net realized gain on investments -- -- (0.07) (0.01) (0.02) --
In excess of net investment income<F6> -- (0.01) (0.01) -- -- --
In excess of net realized gain on investments (0.01) -- -- -- -- --
------ ------ ------ ------ ------ ------
Total distributions declared to shareholders (0.32) $(0.05) $(0.37) $(0.35) $(0.39) $(0.33)
------ ------ ------ ------ ------ ------
Net asset value - end of period $ 5.41 $ 5.47 $ 5.95 $ 5.88 $ 5.42 $ 5.26
====== ====== ====== ====== ====== ======
Total return<F4> 4.85% (7.21)%<F2> 7.64% 15.55% 10.69% 8.03%
Ratios (to average net assets)/Supplemental data<F3>:
Expenses 0.69% 0.68%<F1> 0.60%<F1> 0.39% 0.40% 0.87%
Net investment income 5.80% 5.27%<F1> 4.99%<F1> 6.18% 6.53% 6.39%
Portfolio turnover 57% 8% 38% 64% 73% 102%
Net assets at end of period (000 omitted) $272,161 $313,790 $356,419 $272,179 $177,291 $84,551
<FN>
<F1>Annualized.
<F2>Unannualized.
<F3>The investment adviser did not impose all or a portion of its advisory, distribution or expense reimbursement fees for the
periods indicated. If these fees had been incurred by the Fund, the net investment income per share and the ratios would
have been:
Net investment income $ 0.30 $ 0.05 $ 0.29 $ 0.32 $ 0.33
Ratios (to average net assets):
Expenses 0.84% 0.83%<F1> 0.78%<F1> 0.77% 0.79%
Net investment income 5.65% 5.12%<F1> 4.82%<F1> 5.80% 6.14%
<F4>Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F5>Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
<F6>Per share distributions in excess of net investment income for the year ended March 31, 1995 were $0.0027 for Class A shares.
<F7>For the eleven months ended January 31, 1994.
<F8>For the two months ended March 31, 1994.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------------
California Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
February 28, March 31, January 31, March 31, January 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1990 1989 1988 1987 1986<F1> 1995 1994<F4> 1994<F2> 1995 1994<F4> 1994<F3>
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Class B Class C
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -
beginning of period $ 5.06 $ 5.08 $ 5.38 $ 5.07 $ 4.76 $ 5.47 $ 5.95 $ 6.02 $ 5.48 $ 5.95 $ 5.89
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations<F6> -
Net investment
income<F10> $ 0.33 $ 0.32 $ 0.31 $ 0.32 $ 0.20 $ 0.25 $ 0.04 $ 0.10 $ 0.26 $ 0.03 $ 0.01
Net realized and
unrealized gain
(loss) on investments 0.13 (0.02) (0.29) 0.34 0.28 (0.05) (0.48) -- (0.06) (0.46) 0.06
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations $ 0.46 $ 0.30 $ 0.02 $ 0.66 $ 0.48 $ 0.20 $(0.44) $ 0.10 $ 0.20 $(0.43) $ 0.07
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions
declared to
shareholders -
From net investment
income $(0.33) $(0.32) $(0.31) $(0.33) $(0.17) $(0.25)$(0.04) $(0.10) $(0.25) $(0.04) $(0.01)
From net realized
gain on
investments -- -- (0.01) (0.02) -- -- -- (0.07) -- -- --
In excess of net
investment income<F7> -- -- -- -- -- -- -- -- -- -- --
In excess of net
realized gain on
investments -- -- -- -- -- (0.01) -- -- (0.01) -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions
declared to
shareholders $(0.33) $(0.32) $(0.32) $(0.35) $(0.17) $(0.26)$(0.04) $(0.17) $(0.26) $(0.04) $(0.01)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value -
end of period $ 5.19 $ 5.06 $ 5.08 $ 5.38 $ 5.07 $ 5.41 $ 5.47 $ 5.95 $ 5.42 $ 5.48 $ 5.95
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return<F5> 9.28% 6.07% 0.83% 13.57% 9.77% 3.73% (7.38)%<F9> 1.68%<F9> 3.79% (7.22)%<F9> 1.25%
Ratios (to average net
assets)/
Supplemental data<F10>:
Expenses 1.00% 1.28% 1.20% 1.04% 0.95%<F8>1.76% 1.69%<F8> 1.60%<F8> 1.69% 1.64%<F8> 2.02%<F8>
Net investment income 6.35% 6.35% 6.33% 6.25% 7.34%<F8>4.72% 4.18%<F8> 3.64%<F8> 4.79% 3.92%<F8> 1.78%<F8>
Portfolio turnover 243% 188% 240% 54% 23% 57% 8% 38% 57% 8% 38%
Net assets at end of
period (000 omitted) $68,879 $59,212 $59,479 $62,368 $17,488 $29,057 $21,252 $19,360 $3,858 $1,701 $917
<FN>
<F1> For the period from the commencement of investment operations, June 18, 1985 to February 28, 1986.
<F2> For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F3> For the period from the commencement of offering of Class C shares, January 3, 1994 to January 31, 1994.
<F4> For the two months ended March 31, 1994.
<F5> Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F6> Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
<F7> Per share distributions in excess of net investment income for the two months ended March 31, 1994 were $0.002 and $0.001
for Class B and Class C shares, respectively, and for the eleven months ended January 31, 1994 were $0.003 for both Class B
and Class C shares.
<F8> Annualized.
<F9> Unannualized.
<F10>The investment adviser did not impose all or a portion of its advisory, distribution or expense reimbursement fees for the
periods indicated. If these fees had been incurred by the Fund, the net investment income per share and the ratios would
have been:
Net investment income -- -- -- -- -- $ 0.24 $ 0.04 $ 0.09 $ 0.25 $ 0.03 $ 0.00
Ratios (to average
net assets):
Expenses -- -- -- -- -- 1.91% 1.83%<F8> 1.81%<F8> 1.84% 1.80%<F8> 3.53%<F8>
Net investment income -- -- -- -- -- 4.57% 4.04%<F8> 3.43%<F8> 4.64% 3.77%<F8> 0.27%<F8>
</TABLE>
See notes to financial statements
<PAGE>
Financial Statements - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------------------------------
Louisiana Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
March 31, January 31, March 31, January 31,
- ----------------------------------------------------------------------------------------------------------------------------------
1995 1994<F7> 1994 1995 1994<F7> 1994<F1>
- ----------------------------------------------------------------------------------------------------------------------------------
Class A Class B
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.22 $10.13 $ 9.53 $ 9.23 $10.13 $10.08
------ ------ ------ ------ ------ ------
Income from investment operations<F6> -
Net investment income<F4> $ 0.57 $ 0.09 $ 0.52 $ 0.47 $ 0.07 $ 0.18
Net realized and unrealized gain (loss)
on investments 0.06 (0.91) 0.62 0.06 (0.89) 0.07
------ ------ ------ ------ ------ ------
Total from investment operations $ 0.63 $(0.82) $ 1.14 $ 0.53 $(0.82) $ 0.25
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.56) $(0.09) $(0.52) $(0.47) $(0.08) $(0.18)
From net realized gain on investments (0.02) -- (0.02) (0.02) -- (0.02)
In excess of net realized gain on investments (0.03) -- -- (0.03) -- --
------ ------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.61) $(0.09) $(0.54) $(0.52) $(0.08) $(0.20)
------ ------ ------ ------ ------ ------
Net asset value - end of period $ 9.24 $ 9.22 $10.13 $ 9.24 $ 9.23 $10.13
====== ====== ====== ====== ====== ======
Total return<F5> 7.18% (8.10)%<F3> 12.33% 6.01% (8.16)%<F3> 2.48%<F3>
Ratios (to average net assets)/
Supplemental data<F4>:
Expenses 0.02% 0.00%<F2> 0.00% 1.02% 1.00%<F2> 1.00%<F2>
Net investment income 6.25% 5.64%<F2> 5.41% 5.25% 4.54%<F2> 4.32%<F2>
Portfolio turnover 81% 2% 33% 81% 2% 33%
Net assets at end of period (000 omitted) $16,837 $13,401 $13,781 $2,735 $1,608 $1,263
<FN>
<F1>For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F2>Annualized.
<F3>Unannualized.
<F4>The investment adviser did not impose all or a portion of its advisory, distribution or expense reimbursement fees for the
periods indicated. If these fees had been incurred by the Fund, and if the expense reimbursement agreement had not been in
effect, the net investment income per share and the ratios would have been:
Net investment income $ 0.46 $ 0.05 $ 0.32 $ 0.36 $ 0.03 $ 0.09
Ratios (to average net assets):
Expenses 1.21% 2.33%<F2> 2.03% 2.28% 3.40%<F2> 3.08%<F2>
Net investment income 5.06% 3.31%<F2> 3.38% 3.99% 2.14%<F2> 2.24%<F2>
<F5>Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F6>Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
<F7>For the two months ended March 31, 1994.
</TABLE>
See notes to financial statements
<PAGE>
Financial Statements - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------------------------------
Mississippi Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
March 31, January 31, March 31, January 31,
- ----------------------------------------------------------------------------------------------------------------------------------
1995 1994<F9> 1994 1993<F1> 1995 1994<F9> 1994<F2>
- ----------------------------------------------------------------------------------------------------------------------------------
Class A Class B
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.19 $10.00 $ 9.38 $ 9.53 $ 9.19 $ 9.99 $ 9.94
------ ------ ------ ------ ------ ------ ------
Income from investment operations<F7> -
Net investment income<F5> $ 0.54 $ 0.09 $ 0.55 $ 0.24 $ 0.45 $ 0.07 $ 0.18
Net realized and unrealized gain (loss)
on investments (0.01) (0.81) 0.62 (0.15) -- (0.79) 0.05
------ ------ ------ ------ ------ ------ ------
Total from investment operations $ 0.53 $(0.72) $ 1.17 $ 0.09 $ 0.45 $(0.72) $ 0.23
------ ------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income<F8> $(0.54) $(0.09) $(0.55) $(0.24) $(0.45) $(0.08) $(0.18)
From net realized gain on investments<F10> -- -- -- -- -- -- --
In excess of net investment income<F11> -- -- -- -- -- -- --
In excess of net realized gain on investments (0.03) -- -- -- (0.03) -- --
------ ------ ------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.57) $(0.09) $(0.55) $(0.24) $(0.48) $(0.08) $(0.18)
------ ------ ------ ------ ------ ------ ------
Net asset value - end of period $ 9.15 $ 9.19 $10.00 $ 9.38 $ 9.16 $ 9.19 $ 9.99
====== ====== ====== ====== ====== ====== ======
Total return<F6> 6.08% (7.20)%<F4> 12.80% 5.00%<F4> 5.14% (7.27)%<F4> 2.33%<F4>
Ratios (to average net assets)/
Supplemental data<F5>:
Expenses 0.22% 0.10%<F3> 0.03% 0.00%<F3> 1.23% 1.10%<F3> 1.06%<F3>
Net investment income 5.99% 5.69%<F3> 5.68% 5.59%<F3> 4.97% 4.67%<F3> 4.29%<F3>
Portfolio turnover 47% 2% 28% 14% 47% 2% 28%
Net assets at end of period (000 omitted) $79,033 $79,541 $84,177 $41,212 $9,429 $6,526 $6,268
<FN>
<F1> For the period from the commencement of investment operations, August 6, 1992 to January 31, 1993.
<F2> For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F3> Annualized.
<F4> Unannualized.
<F5> The investment adviser did not impose all or a portion of its advisory, distribution or expense reimbursement fees for the
periods indicated. If these fees had been incurred by the Fund, and if the reimbursement agreement had not been in effect,
the net investment income per share and the ratios would have been:
Net investment income $ 0.48 $ 0.08 $ 0.45 $ 0.19 $ 0.38 $ 0.06 $ 0.14
Ratios (to average net assets):
Expenses 0.93% 0.88%<F3> 1.01% 1.17%<F3> 2.01% 1.95%<F3> 2.12%<F3>
Net investment income 5.28% 4.91%<F3> 4.69% 4.42%<F3> 4.19% 3.82%<F3> 3.23%<F3>
<F6> Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F7> Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
<F8> The per share distribution in excess of net investment income for the two months ended March 31, 1994 was $0.002 for Class B
shares.
<F9> For the two months ended March 31, 1994.
<F10>The per share distribution from net realized gain on investments for the year ended March 31, 1995 was $0.0016 for Class A and
Class B shares.
<F11>The per share distributions in excess of net investment income for the year ended March 31, 1995 were $0.0035 and $0.0029 for
Class A and Class B shares, respectively.
</TABLE>
See notes to financial statements
<PAGE>
Financial Statements - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------------
Tennessee Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
March 31, January 31, March 31, January 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1994<F3> 1994 1993 1992 1991 1990 1989<F1> 1995 1994<F3> 1994<F2>
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Class B Class C
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -
beginning of period $10.26 $10.94 $10.37 $10.10 $ 9.90 $ 9.80 $ 9.68 $ 9.53 $10.26 $10.95 $10.87
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations<F7> -
Net investment
income<F10> $ 0.56 $ 0.09 $ 0.57 $ 0.57 $ 0.61 $ 0.62 $ 0.67 $ 0.22 $ 0.48 $ 0.08 $ 0.19
Net realized and
unrealized gain (loss)
on investments 0.02 (0.68) 0.57 0.31 0.30 0.13 0.11 0.10 0.01 (0.69) 0.08
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations $ 0.58 $(0.59) $ 1.14 $ 0.88 $ 0.91 $ 0.75 $ 0.78 $ 0.32 $ 0.49 $(0.61) $ 0.27
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions
declared to
shareholders -
From net investment
income $(0.56) $(0.07) $(0.54) $(0.57) $(0.66) $(0.63) $(0.66) $(0.17) $(0.48) $(0.08) $(0.19)
From net realized gain
on investments<F5> -- -- -- (0.01) (0.05) (0.02) -- -- -- -- --
In excess of net
investment income -- (0.02) (0.03) (0.03) -- -- -- -- -- -- --
In excess of net realized
gain on investments (0.01) -- -- -- -- -- -- -- (0.01) -- --
From paid-in capital<F4> -- -- -- -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions
declared to
shareholders $(0.57) $(0.09) $(0.57) $(0.61) $(0.71) $(0.65) $(0.66) $(0.17) $(0.49) $(0.08) $(0.19)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value -
end of period $10.27 $10.26 $10.94 $10.37 $10.10 $ 9.90 $ 9.80 $ 9.68 $10.26 $10.26 $10.95
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return<F6> 5.86% (5.39)%<F9> 11.20% 9.03% 9.50% 7.96% 8.30% 3.43%<F9> 5.00% (5.59)%<F9> 2.48%<F9>
Ratios (to average net
assets)/Supplemental
data<F10>:
Expenses 1.22% 1.21%<F8> 1.29% 1.14% 1.15% 1.03% 0.53% 0.40%<F8> 1.94% 1.93%<F8> 1.93%<F8>
Net investment income 5.52% 5.31%<F8> 5.25% 5.89% 6.11% 6.37% 6.70% 5.98%<F8> 4.80% 4.49%<F8> 4.20%<F8>
Portfolio turnover 27% 4% 12% 9% 42% 58% 78% 5% 27% 4% 12%
Net assets at end of
period (000 omitted) $117,572 $117,117 $123,050 $99,443 $87,898 $72,108 $56,048 $15,832 $10,006 $5,294 $3,818
<FN>
<F1> For the period from the commencement of investment operations, August 12, 1988 to January 31, 1989.
<F2> For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F3> For the two months ended March 31, 1994.
<F4> The per share distribution from paid-in capital for the year ended January 31, 1991 was $0.0013.
<F5> The per share distribution from net realized gain on investments for the year ended March 31, 1995 was $0.0014 for
Class A and Class B shares.
<F6> Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F7> Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
<F8> Annualized.
<F9> Unannualized.
<F10>The investment adviser did not impose all or a portion of its advisory, distribution or expense reimbursement fees for the
periods indicated. If these fees had been incurred by the Fund, the net investment income per share and the ratios would
have been:
Net investment income -- -- -- -- -- $ 0.61 $ 0.60 $ 0.20 -- -- --
Ratios (to average
net assets):
Expenses -- -- -- -- -- 1.17% 1.24% 0.95%<F8> -- -- --
Net investment income -- -- -- -- -- 6.23% 5.99% 5.43%<F8> -- -- --
</TABLE>
See notes to financial statements
<PAGE>
Financial Statements - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------------------------------
Texas Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
March 31, January 31, March 31, January 31,
- ----------------------------------------------------------------------------------------------------------------------------------
1995 1994<F10> 1994 1993<F1> 1995 1994<F10> 1994<F2>
- ----------------------------------------------------------------------------------------------------------------------------------
Class A Class B
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.88 $10.86 $10.01 $ 9.53 $ 9.89 $10.86 $10.79
------ ------ ------ ------ ------ ------ ------
Income from investment operations<F9> -
Net investment income<F7> $ 0.60 $ 0.10 $ 0.61 $ 0.57 $ 0.50 $ 0.08 $ 0.19
Net realized and unrealized gain
(loss) on investments 0.09 (0.99) 0.86 0.47 0.10 (0.96) 0.09
------ ------ ------ ------ ------ ------ ------
Total from investment operations $ 0.69 $(0.89) $ 1.47 $ 1.04 $ 0.60 $(0.88) $ 0.28
------ ------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.59) $(0.09) $(0.61) $(0.56) $(0.50) $(0.08) $(0.19)
From net realized gain on investments<F4> (0.03) -- (0.01) -- (0.03) -- (0.01)
In excess of net investment income<F3> -- -- -- -- -- (0.01) (0.01)
In excess of net realized gain on investments (0.03) -- -- -- (0.03) -- --
------ ------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.65) $(0.09) $(0.62) $(0.56) $(0.56) $(0.09) $(0.21)
------ ------ ------ ------ ------ ------ ------
Net asset value - end of period $ 9.92 $ 9.88 $10.86 $10.01 $ 9.93 $ 9.89 $10.86
====== ====== ====== ====== ====== ====== ======
Total return<F8> 7.42% (8.13)%<F6> 15.08% 11.30%<F6> 6.35% (8.19)%<F6> 2.65%<F6>
Ratios (to average net assets)/
Supplemental data<F7>:
Expenses 0.02% 0.00%<F5> 0.00% 0.00%<F5> 1.02% 1.00%<F5> 1.00%<F5>
Net investment income 6.16% 5.71%<F5> 5.74% 6.03%<F5> 5.14% 4.68%<F5> 4.41%<F5>
Portfolio turnover 104% 1% 7% 40% 104% 1% 7%
Net assets at end of period (000 omitted) $18,318 $17,515 $18,987 $8,485 $2,273 $1,183 $956
<FN>
<F1> For the period from the commencement of investment operations, February 3, 1992 to January 31, 1993.
<F2> For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F3> The per share distributions in excess of net investment income for the two months ended March 31, 1994 and for the year
ended January 31, 1994 were $0.004 and $0.003, respectively, for Class A shares.
<F4> For the year ended January 31, 1994, the per share distribution in excess of net realized gain on investments was $0.0008
for both Class A and Class B shares.
<F5> Annualized.
<F6> Unannualized.
<F7> The investment adviser did not impose all or a portion of its advisory, distribution or expense reimbursement fees for the
periods indicated. If these fees had been incurred by the Fund, and if the expense reimbursement agreement had not been in
effect, the net investment income per share and the ratios would have been:
Net investment income $ 0.49 $ 0.07 $ 0.44 $ 0.32 $ 0.38 $ 0.05 $ 0.11
Ratios (to average net assets):
Expenses 1.17% 1.67%<F5> 1.56% 2.67%<F5> 2.24% 2.74%<F5> 2.90%<F5>
Net investment income 5.01% 4.04%<F5> 4.18% 3.36%<F5> 3.92% 2.94%<F5> 2.51%<F5>
<F8> Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F9> Per share data for the periods beginning after January 31, 1994 are based on average shares outstanding.
<F10>For the two months ended March 31, 1994.
</TABLE>
See notes to financial statements
<PAGE>
Financial Statements - continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------------------------------
Washington Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
March 31, January 31, March 31, January 31,
- ----------------------------------------------------------------------------------------------------------------------------------
1995 1994<F8> 1994 1993<F1> 1995 1994<F8> 1994<F2>
- ----------------------------------------------------------------------------------------------------------------------------------
Class A Class B
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.29 $10.25 $ 9.54 $ 9.53 $ 9.29 $10.24 $10.26
------ ------ ------ ------ ------ ------ ------
Income from investment operations<F7> -
Net investment income<F5> $ 0.57 $ 0.09 $ 0.57 $ 0.22 $ 0.48 $ 0.07 $ 0.18
Net realized and unrealized gain (loss)
on investments 0.31 (0.96) 0.78 0.01 0.30 (0.94) 0.05
------ ------ ------ ------ ------ ------ ------
Total from investment operations $ 0.88 $(0.87) $ 1.35 $ 0.23 $ 0.78 $(0.87) $ 0.23
------ ------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.57) $(0.09) $(0.57) $(0.22) $(0.47) $(0.08) $(0.18)
From net realized gain on investments -- -- (0.07) -- -- -- (0.07)
In excess of net investment income<F9> -- -- -- -- -- -- --
In excess of net realized gain on investments (0.01) -- -- -- (0.01) -- --
------ ------ ------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.58) $(0.09) $(0.64) $(0.22) $(0.48) $(0.08) $(0.25)
------ ------ ------ ------ ------ ------ ------
Net asset value - end of period $ 9.59 $ 9.29 $10.25 $ 9.54 $ 9.59 $ 9.29 $10.24
====== ====== ====== ====== ====== ====== ======
Total return<F6> 9.80% (8.47)%<F4> 14.55% 2.72%<F4> 8.72% (8.54)%<F4> 2.30%<F4>
Ratios (to average net assets)/
Supplemental data<F5>:
Expenses 0.02% 0.00%<F3> 0.00% 0.00%<F3> 1.02% 1.00%<F3> 1.00%<F3>
Net investment income 6.17% 5.69%<F3> 5.63% 5.64%<F3> 5.14% 4.56%<F3> 4.28%<F3>
Portfolio turnover 44% 3% 26% 12% 44% 3% 26%
Net assets at end of period (000 omitted) $15,364 $17,993 $19,208 $9,574 $2,707 $1,913 $1,528
<FN>
<F1>For the period from the commencement of investment operations, August 7, 1992 to January 31, 1993.
<F2>For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
<F3>Annualized.
<F4>Unannualized.
<F5>The investment adviser did not impose all or a portion of its advisory, distribution or expense reimbursement fees for
the periods indicated. If these fees had been incurred by the Fund, and if the expense reimbursement agreement had not been
in effect, the net investment income per share and the ratios would have been:
Net investment income $ 0.45 $ 0.07 $ 0.42 $ 0.12 $ 0.36 $ 0.05 $ 0.10
Ratios (to average net assets):
Expenses 1.26% 1.43%<F3> 1.46% 2.47%<F3> 2.33% 2.51%<F3> 2.79%<F3>
Net investment income 4.92% 4.26%<F3> 4.17% 3.17%<F3> 3.83% 3.05%<F3> 2.49%<F3>
<F6>Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
<F7>Per share data for the periods beginning January 31, 1994 are based on average shares outstanding.
<F8>For the two months ended March 31, 1994.
<F9>Per share distributions in excess of net investment income for the two months ended March 31, 1994 were $0.001 and $0.004 for
Class A and Class B shares, respectively.
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Municipal Series 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. The Trust presently
consists of nineteen Funds, as follows: MFS Municipal Income Fund, 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, MFS Georgia Municipal Bond Fund, MFS Louisiana Municipal
Bond Fund* (Louisiana Fund), MFS Maryland Municipal Bond Fund, MFS Massachusetts
Municipal Bond Fund, MFS Mississippi Municipal Bond Fund* (Mississippi 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* (Tennessee Fund), MFS Texas Municipal Bond Fund*
(Texas Fund), MFS Virginia Municipal Bond Fund, MFS Washington Municipal Bond
Fund* (Washington Fund), and MFS West Virginia Municipal Bond Fund. Each Fund,
except for MFS Municipal Income Fund, is non-diversified.
The Funds denoted with an asterisk above are included within these financial
statements.
During 1994, the Trust changed its fiscal year end from January 31 to March 31.
(2) Significant Accounting Policies
Investment Valuations - Debt securities (other than short-term obligations which
mature in 60 days or less), including listed issues, are valued on the basis of
valuations furnished by dealers or by a pricing service with consideration to
factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading characteristics
and other market data, without exclusive reliance upon exchange or
over-the-counter prices. Short-term obligations, which mature in 60 days or
less, are valued at amortized cost, which approximates value. Futures contracts,
options and options on futures contracts listed on commodities exchanges are
valued at closing settlement prices. Over-the-counter options are valued by
brokers through the use of a pricing model which takes into account closing bond
valuations, implied volatility and short-term repurchase rates. Securities for
which there are no such quotations or valuations are valued at fair value as
determined in good faith by or at the direction of the Trustees.
Repurchase Agreements - Each Fund may enter into repurchase agreements with
institutions that the Trust's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. Each Fund requires
that the securities purchased in a repurchase transaction be transferred to the
custodian in a manner sufficient to enable the Fund to obtain those securities
in the event of a default under the repurchase agreement. Each Fund monitors, on
a daily basis, the value of the securities transferred to ensure that the value,
including accrued interest, of the securities under each repurchase agreement is
greater than amounts owed to the Fund under each such repurchase agreement.
Deferred Organization Expenses - Costs incurred by a Fund in connection with its
organization have been deferred and are being amortized on a straight-line basis
over a five-year period beginning on the date of commencement of operations of
the Fund.
Written Options - Each Fund may write covered call or put options for which
premiums are received and are recorded as liabilities, and are subsequently
adjusted to the current value of the options written. Premiums received from
writing options which expire are treated as realized gains. Premiums received
from writing options which are exercised or are closed are offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
security purchased by the Fund. Each Fund, as writer of an option, may have no
control over whether the underlying securities may be sold (call) or purchased
(put) and, as a result, bears the market risk of an unfavorable change in the
price of the securities underlying the written option. In general, written call
options may serve as a partial hedge against decreases in value in the
underlying securities to the extent of the premium received. Written options may
also be used as a part of an income-producing strategy reflecting the view of
the Fund's management on the direction of interest rates.
Futures Contracts - Each Fund may enter into financial futures contracts for the
delayed delivery of securities or contracts based on financial indices at a
fixed price on a future date. In entering such contracts, each Fund is required
to deposit either in cash or securities an amount equal to a certain percentage
of the contract amount. Subsequent payments are made or received by the Fund
each day, depending on the daily fluctuations in the value of the underlying
security, and are recorded for financial statement purposes as unrealized gains
or losses by the Fund. Each Fund's investment in financial futures contracts is
designed to hedge against anticipated future changes in interest rates. For
example, interest rate futures may be used in modifying the duration of the
portfolio without incurring the additional transaction costs involved in buying
and selling the underlying securities. Such transactions may also be entered
into for non-hedging purposes to the extent permitted by applicable law. Should
interest rates move unexpectedly, each Fund may not achieve the anticipated
benefits of the financial futures contracts and may realize a loss.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount are amortized or accreted for both financial statement
and tax reporting purposes as required by federal income tax regulations.
Tax Matters and Distributions - The Trust's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net income,
including any net realized gain on investments. Accordingly, no provision for
federal income or excise tax is provided. Each Fund files a tax return annually
using tax accounting methods required under provisions of the Code which may
differ from generally accepted accounting principles, the basis on which these
financial statements are prepared. Accordingly, the amount of net investment
income and net realized gain reported on these financial statements may differ
from that reported on each Fund's tax return and, consequently, the character of
distributions to shareholders reported in the financial highlights may differ
from that reported to shareholders on Form 1099-DIV.
Distributions paid by each Fund from net interest received on tax-exempt
municipal bonds are not includable by shareholders as gross income for federal
income tax purposes because each Fund intends to meet certain requirements of
the Code applicable to regulated investment companies, which will enable each
Fund to pay exempt-interest dividends. That portion of such interest, if any,
earned on private activity bonds issued after August 7, 1986, may be considered
a tax preference item to shareholders. Distributions to shareholders are
recorded on the ex-dividend date.
Each Fund distinguishes between distributions on a tax basis and and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a return of
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.
The temporary differences resulting in excess distributions from net investment
income or accumulated net realized gains, arose primarily from the differences
between book and tax accounting due to timing of distributions, losses deferred
for tax purposes and pension expense accruals. Net investment income, net
realized gains and net assets were not affected by this change.
Multiple Classes of Shares of Beneficial Interest - Each Fund offers both Class
A and Class B shares. Class B shares were first offered to the public on
September 7, 1993. Effective January 3, 1994, the California Fund began to offer
Class C shares. The three classes of shares differ in their respective
shareholder servicing agent, distribution and service fees. Shareholders of each
class bear certain expenses that pertain only to that particular class. All
shareholders bear the common expenses of the Fund pro rata based on settled
shares outstanding, without distinction between share classes. Dividends are
declared separately for each class. No class has preferential dividend rights;
differences in per share dividend rates are generally due to differences in
separate class expenses, including distribution and shareholder service fees.
(3) Transactions with Affiliates
Investment Adviser - The Trust has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.55% of
each Fund's average daily net assets. The investment adviser voluntarily agreed
to reduce its fees with respect to the Arkansas Fund to 0.20% of average daily
net assets through October 31, 1993, increasing by 0.05% each calendar quarter
thereafter subject to a maximum of 0.55%; with respect to the California Fund to
0.40% of average net assets; with respect to the Mississippi Fund to 0.00% of
average daily net assets through October 31, 1993 increasing by 0.05% each
calendar quarter thereafter subject to a maximum of 0.55%; and with respect to
the Louisiana, Texas, and Washington Funds to 0.00% of average net assets
through February 28, 1995, and at 0.20% of average net assets thereafter. For
the period presented the amounts of such voluntary reductions, which are
reflected as a reduction of expenses on the Statements of Operations, are as
follows:
<TABLE>
<CAPTION>
Arkansas California Louisiana Mississippi Texas Washington
Fund Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended March 31, 1995 $152,542 $476,700 $90,451 $283,718 $108,347 $97,720
</TABLE>
Under an expense reimbursement agreement with MFS, MFS has agreed to pay all of
the operating expenses, exclusive of management and distribution fees, of the
Louisiana, Mississippi, Texas and Washington Funds until December 31, 2001 (or
December 31, 2002 in the case of the Louisiana Fund) or to the date upon which
the expenses attributable to each Fund is repaid. To accomplish the
reimbursement, each Fund will pay an expense reimbursement fee to MFS of 0.40%
of average daily net assets, with a limitation that immediately after any such
payment the aggregate expenses of each such Fund, including the management fee
but excluding any distribution plan fees, will not exceed 0.95% of average daily
net assets. MFS voluntarily reduced, for an indefinite period, its expense
reimbursement fee to 0.00% of average daily net assets for each Fund. For the
year ended March 31, 1995, the amounts so reduced were as follows:
<TABLE>
<CAPTION>
Louisiana Mississippi Texas Washington
Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$68,281 $347,870 $81,510 $73,447
</TABLE>
To the extent that actual expenses are under the agreed-upon expense
limitations, the excess of the limitation over actual expenses will be applied
to amounts reimbursed by the investment adviser in prior years. At March 31,
1995, unreimbursed expenses owed to the adviser were as follows:
<TABLE>
<CAPTION>
Louisiana Mississippi Texas Washington
Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Amount relating to the year ended March 31, 1995 $ 45,965 $(10,876) $ 45,452 $ 58,285
Total amount since commencement of reimbursement agreements 187,835 53,556 232,174 190,927
</TABLE>
The Trust pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Trust, all of whom receive
remuneration for their services to the Trust from MFS. Certain of the officers
and Trustees of the Trust are officers or directors of[fjMFS, MFS Fund
Distributors, Inc. (MFD) and MFS Service Center, Inc. (MFSC). The Trust has an
unfunded defined benefit plan for all its independent Trustees. Included in
Trustees' compensation for the period presented is a net periodic pension
expense for each Fund, as follows:
<PAGE>
<TABLE>
<CAPTION>
Alabama Arkansas California Louisiana Mississippi Tennessee Texas Washington
Fund Fund Fund Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended March 31, 1995 $3,786 $2,448 $11,819 $2,529 $4,644 $4,068 $2,653 $1,285
</TABLE>
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$29,302, $100,116, $74,444, $23,685, $53,458, $41,320, $6,637 and $8,434 for the
year ended March 31, 1995 as its portion of the sales charge on sales of Class A
shares of the Alabama, Arkansas, California, Louisiana, Mississippi, Tennessee,
Texas and Washington Funds, respectively.
The Trustees have adopted separate distribution plans for Class A, Class B and
Class C shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as
follows:
The Class A Distribution Plan provides that each Fund will pay MFD up to 0.35%
of its average daily net assets attributable to Class A shares annually in order
that MFD may pay expenses on behalf of the Fund related to the distribution and
servicing of its shares. These expenses include a service fee to each securities
dealer that enters into a sales agreement with MFD of up to 0.25% per annum of
the Fund's average daily net assets attributable to Class A shares which are
attributable to that securities dealer, a distribution fee to MFD of up to
0.10% per annum of the Fund's average daily net assets attributable to Class A
shares, commissions to dealers and payments to MFD wholesalers for sales at or
above a certain dollar level, and other such distribution-related expenses that
are approved by the Fund. MFD retains the service fee for accounts not
attributable to a securities dealer. The service fees retained amounted to
$7,477 and $8,346 for the Alabama and Tennessee Funds, respectively. In the case
of the Alabama Fund, MFD is currently waiving the 0.10% distribution fee,
which amounted to $82,488 for the year ended March 31, 1995, for an indefinite
period. Payments under the distribution plan by the Arkansas, California,
Louisiana, Mississippi, Texas, and Washington Funds, will commence on such date
to be determined by the Trustees. Fees incurred under the distribution plan
during the year ended March 31, 1995 were 0.35% and 0.25% of average daily net
assets attributable to Class A shares of the Tennessee and Alabama Funds,
respectively, on an annualized basis and amounted to the following:
Alabama Tennessee
Class A Shares Fund Fund
- -------------------------------------------------------------------------------
Total fees incurred under the distribution plan $289,903 $413,832
The Class B and Class C Distribution Plans provide that the Funds will pay MFD a
monthly distribution fee, equal to 0.75% per annum, and a quarterly service fee
of up to 0.25% per annum, of the Fund's average daily net assets attributable to
Class B and Class C shares. MFD retains the service fee for accounts not
attributable to a securities dealer. For Class B, the service fees retained
amounted to $527 and $570 for the Alabama and Tennessee Funds. For Class C, the
service fees retained amounted to $1,731 for the California Fund. MFD will pay
to securities dealers that enter into a sales agreement with MFD all or a
portion of the service fee attributable to Class B and Class C shares, and will
pay to such securities dealers all of the distribution fee attributable to Class
C shares. The service fee is intended to be additional consideration for
services rendered by the dealer with respect to Class B and Class C shares.
Fees incurred under the distribution plans during the year ended March 31, 1995
were 1.00% of average daily net assets attributable to Class B and Class C
shares on an annualized basis and amounted to the following:
<PAGE>
<TABLE>
<CAPTION>
Alabama Arkansas California Louisiana Mississippi Tennessee Texas Washington
Class B Shares Fund Fund Fund Fund Fund Fund Fund Fund
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total fees incurred under
the distribution plan $37,007 $67,664 $248,272 $21,147 $79,585 $77,488 $18,838 $24,013
California
Class C Shares Fund
- --------------------------------------------------------------------------------------------------------------------------
Total fees incurred under the distribution plan $30,592
</TABLE>
A contingent deferred sales charge is imposed on shareholder redemptions of
Class A shares, on purchases of $1 million or more, in the event of a
shareholder redemption within 12 months following the share purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of Class
B shares in the event of a shareholder redemption within six years of purchase.
MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the year ended March 31, 1995
for Class A and Class B shares were the following:
<TABLE>
<CAPTION>
Alabama Arkansas California Louisiana Mississippi Tennessee Texas Washington
CDSC imposed Fund Fund Fund Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $ 4 $ 2,159 $ 15,182 $ -- $ 1,770 $ -- $ 3,008 $18,268
Class B 22,060 12,360 137,206 4,920 14,243 13,716 10,470 7,867
------ ------ ------- ----- ------ ------ ------ -----
$22,064 $14,519 $152,388 $4,920 $16,013 $13,716 $13,478 $26,135
</TABLE>
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earned
fees for its services as shareholder servicing agent for the year ended March
31, 1995, as specified below. The fee is calculated as a percentage of average
daily net assets of each class of shares at an effective annual rate of up to
0.15%, up to 0.22% and up to 0.15% attributable to Class A, Class B and Class C
shares, respectively.
<TABLE>
<CAPTION>
Alabama Arkansas California Louisiana Mississippi Tennessee Texas Washington
Fees paid by Fund Fund Fund Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $123,373 $287,850 $434,586 $22,431 $118,525 $177,357 $27,742 $ 23,942
Class B $ 8,141 $ 14,886 $ 54,620 $ 4,655 $ 17,492 $ 17,047 $ 4,142 $ 5,282
Class C -- -- $ 4,589 -- -- -- -- --
</TABLE>
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions and short-term obligations, were as follows (000
omitted):
<TABLE>
<CAPTION>
Alabama Arkansas California Louisiana Mississippi Tennessee Texas Washington
Fees paid by Fund Fund Fund Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Purchases $27,924 $45,103 $174,300 $16,878 $45,324 $40,947 $22,221 $6,221
Sales $25,102 $46,441 $199,967 $13,375 $39,735 $33,193 $20,490 $7,924
</TABLE>
<PAGE>
The cost and unrealized appreciation or depreciation in value of the investments
owned by the Funds, as computed on a federal income tax basis, are as follows
(000 omitted):
<TABLE>
<CAPTION>
Alabama Arkansas California Louisiana Mississippi Tennessee Texas Washington
Fund Fund Fund Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aggregate cost $82,684 $190,401 $291,144 $17,662 $87,828 $121,319 $19,208 $17,770
------- -------- -------- ------- ------- -------- ------- -------
Gross unrealized appreciation $ 4,634 $ 4,734 $ 11,533 $ 406 $ 1,680 $ 6,223 $ 961 $ 375
Gross unrealized depreciation (400) (3,101) (1,902) (138) (1,585) (1,365) (7) (342)
---- ------ ------ ---- ------ ------ -- ----
Net unrealized appreciation $ 4,234 $ 1,633 $ 9,631 $ 268 $ 95 $ 4,858 $ 954 $ 33
======= ======== ======== ======= ======= ======== ======= =======
</TABLE>
At March 31, 1995, the following Funds, for federal income tax purposes, had
capital loss carryforwards which may be applied against any net taxable realized
gains of each succeeding year until the earlier of their utilization or
expiration.
<TABLE>
<CAPTION>
Alabama California Louisiana Mississippi Tennessee Texas Washington
Expiration Date Fund Fund Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
March 31, 2002 $ -- $ 277,504 $ -- $ -- $ -- $ -- $ --
March 31, 2003 155,891 10,169,212 542,107 940,501 381,262 1,019,734 247,673
</TABLE>
(5) Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
Alabama Fund Arkansas Fund California Fund Louisiana Fund
----------------- ---------------- ----------------- ------------------
Year Ended March 31, 1995 (000 Omitted) Shares Amount Shares Amount Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 1,021 $10,353 1,828 $17,573 10,839 $ 58,024 561 $ 5,055
Shares issued to shareholders in
reinvestment of distributions 164 1,663 569 5,424 1,356 7,227 62 561
Shares reacquired (1,017) (10,194) (3,147) (29,660) (19,244) (102,193) (253) (2,281)
------ ------- ------ ------- ------- -------- ---- ------
Net increase (decrease) 168 $ 1,822 (750) $(6,663) (7,049) $(36,942) 370 $ 3,335
====== ======= ====== ======= ======= ======== ==== =======
<CAPTION>
Two Months Ended March 31, 1994
(000 Omitted) Shares Amount Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 180 $ 1,947 810 $ 8,244 2,485 $ 14,294 115 $ 1,127
Shares issued to shareholders in
reinvestment of distributions 17 175 80 798 215 1,203 8 75
Shares reacquired (216) (2,299) (199) (2,018) (5,297) (30,073) (31) (304)
------ ------- ------ ------- ------- -------- ---- ------
Net increase (decrease) (19) $ (177) 691 $ 7,024 (2,597) $(14,576) 92 $ 898
====== ======= ====== ======= ======= ======== ==== =======
<PAGE>
<CAPTION>
Year Ended January 31, 1994
(000 Omitted)<F1> Shares Amount Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 2,116 $22,650 7,555 $77,199 20,782 $122,320 1,428 $13,909
Shares issued to shareholders in
reinvestment of distributions 89 957 401 4,120 1,322 7,768 31 314
Shares reacquired (803) (8,638) (1,141) (11,716) (8,459) (49,705) (99) (982)
------ ------- ------ ------- ------- -------- ----- -------
Net increase 1,402 $14,969 6,815 $69,603 13,645 $ 80,383 1,360 $13,241
====== ======= ====== ======= ======= ======== ===== =======
<FN>
<F1>For the eleven months ended January 31, 1994 for the California Fund.
</TABLE>
<TABLE>
<CAPTION>
Mississippi Fund Tennessee Fund Texas Fund Washington Fund
---------------- ---------------- ---------------- -----------------
Year Ended March 31, 1995 (000 Omitted) Shares Amount Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 2,121 $19,211 1,284 $13,091 402 $ 3,917 183 $ 1,709
Shares issued to shareholders in
reinvestment of distributions 292 2,636 311 3,153 75 732 56 517
Shares reacquired (2,431) (21,719) (1,555) (15,606) (403) (3,875) (573) (5,314)
------ ------- ------ ------- ----- ------- ---- -------
Net increase (decrease) (18) $ 128 40 $ 638 74 $ 774 (334) $(3,088)
====== ======= ====== ======= ===== ======= ==== =======
<CAPTION>
Two Months Ended March 31, 1994
(000 Omitted) Shares Amount Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 640 $ 6,194 254 $ 2,715 116 $ 1,199 120 $ 1,182
Shares issued to shareholders in
reinvestment of distributions 40 379 44 459 10 98 10 95
Shares reacquired (446) (4,327) (135) (1,431) (102) (1,028) (68) (665)
---- ------- ---- ------- ---- ------- --- -------
Net increase 234 $ 2,246 163 $ 1,743 24 $ 269 62 $ 612
==== ======= ==== ======= ==== ======= === =======
Year Ended January 31, 1994
(000 Omitted) Shares Amount Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 4,669 $45,330 2,162 $23,094 951 $10,063 975 $ 9,814
Shares issued to shareholders in
reinvestment of distributions 188 1,835 245 2,628 40 419 44 443
Shares reacquired (832) (8,111) (747) (8,011) (91) (960) (149) (1,489)
----- ------- ----- ------- --- ------- ---- -------
Net increase 4,025 $39,054 1,660 $17,711 900 $ 9,522 870 $ 8,768
===== ======= ===== ======= === ======= ==== =======
<CAPTION>
Class B Shares
Alabama Fund Arkansas Fund California Fund Louisiana Fund
---------------- ---------------- ---------------- ------------------
Year Ended March 31, 1995 (000 Omitted) Shares Amount Shares Amount Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 203 $ 2,054 167 $ 1,621 2,519 $13,408 168 $ 1,525
Shares issued to shareholders in
reinvestment of distributions 7 74 19 181 109 580 8 68
Shares reacquired (62) (626) (46) (436) (1,141) (6,041) (54) (474)
--- ------- --- ------- ------ ------- --- -------
Net increase 148 $ 1,502 140 $ 1,366 1,487 $ 7,947 122 $ 1,119
=== ======= === ======= ====== ======= === =======
<CAPTION>
Two Months Ended March 31, 1994
(000 Omitted) Shares Amount Shares Amount Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 71 $ 758 112 $ 1,141 784 $ 4,481 49 $ 484
Shares issued to shareholders in
reinvestment of distributions 1 6 2 20 12 69 1 4
Shares reacquired (1) (7) -- -- (168) (952) (1) (4)
--- ------- --- ------- ---- ------- -- -------
Net increase 71 $ 757 114 $ 1,161 628 $ 3,598 49 $ 484
=== ======= === ======= ==== ======= == =======
<CAPTION>
Year Ended January 31, 1994
(000 Omitted)<F1> Shares Amount Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 206 $ 2,245 534 $ 5,546 3,280 $19,513 152 $ 1,528
Shares issued to shareholders in
reinvestment of distributions 1 8 2 25 19 116 1 7
Shares reacquired -- -- (41) (423) (44) (263) (28) (277)
--- ------- --- ------- ----- ------- --- -------
Net increase 207 $ 2,253 495 $ 5,148 3,255 $19,366 125 $ 1,258
=== ======= === ======= ===== ======= === =======
<CAPTION>
Mississippi Fund Tennessee Fund Texas Fund Washington Fund
----------------- ----------------- ----------------- -----------------
Year Ended March 31, 1995 (000 Omitted) Shares Amount Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 385 $ 3,480 505 $ 5,138 137 $ 1,349 102 $ 954
Shares issued to shareholders in
reinvestment of distributions 19 173 19 192 6 60 8 73
Shares reacquired (85) (749) (65) (664) (34) (330) (34) (310)
--- ------- --- ------- --- ------- --- -------
Net increase 319 $ 2,904 459 $ 4,666 109 $ 1,079 76 $ 717
=== ======= === ======= === ======= === =======
<CAPTION>
Two Months Ended March 31, 1994
(000 Omitted) Shares Amount Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 82 $ 787 166 $ 1,750 38 $ 400 56 $ 545
Shares issued to shareholders in
reinvestment of distributions 2 22 1 15 1 4 1 8
Shares reacquired (1) (11) (1) (5) (7) (73) -- --
-- ------- --- ------- -- ------- -- -------
Net increase 83 $ 798 166 $ 1,760 32 $ 331 57 $ 553
== ======= === ======= == ======= == =======
<CAPTION>
Year Ended January 31, 1994 (000 Omitted) Shares Amount Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 628 $ 6,224 352 $ 3,806 88 $ 952 154 $ 1,566
Shares issued to shareholders in
reinvestment of distributions 3 28 2 27 1 4 1 13
Shares reacquired (4) (39) (4) (40) (1) (8) (6) (60)
--- ------- --- ------- -- ------- --- -------
Net increase 627 $ 6,213 350 $ 3,793 88 $ 948 149 $ 1,519
=== ======= === ======= == ======= === =======
<FN>
<F1>For the eleven months ended January 31, 1994 for the California Fund.
</TABLE>
<TABLE>
<CAPTION>
Class C Shares California Fund
------------------
Year Ended March 31, 1995 (000 Omitted) Shares Amount
- ----------------------------------------------------------------------------
<S> <C> <C>
Shares sold 1,073 $ 5,680
Shares issued to shareholders in reinvestment
of distributions 15 80
Shares reacquired (686) (3,622)
----- -------
Net increase 402 $ 2,138
===== =======
Two Months Ended March 31, 1994 (000 Omitted) Shares Amount
- ----------------------------------------------------------------------------
Shares sold 158 $ 901
Shares issued to shareholders in reinvestment
of distributions 1 4
Shares reacquired (3) (16)
----- -------
Net increase 156 $ 889
===== =======
Eleven Months Ended January 31, 1994 (000 Omitted)** Shares Amount
- ----------------------------------------------------------------------------
Shares sold 154 $ 913
Shares issued to shareholders in reinvestment
of distributions -- --
Shares reacquired -- --
----- -------
Net increase 154 $ 913
===== =======
**For the period from the commencement of offering of Class C shares, January
3, 1994 to January 31, 1994.
</TABLE>
(6) Line of Credit
The Trust entered into an agreement which enables each of the Funds to
participate with other funds managed by MFS, or an affiliate of MFS, in an
unsecured line of credit with a bank which permits borrowings up to $350
million, collectively. Borrowings may be made to temporarily finance the
repurchase of Fund shares. Interest is charged to each Fund, based on its
borrowings, at a rate equal to the bank's base rate. In addition, a commitment
fee, based on the average daily unused portion of the line of credit, is
allocated among the participating Funds at the end of each quarter. The
commitment fee allocated to each of the Funds for the year ended March 31, 1995
ranged from $244 to $5,035.
(7) Financial Instruments
The Funds may trade financial instruments with off-balance sheet risk in the
normal course of their investing activities in order to manage exposure to
market risks such as interest rates. These financial instruments include written
options and futures contracts. The notional or contractual amounts of these
instruments represent the investment each Fund has in particular classes of
financial instruments and does not necessarily represent the amounts potentially
subject to risk. The measurement of the risks associated with these instruments
is meaningful only when all related and offsetting transactions are considered.
A summary of open futures contracts under these financial instruments at March
31, 1995 is as follows:
<PAGE>
Unrealized
Appreciation
Fund Description Expiration Contracts Position (Depreciation)
- --------------------------------------------------------------------------------
Arkansas U.S. Treasury June 1995 286 Short $ 153,416
Louisiana U.S. Treasury June 1995 20 Short $ (41,382)
Mississippi U.S. Treasury June 1995 60 Short $(124,147)
Tennessee U.S. Treasury June 1995 66 Short $ 34,625
Texas U.S. Treasury June 1995 15 Short $ (31,037)
At March 31, 1995, each Fund had sufficient cash and/or securities to cover
margin requirements on open futures contracts.
The Trust also invests in indexed securities whose value may be linked to
interest rates, commodities, indices or other financial indicators. Indexed
securities are fixed-income securities whose proceeds at maturity
(principal-indexed securities) or interest rates (coupon-indexed securities)
rise and fall according to the change in one or more specified underlying
indices. Indexed securities may be more volatile than the underlying instrument
itself. The following is a summary of indexed securities held at March 31, 1995:
<TABLE>
<CAPTION>
Unrealized
Principal Appreciation
Fund Description Index (000 Omitted) Value (Depreciation)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alabama Fund Puerto Rico Telephone Authority Rev., 4.47s, 2004 Corp. Swap Rate Curve $1,000 $ 823,820 $(176,180)
Arkansas Fund Puerto Rico Public Buildings Authority, 5.385s, 2016 PSA Municipal Swap $2,000 $1,743,100 $(256,900)
Puerto Rico Telephone Authority Rev., 4.47s, 2004 Corp. Swap Rate Curve $4,000 $3,295,280 $(704,720)
California Fund Puerto Rico Public Buildings Authority, 5.385s, 2016 PSA Municipal Swap $1,000 $ 871,550 $(128,450)
Mississippi Fund Puerto Rico Public Buildings Authority, 5.385s, 2016 PSA Municipal Swap $1,000 $ 871,550 $(128,450)
Tennessee Fund Puerto Rico Public Buildings Authority, 5.385s, 2016 PSA Municipal Swap $2,000 $1,743,100 $(256,900)
Puerto Rico Telephone Authority Rev., 4.47s, 2004 Corp. Swap Rate Curve $2,000 $1,647,640 $(352,360)
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of MFS Municipal Series Trust and the Shareholders of the
Portfolios 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 Louisiana Municipal
Bond Fund, MFS Mississippi Municipal Bond Fund, MFS Tennessee Municipal Bond
Fund, MFS Texas Municipal Bond Fund and MFS Washington Municipal Bond Fund
(portfolios of MFS Municipal Series Trust) as of March 31, 1995, the related
statements of operations for the year then ended, the statements of changes in
net assets for the year ended March 31, 1995, the two months ended March 31,
1994 and for the year ended January 31, 1994 (except for the MFS California
Municipal Bond Fund which is for the eleven months ended January 31, 1994), and
the financial highlights for each of the years in the eight-year period ended
March 31, 1995 (except for MFS California Municipal Bond Fund which is for the
year ended March 31, 1995, the two months ended March 31, 1994, the eleven
months ended January 31, 1994 and for each of the years in the eight-year period
ended February 28, 1993). 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
March 31, 1995 by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of each of the
aforementioned portfolios of MFS Municipal Series Trust at March 31, 1995, the
results of their operations, the changes in their net assets, and their
financial highlights for the respective stated periods in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
May 5, 1995
-------------------------------------------------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
<PAGE>
THE MFS FAMILY OF FUNDS(R)
America's Oldest Mutual Fund Group
The members of the MFS Family of Funds are grouped below according to the types
of securities in their portfolios. For free prospectuses containing more
complete information, including the exchange privilege and all charges and
expenses, please contact your financial adviser or call MFS at 1-800-637-2929
any business day from 9 a.m. to 5 p.m. Eastern time (or, leave a message any
time). This material should be read carefully before investing or sending money.
<TABLE>
<S> <C>
STOCK LIMITED MATURITY BOND
========================================= ========================================
Massachusetts Investors Trust MFS(R) Government Limited Maturity Fund
- ----------------------------------------- ----------------------------------------
Massachusetts Investors Growth Stock Fund MFS(R) Limited Maturity Fund
- ----------------------------------------- ----------------------------------------
MFS(R) Capital Growth Fund MFS(R) Municipal Limited Maturity Fund
- ----------------------------------------- ----------------------------------------
MFS(R) Emerging Growth Fund WORLD
- ----------------------------------------- ========================================
MFS(R) Gold & Natural Resources Fund MFS(R) World Asset Allocation Fund
- ----------------------------------------- ----------------------------------------
MFS(R) Growth Opportunities Fund MFS(R) World Equity Fund
- ----------------------------------------- ----------------------------------------
MFS(R) Managed Sectors Fund MFS(R) World Governments Fund
- ----------------------------------------- ----------------------------------------
MFS(R) OTC Fund MFS(R) World Growth Fund
- ----------------------------------------- ----------------------------------------
MFS(R) Research Fund MFS(R) World Total Return Fund
- ----------------------------------------- ----------------------------------------
MFS(R) Value Fund
- -----------------------------------------
STOCK AND BOND NATIONAL TAX-FREE BOND
========================================= ========================================
MFS(R) Total Return Fund MFS(R) Municipal Bond Fund
- ----------------------------------------- ----------------------------------------
MFS(R) Utilities Fund MFS(R) Municipal High Income Fund
- ----------------------------------------- (closed to new investors)
----------------------------------------
BOND MFS(R) Municipal Income Fund
========================================= ----------------------------------------
MFS(R) Bond Fund
- -----------------------------------------
MFS(R) Government Mortgage Fund STATE TAX-FREE BOND
- ----------------------------------------- ========================================
MFS(R) Government Securities Fund Alabama, Arkansas, California, Florida,
- ----------------------------------------- Georgia, Louisiana, Maryland, Massachusetts,
MFS(R) High Income Fund Mississippi, New York, North Carolina,
- ----------------------------------------- Pennsylvania, South Carolina, Tennessee,
MFS(R) Intermediate Income Fund Texas, Virginia, Washington, West Virginia
- ----------------------------------------- ----------------------------------------
MFS(R) Strategic Income Fund
(formerly MFS(R) Income & Opportunity Fund MONEY MARKET
- ----------------------------------------- ========================================
MFS(R) Cash Reserve Fund
----------------------------------------
MFS(R) Government Money Market Fund
----------------------------------------
MFS(R) Money Market Fund
----------------------------------------
<PAGE>
MFS(R) MUNICIPAL NUMBER BULK RATE
SERIES TRUST 1 U.S. POSTAGE
DALBAR PAID
500 Boylston Street TOP-RATED SERVICE PERMIT #55638
Boston, MA 02116 BOSTON, MA
MFS(R) Alabama Municipal Bond Fund
MFS(R) Arkansas Municipal Bond Fund
MFS(R) California Municipal Bond Fund
MFS(R) Louisiana Municipal Bond Fund
MFS(R) Mississippi Municipal Bond Fund
MFS(R) Tennessee Municipal Bond Fund
MFS(R) Texas Municipal Bond Fund
MFS(R) Washington Municipal Bond Fund
[Logo] MFS
THE FIRST NAME IN MUTUAL FUNDS
54/254
55/255
27/227/337
49/249
58/258
53/253
57/257
MST-2B 5/95 28.5M 59/259
<PAGE>
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116
(617) 954-5000
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street, Boston, MA 02116
(617) 954-5000
CUSTODIAN AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
SHAREHOLDER SERVICING AGENT
MFS Service Center, Inc.
500 Boylston Street, Boston, MA 02116
Toll free: (800) 225-2606
MAILING ADDRESS
P.O. Box 2281, Boston, MA 02107-9906
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110
MFS(R)
MUNICIPAL
SERIES TRUST
500 BOYLSTON STREET
BOSTON, MA 02116
[LOGO: M F S]
THE FIRST NAME IN MUTUAL FUNDS MST-13-6/95/500
<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS INCLUDED IN PART A:
MFS MUNICIPAL SERIES TRUST (ALL SERIES EXCEPT MFS
MUNICIPAL INCOME FUND)
Financial Highlights for a share of beneficial
interest of:
the Maryland, North Carolina, South Carolina,
Virginia and West Virginia Funds of the Registrant
outstanding throughout the ten-year period ending
March 31, 1995;
the Massachusetts Fund throughout the period from
the commencement of investment operations, April 9,
1985, to March 31, 1995;
the Georgia and New York Funds throughout the
period from the commencement of investment
operations, June 6, 1988, to March 31, 1995;
the Tennessee Fund throughout the period from the
commencement of investment operations, August 12,
1988, to March 31, 1995;
the Alabama Fund throughout the period from the
commencement of investment operations, February 1,
1990, to March 31, 1995;
the Arkansas, Florida and Texas Funds throughout
the period from the commencement of investment
operations, February 3, 1992, to March 31, 1995;
the Mississippi Fund throughout the period from the
commencement of investment operations, August 6,
1992, to March 31, 1995;
the Washington Fund throughout the period from the
commencement of investment operations, August 7,
1992, to March 31, 1995;
the Louisiana and Pennsylvania Funds throughout the
period from the commencement of investment
operations, February 1, 1993, to March 31, 1995;
the California Fund throughout the period from the
commencement of investment operations, June 19,
1985, to March 31, 1995.
<PAGE>
FINANCIAL STATEMENTS INCLUDED IN PART B:
MFS MUNICIPAL SERIES TRUST (ALL SERIES EXCEPT
MFS MUNICIPAL INCOME FUND)
At March 31, 1995:
Portfolio of Investments*
Statement of Assets and Liabilities*
For the year ended January 31, 1994, the two-month
period ended March 31, 1994 and for the year ended
March 31, 1995:
Statement of Changes in Net Assets*
For the year ended March 31, 1995:
Statement of Operations*
- ----------------------------
* Incorporated herein by reference to the Funds' Annual Report to
Shareholders dated March 31, 1995 which will be filed with the Securities
and Exchange Commission ("SEC") on or before June 9, 1995.
(B) EXHIBITS
1 Amended and Restated Declaration of Trust,
dated February 3, 1995. (12)
2 Amended and Restated By-Laws, dated December
14, 1994. (12)
3 Not Applicable.
4 Form of Share Certificate for Class A, B and C
Shares. (10)
5 (a) Investment Advisory Agreement, dated August 24,
1984 for all series other than Arkansas,
California, Florida, Louisiana, Mississippi,
Pennsylvania, Texas, Washington, and MFS
Municipal Income Fund. (4)
(b) Investment Advisory Agreement, dated February
1, 1992, for the MFS Arkansas Municipal Bond
Fund. (5)
(c) Investment Advisory Agreement, dated February
1, 1992, for the MFS Florida Municipal Bond
Fund. (5)
(d) Investment Advisory Agreement,dated February 1,
1992, for the MFS Texas Municipal Bond
Fund. (5)
(e) Investment Advisory Agreement, dated August 1,
1992, for the MFS Mississippi Municipal Bond
Fund. (6)
(f) Investment Advisory Agreement, dated August 1,
1992, for the MFS Washington Municipal Bond
Fund. (7)
(g) Investment Advisory Agreement, dated February
1, 1993, for MFS Louisiana Municipal Bond Fund.
(7)
(h) Investment Advisory Agreement, dated February
1, 1993, for MFS Pennsylvania Municipal Bond
Fund. (7)
(i) Investment Advisory Agreement, dated September
1, 1993, for MFS California Municipal Bond
Fund. (11)
(j) Investment Advisory Agreement, dated September
1, 1993, for the MFS Municipal Income Fund.
(11)
6 (a) Amended and Restated Distribution Agreement for
the MFS Municipal Series Trust, dated January
1, 1995. (12)
(b) Form of Dealer Agreement between MFS Financial
Services, Inc. and a dealer, dated December 28,
1994, and form of Mutual Fund Agreement between
MFS Financial Services, Inc. and a bank or NASD
affiliate, dated December 28, 1994. (12)
7 Retirement Plan for Non-Interested Person
Trustees, dated January 1, 1991. (7)
8 (a) Custodian Agreement, dated June 15, 1988. (4)
(b) Amendments to Custodian Agreement, dated August
10, 1989 and October 1, 1989, respectively. (3)
(c) Amendment No. 3 to the Custodian Agreement,
dated October 9, 1991. (5)
9 (a) Shareholder Servicing Agent Agreement, dated
August 1, 1985. (2)
(b) Amendment to Shareholder Servicing Agreement,
dated December 31, 1992. (9)
(c) Amendment to Shareholder Servicing Agreement,
dated September 7, 1993. (11)
(d) Amendment to Shareholder Servicing Agreement,
dated December 28, 1993; filed herewith.
(e) Exchange Privilege Agreement, dated September
1, 1993. (11)
(f) Loan Agreement by and among The Banks Named
Therein, The MFS Funds Named Therein, and The
First National Bank of Boston as Agent, dated
February 21, 1995. (13)
10 Opinion of Counsel; filed herewith.
11 Consent of Deloitte & Touche LLP - MFS
Municipal Series Trust; filed herewith.
12 Not Applicable.
13 Investment Representation Letters. (1)
14 Not Applicable.
15 (a) Form of Amended and Restated Distribution Plan
for Class A shares for each of the series of
MFS Municipal Series Trust except for MFS
Municipal Income Fund, MFS New York Municipal
Bond Fund, MFS Pennsylvania Municipal Bond Fund
and MFS California Municipal Bond Fund. (8)
(b) Form of Distribution Plan for Class A shares
for MFS California Municipal Bond Fund. (8)
(c) Form of Distribution Plan for Class B shares
for each series of MFS Municipal Series Trust
except MFS Municipal Income Fund, MFS New York
Municipal Bond Fund and MFS Pennsylvania
Municipal Bond Fund. (8)
(d) Form of Distribution Plan for Class C shares
for MFS California Municipal Bond Fund, MFS
North Carolina Municipal Bond Fund and MFS
Virginia Municipal Bond Fund. (10)
(e) Distribution Plans for Class A, Class B and
Class C shares of MFS Municipal Income Fund.
(12)
(f) Distribution Plans for Class A and Class B
shares of MFS New York Municipal Bond Fund.
(12)
(g) Distribution Plans for Class A and Class B
shares of MFS Pennsylvania Municipal Bond Fund.
(12)
16 Schedule of Computation for Performance
Quotations - Average Annual Total Rate of
Return, Aggregate Total Rate of Return,
Distribution Rate, Tax-Equivalent Yield and
Yield. (12)
17 Financial Data Schedules for each class of
shares of each State Fund; filed herewith.
<PAGE>
Power of Attorney, dated August 11, 1994;
filed herewith.
- -----------------------------
(1) Incorporated by reference to Registration Statement filed with the SEC on
October 5, 1984.
(2) Incorporated by reference to Post-Effective Amendment No. 3 filed with the
SEC on May 30, 1986.
(3) Incorporated by reference to Post-Effective Amendment No. 11 filed with the
SEC on March 30, 1990.
(4) Incorporated by reference to Post-Effective Amendment No. 12 filed with the
SEC on March 29, 1991.
(5) Incorporated by reference to Post-Effective Amendment No. 16 filed with the
SEC on May 28, 1992.
(6) Incorporated by reference to Post-Effective Amendment No. 18 filed with the
SEC on November 18, 1992
(7) Incorporated by reference to Post-Effective Amendment No. 20 filed with the
SEC on April 1, 1993.
(8) Incorporated by reference to Post-Effective Amendment No. 21 filed with the
SEC on June 28, 1993.
(9) Incorporated by reference to Post-Effective Amendment No. 22 filed with the
SEC on August 4, 1993.
(10)Incorporated by reference to Post-Effective Amendment No. 23 filed with the
SEC on October 29, 1993.
(11)Incorporated by reference to Post-Effective Amendment No. 24 filed with the
SEC on March 30, 1994.
(12)Incorporated by reference to Post-Effective Amendment No. 26 filed with the
SEC on February 22, 1995.
(13)Incorporated by reference to Amendment No. 8 on Form N-2 for MFS Municipal
Income Trust (File No. 811-4841) filed with the SEC on February 28, 1995.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
</TABLE>
<TABLE>
<CAPTION>
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
(As of March 31, 1995)
CLASS A SHARES
<S> <C> <C>
Shares of Beneficial Interest Alabama Series 1,505
(without par value) Arkansas Series 3,757
California Series 4,501
Florida Series 1,815
Georgia Series 1,885
Louisiana Series 415
Maryland Series 4,445
Massachusetts Series 5,226
Mississippi Series 2,113
New York Series 3,363
North Carolina Series 10,968
Pennsylvania Series 649
South Carolina Series 3,861
Tennessee Series 2,598
Texas Series 430
Virginia Series 10,581
Washington Series 556
West Virginia Series 3,270
MFS Municipal Income Fund 677
<PAGE>
CLASS B SHARES
Shares of Beneficial Interest Alabama Series 137
(without par value) Arkansas Series 212
California Series 606
Florida Series 304
Georgia Series 306
Louisiana Series 99
Maryland Series 405
Massachusetts Series 261
Mississippi Series 273
New York Series 369
North Carolina Series 830
Pennsylvania Series 230
South Carolina Series 419
Tennessee Series 225
Texas Series 66
Virginia Series 638
Washington Series 101
West Virginia Series 356
MFS Municipal Income Fund 11,836
CLASS C SHARES
Shares of Beneficial Interest California Series 77
(without par value) North Carolina Series 162
Virginia Series 117
MFS Municipal Income Fund 351
</TABLE>
ITEM 27. INDEMNIFICATION
Reference is hereby made to (a) Article V of Registrant's
Declaration of Trust, filed as an Exhibit to Post-Effective Amendment No. 26 to
its Registration Statement; (b) Section 4 of the Distribution Agreement between
Registrant and MFS Fund Distributors, Inc., filed as an Exhibit to
Post-Effective Amendment No. 26; and (c) the undertaking of the Registrant
regarding indemnification set forth in its Registration Statement as initially
filed.
The Trustees and officers of the Registrant and the personnel
of the Registrant's investment adviser and distributor will be insured under an
errors and omissions liability insurance policy. The Registrant and its officers
are also insured under the fidelity bond required by Rule 17g-1 under the
Investment Company Act of 1940.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Massachusetts Financial Services Company ("MFS") serves as
investment adviser to the following open-end funds comprising the MFS Family of
Funds: Massachusetts Investors Trust, Massachusetts Investors Growth Stock Fund,
MFS Growth Opportunities Fund, MFS Government Securities Fund, MFS Government
Mortgage Fund, MFS Government Limited Maturity Fund, MFS Series Trust I (which
has three series: MFS Managed Sectors Fund, MFS Cash Reserve Fund and MFS World
Asset Allocation Fund), MFS Series Trust II (which has four series: MFS Emerging
Growth Fund, MFS Capital Growth Fund, MFS Intermediate Income Fund and MFS Gold
& Natural Resources Fund), MFS Series Trust III (which has two series: MFS High
Income Fund and MFS Municipal High Income Fund), MFS Series Trust IV (which has
four series: MFS Money Market Fund, MFS Government Money Market Fund, MFS
Municipal Bond Fund and MFS OTC Fund), MFS Series Trust V (which has two series:
MFS Total Return Fund and MFS Research Fund), MFS Series Trust VI (which has
three series: MFS World Total Return Fund, MFS Utilities Fund and MFS World
Equity Fund), MFS Series Trust VII (which has two series: MFS World Governments
Fund and MFS Value Fund), MFS Series Trust VIII (which has two series: MFS
Strategic Income Fund and MFS World Growth Fund), MFS Municipal Series Trust
(which has 19 series: 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 Louisiana Municipal Bond Fund, MFS Maryland
Municipal Bond Fund, MFS Massachusetts Municipal Bond Fund, 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 Texas Municipal Bond
Fund, MFS Virginia Municipal Bond Fund, MFS Washington Municipal Bond Fund, MFS
West Virginia Municipal Bond Fund and MFS Municipal Income Fund) and MFS Series
Trust IX (which has three series: MFS Bond Fund, MFS Limited Maturity Fund and
MFS Municipal Limited Maturity Fund) (the "MFS Funds"). The principal business
address of each of the aforementioned funds is 500 Boylston Street, Boston,
Massachusetts 02116.
MFS also serves as investment adviser of the following
no-load, open-end funds: MFS Institutional Trust ("MFSIT") (which has two
series), MFS Variable Insurance Trust ("MVI") (which has twelve series) and MFS
Union Standard Trust ("UST") (which has two series). The principal business
address of each of the aforementioned funds is 500 Boylston Street, Boston,
Massachusetts 02116.
In addition, MFS serves as investment adviser to the following
closed-end funds: MFS Municipal Income Trust, MFS Multimarket Income Trust, MFS
Government Markets Income Trust, MFS Intermediate Income Trust, MFS Charter
Income Trust and MFS Special Value Trust (the "MFS Closed-End Funds"). The
principal business address of each of the aforementioned funds is 500 Boylston
Street, Boston, Massachusetts 02116.
Lastly, MFS serves as investment adviser to MFS/Sun Life
Series Trust ("MFS/SL"), Sun Growth Variable Annuity Fund, Inc. ("SGVAF"), Money
Market Variable Account, High Yield Variable Account, Capital Appreciation
Variable Account, Government Securities Variable Account, World Governments
Variable Account, Total Return Variable Account and Managed Sectors Variable
Account. The principal business address of each is One Sun Life Executive Park,
Wellesley Hills, Massachusetts 02181.
MFS International Ltd. ("MIL"), a limited liability company
organized under the laws of the Republic of Ireland and a subsidiary of MFS,
whose principal business address is 41-45 St. Stephen's Green, Dublin 2,
Ireland, serves as investment adviser to and distributor for MFS International
Funds (which has four portfolios: MFS International Funds-U.S. Equity Fund, MFS
International Funds-U.S. Emerging Growth Fund, MFS International
Funds-International Governments Fund and MFS International Fund-Charter Income
Fund) (the "MIL Funds"). The MIL Funds are organized in Luxembourg and qualify
as an undertaking for collective investments in transferable securities (UCITS).
The principal business address of the MIL Funds is 47, Boulevard Royal, L-2449
Luxembourg.
MIL also serves as investment adviser to and distributor for
MFS Meridian U.S. Government Bond Fund, MFS Meridian Charter Income Fund, MFS
Meridian Global Government Fund, MFS Meridian U.S. Emerging Growth Fund, MFS
Meridian Global Equity Fund, MFS Meridian Limited Maturity Fund, MFS Meridian
World Growth Fund, MFS Meridian Money Market Fund and MFS Meridian U.S. Equity
Fund (collectively the "MFS Meridian Funds"). Each of the MFS Meridian Funds is
organized as an exempt company under the laws of the Cayman Islands. The
principal business address of each of the MFS Meridian Funds is P.O. Box 309,
Grand Cayman, Cayman Islands, British West Indies.
MFS Fund Distributors, Inc. ("MFD"), a wholly owned subsidiary
of MFS, serves as distributor for the MFS Funds, MVI, UST and MFSIT.
Clarendon Insurance Agency, Inc. ("CIAI"), a wholly owned
subsidiary of MFS, serves as distributor for certain life insurance and annuity
contracts issued by Sun Life Assurance Company of Canada (U.S.).
MFS Service Center, Inc. ("MFSC"), a wholly owned subsidiary
of MFS, serves as shareholder servicing agent to the MFS Funds, the MFS
Closed-End Funds, MFS Institutional Trust, MFS Variable Insurance Trust and MFS
Union Standard Trust.
MFS Asset Management, Inc. ("AMI"), a wholly owned subsidiary
of MFS, provides investment advice to substantial private clients.
MFS Retirement Services, Inc. ("RSI"), a wholly owned
subsidiary of MFS, markets MFS products to retirement plans and provides
administrative and record keeping services for retirement plans.
MFS
The Directors of MFS are A. Keith Brodkin, Jeffrey L. Shames,
Arnold D. Scott, John R. Gardner and John D. McNeil. Mr. Brodkin is the
Chairman, Mr. Shames is the President, Mr. Scott is a Senior Executive Vice
President and Secretary, James E. Russell is a Senior Vice President and the
Treasurer, Stephen E. Cavan is a Senior Vice President, General Counsel and an
Assistant Secretary, and Robert T. Burns is a Vice President and an Assistant
Secretary of MFS.
MASSACHUSETTS INVESTORS TRUST
MASSACHUSETTS INVESTORS GROWTH STOCK FUND
MFS GROWTH OPPORTUNITIES FUND
MFS GOVERNMENT SECURITIES FUND
MFS GOVERNMENT MORTGAGE FUND
MFS SERIES TRUST I
MFS SERIES TRUST V
MFS GOVERNMENT LIMITED MATURITY FUND
MFS SERIES TRUST VI
A. Keith Brodkin is the Chairman and President, Stephen E.
Cavan is the Secretary, W. Thomas London is the Treasurer, James O. Yost, Vice
President of MFS, is Assistant Treasurer, James R. Bordewick, Jr., Vice
President and Associate General Counsel of MFS, is Assistant Secretary.
MFS SERIES TRUST II
A. Keith Brodkin is the Chairman and President, Leslie J.
Nanberg, Senior Vice President of MFS, is a Vice President, Stephen E. Cavan is
the Secretary, W. Thomas London is the Treasurer, James O. Yost is Assistant
Treasurer, and James R. Bordewick, Jr., is Assistant Secretary.
MFS GOVERNMENT MARKETS INCOME TRUST
MFS INTERMEDIATE INCOME TRUST
A. Keith Brodkin is the Chairman and President, Patricia A.
Zlotin, Executive Vice President of MFS and Leslie J. Nanberg, Senior Vice
President of MFS, are Vice Presidents, Stephen E. Cavan is the Secretary, W.
Thomas London is the Treasurer, James O. Yost is Assistant Treasurer, and James
R. Bordewick, Jr., is the Assistant Secretary.
MFS SERIES TRUST III
A. Keith Brodkin is the Chairman and President, James T.
Swanson, Robert J. Manning, Cynthia M. Brown and Joan S. Batchelder, Senior Vice
Presidents of MFS, Bernard Scozzafava, Vice President of MFS, and Matthew
Fontaine, Assistant Vice President of MFS, are Vice Presidents, Sheila
Burns-Magnan and Daniel E. McManus, Assistant Vice Presidents of MFS, are
Assistant Vice Presidents, Stephen E. Cavan is the Secretary, W. Thomas London
is the Treasurer, James O. Yost is Assistant Treasurer, and James R. Bordewick,
Jr., is Assistant Secretary.
MFS SERIES TRUST IV
MFS SERIES TRUST IX
A. Keith Brodkin is the Chairman and President, Robert A.
Dennis and Geoffrey L. Kurinsky, Senior Vice Presidents of MFS, are Vice
Presidents, Stephen E. Cavan is the Secretary, W. Thomas London is the
Treasurer, James O. Yost is Assistant Treasurer and James R. Bordewick, Jr., is
Assistant Secretary.
MFS SERIES TRUST VII
A. Keith Brodkin is the Chairman and President, Leslie J.
Nanberg and Stephen C. Bryant, Senior Vice Presidents of MFS, are Vice
Presidents, Stephen E. Cavan is the Secretary, W. Thomas London is the
Treasurer, James O. Yost is Assistant Treasurer and James R. Bordewick, Jr., is
Assistant Secretary.
MFS SERIES TRUST VIII
A. Keith Brodkin is the Chairman and President, Jeffrey L.
Shames, Leslie J. Nanberg, Patricia A. Zlotin, James T. Swanson and John D.
Laupheimer, Jr., Vice President of MFS, are Vice Presidents, Stephen E. Cavan is
the Secretary, W. Thomas London is the Treasurer, James O. Yost is Assistant
Treasurer and James R. Bordewick, Jr., is Assistant Secretary.
MFS MUNICIPAL SERIES TRUST
A. Keith Brodkin is the Chairman and President, Cynthia M.
Brown and Robert A. Dennis are Vice Presidents, David B. Smith, Geoffrey L.
Schechter and David R. King, Vice Presidents of MFS, are Vice Presidents,
Stephen E. Cavan is the Secretary, W. Thomas London is the Treasurer, James O.
Yost is Assistant Treasurer and James R. Bordewick, Jr., is Assistant Secretary.
MFS VARIABLE INSURANCE TRUST
MFS INSTITUTIONAL TRUST
A. Keith Brodkin is the Chairman and President, Stephen E.
Cavan is the Secretary, W. Thomas London is the Treasurer, James O. Yost is the
Assistant Treasurer and James R. Bordewick, Jr., is the Assistant Secretary.
MFS UNION STANDARD TRUST
A. Keith Brodkin is the Chairman and President, Stephen E.
Cavan is the Secretary, W. Thomas London is the Treasurer, James O. Yost and
Karen C. Jordan are Assistant Treasurers and James R. Bordewick, Jr., is the
Assistant Secretary.
MFS MUNICIPAL INCOME TRUST
A. Keith Brodkin is the Chairman and President, Cynthia M.
Brown and Robert J. Manning are Vice Presidents, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost, is Assistant
Treasurer and James R. Bordewick, Jr., is Assistant Secretary.
MFS MULTIMARKET INCOME TRUST
MFS CHARTER INCOME TRUST
A. Keith Brodkin is the Chairman and President, Patricia A.
Zlotin, Leslie J. Nanberg and James T. Swanson are Vice Presidents, Stephen E.
Cavan is the Secretary, W. Thomas London is the Treasurer, James O. Yost, Vice
President of MFS, is Assistant Treasurer and James R. Bordewick, Jr., is
Assistant Secretary.
MFS SPECIAL VALUE TRUST
A. Keith Brodkin is the Chairman and President, Jeffrey L.
Shames, Patricia A. Zlotin and Robert J. Manning are Vice Presidents, Stephen E.
Cavan is the Secretary, W. Thomas London is the Treasurer, and James O. Yost, is
Assistant Treasurer and James R. Bordewick, Jr., is Assistant Secretary.
SGVAF
W. Thomas London is the Treasurer.
MIL
A. Keith Brodkin is a Director and the President, Arnold D.
Scott, Jeffrey L. Shames are Directors, Ziad Malek, Senior Vice President of
MFS, is a Senior Vice President and Managing Director, Thomas J. Cashman, Jr., a
Vice President of MFS, is a Senior Vice President, Stanley T. Kwok is a Vice
President, Anthony F. Clarizio is an Assistant Vice President, Stephen E. Cavan
is a Director, Senior Vice President and the Clerk, James R. Bordewick, Jr. is a
Director, Senior Vice President and an Assistant Clerk, Robert T. Burns is an
Assistant Clerk and James E. Russell is the Treasurer.
MIL FUNDS
A. Keith Brodkin is the Chairman, President and a Director,
Arnold D. Scott and Jeffrey L. Shames are Directors, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James O. Yost is the Assistant
Treasurer and James R. Bordewick, Jr., is the Assistant Secretary, and Ziad
Malek is a Senior Vice President.
MFS MERIDIAN FUNDS
A. Keith Brodkin is the Chairman, President and a Director,
Arnold D. Scott and Jeffrey L. Shames are Directors, Stephen E. Cavan is the
Secretary, W. Thomas London is the Treasurer, James R. Bordewick, Jr., is the
Assistant Secretary and Ziad Malek is a Senior Vice President.
MFD
A. Keith Brodkin is the Chairman, Arnold D. Scott and Jeffrey
L. Shames are Directors, William W. Scott, Jr., an Executive Vice President of
MFS, is the President, Stephen E. Cavan is the Secretary, Robert T. Burns is the
Assistant Secretary, and James E. Russell is the Treasurer.
CIAI
A. Keith Brodkin is the Chairman, Arnold D. Scott and Jeffrey
L. Shames are Directors, Cynthia Orcott is President, Bruce C. Avery, Executive
Vice President of MFS, is the Vice President, James E. Russell is the Treasurer,
Stephen E. Cavan is the Secretary, and Robert T. Burns is the Assistant
Secretary.
MFSC
A. Keith Brodkin is the Chairman, Arnold D. Scott and Jeffrey
L. Shames are Directors, Joseph A. Recomendes, Senior Vice President of MFS, is
the President, James E. Russell is the Treasurer, Stephen E. Cavan is the
Secretary, and Robert T. Burns is the Assistant Secretary.
AMI
A. Keith Brodkin is the Chairman and a Director, Jeffrey L.
Shames, Leslie J. Nanberg and Arnold D. Scott are Directors, Thomas J. Cashman
is the President and a Director, James E. Russell is the Treasurer and Robert T.
Burns is the Secretary.
RSI
William W. Scott, Jr., Joseph A. Recomendes and Bruce C. Avery
are Directors, Arnold D. Scott is the Chairman, Douglas C. Grip, a Senior Vice
President of MFS, is the President, James E. Russell is the Treasurer, Stephen
E. Cavan is the Secretary, Robert T. Burns is the Assistant Secretary and Henry
A. Shea is an Executive Vice President.
<PAGE>
In addition, the following persons, Directors or officers of
MFS, have the affiliations indicated:
A. Keith Brodkin Director, Sun Life Assurance Company of
Canada (U.S.), One Sun Life Executive
Park, Wellesley Hills, Massachusetts
Director, Sun Life Insurance and Annuity
Company of New York, 67 Broad Street,
New York, New York
John R. Gardner President and a Director, Sun Life
Assurance Company of Canada, Sun Life
Centre, 150 King Street West, Toronto,
Ontario, Canada (Mr. Gardner is also
an officer and/or Director of various
subsidiaries and affiliates of Sun
Life)
John D. McNeil Chairman, Sun Life Assurance Company of
Canada, Sun Life Centre, 150 King
Street West, Toronto, Ontario, Canada
(Mr. McNeil is also an officer and/or
Director of various subsidiaries and
affiliates of Sun Life)
ITEM 29. DISTRIBUTORS
(a) Reference is hereby made to Item 28 above.
(b) Reference is hereby made to Item 28 above.
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts and records of the Registrant are located, in
whole or in part, at the office of the Registrant and the following locations:
<TABLE>
<CAPTION>
NAME ADDRESS
<S> <C>
Massachusetts Financial Services 500 Boylston Street
Company (investment adviser) Boston, MA 02116
MFS Fund Distributors, Inc. 500 Boylston Street
(principal underwriter) Boston, MA 02116
State Street Bank and State Street South
Trust Company (custodian) 5 - West
North Quincy, MA 02171
MFS Service Center, Inc. 500 Boylston Street
(transfer agent) Boston, MA 02116
</TABLE>
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
(c) The Registrant undertakes to furnish each person to whom a
prospectus of a series of the Registrant is delivered with a copy of that
series' latest annual report to shareholders upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Boston and
The Commonwealth of Massachusetts on the 25th day of May, 1995.
MFS MUNICIPAL SERIES TRUST
By: /s/ JAMES R. BORDEWICK, JR.
Name: James R. Bordewick, Jr.
Title: Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to its Registration Statement has been signed below by
the following persons in the capacities indicated on May 25, 1995.
SIGNATURE TITLE
/s/ A. KEITH BRODKIN* Chairman, President (Principal
A. Keith Brodkin Executive Officer) and Trustee
/s/ W. THOMAS LONDON* Treasurer (Principal Financial Officer
W. Thomas London and Principal Accounting Officer)
/s/ RICHARD B. BAILEY* Trustee
Richard B. Bailey
/s/ MARSHALL N. COHAN* Trustee
Marshall N. Cohan
/s/ LAWRENCE H. COHN* Trustee
Lawrence H. Cohn
/s/ SIR J. DAVID GIBBONS* Trustee
Sir J. David Gibbons
<PAGE>
/s/ ABBY M. O'NEILL* Trustee
Abby M. O'Neill
/s/ WALTER E. ROBB, III* Trustee
Walter E. Robb, III
/s/ ARNOLD D. SCOTT* Trustee
Arnold D. Scott
/s/ JEFFREY L. SHAMES* Trustee
Jeffrey L. Shames
/s/ J. DALE SHERRATT* Trustee
J. Dale Sherratt
/s/ WARD SMITH* Trustee
Ward Smith
*By: /s/ JAMES R. BORDEWICK, JR.
Name: James R. Bordewick, Jr.
as Attorney-in-fact
Executed by James R. Bordewick, Jr.
on behalf of those indicated pursuant
to a Power of Attorney dated
August 11, 1994; filed herewith.
<PAGE>
POWER OF ATTORNEY
MFS MUNICIPAL SERIES TRUST
The undersigned, Trustees and officers of MFS Municipal Series Trust
(the "Registrant"), hereby severally constitute and appoint A. Keith Brodkin, W.
Thomas London, Stephen E. Cavan and James R. Bordewick, Jr., and each of them
singly, as true and lawful attorneys, with full power to them and each of them
to sign for each of the undersigned, in the names of, and in the capacities
indicated below, any Registration Statement and any and all amendments thereto
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission for the
purpose of registering the Registrant as a management investment company under
the Investment Company Act of 1940 and/or the shares issued by the Registrant
under the Securities Act of 1933 granting unto our said attorneys, and each of
them, acting alone, full power and authority to do and perform each and every
act and thing requisite or necessary or desirable to be done in the premises, as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys or any of them may
lawfully do or cause to be done by virtue thereof.
In WITNESS WHEREOF, the undersigned have hereunto set their hand on
this 11th day of August, 1994.
SIGNATURES TITLE(S)
/s/ A.KEITH BRODKIN Chairman of the Board; Trustee; and
A. Keith Brodkin Principal Executive Officer
/s/ RICHARD B. BAILEY Trustee
Richard B. Bailey
/s/ MARSHALL N. COHAN Trustee
Marshall N. Cohan
<PAGE>
Trustee
Lawrence H. Cohn
Trustee
Sir J. David Gibbons
Trustee
Jeffrey L. Shames
/s/ ABBY M. O'NEILL Trustee
Abby M. O'Neill
Trustee
Walter E. Robb, III
Trustee
J. Dale Sherratt
Trustee
Ward Smith
Trustee
Arnold D. Scott
Principal Financial and
W. Thomas London Accounting Officer
<PAGE>
/s/ LAWRENCE H. COHN Trustee
Lawrence H. Cohn
/s/ SIR J. DAVID GIBBONS Trustee
Sir J. David Gibbons
/s/ JEFFREY L. SHAMES Trustee
Jeffrey L. Shames
Trustee
Abby M. O'Neill
/s/ WALTER E. ROBB Trustee
Walter E. Robb, III
/s/ J. DALE SHERRATT Trustee
J. Dale Sherratt
/s/ WARD SMITH Trustee
Ward Smith
/s/ ARNOLD D. SCOTT Trustee
Arnold D. Scott
/s/ W. THOMAS LONDON Principal Financial and
W. Thomas London Accounting Officer
<PAGE>
INDEX TO EXHIBITS
MFS MUNICIPAL SERIES TRUST
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE NO.
- ---------- ---------------------- -------
<C> <S> <C>
9 (d) Amendment to Shareholder Servicing Agreement, dated December 31, 1993.
10 Opinion of Counsel
11 Consent of Deloitte & Touche LLP - MFS Municipal Series Trust
27.1 Financial Data Schedule for Class A Shares of MFS
Alabama Municipal Bond Fund for the period ending
March 31, 1995.
27.2 Financial Data Schedule for Class B Shares of MFS
Alabama Municipal Bond Fund for the period ending
March 31, 1995.
27.3 Financial Data Schedule for Class A Shares of MFS
Arkansas Municipal Bond Fund for the period
ending March 31, 1995.
27.4 Financial Data Schedule for Class B Shares of MFS
Arkansas Municipal Bond Fund for the period
ending March 31, 1995.
27.5 Financial Data Schedule for Class A Shares of MFS
California Municipal Bond Fund for the period
ending March 31, 1995.
27.6 Financial Data Schedule for Class B Shares of MFS
California Municipal Bond Fund for the period
ending March 31, 1995.
27.7 Financial Data Schedule for Class C Shares of MFS
California Municipal Bond Fund for the period
ending March 31, 1995.
27.8 Financial Data Schedule for Class A Shares of MFS
Florida Municipal Bond Fund for the period ending
March 31, 1995.
27.9 Financial Data Schedule for Class B Shares of MFS
Florida Municipal Bond Fund for the period ending
March 31, 1995.
27.10 Financial Data Schedule for Class A Shares of MFS
Georgia Municipal Bond Fund for the period ending
March 31, 1995.
27.11 Financial Data Schedule for Class B Shares of MFS
Georgia Municipal Bond Fund for the period ending
March 31, 1995.
<PAGE>
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE NO.
- ---------- ---------------------- -------
27.12 Financial Data Schedule for Class A Shares of MFS
Louisiana Municipal Bond Fund for the period
ending March 31, 1995.
27.13 Financial Data Schedule for Class B Shares of MFS
Louisiana Municipal Bond Fund for the period
ending March 31, 1995.
27.14 Financial Data Schedule for Class A Shares of MFS
Maryland Municipal Bond Fund for the period
ending March 31, 1995.
27.15 Financial Data Schedule for Class B Shares of MFS
Maryland Municipal Bond Fund for the period
ending March 31, 1995.
27.16 Financial Data Schedule for Class A Shares of MFS
Massachusetts Municipal Bond Fund for the period
ending March 31, 1995.
27.17 Financial Data Schedule for Class B Shares of MFS
Massachusetts Municipal Bond Fund for the period
ending March 31, 1995.
27.18 Financial Data Schedule for Class A Shares of MFS
Mississippi Municipal Bond Fund for the period
ending March 31, 1995.
27.19 Financial Data Schedule for Class B Shares of MFS
Mississippi Municipal Bond Fund for the period
ending March 31, 1995.
27.20 Financial Data Schedule for Class A Shares of MFS
New York Municipal Bond Fund for the period
ending March 31, 1995.
27.21 Financial Data Schedule for Class B Shares of MFS
New York Municipal Bond Fund for the period
ending March 31, 1995.
27.22 Financial Data Schedule for Class A Shares of MFS
North Carolina Municipal Bond Fund for the period
ending March 31, 1995.
27.23 Financial Data Schedule for Class B Shares of MFS
North Carolina Municipal Bond Fund for the period
ending March 31, 1995.
27.24 Financial Data Schedule for Class C Shares of MFS
North Carolina Municipal Bond Fund for the period
ending March 31, 1995.
27.25 Financial Data Schedule for Class A Shares of MFS
Pennsylvania Municipal Bond Fund for the period
ending March 31, 1995.
<PAGE>
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE NO.
- ---------- ---------------------- -------
27.26 Financial Data Schedule for Class B Shares of MFS
Pennsylvania Municipal Bond Fund for the period
ending March 31, 1995.
27.27 Financial Data Schedule for Class A Shares of MFS
South Carolina Municipal Bond Fund for the period
ending March 31, 1995.
27.28 Financial Data Schedule for Class B Shares of MFS
South Carolina Municipal Bond Fund for the period
ending March 31, 1995.
27.29 Financial Data Schedule for Class A Shares of MFS
Tennessee Municipal Bond Fund for the period
ending March 31, 1995.
27.30 Financial Data Schedule for Class B Shares of MFS
Tennessee Municipal Bond Fund for the period
ending March 31, 1995.
27.31 Financial Data Schedule for Class A Shares of MFS
Texas Municipal Bond Fund for the period ending
March 31, 1995.
27.32 Financial Data Schedule for Class B Shares of MFS
Texas Municipal Bond Fund for the period ending
March 31, 1995.
27.33 Financial Data Schedule for Class A Shares of MFS
Virginia Municipal Bond Fund for the period
ending March 31, 1995.
27.34 Financial Data Schedule for Class B Shares of MFS
Virginia Municipal Bond Fund for the period
ending March 31, 1995.
27.35 Financial Data Schedule for Class C Shares of MFS
Virginia Municipal Bond Fund for the period
ending March 31, 1995.
27.36 Financial Data Schedule for Class A Shares of MFS
Washington Municipal Bond Fund for the period
ending March 31, 1995.
27.37 Financial Data Schedule for Class B Shares of MFS
Washington Municipal Bond Fund for the period
ending March 31, 1995.
27.38 Financial Data Schedule for Class A Shares of MFS
West Virginia Municipal Bond Fund for the period
ending March 31, 1995.
27.39 Financial Data Schedule for Class B Shares of MFS
West Virginia Municipal Bond Fund for the period
ending March 31, 1995.
</TABLE>
<PAGE>
EXHIBIT 99.9(D)
MFS MUNICIPAL SERIES TRUST
500 BOYLSTON STREET o BOSTON o MASSACHUSETTS 02116-3741
617 o 954-5000
December 28, 1993
MFS Service Center, Inc.
500 Boylston Street
Boston, MA 02116
Dear Sir/Madam:
This will confirm our understanding that Exhibit B to the Shareholder
Servicing Agent Agreement between us, dated August 1, 1985, as amended, is
hereby amended, effective immediately, to read in its entirety as set forth on
Attachment 1 hereto.
Please indicate your acceptance of the foregoing by signing below.
Sincerely,
MFS MUNICIPAL SERIES TRUST
By: /s/ W. THOMAS LONDON
W. Thomas London
Treasurer
Accepted and Agreed:
MFS SERVICE CENTER, INC.
By: /s/ JAMES E. RUSSELL
James E. Russell
Treasurer
<PAGE>
ATTACHMENT 1
DECEMBER 28, 1993
EXHIBIT B TO THE SHAREHOLDER SERVICING AGENT AGREEMENT
BETWEEN MFS SERVICE CENTER, INC. ("MFSC") AND
MFS MUNICIPAL SERIES TRUST (THE "FUND")
1. The fees to be paid by the Fund on behalf of its series with respect to
Class A shares of each series of the Fund to MFSC, for MFSC's services as
shareholder servicing agent, shall be:
0.15% of the first $500 million of the assets of the series attributable
to such class;
0.12% of the second $500 million of the assets of the series
attributable to such class;
0.09% over $1 billion of the assets of the series attributable to such
class.
2. The fees to be paid by the Fund on behalf of its series with respect to
Class B shares of each series of the Fund to MFSC, for MFSC's services as
shareholder servicing agent, shall be:
0.22% of the first $500 million of the assets of the series attributable
to such class;
0.18% of the second $500 million of the assets of the series
attributable to such class;
0.13% over $1 billion of the assets of the series attributable to such
class.
3. The fees to be paid by the Fund on behalf of its series with respect to
Class C shares of each series of the Fund to MFSC, for MFSC's services as
shareholder servicing agent, shall be:
0.15% of the first $500 million of the assets of the series attributable
to such class;
0.12% of the second $500 million of the assets of the series
attributable to such class;
0.09% over $1 billion of the assets of the series attributable to such
class.
<PAGE>
EXHIBIT 99.10
May 22, 1995
MFS Municipal Series Trust
500 Boylston Street
Boston, MA 02116
Re: POST-EFFECTIVE AMENDMENT NO. 27 TO REGISTRATION STATEMENT ON FORM
N-1A (FILE NO. 2-92915) (THE "REGISTRATION STATEMENT")
Gentlemen:
I am Vice President and Associate General Counsel of Massachusetts
Financial Services Company, which serves as investment adviser to MFS
Municipal Series Trust (the "Trust") and the Assistant Secretary of the Trust.
I am admitted to practice law in The Commonwealth of Massachusetts. The Trust
was created under a written Declaration of Trust dated August 23, 1984, and
executed and delivered in Boston, Massachusetts, as amended and restated
February 3, 1995 (the "Declaration of Trust"). The beneficial interest
thereunder is represented by transferable shares without par value. The
Trustees have the powers set forth in the Declaration of Trust, subject to the
terms, provisions and conditions therein provided.
I am of the opinion that the legal requirements have been complied with
in the creation of the Trust, and that said Declaration of Trust is legal and
valid.
Under Article III, Section 3.4 and Article VI, Section 6.4 of the
Declaration of Trust, the Trustees are empowered, in their discretion, from
time to time to issue shares of the Trust for such amount and type of
consideration, at such time or times and on such terms as the Trustees may
deem best. Under Article VI, Section 6.1, it is provided that the number of
shares of beneficial interest authorized to be issued under the Declaration of
Trust is unlimited.
By vote adopted on February 2, 1995, the Trustees of the Trust
determined to sell to the public the authorized but unissued shares of
beneficial interest of the Trust for cash at a price which will net the Trust
(before taxes) not less than the net asset value thereof, as defined in the
Trust's By-Laws, determined next after the sale is made or at some later time
after such sale.
<PAGE>
The Trust is about to register under the Securities Act of 1933, as
amended, 26,119,450 shares of beneficial interest by Post-Effective Amendment
No. 27 to the Trust's Registration Statement. W. Thomas London, Treasurer of
the Trust, has certified that the Trust received cash consideration for the
issuance of each of the Shares of the Trust sold during the Trust's fiscal
year ended March 31, 1995, including the 64,758,876 shares which were sold in
reliance upon Rule 24f-2 of the General Rules and Regulations under the
Investment Company Act of 1940, as amended, at a price which netted the Trust
(before taxes) not less than the net asset value per share, as defined in the
Trust's Declaration of Trust, determined next after the sale was made.
Based on the foregoing, I am of the opinion that all necessary Trust
action precedent to the issue of the shares of the Trust, comprising the
shares covered by Post-Effective Amendment No. 27 to the Registration
Statement has been duly taken, and that all such shares may legally and
validly be issued for cash, and when sold will be fully paid and
nonassessable, except as described below, by the Trust upon receipt by the
Trust or its agent of consideration thereof in accordance with the terms
described in the Registration Statement. I express no opinion as to compliance
with the Securities Act of 1933, the Investment Company Act of 1940 and
applicable state "Blue Sky" or securities laws regulating the sale of
securities.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given
in each agreement, obligation, or instrument entered into or executed by the
Trust or the Trustees. The Declaration of Trust provides for indemnification
out of the Trust property for all loss and expense of any shareholder held
personally liable for the obligations of the Trust. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Trust itself would be unable to meet its
obligations.
I consent to your filing this opinion with the Securities and Exchange
Commission as an exhibit to Post-Effective Amendment No. 27 to the
Registration Statement.
Very truly yours,
JAMES R. BORDEWICK, JR.
James R. Bordewick, Jr.
<PAGE>
EXHIBIT 99.11
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective
Amendment No. 27 to Registration Statement No. 2-92915 of MFS Municipal Series
Trust of our reports dated May 5, 1995 appearing in the annual reports to
shareholders for the year ended March 31, 1995, and to the references to us
under the headings "Condensed Financial Information" in the Prospectus and
"Independent Accountants and Financial Statements" in the Statement of
Additional Information, which are part of such Registration Statement.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
May 26, 1995
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS ALABAMA
MUNICIPAL BOND FUND - CLASS A AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> MFS ALABAMA MUNICIPAL BOND FUND - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 82,683,768
<INVESTMENTS-AT-VALUE> 86,918,071
<RECEIVABLES> 2,617,023
<ASSETS-OTHER> 1,161
<OTHER-ITEMS-ASSETS> 68,847
<TOTAL-ASSETS> 89,605,102
<PAYABLE-FOR-SECURITIES> 936,678
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 467,922
<TOTAL-LIABILITIES> 1,404,600
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 84,988,837
<SHARES-COMMON-STOCK> 8,104,410
<SHARES-COMMON-PRIOR> 7,936,344
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 18,567
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 1,004,071
<ACCUM-APPREC-OR-DEPREC> 4,234,303
<NET-ASSETS> 88,200,502
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,701,782
<OTHER-INCOME> 0
<EXPENSES-NET> 1,022,092
<NET-INVESTMENT-INCOME> (4,679,690)
<REALIZED-GAINS-CURRENT> (720,688)
<APPREC-INCREASE-CURRENT> 1,407,648
<NET-CHANGE-FROM-OPS> 5,366,650
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,455,164)
<DISTRIBUTIONS-OF-GAINS> (208,081)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,021,185
<NUMBER-OF-SHARES-REDEEMED> 1,017,222
<SHARES-REINVESTED> 164,103
<NET-CHANGE-IN-ASSETS> 3,850,626
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 74,046
<OVERDIST-NET-GAINS-PRIOR> 67,137
<GROSS-ADVISORY-FEES> 474,038
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,104,580
<AVERAGE-NET-ASSETS> 86,186,419
<PER-SHARE-NAV-BEGIN> 10.27
<PER-SHARE-NII> 0.56
<PER-SHARE-GAIN-APPREC> 0.09
<PER-SHARE-DIVIDEND> (0.55)
<PER-SHARE-DISTRIBUTIONS> (0.03)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.34
<EXPENSE-RATIO> 1.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS ALABAMA
MUNICIPAL BOND FUND - CLASS B AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FIANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> MFS ALABAMA MUNICIPAL BOND FUND - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 82,683,768
<INVESTMENTS-AT-VALUE> 86,918,071
<RECEIVABLES> 2,617,023
<ASSETS-OTHER> 1,161
<OTHER-ITEMS-ASSETS> 68,847
<TOTAL-ASSETS> 89,605,102
<PAYABLE-FOR-SECURITIES> 936,678
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 467,922
<TOTAL-LIABILITIES> 1,404,600
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 84,988,837
<SHARES-COMMON-STOCK> 425,077
<SHARES-COMMON-PRIOR> 277,409
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 18,567
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 1,004,071
<ACCUM-APPREC-OR-DEPREC> 4,234,303
<NET-ASSETS> 88,200,502
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,701,782
<OTHER-INCOME> 0
<EXPENSES-NET> 1,022,092
<NET-INVESTMENT-INCOME> (4,679,690)
<REALIZED-GAINS-CURRENT> (720,688)
<APPREC-INCREASE-CURRENT> 1,407,648
<NET-CHANGE-FROM-OPS> 5,366,650
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (169,047)
<DISTRIBUTIONS-OF-GAINS> (8,165)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 202,515
<NUMBER-OF-SHARES-REDEEMED> 62,185
<SHARES-REINVESTED> 7,338
<NET-CHANGE-IN-ASSETS> 3,850,626
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 74,046
<OVERDIST-NET-GAINS-PRIOR> 67,137
<GROSS-ADVISORY-FEES> 474,038
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,104,580
<AVERAGE-NET-ASSETS> 86,186,419
<PER-SHARE-NAV-BEGIN> 10.27
<PER-SHARE-NII> 0.47
<PER-SHARE-GAIN-APPREC> 0.09
<PER-SHARE-DIVIDEND> (0.46)
<PER-SHARE-DISTRIBUTIONS> (0.03)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.34
<EXPENSE-RATIO> 1.97
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS MUNICIPAL
SERIES TRUST - ARKANSAS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> MFS MUNCIPAL SERIES TRUST -ARKANSAS CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 190,400,752
<INVESTMENTS-AT-VALUE> 192,034,002
<RECEIVABLES> 3,111,091
<ASSETS-OTHER> 6,994
<OTHER-ITEMS-ASSETS> 63,232
<TOTAL-ASSETS> 195,215,319
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 879,225
<TOTAL-LIABILITIES> 879,225
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 198,772,841
<SHARES-COMMON-STOCK> 19,375,430
<SHARES-COMMON-PRIOR> 20,125,575
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 321,022
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 5,902,391
<ACCUM-APPREC-OR-DEPREC> 1,786,666
<NET-ASSETS> 194,336,094
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 12,421,358
<OTHER-INCOME> 0
<EXPENSES-NET> 1,554,148
<NET-INVESTMENT-INCOME> 10,867,210
<REALIZED-GAINS-CURRENT> (4,813,993)
<APPREC-INCREASE-CURRENT> 4,563,068
<NET-CHANGE-FROM-OPS> 10,616,285
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (10,558,798)
<DISTRIBUTIONS-OF-GAINS> (1,025,561)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,827,739
<NUMBER-OF-SHARES-REDEEMED> 3,146,711
<SHARES-REINVESTED> 568,827
<NET-CHANGE-IN-ASSETS> (6,601,031)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 329,976
<OVERDIST-NET-GAINS-PRIOR> 25,562
<GROSS-ADVISORY-FEES> 1,093,773
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,706,690
<AVERAGE-NET-ASSETS> 198,659,551
<PER-SHARE-NAV-BEGIN> 9.69
<PER-SHARE-NII> 0.53
<PER-SHARE-GAIN-APPREC> 0.02
<PER-SHARE-DIVIDEND> 0.53
<PER-SHARE-DISTRIBUTIONS> 0.05
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.66
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS MUNICIPAL
SERIES TRUST - ARKANSAS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 4
<NAME> MFS Muncipal Series Trust - Arkansas Class B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 190,400,752
<INVESTMENTS-AT-VALUE> 192,034,002
<RECEIVABLES> 3,111,091
<ASSETS-OTHER> 6,994
<OTHER-ITEMS-ASSETS> 63,232
<TOTAL-ASSETS> 195,215,319
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 879,225
<TOTAL-LIABILITIES> 879,225
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 198,772,841
<SHARES-COMMON-STOCK> 749,100
<SHARES-COMMON-PRIOR> 608,411
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 321,022
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 5,902,391
<ACCUM-APPREC-OR-DEPREC> 1,786,666
<NET-ASSETS> 194,336,094
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 12,421,358
<OTHER-INCOME> 0
<EXPENSES-NET> 1,554,148
<NET-INVESTMENT-INCOME> 10,867,210
<REALIZED-GAINS-CURRENT> (4,813,993)
<APPREC-INCREASE-CURRENT> 4,563,068
<NET-CHANGE-FROM-OPS> 10,616,285
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (299,458)
<DISTRIBUTIONS-OF-GAINS> (37,275)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 167,427
<NUMBER-OF-SHARES-REDEEMED> 45,793
<SHARES-REINVESTED> 19,055
<NET-CHANGE-IN-ASSETS> (6,601,031)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 329,976
<OVERDIST-NET-GAINS-PRIOR> 25,562
<GROSS-ADVISORY-FEES> 1,093,773
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,706,690
<AVERAGE-NET-ASSETS> 198,659,551
<PER-SHARE-NAV-BEGIN> 9.69
<PER-SHARE-NII> 0.42
<PER-SHARE-GAIN-APPREC> 0.01
<PER-SHARE-DIVIDEND> 0.42
<PER-SHARE-DISTRIBUTIONS> 0.05
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.65
<EXPENSE-RATIO> 1.84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS CALIFORNIA
MUNICIPAL BOND FUND - CLASS A AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FIANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 5
<NAME> MFS CALIFORNIA MUNICIPAL BOND FUND - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 291,143,608
<INVESTMENTS-AT-VALUE> 300,774,990
<RECEIVABLES> 6,445,469
<ASSETS-OTHER> 4,871
<OTHER-ITEMS-ASSETS> 72,503
<TOTAL-ASSETS> 307,297,833
<PAYABLE-FOR-SECURITIES> 949,781
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,272,106
<TOTAL-LIABILITIES> 2,221,887
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 310,089,338
<SHARES-COMMON-STOCK> 50,289,065
<SHARES-COMMON-PRIOR> 57,337,427
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 587,069
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 14,057,705
<ACCUM-APPREC-OR-DEPREC> 9,631,382
<NET-ASSETS> 305,075,946
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 20,605,991
<OTHER-INCOME> 0
<EXPENSES-NET> 2,482,858
<NET-INVESTMENT-INCOME> (18,123,133)
<REALIZED-GAINS-CURRENT> (13,230,556)
<APPREC-INCREASE-CURRENT> 8,579,734
<NET-CHANGE-FROM-OPS> 13,472,311
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (16,697,698)
<DISTRIBUTIONS-OF-GAINS> (252,101)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,839,421
<NUMBER-OF-SHARES-REDEEMED> 19,244,000
<SHARES-REINVESTED> 1,356,217
<NET-CHANGE-IN-ASSETS> (31,666,658)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 428,258
<OVERDIST-NET-GAINS-PRIOR> 827,149
<GROSS-ADVISORY-FEES> 1,746,273
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,959,558
<AVERAGE-NET-ASSETS> 317,714,300
<PER-SHARE-NAV-BEGIN> 5.47
<PER-SHARE-NII> 0.31
<PER-SHARE-GAIN-APPREC> (0.06)
<PER-SHARE-DIVIDEND> (0.31)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 5.41
<EXPENSE-RATIO> 0.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS CALIFORNIA
MUNICIPAL BOND FUND - CLASS B AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FIANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 6
<NAME> MFS CALIFORNIA MUNICIPAL BOND FUND - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 291,143,608
<INVESTMENTS-AT-VALUE> 300,774,990
<RECEIVABLES> 6,445,469
<ASSETS-OTHER> 4,871
<OTHER-ITEMS-ASSETS> 72,503
<TOTAL-ASSETS> 307,297,833
<PAYABLE-FOR-SECURITIES> 949,781
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,272,106
<TOTAL-LIABILITIES> 2,221,887
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 310,089,338
<SHARES-COMMON-STOCK> 5,369,741
<SHARES-COMMON-PRIOR> 3,882,754
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 587,069
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 14,057,705
<ACCUM-APPREC-OR-DEPREC> 9,631,382
<NET-ASSETS> 305,075,946
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 20,605,991
<OTHER-INCOME> 0
<EXPENSES-NET> 2,482,858
<NET-INVESTMENT-INCOME> (18,123,133)
<REALIZED-GAINS-CURRENT> (13,230,556)
<APPREC-INCREASE-CURRENT> 8,579,734
<NET-CHANGE-FROM-OPS> 13,472,311
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,163,387)
<DISTRIBUTIONS-OF-GAINS> (20,873)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,519,398
<NUMBER-OF-SHARES-REDEEMED> 1,141,335
<SHARES-REINVESTED> 108,924
<NET-CHANGE-IN-ASSETS> (31,666,658)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 428,258
<OVERDIST-NET-GAINS-PRIOR> 827,149
<GROSS-ADVISORY-FEES> 1,746,273
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,959,558
<AVERAGE-NET-ASSETS> 317,714,300
<PER-SHARE-NAV-BEGIN> 5.47
<PER-SHARE-NII> 0.25
<PER-SHARE-GAIN-APPREC> (0.06)
<PER-SHARE-DIVIDEND> (0.25)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 5.41
<EXPENSE-RATIO> 1.76
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS CALIFORNIA
MUNICIPAL BOND FUND - CLASS C AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 7
<NAME> MFS CALIFORNIA MUNICIPAL BOND FUND - CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 291,143,608
<INVESTMENTS-AT-VALUE> 300,774,990
<RECEIVABLES> 6,445,469
<ASSETS-OTHER> 4,871
<OTHER-ITEMS-ASSETS> 72,503
<TOTAL-ASSETS> 307,297,833
<PAYABLE-FOR-SECURITIES> 949,781
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,272,106
<TOTAL-LIABILITIES> 2,221,887
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 310,089,338
<SHARES-COMMON-STOCK> 712,083
<SHARES-COMMON-PRIOR> 310,501
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 587,069
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 14,057,705
<ACCUM-APPREC-OR-DEPREC> 9,631,382
<NET-ASSETS> 305,075,946
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 20,605,991
<OTHER-INCOME> 0
<EXPENSES-NET> 2,482,858
<NET-INVESTMENT-INCOME> (18,123,133)
<REALIZED-GAINS-CURRENT> (13,230,556)
<APPREC-INCREASE-CURRENT> 8,579,734
<NET-CHANGE-FROM-OPS> 13,472,311
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (145,036)
<DISTRIBUTIONS-OF-GAINS> (2,849)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,072,921
<NUMBER-OF-SHARES-REDEEMED> 686,321
<SHARES-REINVESTED> 14,982
<NET-CHANGE-IN-ASSETS> (31,666,658)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 428,258
<OVERDIST-NET-GAINS-PRIOR> 827,149
<GROSS-ADVISORY-FEES> 1,746,273
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,959,558
<AVERAGE-NET-ASSETS> 317,714,300
<PER-SHARE-NAV-BEGIN> 5.48
<PER-SHARE-NII> 0.26
<PER-SHARE-GAIN-APPREC> (0.07)
<PER-SHARE-DIVIDEND> (0.25)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 5.42
<EXPENSE-RATIO> 1.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS FLORIDA
MUNICIPAL BOND FUND - CLASS A AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 8
<NAME> MFS FLORIDA MUNICIPAL BOND FUND - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 95,834,249
<INVESTMENTS-AT-VALUE> 99,585,292
<RECEIVABLES> 3,396,631
<ASSETS-OTHER> 16,602
<OTHER-ITEMS-ASSETS> 27,207
<TOTAL-ASSETS> 103,025,732
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (464,821)
<TOTAL-LIABILITIES> (464,821)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 106,806,530
<SHARES-COMMON-STOCK> 9,360,814
<SHARES-COMMON-PRIOR> 11,248,884
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 112,130
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 7,781,075
<ACCUM-APPREC-OR-DEPREC> 3,647,586
<NET-ASSETS> 102,560,911
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,906,324
<OTHER-INCOME> 0
<EXPENSES-NET> 765,751
<NET-INVESTMENT-INCOME> (6,140,573)
<REALIZED-GAINS-CURRENT> (7,415,954)
<APPREC-INCREASE-CURRENT> 7,473,153
<NET-CHANGE-FROM-OPS> 6,197,772
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,649,584)
<DISTRIBUTIONS-OF-GAINS> (761,516)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,609,249
<NUMBER-OF-SHARES-REDEEMED> 8,730,358
<SHARES-REINVESTED> 233,039
<NET-CHANGE-IN-ASSETS> (14,012,868)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 462,210
<OVERDISTRIB-NII-PRIOR> 140,811
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 599,093
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,013,965
<AVERAGE-NET-ASSETS> 108,801,325
<PER-SHARE-NAV-BEGIN> 9.65
<PER-SHARE-NII> 0.54
<PER-SHARE-GAIN-APPREC> 0.02
<PER-SHARE-DIVIDEND> (0.54)
<PER-SHARE-DISTRIBUTIONS> (0.07)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.60
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS FLORIDA
MUNICIPAL BOND FUND - CLASS B AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 9
<NAME> MFS FLORIDA MUNICIPAL BOND FUND - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 95,834,249
<INVESTMENTS-AT-VALUE> 99,585,292
<RECEIVABLES> 3,396,631
<ASSETS-OTHER> 16,602
<OTHER-ITEMS-ASSETS> 27,207
<TOTAL-ASSETS> 103,025,732
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (464,821)
<TOTAL-LIABILITIES> (464,821)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 106,806,530
<SHARES-COMMON-STOCK> 1,319,480
<SHARES-COMMON-PRIOR> 829,366
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 112,130
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 7,781,075
<ACCUM-APPREC-OR-DEPREC> 3,647,586
<NET-ASSETS> 102,560,911
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,906,324
<OTHER-INCOME> 0
<EXPENSES-NET> 765,751
<NET-INVESTMENT-INCOME> (6,140,573)
<REALIZED-GAINS-CURRENT> (7,415,954)
<APPREC-INCREASE-CURRENT> 7,473,153
<NET-CHANGE-FROM-OPS> 6,197,772
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (462,308)
<DISTRIBUTIONS-OF-GAINS> (65,815)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 674,893
<NUMBER-OF-SHARES-REDEEMED> 212,553
<SHARES-REINVESTED> 27,774
<NET-CHANGE-IN-ASSETS> (14,012,868)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 462,210
<OVERDISTRIB-NII-PRIOR> 140,811
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 599,093
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,013,965
<AVERAGE-NET-ASSETS> 108,801,325
<PER-SHARE-NAV-BEGIN> 9.64
<PER-SHARE-NII> 0.43
<PER-SHARE-GAIN-APPREC> 0.04
<PER-SHARE-DIVIDEND> (0.44)
<PER-SHARE-DISTRIBUTIONS> (0.07)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.60
<EXPENSE-RATIO> 1.68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS GEORGIA
MUNICIPAL BOND FUND - CLASS A AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 10
<NAME> MFS GEORGIA MUNICIPAL BOND FUND - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 77,776,741
<INVESTMENTS-AT-VALUE> 81,600,769
<RECEIVABLES> 3,269,143
<ASSETS-OTHER> 2,082
<OTHER-ITEMS-ASSETS> 78,045
<TOTAL-ASSETS> 84,950,039
<PAYABLE-FOR-SECURITIES> 1,434,644
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 388,162
<TOTAL-LIABILITIES> 1,822,806
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 83,071,922
<SHARES-COMMON-STOCK> 7,188,288
<SHARES-COMMON-PRIOR> 8,272,446
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 197,344
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 3,447,226
<ACCUM-APPREC-OR-DEPREC> 3,699,881
<NET-ASSETS> 83,127,233
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,786,024
<OTHER-INCOME> 0
<EXPENSES-NET> 1,060,365
<NET-INVESTMENT-INCOME> (4,725,659)
<REALIZED-GAINS-CURRENT> (3,196,176)
<APPREC-INCREASE-CURRENT> 2,709,105
<NET-CHANGE-FROM-OPS> 4,238,588
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,347,433)
<DISTRIBUTIONS-OF-GAINS> (276,604)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,076,103
<NUMBER-OF-SHARES-REDEEMED> 2,370,612
<SHARES-REINVESTED> 210,351
<NET-CHANGE-IN-ASSETS> (9,381,212)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 48,548
<OVERDISTRIB-NII-PRIOR> 220,486
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 477,819
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,140,079
<AVERAGE-NET-ASSETS> 87,164,607
<PER-SHARE-NAV-BEGIN> 10.38
<PER-SHARE-NII> 0.57
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.56)
<PER-SHARE-DISTRIBUTIONS> (0.04)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.35
<EXPENSE-RATIO> 1.14
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS GEORGIA
MUNICIPAL BOND FUND - CLASS B AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 11
<NAME> MFS GEORGIA MUNICIPAL BOND FUND - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 77,776,741
<INVESTMENTS-AT-VALUE> 81,600,769
<RECEIVABLES> 3,269,143
<ASSETS-OTHER> 2,082
<OTHER-ITEMS-ASSETS> 78,045
<TOTAL-ASSETS> 84,950,039
<PAYABLE-FOR-SECURITIES> 1,434,644
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 388,162
<TOTAL-LIABILITIES> 1,822,806
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 83,071,922
<SHARES-COMMON-STOCK> 839,376
<SHARES-COMMON-PRIOR> 638,664
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 197,344
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 3,447,226
<ACCUM-APPREC-OR-DEPREC> 3,699,881
<NET-ASSETS> 83,127,233
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,786,024
<OTHER-INCOME> 0
<EXPENSES-NET> 1,060,365
<NET-INVESTMENT-INCOME> (4,725,659)
<REALIZED-GAINS-CURRENT> (3,196,176)
<APPREC-INCREASE-CURRENT> 2,709,105
<NET-CHANGE-FROM-OPS> 4,238,588
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (355,084)
<DISTRIBUTIONS-OF-GAINS> (22,994)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 357,689
<NUMBER-OF-SHARES-REDEEMED> 178,084
<SHARES-REINVESTED> 21,107
<NET-CHANGE-IN-ASSETS> (9,381,212)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 48,548
<OVERDISTRIB-NII-PRIOR> 220,486
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 477,819
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,140,079
<AVERAGE-NET-ASSETS> 87,164,607
<PER-SHARE-NAV-BEGIN> 10.38
<PER-SHARE-NII> 0.47
<PER-SHARE-GAIN-APPREC> 0.02
<PER-SHARE-DIVIDEND> (0.47)
<PER-SHARE-DISTRIBUTIONS> (0.04)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.36
<EXPENSE-RATIO> 1.96
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS LOUISIANA
MUNICIPAL BOND FUND - CLASS A AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 12
<NAME> MFS LOUISIANA MUNICIPAL BOND FUND - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 17,662,299
<INVESTMENTS-AT-VALUE> 17,930,136
<RECEIVABLES> 1,977,001
<ASSETS-OTHER> 7,156
<OTHER-ITEMS-ASSETS> 15,421
<TOTAL-ASSETS> 19,929,714
<PAYABLE-FOR-SECURITIES> 302,046
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 55,367
<TOTAL-LIABILITIES> 357,413
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,337,245
<SHARES-COMMON-STOCK> 1,822,351
<SHARES-COMMON-PRIOR> 1,452,779
<ACCUMULATED-NII-CURRENT> 17,127
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 1,008,526
<ACCUM-APPREC-OR-DEPREC> 226,455
<NET-ASSETS> 19,572,301
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,070,704
<OTHER-INCOME> 0
<EXPENSES-NET> 24,418
<NET-INVESTMENT-INCOME> (1,046,286)
<REALIZED-GAINS-CURRENT> (959,194)
<APPREC-INCREASE-CURRENT> 1,146,721
<NET-CHANGE-FROM-OPS> 1,233,813
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (922,531)
<DISTRIBUTIONS-OF-GAINS> (82,282)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 560,668
<NUMBER-OF-SHARES-REDEEMED> 253,128
<SHARES-REINVESTED> 62,032
<NET-CHANGE-IN-ASSETS> 4,562,719
<ACCUMULATED-NII-PRIOR> 2,725
<ACCUMULATED-GAINS-PRIOR> 44,425
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 93,993
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 229,115
<AVERAGE-NET-ASSETS> 17,080,775
<PER-SHARE-NAV-BEGIN> 9.22
<PER-SHARE-NII> 0.57
<PER-SHARE-GAIN-APPREC> 0.06
<PER-SHARE-DIVIDEND> (0.56)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.24
<EXPENSE-RATIO> 0.02
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS LOUISIANA
MUNICIPAL BOND FUND - CLASS B AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 13
<NAME> MFS LOUISIANA MUNICIPAL BOND FUND - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 17,662,299
<INVESTMENTS-AT-VALUE> 17,930,136
<RECEIVABLES> 1,977,001
<ASSETS-OTHER> 7,156
<OTHER-ITEMS-ASSETS> 15,421
<TOTAL-ASSETS> 19,929,714
<PAYABLE-FOR-SECURITIES> 302,046
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 55,367
<TOTAL-LIABILITIES> 357,413
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,337,245
<SHARES-COMMON-STOCK> 295,986
<SHARES-COMMON-PRIOR> 174,315
<ACCUMULATED-NII-CURRENT> 17,127
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 1,008,526
<ACCUM-APPREC-OR-DEPREC> 226,455
<NET-ASSETS> 19,572,301
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,070,704
<OTHER-INCOME> 0
<EXPENSES-NET> 24,418
<NET-INVESTMENT-INCOME> (1,046,286)
<REALIZED-GAINS-CURRENT> (959,194)
<APPREC-INCREASE-CURRENT> 1,146,721
<NET-CHANGE-FROM-OPS> 1,233,813
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (109,353)
<DISTRIBUTIONS-OF-GAINS> (11,475)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 168,125
<NUMBER-OF-SHARES-REDEEMED> 54,011
<SHARES-REINVESTED> 7,557
<NET-CHANGE-IN-ASSETS> 4,562,719
<ACCUMULATED-NII-PRIOR> 2,725
<ACCUMULATED-GAINS-PRIOR> 44,425
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 93,993
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 229,115
<AVERAGE-NET-ASSETS> 17,080,775
<PER-SHARE-NAV-BEGIN> 9.23
<PER-SHARE-NII> 0.47
<PER-SHARE-GAIN-APPREC> 0.06
<PER-SHARE-DIVIDEND> (0.47)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.24
<EXPENSE-RATIO> 1.02
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS MARYLAND
MUNICIPAL BOND FUND - CLASS A AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 14
<NAME> MFS MARYLAND MUNICIPAL BOND FUND - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 149,574,736
<INVESTMENTS-AT-VALUE> 154,280,172
<RECEIVABLES> 2,917,650
<ASSETS-OTHER> 2,312
<OTHER-ITEMS-ASSETS> 75,821
<TOTAL-ASSETS> 157,275,955
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 747,128
<TOTAL-LIABILITIES> 747,128
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 155,033,431
<SHARES-COMMON-STOCK> 13,290,287
<SHARES-COMMON-PRIOR> 14,812,950
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 650,261
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2,688,311
<ACCUM-APPREC-OR-DEPREC> 4,833,968
<NET-ASSETS> 156,528,827
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,801,506
<OTHER-INCOME> 0
<EXPENSES-NET> 2,029,462
<NET-INVESTMENT-INCOME> (8,772,044)
<REALIZED-GAINS-CURRENT> (1,923,431)
<APPREC-INCREASE-CURRENT> 2,635,697
<NET-CHANGE-FROM-OPS> 9,484,310
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8,368,440)
<DISTRIBUTIONS-OF-GAINS> (551,221)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 792,537
<NUMBER-OF-SHARES-REDEEMED> 2,776,819
<SHARES-REINVESTED> 461,619
<NET-CHANGE-IN-ASSETS> (11,239,592)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 613,928
<OVERDIST-NET-GAINS-PRIOR> 178,165
<GROSS-ADVISORY-FEES> 889,796
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,029,462
<AVERAGE-NET-ASSETS> 161,783,337
<PER-SHARE-NAV-BEGIN> 10.89
<PER-SHARE-NII> 0.59
<PER-SHARE-GAIN-APPREC> 0.09
<PER-SHARE-DIVIDEND> (0.59)
<PER-SHARE-DISTRIBUTIONS> (0.04)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.94
<EXPENSE-RATIO> 1.21
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS MARYLAND
MUNICIPAL BOND FUND - CLASS B AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FIANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 15
<NAME> MFS MARYLAND MUNICIPAL BOND FUND - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 149,574,736
<INVESTMENTS-AT-VALUE> 154,280,172
<RECEIVABLES> 2,917,650
<ASSETS-OTHER> 2,312
<OTHER-ITEMS-ASSETS> 75,821
<TOTAL-ASSETS> 157,275,955
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 747,128
<TOTAL-LIABILITIES> 747,128
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 155,033,431
<SHARES-COMMON-STOCK> 1,021,654
<SHARES-COMMON-PRIOR> 595,446
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 650,261
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2,688,311
<ACCUM-APPREC-OR-DEPREC> 4,833,968
<NET-ASSETS> 156,528,827
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,801,506
<OTHER-INCOME> 0
<EXPENSES-NET> 2,029,462
<NET-INVESTMENT-INCOME> (8,772,044)
<REALIZED-GAINS-CURRENT> (1,923,431)
<APPREC-INCREASE-CURRENT> 2,635,697
<NET-CHANGE-FROM-OPS> 9,484,310
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (439,937)
<DISTRIBUTIONS-OF-GAINS> (35,494)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 597,795
<NUMBER-OF-SHARES-REDEEMED> 196,936
<SHARES-REINVESTED> 25,349
<NET-CHANGE-IN-ASSETS> (11,239,592)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 613,928
<OVERDIST-NET-GAINS-PRIOR> 178,165
<GROSS-ADVISORY-FEES> 889,796
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,029,462
<AVERAGE-NET-ASSETS> 161,783,337
<PER-SHARE-NAV-BEGIN> 10.88
<PER-SHARE-NII> 0.51
<PER-SHARE-GAIN-APPREC> 0.09
<PER-SHARE-DIVIDEND> (0.51)
<PER-SHARE-DISTRIBUTIONS> (0.04)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.93
<EXPENSE-RATIO> 1.93
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS
MASSACHUSETTS MUNICIPAL BOND FUND - CLASS A AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 16
<NAME> MFS MASSACHUSETTS MUNICIPAL BOND FUND - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 252,369,112
<INVESTMENTS-AT-VALUE> 266,424,604
<RECEIVABLES> 8,119,143
<ASSETS-OTHER> 3,987
<OTHER-ITEMS-ASSETS> 63,289
<TOTAL-ASSETS> 274,611,023
<PAYABLE-FOR-SECURITIES> 2,176,143
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,208,273
<TOTAL-LIABILITIES> 3,384,416
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 266,122,193
<SHARES-COMMON-STOCK> 24,222,800
<SHARES-COMMON-PRIOR> 25,478,256
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1,034,592
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 7,916,486
<ACCUM-APPREC-OR-DEPREC> 14,055,492
<NET-ASSETS> 271,226,607
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 19,544,403
<OTHER-INCOME> 0
<EXPENSES-NET> 3,232,128
<NET-INVESTMENT-INCOME> (16,312,275)
<REALIZED-GAINS-CURRENT> (7,575,364)
<APPREC-INCREASE-CURRENT> 6,284,378
<NET-CHANGE-FROM-OPS> 15,021,289
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (15,941,100)
<DISTRIBUTIONS-OF-GAINS> (772,572)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,947,287
<NUMBER-OF-SHARES-REDEEMED> 3,891,617
<SHARES-REINVESTED> 688,874
<NET-CHANGE-IN-ASSETS> (11,514,507)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 446,704
<OVERDISTRIB-NII-PRIOR> 1,064,756
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,495,879
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,232,128
<AVERAGE-NET-ASSETS> 271,995,098
<PER-SHARE-NAV-BEGIN> 10.90
<PER-SHARE-NII> 0.64
<PER-SHARE-GAIN-APPREC> (0.03)
<PER-SHARE-DIVIDEND> (0.64)
<PER-SHARE-DISTRIBUTIONS> (0.03)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.84
<EXPENSE-RATIO> 1.17
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS
MASSACHUSETTS MUNICIPAL BOND FUND - CLASS B AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 17
<NAME> MFS MASSACHUSETTS MUNICIPAL BOND FUND - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 252,369,112
<INVESTMENTS-AT-VALUE> 266,424,604
<RECEIVABLES> 8,119,143
<ASSETS-OTHER> 3,987
<OTHER-ITEMS-ASSETS> 63,289
<TOTAL-ASSETS> 274,611,023
<PAYABLE-FOR-SECURITIES> 2,176,143
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,208,273
<TOTAL-LIABILITIES> 3,384,416
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 266,122,193
<SHARES-COMMON-STOCK> 800,021
<SHARES-COMMON-PRIOR> 457,935
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1,034,592
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 7,916,486
<ACCUM-APPREC-OR-DEPREC> 14,055,492
<NET-ASSETS> 271,226,607
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 19,544,403
<OTHER-INCOME> 0
<EXPENSES-NET> 3,232,128
<NET-INVESTMENT-INCOME> (16,312,275)
<REALIZED-GAINS-CURRENT> (7,575,364)
<APPREC-INCREASE-CURRENT> 6,284,378
<NET-CHANGE-FROM-OPS> 15,021,289
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (341,011)
<DISTRIBUTIONS-OF-GAINS> (15,254)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 427,508
<NUMBER-OF-SHARES-REDEEMED> 102,616
<SHARES-REINVESTED> 17,194
<NET-CHANGE-IN-ASSETS> (11,514,507)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 446,704
<OVERDISTRIB-NII-PRIOR> 1,064,756
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,495,879
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,232,128
<AVERAGE-NET-ASSETS> 271,995,098
<PER-SHARE-NAV-BEGIN> 10.90
<PER-SHARE-NII> 0.55
<PER-SHARE-GAIN-APPREC> (0.02)
<PER-SHARE-DIVIDEND> (0.56)
<PER-SHARE-DISTRIBUTIONS> (0.03)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.84
<EXPENSE-RATIO> 1.89
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS MISSISSIPPI
MUNICIPAL BOND FUND - CLASS A, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 18
<NAME> MFS MISSISSIPPI MUNICIPAL BOND FUND - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 87,818,969
<INVESTMENTS-AT-VALUE> 87,923,340
<RECEIVABLES> 2,968,988
<ASSETS-OTHER> 9,480
<OTHER-ITEMS-ASSETS> 21,789
<TOTAL-ASSETS> 90,923,597
<PAYABLE-FOR-SECURITIES> 2,237,191
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 224,519
<TOTAL-LIABILITIES> 2,461,710
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 92,187,686
<SHARES-COMMON-STOCK> 8,633,487
<SHARES-COMMON-PRIOR> 8,651,558
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 33,152
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 3,672,871
<ACCUM-APPREC-OR-DEPREC> (19,776)
<NET-ASSETS> 88,461,887
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,405,579
<OTHER-INCOME> 0
<EXPENSES-NET> 275,213
<NET-INVESTMENT-INCOME> (5,130,366)
<REALIZED-GAINS-CURRENT> (3,420,916)
<APPREC-INCREASE-CURRENT> 3,106,779
<NET-CHANGE-FROM-OPS> 4,816,229
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,784,223)
<DISTRIBUTIONS-OF-GAINS> (245,745)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,121,269
<NUMBER-OF-SHARES-REDEEMED> 2,431,476
<SHARES-REINVESTED> 292,136
<NET-CHANGE-IN-ASSETS> 2,395,723
<ACCUMULATED-NII-PRIOR> 21,593
<ACCUMULATED-GAINS-PRIOR> 15,607
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 478,963
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 895,925
<AVERAGE-NET-ASSETS> 86,967,693
<PER-SHARE-NAV-BEGIN> 9.19
<PER-SHARE-NII> 0.54
<PER-SHARE-GAIN-APPREC> (0.01)
<PER-SHARE-DIVIDEND> (0.54)
<PER-SHARE-DISTRIBUTIONS> (0.03)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.15
<EXPENSE-RATIO> 0.22
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS MISSISSIPPI
MUNICIPAL BOND FUND - CLASS B AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 19
<NAME> MFS MISSISSIPPI MUNICIPAL BOND FUND - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 87,818,969
<INVESTMENTS-AT-VALUE> 87,923,340
<RECEIVABLES> 2,968,988
<ASSETS-OTHER> 9,480
<OTHER-ITEMS-ASSETS> 21,789
<TOTAL-ASSETS> 90,923,597
<PAYABLE-FOR-SECURITIES> 2,237,191
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 224,519
<TOTAL-LIABILITIES> 2,461,710
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 92,187,686
<SHARES-COMMON-STOCK> 1,029,073
<SHARES-COMMON-PRIOR> 709,997
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 33,152
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 3,672,871
<ACCUM-APPREC-OR-DEPREC> (19,776)
<NET-ASSETS> 88,461,887
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,405,579
<OTHER-INCOME> 0
<EXPENSES-NET> 275,213
<NET-INVESTMENT-INCOME> (5,130,366)
<REALIZED-GAINS-CURRENT> (3,420,916)
<APPREC-INCREASE-CURRENT> 3,106,779
<NET-CHANGE-FROM-OPS> 4,816,229
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (400,888)
<DISTRIBUTIONS-OF-GAINS> (21,817)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 385,210
<NUMBER-OF-SHARES-REDEEMED> 85,342
<SHARES-REINVESTED> 19,208
<NET-CHANGE-IN-ASSETS> 2,395,723
<ACCUMULATED-NII-PRIOR> 21,593
<ACCUMULATED-GAINS-PRIOR> 15,607
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 478,963
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 895,925
<AVERAGE-NET-ASSETS> 86,967,693
<PER-SHARE-NAV-BEGIN> 9.19
<PER-SHARE-NII> 0.45
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.45)
<PER-SHARE-DISTRIBUTIONS> (0.03)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.16
<EXPENSE-RATIO> 1.23
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS NEW YORK
MUNICIPAL BOND FUND - CLASS A AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 20
<NAME> MFS NEW YORK MUNICIPAL BOND FUND - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 146,324,990
<INVESTMENTS-AT-VALUE> 154,952,065
<RECEIVABLES> 12,333,355
<ASSETS-OTHER> 2,463
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 167,287,883
<PAYABLE-FOR-SECURITIES> 7,391,160
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,415,265
<TOTAL-LIABILITIES> 8,806,425
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 156,925,818
<SHARES-COMMON-STOCK> 13,971,589
<SHARES-COMMON-PRIOR> 15,493,625
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 582,451
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 6,488,984
<ACCUM-APPREC-OR-DEPREC> 8,627,075
<NET-ASSETS> 158,481,458
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,560,147
<OTHER-INCOME> 0
<EXPENSES-NET> 1,820,069
<NET-INVESTMENT-INCOME> (8,740,078)
<REALIZED-GAINS-CURRENT> (4,956,654)
<APPREC-INCREASE-CURRENT> 5,683,239
<NET-CHANGE-FROM-OPS> 9,466,663
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8,406,462)
<DISTRIBUTIONS-OF-GAINS> (772,589)
<DISTRIBUTIONS-OTHER> (0)
<NUMBER-OF-SHARES-SOLD> 6,954,596
<NUMBER-OF-SHARES-REDEEMED> 9,003,752
<SHARES-REINVESTED> 527,121
<NET-CHANGE-IN-ASSETS> (10,405,297)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 470,439
<OVERDIST-NET-GAINS-PRIOR> 723,817
<GROSS-ADVISORY-FEES> 894,326
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,994,097
<AVERAGE-NET-ASSETS> 162,549,344
<PER-SHARE-NAV-BEGIN> 10.50
<PER-SHARE-NII> 0.56
<PER-SHARE-GAIN-APPREC> 0.05
<PER-SHARE-DIVIDEND> (0.56)
<PER-SHARE-DISTRIBUTIONS> (0.06)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.49
<EXPENSE-RATIO> 1.07
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS NEW YORK
MUNICIPAL BOND FUND - CLASS B AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 21
<NAME> MFS NEW YORK MUNICIPAL BOND FUND - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 146,324,990
<INVESTMENTS-AT-VALUE> 154,952,065
<RECEIVABLES> 12,333,355
<ASSETS-OTHER> 2,463
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 167,287,883
<PAYABLE-FOR-SECURITIES> 7,391,160
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,415,265
<TOTAL-LIABILITIES> 8,806,425
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 156,925,818
<SHARES-COMMON-STOCK> 1,132,905
<SHARES-COMMON-PRIOR> 596,977
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 582,451
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 6,488,984
<ACCUM-APPREC-OR-DEPREC> 8,627,075
<NET-ASSETS> 158,481,458
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,560,147
<OTHER-INCOME> 0
<EXPENSES-NET> 1,820,069
<NET-INVESTMENT-INCOME> (8,740,078)
<REALIZED-GAINS-CURRENT> (4,956,654)
<APPREC-INCREASE-CURRENT> 5,683,239
<NET-CHANGE-FROM-OPS> 9,466,663
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (445,628)
<DISTRIBUTIONS-OF-GAINS> (35,924)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 700,421
<NUMBER-OF-SHARES-REDEEMED> 189,933
<SHARES-REINVESTED> 25,442
<NET-CHANGE-IN-ASSETS> (10,405,297)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 470,439
<OVERDIST-NET-GAINS-PRIOR> 723,817
<GROSS-ADVISORY-FEES> 894,326
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,994,097
<AVERAGE-NET-ASSETS> 162,549,344
<PER-SHARE-NAV-BEGIN> 10.50
<PER-SHARE-NII> 0.47
<PER-SHARE-GAIN-APPREC> 0.05
<PER-SHARE-DIVIDEND> (0.47)
<PER-SHARE-DISTRIBUTIONS> (0.06)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.49
<EXPENSE-RATIO> 1.89
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS NORTH
CAROLINA MUNICIPAL BOND FUND - CLASS A AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FIANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 22
<NAME> MFS NORTH CAROLINA MUNICIPAL BOND FUND - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 436,799,614
<INVESTMENTS-AT-VALUE> 456,196,027
<RECEIVABLES> 20,709,200
<ASSETS-OTHER> 6,588
<OTHER-ITEMS-ASSETS> (941)
<TOTAL-ASSETS> 476,911,815
<PAYABLE-FOR-SECURITIES> 11,089,266
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,280,846
<TOTAL-LIABILITIES> 13,371,053
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 460,649,353
<SHARES-COMMON-STOCK> 37,574,407
<SHARES-COMMON-PRIOR> 40,111,681
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1,261,813
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 14,829,367
<ACCUM-APPREC-OR-DEPREC> 18,982,589
<NET-ASSETS> 463,540,762
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 30,821,338
<OTHER-INCOME> 0
<EXPENSES-NET> 5,678,994
<NET-INVESTMENT-INCOME> (25,142,344)
<REALIZED-GAINS-CURRENT> (13,223,193)
<APPREC-INCREASE-CURRENT> 13,773,515
<NET-CHANGE-FROM-OPS> 25,692,666
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (23,735,358)
<DISTRIBUTIONS-OF-GAINS> (4,012,661)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,008,127
<NUMBER-OF-SHARES-REDEEMED> 7,002,397
<SHARES-REINVESTED> 1,456,996
<NET-CHANGE-IN-ASSETS> (19,308,173)
<ACCUMULATED-NII-PRIOR> (1,312,321)
<ACCUMULATED-GAINS-PRIOR> 2,643,250
<OVERDISTRIB-NII-PRIOR> 1,312,321
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,592,068
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,678,994
<AVERAGE-NET-ASSETS> 471,284,035
<PER-SHARE-NAV-BEGIN> 11.48
<PER-SHARE-NII> 0.61
<PER-SHARE-GAIN-APPREC> 0.03
<PER-SHARE-DIVIDEND> (0.60)
<PER-SHARE-DISTRIBUTIONS> (0.10)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.42
<EXPENSE-RATIO> 1.16
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS NORTH
CAROLINA MUNICIPAL BOND FUND - CLASS A AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 23
<NAME> MFS NORTH CAROLINA MUNICIPAL BOND FUND - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 436,799,614
<INVESTMENTS-AT-VALUE> 456,196,027
<RECEIVABLES> 20,709,200
<ASSETS-OTHER> 6,588
<OTHER-ITEMS-ASSETS> (941)
<TOTAL-ASSETS> 476,911,815
<PAYABLE-FOR-SECURITIES> 11,089,266
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,280,846
<TOTAL-LIABILITIES> 13,371,053
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 460,649,353
<SHARES-COMMON-STOCK> 2,300,324
<SHARES-COMMON-PRIOR> 1,382,988
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1,261,813
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 14,829,367
<ACCUM-APPREC-OR-DEPREC> 18,982,589
<NET-ASSETS> 463,540,762
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 30,821,338
<OTHER-INCOME> 0
<EXPENSES-NET> 5,678,994
<NET-INVESTMENT-INCOME> (25,142,344)
<REALIZED-GAINS-CURRENT> (13,223,193)
<APPREC-INCREASE-CURRENT> 13,773,515
<NET-CHANGE-FROM-OPS> 25,692,666
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (973,317)
<DISTRIBUTIONS-OF-GAINS> (166,676)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,174,189
<NUMBER-OF-SHARES-REDEEMED> 327,533
<SHARES-REINVESTED> 70,681
<NET-CHANGE-IN-ASSETS> (19,308,173)
<ACCUMULATED-NII-PRIOR> (1,312,321)
<ACCUMULATED-GAINS-PRIOR> 2,643,250
<OVERDISTRIB-NII-PRIOR> 1,312,321
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,592,068
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,678,994
<AVERAGE-NET-ASSETS> 471,284,035
<PER-SHARE-NAV-BEGIN> 11.47
<PER-SHARE-NII> 0.52
<PER-SHARE-GAIN-APPREC> 0.05
<PER-SHARE-DIVIDEND> (0.52)
<PER-SHARE-DISTRIBUTIONS> (0.10)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.42
<EXPENSE-RATIO> 1.88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS NORTH
CAROLINA MUNICIPAL BOND FUND - CLASS C AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 24
<NAME> MFS NORTH CAROLINA MUNICIPAL BOND FUND - CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 436,799,614
<INVESTMENTS-AT-VALUE> 456,196,027
<RECEIVABLES> 20,709,200
<ASSETS-OTHER> 6,588
<OTHER-ITEMS-ASSETS> (941)
<TOTAL-ASSETS> 476,911,815
<PAYABLE-FOR-SECURITIES> 11,089,266
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,280,846
<TOTAL-LIABILITIES> 13,371,053
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 460,649,353
<SHARES-COMMON-STOCK> 713,949
<SHARES-COMMON-PRIOR> 580,785
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1,261,813
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 14,829,367
<ACCUM-APPREC-OR-DEPREC> 18,982,589
<NET-ASSETS> 463,540,762
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 30,821,338
<OTHER-INCOME> 0
<EXPENSES-NET> 5,678,994
<NET-INVESTMENT-INCOME> (25,142,344)
<REALIZED-GAINS-CURRENT> (13,223,193)
<APPREC-INCREASE-CURRENT> 13,773,515
<NET-CHANGE-FROM-OPS> 25,692,666
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (383,161)
<DISTRIBUTIONS-OF-GAINS> (70,087)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 636,788
<NUMBER-OF-SHARES-REDEEMED> 523,082
<SHARES-REINVESTED> 19,458
<NET-CHANGE-IN-ASSETS> (19,308,173)
<ACCUMULATED-NII-PRIOR> (1,312,321)
<ACCUMULATED-GAINS-PRIOR> 2,643,250
<OVERDISTRIB-NII-PRIOR> 1,312,321
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,592,068
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,678,994
<AVERAGE-NET-ASSETS> 471,284,035
<PER-SHARE-NAV-BEGIN> 11.47
<PER-SHARE-NII> 0.53
<PER-SHARE-GAIN-APPREC> 0.04
<PER-SHARE-DIVIDEND> (0.53)
<PER-SHARE-DISTRIBUTIONS> (0.10)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.41
<EXPENSE-RATIO> 1.81
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS
PENNSYLVANNIA MUNICIPAL BOND FUND - CLASS A AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 25
<NAME> MFS PENNSYLVANNIA MUNICIPAL BOND FUND - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 23,988,488
<INVESTMENTS-AT-VALUE> 24,155,509
<RECEIVABLES> 747,891
<ASSETS-OTHER> 5,218
<OTHER-ITEMS-ASSETS> 64,836
<TOTAL-ASSETS> 24,973,454
<PAYABLE-FOR-SECURITIES> 816,173
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 48,223
<TOTAL-LIABILITIES> 864,396
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 24,901,298
<SHARES-COMMON-STOCK> 1,767,105
<SHARES-COMMON-PRIOR> 1,525,723
<ACCUMULATED-NII-CURRENT> 8,529
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 987,725
<ACCUM-APPREC-OR-DEPREC> 186,956
<NET-ASSETS> 24,109,058
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,298,512
<OTHER-INCOME> 0
<EXPENSES-NET> 64,569
<NET-INVESTMENT-INCOME> (1,233,943)
<REALIZED-GAINS-CURRENT> (926,036)
<APPREC-INCREASE-CURRENT> 1,312,816
<NET-CHANGE-FROM-OPS> 1,620,723
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (918,914)
<DISTRIBUTIONS-OF-GAINS> (59,015)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 438,490
<NUMBER-OF-SHARES-REDEEMED> 268,697
<SHARES-REINVESTED> 71,588
<NET-CHANGE-IN-ASSETS> 5,843,570
<ACCUMULATED-NII-PRIOR> 2,483
<ACCUMULATED-GAINS-PRIOR> 18,123
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 119,253
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 322,948
<AVERAGE-NET-ASSETS> 21,727,790
<PER-SHARE-NAV-BEGIN> 9.15
<PER-SHARE-NII> 0.54
<PER-SHARE-GAIN-APPREC> 0.18
<PER-SHARE-DIVIDEND> (0.54)
<PER-SHARE-DISTRIBUTIONS> (0.04)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.29
<EXPENSE-RATIO> 0.01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS
PENNSYLVANNIA MUNICIPAL BOND FUND - CLASS B AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 26
<NAME> MFS PENNSYLVANNIA MUNICIPAL BOND FUND - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 23,988,488
<INVESTMENTS-AT-VALUE> 24,155,509
<RECEIVABLES> 747,891
<ASSETS-OTHER> 5,218
<OTHER-ITEMS-ASSETS> 64,836
<TOTAL-ASSETS> 24,973,454
<PAYABLE-FOR-SECURITIES> 816,173
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 48,223
<TOTAL-LIABILITIES> 864,396
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 24,901,298
<SHARES-COMMON-STOCK> 828,652
<SHARES-COMMON-PRIOR> 470,236
<ACCUMULATED-NII-CURRENT> 8,529
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 987,725
<ACCUM-APPREC-OR-DEPREC> 186,956
<NET-ASSETS> 24,109,058
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,298,512
<OTHER-INCOME> 0
<EXPENSES-NET> 64,569
<NET-INVESTMENT-INCOME> (1,233,943)
<REALIZED-GAINS-CURRENT> (926,036)
<APPREC-INCREASE-CURRENT> 1,312,816
<NET-CHANGE-FROM-OPS> 1,620,723
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (308,983)
<DISTRIBUTIONS-OF-GAINS> (20,797)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 428,298
<NUMBER-OF-SHARES-REDEEMED> 89,748
<SHARES-REINVESTED> 19,866
<NET-CHANGE-IN-ASSETS> 5,843,570
<ACCUMULATED-NII-PRIOR> 2,483
<ACCUMULATED-GAINS-PRIOR> 18,123
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 119,253
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 322,948
<AVERAGE-NET-ASSETS> 21,727,790
<PER-SHARE-NAV-BEGIN> 9.15
<PER-SHARE-NII> 0.45
<PER-SHARE-GAIN-APPREC> 0.18
<PER-SHARE-DIVIDEND> (0.45)
<PER-SHARE-DISTRIBUTIONS> (0.04)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.29
<EXPENSE-RATIO> 1.01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS SOUTH
CAROLINA MUNICIPAL BOND FUND - CLASS A AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 27
<NAME> MFS SOUTH CAROLINA MUNICIPAL BOND FUND - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 174,124,735
<INVESTMENTS-AT-VALUE> 181,112,054
<RECEIVABLES> 7,396,612
<ASSETS-OTHER> 2,519
<OTHER-ITEMS-ASSETS> 19,594
<TOTAL-ASSETS> 188,530,779
<PAYABLE-FOR-SECURITIES> 3,871,581
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 650,557
<TOTAL-LIABILITIES> 4,522,138
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 179,919,932
<SHARES-COMMON-STOCK> 14,420,464
<SHARES-COMMON-PRIOR> 14,706,406
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 437,589
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2,534,470
<ACCUM-APPREC-OR-DEPREC> 7,060,768
<NET-ASSETS> 184,008,641
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11,928,530
<OTHER-INCOME> 0
<EXPENSES-NET> 2,243,880
<NET-INVESTMENT-INCOME> (9,684,650)
<REALIZED-GAINS-CURRENT> (2,073,916)
<APPREC-INCREASE-CURRENT> 4,304,353
<NET-CHANGE-FROM-OPS> 11,915,087
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9,153,252)
<DISTRIBUTIONS-OF-GAINS> (1,321,551)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,421,501
<NUMBER-OF-SHARES-REDEEMED> 2,209,366
<SHARES-REINVESTED> 501,923
<NET-CHANGE-IN-ASSETS> 607,233
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 942,714
<OVERDISTRIB-NII-PRIOR> 433,100
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,001,540
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,243,880
<AVERAGE-NET-ASSETS> 182,099,719
<PER-SHARE-NAV-BEGIN> 11.79
<PER-SHARE-NII> 0.63
<PER-SHARE-GAIN-APPREC> 0.15
<PER-SHARE-DIVIDEND> (0.62)
<PER-SHARE-DISTRIBUTIONS> (0.09)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.86
<EXPENSE-RATIO> 1.19
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS SOUTH
CAROLINA MUNICIPAL BOND FUND - CLASS B AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 28
<NAME> MFS SOUTH CAROLINA MUNICIPAL BOND FUND - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 174,124,735
<INVESTMENTS-AT-VALUE> 181,112,054
<RECEIVABLES> 7,396,612
<ASSETS-OTHER> 2,519
<OTHER-ITEMS-ASSETS> 19,594
<TOTAL-ASSETS> 188,530,779
<PAYABLE-FOR-SECURITIES> 3,871,581
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 650,557
<TOTAL-LIABILITIES> 4,522,138
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 179,919,932
<SHARES-COMMON-STOCK> 1,093,134
<SHARES-COMMON-PRIOR> 855,947
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 437,589
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2,534,470
<ACCUM-APPREC-OR-DEPREC> 7,060,768
<NET-ASSETS> 184,008,641
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11,928,530
<OTHER-INCOME> 0
<EXPENSES-NET> 2,243,880
<NET-INVESTMENT-INCOME> (9,684,650)
<REALIZED-GAINS-CURRENT> (2,073,916)
<APPREC-INCREASE-CURRENT> 4,304,353
<NET-CHANGE-FROM-OPS> 11,915,087
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (535,887)
<DISTRIBUTIONS-OF-GAINS> (81,717)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 382,870
<NUMBER-OF-SHARES-REDEEMED> 175,283
<SHARES-REINVESTED> 29,600
<NET-CHANGE-IN-ASSETS> 607,233
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 942,714
<OVERDISTRIB-NII-PRIOR> 433,100
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,001,540
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,243,880
<AVERAGE-NET-ASSETS> 182,099,719
<PER-SHARE-NAV-BEGIN> 11.78
<PER-SHARE-NII> 0.54
<PER-SHARE-GAIN-APPREC> 0.17
<PER-SHARE-DIVIDEND> (0.54)
<PER-SHARE-DISTRIBUTIONS> (0.06)
<RETURNS-OF-CAPITAL> (0.03)
<PER-SHARE-NAV-END> 11.86
<EXPENSE-RATIO> 0.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS MUNICIPAL
SERIES TRUST - TENNESSEE AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 29
<NAME> MFS Municipal Series Trust - Tennessee Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 121,319,048
<INVESTMENTS-AT-VALUE> 126,177,241
<RECEIVABLES> 2,679,327
<ASSETS-OTHER> 1,638
<OTHER-ITEMS-ASSETS> 97,571
<TOTAL-ASSETS> 128,955,777
<PAYABLE-FOR-SECURITIES> 412,198
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 965,004
<TOTAL-LIABILITIES> 1,377,202
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 124,719,638
<SHARES-COMMON-STOCK> 11,452,723
<SHARES-COMMON-PRIOR> 11,412,537
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 228,302
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 1,805,579
<ACCUM-APPREC-OR-DEPREC> 4,892,818
<NET-ASSETS> 127,578,575
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8,488,724
<OTHER-INCOME> 0
<EXPENSES-NET> 1,592,373
<NET-INVESTMENT-INCOME> 6,896,351
<REALIZED-GAINS-CURRENT> (1,682,291)
<APPREC-INCREASE-CURRENT> 1,666,615
<NET-CHANGE-FROM-OPS> 6,880,675
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,505,625)
<DISTRIBUTIONS-OF-GAINS> (133,352)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,284,337
<NUMBER-OF-SHARES-REDEEMED> 1,555,258
<SHARES-REINVESTED> 311,107
<NET-CHANGE-IN-ASSETS> 5,167,881
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 17,279
<OVERDISTRIB-NII-PRIOR> 249,292
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 692,926
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,592,373
<AVERAGE-NET-ASSETS> 125,976,648
<PER-SHARE-NAV-BEGIN> 10.26
<PER-SHARE-NII> 0.56
<PER-SHARE-GAIN-APPREC> 0.02
<PER-SHARE-DIVIDEND> 0.56
<PER-SHARE-DISTRIBUTIONS> 0.01
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.27
<EXPENSE-RATIO> 1.22
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS MUNICIPAL
SERIES TRUST - TENNESSEE AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 30
<NAME> MFS Municipal Series Trust - Tennessee Class B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 121,319,048
<INVESTMENTS-AT-VALUE> 126,177,241
<RECEIVABLES> 2,679,327
<ASSETS-OTHER> 1,638
<OTHER-ITEMS-ASSETS> 97,571
<TOTAL-ASSETS> 128,955,777
<PAYABLE-FOR-SECURITIES> 412,198
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 965,004
<TOTAL-LIABILITIES> 1,377,202
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 124,719,638
<SHARES-COMMON-STOCK> 974,973
<SHARES-COMMON-PRIOR> 516,131
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 228,302
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 1,805,579
<ACCUM-APPREC-OR-DEPREC> 4,892,818
<NET-ASSETS> 127,578,575
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8,488,724
<OTHER-INCOME> 0
<EXPENSES-NET> 1,592,373
<NET-INVESTMENT-INCOME> 6,896,351
<REALIZED-GAINS-CURRENT> (1,682,291)
<APPREC-INCREASE-CURRENT> 1,666,615
<NET-CHANGE-FROM-OPS> 6,880,675
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (369,736)
<DISTRIBUTIONS-OF-GAINS> (7,215)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 505,266
<NUMBER-OF-SHARES-REDEEMED> 65,362
<SHARES-REINVESTED> 18,938
<NET-CHANGE-IN-ASSETS> 5,167,881
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 17,279
<OVERDISTRIB-NII-PRIOR> 249,292
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 692,926
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,592,373
<AVERAGE-NET-ASSETS> 125,976,648
<PER-SHARE-NAV-BEGIN> 10.26
<PER-SHARE-NII> 0.48
<PER-SHARE-GAIN-APPREC> 0.01
<PER-SHARE-DIVIDEND> 0.48
<PER-SHARE-DISTRIBUTIONS> 0.01
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.26
<EXPENSE-RATIO> 1.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS TEXAS
MUNICIPAL BOND FUND - CLASS A AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 31
<NAME> MFS TEXAS MUNICIPAL BOND FUND - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 19,208,354
<INVESTMENTS-AT-VALUE> 20,161,959
<RECEIVABLES> 609,211
<ASSETS-OTHER> 255
<OTHER-ITEMS-ASSETS> 3,435
<TOTAL-ASSETS> 20,774,860
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 183,955
<TOTAL-LIABILITIES> 183,955
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,192,333
<SHARES-COMMON-STOCK> 1,845,870
<SHARES-COMMON-PRIOR> 1,771,940
<ACCUMULATED-NII-CURRENT> 600
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 1,524,596
<ACCUM-APPREC-OR-DEPREC> 922,568
<NET-ASSETS> 20,590,905
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,258,387
<OTHER-INCOME> 0
<EXPENSES-NET> 22,353
<NET-INVESTMENT-INCOME> (1,236,034)
<REALIZED-GAINS-CURRENT> (1,461,157)
<APPREC-INCREASE-CURRENT> 1,623,234
<NET-CHANGE-FROM-OPS> 1,398,111
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,132,237)
<DISTRIBUTIONS-OF-GAINS> (121,167)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 401,918
<NUMBER-OF-SHARES-REDEEMED> 403,409
<SHARES-REINVESTED> 75,421
<NET-CHANGE-IN-ASSETS> 1,893,395
<ACCUMULATED-NII-PRIOR> (7,289)
<ACCUMULATED-GAINS-PRIOR> 67,331
<OVERDISTRIB-NII-PRIOR> 7,289
<OVERDIST-NET-GAINS-PRIOR> (67,331)
<GROSS-ADVISORY-FEES> 112,189
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 257,662
<AVERAGE-NET-ASSETS> 20,379,292
<PER-SHARE-NAV-BEGIN> 9.88
<PER-SHARE-NII> 0.60
<PER-SHARE-GAIN-APPREC> 0.09
<PER-SHARE-DIVIDEND> (0.65)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.92
<EXPENSE-RATIO> 0.02
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS TEXAS
MUNICIPAL BOND FUND - CLASS B AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 32
<NAME> MFS TEXAS MUNICIPAL BOND FUND - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 19,208,354
<INVESTMENTS-AT-VALUE> 20,161,959
<RECEIVABLES> 609,211
<ASSETS-OTHER> 255
<OTHER-ITEMS-ASSETS> 3,435
<TOTAL-ASSETS> 20,774,860
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 183,955
<TOTAL-LIABILITIES> 183,955
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,192,333
<SHARES-COMMON-STOCK> 228,942
<SHARES-COMMON-PRIOR> 119,635
<ACCUMULATED-NII-CURRENT> 600
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 1,524,596
<ACCUM-APPREC-OR-DEPREC> 922,568
<NET-ASSETS> 20,590,905
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,258,387
<OTHER-INCOME> 0
<EXPENSES-NET> 22,353
<NET-INVESTMENT-INCOME> (1,236,034)
<REALIZED-GAINS-CURRENT> (1,461,157)
<APPREC-INCREASE-CURRENT> 1,623,234
<NET-CHANGE-FROM-OPS> 1,398,111
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (95,908)
<DISTRIBUTIONS-OF-GAINS> (9,603)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 137,751
<NUMBER-OF-SHARES-REDEEMED> 34,585
<SHARES-REINVESTED> 6,141
<NET-CHANGE-IN-ASSETS> 1,893,395
<ACCUMULATED-NII-PRIOR> (7,289)
<ACCUMULATED-GAINS-PRIOR> 67,331
<OVERDISTRIB-NII-PRIOR> 7,289
<OVERDIST-NET-GAINS-PRIOR> (67,331)
<GROSS-ADVISORY-FEES> 112,189
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 257,662
<AVERAGE-NET-ASSETS> 20,379,292
<PER-SHARE-NAV-BEGIN> 9.89
<PER-SHARE-NII> 0.50
<PER-SHARE-GAIN-APPREC> 0.10
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.56)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.93
<EXPENSE-RATIO> 1.02
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS VIRGINIA
MUNICIPAL BOND FUND - CLASS A AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 33
<NAME> MFS VIRGINIA MUNICIPAL BOND FUND - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 429,663,656
<INVESTMENTS-AT-VALUE> 447,989,342
<RECEIVABLES> 10,065,272
<ASSETS-OTHER> 6,329
<OTHER-ITEMS-ASSETS> 25,492
<TOTAL-ASSETS> 458,086,435
<PAYABLE-FOR-SECURITIES> 1,018,043
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,074,027
<TOTAL-LIABILITIES> 3,092,070
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 452,234,555
<SHARES-COMMON-STOCK> 38,844,026
<SHARES-COMMON-PRIOR> 39,790,836
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1,521,124
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 14,044,752
<ACCUM-APPREC-OR-DEPREC> 18,325,686
<NET-ASSETS> 454,994,365
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 30,724,726
<OTHER-INCOME> 0
<EXPENSES-NET> 5,456,784
<NET-INVESTMENT-INCOME> (25,267,942)
<REALIZED-GAINS-CURRENT> (13,703,623)
<APPREC-INCREASE-CURRENT> 12,561,701
<NET-CHANGE-FROM-OPS> 24,126,020
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (24,164,549)
<DISTRIBUTIONS-OF-GAINS> 2,043,837
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,821,748
<NUMBER-OF-SHARES-REDEEMED> 4,987,584
<SHARES-REINVESTED> 1,219,026
<NET-CHANGE-IN-ASSETS> (3,682,832)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,784,084
<OVERDISTRIB-NII-PRIOR> 1,447,109
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,504,233
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,456,784
<AVERAGE-NET-ASSETS> 455,315,130
<PER-SHARE-NAV-BEGIN> 11.15
<PER-SHARE-NII> 0.56
<PER-SHARE-GAIN-APPREC> 0.04
<PER-SHARE-DIVIDEND> (0.61)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.09
<EXPENSE-RATIO> 1.16
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS VIRGINIA
MUNICIPAL BOND FUND - CLASS B AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 34
<NAME> MFS VIRGINIA MUNICIPAL BOND FUND - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 429,663,656
<INVESTMENTS-AT-VALUE> 447,989,342
<RECEIVABLES> 10,065,272
<ASSETS-OTHER> 6,329
<OTHER-ITEMS-ASSETS> 25,492
<TOTAL-ASSETS> 458,086,435
<PAYABLE-FOR-SECURITIES> 1,018,043
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,074,027
<TOTAL-LIABILITIES> 3,092,070
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 452,234,555
<SHARES-COMMON-STOCK> 1,985,433
<SHARES-COMMON-PRIOR> 1,196,916
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1,521,124
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 14,044,752
<ACCUM-APPREC-OR-DEPREC> 18,325,686
<NET-ASSETS> 454,994,365
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 30,724,726
<OTHER-INCOME> 0
<EXPENSES-NET> 5,456,784
<NET-INVESTMENT-INCOME> (25,267,942)
<REALIZED-GAINS-CURRENT> (13,703,623)
<APPREC-INCREASE-CURRENT> 12,561,701
<NET-CHANGE-FROM-OPS> 24,126,020
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (880,002)
<DISTRIBUTIONS-OF-GAINS> (74,449)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 917,957
<NUMBER-OF-SHARES-REDEEMED> 166,822
<SHARES-REINVESTED> 37,382
<NET-CHANGE-IN-ASSETS> (3,682,832)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,784,084
<OVERDISTRIB-NII-PRIOR> 1,447,109
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,504,233
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,456,784
<AVERAGE-NET-ASSETS> 455,315,130
<PER-SHARE-NAV-BEGIN> 11.14
<PER-SHARE-NII> 0.53
<PER-SHARE-GAIN-APPREC> (0.01)
<PER-SHARE-DIVIDEND> (0.53)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.08
<EXPENSE-RATIO> 1.88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS VIRGINIA
MUNICIPAL BOND FUND - CLASS C AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 35
<NAME> MFS VIRGINIA MUNICIPAL BOND FUND - CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 429,663,656
<INVESTMENTS-AT-VALUE> 447,989,342
<RECEIVABLES> 10,065,272
<ASSETS-OTHER> 6,329
<OTHER-ITEMS-ASSETS> 25,492
<TOTAL-ASSETS> 458,086,435
<PAYABLE-FOR-SECURITIES> 1,018,043
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,074,027
<TOTAL-LIABILITIES> 3,092,070
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 452,234,555
<SHARES-COMMON-STOCK> 207,665
<SHARES-COMMON-PRIOR> 157,973
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1,521,124
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 14,044,752
<ACCUM-APPREC-OR-DEPREC> 18,325,686
<NET-ASSETS> 454,994,365
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 30,724,726
<OTHER-INCOME> 0
<EXPENSES-NET> 5,456,784
<NET-INVESTMENT-INCOME> (25,267,942)
<REALIZED-GAINS-CURRENT> (13,703,623)
<APPREC-INCREASE-CURRENT> 12,561,701
<NET-CHANGE-FROM-OPS> 24,126,020
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (297,406)
<DISTRIBUTIONS-OF-GAINS> (6,927)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,049,243
<NUMBER-OF-SHARES-REDEEMED> 1,022,666
<SHARES-REINVESTED> 23,115
<NET-CHANGE-IN-ASSETS> (3,682,832)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,784,084
<OVERDISTRIB-NII-PRIOR> 1,447,109
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,504,233
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,456,784
<AVERAGE-NET-ASSETS> 455,315,130
<PER-SHARE-NAV-BEGIN> 11.14
<PER-SHARE-NII> 0.56
<PER-SHARE-GAIN-APPREC> (0.04)
<PER-SHARE-DIVIDEND> (0.54)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.07
<EXPENSE-RATIO> 1.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS WASHINGTON
MUNICIPAL BOND FUND - CLASS A AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 36
<NAME> MFS WASHINGTON MUNICIPAL BOND FUND - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 17,769,572
<INVESTMENTS-AT-VALUE> 17,802,231
<RECEIVABLES> 297,852
<ASSETS-OTHER> 2,959
<OTHER-ITEMS-ASSETS> 65,018
<TOTAL-ASSETS> 18,168,060
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 96,821
<TOTAL-LIABILITIES> 96,821
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 18,482,115
<SHARES-COMMON-STOCK> 1,601,912
<SHARES-COMMON-PRIOR> 1,935,857
<ACCUMULATED-NII-CURRENT> 4,761
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 448,296
<ACCUM-APPREC-OR-DEPREC> 32,659
<NET-ASSETS> 18,071,239
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,134,419
<OTHER-INCOME> 0
<EXPENSES-NET> 27,105
<NET-INVESTMENT-INCOME> (1,107,314)
<REALIZED-GAINS-CURRENT> (372,115)
<APPREC-INCREASE-CURRENT> 916,248
<NET-CHANGE-FROM-OPS> 1,651,447
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (977,079)
<DISTRIBUTIONS-OF-GAINS> (12,874)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 183,473
<NUMBER-OF-SHARES-REDEEMED> 572,955
<SHARES-REINVESTED> 55,537
<NET-CHANGE-IN-ASSETS> (1,834,602)
<ACCUMULATED-NII-PRIOR> (2,626)
<ACCUMULATED-GAINS-PRIOR> (61,613)
<OVERDISTRIB-NII-PRIOR> 2,626
<OVERDIST-NET-GAINS-PRIOR> 61,613
<GROSS-ADVISORY-FEES> 101,091
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 256,557
<AVERAGE-NET-ASSETS> 15,955,954
<PER-SHARE-NAV-BEGIN> 9.29
<PER-SHARE-NII> 0.57
<PER-SHARE-GAIN-APPREC> 0.31
<PER-SHARE-DIVIDEND> (0.57)
<PER-SHARE-DISTRIBUTIONS> (0.01)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.59
<EXPENSE-RATIO> 0.02
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS WASHINGTON
MUNICIPAL BOND FUND - CLASS B AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 37
<NAME> MFS WASHINGTON MUNICIPAL BOND FUND - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 17,769,572
<INVESTMENTS-AT-VALUE> 17,802,231
<RECEIVABLES> 297,852
<ASSETS-OTHER> 2,959
<OTHER-ITEMS-ASSETS> 65,018
<TOTAL-ASSETS> 18,168,060
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 96,821
<TOTAL-LIABILITIES> 96,821
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 18,482,115
<SHARES-COMMON-STOCK> 282,252
<SHARES-COMMON-PRIOR> 205,898
<ACCUMULATED-NII-CURRENT> 4,761
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 448,296
<ACCUM-APPREC-OR-DEPREC> 32,659
<NET-ASSETS> 18,071,239
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,134,419
<OTHER-INCOME> 0
<EXPENSES-NET> 27,105
<NET-INVESTMENT-INCOME> (1,107,314)
<REALIZED-GAINS-CURRENT> (372,115)
<APPREC-INCREASE-CURRENT> 916,248
<NET-CHANGE-FROM-OPS> 1,651,447
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (122,848)
<DISTRIBUTIONS-OF-GAINS> (1,694)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 102,262
<NUMBER-OF-SHARES-REDEEMED> 33,794
<SHARES-REINVESTED> 7,886
<NET-CHANGE-IN-ASSETS> (1,834,602)
<ACCUMULATED-NII-PRIOR> (2,626)
<ACCUMULATED-GAINS-PRIOR> (61,613)
<OVERDISTRIB-NII-PRIOR> 2,626
<OVERDIST-NET-GAINS-PRIOR> 61,613
<GROSS-ADVISORY-FEES> 101,091
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 256,557
<AVERAGE-NET-ASSETS> 2,402,720
<PER-SHARE-NAV-BEGIN> 9.29
<PER-SHARE-NII> 0.48
<PER-SHARE-GAIN-APPREC> 0.30
<PER-SHARE-DIVIDEND> (0.47)
<PER-SHARE-DISTRIBUTIONS> (0.01)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.59
<EXPENSE-RATIO> 1.02
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS WEST
VIRGINIA MUNICIPAL BOND FUND - CLASS A AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 38
<NAME> MFS WEST VIRGINIA MUNICIPAL BOND FUND - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 129,015,693
<INVESTMENTS-AT-VALUE> 134,865,222
<RECEIVABLES> 3,289,466
<ASSETS-OTHER> 1,879
<OTHER-ITEMS-ASSETS> 10,305
<TOTAL-ASSETS> 138,166,872
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 504,785
<TOTAL-LIABILITIES> 504,785
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 135,298,503
<SHARES-COMMON-STOCK> 11,383,817
<SHARES-COMMON-PRIOR> 11,677,844
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 421,397
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 3,064,548
<ACCUM-APPREC-OR-DEPREC> 5,849,529
<NET-ASSETS> 137,662,087
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,180,565
<OTHER-INCOME> 0
<EXPENSES-NET> 1,663,845
<NET-INVESTMENT-INCOME> (7,516,720)
<REALIZED-GAINS-CURRENT> (2,860,553)
<APPREC-INCREASE-CURRENT> 3,004,520
<NET-CHANGE-FROM-OPS> 7,660,687
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7,131,736)
<DISTRIBUTIONS-OF-GAINS> (170,490)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 907,842
<NUMBER-OF-SHARES-REDEEMED> 1,556,705
<SHARES-REINVESTED> 354,836
<NET-CHANGE-IN-ASSETS> 1,479,675
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 446,221
<OVERDIST-NET-GAINS-PRIOR> 25,254
<GROSS-ADVISORY-FEES> 741,684
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,663,845
<AVERAGE-NET-ASSETS> 134,846,604
<PER-SHARE-NAV-BEGIN> 11.19
<PER-SHARE-NII> 0.62
<PER-SHARE-GAIN-APPREC> 0.03
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.63)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.21
<EXPENSE-RATIO> 1.19
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF MFS WEST
VIRGINIA MUNICIPAL BOND FUND - CLASS B AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 39
<NAME> MFS WEST VIRGINIA MUNICIPAL BOND FUND - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 129,015,693
<INVESTMENTS-AT-VALUE> 134,865,222
<RECEIVABLES> 3,289,466
<ASSETS-OTHER> 1,879
<OTHER-ITEMS-ASSETS> 10,305
<TOTAL-ASSETS> 138,166,872
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 504,785
<TOTAL-LIABILITIES> 504,785
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 135,298,503
<SHARES-COMMON-STOCK> 896,441
<SHARES-COMMON-PRIOR> 487,578
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 421,397
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 3,064,548
<ACCUM-APPREC-OR-DEPREC> 5,849,529
<NET-ASSETS> 137,662,087
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,180,565
<OTHER-INCOME> 0
<EXPENSES-NET> 1,663,845
<NET-INVESTMENT-INCOME> (7,516,720)
<REALIZED-GAINS-CURRENT> (2,860,553)
<APPREC-INCREASE-CURRENT> 3,004,520
<NET-CHANGE-FROM-OPS> 7,660,687
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (360,160)
<DISTRIBUTIONS-OF-GAINS> (8,251)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 439,815
<NUMBER-OF-SHARES-REDEEMED> 50,912
<SHARES-REINVESTED> 19,960
<NET-CHANGE-IN-ASSETS> 1,479,675
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 446,221
<OVERDIST-NET-GAINS-PRIOR> 25,254
<GROSS-ADVISORY-FEES> 741,684
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,663,845
<AVERAGE-NET-ASSETS> 134,846,604
<PER-SHARE-NAV-BEGIN> 11.19
<PER-SHARE-NII> 0.53
<PER-SHARE-GAIN-APPREC> 0.04
<PER-SHARE-DIVIDEND> (0.54)
<PER-SHARE-DISTRIBUTIONS> (0.01)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.21
<EXPENSE-RATIO> 1.19
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
