MFS MUNICIPAL SERIES TRUST
500 BOYLSTON STREET o BOSTON o MASSACHUSETTS 02116-3741
617 o 954-5000
May 28, 1996
VIA EDGAR
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, DC 20549
Re: MFS Municipal Series Trust (the "Trust") (File No. 811-4096)
(the following are state series of the Trust):
MFS Alabama Municipal MFS Maryland Municipal MFS South Carolina
Bond Fund Bond Fund Municipal Bond Fund
MFS Arkansas MFS Massachusetts MFS Tennessee Municipal
Municipal Bond Fund Municipal Bond Fund Bond Fund
MFS California MFS Mississippi Municipal MFS Texas Municipal Bond
Municipal Bond Fund Bond Fund Fund
MFS Florida Municipal MFS New York Municipal MFS Virginia Municipal
Bond Fund Bond Fund Bond Fund
MFS Georgia Municipal MFS North Carolina MFS Washington Municipal
Bond Fund Municipal Bond Fund Bond Fund
MFS Louisian MFS Pennsylvania MFS West Virginia
Municipal Bond Fund Municipal Bond Fund Municipal Bond Fund
- -------------------------------------------------------------------------------
Ladies and Gentlemen:
On behalf of the Funds referenced above, pursuant to the requirements of
Section 30(b) of the Investment Company Act of 1940 and Rule 30b2-1 thereunder,
we hereby file a copy of each of the reports listed below:
<TABLE>
<CAPTION>
Fund Report Period Ended Coded
BOOK 1
<S> <C> <C> <C>
MFS Maryland Municipal Bond Fund Annual Report March 31, 1996 MST-2A-5/96-56M
MFS North Carolina Municipal Bond Fund Annual Report March 31, 1996 MST-2A-5/96-56M
MFS South Carolina Municipal Bond Fund Annual Report March 31, 1996 MST-2A-5/96-56M
MFS Tennessee Municipal Bond Fund Annual Report March 31, 1996 MST-2A-5/96-56M
MFS Virginia Municipal Bond Fund Annual Report March 31, 1996 MST-2A-5/96-56M
MFS West Virginia Municipal Bond Fund Annual Report March 31, 1996 MST-2A-5/96-56M
BOOK 2
MFS Alabama Municipal Bond Fund Annual Report March 31, 1996 MST-2B-4/96-32.5M
MFS Arkansas Municipal Bond Fund Annual Report March 31, 1996 MST-2B-4/96-32.5M
MFS Georgia Municipal Bond Fund Annual Report March 31, 1996 MST-2B-4/96-32.5M
MFS Massachusetts Municipal Bond Fund Annual Report March 31, 1996 MST-2B-4/96-32.5M
MFS New York Municipal Bond Fund Annual Report March 31, 1996 MST-2B-4/96-32.5M
MFS Pennsylvania Municipal Bond Fund Annual Report March 31, 1996 MST-2B-4/96-32.5M
BOOK 3
MFS California Municipal Bond Fund Annual Report March 31, 1996 MST-2C-5/96-25M
MFS Florida Municipal Bond Fund Annual Report March 31, 1996 MST-2C-5/96-25M
MFS Louisiana Municipal Bond Fund Annual Report March 31, 1996 MST-2C-5/96-25M
MFS Mississippi Municipal Bond Fund Annual Report March 31, 1996 MST-2C-5/96-25M
MFS Texas Municipal Bond Fund Annual Report March 31, 1996 MST-2C-5/96-25M
MFS Washington Municipal Bond Fund Annual Report March 31, 1996 MST-2C-5/96-25M
</TABLE>
Very truly yours,
JOHN F. MCNAMARA
John F. McNamara
Production Editor
/jfm
<PAGE>
[front cover]
[logo]
MFS(r)
THE FIRST NAME IN MUTUAL FUNDS
Annual Report for
Year Ended
March 31, 1996
MFS(r) Municipal Series Trust
For the States of: California, Florida
Louisiana, Mississippi, Texas and Washington
[photo of bridge]
<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; Director, Cambridge Bancorp;
Director, Cambridge Trust 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 adviser)
Walter E. Robb, III
President and Treasurer, Benchmark Advisors, Inc.
(corporate financial consultants); Trustee, Landmark Funds
(mutual funds)
Arnold D. Scott*
Senior Executive Vice President, Director and Secretary,
Massachusetts Financial Services Company
Jeffrey L. Shames*
President and Director, 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, MA 02116-3741
Distributor
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
Portfolio Managers
David R. King*
Geoffrey L. Schechter*
David B. Smith*
Treasurer
W. Thomas London*
*Affiliated with the Investment Adviser
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.
[DALBAR MFS #1 logo]
Top-Rated Service
For the second year in a row, MFS earned a #1 ranking in DALBAR, Inc.'s
Broker/Dealer Survey, Main Office Operations Service Quality category. The
firm achieved a 3.49 overall score--on a scale of 1 to 4--in the 1995 survey.
A total of 71 firms responded, offering input on the quality of service they
received from 36 mutual fund companies nationwide. The survey contained
questions about service quality in 17 categories, including "knowledge of
phone service contacts," "accuracy of transaction processing," and "overall
ease of doing business with the firm."
<PAGE>
Letter to Shareholders
Dear Shareholders:
Declining interest rates and a favorable inflation outlook helped create
opportunities in the municipal market during the past 12 months. During the
fiscal year ended March 31, 1996, all classes of shares of the individual
state Funds available within the Trust generated positive total returns. For
the most part, these returns underperformed the 8.38% return of the Lehman
Brothers Municipal Bond Index (the Lehman Index), an unmanaged index of
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 do not exist for all of the states, we have provided a
discussion of each Fund's performance relative to the Lehman Index on the
following pages.
Economic Environment
We believe the U.S. economy will continue to show moderate growth in 1996,
although this growth may be somewhat uneven as we move from quarter to
quarter. Thus, while one quarter may experience an annualized rate of growth
in Gross Domestic Product (GDP) of less than 1%, another quarter may see
annualized growth in excess of 3%--but, for the year, we believe growth could
stay within our expected range of 2% to 2-1/2%. While some increase in
consumer spending has taken place in the early months of this year,
consumers, who represent two-thirds of the economy, remain in a somewhat
weakened position, due in part to an increase in consumer installment debt in
excess of 30% over the past two years. Meanwhile, growth is also being
constrained by ongoing economic doldrums in Europe and Japan, important
markets for U.S. exports. Here again, we are seeing a few tentative signs,
particularly in Japan, of modest recoveries that could lead to improved
prospects for U.S. exporters. Also, the "lag effect" of increases in
short-term interest rates by the Federal Reserve Board in 1994 and into 1995
is helping to keep growth in check. This lag effect can last up to two years,
and although the Fed did reduce short-term rates late last year and earlier
this year, we expect it to continue its diligent anti-inflationary policies.
At the same time, it appears that inflation is likely to remain under control
this year, due in part to a continued moderation in wage pressures and the
subdued level of economic growth. Finally, we believe the current upward
pressure on energy prices bears close scrutiny, as energy is an important
component of the inflation outlook.
Municipal Bond Market
Interest rates on municipal bonds experienced dramatic swings during the
fiscal year ended March 31, 1996. Rates declined by approximately 70 basis
points (0.70%) during the first nine months of the fiscal year, as a
combination of slowing economic growth and reduced inflationary pressures
enabled the Federal Reserve to begin lowering interest rates. Positive news
out of Washington, D.C. regarding the possibility of a balanced budget
provided further impetus for the rally in fixed-income securities. In the
fourth quarter of the fiscal year, interest rates on municipal securities
increased by about 55 basis points (0.55%) as signs of a reemergence in
economic growth and rising commodity prices raised inflationary concerns.
Further driving interest rates higher was the apparent failure of the federal
government to reach agreement on a balanced budget.
The overall 15-basis point (0.15%) decline in tax-exempt yields during the
fiscal year ended March 31, 1996 was dwarfed by the approximately 70-basis
point (0.70%) decline in yields on long-term U.S. Treasury securities during
the same period, driving the yield ratio of 30-year AAA-rated municipals to
U.S. Treasuries from 79% to 86%. The dramatic underperformance by tax-exempt
securities can be attributed to investors' fears concerning major tax reform,
more specifically, the potential of the implementation of a flat tax and the
removal of municipal bonds' special tax status. While these fears have
subsided somewhat recently as it appears that major tax reform is improbable,
tax-exempt securities are still trading at levels reflective of some modest
prospect of tax reform.
Supply continues to provide a positive foundation for the municipal bond
market. In 1995, new issuance totalled approximately $156 billion, a decline
of 5% from the previous year and nearly one-half of 1993's record level. More
importantly, during 1995 the outstanding supply of municipal bonds declined
by approximately $45 billion. It is expected that new issuance will again be
in the range of $160 billion, barring any sharp decline in interest rates,
and that the outstanding supply will again decline, by approximately $30
billion. Given the favorable technical outlook for municipal bonds and their
current yield ratios compared to U.S. Treasuries, we believe that tax-exempt
securities represent good value (although principal value and interest on
Treasury securities are guaranteed by the U.S. government if held to
maturity).
Portfolio Strategy
Although the structure of each Fund is impacted by the unique market dynamics
of its state, we strive to manage all the Funds in a similar style. We are
generally constructive on the municipal market, although recent volatility
and the aforementioned signs of growth have raised some concerns. Therefore,
we have shortened the durations of some of the longer-term Funds to lessen
their interest rate sensitivity. We have also sought to purchase bonds that
came to market at relatively high yields, which tend to be relatively more
defensive and help us maintain dividend levels.
The focus on credit issues in the municipal market has grown with the Orange
County, California bankruptcy filing, the deterioration of Washington, D.C.'s
financial condition, and many other local problems. At the same time, with
the volatility in interest rates, we feel it is appropriate to maintain very
high quality across the Funds' portfolios. Finally, the rapidly changing
credit landscape
1
<PAGE>
Letter to Shareholders -- continued
may present many opportunities that, with our research team, we hope to
identify and take advantage of to enhance the value of the Funds.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/ A. Keith Brodkin
A. Keith Brodkin
Chairman and President
/s/ David R. King /s/ Geoffrey L. Schechter /s/ David B. Smith
David R. King, Geoffrey L. Schechter, and David B. Smith
Portfolio Managers
April 12, 1996
The performance 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 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.
2
<PAGE>
California
The Fund's total returns for the fiscal year ended March 31, 1996 of 7.86%
for Class A shares, 6.93% for Class B shares, and 6.77% for Class C shares
underperformed the 8.38% return of the Lehman Index. Class A shares
outperformed, and Class B and Class C shares slightly underperformed, the
average California tax-exempt municipal bond fund's return of 7.27%, as
reported by Lipper Analytical Services, over the same period.
The Fund benefited from its holdings of high-quality discount bonds during
the period of declining interest rates. With the recent upturn of interest
rates experienced since February 1996, the Fund has moved to hedge its
interest rate sensitivity in an effort to dampen volatility. The Fund
continues to manage its credit exposure by focusing on high-quality and/or
insured, essential-purpose revenue bonds, general obligation bonds, and
tax-backed issues.
Florida
For the 12 months ended March 31, 1996, the Fund had total returns of 7.81%
for Class A shares and 6.88% for Class B shares, compared to the 8.38% return
for the Lehman Index and the 7.13% average return for Florida state
tax-exempt funds, according to Lipper Analytical Services. Its aggressive
structure worked to its advantage during the first three quarters when
interest rates were declining, but to its disadvantage over the last quarter
when interest rates rose and bond prices declined. The Fund's duration, or
interest rate sensitivity, has recently been reduced in an attempt to lessen
the share-price volatility going forward.
Louisiana
During the fiscal year ended March 31, 1996, the total returns of 7.38% for
Class A shares and 6.48% for Class B shares underperformed the 8.38% return
of the Lehman Index. The average return for Louisiana state tax-exempt funds
was 6.78%, according to Lipper Analytical Services. The underperformance is
primarily attributable to the defensive posture the Fund maintained during
the first two months of the fiscal year, when interest rates were generally
declining, and the more aggressive posture that the Fund maintained during
the fourth quarter of the fiscal year, a period marked by rising interest
rates.
Mississippi
During the fiscal year ended March 31, 1996, the total returns of 7.99% for
Class A shares and 7.11% for Class B shares modestly underperformed the 8.38%
return of the Lehman Index. The underperformance is primarily attributable to
the defensive posture that the Fund maintained during the first two months of
the fiscal year, when interest rates were generally declining, and the more
aggressive stance that was maintained during the fourth quarter of the fiscal
year, a period marked by rising interest rates.
Texas
During the fiscal year ended March 31, 1996, the total returns of 7.39% for
Class A shares and 6.38% for Class B shares modestly underperformed the 8.38%
return of the Lehman Index and the 7.56% average return for Texas state
tax-exempt funds, according to Lipper Analytical Services. The
underperformance is primarily attributable to the defensive posture that the
Fund maintained during the first two months of the fiscal year, when interest
rates were generally declining, and the more aggressive posture that was
maintained during the fourth quarter of the fiscal year, a period marked by
rising interest rates.
Washington
The Fund's total returns for the fiscal year ended March 31, 1996 of 9.20%
for Class A shares and 8.24% for Class B shares compared favorably to the
8.38% return of the Lehman Index. Both Class A and Class B shares of the Fund
outperformed the average Washington tax-exempt municipal bond fund's return
of 8.02%, as reported by Lipper Analytical Services, over the same period.
Much of this outperformance can be attributed to the Fund's substantial
holdings of high-quality, non-callable bonds.
Portfolio Manager Profiles
David King has been a member of the MFS investment staff since 1985. A
graduate of the University of New Hampshire and the Babson College Graduate
School of Business Administration, he began his career at MFS 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 (C.F.A.) and currently has portfolio
management responsibility for the Florida state Fund.
Geoffrey 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 state Funds. Mr. Schechter is a Certified Public
Accountant (C.P.A.) and a C.F.A.
David Smith has been a member of the MFS investment staff since 1988. A
graduate of Union College and the Babson College Graduate School of Business
Administration, he began his career at MFS 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 C.F.A. and currently has portfolio management responsibilities for
the California and Washington state Funds.
3
<PAGE>
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. Each Fund may purchase
instruments, the interest on which may be subject to an alternative minimum
tax. 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. A small portion of income may be subject to state,
federal, and/or alternative minimum tax. Capital gains, if any, are subject
to capital gains tax.
Performance
The following information illustrates the growth of a hypothetical $10,000
investment for each Fund's Class A shares for 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.
Please note that the performance of other classes will be greater than or
less than the line shown, based on the differences in loads and fees paid by
shareholders investing in the different classes.
4
<PAGE>
Performance - continued
MFS CALIFORNIA MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment (For the 10-Year Period Ended
March 31, 1996)
[mountain chart]
Days MFS California Lehman Brothers Consumer
Municipal Bond Fund-A Municipal Bond Index Price Index
4/1/86 0 9,525 10,000 10,000
3/31/87 365 10,629 11,097 10,304
3/31/88 731 10,495 11,376 10,705
3/31/89 1095 11,432 12,196 11,238
3/31/90 1460 12,542 13,482 11,826
3/31/91 1825 13,548 14,726 12,405
3/31/92 2191 14,973 16,197 12,800
3/31/93 2556 17,063 18,225 13,195
3/31/94 2921 17,285 18,648 13,526
3/31/95 3286 18,124 20,034 13,912
3/31/96 3652 19,548 21,713 14,307
[legend]
(solid rule) MFS California Municipal Bond Fund (Class A)
(short dashed rule) Lehman Brothers Municipal Bond Index
(long dashed rule) Consumer Price Index
Average Annual Total Returns
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------- ------- ------- ------- ---------
<S> <C> <C> <C> <C>
MFS California Municipal Bond Fund (Class A) including 4.75% sales
charge +2.73% +2.94% +6.56% +6.93%
- ----------------------------------------------------------------------- ------- ------- ------- ---------
MFS California Municipal Bond Fund (Class A) at net asset value +7.86% +4.64% +7.61% +7.45%
- ----------------------------------------------------------------------- ------- ------- ------- ---------
MFS California Municipal Bond Fund (Class B) with CDSC+ +2.93% -- -- +0.67%*
- ----------------------------------------------------------------------- ------- ------- ------- ---------
MFS California Municipal Bond Fund (Class B) without CDSC +6.93% -- -- +1.72%*
- ----------------------------------------------------------------------- ------- ------- ------- ---------
MFS California Municipal Bond Fund (Class C) +6.77% -- -- +1.81%#
- ----------------------------------------------------------------------- ------- ------- ------- ---------
Average California tax-exempt municipal bond fund** +7.27% +5.07% +7.48% +7.18%
- ----------------------------------------------------------------------- ------- ------- ------- ---------
Lehman Brothers Municipal Bond Index** +8.38% +6.01% +8.08% +8.06%
- ----------------------------------------------------------------------- ------- ------- ------- ---------
Consumer Price Index(S)** +2.84% +2.73% +2.89% +3.65%
- ----------------------------------------------------------------------- ------- ------- ------- ---------
</TABLE>
+These returns reflect the current Class B contingent deferred sales charge
(CDSC) of 4% for the 1-year period and 3% for the period commencing
September 7, 1993.
*For the period from the commencement of offering of Class B shares,
September 7, 1993 to March 31, 1996.
**Source: Lipper Analytical Services, Inc.
#For the period from the commencement of offering of Class C shares, January
3, 1994 to March 31, 1996. Class C shares have no initial sales charge or
CDSC but, along with Class B shares, have higher annual fees and expenses
than Class A shares. Class C share purchases made on or after April 1, 1996,
will be subject to a 1% CDSC if redeemed within 12 months of purchase.
(S)The Consumer Price Index is a popular measure of change in prices.
5
<PAGE>
Performance -- continued
MFS FLORIDA MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment (For the period from February 3,
1992 to March 31, 1996)
[mountain chart]
Days MFS Florida Lehman Brothers Consumer
Municipal Bond Fund-A Municipal Bond Index Price Index
2/3/92 0 9,525 10,000 10,000
3/31/92 57 9,487 10,007 10,087
3/31/93 422 10,855 11,260 10,398
3/31/94 787 11,031 11,521 10,659
3/31/95 1152 11,701 12,377 10,963
3/31/96 1518 12,615 13,415 11,274
[legend]
(solid rule) MFS Florida Municipal Bond Fund (Class A)
(short dashed rule) Lehman Brothers Municipal Bond Index
(long dashed rule) Consumer Price Index
Average Annual Total Returns
<TABLE>
<CAPTION>
Life of Class
1 Year 3 Years 5 Years through 3/31/96
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C>
MFS Florida Municipal Bond Fund (Class A) including 4.75% sales charge +2.68% +3.43% -- +5.74%*
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
MFS Florida Municipal Bond Fund (Class A) at net asset value +7.81% +5.13% -- +6.99%*
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
MFS Florida Municipal Bond Fund (Class B) with CDSC+ +2.88% -- -- +0.75%++
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
MFS Florida Municipal Bond Fund (Class B) without CDSC +6.88% -- -- +1.81%++
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
Average Florida tax-exempt municipal bond fund +7.13% +5.28% -- +7.02%**
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
Lehman Brothers Municipal Bond Index +8.38% +6.01% -- +7.30%**
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
Consumer Price Index(S) +2.84% +2.73% -- +2.92%**
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
</TABLE>
*For the period from the commencement of offering of Class A shares, February
3, 1992 to March 31, 1996.
+These returns reflect the current Class B contingent deferred sales charge
(CDSC) of 4% for the 1-year period and 3% for the period commencing
September 7, 1993.
++For the period from the commencement of offering of Class B shares,
September 7, 1993 to March 31, 1996.
**Benchmark comparisons begin on February 1, 1992. Source: Lipper Analytical
Services, Inc.
(S)The Consumer Price Index is a popular measure of change in prices.
6
<PAGE>
Performance -- continued
MFS LOUISIANA MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment (For the period from February 1,
1993 to March 31, 1996)
[mountain chart]
Days MFS Louisiana Lehman Brothers Consumer
Municipal Bond Fund-A Municipal Bond Index Price Index
2/1/93 0 9,525 10,000 10,000
3/31/93 58 9,606 10,252 10,070
3/31/94 423 9,833 10,490 10,323
3/31/95 788 10,539 11,269 10,617
3/31/96 1154 11,317 12,214 10,919
[legend]
(solid rule) MFS Louisiana Municipal Bond Fund (Class A)
(short dashed rule) Lehman Brothers Municipal Bond Index
(long dashed rule) Consumer Price Index
Average Annual Total Returns
<TABLE>
<CAPTION>
Life of Class
1 Year 3 Years 5 Years through 3/31/96
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C>
MFS Louisiana Municipal Bond Fund (Class A) including 4.75% sales
charge +2.29% +3.90% -- +3.99%*
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
MFS Louisiana Municipal Bond Fund (Class A) at net asset value +7.38% +5.62% -- +5.59%*
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
MFS Louisiana Municipal Bond Fund (Class B) with CDSC+ +2.48% -- -- +1.34%++
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
MFS Louisiana Municipal Bond Fund (Class B) without CDSC +6.48% -- -- +2.40%++
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
Average Louisiana tax-exempt municipal bond fund +6.78% +5.08% -- +5.63%**
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
Lehman Brothers Municipal Bond Index +8.38% +6.01% -- +6.52%**
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
Consumer Price Index(S) +2.84% +2.73% -- +2.81%**
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
</TABLE>
*For the period from the commencement of offering of Class A shares, February
1, 1993 to March 31, 1996.
+These returns reflect the current Class B contingent deferred sales charge
(CDSC) of 4% for the 1-year period and 3% for the period commencing
September 7, 1993.
++For the period from the commencement of offering of Class B shares,
September 7, 1993 to March 31, 1996.
**Benchmark comparisons begin on February 1, 1993. Source: Lipper Analytical
Services, Inc.
(S)The Consumer Price Index is a popular measure of change in prices.
7
<PAGE>
Performance -- continued
MFS MISSISSIPPI MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment (For the period from September 1,
1992 to March 31, 1996)
[mountain chart]
Days MFS Mississippi Lehman Brothers Consumer
Municipal Bond Fund-A Municipal Bond Index Price Index
9/1/92 0 9,525 10,000 10,000
3/31/93 211 10,073 10,629 10,192
3/31/94 576 10,312 10,876 10,447
3/31/95 941 10,939 11,684 10,745
3/31/96 1307 11,812 12,663 11,050
[legend]
(solid rule) MFS Mississippi Municipal Bond Fund (Class A)
(short dashed rule) Lehman Brothers Municipal Bond Index
(long dashed rule) Consumer Price Index
Average Annual Total Returns
<TABLE>
<CAPTION>
Life of Class
1 Year 3 Years 5 Years through 3/31/96
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C>
MFS Mississippi Municipal Bond Fund (Class A) including 4.75% sales
charge +2.81% +3.77% -- +4.03%*
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
MFS Mississippi Municipal Bond Fund (Class A) at net asset value +7.99% +5.45% -- +5.43%*
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
MFS Mississippi Municipal Bond Fund (Class B) with CDSC+ +3.11% -- -- +1.56%++
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
MFS Mississippi Municipal Bond Fund (Class B) without CDSC +7.11% -- -- +2.63%++
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
Average other state tax-exempt municipal bond fund +6.99% +5.40% -- +5.56%**
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
Lehman Brothers Municipal Bond Index +8.38% +6.01% -- +6.37%**
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
Consumer Price Index(S) +2.84% +2.73% -- +2.84%**
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
</TABLE>
*For the period from the commencement of offering of Class A shares, August
6, 1992 to March 31, 1996.
+These returns reflect the current Class B contingent deferred sales charge
(CDSC) of 4% for the 1-year period and 3% for the period commencing
September 7, 1993.
++For the period from the commencement of offering of Class B shares,
September 7, 1993 to March 31, 1996.
**Benchmark comparisons begin on August 1, 1992. Source: Lipper Analytical
Services, Inc.
(S)The Consumer Price Index is a popular measure of change in prices.
8
<PAGE>
Performance -- continued
MFS TEXAS MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment (For the period from February 3,
1992 to March 31, 1996)
[mountain chart]
Days MFS Texas Lehman Brothers Consumer
Municipal Bond Fund-A Municipal Bond Index Price Index
2/3/92 0 9,525 10,000 10,000
3/31/92 57 9,524 10,007 10,087
3/31/93 422 10,919 11,260 10,398
3/31/94 787 11,208 11,521 10,659
3/31/95 1152 12,039 12,377 10,963
3/31/96 1518 12,929 13,415 11,274
[legend]
(solid rule) MFS Texas Municipal Bond Fund (Class A)
(short dashed rule) Lehman Brothers Municipal Bond Index
(long dashed rule) Consumer Price Index
Average Annual Total Returns
<TABLE>
<CAPTION>
Life of Class
1 Year 3 Years 5 Years through 3/31/96
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C>
MFS Texas Municipal Bond Fund (Class A) including 4.75% sales charge +2.33% +4.09% -- +6.37%*
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
MFS Texas Municipal Bond Fund (Class A) at net asset value +7.39% +5.79% -- +7.63%*
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
MFS Texas Municipal Bond Fund (Class B) with CDSC+ +2.38% -- -- +1.48%++
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
MFS Texas Municipal Bond Fund (Class B) without CDSC +6.38% -- -- +2.54%++
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
Average Texas tax-exempt municipal bond fund +7.56% +5.59% -- +7.58%**
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
Lehman Brothers Municipal Bond Index +8.38% +6.01% -- +7.30%**
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
Consumer Price Index(S) +2.84% +2.73% -- +2.92%**
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
</TABLE>
*For the period from the commencement of offering of Class A shares, February
3, 1992 to March 31, 1996.
+These returns reflect the current Class B contingent deferred sales charge
(CDSC) of 4% for the 1-year period and 3% for the period commencing
September 7, 1993.
++For the period from the commencement of offering of Class B shares,
September 7, 1993 to March 31, 1996.
**Benchmark comparisons begin on February 1, 1992. Source: Lipper Analytical
Services, Inc.
(S)The Consumer Price Index is a popular measure of change in prices.
9
<PAGE>
Performance -- continued
MFS WASHINGTON MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment (For the period from September 1,
1992 to March 31, 1996)
[mountain chart]
Days MFS Washington Lehman Brothers Consumer
Municipal Bond Fund-A Municipal Bond Index Price Index
9/1/92 0 9,525 10,000 10,000
3/31/93 211 10,169 10,629 10,192
3/31/94 576 10,321 10,876 10,447
3/31/95 941 11,332 11,684 10,745
3/31/96 1307 12,375 12,663 11,050
[legend]
(solid rule) MFS Washington Municipal Bond Fund (Class A)
(short dashed rule) Lehman Brothers Municipal Bond Index
(long dashed rule) Consumer Price Index
Average Annual Total Returns
<TABLE>
<CAPTION>
Life of Class
1 Year 3 Years 5 Years through 3/31/96
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C>
MFS Washington Municipal Bond Fund (Class A) including 4.75% sales
charge +3.99% +5.03% -- +5.84%*
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
MFS Washington Municipal Bond Fund (Class A) at net asset value +9.20% +6.76% -- +7.26%*
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
MFS Washington Municipal Bond Fund (Class B) with CDSC+ +4.24% -- -- +2.76%++
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
MFS Washington Municipal Bond Fund (Class B) without CDSC +8.24% -- -- +3.83%++
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
Average Washington tax-exempt municipal bond fund +8.02% +5.65% -- +6.47%**
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
Lehman Brothers Municipal Bond Index +8.38% +6.01% -- +6.37%**
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
Consumer Price Index(S) +2.84% +2.73% -- +2.84%**
- ----------------------------------------------------------------------- ------- ------- ------- ----------------
</TABLE>
*For the period from the commencement of offering of Class A shares, August
7, 1992 to March 31, 1996.
+These returns reflect the current Class B contingent deferred sales charge
(CDSC) of 4% for the 1-year period and 3% for the period commencing
September 7, 1993.
++For the period from the commencement of offering of Class B shares,
September 7, 1993 to March 31, 1996.
**Benchmark comparisons begin on August 1, 1992. Source: Lipper Analytical
Services, Inc.
(S)The Consumer Price Index is a popular measure of change in prices.
All results are historical and are not an indication of future results. The
investment return and principal value 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 results for the California,
Louisiana, Mississippi, Texas and Washington Funds reflect the applicable
expense subsidy which is explained in the Notes to Financial Statements. Had
these subsidies not been in effect, the results would have been less
favorable. These subsidies may be rescinded at any time.
10
<PAGE>
Federal Income Tax Information on Distributions
(For the year ended March 31, 1996)
<TABLE>
<CAPTION>
California Florida Louisiana Mississippi Texas Washington
Sources of Distributions Paid+++ Fund Fund Fund Fund Fund Fund
------------------------------ -------- ------- ------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
(Class A) $0.30824 $0.51688 $0.56189 $0.52200 $0.57271 $0.56000
(Class B) 0.25917 0.42912 0.48153 0.44528 0.48666 0.48066
(Class C) 0.25245 -- -- -- -- --
Short-term capital gains:
(Class A) 0.00176 0.00362 0.00111 -- 0.01129 --
(Class B) 0.00176 0.00362 0.00111 -- 0.01129 --
(Class C) 0.00176 -- -- -- -- --
</TABLE>
+++Estimated at time of report.
Tax Form Summary
In January 1996, shareholders were mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1995.
Exempt-Interest Dividends
For federal income tax purposes, at least 98% of the total dividends paid by
each Fund from net investment income during the year ended March 31, 1996 is
designated as an exempt-interest dividend.
11
<PAGE>
Portfolio of Investments - March 31, 1996
MFS CALIFORNIA MUNICIPAL BOND FUND
Municipal Bonds - 97.1%
<TABLE>
<CAPTION>
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ------------------------------------------------- ---------------- -------------
<S> <C> <C> <C>
General Obligation - 11.7%
AAA Castaic, CA, FGIC, 0s, 2019 $10,000 $ 2,423,600
AAA Palm Springs, CA, MBIA, 6.125s, 2020 4,000 4,075,120
AA- Palos Verdes, CA, Library District, 6.7s, 2016 1,250 1,310,550
AAA Roseville, CA, FGIC, 0s, 2020 4,000 935,960
AA- Santa Monica, CA, Malibu Unified School District,
5.75s, 2018 1,475 1,478,569
A State of California, 10s, 2007 1,055 1,495,515
A State of California, 0s, 2009 3,100 1,479,909
A State of California, 6.5s, 2010 1,235 1,364,058
A State of California, 5.75s, 2023 2,415 2,334,943
AAA State of California, 5.9s, 2025 5,000 5,001,400
AAA State of California, AMBAC, 7.2s, 2008 1,600 1,876,208
AAA State of California, AMBAC, 6.3s, 2010 6,000 6,540,720
AAA State of California, AMBAC, 7s, 2010 2,000 2,320,720
AAA Sulphur Springs, CA, MBIA, 0s, 2016 2,215 656,017
AAA Walnut Valley, CA, AMBAC, 6s, 2011 1,600 1,683,376
-----------
$34,976,665
- ---------- ------------------------------------------------- -------------- -----------
State and Local Appropriation - 14.0%
AAA Banning, CA, Certificates of Participation, Water
System Improvement, AMBAC, 8s, 2019 $ 1,000 $ 1,270,090
A- California Public Works Board, Lease Rev., 6.75s,
2012 3,200 3,386,944
A- California Public Works Board, Lease Rev.
(Department of Corrections), 7.4s, 2010 5,000 5,821,150
NR Fortuna, Parlier & Susanville, CA, Certificates
of Participation, "B", 7.375s, 2017 930 966,428
AAA Grossmont, CA, Union High School District,
Certificates of Participation, MBIA, 0s, 2006 6,000 3,424,980
AAA Los Angeles, CA, Convention & Exhibition Center
Authority, Certificates of Participation, AMBAC,
0s, 2005 2,400 1,476,768
AAA Los Angeles County, CA, MBIA, 0s, 2013 3,380 1,187,056
AAA Oakland, CA, Financing Authority Lease Rev.
(Oakland Administration Buildings), AMBAC,
5.75s, 2021 3,000 2,887,590
A+ Pasadena, CA, Certificates of Participation
(Pasadena Parking Facility), 6.25s, 2018 3,460 3,585,252
A- Pomona, CA, Public Financing, 6.25s, 2010 4,020 4,111,335
A Puerto Rico Public Buildings Authority, 5.91s,
2016 (Municipal Swap)(section) 1,000 929,420
A Riverside County, CA, Asset Leasing Corp., "A",
6.25s, 2019 1,210 1,205,463
A- San Francisco, CA, City & County Redevelopment
Agency, Lease Rev., 5.5s, 2018 5,000 4,540,250
A- San Joaquin County, CA, Certificates of
Participation (General Hospital), 6.625s, 2020 4,235 4,272,776
AAA Visalia, CA, Unified School District,
Certificates of Participation, MBIA, 0s, 2005 4,655 2,834,336
-----------
$41,899,838
- ---------- ------------------------------------------------- -------------- -----------
Refunded and Special Obligation - 14.8%
NR California Educational Facilities Authority Rev.
(St. Mary's College), 7.5s, 2000 $ 1,000 $ 1,139,410
Refunded and Special Obligation - continued
A+ California Health Facilities Financing Authority
(AIDS Hospice Foundation), CHFC, 7.15s, 2000 $ 3,040 $ 3,365,919
NR California Health Facilities Financing Authority
(Brookside Hospital), 8.1s, 1997 1,000 1,082,430
NR California Health Facilities Financing Authority
(Daughters of Charity Queen Angel), 9.25s, 2015 300 307,314
AA- California Health Facilities Financing Authority
(St. Joseph Health System), 6.9s, 1999 1,000 1,095,280
AA- California Health Facilities Financing Authority
(St. Joseph Hospital), 6.75s, 2001 2,710 3,021,216
A California Health Facilities Financing Authority
(Valley Memorial Hospital), 7.9s, 1997 500 531,300
AAA California Health Facilities Financing Authority
Rev., AMBAC, 7.625s, 1998 1,205 1,325,006
AAA Concord, CA, Redevelopment Agency, Tax
Allocation, BIGI, 8s, 1998 40 43,993
AAA Concord, CA, Redevelopment Agency, Tax Allocation
(Central Concord), BIGI, 8s, 1998 370 406,937
AAA Corona, CA, Certificates of Participation (Corona
Community Hospital), 8s, 2005 585 709,915
NR Hemet Valley, CA, Hospital District, 8.25s, 1998 4,705 5,188,956
AAA Los Angeles, CA, Convention & Exhibition Center
Authority, Certificates of Participation, 9s,
2005 1,900 2,476,498
AA- Los Angeles, CA, Department of Water and Power,
Electric Plant Rev., 7.9s, 2028 1,000 1,092,230
A Los Angeles, CA, Wastewater System Rev., 6.8s,
1999 500 546,060
AAA Los Angeles, CA, Wastewater System Rev., "B",
8.125s, 1997 2,500 2,709,050
AAA Northern California Power Agency, Public Power
Rev. (Hydro-Electric), 8s, 1998 290 313,664
AAA Oakland, CA, Redevelopment Agency, Certificates
of Participation, AMBAC, 8.125s, 1997 750 796,185
A- Pomona, CA, Public Financing Authority Rev., "J",
7.875s, 2000 7,155 8,244,850
NR Pomona, CA, Single Family Mortgage Rev., FNMA,
GNMA, 7.375s, 2010 2,000 2,354,760
AAA Pomona, CA, Single Family Mortgage Rev., GNMA,
7.5s, 2000 2,000 2,476,640
AAA Sacramento, CA, Municipal Utility District,
Electric Rev., "W", 7.875s, 1998 2,500 2,756,025
A Tracy, CA, Hospital Rev., Certificates of
Participation (Tracy Community Hospital), CHFC,
8.625s, 1997 2,000 2,110,400
-----------
$44,094,038
- ---------- ------------------------------------------------- -------------- -----------
Single Family Housing Revenue - 1.5%
AA- California Housing Finance Agency, 7.75s, 2010 $ 1,210 $ 1,281,886
AA- California Housing Finance Agency, 8.1s, 2016 2,500 2,557,250
12
<PAGE>
Portfolio of Investments -- continued
Municipal Bonds -- continued
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ------------------------------------------------- ---------------- -------------
Single Family Housing Revenue - continued
A+ Riverside County, CA, 0s, 2014 $ 1,875 $ 262,468
AAA San Bernardino County, CA, Single Family Mortgage
Rev., GNMA, 7.65s, 2023 225 237,524
AAA Santa Ana, CA, Home Mortgage Rev., "A", FGIC,
8.875s, 2017 10 10,156
AAA Southern California Home Finance Authority,
Single Family Mortgage Rev., GNMA, 7.625s, 2023 260 271,372
-----------
$ 4,620,656
- ---------- ------------------------------------------------- -------------- -----------
Multi-Family Housing Revenue - 7.2%
A+ California Housing Finance Agency (Multi-Unit
Rental Housing), 6.7s, 2015 $ 2,750 $ 2,842,043
NR Escondido, CA, Community Development Authority
(Las Villas del Norte), 8.875s, 2005 4,290 4,215,826
AAA Palmdale, CA, Multi-Family Housing Rev., FNMA,
7.375s, 2024 1,000 1,061,460
BBB Thousand Oaks, CA, Redevelopment Agency (Shadow
Hills Project), 7s, 2021 8,900 9,155,964
A+ Yolo County, CA, Housing Authority Mortgage Rev.
(Walnut Park Apartments), FHA, 7.2s, 2033 4,150 4,366,588
-----------
$21,641,881
- ---------- ------------------------------------------------- -------------- -----------
Insured Health Care Revenue - 7.7%
A Apple Valley, CA, Hospital Rev. (St. Mary's
Hospital), CHFC, 6.75s, 2012### $ 4,880 $ 5,023,960
A California Health Facilities Financing Authority
(American Baptist Homes West), CHFC, 7.65s, 2014 4,420 4,673,929
AAA California Health Facilities Financing Authority
(Sutter Health), MBIA, 7s, 2009 1,000 1,068,590
AAA California Health Facilities Financing Authority
(Unihealth America), AMBAC, 7.625s, 2015 45 48,500
A+ California Statewide Communities Development
Authority, Certificates of Participation, CHFC,
0s, 2007 6,645 3,221,895
A+ California Statewide Communities Development
Authority, Certificates of Participation, CHFC,
0s, 2008 6,345 2,868,955
A California Statewide Communities Development
Authority, Certificates of Participation, CHFC,
6.75s, 2021 3,000 3,080,610
AAA Desert Hospital District, CA, Hospital Rev.,
CGIC, 8.684s, 2020++++ 3,000 3,172,500
-----------
$23,158,939
- ---------- ------------------------------------------------- -------------- -----------
Health Care Revenue - 3.7%
A- California Health Facilities Financing Authority
(Good Samaritan), 6.6s, 2000 $ 1,300 $ 1,367,587
A- California Health Facilities Financing Authority
(Good Samaritan), 6.65s, 2001 500 528,665
AA California Health Facilities Financing Authority
(Kaiser Permanente), 7s, 2018 1,000 1,067,260
AA California Statewide Communities Development
Authority (St. Joseph's), 6.625s, 2021 4,205 4,425,889
A West Covina, CA (Queen of the Valley Hospital),
6.5s, 2014 3,615 3,657,259
-----------
$11,046,660
- ---------- ------------------------------------------------- -------------- -----------
Electric and Gas Utility Revenue - 8.1%
AAA East Bay, CA, Municipal Utilities District, MBIA,
5s, 2021 $ 2,000 $ 1,767,660
AA- Los Angeles, CA, Department of Water and Power,
Electric Plant Rev., 7.25s, 2030 1,000 1,122,750
AA- Los Angeles, CA, Department of Water and Power,
Electric Plant Rev., 7.1s, 2031 1,050 1,177,039
AAA M-S-R Public Power Agency (San Juan), MBIA,
6.75s, 2020 3,000 3,394,170
A+ Modesto, CA, Irrigation District, Certificates of
Participation (Geyser), 5s, 2017 4,300 3,713,824
AAA Northern California Public Power Refunding
(Geothermal), "93A", AMBAC, 5.85s, 2010 1,000 1,039,940
AAA Sacramento, CA, Municipal Utilities District,
MBIA, 5.25s, 2020 7,500 6,879,450
NR Southern California Public Power Authority
(Southern Transmission Project), 0s, 2005 8,000 4,967,200
-----------
$24,062,033
- ---------- ------------------------------------------------- -------------- -----------
Water and Sewer Utility Revenue - 12.1%
AA California Department of Water, 5.5s, 2022 $ 2,800 $ 2,597,140
AA California Department of Water Resources, Central
Valley Project Rev., 7s, 2012 1,495 1,700,129
AAA Eastern Municipal Water District, FGIC, 5.25s,
2023 2,000 1,827,200
AAA Fairfield-Suisun, CA, Sewer District Rev., MBIA,
0s, 2006 2,080 1,221,542
AA Long Beach, CA, Water Rev., 6.125s, 2019 2,000 2,021,120
AAA Los Angeles County, CA, Financing Authority Rev.,
MBIA, 5s, 2023 4,500 3,957,750
AA Metropolitan Water District, 5s, 2020 7,000 6,158,390
AA Metropolitan Water District, Linked Savers, RIBS,
5.75s, 2018 10,000 9,905,500
BBB+ Mojave, CA, Water Agency (Morongo Basin), 6.6s,
2022 1,400 1,441,048
AAA Redding, CA, Wastewater Rev., FGIC, 5.5s, 2018 1,500 1,436,175
AAA Sacramento, CA, Area Flood Control Agency, FGIC,
5.375s, 2025 1,500 1,402,545
AA San Francisco, CA, Utility Water Rev., 0s, 2019 2,100 510,132
AAA San Jose-Santa Clara, CA, Water Financing
Authority, FGIC, 5.375s, 2020 2,000 1,866,820
-----------
$36,045,491
- ---------- ------------------------------------------------- -------------- -----------
Turnpike Revenue - 1.0%
BBB- Foothill/Eastern Transportation Corridor Agency,
CA, 0s, 2011 $ 5,000 $ 2,993,350
- ---------- ------------------------------------------------- -------------- -----------
Airport and Port Revenue - 1.9%
AAA California Maritime, Infrastructure Authority,
AMBAC, 5s, 2020 $ 1,750 $ 1,528,328
AAA San Francisco, CA, City & County Airports
Commission, International Airport Rev., FGIC,
6.5s, 2019 4,000 4,165,840
-----------
$ 5,694,168
- ---------- ------------------------------------------------- -------------- -----------
13
<PAGE>
Portfolio of Investments -- continued
Municipal Bonds -- continued
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ------------------------------------------------- ---------------- -------------
Sales and Excise Tax Revenue - 5.1%
AAA Chico, CA (Southeast Chico Redevelopment), FGIC,
6.625s, 2021 $1,735 $ 1,839,777
AAA Los Angeles County, CA, Metropolitan
Transportation Authority, AMBAC, 5.25s, 2023 2,000 1,827,200
AAA Los Angeles County, CA, Metropolitan
Transportation Authority, AMBAC, 5s, 2025 5,000 4,414,050
AAA Los Angeles County, CA, Metropolitan
Transportation Authority, FGIC, 5s, 2021 8,000 7,069,200
-----------
$ 15,150,227
- ---------- ------------------------------------------------- -------------- -----------
Industrial Revenue (Corporate Guarantee) - 0.7%
NR California Pollution Control Financing Authority
(Frito-Lay, Inc.), 6.375s, 2004 $1,025 $ 1,088,560
A California Pollution Control Financing Authority
(Pacific Gas & Electric Co.), 6.625s, 2009 1,000 1,056,420
-----------
$ 2,144,980
- ---------- ------------------------------------------------- -------------- -----------
Universities - 3.8%
NR California Educational Facilities Authority Rev.
(College & University), 6s, 2012 $1,400 $ 1,324,386
A- California State University Housing System Rev.,
6.75s, 2010 1,705 1,866,975
A- California State University Housing System Rev.,
6.75s, 2011 3,570 3,893,692
AAA University of California, MBIA, 6.375s, 2024 4,000 4,165,000
-----------
$ 11,250,053
- ---------- ------------------------------------------------- -------------- -----------
Special Assessment District - 2.4%
AAA Anaheim, CA, Public Financing Authority
(Redevelopment Project Alpha), MBIA, 0s, 2005 $3,210 $ 1,945,292
AAA Brea, CA, Public Finance Authority, MBIA, 0s,
2005 2,235 1,384,292
AAA Brea, CA, Public Finance Authority, MBIA, 0s,
2006 3,415 1,989,306
AAA Concord, CA, Redevelopment Agency, Tax
Allocation, BIGI, 8s, 2018 40 43,515
AAA Walnut, CA, Public Finance Authority (Walnut
Improvement), MBIA, 0s, 2007 1,150 622,564
AAA Walnut, CA, Public Finance Authority (Walnut
Improvement), MBIA, 0s, 2008 1,125 570,240
AAA Walnut, CA, Public Finance Authority (Walnut
Improvement), MBIA, 0s, 2009 1,175 556,550
-----------
$ 7,111,759
- ---------- ------------------------------------------------- -------------- -----------
Other - 1.4%
AAA California Public Capital Improvements Financing
Authority Rev., BIGI, 8.1s, 2018 $1,890 $ 2,024,870
AAA South Coast Air Quality Management District,
AMBAC, 0s, 2005 3,480 2,145,629
-----------
$ 4,170,499
- ---------- ------------------------------------------------- -------------- -----------
Total Municipal Bonds (Identified Cost, $277,854,789) $290,061,237
- ----------------------------------------------------------------------------------- -------------
Floating Rate Demand Notes - 1.4%
California Health Facilities (St. Joseph Health
System), due 7/01/13 $2,040 $ 2,040,000
California Pollution Control Financing Authority
(Shell Oil Corp.), due 11/01/00 500 500,000
Floating Rate Demand Notes - continued
California Pollution Control Financing Authority
(Shell Oil Corp.), due 10/01/08 $300 $ 300,000
California Pollution Control Financing Authority
(Shell Oil Corp.), due 10/01/11 700 700,000
Uinta County, WY, Pollution Control Rev. (Chevron
USA, Inc.), due 8/15/20 700 700,000
- ---------- ------------------------------------------------- -------------- -----------
Total Floating Rate Demand Notes, at Identified Cost $ 4,240,000
- ----------------------------------------------------------------------------------- -------------
Call Option Purchased - 0.1%
Issuer/Expiration Date/Strike Price Principal Amount
of Contracts
(000 Omitted)
--------------------------------------------------------------- ---------------- -------------
State of New Jersey, "D"/2003/102
(Premium Paid, $225,000) $ 2 $ 382,000
--------------------------------------------------------------- ---------------- -------------
Total Investments (Identified Cost, $282,319,789) $294,683,237
Other Assets, Less Liabilities - 1.4% 4,161,202
- ----------------------------------------------------------------------------------- -------------
Net Assets - 100.0% $298,844,439
- ----------------------------------------------------------------------------------- -------------
</TABLE>
###Security segregated as collateral for an open futures contract.
(section)Indexed security.
++++Inverse floating rate security.
See notes to financial statements
Portfolio of Investments - March 31, 1996
MFS FLORIDA MUNICIPAL BOND FUND
Municipal Bonds - 96.6%
<TABLE>
<CAPTION>
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ------------------------------------------------- ---------------- -------------
<S> <C> <C> <C>
General Obligation - 9.3%
AA Florida Board of Education, Capital Outlay,
9.125s, 2014 $2,600 $3,618,316
AA Palm Beach County, FL, 6.5s, 2010 2,000 2,207,260
AA State of Florida, 9.875s, 2009 1,100 1,576,971
AA State of Florida, 6.4s, 2022 2,000 2,127,080
-----------
$9,529,627
- ---------- ------------------------------------------------- -------------- -----------
State and Local Appropriation - 4.2%
AAA Bay County, FL, School Board, Certificates of
Participation, AMBAC, 6.75s, 2012### $ 1,000 $1,111,200
AAA Collier County, FL, School Board, Certificates of
Participation, FSA, 5s, 2016 1,250 1,121,563
AAA Palm Beach County, FL, School Board, Certificates
of Participation, AMBAC, 6.375s, 2015 2,000 2,103,260
-----------
$4,336,023
- ---------- ------------------------------------------------- -------------- -----------
Refunded and Special Obligation - 6.7%
AAA Broward County, FL, School District, 7.125s, 1999 $ 250 $ 273,975
AAA Florida Board of Education, Capital Outlay,
7.25s, 2000 510 572,149
AAA Florida Board of Education, Capital Outlay, ETM,
9.125s, 2014 400 564,664
AAA Florida Turnpike Authority Rev., AMBAC, 7.125s,
2001 1,250 1,418,300
AAA Gainesville, FL, Utility Systems Rev., AMBAC,
7.25s, 1998 500 545,395
14
<PAGE>
Portfolio of Investments -- continued
Municipal Bonds -- continued
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ------------------------------------------------- ---------------- -------------
Refunded and Special Obligation - continued
A Hillsborough County, FL, Capital Improvement
Rev., 6.75s, 2022 $1,500 $ 1,682,700
AAA Orange County, FL, Tourist Development Tax Rev.,
AMBAC, 7.25s, 2000 500 564,665
A- Puerto Rico Electric Power Authority Rev., 7s,
2001 240 272,133
AAA Puerto Rico Highway & Transportation Authority,
Highway Rev., 6.625s, 2002 100 112,292
AAA Puerto Rico Public Buildings Authority, 6.875s,
2002 740 840,921
-----------
$ 6,847,194
- ---------- ------------------------------------------------- -------------- -----------
Single Family Housing Revenue - 1.1%
NR Dade County, FL, Housing Finance Authority, FNMA,
GNMA, 7s, 2024 $ 75 $ 77,500
AAA Dade County, FL, Housing Finance Authority, FSA,
6.95s, 2012 1,000 1,043,990
-----------
$ 1,121,490
- ---------- ------------------------------------------------- -------------- -----------
Multi-Family Housing Revenue - 1.5%
NR Florida Housing Finance Agency (Southlake
Apartments), 8.7s, 2021 $ 1,500 $ 1,513,845
- ---------- ------------------------------------------------- -------------- -----------
Insured Health Care Revenue - 11.3%
AAA Brevard County, FL, Health Facilities Authority
Rev. (Wuesthoff Memorial), MBIA, 6.5s, 2007 $ 1,000 $ 1,085,430
AAA Brevard County, FL, Health Facilities Authority
Rev. (Wuesthoff Memorial), MBIA, 5s, 2013 1,000 913,780
AAA Brevard County, FL, Health Facilities Authority
Rev. (Wuesthoff Memorial), MBIA, 7.2s, 2013 1,000 1,117,920
AAA Charlotte County, FL, Public Facilities Authority
Rev. (Bon Secours), FSA, 7.826s, 2027 ++++ 2,500 2,518,750
AAA Hillsborough County, FL, Industrial Development
Authority (University Community Hospital), 6.5s,
2019 1,000 1,097,260
AAA Jacksonville, FL, Hospital Rev. (Baptist
Medical), MBIA, 7.3s, 2019 1,900 2,053,995
AAA Jacksonville, FL, Hospital Rev. (University
Community Hospital), Connie Lee, 6.6s, 2013 500 528,410
AAA Tallahassee, FL, Health Facilities Rev.
(Tallahassee Memorial Regional Medical), MBIA,
6.625s, 2013 1,000 1,096,060
AAA Tampa, FL, Alleghany Health System (St. Joseph
Hospital), MBIA, 6.5s, 2023 1,000 1,087,490
-----------
$11,499,095
- ---------- ------------------------------------------------- -------------- -----------
Health Care Revenue - 9.2%
NR Brevard County, FL, Health Facilities Authority
Rev. (Friendly Village), 9.25s, 2012 $ 375 $ 387,881
BBB+ Escambia County, FL, Health Facilities Authority
(Baptist Hospital), 6s, 2014 2,500 2,347,550
BBB+ Escambia County, FL, Health Facilities Authority
(Baptist Hospital & Baptist Manor), 6.75s, 2014 1,000 1,017,830
NR Jacksonville, FL, Health Facilities Authority,
Industrial Development Rev. (Cypress Village),
7s, 2014 1,250 1,271,875
Health Care Revenue - continued
NR Jacksonville, FL, Health Facilities Authority,
Industrial Development Rev. (National Benevolent
Assn./Cypress), 6.4s, 2016 $1,825 $ 1,773,353
NR Orange County, FL, Industrial Development
Authority Rev. (Friendly Village), 9.25s, 2012 335 347,418
A+ Palm Beach County, FL, Health Facilities
Authority Rev. (Good Samaritan Health System),
6.3s, 2022 1,750 1,763,020
NR St. Petersburg, FL, Health Facilities Rev.
(Swanholm Nursing), 10s, 2022 490 531,263
-----------
$ 9,440,190
- ---------- ------------------------------------------------- -------------- -----------
Electric and Gas Utility Revenue - 27.2%
AAA Charlotte County, FL, Utility Systems Rev., FGIC,
6.875s, 2021 $ 500 $ 554,350
AAA Escambia County, FL, Utilities Authority, FGIC,
0s, 2015 2,000 667,540
AAA Escambia County, FL, Utilities District, Utility
Systems Rev., FGIC, 6.25s, 2015 1,500 1,604,730
AA- Hillsborough County, FL, Industrial Development
Authority, Pollution Control Rev. (Tampa
Electric Co.), 8s, 2022 3,000 3,498,000
AA Jacksonville, FL, Electric Authority Rev., 0s,
2010 4,995 2,193,105
AA- Lakeland, FL, Electric & Water Rev., 0s, 2011 5,000 2,058,550
AA- Lakeland, FL, Electric & Water Rev., 0s, 2012 3,000 1,157,070
BBB- Martin County, FL, Industrial Development
Authority (Indiantown Cogeneration Project),
7.875s, 2025 3,625 4,061,595
AA- Orlando, FL, Utilities Commission, Water &
Electric Rev., 6.75s, 2017 2,500 2,836,875
NR Palm Beach County, FL, Industrial Development
Rev. (Osceola Power Project), 6.85s, 2014 3,000 3,046,830
NR Palm Beach County, FL, Solid Waste Industrial
Development Rev. (Osceola Power Project), 6.95s,
2022 1,500 1,517,550
A- Puerto Rico Electric Power Authority Rev.,
6.125s, 2008 2,400 2,516,016
AAA Puerto Rico Electric Power Authority Rev., FSA,
6s, 2016 2,000 2,029,400
-----------
$27,741,611
- ---------- ------------------------------------------------- -------------- -----------
Water and Sewer Utility Revenue - 5.2%
AAA Bradenton, FL, Utility System Rev., FGIC, 0s,
2008 $ 1,000 $ 507,040
AAA Miramar, FL, Wastewater Improvement, FGIC, 6.75s,
2016 1,500 1,631,580
AAA Seminole, FL, Water & Sewer Improvement Rev.,
MBIA, 6s, 2019 3,000 3,120,120
-----------
$ 5,258,740
- ---------- ------------------------------------------------- -------------- -----------
Turnpike Revenue - 3.2%
AAA Florida Turnpike Authority Rev., 5s, 2019 $ 2,000 $ 1,791,980
AAA Lee County, FL, Transportation Facility Rev.,
MBIA, 5.75s, 2022 1,500 1,486,155
-----------
$ 3,278,135
- ---------- ------------------------------------------------- -------------- -----------
15
<PAGE>
Portfolio of Investments -- continued
Municipal Bonds -- continued
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ------------------------------------------------- ---------------- -------------
Airport and Port Revenue - 7.4%
AAA Dade County, FL, MBIA, 5.125s, 2016### $ 1,000 $ 921,680
AAA Dade County, FL, Aviation Rev., MBIA, 5.75s, 2015 1,500 1,466,970
AAA Dade County, FL, Aviation Rev., MBIA, 6.6s, 2022 1,000 1,057,430
BB Hillsborough County, FL, Aviation Authority Rev.
(Delta Air Lines), 6.8s, 2024 1,500 1,530,720
B- Hillsborough County, FL, Aviation Authority Rev.
(US Air), 8.6s, 2022 2,400 2,569,152
-----------
$ 7,545,952
- ---------- ------------------------------------------------- -------------- -----------
Sales and Excise Tax Revenue - 3.6%
AAA Dade County, FL, 0s, 2024 $ 2,000 $ 369,580
AAA Dade County, FL, 0s, 2026 3,660 600,533
AAA Jacksonville, FL, Excise Tax Rev., FGIC, 0s, 2010 1,000 434,130
AAA Jacksonville, FL, Excise Tax Rev., FGIC, 0s, 2011 1,000 403,710
A Puerto Rico Highway & Transportation Authority
Rev., 6.625s, 2018 1,000 1,101,570
AAA Sunrise, FL, Public Facilities Rev., MBIA, 0s,
2020 3,100 729,926
-----------
$ 3,639,449
- ---------- ------------------------------------------------- -------------- -----------
Industrial Revenue (Corporate Guarantee) - 5.8%
BBB Escambia County, FL, Pollution Control Rev.
(Champion International Corp.), 6.95s, 2007 $ 2,500 $ 2,628,750
BBB Escambia County, FL, Pollution Control Rev.
(Champion International Corp.), 6.8s, 2012 1,000 1,043,820
BBB Escambia County, FL, Pollution Control Rev.
(Champion International Corp.), 6.9s, 2022 1,000 1,041,650
AAA Hillsborough County, FL, FGIC, 0s, 2016 1,485 451,737
AAA Hillsborough County, FL, FGIC, 0s, 2017 2,485 712,921
-----------
$ 5,878,878
- ---------- ------------------------------------------------- -------------- -----------
Other - 0.9%
AAA Hillsborough County, FL, MBIA, 5s, 2015 $ 1,000 $ 909,700
- ---------- ------------------------------------------------- -------------- -----------
Total Municipal Bonds (Identified Cost, $94,420,132) $ 98,539,929
- ----------------------------------------------------------------------------------- -------------
Floating Rate Demand Notes - 1.9%
Hillsborough County, FL, Pollution Control Rev.
(Tampa Electric Co.), due 5/15/18 $ 800 $ 800,000
Jacksonville, FL, Pollution Control Rev. (Florida
Power & Light Co.), due 5/01/29 1,100 1,100,000
- ---------- ------------------------------------------------- -------------- -----------
Total Floating Rate Demand Notes, at Identified Cost $ 1,900,000
- ----------------------------------------------------------------------------------- -------------
Total Investments (Identified Cost, $96,320,132) $100,439,929
Other Assets, Less Liabilities - 1.5% 1,560,968
- ----------------------------------------------------------------------------------- -------------
Net Assets - 100.0% $102,000,897
- ----------------------------------------------------------------------------------- -------------
</TABLE>
###Security segregated as collateral for an open futures contract.
++++Inverse floating rate security.
See notes to financial statements
Portfolio of Investments - March 31, 1996
MFS LOUISIANA MUNICIPAL BOND FUND
Municipal Bonds - 99.2%
<TABLE>
<CAPTION>
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ------------------------------------------------- ---------------- -------------
<S> <C> <C> <C>
General Obligation - 13.3%
A Commonwealth of Puerto Rico, 5.4s, 2025 $1,000 $ 917,680
AAA New Orleans, LA, AMBAC, 0s, 2008 1,800 911,268
AAA New Orleans, LA, AMBAC, 0s, 2016 1,000 295,580
AAA Orleans Parish, LA, School Board, MBIA, 6s, 2009 555 583,039
AAA State of Louisiana, AMBAC, 6.1s, 2011 250 261,045
AAA State of Louisiana, AMBAC, 6.5s, 2011 250 267,873
-----------
$3,236,485
- ---------- ------------------------------------------------- -------------- -----------
State and Local Appropriation - 6.7%
AAA Louisiana Public Facilities Authority Lease Rev.
(Orleans Parish School Board), FSA, 5.65s, 2011 $1,000 $ 978,690
BBB Natchitoches Parish, LA, 7.2s, 2015 650 660,485
-----------
$1,639,175
- ---------- ------------------------------------------------- -------------- -----------
Refunded and Special Obligation - 1.2%
AAA Puerto Rico Public Buildings Authority, 6.875s,
2002 $ 250 $ 284,095
- ---------- ------------------------------------------------- -------------- -----------
Single Family Housing Revenue - 8.0%
NR East Baton Rouge, LA, FNMA, GNMA, 6.8s, 2028 $ 460 $ 469,577
NR Louisiana Housing Finance Agency, Single Family
Mortgage Rev., FNMA, GNMA, 7.8s, 2026 1,000 1,090,230
AAA Puerto Rico Housing Bank & Finance Agency, FNMA,
GNMA, 6.25s, 2029 400 401,840
-----------
$1,961,647
- ---------- ------------------------------------------------- -------------- -----------
Insured Health Care Revenue - 6.8%
AAA Jefferson Parish, LA, Hospital Service District
No. 2, Hospital Rev., MBIA, 5.75s, 2016 $ 250 $ 245,552
AAA St. Tammany Parish, LA, Hospital Rev., Connie
Lee, 6.125s, 2009 500 509,650
AAA St. Tammany Parish, LA, Hospital Rev., Connie
Lee, 6.25s, 2014 500 512,130
AAA Tangipahoa Parish, LA, Hospital Service District
No. 1, Hospital Rev., AMBAC, 6.125s, 2014 400 405,800
-----------
$1,673,132
- ---------- ------------------------------------------------- -------------- -----------
Health Care Revenue - 6.1%
A- St. Tammany Parish, LA, Hospital Service District
#1, Hospital Rev., 6.5s, 2017 $1,000 $ 983,780
NR Westside Habilitation Center, Cheneyville, LA,
8.375s, 2013 500 498,910
-----------
$1,482,690
- ---------- ------------------------------------------------- -------------- -----------
Electric and Gas Utility Revenue - 11.0%
AAA Alexandria, LA, Utilities Rev., FGIC, 5.25s,
2012### $1,065 $1,012,517
BB+ Calcasieu Parish, Inc., LA, Pollution Control
Rev. (Gulf States Utilities Co.), 6.75s, 2012### 800 804,472
BBB St. Charles Parish, LA, Environmental Improvement
Rev. (Louisiana Power & Light Co.), 6.875s, 2024 250 256,650
AAA St. Charles Parish, LA, Environmental Improvement
Rev. (Louisiana Power & Light Co.), AMBAC,
6.875s, 2024 330 347,787
BB+ West Feliciana Parish, LA, Pollution Control
Rev., 7.7s, 2014 250 268,707
-----------
$2,690,133
- ---------- ------------------------------------------------- -------------- -----------
16
<PAGE>
Portfolio of Investments -- continued
Municipal Bonds -- continued
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ------------------------------------------------- ---------------- -------------
Water and Sewer Utility Revenue - 7.3%
A Commonwealth of Puerto Rico, Aqueduct & Sewer
Authority Rev., 6.25s, 2012 $ 500 $ 527,655
AA- Louisiana Public Facilities Authority Rev. (Baton
Rouge Water Works Co.), 6.4s, 2010 500 520,550
AAA Terrebonne Parish, LA, Waterworks Rev., FGIC,
5.95s, 2012 730 740,643
-----------
$ 1,788,848
- ---------- ------------------------------------------------- -------------- -----------
Turnpike Revenue - 4.3%
AAA Greater New Orleans, LA, MBIA, 6s, 2016 $ 500 $ 507,040
A- Mississippi River Bridge Authority, 6.75s, 2012 500 536,635
-----------
$ 1,043,675
- ---------- ------------------------------------------------- -------------- -----------
Sales and Excise Tax Revenue - 10.0%
A Commonwealth of Puerto Rico Highway, 5.5s, 2026 $ 500 $ 462,645
AAA East Baton Rouge Parish, LA, FGIC, 5.4s, 2018 1,000 943,600
AAA East Baton Rouge Parish, LA, FGIC, 5.9s, 2020 500 499,815
AAA Louisiana Stadium & Exposition District, FGIC,
5.9s, 2012 240 240,955
AAA Regional Transit Authority, LA, Sales Tax Rev.,
FGIC, 0s, 2012 800 294,872
-----------
$ 2,441,887
- ---------- ------------------------------------------------- -------------- -----------
Industrial Revenue (Corporate Guarantee) - 12.0%
A- DeSoto Parish, LA, Environmental Improvement Rev.
(International Paper Co.), 7.7s, 2018 $ 750 $ 842,160
A- DeSoto Parish, LA, Environmental Improvement Rev.
(International Paper Co.), 6.55s, 2019 250 252,902
A Natchitoches Parish, LA, Solid Waste Disposal
Rev. (Williamette Industries), 5.875s, 2023 830 785,031
NR Port New Orleans, LA, Industrial Development Rev.
(Avondale Industries), 8.5s, 2014 500 552,595
A+ Vidalia, LA (Alcoa), 5.875s, 2013 500 496,830
-----------
$ 2,929,518
- ---------- ------------------------------------------------- -------------- -----------
Universities - 8.4%
AAA Louisiana Public Facilities Authority, FGIC,
5.875s, 2012 (Corporate Swap Rate)(section) $1,060 $ 1,061,516
AAA Louisiana State University & Agriculture, FGIC,
5.75s, 2014 1,000 988,620
-----------
$ 2,050,136
- ---------- ------------------------------------------------- -------------- -----------
Other - 4.1%
AAA State of Louisiana, Public Finance Authority (Our
Lady of the Lake), FSA, 5.9s, 2021 $1,000 $ 990,970
- ---------- ------------------------------------------------- -------------- -----------
Total Municipal Bonds (Identified Cost, $23,509,388) $24,212,391
- ----------------------------------------------------------------------------------- -------------
Floating Rate Demand Notes - 4.9%
East Baton Rouge Parish, LA, Pollution Control
Rev. (Exxon), due 11/01/19 $1,000 $ 1,000,000
St. Charles Parish, LA, Pollution Control Rev.
(Shell Oil Co.), due 11/01/21 200 200,000
- ---------- ------------------------------------------------- -------------- -----------
Total Floating Rate Demand Notes, at Identified Cost $ 1,200,000
- ----------------------------------------------------------------------------------- -------------
Value
---------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $24,709,388) $25,412,391
Other Assets, Less Liabilities - (4.1)% (993,905)
- ----------------------------------------------------------------------------------- -------------
Net Assets - 100.0% $24,418,486
- ----------------------------------------------------------------------------------- -------------
</TABLE>
###Security segregated as collateral for an open futures contract.
(section)Indexed security.
See notes to financial statements
Portfolio of Investments - March 31, 1996
MFS MISSISSIPPI MUNICIPAL BOND FUND
Municipal Bonds - 96.7%
<TABLE>
<CAPTION>
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ------------------------------------------------- ---------------- -------------
<S> <C> <C> <C>
General Obligation - 10.0%
AAA DeSoto County, MS, School District, MBIA, 4.75s,
2014 $1,440 $ 1,260,922
NR Gulfport, MS, 5s, 2011 1,085 1,021,191
AAA Hinds County, MS, MBIA, 6.25s, 2010 1,660 1,789,131
AAA Hinds County, MS, MBIA, 6.25s, 2011 1,285 1,376,184
BBB+ Jackson County, MS, Road Improvement, 6.5s, 2008 425 451,035
AA- State of Mississippi, 5.1s, 2012 750 712,530
AA- State of Mississippi, 6.75s, 2014 1,800 1,949,994
-----------
$ 8,560,987
- ---------- ------------------------------------------------- -------------- -----------
State and Local Appropriation - 16.5%
NR Hinds Community College, MS, District M
Conference and Training Center, 6.5s, 2014 $1,320 $ 1,335,352
NR Hinds County, MS, School District, Certificates
of Participation (Utica Project), 7.25s, 2012 1,000 1,098,600
AAA Medical Center Educational Building Corp., MS
(University of Mississippi Medical Center),
MBIA, 5.65s, 2009 2,000 1,993,540
AAA Medical Center Educational Building Corp., MS
(University of Mississippi Medical Center),
MBIA, 5.9s, 2023 3,750 3,694,612
A Puerto Rico Public Buildings Authority, 5.91s,
2016 (Municipal Swap)(section) 1,000 929,420
AAA State of Mississippi, Certificates of
Participation (Marshall County Correctional
Facility), MBIA, 5.625s, 2015 3,310 3,158,071
NR State of Mississippi, Certificates of
Participation (Rehabilitation Services), 6.1s,
2014 2,000 2,008,280
-----------
$14,217,875
- ---------- ------------------------------------------------- -------------- -----------
Refunded and Special Obligation - 5.9%
AAA Commonwealth of Puerto Rico, Public Improvement,
6.8s, 2002 $1,500 $ 1,698,510
AAA Puerto Rico Highway & Transportation Authority,
Highway Rev., 6.625s, 2002 100 112,292
AA- State of Mississippi, 6s, 2002### 3,000 3,221,670
-----------
$ 5,032,472
- ---------- ------------------------------------------------- -------------- -----------
Single Family Housing Revenue - 4.7%
NR Mississippi Home Corp., GNMA, 6.5s, 2024 $2,650 $ 2,677,163
NR Mississippi Home Corp., GNMA, 6.625s, 2027 1,350 1,378,890
-----------
$ 4,056,053
- ---------- ------------------------------------------------- -------------- -----------
17
<PAGE>
Portfolio of Investments -- continued
Municipal Bonds -- continued
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ------------------------------------------------- ---------------- -------------
Multi-Family Housing Revenue - 4.6%
AAA Gulfport, MS, Community Development (Oakview
Apartments), FNMA, 7.4s, 2025 $1,755 $ 1,861,669
AAA Jackson, MS, Elderly Housing Corp., Mortgage Rev.
(Delhaven Manor), "C", FHA, 7.375s, 2024 1,985 2,105,231
-----------
$ 3,966,900
- ---------- ------------------------------------------------- -------------- -----------
Insured Health Care Revenue - 17.4%
AAA Alcorn County, Corinth, MS (Magnolia Regional
Health Center), AMBAC, 5.75s, 2013 $2,000 $ 1,948,000
AAA Gulfport, MS, Hospital Facilities (Memorial
Hospital), MBIA, 6.125s, 2015 2,500 2,564,525
AAA Gulfport, MS, Hospital Facilities (Memorial
Hospital), MBIA, 6.2s, 2018 1,000 1,027,650
AAA Hinds County, MS, Rev. (Methodist Hospital &
Rehabilitation Center), AMBAC, 5.6s, 2012 3,055 3,028,635
AAA Mississippi Hospital Equipment & Facilities
Authority Rev. (Baptist), MBIA, 6.5s, 2010 1,190 1,276,977
AAA Mississippi Hospital Equipment & Facilities
Authority Rev. (Baptist), MBIA, 6s, 2013 1,000 1,017,320
AAA Mississippi Hospital Equipment & Facilities
Authority Rev. (North Mississippi Health
Services), AMBAC, 5.25s, 2013 1,615 1,512,270
AAA Mississippi Hospital Equipment & Facilities
Authority Rev. (Rush Medical Foundation), Connie
Lee, 6.7s, 2018 2,500 2,611,575
-----------
$14,986,952
- ---------- ------------------------------------------------- -------------- -----------
Health Care Revenue - 3.9%
NR Adams County, MS, Hospital Rev. (Jefferson Davis
Memorial Hospital), 8s, 2016 $1,000 $ 1,064,650
NR Mississippi Hospital Equipment & Facilities
Authority Rev. (Magnolia Hospital), 7.375s, 2021 1,500 1,413,495
NR Mississippi Hospital Equipment & Facilities
Authority Rev. (Rankin Medical Center), 5.7s,
2023 1,000 910,510
-----------
$ 3,388,655
- ---------- ------------------------------------------------- -------------- -----------
Electric and Gas Utility Revenue - 6.2%
BBB- Claiborne County, MS, Pollution Control Rev.
(System Energy Resources, Inc.), 7.3s, 2025 $1,000 $ 1,045,220
BBB- Claiborne County, MS, Pollution Control Rev.
(System Energy Resources, Inc.), 6.2s, 2026 2,000 1,931,480
NR Warren County, MS, Pollution Control Rev.
(Mississippi Power & Light), 7s, 2022 1,000 1,037,550
NR Washington County, MS, Pollution Control Rev.
(Mississippi Power & Light), 7s, 2022 1,230 1,274,354
-----------
$ 5,288,604
- ---------- ------------------------------------------------- -------------- -----------
Water and Sewer Utility Revenue - 12.4%
AAA Clarksdale, MS, Sewer & Wastewater Treatment
System Rev., MBIA, 6.1s, 2012 $1,885 $ 1,925,207
Water and Sewer Utility Revenue - continued
AAA Columbus, MS, Water & Sewer Rev., MBIA, 6.5s,
2013 $1,000 $ 1,069,670
AAA Gautier, MS, Utility District, Utility Systems
Rev., FGIC, 6.375s, 2019 1,300 1,347,684
AAA Harrison County, MS, Wastewater Management
District, Wastewater Treatment, FGIC, 6.5s, 2006 1,375 1,479,858
AAA Harrison County, MS, Wastewater Management
District, Wastewater Treatment, FGIC, 5.875s,
2025 1,500 1,488,690
AAA Meridian, MS, Water & Sewer Rev., AMBAC, 6s, 2010 1,500 1,539,555
AAA Meridian, MS, Water & Sewer Rev., AMBAC, 6.2s,
2012 650 674,070
AAA Meridian, MS, Water & Sewer Rev., AMBAC, 6.2s,
2013 400 414,812
AAA Meridian, MS, Water & Sewer Rev., AMBAC, 4.625s,
2014 390 337,658
AAA Meridian, MS, Water & Sewer Rev., AMBAC, 4.625s,
2015 410 353,383
-----------
$10,630,587
- ---------- ------------------------------------------------- -------------- -----------
Sales and Excise Tax Revenue - 4.6%
A Commonwealth of Puerto Rico Highway, 5.5s, 2026 $2,000 $ 1,850,580
A Puerto Rico Highway & Transportation Authority
Rev., 6.625s, 2018 1,900 2,092,983
-----------
$ 3,943,563
- ---------- ------------------------------------------------- -------------- -----------
Industrial Revenue (Corporate Guarantee) - 9.3%
A- Jackson County, MS, Solid Waste Disposal
Facilities Rev. (International Paper), 5.55s,
2017 $1,300 $ 1,228,097
A Lowndes County, MS, Solid Waste Disposal &
Pollution Control Rev. (Weyerhaeuser), 6.8s,
2022 4,250 4,666,203
BBB Mississippi Business Finance Corp. (Jackson
Municipal Airport/Airborne Freight), 7.15s, 2007 985 1,054,983
A- Warren County, MS, Pollution Control Rev.
(International Paper), 6.6s, 2019 1,000 1,013,740
-----------
$ 7,963,023
- ---------- ------------------------------------------------- -------------- -----------
Other - 1.2%
AAA Jackson, MS, Redevelopment Authority (Jackson
Street Area), MBIA, 5.7s, 2013 $1,035 $ 1,019,309
- ---------- ------------------------------------------------- -------------- -----------
Total Municipal Bonds (Identified Cost, $80,566,958) $83,054,980
- ----------------------------------------------------------------------------------- -------------
Floating Rate Demand Notes - 1.5%
- ----------------------------------------------------------------------------------- -------------
Jackson County, MS, Pollution Control Rev.
(Chevron USA, Inc.), due 12/01/16 $ 100 $ 100,000
Jackson County, MS, Pollution Control Rev.
(Chevron USA, Inc.), due 6/01/23 200 200,000
Perry County, MS, Pollution Control Rev. (Leaf
River Forest), due 3/01/02 1,000 1,000,000
- ---------- ------------------------------------------------- -------------- -----------
Total Floating Rate Demand Notes, at Identified Cost $ 1,300,000
- ----------------------------------------------------------------------------------- -------------
Total Investments (Identified Cost, $81,866,958) $84,354,980
Other Assets, Less Liabilities - 1.8% 1,555,385
- ----------------------------------------------------------------------------------- -------------
Net Assets - 100.0% $85,910,365
- ----------------------------------------------------------------------------------- -------------
</TABLE>
###Security segregated as collateral for an open futures contract.
(section)Indexed security.
See notes to financial statements
18
<PAGE>
Portfolio of Investments - March 31, 1996
MFS TEXAS MUNICIPAL BOND FUND
Municipal Bonds - 103.8%
<TABLE>
<CAPTION>
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ----------------------------------------------------------- ---------------- -------------
<S> <C> <C> <C>
General Obligation - 29.0%
AAA Brownsville, TX, Public Improvement, AMBAC, 0s, 2011 $ 250 $ 107,628
NR Burleson, TX, Independent School District, PSF, 0s, 2021 2,405 539,033
AAA Garland, TX, Independent School District, PSF, 5.5s, 2015 1,245 1,202,060
NR Robstown, TX, Independent School District, PSF, 0s, 2016 1,480 452,806
AA State of Texas, 6.8s, 2010 1,000 1,038,140
AAA Valwood, TX, Public Improvement Authority, MBIA, 0s, 2005 500 302,475
NR Wylie, TX, Independent School District, PSF, 6.9s, 2013 1,100 1,229,877
-----------
$ 4,872,019
- ---------- ----------------------------------------------------------- -------------- -----------
State and Local Appropriation - 9.8%
AAA State of Texas, Public Finance Authority, MBIA, 6.25s, 2009 $1,000 $ 1,085,640
AAA State of Texas, Public Finance Authority, Building Rev.,
MBIA, 0s, 2013 1,500 558,270
-----------
$ 1,643,910
- ---------- ----------------------------------------------------------- -------------- -----------
Refunded and Special Obligation - 6.9%
AA Arlington, TX, Permanent Improvement, 6.7s, 2002### $ 100 $ 110,309
AAA Coastal Water Authority, TX, Water Conveyance Systems Rev.,
AMBAC, 6.25s, 2017 250 258,730
NR Mesquite, TX, Independent School District, PSF, 6.7s, 2001 400 438,520
AAA Puerto Rico Public Buildings Authority, 6.875s, 2002 250 284,095
AAA Texas National Research Laboratory Commission Finance
Corp., 7.1s, 2001 60 68,162
-----------
$ 1,159,816
- ---------- ----------------------------------------------------------- -------------- -----------
Single Family Housing Revenue - 2.3%
NR Midland, TX, Housing Finance Corp., 8.15s, 2011 $ 294 $ 302,964
AA State of Texas, 7s, 2025 85 89,481
-----------
$ 392,445
- ---------- ----------------------------------------------------------- -------------- -----------
Insured Health Care Revenue - 4.9%
AAA Bexar County, TX, Health (Baptist), MBIA, 6.75s, 2019 $ 750 $ 817,538
- ---------- ----------------------------------------------------------- -------------- -----------
Health Care Revenue - 2.7%
AA Harris County, TX, Health Facilities Development Corp.
(Texas Children's Hospital), 5.5s, 2019 $ 500 $ 460,380
- ---------- ----------------------------------------------------------- -------------- -----------
Electric and Gas Utility Revenue - 5.2%
AAA Brazos River Authority, TX, Rev. (Houston Power & Light),
AMBAC, 6.375s, 2012 $ 250 $ 260,410
AAA Texas Municipal Power Agency Rev., AMBAC, 0s, 2011 500 204,985
AAA Texas Municipal Power Agency Rev., MBIA, 0s, 2016 1,350 403,015
-----------
$ 868,410
- ---------- ----------------------------------------------------------- -------------- -----------
Water and Sewer Utility Revenue - 18.0%
AAA Bexar, TX, Metropolitan Water District, MBIA, 5.875s, 2022 $ 500 $ 497,690
AAA Colorado River, TX, Municipal Water District, Water Rev.,
AMBAC, 6.625s, 2021 250 270,783
Water and Sewer Utility Revenue - continued
A Commonwealth of Puerto Rico, Aqueduct & Sewer Authority
Rev., 6.25s, 2012 $ 500 $ 527,655
AAA Houston TX, Water & Sewage, AMBAC., 0s, 2010 2,000 868,600
AAA Texas Water Resources Finance Authority Rev., AMBAC, 7.5s,
2013 800 859,144
-----------
$ 3,023,872
- ---------- ----------------------------------------------------------- -------------- -----------
Sales and Excise Tax Revenue - 2.8%
A Commonwealth of Puerto Rico Highway, 5.5s, 2026 $ 500 $ 462,645
- ---------- ----------------------------------------------------------- -------------- -----------
Airport and Port Revenue - 9.1%
BB+ Dallas-Fort Worth, TX, International Airport (American
Airlines), 7.5s, 2025 $1,200 $ 1,276,896
BB Dallas-Fort Worth, TX, International Airport Facilities
Improvement Corp. Rev. (Delta Airlines), 7.125s, 2026 250 257,083
-----------
$ 1,533,979
- ---------- ----------------------------------------------------------- -------------- -----------
Industrial Revenue (Corporate Guarantee) - 13.1%
BBB Angelina & Neches River Authority, TX, Solid Waste Disposal
Rev. (Champion International), 7.375s, 2015### $ 100 $ 106,892
BBB Gulf Coast Waste Disposal Authority, TX (Champion
International), 7.45s, 2026 100 106,900
BBB Gulf Coast Waste Disposal Authority, TX, Solid Waste
Disposal Rev. (Champion International), 7.25s, 2017 100 105,913
A+ Red River, TX, Pollution Control (Hoescht Celanese Corp.),
6.875s, 2017 750 792,726
A Texas City, TX, Industrial Development Corp. (ARCO Pipe
Line), 7.375s, 2020 500 593,660
A Trinity River Authority, TX (Texas Instruments, Inc.),
6.2s, 2020 500 498,715
-----------
$ 2,204,806
- ---------- ----------------------------------------------------------- -------------- -----------
Total Municipal Bonds (Identified Cost, $16,410,627) $17,439,820
-------------------------------------------------------------------------------------------- -------------
Floating Rate Demand Note - 0.6%
- --------------------------------------------------------------------------------------------- -------------
Lubbock, TX, Health Facilities (St. Joseph Health System),
due 7/01/13, at Identified Cost $ 100 $ 100,000
- ---------- ----------------------------------------------------------- -------------- -----------
Total Investments (Identified Cost, $16,510,627) $17,539,820
Other Assets, Less Liabilities - (4.4)% (733,822)
- --------------------------------------------------------------------------------------------- -------------
Net Assets - 100.0% $16,805,998
- --------------------------------------------------------------------------------------------- -------------
</TABLE>
###Security segregated as collateral for an open futures contract.
See notes to financial statements
Portfolio of Investments - March 31, 1996
MFS WASHINGTON MUNICIPAL BOND FUND
Municipal Bonds - 97.4%
<TABLE>
<CAPTION>
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ----------------------------------------------------------- ---------------- -------------
<S> <C> <C> <C>
General Obligation - 34.3%
NR Cowlitz County, WA, School District No. 4, 6.7s, 2011 $ 150 $ 156,981
AA+ King County, WA, 6.125s, 2012 500 520,160
AA- King County, WA, School District No. 415, 5.55s, 2011 500 503,930
A+ Kitsap County, WA, 6.75s, 2011 410 442,054
AAA Lewis County, WA, AMBAC, 6.25s, 2012 250 257,162
19
<PAGE>
Portfolio of Investments -- continued
Municipal Bonds -- continued
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ------------------------------------------------- ---------------- -------------
General Obligation - continued
AA+ Pike Place Market Preservation & Development Authority, WA,
Special Obligation, 6.5s, 2017 $ 185 $ 191,246
AA+ Seattle, WA, 6.5s, 2012 170 177,869
A+ Seattle, WA, 5.65s, 2020 500 485,950
AAA Thurston County, WA, FGIC, 0s, 2010 1,000 439,930
AA State of Washington, 0s, 2008 1,500 765,630
AA State of Washington, 6.4s, 2017 1,000 1,090,620
AA State of Washington, 5.5s, 2018 1,150 1,134,027
-----------
$ 6,165,559
- ---------- ----------------------------------------------------------- -------------- -----------
State and Local Appropriation - 0.6%
A State of Washington, Certificates of Participation (State
Office Building), 6s, 2012 $ 100 $ 101,115
- ---------- ----------------------------------------------------------- -------------- -----------
Refunded and Special Obligation - 5.2%
A+ Douglas County, WA, Public Utility District No. 001, Wells
Hydroelectric, 7.7s, 2000 $ 185 $ 209,881
AAA Puerto Rico Highway and Special Obligation & Transport
Authority, Highway Rev., 6.5s, 2002 200 223,240
AAA Puerto Rico Public Buildings Authority, 6.875s, 2002 250 284,095
A+ Snohomish County, WA, Public Utility District No. 1,
Electric Rev., 6.8s, 2020 100 114,080
AA State of Washington, 6.7s, 2001 100 109,302
-----------
$ 940,598
- ---------- ----------------------------------------------------------- -------------- -----------
Multi-Family Housing Revenue - 2.0%
NR Bellingham, WA, Housing Authority Rev. (Pacific Rim
Project), 6.5s, 2022 $ 250 $ 252,005
NR King County, WA, Housing Authority Rev. (Sprintwood Manor),
6.5s, 2012 100 102,406
-----------
$ 354,411
- ---------- ----------------------------------------------------------- -------------- -----------
Insured Health Care Revenue - 7.9%
AAA Washington Health Care Facilities Authority Rev. (Allenmore
Hospital), FGIC, 6.5s, 2013 $ 150 $ 154,586
AAA Washington Health Care Facilities Authority Rev.
(Franciscan Health/St. Claire), MBIA, 6.7s, 2021 250 264,477
AAA Washington Health Care Facilities Authority Rev. (Multicare
Medical/ Tacoma), FGIC, 5.75s, 2022 500 484,810
AAA Washington Health Care Facilities Authority Rev. (Virginia
Mason Group/ Seattle), MBIA, 6.3s, 2017 500 515,420
-----------
$ 1,419,293
- ---------- ----------------------------------------------------------- -------------- -----------
Electric and Gas Utility Revenue - 23.0%
A+ Douglas County, WA, Public Utility District No. 001, Wells
Hydroelectric, 7.7s, 2008 $ 315 $ 357,648
A+ Grant County, WA, Public Utility District No. 2 (Wanapum
Hydroelectric), 6.375s, 2023### 1,000 1,027,190
Electric and Gas Utility Revenue - continued
A+ Grant County, WA, Public Utility District No. 2 (Wanapum
Hydroelectric), 6.75s, 2023 $ 255 $ 265,396
AAA Seattle, WA, Municipal Light & Power Rev., MBIA, 5.7s, 2020 400 389,192
AA Washington Public Power Supply System, Nuclear Project No.
1 Rev., 7s, 2008 500 563,595
AA Washington Public Power Supply System, Nuclear Project No.
2 Rev., 6s, 2012 500 494,715
AA Washington Public Power Supply System, Nuclear Project No.
3 Rev., 0s, 2015 1,500 441,870
AA Washington Public Power Supply System, Nuclear Project No.
3 Rev., 6.5s, 2018 100 103,002
AAA Washington Public Power Supply System, Nuclear Project No.
3 Rev., MBIA, 7.125s, 2016 425 489,324
-----------
$ 4,131,932
- ---------- ----------------------------------------------------------- -------------- -----------
Water and Sewer Utility Revenue - 14.1%
AAA Richland, WA, Water & Sewer System Rev., MBIA, 6.25s, 2012 $ 500 $ 511,135
AA- Seattle, WA, Municipality of Metropolitan Seattle, Sewer
Rev., 6.2s, 2032 500 510,405
AA Seattle, WA, Water Systems Rev., 5.5s, 2018 750 702,420
AA Seattle, WA, Water Systems Rev., 5.25s, 2023 675 607,000
A- Soos Creek, WA, Water & Sewer District, Water & Sewer Rev.,
0s, 2010 200 86,858
A+ Vancouver, WA, Water & Sewer Rev., 6.5s, 2012 100 104,746
-----------
$ 2,522,564
- ---------- ----------------------------------------------------------- -------------- -----------
Industrial Revenue (Corporate Guarantee) - 5.4%
A Port of Seattle, WA, Industrial Development Corp.
(Weyerhaeuser Co.), 5.6s, 2014 $1,000 $ 967,150
- ---------- ----------------------------------------------------------- -------------- -----------
Universities - 4.9%
AAA University of Washington, Housing & Dining, MBIA, 5, 2021 $1,000 $ 881,630
- ---------- ----------------------------------------------------------- -------------- -----------
Total Municipal Bonds (Identified Cost, $16,974,115) $17,484,252
-------------------------------------------------------------------------------------------- -------------
Floating Rate Demand Note - 1.1%
- --------------------------------------------------------------------------------------------- -------------
Uinta County, WY, Pollution Control Rev. (Chevron USA,
Inc.), due 8/15/20, at Identified Cost $ 200 $ 200,000
- ---------- ----------------------------------------------------------- -------------- -----------
Total Investments (Identified Cost, $17,174,115) $17,684,252
Other Assets, Less Liabilities - 1.5% 276,669
- --------------------------------------------------------------------------------------------- -------------
Net Assets - 100.0% $17,960,921
-------------------------------------------------------------------------------------------- -------------
</TABLE>
###Security segregated as collateral for an open futures contract.
See notes to financial statements
20
<PAGE>
Financial Statements
Statements of Assets and Liabilities
<TABLE>
<CAPTION>
California Florida Louisiana Mississippi Texas Washington
March 31, 1996 Fund Fund Fund Fund Fund Fund
--------------------------------- ----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investments -
Identified cost $282,319,789 $ 96,320,132 $24,709,388 $81,866,958 $16,510,627 $17,174,115
Unrealized appreciation 12,363,448 4,119,797 703,003 2,488,022 1,029,193 510,137
--------- --------- --------- --------- --------- -----------
Total, at value $294,683,237 $100,439,929 $25,412,391 $84,354,980 $17,539,820 $17,684,252
Cash 145,817 66,798 41,612 122,599 35,785 37,200
Receivable for Fund shares sold 3,793,477 260,405 56,899 29,814 8,283 23,429
Receivable for investments sold 5,000 977,310 1,005,083 3,909,633 7,019 --
Interest receivable 4,420,047 1,840,071 422,872 1,664,808 242,974 271,306
Deferred organization expenses -- 1,928 5,223 4,776 1,562 1,542
Other assets 3,958 12,290 245 1,123 267 1,991
--------- --------- --------- --------- --------- -----------
Total assets $303,051,536 $103,598,731 $26,944,325 $90,087,733 $17,835,710 $18,019,720
--------- --------- --------- --------- --------- -----------
Liabilities:
Distributions payable $ 737,484 $ 266,264 $ 63,854 $ 203,408 $ 37,446 $ 34,074
Payable for Fund shares
reacquired 294,396 322,984 33,008 64,474 -- --
Payable for investments
purchased 2,911,275 927,080 2,400,192 3,811,404 968,303 --
Payable for daily variation
margin on open futures
contracts 112,500 11,250 21,906 67,500 21,375 22,500
Payable to affiliates -
Management fee 9,713 4,627 400 3,517 275 294
Shareholder servicing agent fee 3,840 1,344 -- 66 -- --
Distribution fee 10,509 4,175 1,543 3,279 1,078 680
Accrued expenses and other
liabilities 127,380 60,110 4,936 23,720 1,235 1,251
--------- --------- --------- --------- --------- -----------
Total liabilities $ 4,207,097 $ 1,597,834 $ 2,525,839 $ 4,177,368 $ 1,029,712 $ 58,799
--------- --------- --------- --------- --------- -----------
Net assets $298,844,439 $102,000,897 $24,418,486 $85,910,365 $16,805,998 $17,960,921
========= ========= ========= ========= ========= ===========
Net assets consist of:
Paid-in capital $297,771,186 $103,809,469 $25,030,643 $87,637,106 $17,159,102 $17,803,161
Unrealized appreciation on
investments 12,349,625 4,179,852 676,212 2,460,510 1,004,005 495,810
Accumulated undistributed net
realized loss on investments (10,879,050) (5,983,831) (1,302,554) (4,154,247) (1,399,201) (345,504)
Accumulated undistributed
(distributions in excess of)
net investment income (397,322) (4,593) 14,185 (33,004) 42,092 7,454
--------- --------- --------- --------- --------- -----------
Total $298,844,439 $102,000,897 $24,418,486 $85,910,365 $16,805,998 $17,960,921
========= ========= ========= ========= ========= ===========
Shares of beneficial interest
outstanding:
Class A 47,083,897 8,915,370 2,097,927 7,962,256 1,375,324 1,505,363
Class B 6,285,326 1,471,451 512,751 1,226,320 295,499 309,843
Class C 787,784 -- -- -- -- --
--------- --------- --------- --------- --------- -----------
Total shares of beneficial
interest outstanding 54,157,007 10,386,821 2,610,678 9,188,576 1,670,823 1,815,206
========= ========= ========= ========= ========= ===========
Net assets:
Class A $259,816,854 $ 87,552,627 $19,622,000 $74,435,499 $13,832,260 $14,896,064
Class B 34,674,687 14,448,270 4,796,486 11,474,866 2,973,738 3,064,857
Class C 4,352,898 -- -- -- -- --
--------- --------- --------- --------- --------- -----------
Total net assets $298,844,439 $102,000,897 $24,418,486 $85,910,365 $16,805,998 $17,960,921
========= ========= ========= ========= ========= ===========
Class A shares:
Net asset value and redemption
price per share (net assets /
shares of beneficial interest
outstanding) $5.52 $9.82 $9.35 $9.35 $10.06 $9.90
========= ========= ========= ========= ========= ===========
Offering price per share
(100/95.25 of net asset value
per share) $5.80 $10.31 $9.82 $9.82 $10.56 $10.39
========= ========= ========= ========= ========= ===========
Class B shares:
Net asset value and offering
price per share (net assets /
shares of beneficial interest
outstanding) $5.52 $9.82 $9.35 $9.36 $10.06 $9.89
========= ========= ========= ========= ========= ===========
Class C shares:
Net asset value, offering price,
and redemption price per share
(net assets / shares of
beneficial interest
outstanding) $5.53 $ -- $ -- $ -- $ -- $ --
========= ========= ========= ========= ========= ===========
</TABLE>
On sales of $100,000 or more, the offering price of Class A shares is
reduced. A contingent deferred sales charge may be imposed on redemptions of
Class A and Class B shares.
See notes to financial statements
21
<PAGE>
Financial Statements - continued
Statements of Operations
<TABLE>
<CAPTION>
California Florida Louisiana Mississippi Texas Washington
Year Ended March 31, 1996 Fund Fund Fund Fund Fund Fund
--------------------------------- ----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income:
Interest income $18,670,294 $6,346,027 $1,326,461 $5,371,501 $1,131,165 $1,067,165
--------- --------- --------- --------- --------- -----------
Expenses -
Management fee $ 1,682,313 $ 575,039 $ 120,124 $ 497,667 $ 105,033 $ 100,775
Trustees' compensation 43,348 15,712 14,605 14,829 15,100 14,672
Shareholder servicing agent fee
(Class A) 404,221 135,934 27,182 118,488 24,402 23,042
Shareholder servicing agent fee
(Class B) 72,333 30,583 8,066 24,187 6,158 6,437
Shareholder servicing agent fee
(Class C) 5,924 -- -- -- -- --
Distribution and service fee
(Class B) 262,715 111,506 31,106 87,645 23,617 22,954
Distribution and service fee
(Class C) 39,494 -- -- -- -- --
Custodian fee 124,851 53,356 11,356 43,090 10,044 9,237
Printing 35,702 13,542 6,667 15,101 5,806 5,373
Postage 13,152 10,682 3,683 6,266 3,488 3,881
Auditing fees 32,680 31,580 28,805 28,905 27,955 27,955
Legal fees 4,829 4,991 2,282 1,921 3,413 2,614
Registration fees -- -- 18,398 -- 16,588 16,433
Amortization of organization
expenses -- 2,068 1,746 3,558 1,873 1,151
Miscellaneous 82,296 70,760 6,605 49,714 5,970 7,028
--------- --------- --------- --------- --------- -----------
Total expenses $ 2,803,858 $1,055,753 $ 280,625 $ 891,371 $ 249,447 $ 241,552
Fees paid indirectly (34,184) (12,260) (3,480) (1,309) (331) (3,347)
Reduction of expenses by
investment adviser and
distributor (457,078) (38,724) (202,172) (393,395) (187,202) (178,481)
--------- --------- --------- --------- --------- -----------
Net expenses $ 2,312,596 $1,004,769 $ 74,973 $ 496,667 $ 61,914 $ 59,724
--------- --------- --------- --------- --------- -----------
Net investment income $16,357,698 $5,341,258 $1,251,488 $4,874,834 $1,069,251 $1,007,441
--------- --------- --------- --------- --------- -----------
Realized and unrealized gain
(loss) on investments:
Realized gain (loss) (identified
cost basis) -
Investment transactions $ 4,036,092 $2,452,059 $ (86,073) $ 149,432 $ 321,299 $ 61,825
Futures contracts (379,339) (532,353) (197,360) (618,036) (154,502) 43,893
--------- --------- --------- --------- --------- -----------
Net realized gain (loss) on
investments $ 3,656,753 $1,919,706 $ (283,433) $ (468,604) $ 166,797 $ 105,718
--------- --------- --------- --------- --------- -----------
Change in unrealized
appreciation (depreciation) -
Investments $ 2,732,066 $ 368,754 $ 435,166 $2,383,651 $ 75,588 $ 477,478
Futures contracts (13,823) 163,512 14,591 96,635 5,849 (14,327)
--------- --------- --------- --------- --------- -----------
Net unrealized gain on
investments $ 2,718,243 $ 532,266 $ 449,757 $2,480,286 $ 81,437 $ 463,151
--------- --------- --------- --------- --------- -----------
Net realized and unrealized
gain on investments $ 6,374,996 $2,451,972 $ 166,324 $2,011,682 $ 248,234 $ 568,869
--------- --------- --------- --------- --------- -----------
Increase in net assets from
operations $22,732,694 $7,793,230 $1,417,812 $6,886,516 $1,317,485 $1,576,310
========= ========= ========= ========= ========= ===========
</TABLE>
See notes to financial statements
22
<PAGE>
Financial Statements -- continued
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
California Florida Louisiana Mississippi Texas Washington
Year Ended March 31, 1996 Fund Fund Fund Fund Fund Fund
--------------------------------- ----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets:
From operations -
Net investment income $ 16,357,698 $ 5,341,258 $ 1,251,488 $ 4,874,834 $ 1,069,251 $ 1,007,441
Net realized gain (loss) on
investments 3,656,753 1,919,706 (283,433) (468,604) 166,797 105,718
Net unrealized gain on
investments 2,718,243 532,266 449,757 2,480,286 81,437 463,151
--------- --------- --------- --------- --------- -----------
Increase in net assets from
operations $ 22,732,694 $ 7,793,230 $ 1,417,812 $ 6,886,516 $ 1,317,485 $ 1,576,310
--------- --------- --------- --------- --------- -----------
Distributions declared to
shareholders -
From net investment income
(Class A) $ (14,676,735) $ (4,746,329) $(1,078,113) $ (4,360,203) $ (932,830) $ (865,865)
From net investment income
(Class B) (1,505,089) (605,261) (186,912) (514,631) (136,331) (141,808)
From net investment income
(Class C) (175,874) -- -- -- -- --
In excess of net investment
income (Class A) (237,111) (4,074) -- (11,291) -- --
In excess of net investment
income (Class B) (24,316) (519) -- (1,333) -- --
In excess of net investment
income (Class C) (2,841) -- -- -- -- --
--------- --------- --------- --------- --------- -----------
Total distributions declared to
shareholders $ (16,621,966) $ (5,356,183) $(1,265,025) $ (4,887,458) $(1,069,161) $(1,007,673)
--------- --------- --------- --------- --------- -----------
Fund share (principal)
transactions -
Net proceeds from sale of shares $ 95,667,192 $ 43,564,467 $ 7,355,841 $ 10,936,455 $ 2,848,106 $ 1,540,290
Net asset value of shares issued
to shareholders in reinvestment
of distributions 7,228,615 1,872,446 591,791 2,349,051 579,547 586,545
Cost of shares reacquired (115,238,042) (48,433,974) (3,254,234) (17,836,086) (7,460,884) (2,805,790)
--------- --------- --------- --------- --------- -----------
Increase (decrease) in net
assets from Fund share
transactions $ (12,342,235) $ (2,997,061) $ 4,693,398 $ (4,550,580) $(4,033,231) $ (678,955)
--------- --------- --------- --------- --------- -----------
Total increase (decrease) in
net assets $ (6,231,507) $ (560,014) $ 4,846,185 $ (2,551,522) $(3,784,907) $ (110,318)
Net assets:
At beginning of period 305,075,946 102,560,911 19,572,301 88,461,887 20,590,905 18,071,239
--------- --------- --------- --------- --------- -----------
At end of period $ 298,844,439 $102,000,897 $24,418,486 $ 85,910,365 $16,805,998 $17,960,921
========= ========= ========= ========= ========= ===========
Accumulated undistributed
(distributions in excess of)
net investment income included
in net assets at end of period $ (397,322) $ (4,593) $ 14,185 $ (33,004) $ 42,092 $ 7,454
========= ========= ========= ========= ========= ===========
</TABLE>
See notes to financial statements
23
<PAGE>
Financial Statements -- continued
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
California Florida Louisiana Mississippi Texas Washington
Year Ended March 31, 1995 Fund Fund Fund Fund Fund Fund
--------------------------------- ----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets:
From operations -
Net investment income $ 18,123,133 $ 6,140,573 $ 1,046,286 $ 5,130,366 $ 1,236,034 $ 1,107,314
Net realized loss on investments (13,230,556) (7,415,954) (959,194) (3,420,916) (1,461,157) (372,115)
Net unrealized gain on
investments 8,579,734 7,473,153 1,146,721 3,106,779 1,623,234 916,248
--------- --------- --------- --------- --------- -----------
Increase in net assets from $ $ $
operations $ 13,472,311 6,197,772 $ 1,233,813 4,816,229 1,398,111 $ 1,651,447
--------- --------- --------- --------- --------- -----------
Distributions declared to
shareholders -
From net investment income $ $ $ $
(Class A) (16,697,698) (5,649,584) $ (922,531) (4,753,634) (1,132,237) $ (977,079)
From net investment income
(Class B) (1,163,387) (462,308) (109,353) (398,325) (95,908) (122,848)
From net investment income
(Class C) (145,036) -- -- -- -- --
From net realized gain on
investments (Class A) -- (425,441) (38,988) (14,334) (62,387) --
From net realized gain on
investments (Class B) -- (36,769) (5,437) (1,273) (4,944) --
In excess of net investment
income (Class A) -- -- -- (30,589) -- --
In excess of net investment
income (Class B) -- -- -- (2,563) -- --
In excess of net realized gain
on investments (Class A) (252,101) (336,075) (43,294) (231,411) (58,780) (12,874)
In excess of net realized gain
on investments (Class B) (20,873) (29,046) (6,038) (20,544) (4,659) (1,694)
In excess of net realized gain
on investments (Class C) (2,849) -- -- -- -- --
--------- --------- --------- --------- --------- -----------
Total distributions declared to
shareholders $ (18,281,944) $ (6,939,223) $(1,125,641) $ (5,452,673) $(1,358,915) $(1,114,495)
--------- --------- --------- --------- --------- -----------
Fund share (principal)
transactions -
Net proceeds from sale of shares $ 77,112,097 $ 67,775,415 $ 6,579,848 $ 22,690,809 $ 5,266,676 $ 2,662,499
Net asset value of shares issued
to shareholders in reinvestment
of distributions 7,886,955 2,464,452 629,725 2,809,324 791,694 590,085
Cost of shares reacquired (111,856,077) (83,511,284) (2,755,026) (22,467,966) (4,204,171) (5,624,138)
--------- --------- --------- --------- --------- -----------
Increase (decrease) in net
assets from Fund share
transactions $ (26,857,025) $(13,271,417) $ 4,454,547 $ 3,032,167 $ 1,854,199 $(2,371,554)
--------- --------- --------- --------- --------- -----------
Total increase (decrease) in
net assets $ (31,666,658) $(14,012,868) $ 4,562,719 $ 2,395,723 $ 1,893,395 $(1,834,602)
Net assets:
At beginning of period 336,742,604 116,573,779 15,009,582 86,066,164 18,697,510 19,905,841
--------- --------- --------- --------- --------- -----------
At end of period $ 305,075,946 $102,560,911 $19,572,301 $ 88,461,887 $20,590,905 $18,071,239
========= ========= ========= ========= ========= ===========
Accumulated undistributed
(distributions in excess of)
net investment income included
in net assets at end of period $ (311,246) $ (112,130) $ 17,127 $ (33,152) $ 600 $ 4,761
========= ========= ========= ========= ========= ===========
</TABLE>
See notes to financial statements
24
<PAGE>
Financial Statements -- continued
Financial Highlights
<TABLE>
<CAPTION>
California Fund
- ------------------------------- ---------------------------------------------------------------------------------------------
Two Eleven
Months Months
Year Ended Ended Ended Year Ended
March 31, March 31, January 31, February 28,
- ------------------------------- ------------------ -------- ----------- ----------- ------- ------ --------
1996 1995 1994 1994 1993 1992 1991 1990
- ------------------------------- ------- ------- -------- ----------- ----------- ------- ------ --------
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 $ 5.41 $ 5.47 $ 5.95 $ 5.88 $ 5.42 $ 5.26 $ 5.19 $ 5.06
----- ----- ------ --------- --------- ----- ---- ------
Income from investment
operations# -
Net investment income(section) $ 0.30 $ 0.31 $ 0.05 $ 0.30 $ 0.34 $ 0.35 $ 0.33 $ 0.33
Net realized and unrealized
gain (loss) on investments 0.11 (0.05) (0.48) 0.14 0.47 0.20 0.07 0.13
----- ----- ------ --------- --------- ----- ---- ------
Total from investment
operations $ 0.41 $ 0.26 $ (0.43) $ 0.44 $ 0.81 $ 0.55 $ 0.40 $ 0.46
----- ----- ------ --------- --------- ----- ---- ------
Less distributions declared to shareholders -
From net investment income++++ $ (0.30) $ (0.31) $ (0.04) $ (0.29) $ (0.34) $ (0.37) $ (0.33) $ (0.33)
From net realized gain on
investments -- -- -- (0.07) (0.01) (0.02) -- --
In excess of net investment
income 0.00 0.00 (0.01) (0.01) -- -- -- --
In excess of net realized gain
on investments -- (0.01) -- -- -- -- -- --
----- ----- ------ --------- --------- ----- ---- ------
Total distributions declared
to shareholders $ (0.30) $ (0.32) $ (0.05) $ (0.37) $ (0.35) $ (0.39) $ (0.33) $ (0.33)
----- ----- ------ --------- --------- ----- ---- ------
Net asset value - end of period $ 5.52 $ 5.41 $ 5.47 $ 5.95 $ 5.88 $ 5.42 $ 5.26 $ 5.19
===== ===== ====== ========= ========= ===== ==== ======
Total return++ 7.86% 4.85% (7.21)%+++ 7.64%+++ 15.55% 10.69% 8.03% 9.28%
Ratios (to average net assets)/Supplemental data(section):
Expenses## 0.66% 0.69% 0.68%+ 0.60%+ 0.39% 0.40% 0.87% 1.00%
Net investment income 5.48% 5.80% 5.27%+ 4.99%+ 6.18% 6.53% 6.39% 6.35%
Portfolio turnover 69% 57% 8% 38% 64% 73% 102% 243%
Net assets at end of period
(000 omitted) $259,817 $272,161 $313,790 $356,419 $272,179 $177,291 $84,551 $68,879
+ Annualized.
+++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
++ 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.
++++ For the years ended March 31, 1996 and 1995, the per share distributions in excess of net investment income were $0.0049
and $0.0027, respectively.
(section) The investment adviser and/or the distributor voluntarily waived a portion of their management fee and/or
distribution fee, respectively, for certain of 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 $ 0.29 $ 0.30 $ 0.05 $ 0.29 $ 0.32 $ 0.33 -- --
Ratios (to average net
assets):
Expenses 0.81% 0.84% 0.83%+ 0.78%+ 0.77% 0.79% -- --
Net investment income 5.33% 5.65% 5.12%+ 4.82%+ 5.80% 6.14% -- --
</TABLE>
See notes to financial statements
25
<PAGE>
Financial Statements -- continued
Financial Highlights - continued
<TABLE>
<CAPTION>
California Fund
----------------------- ---------------------------------------------------------------------------------------------------
Two Months
Year Ended Year Ended Ended Year Ended
February 28, March 31, March 31, January 31,
----------------------- ----------- ------- ------- ------- ----------- ------- ---------- ------------
1989 1988 1987 1986* 1996 1995 1994 1994**
----------------------- ----------- ------- ------- ------- ----------- ------- ---------- ------------
Class A Class B
----------------------- ----------- ------- ------- ------- ----------- ------- ---------- ------------
<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 $ 5.08 $ 5.38 $ 5.07 $ 4.76 $ 5.41 $ 5.47 $ 5.95 $ 6.02
--------- ----- ----- ----- --------- ----- -------- ----------
Income from investment
operations# -
Net investment
income(section) $ 0.32 $ 0.31 $ 0.32 $ 0.20 $ 0.26 $ 0.25 $ 0.04 $ 0.10
Net realized and
unrealized gain
(loss) on investments (0.02) (0.29) 0.34 0.28 0.11 (0.05) (0.48) --
--------- ----- ----- ----- --------- ----- -------- ----------
Total from investment
operations $ 0.30 $ 0.02 $ 0.66 $ 0.48 $ 0.37 $ 0.20 $ (0.44) $ 0.10
--------- ----- ----- ----- --------- ----- -------- ----------
Less distributions declared to
shareholders -
From net investment
income++++ $ (0.32) $ (0.31) $ (0.33) $ (0.17) $ (0.26) $ (0.25) $ (0.04) $ (0.10)
From net realized gain
on investments -- (0.01) (0.02) -- -- -- -- (0.07)
In excess of net
realized gain on
investments -- -- -- -- -- (0.01) -- --
--------- ----- ----- ----- --------- ----- -------- ----------
Total distributions
declared to
shareholders $ (0.32) $ (0.32) $ (0.35) $ (0.17) $ (0.26) $ (0.26) $ (0.04) $ (0.17)
--------- ----- ----- ----- --------- ----- -------- ----------
Net asset value - end
of period $ 5.06 $ 5.08 $ 5.38 $ 5.07 $ 5.52 $ 5.41 $ 5.47 $ 5.95
========= ===== ===== ===== ========= ===== ======== ==========
Total return++ 6.07% 0.83% 13.57% 9.77%+++ 6.93% 3.73% (7.38)%+++ 1.68%+++
Ratios (to average net assets)/Supplemental data(section):
Expenses## 1.28% 1.20% 1.04% 0.95%+ 1.54% 1.76% 1.69%+ 1.60%+
Net investment income 6.35% 6.33% 6.25% 7.34%+ 4.59% 4.72% 4.18%+ 3.64%+
Portfolio turnover 188% 240% 54% 23% 69% 57% 8% 38%
Net assets at end of
period (000 omitted) $59,212 $59,479 $62,368 $17,488 $34,675 $29,057 $21,252 $19,360
* For the period from the commencement of investment operations, June 18, 1985 to February 28, 1986.
** For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
+ Annualized.
+++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
++ 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.
++++ For the year ended March 31, 1996, the two months ended March 31, 1994 and the period ended January 31, 1994, the per
share distributions in excess of net investment income were $0.0041, $0.002 and $0.003, respectively, for Class B shares.
(section) The investment adviser and/or the distributor voluntarily waived a portion of their management fee and/or
distribution fee, respectively, for certain of 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 -- -- -- $ 0.25 $ 0.24 $ 0.04 $ 0.09
Ratios (to average net assets):
Expenses -- -- -- 1.69% 1.91% 1.83%+ 1.81%+
Net investment income -- -- -- 4.43% 4.57% 4.04%+ 3.43%+
</TABLE>
See notes to financial statements
26
<PAGE>
Financial Statements -- continued
Financial Highlights - continued
<TABLE>
<CAPTION>
California Fund
- -------------------------------------------------------------------- ---------------------------------------------------
Two Months
Year Ended Ended Year Ended
March 31, March 31, January 31,
- -------------------------------------------------------------------- ----------- ------- --------- -------------
1996 1995 1994 1994***
- -------------------------------------------------------------------- ----------- ------- --------- -------------
Class C
- -------------------------------------------------------------------- ----------- ------- --------- -------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 5.42 $ 5.48 $ 5.95 $ 5.89
--------- ----- ------- -----------
Income from investment operations# -
Net investment income(section) $ 0.25 $ 0.26 $ 0.03 $ 0.01
Net realized and unrealized gain (loss) on investments 0.11 (0.06) (0.46) 0.06
--------- ----- ------- -----------
Total from investment operations $ 0.36 $ 0.20 $(0.43) $ 0.07
--------- ----- ------- -----------
Less distributions declared to shareholders -
From net investment income++++ $(0.25) $(0.25) $(0.04) $(0.01)
In excess of net realized gain on investments -- (0.01) -- --
--------- ----- ------- -----------
Total distributions declared to shareholders $(0.25) $(0.26) $(0.04) $(0.01)
--------- ----- ------- -----------
Net asset value - end of period $ 5.53 $ 5.42 $ 5.48 $ 5.95
========= ===== ======= ===========
Total return 6.77% 3.79% (7.22)%+++ 1.25%+++
Ratios (to average net assets)/Supplemental data(section):
Expenses## 1.67% 1.69% 1.64%+ 2.02%+
Net investment income 4.47% 4.79% 3.92%+ 1.78%+
Portfolio turnover 69% 57% 8% 38%
Net assets at end of period (000 omitted) $4,353 $3,858 $1,701 $ 917
*** For the period from the commencement of offering of Class C shares, January 3, 1994 to January 31, 1994.
+ Annualized.
+++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
++++ For the year ended March 31, 1996, the two months ended March 31, 1994 and the period ended January 31, 1994, the per
share distributions in excess of net investment income were $0.004, $0.001 and $0.003, respectively.
(section) The investment adviser and/or the distributor voluntarily waived a portion of their management fee and/or
distribution fee, respectively, 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 $ 0.25 $ 0.03 --
Ratios (to average net assets):
Expenses 1.82% 1.84% 1.80%+ 3.53%+
Net investment income 4.32% 4.64% 3.77%+ 0.27%+
</TABLE>
See notes to financial statements
27
<PAGE>
Financial Statements -- continued
Financial Highlights - continued
<TABLE>
<CAPTION>
Florida Fund
------------------------------------------------- ---------------------------------------------------------------
Two Months
Year Ended Ended Year Ended
March 31, March 31, January 31,
------------------------------------------------- ----------- ------- ---------- ----------- ---------
1996 1995 1994 1994 1993*
------------------------------------------------- ----------- ------- ---------- ----------- ---------
Class A
------------------------------------------------- ----------- ------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.60 $ 9.65 $10.63 $ 9.89 $ 9.53
--------- ----- -------- --------- -------
Income from investment operations# -
Net investment income(section) $ 0.52 $ 0.54 $ 0.09 $ 0.57 $ 0.58
Net realized and unrealized gain (loss)
on investments 0.22 0.02 (0.98) 0.86 0.36
--------- ----- -------- --------- -------
Total from investment operations $ 0.74 $ 0.56 $(0.89) $ 1.43 $ 0.94
--------- ----- -------- --------- -------
Less distributions declared to
shareholders -
From net investment income $(0.52) $(0.54) $(0.08) $(0.57) $(0.58)
From net realized gain on investments -- (0.04) -- (0.11) --
In excess of net investment income++++ 0.00 -- (0.01) (0.01) --
In excess of net realized gain on
investments -- (0.03) -- -- --
--------- ----- -------- --------- -------
Total distributions declared to shareholders $(0.52) $(0.61) $(0.09) $(0.69) $(0.58)
--------- ----- -------- --------- -------
Net asset value - end of period $ 9.82 $ 9.60 $ 9.65 $10.63 $ 9.89
========= ===== ======== ========= =======
Total return++ 7.81% 6.07% (8.39)%+++ 14.71% 10.28%+
Ratios (to average net assets)/Supplemental data(section):
Expenses## 0.86% 0.60% 0.77%+ 0.49% 0.05%+
Net investment income 5.26% 5.75% 5.15%+ 5.42% 6.27%+
Portfolio turnover 56% 131% 19% 53% 54%
Net assets at end of period (000 omitted) $87,553 $89,894 $108,579 $124,131 $74,329
* For the period from the commencement of investment operations, February 3, 1992 to January 31, 1993.
** For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
+ Annualized.
+++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees
paid indirectly.
++ 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.
++++ For the year ended March 31, 1996, the per share distributions in excess of net investment income were $0.0015
and $0.0012 for Class A and Class B shares, respectively.
(section) The investment adviser and/or the distributor voluntarily waived a portion of their management fee and/or
distribution fee, respectively, 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 $ 0.52 $ 0.08 $ 0.52 $ 0.51
Ratios (to average net assets):
Expenses 0.90% 0.83% 1.12%+ 0.93% 0.81%+
Net investment income 5.22% 5.52% 4.80%+ 4.97% 5.51%+
</TABLE>
<TABLE>
<CAPTION>
Florida Fund
-------------------------------------------------------
Two Months
Year Ended Ended Year Ended
March 31, March 31, January 31,
------------------------------------------------- ----------- ------- ------------ -------------
1996 1995 1994 1994**
------------------------------------------------- ----------- ------- ------------ -------------
Class B
------------------------------------------------- ----------- ------- ------------ -------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.60 $ 9.64 $10.62 $10.69
--------- ----- ----------- -----------
Income from investment operations# -
Net investment income(section) $ 0.43 $ 0.43 $ 0.07 $ 0.18
Net realized and unrealized gain (loss)
on investments 0.22 0.04 (0.98) 0.03
--------- ----- ----------- -----------
Total from investment operations $ 0.65 $ 0.47 $(0.91) $ 0.21
--------- ----- ----------- -----------
Less distributions declared to
shareholders -
From net investment income $ (0.43) $ (0.44) $(0.06) $(0.17)
From net realized gain on investments -- (0.04) -- (0.10)
In excess of net investment income++++ 0.00 -- (0.01) (0.01)
In excess of net realized gain on
investments -- (0.03) -- --
--------- ----- ----------- -----------
Total distributions declared to shareholders $ (0.43) $ (0.51) $(0.07) $(0.28)
--------- ----- ----------- -----------
Net asset value - end of period $ 9.82 $ 9.60 $ 9.64 $10.62
========= ===== =========== ===========
Total return++ 6.88% 5.06% (8.55)%+++ 4.87%+
Ratios (to average net assets)/Supplemental data(section):
Expenses## 1.74% 1.68% 1.82%+ 1.64%+
Net investment income 4.36% 4.63% 4.08%+ 3.82%+
Portfolio turnover 56% 131% 19% 53%
Net assets at end of period (000 omitted) $14,448 $12,667 $7,995 $7,244
* For the period from the commencement of investment operations, February 3, 1992 to January 31, 1993.
** For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31,
1994.
+ Annualized.
+++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for
fees paid indirectly.
++ 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.
++++ For the year ended March 31, 1996, the per share distributions in excess of net investment income were
$0.0015 and $0.0012 for Class A and Class B shares, respectively.
(section) The investment adviser and/or the distributor voluntarily waived a portion of their management fee
and/or distribution fee, respectively, 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 $ 0.41 $ 0.06 $ 0.16
Ratios (to average net assets):
Expenses 1.78% 1.91% 2.17%+ 2.09%+
Net investment income 4.33% 4.40% 3.72%+ 3.38%+
</TABLE>
See notes to financial statements
28
<PAGE>
Financial Statements -- continued
Financial Highlights - continued
<TABLE>
<CAPTION>
Louisiana Fund
---------------------------------------------------------- ----------------------------------------------------
Two Months
Year Ended Ended Year Ended
March 31, March 31, January 31,
---------------------------------------------------------- ----------- ------- ---------- -------------
1996 1995 1994 1994
---------------------------------------------------------- ----------- ------- ---------- -------------
Class A
---------------------------------------------------------- ----------- ------- ---------- -------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.24 $ 9.22 $ 10.13 $ 9.53
--------- ----- -------- -----------
Income from investment operations# -
Net investment income(section) $ 0.55 $ 0.57 $ 0.09 $ 0.52
Net realized and unrealized gain (loss) on investments 0.12 0.06 (0.91) 0.62
--------- ----- -------- -----------
Total from investment operations $ 0.67 $ 0.63 $ (0.82) $ 1.14
--------- ----- -------- -----------
Less distributions declared to
shareholders -
From net investment income $ (0.56) $ (0.56) $ (0.09) $ (0.52)
From net realized gain on investments -- (0.02) -- (0.02)
In excess of net realized gain on investments -- (0.03) -- --
--------- ----- -------- -----------
Total distributions declared to shareholders $ (0.56) $ (0.61) $ (0.09) $ (0.54)
--------- ----- -------- -----------
Net asset value - end of period $ 9.35 $ 9.24 $ 9.22 $ 10.13
========= ===== ======== ===========
Total return++ 7.38% 7.18% (8.10)%+++ 12.33%
Ratios (to average net assets)/Supplemental data(section):
Expenses## 0.20% 0.02% 0.00%+ 0.00%
Net investment income 5.87% 6.25% 5.64%+ 5.41%
Portfolio turnover 45% 81% 2% 33%
Net assets at end of period (000 omitted) $19,622 $16,837 $13,401 $13,781
** For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
+ Annualized.
+++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees
paid indirectly.
++ 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.
(section) The Adviser voluntarily agreed to maintain the expenses of the Fund at not more than 1.30% and 1.95% of
average daily net assets for Class A and Class B shares, respectively. To the extent actual expenses were
over/under these limitations, the net investment income per share and the ratios would have been:
Net investment income $ 0.46 $ 0.46 $ 0.05 $ 0.32
Ratios (to average net assets):
Expenses 1.12% 1.21% 2.33%+ 2.03%
Net investment income 4.95% 5.06% 3.31%+ 3.38%
</TABLE>
<TABLE>
<CAPTION>
Louisiana Fund
---------------------------------------------------------- ----------------------------------------------------
Two Months
Year Ended Ended Year Ended
March 31, March 31, January 31,
---------------------------------------------------------- ----------- ------- ---------- -------------
1996 1995 1994 1994**
---------------------------------------------------------- ----------- ------- ---------- -------------
Class B
---------------------------------------------------------- ----------- ------- ---------- -------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.24 $ 9.23 $10.13 $10.08
--------- ----- -------- -----------
Income from investment operations# -
Net investment income(section) $ 0.47 $ 0.47 $ 0.07 $ 0.18
Net realized and unrealized gain (loss) on investments 0.13 0.06 (0.89) 0.07
--------- ----- -------- -----------
Total from investment operations $ 0.60 $ 0.53 $(0.82) $ 0.25
--------- ----- -------- -----------
Less distributions declared to
shareholders -
From net investment income $(0.49) $(0.47) $(0.08) $(0.18)
From net realized gain on investments -- (0.02) -- (0.02)
In excess of net realized gain on investments -- (0.03) -- --
--------- ----- -------- -----------
Total distributions declared to shareholders $(0.49) $(0.52) $(0.08) $(0.20)
--------- ----- -------- -----------
Net asset value - end of period $ 9.35 $ 9.24 $ 9.23 $10.13
========= ===== ======== ===========
Total return++ 6.48% 6.01% (8.16)%+++ 2.48%+++
Ratios (to average net assets)/Supplemental data(section):
Expenses## 1.05% 1.02% 1.00%+ 1.00%+
Net investment income 5.00% 5.25% 4.54%+ 4.32%+
Portfolio turnover 45% 81% 2% 33%
Net assets at end of period (000 omitted) $4,796 $2,735 $1,608 $1,263
** For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
+ Annualized.
+++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees
paid indirectly.
++ 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.
(section) The Adviser voluntarily agreed to maintain the expenses of the Fund at not more than 1.30% and 1.95% of
average daily net assets for Class A and Class B shares, respectively. To the extent actual expenses were
over/under these limitations, the net investment income per share and the ratios would have been:
Net investment income $ 0.38 $ 0.36 $ 0.03 $ 0.09
Ratios (to average net assets):
Expenses 2.04% 2.28% 3.40%+ 3.08%+
Net investment income 4.01% 3.99% 2.14%+ 2.24%+
</TABLE>
See notes to financial statements
29
<PAGE>
Financial Statements -- continued
Financial Highlights - continued
<TABLE>
<CAPTION>
Mississippi Fund
---------------------------------------------------------- ---------------------------------------------------------------
Two Months
Year Ended Ended Year Ended
March 31, March 31, January 31,
---------------------------------------------------------- ----------- ------- ---------- ----------- ---------
1996 1995 1994 1994 1993*
---------------------------------------------------------- ----------- ------- ---------- ----------- ---------
Class A
---------------------------------------------------------- ----------- ------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.15 $ 9.19 $ 10.00 $ 9.38 $ 9.53
--------- ----- -------- --------- -------
Income from investment operations# -
Net investment income(section) $ 0.52 $ 0.54 $ 0.09 $ 0.55 $ 0.24
Net realized and unrealized gain (loss) on investments 0.20 (0.01) (0.81) 0.62 (0.15)
--------- ----- -------- --------- -------
Total from investment operations $ 0.72 $ 0.53 $ (0.72) $ 1.17 $ 0.09
--------- ----- -------- --------- -------
Less distributions declared to shareholders -
From net investment income++++ $ (0.52) $ (0.54) $ (0.09) $ (0.55) $ (0.24)
From net realized gain on investments++++++ -- 0.00 -- -- --
In excess of net realized gain on investments -- (0.03) -- -- --
--------- ----- -------- --------- -------
Total distributions declared to shareholders $ (0.52) $ (0.57) $ (0.09) $ (0.55) $ (0.24)
--------- ----- -------- --------- -------
Net asset value - end of period $ 9.35 $ 9.15 $ 9.19 $ 10.00 $ 9.38
========= ===== ======== ========= =======
Total return++ 7.99% 6.08% (7.20)%+++ 12.80% 5.00%+++
Ratios (to average net assets)/Supplemental data(section):
Expenses## 0.45% 0.22% 0.10%+ 0.03% 0.00%+
Net investment income 5.51% 5.99% 5.69%+ 5.68% 5.59%+
Portfolio turnover 31% 47% 2% 28% 14%
Net assets at end of period (000 omitted) $74,435 $79,033 $79,541 $84,177 $41,212
* For the period from the commencement of investment operations, August 6, 1992 to January 31, 1993.
** For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
+ Annualized.
+++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
++ 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.
++++ For the year ended March 31, 1996, the per share distributions in excess of net investment income were $0.0013 and
$0.0011 for Class A and Class B shares, respectively. For the year ended March 31, 1995, the per share distributions in
excess of net investment income were $0.0035 and $0.0029 for Class A and Class B shares, respectively. For the two months
ended March 31, 1994, the per share distribution in excess of net investment income was $0.002 for Class B shares.
++++++ For the year ended March 31, 1995, the per share distributions from net realized gain on investments were $0.0016 for
Class A and Class B shares.
(section) The Adviser voluntarily agreed to maintain the expenses of the Fund at not more than 1.30% and 1.95% of average
daily net assets for Class A and Class B shares, respectively. To the extent actual expenses were over/under these
limitations, the net investment income per share and the ratios would have been:
Net investment income $ 0.48 $ 0.48 $ 0.08 $ 0.45 $ 0.19
Ratios (to average net assets):
Expenses 0.88% 0.93% 0.88%+ 1.01% 1.17%+
Net investment income 5.08% 5.28% 4.91%+ 4.69% 4.42%+
</TABLE>
<TABLE>
<CAPTION>
Mississippi Fund
---------------------------------------------------------- ----------------------------------------------------
Two Months
Year Ended Ended Year Ended
March 31, March 31, January 31,
---------------------------------------------------------- ----------- ------- ---------- -------------
1996 1995 1994 1994**
---------------------------------------------------------- ----------- ------- ---------- -------------
Class B
---------------------------------------------------------- ----------- ------- ---------- -------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.16 $ 9.19 $ 9.99 $ 9.94
--------- ----- -------- -----------
Income from investment operations# -
Net investment income(section) $ 0.44 $ 0.45 $ 0.07 $ 0.18
Net realized and unrealized gain (loss) on investments 0.20 -- (0.79) 0.05
--------- ----- -------- -----------
Total from investment operations $ 0.64 $ 0.45 $(0.72) $ 0.23
--------- ----- -------- -----------
Less distributions declared to shareholders -
From net investment income++++ $ (0.44) $(0.45) $(0.08) $(0.18)
From net realized gain on investments++++++ -- 0.00 -- --
In excess of net realized gain on investments -- (0.03) -- --
--------- ----- -------- -----------
Total distributions declared to shareholders $ (0.44) $(0.48) $(0.08) $(0.18)
--------- ----- -------- -----------
Net asset value - end of period $ 9.36 $ 9.16 $ 9.19 $ 9.99
========= ===== ======== ===========
Total return++ 7.11% 5.14% (7.27)%+++ 2.33%+++
Ratios (to average net assets)/Supplemental data(section):
Expenses## 1.28% 1.23% 1.10%+ 1.06%+
Net investment income 4.67% 4.97% 4.67%+ 4.29%+
Portfolio turnover 31% 47% 2% 28%
Net assets at end of period (000 omitted) $11,475 $9,429 $6,526 $6,268
* For the period from the commencement of investment operations, August 6, 1992 to January 31, 1993.
** For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
+ Annualized.
+++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees
paid indirectly.
++ 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.
++++ For the year ended March 31, 1996, the per share distributions in excess of net investment income were $0.0013
and $0.0011 for Class A and Class B shares, respectively. For the year ended March 31, 1995, the per share
distributions in excess of net investment income were $0.0035 and $0.0029 for Class A and Class B shares,
respectively. For the two months ended March 31, 1994, the per share distribution in excess of net investment
income was $0.002 for Class B shares.
++++++ For the year ended March 31, 1995, the per share distributions from net realized gain on investments were
$0.0016 for Class A and Class B shares.
(section) The Adviser voluntarily agreed to maintain the expenses of the Fund at not more than 1.30% and 1.95% of
average daily net assets for Class A and Class B shares, respectively. To the extent actual expenses were
over/under these limitations, the net investment income per share and the ratios would have been:
Net investment income $ 0.40 $ 0.38 $ 0.06 $ 0.14
Ratios (to average net assets):
Expenses 1.71% 2.01% 1.95%+ 2.12%+
Net investment income 4.24% 4.19% 3.82%+ 3.23%+
</TABLE>
See notes to financial statements
30
<PAGE>
Financial Statements -- continued
Financial Highlights - continued
<TABLE>
<CAPTION>
Texas Fund
---------------------------------------------------------- ---------------------------------------------------------------
Two Months
Year Ended Ended Year Ended
March 31, March 31, January 31,
---------------------------------------------------------- ----------- ------- ---------- ----------- ---------
1996 1995 1994 1994 1993*
---------------------------------------------------------- ----------- ------- ---------- ----------- ---------
Class A
---------------------------------------------------------- ----------- ------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.92 $ 9.88 $ 10.86 $ 10.01 $ 9.53
--------- ----- -------- --------- -------
Income from investment operations# -
Net investment income(section) $ 0.58 $ 0.60 $ 0.10 $ 0.61 $ 0.57
Net realized and unrealized gain (loss) on investments 0.14 0.09 (0.99) 0.86 0.47
--------- ----- -------- --------- -------
Total from investment operations $ 0.72 $ 0.69 $ (0.89) $ 1.47 $ 1.04
--------- ----- -------- --------- -------
Less distributions declared to shareholders -
From net investment income++++ $ (0.58) $ (0.59) $ (0.09) $ (0.61) $(0.56)
From net realized gain on
investments++++++ -- (0.03) -- (0.01) --
In excess of net investment income -- -- 0.00 0.00 --
In excess of net realized gain on investments -- (0.03) -- 0.00 --
--------- ----- -------- --------- -------
Total distributions declared to
shareholders $ (0.58) $ (0.65) $ (0.09) $ (0.62) $(0.56)
--------- ----- -------- --------- -------
Net asset value - end of period $ 10.06 $ 9.92 $ 9.88 $ 10.86 $10.01
========= ===== ======== ========= =======
Total return++ 7.39% 7.42% (8.13)%+++ 15.08% 11.30%+++
Ratios (to average net assets)/Supplemental data(section):
Expenses## 0.20% 0.02% 0.00%+ 0.00% 0.00%+
Net investment income 5.74% 6.16% 5.71%+ 5.74% 6.03%+
Portfolio turnover 54% 104% 1% 7% 40%
Net assets at end of period (000 omitted) $13,832 $18,318 $17,515 $18,987 $8,485
* For the period from the commencement of investment operations, February 3, 1992 to January 31, 1993.
** For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
+ Annualized.
+++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
++ 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.
++++ For the two months ended March 31, 1994 and the year ended January 31, 1994, the per share distributions in excess of
net investment income were $0.004 and $0.003, respectively, for Class A shares.
++++++ For the year ended January 31, 1994, the per share distributions in excess of net realized gain on investments were
$0.0008 for Class A and Class B shares.
(section) The Adviser voluntarily agreed to maintain the expenses of the Fund at not more than 1.30% and 1.95% of average
daily net assets for Class A and Class B shares, respectively. To the extent actual expenses were over/under these
limitations, the net investment income per share and the ratios would have been:
Net investment income $ 0.48 $ 0.49 $ 0.07 $ 0.44 $ 0.32
Ratios (to average net assets):
Expenses 1.17% 1.17% 1.67%+ 1.56% 2.67%+
Net investment income 4.77% 5.01% 4.04%+ 4.18% 3.36%+
</TABLE>
<TABLE>
<CAPTION>
Texas Fund
---------------------------------------------------------- ----------------------------------------------------
Two Months
Year Ended Ended Year Ended
March 31, March 31, January 31,
---------------------------------------------------------- ----------- ------- ---------- -------------
1996 1995 1994 1994**
---------------------------------------------------------- ----------- ------- ---------- -------------
Class B
---------------------------------------------------------- ----------- ------- ---------- -------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.93 $ 9.89 $10.86 $10.79
--------- ----- -------- -----------
Income from investment operations# -
Net investment income(section) $ 0.50 $ 0.50 $ 0.08 $ 0.19
Net realized and unrealized gain (loss) on investments 0.13 0.10 (0.96) 0.09
--------- ----- -------- -----------
Total from investment operations $ 0.63 $ 0.60 $(0.88) $ 0.28
--------- ----- -------- -----------
Less distributions declared to shareholders -
From net investment income++++ $(0.50) $(0.50) $(0.08) $(0.19)
From net realized gain on
investments++++++ -- (0.03) -- (0.01)
In excess of net investment income -- -- (0.01) (0.01)
In excess of net realized gain on investments -- (0.03) -- 0.00
--------- ----- -------- -----------
Total distributions declared to
shareholders $(0.50) $(0.56) $(0.09) $(0.21)
--------- ----- -------- -----------
Net asset value - end of period $10.06 $ 9.93 $ 9.89 $10.86
========= ===== ======== ===========
Total return++ 6.38% 6.35% (8.19)%+++ 2.65%+++
Ratios (to average net assets)/Supplemental data(section):
Expenses## 1.04% 1.02% 1.00%+ 1.00%+
Net investment income 4.87% 5.14% 4.68%+ 4.41%+
Portfolio turnover 54% 104% 1% 7%
Net assets at end of period (000 omitted) $2,974 $2,273 $1,183 $ 956
* For the period from the commencement of investment operations, February 3, 1992 to January 31, 1993.
** For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
+ Annualized.
+++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees
paid indirectly.
++ 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.
++++ For the two months ended March 31, 1994 and the year ended January 31, 1994, the per share distributions in
excess of net investment income were $0.004 and $0.003, respectively, for Class A shares.
++++++ For the year ended January 31, 1994, the per share distributions in excess of net realized gain on
investments were $0.0008 for Class A and Class B shares.
(section) The Adviser voluntarily agreed to maintain the expenses of the Fund at not more than 1.30% and 1.95% of
average daily net assets for Class A and Class B shares, respectively. To the extent actual expenses were
over/under these limitations, the net investment income per share and the ratios would have been:
Net investment income $ 0.39 $ 0.38 $ 0.05 $ 0.11
Ratios (to average net assets):
Expenses 2.08% 2.24% 2.74%+ 2.90%+
Net investment income 3.83% 3.92% 2.94%+ 2.51%+
</TABLE>
See notes to financial statements
31
<PAGE>
Financial Statements -- continued
Financial Highlights - continued
<TABLE>
<CAPTION>
Washington Fund
---------------------------------------------------------- ---------------------------------------------------------------
Two Months
Year Ended Ended Year Ended
March 31, March 31, January 31,
---------------------------------------------------------- ----------- ------- ---------- ----------- ---------
1996 1995 1994 1994 1993*
---------------------------------------------------------- ----------- ------- ---------- ----------- ---------
Class A
---------------------------------------------------------- ----------- ------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.59 $ 9.29 $ 10.25 $ 9.54 $ 9.53
--------- ----- -------- --------- -------
Income from investment operations# -
Net investment income(section) $ 0.56 $ 0.57 $ 0.09 $ 0.57 $ 0.22
Net realized and unrealized gain (loss)
on investments 0.32 0.31 (0.96) 0.78 0.01
--------- ----- -------- --------- -------
Total from investment operations $ 0.88 $ 0.88 $ (0.87) $ 1.35 $ 0.23
--------- ----- -------- --------- -------
Less distributions declared to shareholders -
From net investment income++++ $ (0.57) $ (0.57) $ (0.09) $ (0.57) $(0.22)
From net realized gain on investments -- -- -- (0.07) --
In excess of net realized gain on
investments -- (0.01) -- -- --
--------- ----- -------- --------- -------
Total distributions declared to
shareholders $ (0.57) $ (0.58) $ (0.09) $ (0.64) $(0.22)
--------- ----- -------- --------- -------
Net asset value - end of period $ 9.90 $ 9.59 $ 9.29 $ 10.25 $ 9.54
========= ===== ======== ========= =======
Total return++ 9.20% 9.80% (8.47)%+++ 14.55% 2.72%+++
Ratios (to average net assets)/Supplemental data(section):
Expenses## 0.20% 0.02% 0.00%+ 0.00% 0.00%+
Net investment income 5.64% 6.17% 5.69%+ 5.63% 5.64%+
Portfolio turnover 30% 44% 3% 26% 12%
Net assets at end of period (000 omitted) $14,896 $15,364 $17,993 $19,208 $9,574
* For the period from the commencement of investment operations, August 7, 1992 to January 31, 1993.
** For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
+ Annualized.
+++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
++ 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.
++++ For the two months ended March 31, 1994, the per share distributions in excess of net investment income were $0.001 and
$0.004 for Class A and Class B shares, respectively.
(section) The Adviser voluntarily agreed to maintain the expenses of the Fund at not more than 1.30% and 1.95% of average
daily net assets for Class A and Class B shares, respectively. To the extent actual expenses were over/under these
limitations, the net investment income per share and the ratios would have been:
Net investment income $ 0.46 $ 0.45 $ 0.07 $ 0.42 $ 0.12
Ratios (to average net assets):
Expenses 1.16% 1.26% 1.43%+ 1.46% 2.47%+
Net investment income 4.68% 4.92% 4.26%+ 4.17% 3.17%+
</TABLE>
<TABLE>
<CAPTION>
Washington Fund
---------------------------------------------------------- ----------------------------------------------------
Two Months
Year Ended Ended Year Ended
March 31, March 31, January 31,
---------------------------------------------------------- ----------- ------- ---------- -------------
1996 1995 1994 1994**
---------------------------------------------------------- ----------- ------- ---------- -------------
Class B
---------------------------------------------------------- ----------- ------- ---------- -------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.59 $ 9.29 $10.24 $10.26
--------- ----- -------- -----------
Income from investment operations# -
Net investment income(section) $ 0.48 $ 0.48 $ 0.07 $ 0.18
Net realized and unrealized gain (loss)
on investments 0.30 0.30 (0.94) 0.05
--------- ----- -------- -----------
Total from investment operations $ 0.78 $ 0.78 $(0.87) $ 0.23
--------- ----- -------- -----------
Less distributions declared to shareholders -
From net investment income++++ $(0.48) $(0.47) $(0.08) $(0.18)
From net realized gain on investments -- -- -- (0.07)
In excess of net realized gain on
investments -- (0.01) -- --
--------- ----- -------- -----------
Total distributions declared to
shareholders $(0.48) $(0.48) $(0.08) $(0.25)
--------- ----- -------- -----------
Net asset value - end of period $ 9.89 $ 9.59 $ 9.29 $10.24
========= ===== ======== ===========
Total return++ 8.24% 8.72% (8.54)%+++ 2.30%+++
Ratios (to average net assets)/Supplemental data(section):
Expenses## 0.99% 1.02% 1.00%+ 1.00%+
Net investment income 4.84% 5.14% 4.56%+ 4.28%+
Portfolio turnover 30% 44% 3% 26%
Net assets at end of period (000 omitted) $3,065 $2,707 $1,913 $1,528
* For the period from the commencement of investment operations, August 7, 1992 to January 31, 1993.
** For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
+ Annualized.
+++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees
paid indirectly.
++ 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.
++++ For the two months ended March 31, 1994, the per share distributions in excess of net investment income were
$0.001 and $0.004 for Class A and Class B shares, respectively.
(section) The Adviser voluntarily agreed to maintain the expenses of the Fund at not more than 1.30% and 1.95% of
average daily net assets for Class A and Class B shares, respectively. To the extent actual expenses were
over/under these limitations, the net investment income per share and the ratios would have been:
Net investment income $ 0.38 $ 0.36 $ 0.05 $ 0.10
Ratios (to average net assets):
Expenses 2.02% 2.33% 2.51%+ 2.79%+
Net investment income 3.81% 3.83% 3.05%+ 2.49%+
</TABLE>
See notes to financial statements
32
<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* (California Fund), MFS Florida Municipal Bond Fund*
(Florida 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, 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 MFS Municipal Income Fund, is non-diversified.
The Funds denoted with an asterisk above are included within these financial
statements.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. Because each Fund invests primarily in the securities of a single
state and its political subdivisions, each Fund is vulnerable to the effects
of changes in the legal and economic environment of the particular state.
Investment Valuations - Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues, are valued on the
basis of valuations furnished by dealers or by a pricing service with
consideration to factors such as institutional-size trading in similar groups
of securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data, without exclusive reliance upon
exchange or over-the-counter prices. Short-term obligations, which mature in
60 days or less, are valued at amortized cost, which approximates market
value. Futures contracts, 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.
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.
Futures Contracts - Each Fund may enter into futures contracts for the
delayed delivery of securities or contracts based on financial indices at a
fixed price on a future date. In entering such contracts, 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 futures
contracts is designed to hedge against anticipated future changes in interest
rates or securities prices. Investments in interest rate futures for purposes
other than hedging may be made to modify the duration of the portfolio
without incurring the additional transaction costs involved in buying and
selling the underlying securities. Investments in index contracts, or
contracts on related options, for purposes other than hedging may be made
when a Fund has cash on hand and wishes to participate in anticipated market
appreciation while the cash is being invested. Should interest rates or
securities prices move unexpectedly, the Fund may not achieve the anticipated
benefits of the futures contracts and may realize a loss.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and original issue discount are amortized or accreted for financial statement
and tax reporting purposes as required by federal income tax regulations.
Fees Paid Indirectly - The Trust's custodian bank calculates its fee based on
each Fund's average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure the value of cash deposited with the custodian by each
Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
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. The portion of such
interest, if any, earned on private activity bonds issued after August 7,
1986 may be considered a tax-preference item to shareholders. Distributions
to shareholders are recorded on the ex-dividend date.
33
<PAGE>
Notes to Financial Statements - continued
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 tax 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.
During the year ended March 31, 1996, the following amounts were reclassified
from accumulated net realized loss on investments to accumulated
undistributed (distributions in excess of) net investment income due to
differences between book and tax accounting for accrued market discount on
disposal of securities:
Florida Louisiana Mississippi Texas Washington
Fund Fund Fund Fund Fund
=========== ========= ========= ========= ===========
$122,462 $10,595 $12,772 $41,401 $2,925
With respect to the California Fund, $178,192 and $24,082 was reclassified to
accumulated distributions in excess of net investment income and paid-in
capital, respectively, from accumulated undistributed net realized loss on
investments due to differences between book and tax accounting for accrued
market discount on disposal of securities.
At March 31, 1996, 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>
California Florida Louisiana Mississippi Texas Washington
Expiration Date Fund Fund Fund Fund Fund Fund
================== ========== ========= ========= ========= ========= ==========
<S> <C> <C> <C> <C> <C> <C>
March 31, 2002 $ 277,504 $ -- $ -- $ -- $ -- $ --
March 31, 2003 10,212,078 5,923,777 531,096 940,501 1,019,734 247,673
March 31, 2004 403,290 -- 647,370 3,172,754 404,655 112,157
---------- --------- --------- --------- --------- ----------
Total $10,892,872 $5,923,777 $1,178,466 $4,113,255 $1,424,389 $359,830
========== ========= ========= ========= ========= ==========
</TABLE>
Multiple Classes of Shares of Beneficial Interest - Each Fund offers both
Class A and Class B shares. The California Fund offers Class C shares. The
three classes of shares differ in their respective shareholder servicing
agent, distribution and service fees. 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.
(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
waived a portion of its fee with respect to each of the Funds, which is
reflected as a reduction of expenses in the Statement of Operations.
Under a temporary expense reimbursement agreement with MFS, MFS has
voluntarily agreed to pay all of the Louisiana, Texas and Washington Funds'
operating expenses, exclusive of management, distribution and service fees.
The Louisiana, Texas and Washington Funds in turn will pay MFS an expense
reimbursement fee not greater than 0.40% of each Fund's average daily net
assets. To the extent that the expense reimbursement fee exceeds the Fund's
actual expenses, the excess will be applied to amounts paid by MFS in prior
years. At March 31, 1996, the aggregate unreimbursed expenses owed to MFS by
each Fund were as follows:
<TABLE>
<CAPTION>
Louisiana Texas Washington
Fund Fund Fund
=================================================================================================
<S> <C> <C> <C>
Amount relating to the year ended March 31, 1996 $ 38,765 $ 44,197 $ 41,328
Total amount since commencement of reimbursement agreements 226,600 276,371 232,255
</TABLE>
During the year ended March 31, 1996 for the Louisiana, Texas and Washington
Funds, MFS voluntarily waived the reimbursement fees of $204,060, $243,434
and $228,401, respectively.
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 and Mr.
Bailey. Included in Trustees' compensation for the year ended March 31, 1996
is a net periodic pension expense for each Fund, as follows:
<TABLE>
<CAPTION>
California Florida Louisiana Mississippi Texas Washington
Fund Fund Fund Fund Fund Fund
======= =========== =========== =========== =========== =========== ============
<S> <C> <C> <C> <C> <C> <C>
$9,973 $2,542 $2,292 $2,359 $2,787 $2,359
</TABLE>
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$479,546, $179,736, $119,786, $182,722, $25,944 and $36,619 as its portion of
the sales charge on sales of Class A shares of the California, Florida,
Louisiana, Mississippi, Texas and Washington Funds, respectively, for the
year ended March 31, 1996.
34
<PAGE>
Notes to Financial Statements -- continued
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% per annum of its average daily net assets attributable to Class A
shares in order that MFD may pay expenses on behalf of the Fund related to
the distribution and servicing of its shares. These expenses include a
service fee 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. Payments under the distribution plan by the Funds will commence
on such date to be determined by the Trustees.
The Class B and Class C distribution plans provide that each Fund will pay
MFD a distribution fee of 0.75% per annum, and a service fee of up to 0.25%
per annum, of the Fund's average daily net assets attributable to Class B and
Class C shares. The service fee is currently suspended on Class B shares held
over one year. 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. MFD retains the service fee for
accounts not attributable to a securities dealer, which amounted to $746 for
the California Fund for Class C shares. Fees incurred under the distribution
plans during the year ended March 31, 1996 were 0.80%, 0.80%, 0.81%, 0.79%,
0.84% and 0.78% of each of the Funds' average daily net assets attributable
to Class B shares for the California, Florida, Louisiana, Mississippi, Texas
and Washington Funds, respectively on an annualized basis. Fees incurred
under the distribution plans during the year ended March 31, 1996 were 1.00%
of the California Fund's average daily net assets attributable to Class C
shares.
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, 1996 on Class
A and Class B shares were as follows:
<TABLE>
<CAPTION>
California Florida Louisiana Mississippi Texas Washington
CDSC imposed Fund Fund Fund Fund Fund Fund
==================== ========== ========== ========== ========== ========== ============
<S> <C> <C> <C> <C> <C> <C>
Class A $ 4,819 $ 4 $ -- $17,464 $ -- $ --
---------- ---------- ---------- ---------- ---------- ------------
Class B $96,292 $52,478 $9,864 $24,336 $2,195 $11,540
========== ========== ========== ========== ========== ============
</TABLE>
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as
a percentage of the average daily net assets of each class of shares at an
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.
(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>
California Florida Louisiana Mississippi Texas Washington
Fund Fund Fund Fund Fund Fund
==================== ========== ========== ========== ========== ========== ============
<S> <C> <C> <C> <C> <C> <C>
Purchases $188,593 $54,700 $15,669 $20,738 $10,075 $4,754
Sales 203,934 58,870 9,518 27,459 13,818 5,380
</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>
California Florida Louisiana Mississippi Texas Washington
Fund Fund Fund Fund Fund Fund
==================== ========== ========== ========== ========== ========== ============
<S> <C> <C> <C> <C> <C> <C>
Aggregate cost $282,320 $96,320 $24,709 $81,867 $16,511 $17,174
========== ========== ========== ========== ========== ============
Gross unrealized
appreciation $ 14,485 $ 4,708 $ 754 $ 2,936 $ 1,084 $ 673
Gross unrealized
depreciation (2,122) (588) (51) (448) (55) (163)
---------- ---------- ---------- ---------- ---------- ------------
Net unrealized
appreciation $ 12,363 $ 4,120 $ 703 $ 2,488 $ 1,029 $ 510
========== ========== ========== ========== ========== ============
</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 California Fund Florida Fund Louisiana Fund
------------------------ ------------------------ --------------------------
Year Ended March 31,
1996 (000 Omitted) Shares Amount Shares Amount Shares Amount
==================== ========== ========== ========== ========== ========== ============
<S> <C> <C> <C> <C> <C> <C>
Shares sold 14,785 $ 82,615 4,022 $ 39,659 511 $ 4,872
Shares issued to
shareholders in
reinvestment of
distributions 1,157 6,424 164 1,624 51 480
Shares reacquired (19,147) (106,882) (4,632) (45,774) (287) (2,704)
---------- ---------- ---------- ---------- ---------- ------------
Net increase
(decrease) (3,205) $ (17,843) (446) $ (4,491) 275 $ 2,648
========== ========== ========== ========== ========== ============
</TABLE>
35
<PAGE>
Financial Statements -- continued
<TABLE>
<CAPTION>
Class A Shares - continued California Fund Florida Fund Louisiana Fund
------------------------ ------------------------ --------------------------
Year Ended March 31, 1995 (000 Omitted) Shares Amount Shares Amount Shares Amount
======================================= ======== ======== ======== ======== ======== ==========
<S> <C> <C> <C> <C> <C> <C>
Shares sold 10,839 $ 58,024 6,609 $ 61,425 561 $ 5,055
Shares issued to shareholders in
reinvestment of distributions 1,356 7,227 233 2,203 62 561
Shares reacquired (19,244) (102,193) (8,730) (81,517) (253) (2,281)
-------- -------- -------- -------- -------- ----------
Net increase (decrease) $
(7,049) (36,942) (1,888) $(17,889) 370 $ 3,335
======== ======== ======== ======== ======== ==========
Mississippi Fund Texas Fund Washington Fund
---------------------- ---------------------- ------------------------
Year Ended March 31, 1996 (000 Omitted) Shares Amount Shares Amount Shares Amount
======================================= ======== ======== ======== ======== ======== ==========
Shares sold 877 $ 8,180 176 $ 1,763 98 $ 972
Shares issued to shareholders in
reinvestment of distributions 228 2,141 52 525 51 503
Shares reacquired (1,776) (16,709) (699) (6,980) (246) (2,432)
-------- -------- -------- -------- -------- ----------
Net decrease (671) $ (6,388) (471) $ (4,692) (97) $ (957)
======== ======== ======== ======== ======== ==========
Year Ended March 31, 1995 (000 Omitted) Shares Amount Shares Amount
======================================= ======== ======== ======== ========
Shares sold 2,121 $ 19,211 402 $ 3,917
Shares issued to shareholders in
reinvestment of distributions 292 2,636 75 732
Shares reacquired (2,431) (21,719) (403) (3,875)
-------- -------- -------- --------
Net increase (decrease) (18) $ 128 74 $ 774
======== ======== ======== ========
Year Ended March 31, 1995 (000 Omitted) Shares Amount
======================================= ======== ========
Shares sold 183 $ 1,709
Shares issued to shareholders in
reinvestment of distributions 56 517
Shares reacquired (573) (5,314)
-------- --------
Net increase (decrease) (334) $ (3,088)
======== ========
Class B Shares California Fund Florida Fund
---------------------- ----------------------
Year Ended March 31, 1996 (000 Omitted) Shares Amount Shares Amount
======================================= ======== ======== ======== ========
Shares sold 1,980 $ 11,011 396 $ 3,905
Shares issued to shareholders in
reinvestment of distributions 130 724 25 249
Shares reacquired (1,194) (6,655) (269) (2,660)
-------- -------- -------- --------
Net increase 916 $ 5,080 152 $ 1,494
======== ======== ======== ========
Year Ended March 31, 1995 (000 Omitted) Shares Amount Shares Amount
======================================= ======== ======== ======== ========
Shares sold 2,519 $ 13,408 675 $ 6,350
Shares issued to shareholders in
reinvestment of distributions 109 580 28 262
Shares reacquired (1,141) (6,041) (213) (1,994)
-------- -------- -------- --------
Net increase 1,487 $ 7,947 490 $ 4,618
======== ======== ======== ========
Class B Shares Louisiana Fund
----------------------
Year Ended March 31, 1996 (000 Omitted) Shares Amount
======================================= ======== ========
Shares sold 263 $ 2,484
Shares issued to shareholders in
reinvestment of distributions 12 111
Shares reacquired (58) (550)
-------- --------
Net increase 217 $ 2,045
======== ========
Year Ended March 31, 1995 (000 Omitted) Shares Amount
======================================= ======== ========
Shares sold 168 $ 1,525
Shares issued to shareholders in
reinvestment of distributions 8 68
Shares reacquired (54) (474)
-------- --------
Net increase 122 $ 1,119
======== ========
Mississippi Fund Texas Fund
---------------------- ----------------------
Year Ended March 31, 1996 (000 Omitted) Shares Amount Shares Amount
======================================= ======== ======== ======== ========
Shares sold 295 $ 2,757 108 $ 1,085
Shares issued to shareholders in
reinvestment of distributions 22 208 5 54
Shares reacquired (120) (1,127) (46) $ (481)
-------- -------- -------- --------
Net increase 197 $ 1,838 67 $ 658
======== ======== ======== ========
Year Ended March 31, 1995 (000 Omitted) Shares Amount Shares Amount
======================================= ======== ======== ======== ========
Shares sold 385 $ 3,480 137 $ 1,349
Shares issued to shareholders in
reinvestment of distributions 19 173 6 60
Shares reacquired (85) (749) (34) (330)
-------- -------- -------- --------
Net increase 319 $ 2,904 109 $ 1,079
======== ======== ======== ========
Washington Fund
----------------------
Year Ended March 31, 1996 (000 Omitted) Shares Amount
======================================= ======== ========
Shares sold 57 $ 568
Shares issued to shareholders in
reinvestment of distributions 8 84
Shares reacquired (38) $ (374)
-------- --------
Net increase 27 $ 278
======== ========
Year Ended March 31, 1995 (000 Omitted) Shares Amount
======================================= ======== ========
Shares sold 102 $ 954
Shares issued to shareholders in
reinvestment of distributions 8 73
Shares reacquired (34) (310)
-------- --------
Net increase 76 $ 717
======== ========
</TABLE>
36
<PAGE>
Financial Statements -- continued
<TABLE>
<CAPTION>
Class C Shares California Fund
--------------------------
Year Ended March 31, 1996 (000 Omitted) Shares Amount
===================================================================================================================== ==========
<S> <C> <C>
Shares sold 368 $ 2,042
Shares issued to shareholders in
reinvestment of distributions 14 80
Shares reacquired (307) (1,701)
---------- ------------
Net increase 75 $ 421
========== ============
California Fund
--------------------------
Year Ended March 31, 1995 (000 Omitted) Shares Amount
===================================================================================================================== ==========
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
========== ============
</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 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, 1996 ranged from $228 to
$3,649.
(7) Financial Instruments
The Trust trades financial instruments with off-balance sheet risk in the
normal course of its investing activities in order to manage exposure to
market risks such as interest rates. These financial instruments include
futures contracts. The notional or contractual amounts of these instruments
represent the investment a Fund has in particular classes of financial
instruments and does not necessarily represent the amounts potentially
subject to risk. The measurement of the risks associated with these
instruments is meaningful only when all related and offsetting transactions
are considered.
Futures Contracts
<TABLE>
<CAPTION>
Unrealized
Appreciation
Fund Description Expiration Contracts Position (Depreciation)
=================== ================ =========== ========== ========= =================
<S> <C> <C> <C> <C> <C>
California Fund U.S. Treasury June 1996 150 Short $(13,823)
Florida Fund U.S. Treasury June 1996 15 Short $ 60,055
Louisiana Fund U.S. Treasury June 1996 20 Short $ (6,113)
Municipal Index June 1996 13 Short $(20,678)
Mississippi Fund U.S. Treasury June 1996 90 Short $(27,512)
Texas Fund U.S. Treasury June 1996 20 Short $ (6,114)
Municipal Index June 1996 12 Short $(19,074)
Washington Fund Municipal Index June 1996 30 Short $(14,327)
</TABLE>
At March 31, 1996, 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
instruments. Indexed securities may be more volatile than the underlying
instrument itself. The following is a summary of such securities held at
March 31, 1996:
<TABLE>
<CAPTION>
Principal Unrealized
Amount Appreciation
Fund Description Index (000 Omitted) Value (Depreciation)
=============== =========================================== ================== ============= ======= =============
<S> <C> <C> <C> <C> <C>
California Fund Puerto Rico Public Buildings Authority, PSA Municipal Swap
5.91s, 2016 $1,000 $ 929,420 $(70,580)
Louisiana Fund Louisiana Public Facilities Authority, Corp. Swap Rate
FGIC, 5.875s, 2012 Curve $1,060 $1,061,516 $ 1,516
Mississippi Puerto Rico Public Buildings Authority, PSA Municipal Swap
Fund 5.91s, 2016 $1,000 $ 929,420 $(70,580)
</TABLE>
(8) Subsequent Event
The Board of Trustees has approved the dissolution of the Louisiana, Texas
and Washington Funds, effective May 31, 1996.
37
<PAGE>
Independent Auditors' Report
To the Trustees of MFS Municipal Series Trust and 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 California Municipal Bond
Fund, MFS Florida Municipal Bond Fund, MFS Louisiana Municipal Bond Fund, MFS
Mississippi Municipal Bond Fund, MFS Texas Municipal Bond Fund, and MFS
Washington Municipal Bond Fund (portfolios of MFS Municipal Series Trust) as
of March 31, 1996, the related statements of operations for the year then
ended, the statements of changes in net assets for the years ended March 31,
1996 and 1995, and the financial highlights for each of the years in the two
year period ended March 31, 1996, the two months ended March 31, 1994, and
each of the years in the nine-year period ended January 31, 1994 (except for
MFS California Municipal Bond Fund which is for the two years ended March 31,
1996, 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, 1996 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, 1996,
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
April 29, 1996
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.
38
<PAGE>
It's Easy to Contact Us
[phone] MFS Automated Information
Account Information:
Call 1-800-MFS-TALK (1-800-637-8255)
anytime.
Market Outlook:
Call 1-800-637-4458 anytime for the MFS outlook
on the bond and stock markets.
[question mark] MFS Personal Service
Account Service:
Call 1-800-225-2606 any business day
from 8 a.m. to 8 p.m. Eastern time.
Product Information:
Call 1-800-637-2929 any business day
from 9 a.m. to 5 p.m. Eastern time.
IRA Service:
Call 1-800-637-1255 any business day
from 8 a.m. to 6 p.m. Eastern time.
Service for the Hearing-Impaired:
Call 1-800-637-6576 any business day
from 9 a.m. to 5 p.m. Eastern time (TDD required).
[envelope] MFS Mailing Addresses
For Personal Accounts:
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
For IRA Accounts:
MFS Service Center, Inc.
J.W. McCormack Station
P.O. Box 4501
Boston, MA 02101-9817
39
<PAGE>
MFS Investment Opportunities
Mutual Funds
The MFS Family of Funds(r), shown on the facing page, falls into the eight
general categories below. All offer full-time professional management, a
diversified portfolio, and a wide array of shareholder services.
Stock funds seek growth of capital rather than income
through investments in stocks.
Stock and bond funds seek current income and growth of
capital through investments in both stocks and bonds.
Bond funds seek current income through investments in debt securities.
World funds seek stock, balanced, and bond fund objectives through
investments in U.S. and foreign stocks and bonds.
Limited-maturity funds seek current income and preservation of capital
through investments in debt securities with remaining maturities of five
years or less.
National tax-free bond funds seek current income exempt from federal income
tax through investments in debt securities issued by states and
municipalities.(1)
State tax-free bond funds seek current income exempt from federal and state
income taxes through investments in debt securities issued by a single state
and its municipalities.(1)
Money market funds seek preservation of capital and current income through
investments in short-term debt securities.(2)
To determine which MFS fund may be appropriate for you, please contact your
financial adviser, who can help you relate these investment opportunities to
your financial goals. If you prefer, you may call MFS Investor Information
for literature(3) on MFS products and services: 1-800-637-2929, from 9 a.m.
to 5 p.m. Eastern time any business day (leave a message anytime).
(1) A small portion of the income may be subject to federal, state and/or
alternative minimum tax.
(2) Investments in money market funds are not issued or guaranteed by the
U.S. government and there is no assurance that the fund will be able to
maintain a stable net asset value.
(3) Including a prospectus containing more complete information including
charges and expenses. Read the prospectus carefully before investing.
40
<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 anytime). This material should be read carefully before investing
or sending money.
Stock
Massachusetts Investors Trust
Massachusetts Investors Growth Stock Fund
MFS Capital Growth Fund
MFS Emerging Growth Fund
MFS Gold & Natural Resources Fund
MFS Growth Opportunities Fund
MFS Managed Sectors Fund
MFS OTC Fund
MFS Research Fund
MFS Value Fund
Stock and Bond
MFS Total Return Fund
MFS Utilities Fund
Bond
MFS Bond Fund
MFS Government Mortgage Fund
MFS Government Securities Fund
MFS High Income Fund
MFS Intermediate Income Fund
MFS Strategic Income Fund
Limited Maturity Bond
MFS Government Limited Maturity Fund
MFS Limited Maturity Fund
MFS Municipal Limited Maturity Fund
World
MFS/Foreign & Colonial Emerging
Markets Equity Fund
MFS/Foreign & Colonial International
Growth Fund
MFS/Foreign & Colonial International
Growth and Income Fund
MFS World Asset Allocation FundSM
MFS World Equity Fund
MFS World Governments Fund
MFS World Growth Fund
MFS World Total Return Fund
National Tax-Free Bond
MFS Municipal Bond Fund
MFS Municipal High Income Fund
(closed to new investors)
MFS Municipal Income Fund
State Tax-Free Bond
Alabama, Arkansas, California, Florida, Georgia, Louisiana, Maryland,
Massachusetts, Mississippi, New York, North Carolina, Pennsylvania, South
Carolina, Tennessee, Texas, Virginia, Washington, West Virginia
Money Market
MFS Cash Reserve Fund
MFS Government Money Market Fund
MFS Money Market Fund
<PAGE>
MFS(R) Municipal
Series Trust [DALBAR MFS #1 logo]
500 Boylston Street
Boston, MA 02116
MFS(R) California Municipal Bond Fund
MFS(R) Florida Municipal Bond Fund
MFS(R) Louisiana Municipal Bond Fund
MFS(R) Mississippi Municipal Bond Fund
MFS(R) Texas Municipal Bond Fund
MFS(R) Washington Municipal Bond Fund
Bulk Rate
U.S. Postage
P A I D
Permit #55638
Boston, MA
27/227/327
56/256
49/249
58/258
57/257
MST-2C-5/96-25M 59/259
[logo]
MFS(R)
THE FIRST NAME IN MUTUAL FUNDS
