[logo][picture of man and woman at office desk]
MFS
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
MFS(R) Municipal
Series Trust
Annual Report (bullet) March 31, 1998
For the State of: Alabama, Arkansas,
California, Florida, Georgia, Maryland,
and Massachusetts
Now two MFS(R) IRA choices (see page 60)
<PAGE>
In Memoriam
A. Keith Brodkin
1935-1998
Chairman and Chief Executive Officer
MFS Investment Management(SM)
[PHOTO OF A. KEITH BRODKIN]
On February 2, 1998, Keith Brodkin, a friend and leader to everyone at MFS, died
unexpectedly at age 62. His thoughtful letters to shareholders on the markets
and economy have been an integral part of MFS shareholder reports like this one
for many years.
Keith joined MFS in 1970 as the firm's first fixed-income manager, managing the
bond portion of MFS(R) Total Return Fund. He went on to manage our first pure
bond fund, MFS(R) Bond Fund, when it was introducted in 1974, and he was
considered a pioneer in the art of active bond management.
Keith was named President and Chief Investment Officer of MFS in 1987 and four
years later became Chairman and Chief Executive Officer. During his stewardship,
MFS has achieved significant growth in total assets under management, rising
from some $25 billion in 1991 to the over $80 billion today entrusted to us by
three million individual and institutional investors worldwide. Under Keith's
leadership, MFS has carefully but steadily built its domestic and international
investment capabilities through the introduction of a range of new products and
a still-growing staff that now numbers over 100 equity and fixed-income
professionals.
Throughout his career, Keith was very active in a wide range of charitable
endeavors. He is survived by hiS wife and three children. His leadership,
friendship, and wise counsel will be sorely missed.
<PAGE>
Table of Contents
<TABLE>
<S> <C>
Letter from the Chairman .............. 2
Portfolio Managers' Overviews ......... 3
Portfolio Managers' Profiles .......... 3
Performance Summary ................... 4
Fund Facts ............................ 5
Federal Tax Information ............... 5
Portfolio of Investments .............. 13
Financial Statements .................. 26
Notes to Financial Statements ......... 53
Independent Auditors' Report .......... 59
The MFS(R) Roth IRA ............ . .... 60
Trustees and Officers ................. 61
</TABLE>
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HIGHLIGHTS
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o The 12-month period ended March 31, 1998, was a positive one for
domestic fixed-income investors, as inflationary expectations declined and
economic growth did not add meaningful inflationary pressures.
o The municipal bond market was positively impacted by this
environment, as yields on long-term, high-grade municipal bonds fell
approximately 61 basis points (0.61%) and continued economic growth
translated into improved credit strength.
o While equity markets were captivating the interest of most
investors, the supply of new municipal issues increased by 19% over the
previous year as issuers rushed to take advantage of the lower
interest-rate environment. This helped create a supply/demand imbalance
that caused municipals to underperform the general market.
o Our strategy of reducing the Funds' volatility and increasing
holdings of lower-rated investment-grade securities worked well in this
environment. We continue to focus on coupons, call protection, effective
maturities, and credit quality to optimize the relationship between yield
and total return.
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This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other
MFS product is available from your financial adviser, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
Letter from the Chairman
[Picture of Dear Shareholders:
Jeffrey L. Shames] As investment managers we take a long-term view of the
world's economies, as well as of the stock and bond
markets, and try to avoid getting caught up in short-term fluctuations. However,
it is hard to ignore unexpected events such as the Asian economic turmoil or
closely watched companies that miss their quarterly earnings estimates. Given
the potential for these events and their possible impact on major market
indices, we think it's important to offer some perspective about recent market
behavior and to let you know what MFS is doing in an effort to provide you with
favorable long-term investment performance.
The most notable recent event affecting investment markets has been the Asian
turmoil, which began in the summer of 1997 as a result of slowing growth rates
in the region and excess speculation in real estate markets. Since then, most
countries in the region have begun to implement the economic and regulatory
restructuring needed to put themselves on a stronger financial foundation.
While it may be a few years before some of these countries return to solid
economic footing, and while there will probably be a relatively short-term
impact on the U.S. economy, we believe the long-term outlook for the region is
quite positive.
The Asian situation has brought home the lesson that major events can quickly
impact investment markets around the world, including those of the United
States. Although U.S. equities have enjoyed a bull market lasting more than 15
years and have continued to set records in the first few months of 1998, there
have been brief bouts of volatility associated with the Asian turmoil, as well
as with perceived downturns for certain industries such as technology.
While we believe the long-term outlook for the equity markets is favorable, we
also believe we are overdue for a market correction in which prices will remain
flat or decline, possibly for an extended period of time. Since no one can
predict market cycles, that makes it that much more important to find companies
that can keep growing in the face of the occasional downturn and even gain
market share. For us, this means using original, bottom-up research to examine
each company's earnings potential and position as well as the overall prospects
for its industry. To that end, MFS continues to increase the research support
available to portfolio managers of MFS funds.
On the fixed-income side, MFS uses active portfolio management based on
extensive research and credit analysis to reduce the potential for price
declines and enhance the opportunity for price appreciation. For both equity
and fixed-income managers, this means visiting and meeting with thousands of
companies and issuers of credit every year, as well as attending many
presentations and closely following sources of industry research.
We believe this approach, based on thorough research, teamwork, innovative
thinking, and the free exchange of ideas, is the best way to get the most
performance for shareholders in MFS funds -- in any market environment.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management
April 14, 1998
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Jeffrey L. Shames, a graduate of Wesleyan University and the Massachusetts
Institute of Technology Sloan School of Management, joined MFS in 1983.
After four years as an industry analyst and portfolio manager, he was named
Chief Equity Officer in 1987 and President and a member of the Board of
Directors in 1993. Mr. Shames was appointed Chairman and Chief Executive
Officer in February 1998.
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2
<PAGE>
Portfolio Managers' Overviews
Dear Shareholders:
The 12-month period ended March 31, 1998, was a positive one for domestic
fixed-income investors, as inflationary expectations declined and economic
growth did not add meaningful inflationary pressures. In fact, 1997's 1.7%
inflation rate, as measured by the Consumer Price Index, was near a 25-year
low.
The U.S. fixed-income markets also benefited from the "flight to quality" of
global investors out of damaged Asian markets to more-stable U.S.
dollar-denominated assets. The Asian slowdown may further relieve inflation in
the United States as industrial commodity prices remain weak and the strength
of the U.S. dollar moderates demand for exports. These factors have helped to
lower yields on 30-year U.S. Treasury bonds by approximately 114 basis points
(1.14%) over the period, from 7.09% to 5.95%.
The municipal bond market was positively impacted by these domestic and global
forces. Yields on long-term, high-grade municipal bonds over the period, as
measured by general obligation bonds rated "Aaa" by Moody's Investors Service,
fell approximately 61 basis points (0.61%), from 5.66% to 5.05%. In addition,
continued economic growth translated into improved credit strength. According to
Moody's, 258 issuers were upgraded, versus 101 downgrades during the last
calendar year. As a result of strengthening credits, the yield spread between
the highest- and lowest-rated investment-grade securities compressed by 25 basis
points (0.25%) over the period. This helped the performance of lower-quality
investment-grade bonds.
Municipal bond mutual funds had generally negative cash flows over the period
as the equity market captivated the interest of most fund investors. The supply
of new municipal issues increased by 19% over the previous year as many issuers
rushed to take advantage of the lower interest-rate environment. These factors
helped create an imbalance between supply and demand that caused municipals to
underperform the general market. The ratio of municipal to U.S. Treasury yields
thus increased from 81% at the beginning of the period to 87% by the end of the
period.
We continue to focus on coupons, call protection, effective maturities, and
credit quality to optimize the relationship between yield and total return.
While we remain constructive on the fixed-income markets with inflation benign,
we are cognizant that the Federal Reserve Board might feel the need for a
pre-emptive tightening if growth in the economy continues unabated.
Respectfully,
/s/ John P. Kihn /s/ David B. Smith
John P. Kihn David B. Smith
Portfolio Manager Portfolio Manager
The opinions expressed in this report are those of the portfolio managers and
are only through the end of the period of the report as stated on the cover.
The managers' views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
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PORTFOLIO MANAGERS' PROFILES
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Note to Shareholders: Effective December 15, 1997, John P. Kihn joined David B.
Smith as Portfolio Manager of the Funds, succeeding Geoffrey L. Schechter.
John P. Kihn is a Vice President of MFS Investment Management and Portfolio
Manager of MFS(R) Municipal Income Fund, MFS(R) Municipal Limited
Maturity Fund, and MFS Florida, New York, and Tennessee Municipal Bond funds. He
joined MFS as a quantitative analyst in October 1997, after working as a Senior
Quantitative Analyst with a major investment firm. Mr. Kihn earned a bachelor's
degree in Economics from the University of California, Berkeley, and a master's
degree in Business Economics from the University of California, Santa Barbara,
and a doctorate degree in Accounting and finance from the London School of
Economics.
David B. Smith is a Vice President--Investments in the Municipal Fixed-Income
Department of MFS Investment Management. He is Portfolio Manager of MFS Alabama,
Arkansas, California, Georgia, Maryland, Massachusetts, Mississippi, North
Carolina, Pennsylvania, South Carolina, Virginia, and West Virginia Municipal
Bond funds. He joined MFS in 1988 as a Senior Treasury Analyst in the Corporate
Treasury Department. He was named a Research Analyst in the Fixed-Income
Department in 1989, an Investment Officer in 1990, an Assistant Vice President
in 1991, and a Vice President in 1993. Mr. Smith is a graduate of Union College
and holds a Masters in Business Administration degree from Babson College.
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3
<PAGE>
Performance Summary
The performances of the individual state Funds listed below include the
reinvestment of dividends and capital gains but exclude the effects of any
sales charges. Each Fund's results have been compared to the Lehman Brothers
Municipal Bond Index (the Lehman Index), an unmanaged index of municipal bond
investments rated "Baa" or higher. However, while 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.
The portfolio of each Fund will tend to be structured with respect to maturity
and coupon and sector distribution based on our views on interest rates, credit
quality, and financing trends. However, each Fund's performance will differ
because of supply/demand and credit quality conditions, which vary from state
to state.
Alabama
The Fund's total returns for the fiscal year ended March 31, 1998, were 9.72%
for Class A shares and 8.91% for Class B shares. These returns compare to a
10.33% return for the average Alabama fund as tracked by Lipper Analytical
Services, Inc., an independent firm that reports mutual fund performance, and
to a 10.70% return for the Lehman Index over the same period.
Arkansas
The Fund's total returns for the fiscal year ended March 31, 1998, were 10.06%
for Class A shares and 9.18% for Class B shares. These returns compare to a
9.84% return for the average other state fund as tracked by Lipper and to a
10.70% return for the Lehman Index over the same period. We decreased the
Fund's holdings of insured bonds over the period, a move that added to
performance.
California
The Fund's total returns for the fiscal year ended March 31, 1998, were 11.51%
for Class A shares, 10.62% for Class B shares, and 10.39% for Class C shares.
These returns compare to a 10.85% return for the average California fund as
tracked by Lipper and to a 10.70% return for the Lehman Index over the same
period. Our strategy of reducing the average maturity, reducing the amount of
insured bond holdings, and increasing the holdings of intermediate-term
noncallable bonds allowed the Fund to outperform its peer group.
Florida
The Fund's total returns for the fiscal year ended March 31, 1998, were 10.16%
for Class A shares and 9.18% for Class B shares. These returns compare to a
10.25% return for the average Florida fund as tracked by Lipper and to a 10.70%
return for the Lehman Index over the same period.
Georgia
The Fund's total returns for the fiscal year ended March 31, 1998, were 11.02%
for Class A shares and 10.19% for Class B shares. These returns compare to a
10.64% return for the average Georgia fund as tracked by Lipper and to a 10.70%
return for the Lehman Index over the same period. The Fund's heavier weightings
in noncallable and zero coupon bonds that were escrowed to maturity allowed it
to outperform its peer group.
Maryland
The Fund's total returns for the fiscal year ended March 31, 1998, were 10.57%
for Class A shares and 9.96% for Class B shares. These returns compare to a
9.94% return for the average Maryland fund as tracked by Lipper and to a 10.70%
return for the Lehman Index over the same period. The Fund's overweightings in
lower-investment-grade holdings and discount coupon bonds allowed it to
outperform its peer group.
Massachusetts
The Fund's total returns for the fiscal year ended March 31, 1998, were 9.99%
for Class A shares and 9.25% for Class B shares. These returns compare to a
9.98% return for the average Massachusetts fund as tracked by Lipper and to a
10.70% return for the Lehman Index over the same period. Several nonrated
holdings were pre-refunded over the period, adding to performance; however, one
nonrated holding deteriorated over the period, which detracted from
performance.
4
<PAGE>
Performance Summary - continued
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FUND FACTS
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Objective: Each Fund seeks current income exempt from federal income taxes and
from the personal income taxes, if any, of the State to which its
name refers.
<TABLE>
<S> <C>
Commencement of investment operations:
Alabama February 1, 1990
Arkansas February 3, 1992
California June 18, 1985
Florida February 3, 1992
Georgia June 6, 1988
Maryland October 31, 1984
Massachusetts April 9, 1985
Net assets as of March 31, 1998:
Alabama $ 83.6 million
Arkansas $141.4 million
California $270.6 million
Florida $ 94.4 million
Georgia $ 70.4 million
Maryland $147.6 million
Massachusetts $256.6 million
</TABLE>
<TABLE>
<S> <C> <C>
Class inception:
Alabama Class A February 1, 1990
Class B September 7, 1993
Arkansas Class A February 3, 1992
Class B September 7, 1993
California Class A June 18, 1985
Class B September 7, 1993
Class C January 3, 1994
Florida Class A February 3, 1992
Class B September 7, 1993
Georgia Class A June 6, 1988
Class B September 7, 1993
Maryland Class A October 31, 1984
Class B September 7, 1993
Massachusetts Class A April 9, 1985
Class B September 7, 1993
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</TABLE>
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FEDERAL TAX INFORMATION
- --------------------------------------------------------------------------------
In January 1999, shareholders will be mailed a Form 1099 reporting the federal
tax status of all distributions paid during the calendar year 1998.
The Alabama Fund has designated $929,504 as a long-term capital gain.
For federal income tax purposes, approximately 99% of the total dividends paid
by the fund from net investment income during the year ended March 31, 1998, is
designated as an exempt-interest dividend.
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5
<PAGE>
Performance Summary - continued
The information below and on the following pages illustrates the historical
performance of each Fund's Class A shares for the periods indicated in
comparison to various market indicators. Class A share performance results
reflect the deduction of the 4.75% maximum sales charge; benchmark comparisons
are unmanaged and do not reflect any fees or expenses. The performance of other
share classes will be greater than or less than the line shown, based on the
differences in charges and fees paid by shareholders investing in different
classes. It is not possible to invest directly in an index.
MFS(R) ALABAMA MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the period from February 1, 1990, through March 31, 1998)
[CHART]
<TABLE>
<CAPTION>
MFS Alabama Municipal Consumer Price Lehman Brothers
Bond Fund - Class A Index - U.S. Municipal Bond Index
--------------------- ------------------- --------------------
Period Market Percent Market Percent Market Percent
End Value Change Value Change Value Change
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
02/90 9,525 0.00 10,000 0.00 10,000 0.00
03/90 9,530 0.05 10,102 1.02 10,092 0.92
03/91 10,289 7.97 10,597 4.90 11,023 9.23
03/92 11,335 10.16 10,934 3.18 12,124 9.99
03/93 12,849 13.35 11,272 3.09 13,643 12.52
03/94 13,218 2.88 11,554 2.51 13,959 2.32
03/95 14,080 6.51 11,884 2.85 14,996 7.43
03/96 15,084 7.13 12,208 2.72 16,253 8.38
03/97 15,978 5.93 12,599 2.88 17,140 5.46
03/98 17,532 9.72 12,732 1.38 18,975 10.70
Cumulative: 75.32% 27.32% 89.75%
Average Annual: 7.12% 3.00% 8.16%
</TABLE>
Average Annual Total Rates of Return as of March 31, 1998
<TABLE>
<CAPTION>
Class A Investment Results Class B Investment Results
--------------------------------------------------------------------------------------------
1 Year 3 Years 5 Years Life of Fund* 1 Year 3 Years 5 Years Life of Fund*
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return +9.72% +7.55% +6.39% +7.75% +8.91% +6.70% +5.61% +7.22%
- ----------------------------------------------------------------------------------------------------------------------------
SEC Results +4.51% +5.81% +5.36% +7.11% +4.91% +5.81% +5.27% +7.22%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Comparative Indices
---------------------------------------------------
1 Year 3 Years 5 Years Life of Fund*
---------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Average Alabama tax-exempt municipal bond fund+ +10.33% +7.27% +5.96% +7.74%
- -----------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index++ +10.70% +8.16% +6.82% +8.16%
- -----------------------------------------------------------------------------------------------------
Consumer Price Index**++ +1.38% +2.32% +2.47% +3.00%
- -----------------------------------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Fund's investment operations,
February 1, 1990, through March 31, 1998.
**The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
+Source: Lipper Analytical Services, Inc.
++Source: CDA/Wiesenberger.
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%.
B results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of B. Because operating expenses
of A are lower than those of B, B performance generally would have been lower
than A performance. The A performance included within the B SEC performance has
been adjusted to reflect the CDSC generally applicable to B rather than the
initial sales charge generally applicable to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to a capital gains tax.
6
<PAGE>
Performance Summary - continued
MFS(R) ARKANSAS MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the period from March 1, 1992, through March 31, 1998)
[CHART]
<TABLE>
<CAPTION>
MFS Arkansas Municipal Consumer Price Lehman Brothers
Bond Fund - Class A Index - U.S. Municipal Bond Index
--------------------- ------------------- --------------------
Period Market Percent Market Percent Market Percent
End Value Change Value Change Value Change
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
03/92 9,529 0.00 10,000 0.00 10,000 0.00
03/92 9,532 0.03 10,050 0.50 10,003 0.03
03/93 10,813 13.45 10,361 3.09 11,256 12.52
03/94 10,986 1.59 10,620 2.51 11,517 2.32
03/95 11,634 5.90 10,923 2.85 12,373 7.43
03/96 12,354 6.19 11,221 2.72 13,410 8.38
03/97 12,956 4.87 11,544 2.88 14,142 5.46
03/98 14,259 10.06 11,703 1.38 15,656 10.70
Cumulative: 42.59% 17.03% 56.56%
Average Annual: 6.01% 2.62% 7.65%
</TABLE>
Average Annual Total Rates of Return as of March 31, 1998
<TABLE>
<CAPTION>
Class A Investment Results Class B Investment Results
--------------------------------------------------------------------------------------------
1 Year 3 Years 5 Years Life of Fund* 1 Year 3 Years 5 Years Life of Fund*
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Return +10.06% +7.02% +5.69% +6.74% +9.18% +6.20% +4.82% +5.96%
- ----------------------------------------------------------------------------------------------------------------------------
SEC Results + 4.83% +5.30% +4.66% +5.90% +5.18% +5.30% +4.47% +5.96%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Comparative Indices
---------------------------------------------------
1 Year 3 Years 5 Years Life of Fund*
---------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Average other state tax-exempt municipal bond fund+ + 9.84% +7.21% +6.14% +6.62%
- -----------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index++ +10.70% +8.16% +6.82% +7.56%
- -----------------------------------------------------------------------------------------------------
Consumer Price Index**++ + 1.38% +2.32% +2.47% +2.65%
- -----------------------------------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Fund's investment operations,
February 3, 1992, through March 31, 1998.
**The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
+Source: Lipper Analytical Services, Inc.
++Source: CDA/Wiesenberger.
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%.
B results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of B. Because operating expenses
of A are lower than those of B, B performance generally would have been lower
than A performance. The A performance included within the B SEC performance has
been adjusted to reflect the CDSC generally applicable to B rather than the
initial sales charge generally applicable to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to a capital gains tax.
7
<PAGE>
Performance Summary - continued
MFS(R) CALIFORNIA MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the 5-year period ended March 31, 1998)
[CHART]
<TABLE>
<CAPTION>
MFS California
Municipal Consumer Price Lehman Brothers
Bond Fund - Class A Index - U.S. Municipal Bond Index
--------------------- ------------------- --------------------
Period Market Percent Market Percent Market Percent
End Value Change Value Change Value Change
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
03/93 9,521 0.00 10,000 0.00 10,000 0.00
03/94 9,645 1.30 10,251 2.51 10,232 2.32
03/95 10,113 4.85 10,543 2.85 10,992 7.43
03/96 10,908 7.86 10,830 2.72 11,914 8.38
03/97 11,405 4.55 11,142 2.88 12,564 5.46
03/98 12,717 11.51 11,295 1.38 13,908 10.70
Cumulative: 27.18% 12.95% 39.09%
Average Annual: 4.93% 2.46% 6.82%
</TABLE>
Growth of a Hypothetical $10,000 Investment
(For the 10-year period ended March 31, 1998)
[CHART]
<TABLE>
<CAPTION>
MFS California
Municipal Consumer Price Lehman Brothers
Bond Fund - Class A Index - U.S. Municipal Bond Index
--------------------- ------------------- --------------------
Period Market Percent Market Percent Market Percent
End Value Change Value Change Value Change
<S> <C> <C> <C> <C> <C> <C>
03/88 9,534 0.00 10,000 0.00 10,000 0.00
03/89 10,384 8.92 10,498 4.98 10,721 7.21
03/90 11,393 9.71 11,047 5.23 11,853 10.56
03/91 12,307 8.02 11,588 4.90 12,946 9.23
03/92 13,601 10.51 11,957 3.18 14,239 9.99
03/93 15,500 13.96 12,326 3.09 16,023 12.52
03/94 15,702 1.30 12,635 2.51 16,394 2.32
03/95 16,463 4.85 12,996 2.85 17,613 7.43
03/96 17,757 7.86 13,350 2.72 19,089 8.38
03/97 18,566 4.55 13,734 2.88 20,131 5.46
03/98 20,703 11.51 13,923 1.38 22,285 10.70
Cumulative: 107.03% 39.23% 122.85%
Average Annual: 7.55% 3.36% 8.34%
</TABLE>
Average Annual Total Rates of Return as of March 31, 1998
<TABLE>
<CAPTION>
Class A Investment Results Class B Investment Results
--------------------------------------------------------------------------------------------
1 Year 3 Years 5 Years Life of Fund* 1 Year 3 Years 5 Years Life of Fund*
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return +11.51% +7.94% +5.96% +8.06% +10.62% +7.02% +5.07% +7.61%
- ----------------------------------------------------------------------------------------------------------------------------
SEC Results + 6.21% +6.20% +4.93% +7.54% + 6.62% +6.14% +4.71% +7.61%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Investment Results
---------------------------------------------
1 Year 3 Years 5 Years 10 Years
---------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +10.39% +6.85% +5.07% +7.61%
- ---------------------------------------------------------------------------------
SEC Results + 9.39% +6.85% +5.07% +7.61%
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Comparative Indices
--------------------------------------------
1 Year 3 Years 5 Years 10 Years
----------------------------------------------
<S> <C> <C> <C> <C>
Average California tax-exempt
municipal bond fund+ +10.85% +7.77% +6.31% +7.87%
- ------------------------------------------------------------------------------
Lehman Brothers Municipal Bond
Index++ +10.70% +8.16% +6.82% +8.34%
- ------------------------------------------------------------------------------
Consumer Price Index*++ + 1.38% +2.32% +2.47% +3.37%
- ------------------------------------------------------------------------------
</TABLE>
+Source: Lipper Analytical Services, Inc.
++Source: CDA/Wiesenberger.
*The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%. Class C shares ("C") have
no initial sales charge but, like B, have higher annual fees and expenses than
A. C SEC results reflect the 1% CDSC applicable to shares redeemed within 12
months.
B and C results include the performance and the operating expenses (e.g., Rule
12b-1 fees) of A for periods prior to the inception of B and C. Because
operating expenses of B and C are higher than those of A, B and C performance
generally would have been lower than A performance. The A performance included
in the B and C SEC performance has been adjusted to reflect the CDSC generally
applicable to B and C rather than the initial sales charge generally applicable
to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to a capital gains tax.
8
<PAGE>
Performance Summary - continued
MFS(R) FLORIDA MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the period from April 1, 1992, through March 31, 1998)
[CHART]
<TABLE>
<CAPTION>
MFS Florida
Municipal Consumer Price Lehman Brothers
Bond Fund - Class A Index - U.S. Municipal Bond Index
--------------------- ------------------- --------------------
Period Market Percent Market Percent Market Percent
End Value Change Value Change Value Change
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
04/92 9,525 0.00 10,000 0.00 10,000 0.00
03/93 10,898 14.42 10,309 3.09 11,252 12.52
03/94 11,074 1.62 10,567 2.51 11,513 2.32
03/95 11,747 6.07 10,869 2.85 12,369 7.43
03/96 12,664 7.81 11,165 2.72 13,406 8.38
03/97 13,098 3.43 11,486 2.88 14,137 5.46
03/98 14,417 10.16 11,703 1.38 15,656 10.70
Cumulative: 44.30% 16.44% 56.50%
Average Annual: 6.31% 2.57% 7.75%
</TABLE>
Average Annual Total Rates of Return as of March 31, 1998
<TABLE>
<CAPTION>
Class A Investment Results Class B Investment Results
--------------------------------------------------------------------------------------------
1 Year 3 Years 5 Years Life of Fund* 1 Year 3 Years 5 Years Life of Fund*
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return +10.16% +7.10% +5.78% +6.91% +9.18% +6.17% +4.87% +6.09%
- ----------------------------------------------------------------------------------------------------------------------------
SEC Results + 4.93% +5.37% +4.75% +6.07% +5.18% +5.27% +4.51% +6.09%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Comparative Indices
--------------------------------------------------
1 Year 3 Years 5 Years Life of Fund*
--------------------------------------------------
<S> <C> <C> <C> <C>
Average Florida tax-exempt municipal bond fund+ +10.25% +7.46% +6.11% +7.17%
- ----------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index++ +10.70% +8.16% +6.82% +7.56%
- ----------------------------------------------------------------------------------------------------
Consumer Price Index**++ + 1.38% +2.32% +2.47% +2.65%
- ----------------------------------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Fund's investment operations,
February 3, 1992, through March 31, 1998.
**The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
+Source: Lipper Analytical Services, Inc.
++Source: CDA/Wiesenberger.
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%.
B results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of B. Because operating expenses
of A are lower than those of B, B performance generally would have been lower
than A performance. The A performance included within the B SEC performance has
been adjusted to reflect the CDSC generally applicable to B rather than the
initial sales charge generally applicable to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to a capital gains tax.
9
<PAGE>
Performance Summary - continued
MFS(R) GEORGIA MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the period from July 1, 1988, through March 31, 1998)
[CHART]
<TABLE>
<CAPTION>
MFS Georgia
Municipal Consumer Price Lehman Brothers
Bond Fund - Class A Index - U.S. Municipal Bond Index
--------------------- ------------------- --------------------
Period Market Percent Market Percent Market Percent
End Value Change Value Change Value Change
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
07/88 9,530 0.00 10,000 0.00 10,000 0.00
03/89 9,944 4.35 10,364 3.64 10,517 5.17
03/90 10,849 9.10 10,907 5.23 11,627 10.56
03/91 11,723 8.05 11,441 4.90 12,700 9.23
03/92 12,900 10.04 11,805 3.18 13,969 9.99
03/93 14,505 12.44 12,169 3.09 15,718 12.52
03/94 14,761 1.77 12,475 2.51 16,083 2.32
03/95 15,595 5.65 12,830 2.85 17,278 7.43
03/96 16,606 6.48 13,180 2.72 18,726 8.38
03/97 17,348 4.47 13,559 2.88 19,748 5.46
03/98 19,260 11.02 13,746 1.38 21,861 10.70
Cumulative: 92.60% 37.46% 118.61%
Average Annual: 6.96% 3.32% 8.35%
</TABLE>
Average Annual Total Rates of Return as of March 31, 1998
<TABLE>
<CAPTION>
Class A Investment Results Class B Investment Results
--------------------------------------------------------------------------------------------
1 Year 3 Years 5 Years Life of Fund* 1 Year 3 Years 5 Years Life of Fund*
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average Annual Total Return +11.02% +7.29% +5.83% +7.43% +10.19% +6.41% +5.06% +6.98%
- ----------------------------------------------------------------------------------------------------------------------------
SEC Results + 5.74% +5.56% +4.81% +6.89% + 6.19% +5.52% +4.71% +6.98%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Comparative Indices
----------------------------------------------------
1 Year 3 Years 5 Years Life of Fund*
----------------------------------------------------
<S> <C> <C> <C> <C>
Average Georgia tax-exempt municipal bond fund+ +10.64% +7.72% +6.32% +7.91%
- ------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index++ +10.70% +8.16% +6.82% +8.45%
- ------------------------------------------------------------------------------------------------------
Consumer Price Index**++ + 1.38% +2.32% +2.47% +3.34%
- ------------------------------------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Fund's investment operations,
June 6, 1988, through March 31, 1998.
**The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
+Source: Lipper Analytical Services, Inc.
++Source: CDA/Wiesenberger.
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%.
B results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of B. Because operating expenses
of A are lower than those of B, B performance generally would have been lower
than A performance. The A performance included within the B SEC performance has
been adjusted to reflect the CDSC generally applicable to B rather than the
initial sales charge generally applicable to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to a capital gains tax.
10
<PAGE>
Performance Summary - continued
MFS(R) MARYLAND MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the 5-year period ended March 31, 1998)
[CHART]
<TABLE>
<CAPTION>
MFS Maryland
Municipal Consumer Price Lehman Brothers
Bond Fund - Class A Index - U.S. Municipal Bond Index
--------------------- ------------------- --------------------
Period Market Percent Market Percent Market Percent
End Value Change Value Change Value Change
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
03/93 9,521 0.00 10,000 0.00 10,000 0.00
03/94 9,557 0.37 10,251 2.51 10,232 2.32
03/95 10,179 6.51 10,543 2.85 10,992 7.43
03/96 10,807 6.17 10,830 2.72 11,914 8.38
03/97 11,212 3.75 11,142 2.88 12,564 5.46
03/98 12,397 10.57 11,295 1.38 13,908 10.70
Cumulative: 23.97% 12.95% 39.09%
Average Annual: 4.39% 2.46% 6.82%
</TABLE>
Growth of a Hypothetical $10,000 Investment
(For the 10-year period ended March 31, 1998)
[CHART]
<TABLE>
<CAPTION>
MFS Maryland
Municipal Consumer Price Lehman Brothers
Bond Fund - Class A Index - U.S. Municipal Bond Index
--------------------- ------------------- --------------------
Period Market Percent Market Percent Market Percent
End Value Change Value Change Value Change
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
03/88 9,525 0.00 10,000 0.00 10,000 0.00
03/89 10,324 8.39 10,498 4.98 10,721 7.21
03/90 11,202 8.50 11,047 5.23 11,853 10.56
03/91 12,166 8.60 11,588 4.90 12,946 9.23
03/92 13,205 8.54 11,957 3.18 14,239 9.99
03/93 14,604 10.59 12,326 3.09 16,023 12.52
03/94 14,658 0.37 12,635 2.51 16,394 2.32
03/95 15,612 6.51 12,996 2.85 17,613 7.43
03/96 16,576 6.17 13,350 2.72 19,089 8.38
03/97 17,197 3.75 13,734 2.88 20,131 5.46
03/98 19,014 10.57 13,923 1.38 22,285 10.70
Cumulative: 90.14% 39.23% 122.85%
Average Annual: 6.64% 3.36% 8.34%
</TABLE>
<TABLE>
<CAPTION>
Class A Investment Results Class B Investment Results
--------------------------------------------------------------------------------------------
1 Year 3 Years 5 Years Life of Fund* 1 Year 3 Years 5 Years Life of Fund*
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return +10.57% +6.79% +5.42% +7.16% +9.96% +6.09% +4.75% +6.82%
- ----------------------------------------------------------------------------------------------------------------------------
SEC Results + 5.31% +5.07% +4.40% +6.64% +5.96% +5.20% +4.40% +6.82%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Comparative Indices
-------------------------------------------
1 Year 3 Years 5 Years 10 Years
-------------------------------------------
<S> <C> <C> <C> <C>
Average Maryland tax-exempt municipal bond fund+ + 9.94% +7.23% +5.99% +7.59%
- ----------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index++ +10.70% +8.16% +6.82% +8.34%
- ----------------------------------------------------------------------------------------------
Consumer Price Index*++ + 1.38% +2.32% +2.47% +3.37%
- ----------------------------------------------------------------------------------------------
</TABLE>
+Source: Lipper Analytical Services, Inc.
++Source: CDA/Wiesenberger.
*The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%.
B results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of B. Because operating expenses
of A are lower than those of B, B performance generally would have been lower
than A performance. The A performance included within the B SEC performance has
been adjusted to reflect the CDSC generally applicable to B rather than the
initial sales charge generally applicable to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to a capital gains tax.
11
<PAGE>
Performance Summary - continued
MFS(R) MASSACHUSETTS MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the 5-year period ended March 31, 1998)
[CHART]
<TABLE>
<CAPTION>
MFS Massachusetts
Municipal Consumer Price Lehman Brothers
Bond Fund - Class A Index - U.S. Municipal Bond Index
------------------- ------------------- --------------------
Period Market Percent Market Percent Market Percent
End Value Change Value Change Value Change
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
03/93 9,522 0.00 10,000 0.00 10,000 0.00
03/94 9,676 1.62 10,251 2.51 10,232 2.32
03/95 10,246 5.89 10,543 2.85 10,992 7.43
03/96 10,958 6.95 10,830 2.72 11,914 8.38
03/97 11,439 4.39 11,142 2.88 12,564 5.46
03/98 12,579 9.96 11,295 1.38 13,908 10.70
Cumulative: 25.79% 12.95% 39.09%
Average Annual: 4.70% 2.46% 6.82%
</TABLE>
Growth of a Hypothetical $10,000 Investment
(For the 10-year period ended March 31, 1998)
[CHART]
<TABLE>
<CAPTION>
MFS Massachusetts
Municipal Consumer Price Lehman Brothers
Bond Fund - Class A Index - U.S. Municipal Bond Index
--------------------- ------------------- --------------------
Period Market Percent Market Percent Market Percent
End Value Change Value Change Value Change
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
03/88 9,523 0.00 10,000 0.00 10,000 0.00
03/89 10,282 7.97 10,498 4.98 10,721 7.21
03/90 11,084 7.80 11,047 5.23 11,853 10.56
03/91 12,030 8.53 11,588 4.90 12,946 9.23
03/92 13,240 10.06 11,957 3.18 14,239 9.99
03/93 14,881 12.39 12,326 3.09 16,023 12.52
03/94 15,121 1.62 12,635 2.51 16,394 2.32
03/95 16,011 5.89 12,996 2.85 17,613 7.43
03/96 17,124 6.95 13,350 2.72 19,089 8.38
03/97 17,876 4.39 13,734 2.88 20,131 5.46
03/98 19,657 9.96 13,923 1.38 22,285 10.70
Cumulative: 96.57% 39.23% 122.85%
Average Annual: 6.99% 3.36% 8.34%
</TABLE>
<TABLE>
<CAPTION>
Class A Investment Results Class B Investment Results
--------------------------------------------------------------------------------------------
1 Year 3 Years 5 Years Life of Fund* 1 Year 3 Years 5 Years Life of Fund*
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return +9.99% +7.09% +5.73% +7.52% +9.25% +6.37% +5.07% +7.18%
- ----------------------------------------------------------------------------------------------------------------------------
SEC Results +4.76% +5.36% +4.71% +7.00% +5.25% +5.48% +4.72% +7.18%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Comparative Indices
--------------------------------------------
1 Year 3 Years 5 Years 10 Years
--------------------------------------------
<S> <C> <C> <C> <C>
Average Massachusetts tax-exempt municipal
bond fund+ + 9.98% +7.34% +6.14% +7.85%
- ----------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index++ +10.70% +8.16% +6.82% +8.34%
- ----------------------------------------------------------------------------------------
Consumer Price Index*++ + 1.38% +2.32% +2.47% +3.37%
- ----------------------------------------------------------------------------------------
</TABLE>
+Source: Lipper Analytical Services, Inc.
++Source: CDA/Wiesenberger.
*The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%.
B results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of B. Because operating expenses
of A are lower than those of B, B performance generally would have been lower
than A performance. The A performance included within the B SEC performance has
been adjusted to reflect the CDSC generally applicable to B rather than the
initial sales charge generally applicable to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to a capital gains tax.
12
<PAGE>
Portfolio of Investments - March 31, 1998
MFS ALABAMA MUNICIPAL BOND FUND
Municipal Bonds - 98.7%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 13.6%
Commonwealth of Puerto Rico, 0s, 2015 $3,000 $ 1,282,890
Commonwealth of Puerto Rico, 0s, 2017 1,500 565,080
Huntsville, AL, 5.5s, 2020 1,000 1,013,900
Puerto Rico Public Bldgs Authority, Government
Facilities, AMBAC, 6.25s, 2013 2,000 2,298,900
Shelby County, AL, 7.4s, 2007 1,000 1,110,600
Shelby County, AL, MBIA, 0s, 2011 3,000 1,370,190
Shelby County, AL, 7.7s, 2017 800 890,824
State of Alabama, 0s, 2004 2,500 1,816,275
State of Alabama, 0s, 2006 1,165 730,071
State of Alabama, 7.1s, 2010 250 271,077
-----------
$11,349,807
- ------------------------------------------------------------------------------------
State and Local Appropriation - 2.5%
Lawrence County, AL, Public Building Authority
(County Jail), AMBAC, 5s, 2027 $1,000 $ 979,070
Puerto Rico Public Buildings Authority, Education
& Health, 5.6s, 2008 500 541,515
Puerto Rico Public Buildings Authority, Education
& Health, 5.5s, 2021 500 529,200
-----------
$ 2,049,785
- ------------------------------------------------------------------------------------
Refunded and Special Obligations - 14.6%
Alabama Building Renovation Finance Authority
Rev., (Fitch Light), 7.45s, 2000### $1,500 $ 1,641,360
Alabama Water Pollution Control Authority,
Revolving Fund Loan, AMBAC, 7.75s, 2001 890 970,910
Alexander City, AL, 0s, 2001 1,000 357,610
Alexander City, AL, 0s, 2001 1,000 332,550
Alexander City, AL, 0s, 2001 1,250 386,550
Baldwin County, AL, Eastern Shore Health Care
Authority (Thomas), 8.5s, 2001 1,000 1,137,470
Birmingham, AL, Historical Preservation Authority
Rev.(Kelly Ingram/Civil Rights), 7.2s, 2001 1,000 1,098,750
Gadsden East, AL, Medical Clinic Board Rev.
(Baptist Hospital), 7.8s, 2001 2,000 2,271,240
Hoover, AL, Board of Education, AMBAC,
6.625s, 2001 1,000 1,083,120
Montgomery County, AL, Department of Human
Resources Rev., 7s, 2001 1,000 1,095,670
Montgomery, AL, Medical Clinic Board Rev.
(Jackson Hospital & Clinic), AMBAC, 7s, 2001 695 747,764
Puerto Rico Highway & Transportation Authority,
6.5s, 2002 1,000 1,107,230
-----------
$12,230,224
- ------------------------------------------------------------------------------------
Airport and Port Revenue - 7.0%
Alabama Docks Department Facilities Rev.,
Refunding, MBIA, 5.5s, 2022[sec][sec] $1,000 $ 1,008,650
Alabama Docks Department, Docks Facilities Rev.,
MBIA, 5.375s, 2017 1,000 1,011,150
Alabama, Docks Department, Docks Facilities
Rev., MBIA, 7.6s, 2012 1,600 1,662,112
Mobile, AL, Airport Authority Rev., 8.875s, 2015 975 1,064,934
Mobile, AL, Airport Authority, Rev., 7.375s, 2012 1,000 1,078,870
-----------
$ 5,825,716
- ------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 2.4%
DeKalb & Cherokee County, AL, Gas Rev.,
AMBAC, 5.4s, 2016 $2,000 $ 2,040,500
- ------------------------------------------------------------------------------------
</TABLE>
Municipal Bonds - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
Health Care Revenue - 6.9%
Alabama Special Care Facilities Financing
Authority, (Daughters of Charity), 5s, 2025 $1,500 $ 1,445,850
Baldwin County, AL, Eastern Shore Health Care
(Thomas Hospital), 6.75s, 2015 1,000 1,093,730
Cullman, AL, Medical Park South Clinic, "A",
6.5s, 2023 1,000 1,071,390
Montgomery, AL, Medical Clinic Board Rev.
(Jackson Hospital & Clinic), 7s, 2015 2,030 2,145,345
-----------
$ 5,756,315
- ------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 10.1%
Butler, AL, Industrial Developement Board, Solid
Waste Rev. (James River Corp.), 8s, 2028 $1,000 $ 1,152,730
Camden, AL, Industrial Development Board
Pollution Control Rev. (Macmillian Bloedel),
7.75s, 2009 500 545,460
Courtland, AL, Industrial Development Board,
Solid Waste Disposal Rev. (Champion
International Corp.), 5.9s, 2017 1,000 1,051,080
Courtland, AL, Industrial Development Board,
Solid Waste Disposal Rev. (Champion
International Corp.), 7.75s, 2020 1,485 1,587,747
Mobile, AL, Industrial Development Board, Dock
& Wharf Rev. (Ideal Basic Industries Inc.),
6.75s, 2004 270 272,030
Mobile, AL, Industrial Development Board, Dock
& Wharf Rev. (Ideal Basic Industries Inc.),
6.875s, 2009 1,075 1,083,514
Piedmont, AL, Industrial Development Board Rev.
(Springs Industries Project), 8.25s, 2010 1,000 1,093,760
Tarrant City, AL, Industrial Development Board
Rev. (Vulcan Materials Co.), 7.5s, 2011 1,500 1,634,430
-----------
$ 8,420,751
- ------------------------------------------------------------------------------------
Insured Health Care Revenue - 9.1%
Alabama Special Care Facilities Financing
Authority, (Daughters of Charity), AMBAC,
5s, 2025 $1,000 $ 961,080
Huntsville, AL, Health Care Authority, MBIA,
5s, 2023 1,000 966,690
Huntsville, AL, Health Care Facilities Rev., MBIA,
6.375s, 2022 850 920,856
Lauderdale County & Florence, AL, (Eliza Coffee
Memorial Hospital), MBIA, 5.75s, 2014 1,000 1,057,390
Montgomery AL Special Care Facilities (Baptist
Medical), FSA, 5.375s, 2019 1,150 1,166,652
Montgomery, AL, Medical Clinic Board Rev.
(Jackson Hospital & Clinic), AMBAC,
5.875s, 2016 1,000 1,063,210
University of Alabama, Hospital Rev.
(Birmingham), MBIA, 5s, 2014 1,500 1,486,470
-----------
$ 7,622,348
- ------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 2.2%
Alabama Housing Finance Authority, Multi-Family
Residential Development Rev., (St. Jude), FHA,
7.25s, 2023 $1,385 $ 1,494,083
Puerto Rico Housing Finance Corp., Multi-Family
Mortgage Rev., 7.5s, 2015 355 372,132
-----------
$ 1,866,215
- ------------------------------------------------------------------------------------
</TABLE>
13 - MAL
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
Single Family Housing Revenue - 5.4%
Alabama Housing Finance Authority, Single Family
Mortgage Rev., GNMA, 6.55s, 2014 $ 985 $ 1,063,682
Alabama Housing Finance Authority, Single Family
Mortgage Rev., Collateral Home Mortgage
Program, 5.7s, 2015 1,700 1,782,229
Alabama Housing Finance Authority, Single Family
Mortgage Rev., GNMA, 7.4s, 2022 670 695,185
Alabama Housing Finance Authority, Single Family
Mortgage Rev., GNMA, 7.5s, 2022 420 441,365
Alabama Housing Finance Authority, Single Family
Mortgage Rev., GNMA, 7.75s, 2022 345 361,419
Alabama Housing Finance Authority, Single Family
Mortgage Rev., GNMA, 7.6s, 2022 150 158,978
-----------
$ 4,502,858
- -------------------------------------------------------------------------------------
Universities - 6.4%
Alabama Agriculture & Mechanics University,
MBIA, 5.75s, 2013 $ 500 $ 533,500
Alabama Agriculture & Mechanics University,
MBIA, 5.5s, 2020 2,545 2,614,198
Alabama, Board of Education Rev., (Shelton State
Community College), MBIA, 6s, 2014 1,000 1,084,400
Homewood, AL, Educational Building Authority,
Educational Facilities Rev. (Samford University),
6.5s, 2016 1,000 1,083,730
-----------
$ 5,315,828
- -------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 15.2%
Alabama Water Pollution Control Authority,
5.5s, 2020 $1,500 $ 1,534,365
Arab, AL, Waterworks Board, Water Rev., MBIA,
7.05s, 2016 1,000 1,098,090
Bessemer, AL, Water Rev., AMBAC, 5.75s, 2026 1,000 1,054,110
Birmingham, AL, Waterworks & Sewer Board
Rev., 5.375s, 2020 2,000 2,036,060
Commonwealth of Puerto Rico, Aqueduct &
Sewer Authority Rev., 5s, 2015 1,300 1,289,366
Fairview, AL, Water Rev. (East Cullman), AMBAC,
8s, 2020 1,000 1,053,900
Limestone County, AL, Water Authority Rev., FGIC,
7.7s, 2019 900 923,229
Limestone County, AL, Water Authority Rev., FGIC,
5.5s, 2026 2,650 2,726,744
Madison, AL, Water & Waste Board, MBIA,
5.5s, 2019 1,000 1,027,940
-----------
$12,743,804
- -------------------------------------------------------------------------------------
Other - 3.3%
Birmingham, AL, Downtown Redevelopment
Authority, Social Security Administration Building
Rev., 0s, 2010 $2,435 $ 2,762,800
- -------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $75,841,879) $82,486,951
- -------------------------------------------------------------------------------------
Floating Rate Demand Notes - 1.2%
- -------------------------------------------------------------------------------------
Bartow County, GA, Development Authority,
Pollution Control Rev. (Georgia Power Co.), due
04/01/98 $ 100 $ 100,000
Harris County, TX, Hospital Rev. (Methodist
Hospital), due 04/01/98 900 900,000
- -------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 1,000,000
- -------------------------------------------------------------------------------------
Total Investments (Identified Cost, $76,841,879) $83,486,951
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
Other Assets, Less Liabilities - 0.1% $ 125,049
- -------------------------------------------------------------------------------------
Net assets - 100.0% $83,612,000
- -------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
Portfolio of Investments - March 31, 1998
MFS ARKANSAS MUNICIPAL BOND FUND
Municipal Bonds - 97.3%
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 6.9%
Arkansas College Savings, "A", 0s, 2009 $1,146 $ 683,887
Arkansas College Savings, "A", 0s, 2015 2,575 1,089,096
Arkansas College Savings, "A", 0s, 2016 3,050 1,216,066
Arkansas College Savings, "A", 0s, 2017 2,590 972,519
Arkansas College Savings, "B", 0s, 2012 1,200 602,244
Arkansas College Savings, "B", 0s, 2013 1,000 474,520
Arkansas College Savings, "B", 0s, 2014 1,150 515,441
Arkansas College Savings, "B", 0s, 2015 1,600 676,720
Arkansas College Savings, "B", 0s, 2016 1,000 398,710
Arkansas College Savings, "C", 0s, 2014 1,000 448,210
Arkansas College Savings, "C", 0s, 2015 1,000 422,950
Commonwealth of Puerto Rico, 5.5s, 2013 1,210 1,295,148
Commonwealth of Puerto Rico, 5.4s, 2025 1,000 1,015,180
-----------
$ 9,810,691
- -----------------------------------------------------------------------------------
State and Local Appropriation - 3.2%
Arkansas Development Finance Authority, Local
Government Rev., 7.1s, 2008 $2,440 $ 2,660,332
Arkansas Development Finance Authority, Single
Family Mortgage Rev., 0s, 2011 5,000 1,920,050
-----------
$ 4,580,382
- -----------------------------------------------------------------------------------
Refunded and Special Obligations - 13.4%
Arkansas Development Finance Authority, Water
& Sewer Rev., MBIA, 7s, 2001 $2,900 $ 3,176,776
Arkansas Development Finance Authority, Water
& Sewer Rev., MBIA, 6.4s, 2002 2,000 2,191,080
Arkansas Housing Development Agency, Single
Family Mortgage Rev., FHA, 8.375s, 2011 1,000 1,323,830
Arkansas Waste Disposal & Pollution Control
Rev., 6.25s, 2002 4,000 4,331,600
Harrison, AR, Residential Housing Facilities Board,
Single Family Mortgage Rev., FGIC, ETM,
7.4s, 2011 4,000 4,964,800
Sherwood, AR, Residential Housing Facilities
Board, Single Family Mortgage Rev., MBIA,
7.5s, 2010 1,250 1,554,775
West Memphis, AR, Public Utility Systems Rev.,
MBIA, 6.6s, 2009 1,250 1,378,825
-----------
$18,921,686
- -----------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 12.0%
Jefferson County, AR, Pollution Control Rev.
(Arkansas Power & Light Co.), 6.3s, 2018 $1,050 $ 1,130,472
North Little Rock, AR, Electric Rev., MBIA,
6.5s, 2010 2,000 2,323,500
North Little Rock, AR, Electric Rev., MBIA,
6.5s, 2010 1,000 1,109,380
North Little Rock, AR, Electric Rev., MBIA,
6.5s, 2015 6,000 7,171,200
</TABLE>
14 - MAR
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Electric and Gas Utility Revenue - continued
Pope County, AR, Solid Waste Disposal Rev.
(Arkansas Power & Light Co.), 8s, 2020 $1,780 $ 1,958,926
Pope County, AR, Solid Waste Disposal Rev.
(Arkansas Power & Light Co.), FSA, 8s, 2021 3,000 3,313,620
------------
$ 17,007,098
- ---------------------------------------------------------------------------------------
Health Care Revenue - 6.9%
Baxter County, AR, Hospital Rev., 7.5s, 2021 $3,145 $ 3,488,654
Little Rock, AR, Health Facilities Board, (Baptist
Medical Center), 6.9s, 2009 1,400 1,658,370
Little Rock, AR, Health Facilities Board, (Baptist
Medical Center), 7s, 2017 3,250 3,559,595
Pulaski County, AR, Hospital Rev. (Children's
Hospital), 6.15s, 2017 1,000 1,051,160
------------
$ 9,757,779
- ---------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 6.3%
Blytheville, AR, Solid Waste Recycling &
Sewerage Treatment Rev. (Nucor Corp.),
6.375s, 2023 $3,565 $ 3,832,339
Camden, AR, Environmental Improvement Rev.
(International Paper Co.), 7.625s, 2018 1,000 1,172,930
Jonesboro, AR, Industrial Development Rev.
(Anheuser-Busch Cos, Inc.), 6.5s, 2012 3,500 3,867,570
------------
$ 8,872,839
- ---------------------------------------------------------------------------------------
Insured Health Care Revenue - 9.3%
Arkansas Development Finance Authority, Health
Facilities Rev. (Sisters of Mercy), MBIA, 5s, 2013 $6,340 $ 6,550,171
Arkansas Development Finance Authority, Health
Facilities Rev. (Sisters of Mercy), MBIA, 5s, 2019 5,500 5,457,210
Pulaski County, AR, Health Facilities Board Rev.
(Sisters of Charity), MBIA, 6s, 2012 1,000 1,072,140
------------
$ 13,079,521
- ---------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 1.1%
Pope County, AR, Residential Housing Facilities
Board (Arkansas Tech University), 6s, 2027 $1,000 $ 996,020
West Memphis, AR, Public Facilities Board,
Mortgage Rev., AMBAC, 0s, 2011 1,090 504,245
------------
$ 1,500,265
- ---------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 4.3%
Little Rock, AR, Hotel & Restaurant Gross
Receipts Tax Rev., 7.375s, 2015 $4,790 $ 6,124,398
- ---------------------------------------------------------------------------------------
Single Family Housing Revenue - 17.6%
Arkansas Development Finance Authority, Home
Meeting Rev., GNMA, FNMA, 5.15s, 2017 $1,500 $ 1,483,110
Arkansas Development Finance Authority, Single
Family Mortgage Rev., GNMA, 7.4s, 2023 1,185 1,253,268
Arkansas Development Finance Authority, Single
Family Mortgage Rev., GNMA, 7.45s, 2027 1,695 1,888,450
Arkansas Development Finance Authority, Single
Family Mortgage Rev., GNMA, 6.7s, 2027 2,765 2,984,237
Arkansas Housing Development Agency,
Residential Mortgage Rev., 0s, 2015 15,975 2,570,378
Jefferson County, AR, Health Care & Residential
Facilities Board, 7.25s, 2011 890 945,527
Lonoke County, AR, Residential Housing Facilities
Board, 7.375s, 2011 205 222,022
Lonoke County, AR, Residential Housing Facilities
Board, FNMA, 7.9s, 2011 811 900,706
</TABLE>
Municipal Bonds - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Single Family Housing Revenue - continued
Mississippi County, AR, Public Facilities Board,
Mortgage Rev., 7.2s, 2010 $1,030 $ 1,148,079
North Little Rock, AR, Residential Housing
Facilities Board, 0s, 2010 21,830 9,422,265
Pulaski County, AR, Public Facilities Board Rev.,
FNMA, 0s, 2014 2,750 1,181,620
Saline County, AR, Residential Housing Facilities
Board, 7.875s, 2011 870 939,304
------------
$ 24,938,966
- ---------------------------------------------------------------------------------------
Student Loan Revenue - 2.7%
Arkansas Student Loan Authority Rev., 7.15s, 2002 $ 650 $ 699,524
Arkansas Student Loan Authority Rev., 6.75s, 2006 985 1,039,421
Arkansas Student Loan Authority Rev., "B",
6.25s, 2010 2,000 2,140,060
------------
$ 3,879,005
- ---------------------------------------------------------------------------------------
Universities - 0.8%
Conway, AR, Public Facilities Rev. (Hendrix
College), 5.85s, 2016 $1,000 $ 1,052,740
- ---------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 12.8%
Arkansas Development Finance Authority,
Revolving Loan Fund, 5.85s, 2019 $2,130 $ 2,248,300
Arkansas Development Finance Authority, Water
& Sewer Rev., MBIA, 5s, 2012 1,000 1,012,050
Arkansas Development Finance Authority, Water
& Sewer Rev., MBIA, 5s, 2015 2,000 2,000,020
Arkansas Water Resources Development
Authority, 6.375s, 2012 1,000 1,075,970
Arkansas Water Resources Development
Authority, 6.375s, 2021 1,000 1,069,180
Beaver, AR, Water District, Benton & Washington
Counties, Water & Sewer Rev., MBIA,
5.85s, 2008 2,000 2,162,300
Fort Smith, AR, Water & Sewer Rev., MBIA,
6s, 2012 2,250 2,442,488
Russellville, AR, Water Systems Rev., AMBAC,
6.25s, 2012 1,365 1,468,030
South Sebastian County, AR, Water Users Assn.,
5.95s, 2013 2,425 2,510,918
South Sebastian County, AR, Water Users Assn.,
6.15s, 2023 1,000 1,042,100
Texarkana, AR, Waterworks Facilities Rev., FGIC,
5.2s, 2010 1,000 1,037,920
------------
$ 18,069,276
- ---------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $126,194,066) $137,594,646
- ---------------------------------------------------------------------------------------
Floating Rate Demand Notes - 1.7%
- ---------------------------------------------------------------------------------------
Bartow County, GA, Development Authority,
Pollution Control Rev. (Georgia Power Company),
due 4/01/98 $1,400 $ 1,400,000
Harris County, TX, Industrial Development Corp.,
(Shell Oil Company Project), due 4/01/98 1,000 1,000,000
- ---------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 2,400,000
- ---------------------------------------------------------------------------------------
Total Investments (Identified Cost, $128,594,066) $139,994,646
Other Assets, Less Liabilities - 1.0% 1,447,679
Net assets - 100.0% $141,442,325
- ---------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
15 - MAR
<PAGE>
Portfolio of Investments - March 31, 1998
MFS CALIFORNIA MUNICIPAL BOND FUND
Municipal Bonds - 96.2%
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 10.1%
Commonwealth of Puerto Rico, 5.5s, 2009 $2,500 $ 2,701,625
Lucia Mar, CA, Unified School District, FGIC,
0s, 2013 1,350 626,859
Lucia Mar, CA, Unified School District, FGIC,
0s, 2014 1,200 525,816
Palos Verdes, CA, Library District, 6.7s, 2016 1,250 1,337,162
State of California, 10s, 2007 1,055 1,502,067
State of California, 6.5s, 2010 1,235 1,452,125
State of California, 5s, 2019 3,000 2,920,230
State of California, AMBAC, 7.2s, 2008 1,600 1,946,976
State of California, AMBAC, 5s, 2009 2,910 3,014,615
State of California, AMBAC, 6.3s, 2010 6,000 6,936,240
State of California, AMBAC, 7s, 2010 2,000 2,445,520
Walnut Valley, CA, AMBAC, 6s, 2011 1,600 1,807,248
-----------
$27,216,483
- ---------------------------------------------------------------------------------------
State and Local Appropriation - 15.6%
Banning, CA, Certificates of Participation, Water
System Improvement, AMBAC, 8s, 2019 $1,000 $ 1,367,210
California Public Works Board, Lease Rev.,
5.55s, 2010 4,000 4,341,760
California Public Works Board, Lease Rev.
(Department of Corrections), 7.4s, 2010 5,000 6,262,800
California Public Works Board, Lease Rev., MBIA,
5.5s, 2015 4,500 4,777,965
Fortuna, Parlier & Susanville, CA, Certificates of
Participation, "B", 7.375s, 2017 930 996,690
Grossmont, CA, Union High School District,
Certificates of Participation, MBIA, 0s, 2006 6,000 4,071,180
Los Angeles, CA, Building Authority, MBIA,
5.625s, 2011 3,375 3,683,408
Los Angeles, CA, Convention & Exhibition Center
Authority, Certificates of Participation, AMBAC,
0s, 2005 2,400 1,728,648
Pasadena, CA, Certificates of Participation
(Pasadena Parking Facilities), 6.25s, 2018 3,460 3,956,233
Pomona, CA, Public Financing, 6.25s, 2010 4,020 4,541,756
San Joaquin County, CA, Certificates of
Participation (General Hospital), 6.625s, 2020 2,000 2,180,420
Tulare County, CA, Certificates of Participation
(Capital Improvements Program), MBIA, 6s, 2016 1,000 1,079,860
Visalia, CA, Utility Systems Department,
Certificates of Participation, MBIA, 0s, 2005 4,655 3,329,256
-----------
$42,317,186
- ---------------------------------------------------------------------------------------
Refunded and Special Obligations - 13.8%
Apple Valley, CA, Hospital Rev., Certificates of
Participation (St. Mary's Hospital), 6.75s, 2012 $4,880 $ 5,381,713
California Educational Facilities Authority Rev. (St.
Mary's College), 7.5s, 2000 1,000 1,100,420
California Health Facilities Financing Authority
Rev. (AIDS Hospice Foundation), 7.15s, 2000 2,875 3,082,057
California Health Facilities Financing Authority
Rev. (St. Joseph's Hospital), 6.75s, 2001 2,710 2,973,358
California Statewide Community Development
Authority (St. Joseph's), 6.625s, 2004 4,205 4,811,992
Corona, CA, Certificates of Participation (Corona
Community Hospital), 8s, 2005 585 715,151
Desert Hospital District, CA, Hospital Rev. (Desert
Hospital Corp.), 9s, 2005[dbldag][dbldag] 3,000 3,610,470
Los Angeles, CA, Convention & Exhibition Center
Authority, Certificates of Participation, 9s, 2005 1,900 2,477,429
</TABLE>
Municipal Bonds - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Refunded and Special Obligations - continued
Mojave, CA, Water Agency Rev. (Morongo Basin),
6.6s, 2002 $1,400 $ 1,563,268
M-S-R Public Power Agency (San Juan), MBIA,
6.75s, 2020 3,000 3,677,400
Northern California Power Agency, Public Power
Rev. (Hydro-Electric), 8s, 1998 290 293,111
Pomona, CA, Single Family Mortgage Rev., FNMA,
GNMA, 7.375s, 2010 2,000 2,412,780
Pomona, CA, Single Family Mortgage Rev.,
GNMA, FHLMC, 7.5s, 2023 2,000 2,637,420
Southern California Public Power Transmission
Rev., "A", 0s, 2005 3,795 2,758,889
-----------
$37,495,458
- ---------------------------------------------------------------------------------------
Airport and Port Revenue - 6.0%
Los Angeles, CA, Department Airports Rev.,
Ontario International Airport, FGIC, 6s, 2017 $4,100 $ 4,391,838
Los Angeles, CA, Harbor Department Rev.,
6.625s, 2025 2,000 2,180,040
Port Oakland, CA, Port Rev., MBIA, 0s, 2009 7,000 4,065,320
Port Oakland, CA, Port Rev., MBIA, 6.5s, 2016 1,000 1,092,570
San Francisco, CA, City & County Airports
Commission, International Airport Rev., FGIC,
6.5s, 2019 4,000 4,431,920
-----------
$16,161,688
- ---------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 4.2%
California Pollution Control Financing Authority
Rev. (Pacific Gas & Electric Co.), 6.625s, 2009 $1,000 $ 1,091,110
Central Valley, CA, 6.2s, 2020 3,000 3,162,150
Los Angeles, CA, Department of Water & Power,
Electric Plant Rev., 7.25s, 2030 1,000 1,090,790
Los Angeles, CA, Department of Water & Power,
Electric Plant Rev., 7.1s, 2031 1,050 1,147,807
Northern California Public Power Authority
(Geothermal Project), 5.85s, 2010 1,750 1,856,243
Southern California Public Power Authority Rev.
(Southern Transmission Project), 0s, 2005 4,205 2,945,434
-----------
$11,293,534
- ---------------------------------------------------------------------------------------
Health Care Revenue - 2.6%
California Health Facilities Financing Authority
(Downey Community Hospital), 5.625s, 2008 $3,000 $ 3,129,090
California Health Facilities Financing Authority
(Kaiser Permanente), 7s, 2018 1,000 1,058,340
California Hospital Rev., Refunding &
Improvement Project (Valley Health Systems),
6.5s, 2015 2,760 2,997,526
-----------
$ 7,184,956
- ---------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 1.5%
California Pollution Control Financing Authority
Rev., 6.7s, 2007 $2,750 $ 2,893,825
California Pollution Control Financing Authority
Rev. (Frito-Lay, Inc.), 6.375s, 2004 1,025 1,106,139
-----------
$ 3,999,964
- ---------------------------------------------------------------------------------------
Insured Health Care Revenue - 4.5%
California Health Facilities (Stanford Health Care),
FSA, 5s, 2018 $4,000 $ 3,904,200
California Health Facilities Financing Authority
(Sutter Health), MBIA, 7s, 2009 1,000 1,039,830
California Health Facilities Financing Authority
(Unihealth America), AMBAC, 7.625s, 2015 45 46,650
</TABLE>
16 - MCA
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Insured Health Care Revenue - continued
California Statewide Community Development
Authority, Certificates of Participation, 0s, 2007 $3,645 $ 2,253,485
California Statewide Community Development
Authority, Certificates of Participation, 0s, 2008 6,345 3,677,499
California Statewide Community Development
Authority, MBIA, 6s, 2011 1,015 1,139,936
------------
$ 12,061,600
- ------------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 6.6%
California Housing Finance Agency (Multi-Unit
Rental Housing), 6.7s, 2015 $2,750 $ 2,933,865
Palmdale, CA, Multi-Family Housing Rev., FNMA,
7.375s, 2024 1,000 1,087,240
Thousand Oaks, CA, Redevelopment Agency
(Shadow Hills Project), 7s, 2021 8,900 9,470,223
Yolo County, CA, Housing Authority Mortgage Rev.
(Walnut Park Apartments), FHA, 7.2s, 2033 4,150 4,499,306
------------
$ 17,990,634
- ------------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 2.4%
Puerto Rico Commonwealth Highway &
Transportation Authority, Highway Rev., FSA,
5.5s, 2015 $1,000 $ 1,065,560
Puerto Rico Commonwealth Highway &
Transportation Authority, Highway Rev., MBIA,
5.5s, 2013 5,000 5,346,250
------------
$ 6,411,810
- ------------------------------------------------------------------------------------------
Single Family Housing Revenue - 1.0%
California Housing Finance Agency, 7.75s, 2010 $ 800 $ 828,960
California Housing Finance Agency, MBIA,
6s, 2010 1,400 1,496,502
San Bernardino County, CA, Single Family
Mortgage Rev., GNMA, 7.65s, 2023 150 166,625
Southern California Home Finance Authority,
Single Family Mortgage Rev., GNMA,
7.625s, 2023 180 189,887
------------
$ 2,681,974
- ------------------------------------------------------------------------------------------
Special Assesment District - 9.1%
Anaheim, CA, Public Financing Authority Rev.,
MBIA, 0s, 2006 $5,000 $ 3,385,900
Anaheim, CA, Public Finance Authority Rev.
(Redevelopment Project Alpha), MBIA, 0s, 2005 3,210 2,282,053
Brea, CA, Public Finance Authority Rev., MBIA,
0s, 2005 2,235 1,612,597
Brea, CA, Public Finance Authority Rev., MBIA,
0s, 2006 3,415 2,347,403
Commerce, CA, Community Development
Commission, MBIA, 5.5s, 2010 3,545 3,819,525
Concord, CA, Redevelopment Agency, Tax
Allocation, MBIA, 8s, 2018 40 41,182
Emeryville, CA, Public Financing Authority Rev,
6.5s, 2021 2,000 2,160,220
Fontana, CA, Redevelopment Agency (Jurupa
Hills), 5.5s, 2027 1,500 1,503,180
Pomona, CA, Public Financing Authority Rev,
Southwest Pomona Redevelopment, 5.75s, 2020 2,500 2,571,200
San Jose, CA, Redevelopment Agency, MBIA,
6s, 2010 1,000 1,127,270
Santa Cruz County, CA, Redevelopment Agency,
Oak/Soquel Community, 5.6s, 2017 1,455 1,532,202
Walnut Valley, CA, Public Finance Authority
(Walnut Improvement), MBIA, 0s, 2007 1,150 746,074
</TABLE>
Municipal Bonds - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Special Assesment District - continued
Walnut Valley, CA, Public Finance Authority
(Walnut Improvement), MBIA, 0s, 2008 $1,125 $ 693,585
Walnut Valley, CA, Public Finance Authority
(Walnut Improvement), MBIA, 0s, 2009 1,175 687,751
------------
$ 24,510,142
- ------------------------------------------------------------------------------------------
Turnpike Revenue - 2.5%
Foothill/Eastern Transportation Corridor Agency,
CA, 0s, 2011 $5,000 $ 3,752,300
Foothill/Eastern Transportation Corridor Agency,
CA, 0s, 2020 10,000 3,015,700
------------
$ 6,768,000
- ------------------------------------------------------------------------------------------
Universities - 3.2%
California Education Facilities Authority Rev.
(College & University), 6s, 2012 $1,400 $ 1,509,830
California Education Facilities Authority Rev.
(College & University), 6.3s, 2021 1,000 1,076,940
California Educational Facilities Authority Rev.
(L.A. College of Chiropractic), 5.6s, 2017 500 505,725
California State University Housing System Rev.,
6.75s, 2010 1,705 1,831,596
California State University Housing System Rev.,
6.75s, 2011 3,570 3,835,073
------------
$ 8,759,164
- ------------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 10.4%
California Department of Water Resources,
Central Valley Project Rev., 7s, 2012 $1,495 $ 1,834,589
Fairfield-Suisun, CA, Sewer District Rev., MBIA,
0s, 2006 2,080 1,445,891
Metropolitan Water District, Linked Savers, RIBS,
5.75s, 2018 10,000 10,952,400
Metropolitan Water District, South California,
5.75s, 2009 3,000 3,299,010
Metropolitan Water District, South California, "A",
5s, 2026 2,000 1,935,580
Metropolitan Water District, Waterworks Rev., 5s, 2020 9,000 8,740,800
------------
$ 28,208,270
- ------------------------------------------------------------------------------------------
Other - 2.7%
Anaheim, CA, Public Financing Authority, FSA,
6s, 2024 $1,000 $ 1,128,490
California Public Capital Improvements Financing
Authority Rev., MBIA, 8.1s, 2018 1,820 1,891,926
Los Angeles, CA, Certificates of Participation,
5.7s, 2018 1,900 1,895,212
South Coast Air Quality Management District Rev.,
AMBAC, 0s, 2005 3,480 2,510,890
------------
$ 7,426,518
- ------------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $236,923,866) $260,487,381
- ------------------------------------------------------------------------------------------
Floating Rate Demand Notes - 0.7%
- ------------------------------------------------------------------------------------------
California Pollution Control Financing Authority
Rev. (Shell Martinez Refining), due 04/01/98, at
Identified Cost $1,800 $ 1,800,000
- ------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $238,723,866) $262,287,381
- ------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 3.1% 8,319,238
- ------------------------------------------------------------------------------------------
Net assets - 100.0% $270,606,619
- ------------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
17 - MCA
<PAGE>
Portfolio of Investments - March 31, 1998
MFS FLORIDA MUNICIPAL BOND FUND
Municipal Bonds - 98.8%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 9.5%
Dade County, FL, 7.125s, 2015 $2,380 $ 2,997,610
Florida Board of Education, Capital Outlay,
9.125s, 2014 2,600 3,667,092
Palm Beach County, FL, 6.5s, 2010 2,000 2,350,040
-----------
$ 9,014,742
- --------------------------------------------------------------------------------------
State and Local Appropriation - 3.6%
Bay County, FL, School Board, Certificates of
Participation, AMBAC, 6.75s, 2012 $1,000 $ 1,148,170
Palm Beach County, FL, School Board,
Certificates of Participation, AMBAC,
6.375s, 2015 2,000 2,248,820
-----------
$ 3,396,990
- --------------------------------------------------------------------------------------
Refunded and Special Obligations - 11.8%
Altamonte Springs, FL, Health Care Facilities Rev.
(Adventist), 5.7s, 2012 $1,175 $ 1,274,076
Brevard County, FL, Health Care Facilities Rev.
(Wuesthoff Memorial), MBIA, 7.2s, 2002 1,000 1,130,150
Charlotte County, FL, Utility Rev., FGIC,
6.875s, 2003 500 574,305
Florida Board of Education, Capital Outlay,
9.125s, 2014 400 565,700
Florida Turnpike Authority Rev., "A", AMBAC,
7.125s, 2001 1,250 1,385,575
Hillsborough County, FL, Capital Improvement Rev.
(County Center), 6.75s, 2002 1,500 1,672,305
Jacksonville, FL, Transportation Authority, System
Rev., 6.4s, 2002 2,000 2,190,100
Puerto Rico Electric Power Authority Rev.,
7s, 2001 240 265,903
Puerto Rico Highway & Transportation Authority,
Highway Rev., 6.625s, 2002 100 111,206
Puerto Rico Highway & Transportation Authority,
Highway Rev., 6.625s, 2002 1,000 1,112,060
Puerto Rico Public Buildings Authority Rev.,
6.875s, 2002 740 830,073
-----------
$11,111,453
- --------------------------------------------------------------------------------------
Airport and Port Revenue - 6.6%
Hillsborough County, FL, Airport Rev. (Tampa
International), FGIC, 5.875s, 2015 $ 750 $ 806,587
Hillsborough County, FL, Aviation Authority Rev.
(Delta Airlines), 6.8s, 2024 1,500 1,617,945
Hillsborough County, FL, Aviation Authority Rev.
(USAir Airlines), 8.6s, 2022 2,400 2,733,984
Pensacola, FL, Airport Rev., MBIA, 5.625s, 2014 1,000 1,050,200
-----------
$ 6,208,716
- --------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 26.0%
Clark County, NV, Pollution Control Rev. (Nevada
Power), 5.3s, 2011 $ 500 $ 500,000
Escambia County, FL, Utility District Rev., FGIC,
0s, 2015 1,000 426,950
Escambia County, FL, Utility District Rev., FGIC,
6.25s, 2015 1,500 1,725,630
Hillsborough County, FL, Industrial Development
Authority, Pollution Control Rev. (Tampa Electric),
8s, 2022 3,000 3,493,980
Jacksonville, FL, Electric Authority Rev. (St. Johns
River Power), 0s, 2010 4,995 2,735,112
Lakeland, FL, Electricity & Water Rev., Capital
Appreciation, 0s, 2011 5,000 2,616,100
</TABLE>
Municipal Bonds - continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
Electric and Gas Utility Revenue - continued
Lakeland, FL, Electricity & Water Rev., Capital
Appreciation, 0s, 2012 $3,000 $ 1,479,300
Martin County, FL, Industrial Development
Authority (Indiantown Cogeneration), 7.875s, 2025 3,625 4,214,135
Orlando, FL, Utility Commission, Water and
Electric Rev., 6.75s, 2017 1,500 1,841,880
Port St. Lucie, FL, Utility Rev., Capital
Appreciation, FGIC, 0s, 2021 2,405 678,499
Puerto Rico Electric Power Authority Rev., MBIA,
6.125s, 2008 2,400 2,716,200
Puerto Rico Electric Power Authority Rev., FSA,
6s, 2016 2,000 2,160,880
-----------
$24,588,666
- --------------------------------------------------------------------------------------
Health Care Revenue - 8.7%
Brevard County, FL, Health Care Facilities Rev.
(Friendly Village), 9.25s, 2012 $ 365 $ 377,870
Escambia County, FL, Health Care Facilities Rev.
(Baptist Hospital & Baptist Manor), 6.75s, 2014 1,000 1,106,840
Escambia County, FL, Health Care Facilities Rev.
(Baptist Hospital), "B", 6s, 2014 2,500 2,624,425
Jacksonville, FL, Health Care Facilities, Industrial
Development Rev. (Cypress Village), 7s, 2014 1,250 1,382,550
Jacksonville, FL, Health Care Facilities, Industrial
Development Rev. (National Benevolent), 6.4s, 2016 1,825 1,971,018
Orange County, FL, Industrial Development Rev.
(Friendly Village), 9.25s, 2012 335 343,429
St. Petersburg, FL, Health Care Facilities Rev.
(Swanholm Nursing), 10s, 2022 480 432,000
-----------
$ 8,238,132
- --------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 2.3%
Escambia County, FL, Pollution Control Rev.
(Champion International), 6.95s, 2007 $1,000 $ 1,106,570
Escambia County, FL, Pollution Control Rev.
(Champion International), 6.85s, 2012 1,000 1,103,340
-----------
$ 2,209,910
- --------------------------------------------------------------------------------------
Insured Health Care Revenue - 10.5%
Brevard County, FL, Health Care Facilities Rev.
(Wuesthoff Memorial), MBIA, 6.5s, 2007 $1,000 $ 1,096,830
Charlotte County, FL, Health Care Facilities Rev.
(Bon Secours), FSA, 8.076s, 2027[dbldag][dbldag] 2,500 2,795,650
Hillsborough County, FL, Industrial Development
Rev. (University Hospital), MBIA, 6.5s, 2019 1,000 1,189,810
Jacksonville, FL, Hospital Rev. (Baptist Medical),
"A", MBIA, 7.3s, 2019 1,900 2,005,906
Jacksonville, FL, Hospital Rev. (University
Medical), CONNIE LEE, 6.6s, 2013 500 544,195
Tallahassee, FL, Health Care Facilities Rev.
(Memorial Regional Medical), MBIA, 6.625s, 2013 1,000 1,142,770
Tampa, FL, Allegheny Health Care System (St.
Joseph's), MBIA, 6.5s, 2023 1,000 1,144,380
-----------
$ 9,919,541
- --------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 3.9%
Jacksonville, FL, Excise Tax Rev., FGIC, 0s, 2010 $1,000 $ 538,280
Jacksonville, FL, Excise Tax Rev., FGIC, 0s, 2011 1,000 510,260
Puerto Rico Highway & Transportation Authority,
5.5s, 2008 1,000 1,044,810
Sales and Excise Tax Revenue - continued
Puerto Rico Highway & Transportation Authority,
MBIA, 5.5s, 2015 1,500 1,598,340
-----------
$ 3,691,690
- --------------------------------------------------------------------------------------
</TABLE>
18 - MFL
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
Single Family Housing Revenue - 0.8%
Dade County, FL, Housing Finance Authority,
Mortgage Rev., "D", FSA, 6.95s, 2012 $ 605 $ 648,257
Dade County, FL, Housing Finance Authority,
Mortgage Rev., "E", FNMA, GNMA, 7s, 2024 75 79,326
-----------
$ 727,583
- ------------------------------------------------------------------------------------
Solid Waste Revenue - 0.5%
Escambia County, FL, Utility Systems Rev., FSA,
4.5s, 2018 $ 500 $ 457,610
- ------------------------------------------------------------------------------------
Turnpike Revenue - 1.8%
Florida Mid-Bay Bridge Authority Rev., AMBAC,
0s, 2018 $1,860 $ 629,275
Orlando & Orange County, FL, Expressway Florida
LEVRRS., FGIC, 6.164s/6.314s, 2004[dbldag][dbldag] 1,000 1,082,370
-----------
$ 1,711,645
- ------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 6.6%
Lee County, FL, Industrial Development Authority
Rev. (Bonita Springs), MBIA, 6.05s, 2015 $1,000 $ 1,085,050
Miramar, FL, Wastewater Improvement Rev., FGIC,
6.75s, 2016 1,500 1,700,310
Seminole, FL, Water & Sewer Improvement Rev.,
MBIA, 6s, 2019 3,000 3,397,230
-----------
$ 6,182,590
- ------------------------------------------------------------------------------------
Other - 6.2%
Dade County, FL, Solid Waste Authority Rev.,
Special Obligation, AMBAC, 5.125s, 2010 $1,250 $ 1,286,225
Florida Department of Environmental Preservation
Rev., MBIA, 5.5s, 2012 2,295 2,440,732
Palm Beach County, FL, Criminal Justice Facilities,
5.75s, 2013 1,000 1,095,630
Palm Beach County, FL, Solid Waste Authority
Rev., Improvement Series "B", AMBAC,
5.375s, 2011 1,000 1,038,310
-----------
$ 5,860,897
- ------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $84,560,484) $93,320,165
- ------------------------------------------------------------------------------------
Floating Rate Demand Notes - 1.0%
- ------------------------------------------------------------------------------------
Hillsborough County, FL, Pollution Control Rev.,
due 4/01/98, at Identified Cost $ 900 $ 900,000
- ------------------------------------------------------------------------------------
Total Investments (Identified Cost, $85,460,484) $94,220,165
- ------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.2% 209,960
- ------------------------------------------------------------------------------------
Net assets - 100.0% $94,430,125
- ------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
Portfolio of Investments - March 31, 1998
MFS GEORGIA MUNICIPAL BOND FUND
Municipal Bonds - 97.3%
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 10.4%
Dalton, GA, Development Authority Rev., MBIA,
5.5s, 2017 $1,000 $1,070,580
Fulton County, GA, School District, 6.375s, 2010 2,000 2,327,600
Fulton County, GA, School District, 6.375s, 2012 1,000 1,165,260
Fulton County, GA, School District, 6.375s, 2016 1,000 1,171,600
State of Georgia, 6.25s, 2011 1,000 1,155,200
Territory of Virgin Islands, 7.75s, 2006 365 402,464
----------
$7,292,704
- ---------------------------------------------------------------------------------------
State and Local Appropriation - 2.3%
Fulton County, GA, Building Authority Rev.
(Judicial Center), 0s, 2011 $3,000 $1,639,350
- ---------------------------------------------------------------------------------------
Refunded and Special Obligations - 8.6%
Columbia County, GA, Water and Sewer Rev.,
AMBAC, 6.9s, 2011 $1,000 $1,099,740
DeKalb County, GA, 7.5s, 2000 780 840,731
George L. Smith II/Georgia World Congress
Center Authority (Domed Stadium Project),
7.875s, 2020 1,475 1,616,673
Hogansville, GA, Combined Public Utility Systems
Rev., 9s, 2000 2,200 2,490,070
----------
$6,047,214
- ---------------------------------------------------------------------------------------
Airport and Port Revenue - 13.8%
Atlanta, GA, Airport Facilities Rev., 6.25s, 2021 $ 500 $ 527,695
Atlanta, GA, Airport Facilities Rev., AMBAC,
0s, 2010 6,000 3,325,020
Atlanta, GA, Airport Facilities Rev., MBIA, 0s, 2010 5,100 2,718,147
Atlanta, GA, Special Purpose Facilities Rev. (Delta
Airlines), 7.9s, 2018 1,000 1,067,810
Clayton County, GA, Development Authority,
Special Facilities Rev. (Delta Airlines), 7.625s, 2020 500 532,515
Puerto Rico Ports Authority (American Airlines),
6.25s, 2026 1,425 1,546,282
----------
$9,717,469
- ---------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 12.6%
Appling County, GA, Development Authority
Pollution (Ogelthorpe Power Corp.), MBIA,
7.15s, 2021 $1,400 $1,583,526
Georgia Municipal Electric Authority, Power Rev.,
AMBAC, 5.5s, 2009 1,225 1,311,718
Georgia Municipal Electric Authority, Power Rev.,
AMBAC, 0s, 2013 1,675 797,333
Georgia Municipal Electric Authority, Power Rev.,
MBIA, 0s, 2008 2,500 1,595,750
Georgia Municipal Electric Authority, Power Rev.,
MBIA, 0s, 2009 1,500 902,025
Georgia Municipal Electric Authority, Power Rev.,
MBIA, 6.5s, 2020 1,250 1,476,650
Monroe County, GA, Development Authority,
Pollution Control Rev. (Oglethorpe Power),
6.8s, 2012 1,000 1,187,060
----------
$8,854,062
- ---------------------------------------------------------------------------------------
Health Care Revenue - 4.3%
Richmond County, GA, Development Authority,
Nursing Home Refunding (Beverly Enterprises),
8.75s, 2011 $1,190 $1,323,875
Royston, GA, Hospital Authority Rev. (Cobb
Health), 7.375s, 2014 1,565 1,672,813
----------
$2,996,688
- ---------------------------------------------------------------------------------------
</TABLE>
19 - MGA
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Revenue (Corporate Guarantee) - 18.6%
Adel County, GA, Industrial Development
Authority, Pollution Control Rev. (Weyerhaeuser
Co.), AMBAC, 9s, 2006 $1,000 $ 1,011,280
Cartersville, GA, Developement Authority Rev.,
Water & Wastewater Facilities (Anheuser-Busch
Cos., Inc.), 5.625s, 2009 1,500 1,615,470
Cartersville, GA, Developement Authority Rev.,
Water & Wastewater Facilities (Anheuser-Bush
Cos., Inc.), 7.4s, 2010 500 621,575
Cartersville, GA, Developement Authority Rev.,
Water & Wastewater Facilities (Anheuser-Busch
Cos., Inc.), 6.75s, 2012 1,000 1,099,530
Effingham County, GA, Development Authority,
Pollution Control Rev. (Fort Howard Corp.),
7.9s, 2005 1,750 1,859,917
Emanuel County, GA, Development Authority
(Figgie Properties), 7.95s, 2004 475 478,881
Savannah, GA, Economic Development Authority,
Industrial Development Rev. (Hershey Foods
Corp.), 6.6s, 2012 1,150 1,261,987
Savannah, GA, Economic Development Authority,
Industrial Development Rev. (Stone Container
Corp.) 0s, 7.4s, 2026 1,750 1,948,450
Savannah, GA, Economic Development Authority,
Industrial Development Rev. (Union Camp Corp.),
6.15s, 2017 1,000 1,127,750
Savannah, GA, Port Authority, Pollution Control
Rev. (Union Carbide), 7.55s, 2004 1,000 1,002,870
Wayne County, GA, Solid Waste Rev.
(ITT-Rayonier, Inc.), 8s, 2015 1,000 1,087,200
-----------
$13,114,910
- ---------------------------------------------------------------------------------------------
Insured Health Care Revenue - 2.4%
Albany-Dougherty County, Georgia Hospital
Authority Rev. (Phoebe Putney Memorial
Hospital, Inc.), CARS, AMBAC, 7.37s, 2013[dbldag][dbldag] $1,550 $ 1,678,929
- ---------------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 7.2%
Cobb County, GA, Housing Authority Rev.
(Signature Place Project), 6.875s, 2017 $1,480 $ 1,568,593
Hinesville, GA, Leased Housing Corp. Rev.
(Baytree Apartments), FHA, 6.7s, 2017 900 964,791
Marietta, GA, Development Authority Rev.
(Southern Polytech), 6.25s, 2027 1,000 1,012,250
St. Mary's, GA (Cumberland Oaks Apartments),
FNMA, 7.375s, 2022 1,470 1,559,390
-----------
$ 5,105,024
- ---------------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 1.5%
Puerto Rico Highway & Transportation Authority
Rev., 5.5s, 2036 $1,000 $ 1,042,160
- ---------------------------------------------------------------------------------------------
Single Family Housing Revenue - 2.6%
DeKalb County, GA, Housing Authority, Single
Family Mortgage Rev., GNMA, 7.75s, 2022 $ 495 $ 519,121
Georgia Housing & Finance Authority, 0s, 2031 6,825 604,900
Georgia Residential Finance Authority Rev., FHA,
8s, 2020 335 352,544
Georgia Residential Finance Authority Rev., FHA,
7.25s, 2021 335 360,896
-----------
$ 1,837,461
</TABLE>
Municipal Bonds - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Water and Sewer Utility Revenue - 13.0%
Barnesville, GA, Water and Sewer Rev., 6.9s, 2022 $1,715 $ 1,864,342
Brunswick, GA, Water and Sewer Rev., MBIA,
6.1s, 2014 1,000 1,140,780
Cartersville, GA, Water and Sewer Rev., AMBAC,
7.2s, 2012 2,225 2,417,040
Fulton County, GA, Water and Sewer Rev., FGIC,
6.375s, 2014 3,250 3,744,065
-----------
$ 9,166,227
- ---------------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $61,422,969) $68,492,198
- ---------------------------------------------------------------------------------------------
Floating Rate Demand Notes - 1.0%
- ---------------------------------------------------------------------------------------------
Burke County, GA, Development Authority,
Pollution Control Rev., (Daily Georgia Power Co.),
due 04/01/98 $ 600 $ 600,000
Georgia Hospital Financing Authority Revenue,
due 04/01/98 110 110,000
- ---------------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 710,000
- ---------------------------------------------------------------------------------------------
Short-Term Obligations - 0.1%
- ---------------------------------------------------------------------------------------------
Burke County, GA, Development Authority,
Pollution Control Rev., (Georgia Power Co.), due
04/01/98, at Identified Cost $ 100 $ 100,000
- ---------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $62,232,969) $69,302,198
Other Assets, Less Liabilities - 1.6% 1,114,478
- ---------------------------------------------------------------------------------------------
Net assets - 100.0% $70,416,676
- ---------------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
20 - MGA
<PAGE>
Portfolio of Investments - March 31, 1998
MFS MARYLAND MUNICIPAL BOND FUND
Municipal Bonds - 94.8%
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 13.4%
Anne Arundel County, MD, 4.9s, 2011 $1,005 $ 1,011,472
Baltimore, MD, Consolidated Public Improvement,
FGIC, 5.3s, 2009 700 735,539
Baltimore, MD, Consolidated Public Improvement,
MBIA, 7s, 2009 1,000 1,210,670
Baltimore, MD, Consolidated Public Improvement,
7.15s, 2009 2,120 2,601,240
Baltimore, MD, Consolidated Public Improvement,
FGIC, 5.3s, 2010 815 855,147
Baltimore, MD, Consolidated Public Improvement,
FGIC, 5.375s, 2011 900 951,768
Baltimore, MD, Consolidated Public Improvement,
FGIC, 5.375s, 2013 770 821,467
Commonwealth of Puerto Rico, 6.5s, 2023 2,000 2,279,260
Howard County, MD, Metropolitan District,
0s, 2008 1,975 1,231,333
Montgomery County, MD, Public Improvement,
0s, 2009 4,000 2,391,000
Prince George's County, MD, 0s, 2007 5,110 3,331,516
State of Maryland, 9s, 1999 350 375,154
Washington, MD, Suburban Sanitation District,
6.1s, 2015 1,070 1,162,619
Washington, MD, Suburban Sanitation District,
5.25s, 2016 865 873,624
-----------
$19,831,809
- ---------------------------------------------------------------------------------------
State and Local Appropriation - 14.4%
Calvert County, MD, Community Lease Rev.,
7.2s, 2010 $ 750 $ 809,625
Howard County, MD, Certificates of Participation,
8.15s, 2021 450 636,538
Howard County, MD, Certificates of Participation,
"A", 8s, 2019 805 1,112,156
Howard County, MD, Certificates of Participation,
"B", 8s, 2019 385 531,901
Howard County, MD, Certificates of Participation,
"C", 8s, 2019 680 939,461
Maryland Stadium Authority, Sports Facilities
Leasing Rev., AMBAC, 5.875s, 2012 1,000 1,075,980
Maryland Stadium Authority, Sports Facilities
Leasing Rev., 7.6s, 2019 2,580 2,765,450
Prince George's County, MD, Certificates of
Participation, MBIA, 0s, 2005 2,495 1,818,655
Prince George's County, MD, Certificates of
Participation, MBIA, 0s, 2006 2,490 1,723,777
Prince George's County, MD, Certificates of
Participation, MBIA, 0s, 2011 3,675 1,943,781
Prince George's County, MD, Industrial
Development Authority, MBIA, 0s, 2004 980 748,387
Prince George's County, MD, Industrial
Development Authority, MBIA, 0s, 2006 1,800 1,246,104
Prince George's County, MD, Industrial
Development Authority, MBIA, 0s, 2009 1,500 887,895
Prince George's County, MD, Industrial
Development Authority, MBIA, 0s, 2010 2,730 1,533,250
Prince George's County, MD, Industrial
Development Authority, MBIA, 0s, 2011 1,000 528,920
Puerto Rico Public Buildings Authority, AMBAC,
5s, 2027 3,000 2,906,310
-----------
$21,208,190
- ---------------------------------------------------------------------------------------
Refunded and Special Obligations - 10.5%
Baltimore, MD, Water Utility Rev., MBIA, 6.5s, 2000 $ 540 $ 568,658
Commonwealth of Puerto Rico, Public
Improvement Rev., 6.8s, 2002 1,500 1,678,230
</TABLE>
Municipal Bonds - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Refunded and Special Obligations - continued
Maryland Health & Higher Education Facilities
Authority Rev. (Good Samaritan Hospital),
5.7s, 2009 $1,085 $ 1,188,780
Maryland Health & Higher Education Facilities
Authority Rev. (Kennedy Institute), 6.75s, 2001 500 539,040
Maryland Health & Higher Education Facilities
Authority Rev. (Sinai Hospital/Baltimore), 7s, 2000 2,000 2,164,000
Maryland Health & Higher Education Facilities
Authority Rev. (University of Maryland Medical
System), FGIC, 6.5s, 2001 1,000 1,072,130
Maryland Health & Higher Education Facilities
Authority Rev. (University of Maryland Medical
System), FGIC, 7s, 2001 1,840 2,032,648
Morgan, MD, State University Academic &
Auxiliary Facilities & Fees Rev., MBIA, 0s, 2006 1,135 787,543
Morgan, MD, State University Academic &
Auxiliary Facilities & Fees Rev., MBIA, 0s, 2008 1,400 871,570
Prince George's County, MD, Hospital Rev.
(Dimensions Health), 7.25s, 2002 2,000 2,272,420
Puerto Rico Electric Power Authority Rev.,
7s, 2001 1,000 1,107,930
Washington, MD, Suburban Sanitation District,
6.9s, 2001 1,045 1,149,228
-----------
$15,432,177
- ---------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 1.9%
Prince George's County, MD (Potomac Electric),
5.75s, 2010 $2,000 $ 2,180,120
Puerto Rico Aqueduct & Sewer Authority Rev.,
10.25s, 2009 500 691,455
-----------
$ 2,871,575
- ---------------------------------------------------------------------------------------
Health Care Revenue - 11.3%
Berlin, MD, Hospital Rev. (Atlantic General
Hospital), 8.375s, 2022 $1,345 $ 1,434,429
Maryland Health & Higher Education Facilities
Authority Rev. (Bradford Oaks Nursing &
Rehabilation, Center), 6.375s, 2027 1,500 1,536,555
Maryland Health & Higher Education Facilities
Authority Rev. (Doctors Community Hospital),
5.5s, 2024 2,000 2,004,740
Maryland Health & Higher Education Facilities
Authority Rev. (Johns Hopkins Hospital), 0s, 2010 2,000 1,107,080
Maryland Health & Higher Education Facilities
Authority Rev. (Medlantic Hospital Care Corp.),
8.375s, 2014 3,440 3,472,886
Maryland Health & Higher Educational Facilities
Authority Rev. (Howard County General
Hospital), 5.5s, 2021 4,000 4,020,720
Prince George's County, MD, Hospital Rev.
(Greater Southeast), 6.375s, 2023 2,900 3,035,778
-----------
$16,612,188
- ---------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 2.3%
Baltimore, MD, Port Facilities Rev. (duPont (E.I.)
de Nemours), 6.5s, 2011 $1,500 $ 1,643,325
Cecil County, MD, Commissioners Industrial
Development Revenue Board, 5.25s, 2006 1,000 1,054,290
Upper Potomac, MD, River Commission, Pollution
Control Rev. (Westvaco), 10.5s, 2004 150 151,980
Upper Potomac, MD, River Commission, Pollution
Control Rev. (Westvaco), 9.125s, 2015 500 509,300
-----------
$ 3,358,895
- ---------------------------------------------------------------------------------------
</TABLE>
21 - MMD
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Insured Health Care Revenue - 5.7%
Maryland Health & Higher Education Facilities
Authority Rev. (Frederick Memorial Hospital),
FGIC, 5.25s, 2013 $4,550 $ 4,755,979
Maryland Health & Higher Education Facilities
Authority Rev. (Mercy Medical Center), FSA,
5.625s, 2017 1,800 1,891,350
Maryland Industrial Development Finance
Authority, Economic Development Rev. (Bon
Secours), FSA, 7.924s, 2022[dbldag][dbldag] 1,400 1,689,506
------------
$ 8,336,835
- ---------------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 4.4%
Baltimore, MD, City Housing, 7.75s, 2009 $ 930 $ 953,250
Baltimore, MD, City Housing, 7.25s, 2023 1,210 1,253,088
Maryland Community Development Administration,
7.375s, 2021 330 352,849
Maryland Community Development Administration,
8.4s, 2029 1,320 1,336,500
Maryland Community Development Administration,
0s, 2032 11,605 856,565
Maryland Community Development Administration,
7.8s, 2032 1,190 1,267,553
Montgomery County, MD, Housing Opportunities
Commission, 7.375s, 2032 510 541,849
------------
$ 6,561,654
- ---------------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 3.5%
Puerto Rico Commonwealth Highway &
Transportation Authority, Highway Rev., FSA,
5.5s, 2013 $1,850 $ 1,978,113
Puerto Rico Highway & Transportation Authority
Rev., 6.625s, 2012 1,000 1,100,920
Puerto Rico Highway & Transportation Authority
Rev., 5.5s, 2013 2,000 2,131,800
------------
$ 5,210,833
- ---------------------------------------------------------------------------------------------
Single Family Housing Revenue - 4.8%
Maryland Community Development Administration,
7.7s, 2015 $ 580 $ 610,821
Maryland Community Development Administration,
5.875s, 2016 2,000 2,108,240
Maryland Community Development Administration,
8.25s, 2017 240 246,435
Maryland Community Development Administration,
6.75s, 2026 2,250 2,429,640
Maryland Community Development Administration,
7.625s, 2029 860 888,492
Maryland Community Development Administration,
7.85s, 2029 390 409,402
Montgomery County, MD, Housing Opportunities
Commission, 7.5s, 2017 365 384,728
------------
$ 7,077,758
- ---------------------------------------------------------------------------------------------
Solid Waste Revenue - 5.4%
Northeast Maryland, Waste Disposal Authority
(Montgomery County), 6s, 2006 $1,000 $ 1,085,960
Northeast Maryland, Waste Disposal Authority
(Montgomery County), MBIA, 6.3s, 2016 2,000 2,154,520
Northeast Maryland Waste Disposal Authority
(Southwest County Resource Recovery), MBIA,
7.2s, 2005 1,000 1,158,320
</TABLE>
Municipal Bonds - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Prince George's County, MD (Solid Waste
Management), FSA, 5.25s, 2013 $3,500 $ 3,568,915
------------
$ 7,967,715
- ---------------------------------------------------------------------------------------------
Universities - 7.6%
Maryland Health & Higher Education Facilities
Authority Rev. (John Hopkins University),
5.625s, 2027 $1,400 $ 1,468,992
Maryland Health & Higher Education Facilities
Authority Rev. (Loyola College), MBIA, 5.5s, 2016 3,000 3,142,560
Maryland Health & Higher Education Facilities
Authority Rev. (Mount St. Mary's College),
6.5s, 2009 669 715,380
Maryland Health & Higher Educational Facilities
Authority Rev. (John Hopkins), 5.125s, 2020[sec][sec] 3,500 3,479,210
Morgan, MD, State University, Academic &
Auxiliary Facilities Rev., MBIA, 6.05s, 2015 1,500 1,689,735
University of Maryland, Auxillary Facilities &
Tuition Rev., 0s, 2004 1,000 762,650
------------
$ 11,258,527
- ---------------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 4.6%
Baltimore, MD, Wastewater Rev., FGIC, 6s, 2015 $1,000 $ 1,120,740
Baltimore, MD, Wastewater Rev., MBIA,
5.65s, 2020 2,000 2,156,880
Baltimore, MD, Wastewater Rev., MBIA,
7.37s, 2020[dbldag][dbldag] 3,000 3,455,460
------------
$ 6,733,080
- ---------------------------------------------------------------------------------------------
Other - 5.0%
Baltimore County, MD, 5.375s, 2013 $1,600 $ 1,634,928
Maryland Industrial Development Finance
Authority (American Center for Physics),
6.625s, 2017 1,500 1,626,180
Maryland Industrial Development Finance
Authority (YMCA/Baltimore), 8s, 2012 2,825 3,238,297
Maryland Industrial Development Finance
Authority (YMCA/Baltimore), 8.25s, 2012 865 932,150
------------
$ 7,431,555
- ---------------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $126,875,737) $139,892,791
- ---------------------------------------------------------------------------------------------
Floating Rate Demand Notes - 5.4%
- ---------------------------------------------------------------------------------------------
Bartow County, GA, Development Authority,
Pollution Control Rev. (Georgia Power), due
4/01/98 $1,800 $ 1,800,000
Burke County, GA, Development Authority,
Pollution Control Rev. (Vogtle), due 4/01/98 1,500 1,500,000
Harris County, TX, Hospital Rev. (Methodist
Hospital), due 4/01/98 2,500 2,500,000
Hillsborough County, FL, Pollution Control Rev.,
due 4/01/98 100 100,000
Lubbock, TX, Health Facilities Development Corp.
Rev. (St. Joseph's), due 4/01/98 2,100 2,100,000
- ---------------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 8,000,000
- ---------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $134,875,737) $147,892,791
Other Assets, Less Liabilities - (0.2)% (253,176)
- ---------------------------------------------------------------------------------------------
Net assets - 100.0% $147,639,615
- ---------------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
22 - MMD
<PAGE>
Portfolio of Investments - March 31, 1998
MFS MASSACHUSETTS MUNICIPAL BOND FUND
Municipal Bonds - 96.7%
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 15.2%
Belmont, MA, 5s, 2015 $2,165 $ 2,178,791
Commonwealth of Massachusetts, 0s, 2004 10,000 7,461,000
Commonwealth of Massachusetts, 0s, 2005 2,000 1,438,900
Commonwealth of Massachusetts, 0s, 2005 2,000 1,417,580
Commonwealth of Massachusetts, 5s, 2017 1,800 1,758,348
Commonwealth of Massachusetts, AMBAC,
6.75s, 2009 2,500 2,747,625
Commonwealth of Massachusetts, AMBAC,
5.75s, 2010 3,000 3,285,270
Commonwealth of Massachusetts, FGIC, 0s, 2006 4,000 2,779,040
Commonwealth of Massachusetts, FGIC, 7s, 2009 1,250 1,504,500
Commonwealth of Massachusetts, FGIC,
5.75s, 2011 3,000 3,277,320
Commonwealth of Massachusetts, MBIA,
7.5s, 2004 2,850 3,341,967
Gloucester, MA, AMBAC, 7s, 2009 225 244,179
Gloucester, MA, AMBAC, 7s, 2010 215 233,582
Holyoke, MA, 8s, 2001 490 524,021
Lawrence, MA, AMBAC, 9.75s, 2002 600 716,880
Lowell, MA, 8.4s, 2009 1,000 1,126,390
Mashpee MA, MBIA, 6.25s, 2008 1,530 1,742,655
North Attleborough, MA, AMBAC, 5s, 2013 2,240 2,257,741
Northbridge, MA, 7.6s, 2001 325 356,099
Princeton, MA, AMBAC, 7.25s, 2009 490 529,484
-----------
$38,921,372
- -----------------------------------------------------------------------------------
State and Local Appropriation - 7.3%
Massachusetts Bay Transportation Authority,
7s, 2021 $5,000 $ 6,205,850
Massachusetts Bay Transportation Authority
(General Transportation), 6.2s, 2016 10,400 11,851,736
Massachusetts Industrial Finance Agency (Vinfen
Corporation), 7.1s, 2018 675 735,817
-----------
$18,793,403
- -----------------------------------------------------------------------------------
Refunded and Special Obligations - 18.7%
Haverhill, MA, FGIC, 7s, 2002 $1,250 $ 1,406,950
Holyoke, MA, MBIA, 8s, 2001 1,700 1,896,775
Holyoke, MA, MBIA, 8.1s, 2002 500 587,980
Lowell, MA, 7.625s, 2001 4,875 5,465,119
Massachusetts Federally Assisted Housing,
0s, 2023 4,995 1,111,987
Massachusetts Health & Education Facilities
Authority (Brigham & Women's Hospital), MBIA,
6.75s, 2001 2,900 3,181,822
Massachusetts Health & Education Facilities
Authority (Charlton Memorial Hospital),
7.25s, 2001 1,700 1,888,037
Massachusetts Health & Education Facilities
Authority (Suffolk University), 8s, 2000 1,750 1,920,695
Massachusetts Health & Education Facilities
Authority (Fairview Extended Care Facility),
10.25s, 2001 2,000 2,363,840
Massachusetts Health & Education Facilities
Authority (New England Deaconess Hospital),
6.875s, 2002 5,600 6,251,448
Massachusetts Health & Education Facilities
Authority (New England Deaconess Hospital),
7.2s, 2001 2,500 2,760,575
Massachusetts Health & Education Facilities
Authority (Newton-Wellesley Hospital), 8s, 2001 1,710 1,886,557
</TABLE>
Municipal Bonds - continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
Massachusetts Industrial Finance Agency, Tunnel
Rev. (Mass. Turnpike), 9s, 2000 $8,020 $ 9,077,437
Refunded and Special Obligations - continued
Massachusetts Industrial Finance Agency (Cape
Cod Health System), 8.5s, 2000 500 563,680
Massachusetts Industrial Finance Agency (Dexter
School), 7.5s, 2001 1,655 1,845,275
Massachusetts Industrial Finance Agency (Dexter
School), 7.5s, 2001 2,900 3,233,413
Massachusetts Port Authority, 12.75s, 2002 485 590,488
Massachusetts Port Authority Rev., ETM,
13s, 2013 780 1,327,677
Palmer, MA, AMBAC, 7.7s, 2000 500 551,930
-----------
$47,911,685
- -----------------------------------------------------------------------------------
Airport and Port Revenue - 6.7%
Massachusetts Port Authority (USAIR), MBIA,
5.625s, 2011 $2,140 $ 2,257,186
Massachusetts Port Authority, 5.75s, 2010 500 549,750
Massachusetts Port Authority, 5s, 2015 5,600 5,491,024
Massachusetts Port Authority, FGIC, 7.5s, 2020 1,060 1,154,584
Massachusetts Port Authority, 7.5s, 2020 3,440 3,729,889
Puerto Rico Ports Authority (American Airlines),
6.3s, 2023 2,370 2,532,132
Puerto Rico Ports Authority (American Airlines),
6.25s, 2026 1,500 1,627,665
-----------
$17,342,230
- -----------------------------------------------------------------------------------
Health Care Revenue - 10.2%
Boston, MA, Industrial Development Finance
Authority Rev. (Stonehedge Convalescent
Center), 10.75s, 2011 $ 665 $ 706,183
Massachusetts Health & Education Facilities
Authority (Dana Farber Cancer Institute),
6.25s, 2022 1,000 1,084,440
Massachusetts Health & Education Facilities
Authority (Beth Israel Hospital), 7s, 2014 3,000 3,151,860
Massachusetts Health & Education Facilities
Authority (Children's Hospital), 6.125s, 2012 2,285 2,446,869
Massachusetts Health & Education Facilities
Authority (Massachusetts Eye & Ear Infirmary),
7.375s, 2011 3,000 3,189,210
Massachusetts Health & Education Facilities
Authority (North Adams Regional Hospital),
6.625s, 2018 1,000 1,072,430
Massachusetts Health & Educational Facilities
Authority (Milford-Whitinsville Regional),
5.25s, 2018 1,000 967,140
Massachusetts Industrial Finance Agency
(Beverly Enterprises), 8.375s, 2009 4,040 4,493,854
Massachusetts Industrial Finance Agency
(Evanswood), 7.625s, 2014 1,200 1,281,660
Massachusetts Industrial Finance Agency
(Martha's Vineyard Long-Term Care Facility),
9.25s, 2022**[dbldag] 3,000 771,000
Massachusetts Industrial Finance Agency
(Massachusetts Biomedical Research), 0s, 2004 5,000 3,780,650
Massachusetts Industrial Finance Agency
(Massachusetts Biomedical Research), 0s, 2010 5,300 2,845,517
Massachusetts Industrial Finance Agency
(Needham/Hamilton House), 11s, 2010 500 520,560
-----------
$26,311,373
- -----------------------------------------------------------------------------------
</TABLE>
23 - MMA
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Revenue (Corporate Guarantee) - 0.8%
Massachusetts Industrial Finance Agency (Welch
Foods Inc.), 5.6s, 2017 $ 1,700 $ 1,724,140
Springfield, MA, Industrial Development Finance
Agency (Terminal Building), 10s, 2001 315 323,141
------------
$ 2,047,281
- ------------------------------------------------------------------------------------
Insured Health Care Revenue - 4.6%
Boston, MA, Industrial Development Finance
Authority Rev., (Alzheimers Center), FHA,
5.5s, 2012 $ 750 $ 777,518
Massachusetts Health & Education Facilities
Authority (Beth Israel Hospital), AMBAC,
8.522s, 2025[dbldag][dbldag] 5,000 5,628,800
Massachusetts Health & Education Facility
Authority (Newton Wellesley College), MBIA,
6.125s, 2015 1,000 1,095,350
Massachusetts Health & Education Facility
Authority(Partners Healthcare), MBIA,
5.375s, 2018 2,000 2,014,960
Massachusetts Health & Educational Facilities
Authority (Hallmark Health System), FSA,
5s, 2027 2,500 2,385,800
------------
$ 11,902,428
- ------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 3.1%
Massachusetts Housing Finance Agency,
8.4s, 2021 $ 2,190 $ 2,250,838
Massachusetts Housing Finance Agency,
8.2s, 2027 720 749,945
Massachusetts Housing Finance Agency, FHA,
8.8s, 2021 1,995 2,012,456
Massachusetts Housing Finance Agency, FNMA,
6.9s, 2025 1,700 1,838,635
Somerville, MA, Housing Authority Rev.
(Clarendon Hill), GNMA, 7.85s, 2010 955 1,011,699
------------
$ 7,863,573
- ------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 1.9%
Commonwealth of Massachusetts (Spot
Obligation Revenue), 5s, 2017 $ 4,000 $ 3,907,880
Puerto Rico Highway & Transportation Authority
Rev., 5.5s, 2036 1,000 1,042,160
------------
$ 4,950,040
- ------------------------------------------------------------------------------------
Single Family Housing Revenue - 3.3%
Massachusetts Housing Finance Agency,
8.1s, 2020 $ 2,270 $ 2,323,799
Massachusetts Housing Finance Agency,
8.1s, 2021 2,000 2,071,380
Massachusetts Housing Finance Agency,
7.95s, 2023 820 871,094
Massachusetts Industrial Finance Agency, MBIA,
6.35s, 2022 3,000 3,208,020
------------
$ 8,474,293
- ------------------------------------------------------------------------------------
Student Loan Revenue
Massachusetts Education Loan Authority, 9s, 2001 $ 5 $ 5,022
- ------------------------------------------------------------------------------------
Turnpike Revenue - 1.9%
Massachusetts Turnpike Authority, MBIA, 0s, 2018 $10,000 $ 3,630,600
Massachusetts Turnpike Authority, Metropolitan
Highway System Rev., MBIA, 0s, 2019 3,500 1,202,250
------------
$ 4,832,850
- ------------------------------------------------------------------------------------
</TABLE>
Municipal Bonds - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
Universities - 10.3%
Massachusetts Health & Education Facility
Authority (Boston College), 5.25s, 2018 $ 3,500 $ 3,514,000
Massachusetts Health & Education Facility
Authority (Wheaton College), 5.25s, 2019 1,000 1,005,980
Massachusetts Health & Education Facilities
Authority (Boston College), 5.25s, 2023 4,350 4,308,196
Massachusetts Health & Education Facilities
Authority (Boston University), MBIA, 9.477s,
2031[dbldag][dbldag] 5,000 5,895,650
Massachusetts Industrial Finance Agency
(Babson College), 5.25s, 2027 3,000 2,987,280
Massachusetts Industrial Finance Agency (Curry
College), 8s, 2010 560 583,134
Massachusetts Industrial Finance Agency (Curry
College), 8s, 2014 1,885 1,986,036
Massachusetts Industrial Finance Agency
(Emerson College), 8.9s, 2018 1,000 1,102,060
Massachusetts Industrial Finance Agency (Lesley
College), 6.3s, 2025 2,000 2,193,220
Massachusetts Industrial Finance Agency
(Brandeis University), MBIA, 0s, 2004 1,000 754,440
Massachusetts Industrial Finance Agency
(Brandeis University), MBIA, 0s, 2005 1,000 717,250
Massachusetts Industrial Finance Agency
(Brandeis University), MBIA, 0s, 2009 1,000 585,010
Massachusetts Industrial Finance Agency
(Brandeis University), MBIA, 0s, 2010 1,000 551,610
Massachusetts Industrial Finance Agency
(Brandeis University), MBIA, 0s, 2011 500 259,545
------------
$ 26,443,411
- ------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 8.7%
Massachusetts Water Resources Authority,
MBIA, 0s, 2006 $ 2,500 $ 1,747,100
Massachusetts Water Resources Authority, FSA,
5.5s, 2016 1,000 1,061,940
Massachusetts Water Resources Authority,
6.5s, 2019 8,470 10,288,170
Massachusetts Water Resources Authority,
AMBAC, 5.25s, 2015 5,000 5,186,600
Massachusetts Water Resources Authority,
MBIA, 5.25s, 2020 4,000 4,000,200
------------
$ 22,284,010
- ------------------------------------------------------------------------------------
Other - 4.0%
Martha's Vineyard, MA, Land Bank (Land
Acquisition), 8.125s, 2011 $ 3,600 $ 3,913,920
Massachusetts Health & Education Facilities
Authority (Learning Center for Deaf Children),
9.25s, 2014 2,250 2,395,958
Massachusetts Health & Education Facilities
Authority (Learning Center for Deaf Children),
8s, 2020 1,500 1,565,775
Massachusetts Industrial Finance Agency
(Concord Academy), 5.5s, 2027 1,000 1,004,590
Nantucket Island, MA, Land Bank, 7.75s, 2020 1,200 1,335,612
------------
$ 10,215,855
- ------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $227,046,978) $248,298,826
- ------------------------------------------------------------------------------------
</TABLE>
24 - MMA
<PAGE>
Portfolio of Investments - continued
Floating Rate Demand Notes - 1.5%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
Massachusetts Port Authority Rev., due 04/01/98 $ 400 $ 400,000
Massachusetts State Health & Education Facility,
Variable Rate-Cap Assets Prog-Ser D, due
04/01/98 3,400 3,400,000
- ------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $3,800,000
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
Total Investments (Identified Cost, $230,846,978) $252,098,826
Other Assets, Less Liabilities - 1.8% 4,512,624
- ------------------------------------------------------------------------------------
Net assets - 100.0% $256,611,450
- ------------------------------------------------------------------------------------
Portfolio Footnotes:
[dbldag] Security valued by or at the direction of the Trustees.
[dbldag][dbldag] Inverse floating rate security.
[sec][sec] When-issued security. At March 31, 1998, the Fund had
sufficient cash and/or securities at least equal to the value of the
when-issued security.
### Security segregated as collateral for an open futures contract.
** Non-income producing security in default.
See notes to financial statements
</TABLE>
25 - MMA
<PAGE>
Financial Statements
Statements of Assets and Liabilities
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Alabama Arkansas California
March 31, 1998 Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Investments -
Identified cost $ 76,841,879 $128,594,066 $238,723,866
Unrealized appreciation 6,645,072 11,400,580 23,563,515
------------ ------------ ------------
Total investments, at value $ 83,486,951 $139,994,646 $262,287,381
Cash 46,157 31,674 68,664
Receivable for daily variation margin on open futures contracts 13,125 -- --
Receivable for Fund shares sold 44,635 224,858 1,453,827
Receivable for investments sold 80,000 14,344 4,528,400
Interest receivable 1,258,107 1,858,466 3,352,576
Other assets 752 1,402 2,539
------------ ------------ ------------
Total assets $ 84,929,727 $142,125,390 $271,693,387
------------ ------------ ------------
Liabilities:
Distributions payable $ 205,936 $ 304,367 $ 622,639
Payable for Fund shares reacquired 64,670 281,698 310,736
Payable for when-issued investments purchased 967,430 -- --
Payable to affiliates -
Management fee 3,071 5,201 8,806
Shareholder servicing agent fee 768 1,299 2,479
Distribution and service fee 2,200 4,008 6,964
Administrative fee 102 173 400
Accrued expenses and other liabilities 73,550 86,319 134,744
------------ ------------ ------------
Total liabilities $ 1,317,727 $ 683,065 $ 1,086,768
------------ ------------ ------------
Net assets $ 83,612,000 $141,442,325 $270,606,619
------------ ------------ ------------
Net assets consist of:
Paid-in capital $ 76,550,925 $137,493,426 $255,829,583
Unrealized appreciation on investments and futures 6,647,687 11,400,580 23,563,515
Accumulated undistributed net realized
gain (loss) on investments 226,200 (7,292,351) (8,488,226)
Accumulated undistributed (distributions in excess of)
net investment income 187,188 (159,330) (298,253)
------------ ------------ ------------
Total $ 83,612,000 $141,442,325 $270,606,619
------------ ------------ ------------
Shares of beneficial interest outstanding:
Class A 6,993,187 13,164,767 38,343,376
Class B 747,341 723,825 7,548,679
Class C -- -- 756,445
------------ ------------ ------------
Total shares of beneficial interest outstanding 7,740,528 13,888,592 46,648,500
------------ ------------ ------------
Net assets:
Class A $ 75,537,546 $134,072,147 $222,421,244
Class B 8,074,454 7,370,178 43,789,768
Class C -- -- 4,395,607
------------ ------------ ------------
Total net assets $ 83,612,000 $141,442,325 $270,606,619
------------ ------------ ------------
Class A shares:
Net asset value per share
(net assets [divided by] shares of beneficial interest outstanding) $ 10.80 $ 10.18 $ 5.80
------------ ------------ ------------
Offering price per share (100 [divided by] 95.25 of NAV per share) $ 11.34 $ 10.69 $ 6.09
------------ ------------ ------------
Class B shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) $ 10.80 $ 10.18 $ 5.80
------------ ------------ ------------
Class C shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) -- -- $ 5.81
------------ ------------ ------------
</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,
Class B, and Class C shares.
See notes to financial statements
26
<PAGE>
Financial Statements - continued
Statements of Assets and Liabilities -- continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Florida Georgia Maryland Massachusetts
March 31, 1998 Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments -
Identified cost $ 85,460,484 $ 62,232,969 $134,875,737 $230,846,978
Unrealized appreciation 8,759,681 7,069,229 13,017,054 21,251,848
------------ ------------ ------------ ------------
Total investments, at value $ 94,220,165 $ 69,302,198 $147,892,791 $252,098,826
Cash 16,094 138,303 37,901 41,184
Receivable for Fund shares sold 105,562 93,778 148,546 1,220,348
Receivable for investments sold -- 20,001 1,540,000 300,000
Interest receivable 1,638,798 1,098,802 2,010,694 3,767,737
Other assets 13,195 638 1,302 2,288
------------ ------------ ------------ ------------
Total assets $ 95,993,814 $ 70,653,720 $151,631,234 $257,430,383
------------ ------------ ------------ ------------
Liabilities:
Cash overdraft $ 963,261 $ -- $ -- $ --
Distributions payable 234,622 141,501 276,729 557,703
Payable for Fund shares reacquired 287,223 11,641 228,156 122,317
Payable for when-issued investments purchased -- -- 3,389,365 --
Payable to affiliates -
Management fee 3,480 2,586 5,430 9,427
Shareholder servicing agent fee 870 646 1,358 2,357
Distribution and service fee 2,969 2,103 5,368 8,315
Administrative fee 116 86 181 314
Accrued expenses and other liabilities 71,148 78,481 85,032 118,500
------------ ------------ ------------ ------------
Total liabilities $ 1,563,689 $ 237,044 $ 3,991,619 $ 818,933
------------ ------------ ------------ ------------
Net assets $ 94,430,125 $ 70,416,676 $147,639,615 $256,611,450
------------ ------------ ------------ ------------
Net assets consist of:
Paid-in capital $ 93,656,651 $ 66,248,925 $139,230,730 $239,548,702
Unrealized appreciation on investments 8,759,681 7,069,229 13,017,054 21,251,848
Accumulated undistributed net realized
loss on investments (7,996,199) (2,871,096) (4,406,212) (3,578,470)
Accumulated undistributed (distributions in excess of)
net investment income 9,992 (30,382) (201,957) (610,630)
------------ ------------ ------------ ------------
Total $ 94,430,125 $ 70,416,676 $147,639,615 $256,611,450
------------ ------------ ------------ ------------
Shares of beneficial interest outstanding:
Class A 7,696,941 5,439,735 10,985,563 20,970,023
Class B 1,656,208 992,582 1,885,910 1,652,019
------------ ------------ ------------ ------------
Total shares of beneficial interest outstanding 9,353,149 6,432,317 12,871,473 22,622,042
------------ ------------ ------------ ------------
Net assets:
Class A $ 77,711,347 $ 59,546,077 $126,017,610 $237,861,440
Class B 16,718,778 10,870,599 21,622,005 18,750,010
------------ ------------ ------------ -----------
Total net assets $ 94,430,125 $ 70,416,676 $147,639,615 $256,611,450
------------ ------------ ------------ ------------
Class A shares:
Net asset value per share
(net assets [divided by] shares of beneficial
interest outstanding) $ 10.10 $ 10.95 $ 11.47 $ 11.34
------------ ------------ ------------ ------------
Offering price per share (100 [divided by]
95.25 of NAV per share) $ 10.60 $ 11.50 $ 12.04 $ 11.91
------------ ------------ ------------ ------------
Class B shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial
interest outstanding) $ 10.09 $ 10.95 $ 11.47 $ 11.35
------------ ------------ ------------ ------------
</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,
Class B, and Class C shares.
See notes to financial statements
27
<PAGE>
Financial Statements - continued
Statements of Operations
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Alabama Arkansas California
Year Ended March 31, 1998 Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income:
Interest income $5,185,811 $ 8,516,813 $15,493,585
---------- ----------- -----------
Expenses -
Management fee $ 462,104 $ 802,329 $ 1,492,065
Trustees' compensation 17,668 16,915 17,403
Shareholder servicing agent fee 105,726 183,675 340,548
Distribution and service fee (Class A) 191,668 138,581 --
Distribution and service fee (Class B) 74,761 67,455 323,302
Distribution and service fee (Class C) -- -- 39,404
Administrative fee 11,875 20,632 38,331
Custodian fee 36,401 54,841 98,631
Auditing fees 30,327 32,327 32,327
Printing 7,583 18,017 24,894
Postage 3,703 11,388 18,891
Legal fees 1,973 2,180 6,945
Miscellaneous 50,492 58,894 77,184
---------- ----------- -----------
Total expenses $ 994,281 $ 1,407,234 $ 2,509,925
Fees paid indirectly (12,457) (12,509) (26,065)
Reduction of expenses by investment adviser and/or distributor (55,426) (95,452) (407,800)
---------- ----------- -----------
Net expenses $ 926,398 $ 1,299,273 $ 2,076,060
---------- ----------- -----------
Net investment income $4,259,413 $ 7,217,540 $13,417,525
---------- ----------- -----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 643,984 $ 513,409 $ 3,073,681
Futures contracts 160,255 (8,670) --
---------- ----------- -----------
Net realized gain on investments $ 804,239 $ 504,739 $ 3,073,681
---------- ----------- -----------
Change in unrealized appreciation -
Investments $2,634,890 $ 6,322,102 $12,733,420
Futures contracts 104,146 40,728 --
---------- ----------- -----------
Net unrealized gain on investments $2,739,036 $ 6,362,830 $12,733,420
---------- ----------- -----------
Net realized and unrealized gain on investments $3,543,275 $ 6,867,569 $15,807,101
---------- ----------- -----------
Increase in net assets from operations $7,802,688 $14,085,109 $29,224,626
---------- ----------- -----------
</TABLE>
See notes to financial statements
28
<PAGE>
Financial Statements - continued
Statements of Operations -- continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Florida Georgia Maryland Massachusetts
Year Ended March 31, 1998 Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income:
Interest income $5,528,740 $4,369,894 $ 8,570,505 $15,826,875
---------- ---------- ----------- -----------
Expenses -
Management fee $ 522,340 $ 390,188 $ 803,559 $ 1,396,410
Trustees' compensation 15,847 18,339 17,137 17,077
Shareholder servicing agent fee 119,388 89,058 183,384 318,677
Distribution and service fee (Class A) -- 150,448 442,077 829,850
Distribution and service fee (Class B) 125,871 107,303 197,267 166,760
Administrative fee 13,397 10,002 20,597 35,807
Custodian fee 37,234 28,419 58,586 105,028
Auditing fees 30,327 31,027 32,027 31,027
Printing 8,935 8,666 23,173 24,803
Postage 6,863 4,370 13,410 16,100
Legal fees 4,702 1,033 3,990 10,528
Miscellaneous 48,287 42,549 71,992 101,856
---------- ---------- ----------- -----------
Total expenses $ 933,191 $ 881,402 $ 1,867,199 $ 3,053,923
Fees paid indirectly (10,469) (17,140) (34,317) (34,577)
Reduction of expenses by investment adviser and/or distributor (63,152) (71,098) (146,404) (254,419)
---------- ---------- ----------- -----------
Net expenses $ 859,570 $ 793,164 $ 1,686,478 $ 2,764,927
---------- ---------- ----------- -----------
Net investment income $4,669,170 $3,576,730 $ 6,884,027 $13,061,948
---------- ---------- ----------- -----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ (663,287) $ 557,951 $ 1,097,797 $ 1,678,366
Futures contracts (15,648) -- -- --
---------- ---------- ----------- -----------
Net realized gain (loss) on investments $ (678,935) $ 557,951 $ 1,097,797 $ 1,678,366
---------- ---------- ----------- -----------
Change in unrealized appreciation -
Investments $5,126,079 $3,175,485 $ 6,667,042 $ 9,433,538
---------- ---------- ----------- -----------
Net unrealized gain on investments $5,126,079 $3,175,485 $ 6,667,042 $ 9,433,538
---------- ---------- ----------- -----------
Net realized and unrealized gain on investments $4,447,144 $3,733,436 $ 7,764,839 $11,111,904
---------- ---------- ----------- -----------
Increase in net assets from operations $9,116,314 $7,310,166 $14,648,866 $24,173,852
---------- ---------- ----------- -----------
</TABLE>
See notes to financial statements
29
<PAGE>
Financial Statements - continued
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Alabama Arkansas California
Year Ended March 31, 1998 Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 4,259,413 $ 7,217,540 $ 13,417,525
Net realized gain on investments 804,239 504,739 3,073,681
Net unrealized gain on investments 2,739,036 6,362,830 12,733,420
------------ ------------- -------------
Increase in net assets
from operations $ 7,802,688 $ 14,085,109 $ 29,224,626
------------ ------------- -------------
Distributions declared to shareholders -
From net investment income (Class A) $ (3,952,098) $ (6,904,570) $ (11,527,300)
From net investment income (Class B) (328,801) (312,970) (1,703,179)
From net investment income (Class C) -- -- (160,099)
From net realized gain on investments (Class A) (875,615) -- --
From net realized gain on investments (Class B) (85,133) -- --
In excess of net investment income (Class A) -- (21,863) --
In excess of net investment income (Class B) -- (991) --
------------ ------------- -------------
Total distributions declared to shareholders $ (5,241,647) $ (7,240,394) $ (13,390,578)
------------ ------------- -------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 4,086,612 $ 6,514,543 $ 49,807,648
Net asset value of shares issued to shareholders
in reinvestment of distributions 2,192,360 3,290,995 5,602,613
Cost of shares reacquired (9,437,201) (27,018,684) (73,799,364)
------------ ------------- -------------
Net decrease in net assets from
Fund share transactions $ (3,158,229) $ (17,213,146) $ (18,389,103)
------------ ------------- -------------
Total decrease in net assets $ (597,188) $ (10,368,431) $ (2,555,055)
Net assets:
At beginning of period 84,209,188 151,810,756 273,161,674
------------ ------------- -------------
At end of period $ 83,612,000 $ 141,442,325 $ 270,606,619
------------ ------------- -------------
Accumulated undistributed (distributions in excess of)
net investment income included in net assets
at end of period $ 187,188 $ (159,330) $ (298,253)
------------ ------------- -------------
</TABLE>
See notes to financial statements
30
<PAGE>
Financial Statements - continued
Statements of Changes in Net Assets -- continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Florida Georgia Maryland Massachusetts
Year Ended March 31, 1998 Fund Fund Fund Fund
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 4,669,170 $ 3,576,730 $ 6,884,027 $ 13,061,948
Net realized gain (loss) on investments (678,935) 557,951 1,097,797 1,678,366
Net unrealized gain on investments 5,126,079 3,175,485 6,667,042 9,433,538
------------- ------------- ------------- -------------
Increase in net assets
from operations $ 9,116,314 $ 7,310,166 $ 14,648,866 $ 24,173,852
------------- ------------- ------------- -------------
Distributions declared to shareholders -
From net investment income (Class A) $ (4,017,401) $ (3,095,247) $ (6,063,937) $ (12,306,601)
From net investment income (Class B) (664,633) (470,417) (820,090) (755,347)
In excess of net investment income (Class A) -- -- (111,652) (39,763)
In excess of net investment income (Class B) -- -- (15,100) (2,441)
------------- ------------- ------------- -------------
Total distributions declared to shareholders $ (4,682,034) $ (3,565,664) $ (7,010,779) $ (13,104,152)
------------- ------------- ------------- -------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 18,201,517 $ 5,558,029 $ 12,014,517 $ 69,075,967
Net asset value of shares issued to shareholders
in reinvestment of distributions 1,719,736 1,841,422 3,703,002 6,284,180
Cost of shares reacquired (24,967,989) (10,564,901) (19,499,553) (79,896,216)
------------- ------------- ------------- -------------
Net decrease in net assets from
Fund share transactions $ (5,046,736) $ (3,165,450) $ (3,782,034) $ (4,536,069)
------------- ------------- ------------- -------------
Total increase (decrease) in
net assets $ (612,456) $ 579,052 $ 3,856,053 $ 6,533,631
Net assets:
At beginning of period 95,042,581 69,837,624 143,783,562 250,077,819
------------- ------------- ------------- -------------
At end of period $ 94,430,125 $ 70,416,676 $ 147,639,615 $ 256,611,450
------------- ------------- ------------- -------------
Accumulated undistributed (distributions in excess of)
net investment income included in net assets
at end of period $ 9,992 $ (30,382) $ (201,957) $ (610,630)
------------- ------------- ------------- -------------
</TABLE>
See notes to financial statements
31
<PAGE>
Financial Statements - continued
Statements of Changes in Net Assets -- continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Alabama Arkansas California
Year Ended March 31, 1997 Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 4,531,494 $ 8,421,933 $ 15,145,169
Net realized gain (loss) on investments 494,185 (150,505) (560,206)
Net unrealized loss on investments (137,249) (395,653) (1,519,530)
------------- ------------- --------------
Increase in net assets from operations $ 4,888,430 $ 7,875,775 $ 13,065,433
------------- ------------- --------------
Distributions declared to shareholders -
From net investment income (Class A) $ (4,197,127) $ (7,990,669) $ (13,365,451)
From net investment income (Class B) (303,407) (332,561) (1,604,012)
From net investment income (Class C) -- -- (175,706)
From net realized gain on investments (Class A) (638,656) -- --
From net realized gain on investments (Class B) (55,537) -- --
In excess of net investment income (Class A) -- -- (44,591)
In excess of net investment income (Class B) -- -- (5,352)
In excess of net investment income (Class C) -- -- (586)
------------- ------------- --------------
Total distributions declared to shareholders $ (5,194,727) $ (8,323,230) $ (15,195,698)
------------- ------------- --------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 3,979,559 $ 9,627,230 $ 151,915,799
Net asset value of shares issued to shareholders
in reinvestment of distributions 2,180,791 3,747,332 6,490,899
Cost of shares reacquired (10,268,087) (41,972,562) (181,959,198)
------------- ------------- --------------
Net decrease in net assets from
Fund share transactions $ (4,107,737) $ (28,598,000) $ (23,552,500)
------------- ------------- --------------
Total decrease in net assets $ (4,414,034) $ (29,045,455) $ (25,682,765)
Net assets:
At beginning of period 88,623,222 180,856,211 298,844,439
------------- ------------- --------------
At end of period $ 84,209,188 $ 151,810,756 $ 273,161,674
------------- ------------- --------------
Accumulated undistributed (distributions in excess of)
net investment income included in net assets
at end of period $ 179,772 $ (139,974) $ (378,009)
------------- ------------- --------------
</TABLE>
See notes to financial statements
32
<PAGE>
Financial Statements - continued
Statements of Changes in Net Assets -- continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Florida Georgia Maryland Massachusetts
Year Ended March 31, 1997 Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 5,124,807 $ 3,897,912 $ 7,616,826 $ 14,194,777
Net realized gain (loss) on investments (1,328,413) 391,667 (762,039) (339,059)
Net unrealized loss on investments (546,250) (1,017,086) (1,489,457) (2,770,273)
------------- ------------- ------------- -------------
Increase in net assets from operations $ 3,250,144 $ 3,272,493 $ 5,365,330 $ 11,085,445
------------- ------------- ------------- -------------
Distributions declared to shareholders -
From net investment income (Class A) $ (4,467,721) $ (3,377,412) $ (6,713,171) $ (13,195,047)
From net investment income (Class B) (634,657) (454,697) (679,183) (653,840)
------------- ------------- ------------- -------------
Total distributions declared to shareholders $ (5,102,378) $ (3,832,109) $ (7,392,354) $ (13,848,887)
------------- ------------- ------------- -------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 43,852,042 $ 5,089,635 $ 11,277,965 $ 60,963,962
Net asset value of shares issued to shareholders
in reinvestment of distributions 1,953,163 2,000,992 3,935,520 6,335,241
Cost of shares reacquired (50,911,287) (15,081,831) (22,393,495) (75,271,052)
------------- ------------- ------------- -------------
Net decrease in net assets from
Fund share transactions $ (5,106,082) $ (7,991,204) $ (7,180,010) $ (7,971,849)
------------- ------------- ------------- -------------
Total decrease in net assets $ (6,958,316) $ (8,550,820) $ (9,207,034) $ (10,735,291)
Net assets:
At beginning of period 102,000,897 78,388,444 152,990,596 260,813,110
------------- ------------- ------------- -------------
At end of period $ 95,042,581 $ 69,837,624 $ 143,783,562 $ 250,077,819
------------- ------------- ------------- -------------
Accumulated undistributed (distributions in excess of)
net investment income included in net assets
at end of period $ 22,856 $ (41,448) $ (137,662) $ (607,456)
------------- ------------- ------------- -------------
</TABLE>
See notes to financial statements
33
<PAGE>
Financial Statements - continued
Financial Highlights
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Alabama Fund
- ---------------------------------------------------------------------------------------------------------------
Year Ended March 31,
-----------------------------------------------
1998 1997 1996 1995
-----------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.48 $ 10.52 $ 10.34 $ 10.27
------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.55 $ 0.56 $ 0.55 $ 0.56
Net realized and unrealized gain (loss) on investments 0.45 0.04 0.18 0.09
------- ------- ------- -------
Total from investment operations $ 1.00 $ 0.60 $ 0.73 $ 0.65
------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.55) $ (0.55) $ (0.55) $ (0.55)
From net realized gain on investments (0.13) (0.09) -- --
In excess of net investment income[dbldag][dbldag] -- -- -- --
In excess of net realized gain on investments -- -- -- (0.03)
-------- -------- -------- --------
Total distributions declared to shareholders $ (0.68) $ (0.64) $ (0.55) $ (0.58)
-------- -------- -------- --------
Net asset value - end of period $ 10.80 $ 10.48 $ 10.52 $ 10.34
-------- -------- -------- --------
Total return[dbldag] 9.72% 5.82% 7.13% 6.51%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.04% 1.10% 1.14% 1.15%
Net investment income 5.12% 5.28% 5.18% 5.47%
Portfolio turnover 21% 22% 37% 30%
Net assets at end of period (000 omitted) $ 75,538 $ 76,928 $ 82,484 $ 83,805
Net investment income $ 0.54 -- $ 0.54 $ 0.55
Ratios (to average net assets):
Expenses## 1.11% -- 1.24% 1.25%
Net investment income 5.05% -- 5.08% 5.37%
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Alabama Fund
- ------------------------------------------------------------------------------------------------------------------------------
Two Months
Ended Year ended January 31,
March 31, -------------------------------------------
1994 1994 1993 1992 1991
------------------------------------------------------------
Class B
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.98 $ 10.33 $ 9.95 $ 9.65 $ 9.53
--------- ------- ------- ------ ------
Income from investment operations# -
Net investment income[sec] $ 0.09 $ 0.55 $ 0.56 $ 0.60 $ 0.59
Net realized and unrealized gain (loss) on investments (0.71) 0.69 0.41 0.41 0.08
--------- ------- ------- ------- ------
Total from investment operations $ (0.62) $ 1.24 $ 0.97 $ 1.01 $ 0.67
--------- ------- ------- ------- ------
Less distributions declared to shareholders -
From net investment income $ (0.08) $ (0.54) $ (0.58) $ (0.65) $(0.55)
From net realized gain on investments -- (0.04) (0.01) (0.06) --
In excess of net investment income[dbldag][dbldag] (0.01) (0.01) -- (0.00) --
In excess of net realized gain on investments -- -- -- -- --
--------- -------- -------- ------- ------
Total distributions declared to shareholders $ (0.09) $ (0.59) $ (0.59) $ (0.71) $(0.55)
--------- -------- -------- ------- -------
Net asset value - end of period $ 10.27 $ 10.98 $ 10.33 $ 9.95 $ 9.65
--------- -------- -------- ------- -------
Total return[dbldag] (5.66)%++ 12.26% 10.08% 10.92% 7.31%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.18%+ 1.21% 1.08% 0.95% 0.57%
Net investment income 5.17%+ 5.13% 5.79% 6.19% 6.63%
Portfolio turnover 4% 12% 17% 23% 64%
Net assets at end of period (000 omitted) $ 81,501 $ 87,344 $ 67,678 $ 48,476 $22,076
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994, are based on average shares outstanding.
## For the fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for
fees paid indirectly.
[dbldag] 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.
[dbldag] [dbldag] For the year ended January 31, 1992, the per share distribution in excess of net investment income
was $0.004.
[sec] 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 the fee had been incurred by the
Fund, the net investment income per share and the ratios would have been:
Net investment income $ 0.09 $ 0.54 $ 0.55 $ 0.59 $ 0.52
Ratios (to average net assets):
Expenses## 1.28%+ 1.31% 1.18% 1.08% 1.33%
Net investment income 5.07%+ 5.03% 5.69% 6.06% 5.87%
</TABLE>
See notes to financial statements
34
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
Alabama Fund
- ---------------------------------------------------------------------------------------------------------------
Year Ended March 31,
-----------------------------------------------
1998 1997 1996 1995
-----------------------------------------------
Class B
- ---------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.48 $ 10.52 $ 10.34 $ 10.27
------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.47 $ 0.47 $ 0.46 $ 0.47
Net realized and unrealized gain (loss) on investments 0.45 0.04 0.18 0.09
------- ------- ------- -------
Total from investment operations $ 0.92 $ 0.51 $ 0.64 $ 0.56
------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.47) $ (0.47) $ (0.46) $ (0.46)
From net realized gain on investments (0.13) (0.08) -- --
In excess of net realized gain on investments -- -- -- (0.03)
-------- -------- -------- --------
Total distributions declared to shareholders $ (0.60) $ (0.55) $ (0.46) $ (0.49)
-------- -------- -------- --------
Net asset value - end of period $ 10.80 $ 10.48 $ 10.52 $ 10.34
-------- -------- -------- --------
Total return 8.91% 4.98% 6.25% 5.64%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses ## 1.79% 1.90% 1.96% 1.97%
Net investment income 4.36% 4.48% 4.34% 4.63%
Portfolio turnover 21% 22% 37% 30%
Net assets at end of period (000 omitted) $ 8,074 $ 7,281 $ 6,139 $ 4,396
** For the period from the commencement of the Fund's offering of Class B shares, September 7, 1993, through
January 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994, are 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.
[sec] 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 the fee had been incurred by the
Fund, the net investment income per share and the ratios would have been:
Net investment income $ 0.46 -- -- --
Ratios (to average net assets):
Expenses## 1.86% -- -- --
Net investment income 4.29% -- -- --
<CAPTION>
- ---------------------------------------------------------------------------------------------
Alabama Fund
- ---------------------------------------------------------------------------------------------
Two Months
Ended Period Ended
March 31, January 31,
1994 1994**
--------------------------
Class B
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.98 $ 10.93
--------- ---------
Income from investment operations# -
Net investment income[sec] $ 0.08 $ 0.18
Net realized and unrealized gain (loss) on investments (0.71) 0.07
--------- ---------
Total from investment operations $ (0.63) $ 0.25
--------- ---------
Less distributions declared to shareholders -
From net investment income $ (0.08) $ (0.18)
From net realized gain on investments -- (0.02)
In excess of net realized gain on investments -- --
--------- ---------
Total distributions declared to shareholders $ (0.08) $ (0.20)
--------- ---------
Net asset value - end of period $ 10.27 $ 10.98
--------- ---------
Total return (5.79)%++ 2.29%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses ## 2.01%+ 1.98%+
Net investment income 4.30%+ 3.98%+
Portfolio turnover 4% 12%
Net assets at end of period (000 omitted) $ 2,849 $ 2,269
** For the period from the commencement of the Fund's offering of Class B shares, September 7, 1993, through January 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994, are 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.
[sec]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 the fee had been incurred by
the Fund, the net investment income per share and the ratios would have been:
Net investment income -- --
Ratios (to average net assets):
Expenses## -- --
Net investment income -- --
</TABLE>
See notes to financial statements
35
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Arkansas Fund
- -------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------------------
1998 1997 1996 1995
---------------------------------------------------------
Class A
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.72 $ 9.75 $ 9.66 $ 9.69
------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.50 $ 0.50 $ 0.50 $ 0.53
Net realized and unrealized gain (loss) on investments 0.46 (0.03) 0.09 0.02
------- -------- ------- -------
Total from investment operations $ 0.96 $ 0.47 $ 0.59 $ 0.55
------- -------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.50) $ (0.50) $ (0.50) $ (0.53)
From net realized gain on investments[dbldag][dbldag][dbldag] -- -- -- --
In excess of net investment income[dbldag][dbldag] (0.00) -- -- --
In excess of net realized gain on investments[dbldag][dbldag][dbldag] -- -- -- (0.05)
-------- -------- -------- --------
Total distributions declared to shareholders $ (0.50) $ (0.50) $ (0.50) $ (0.58)
-------- -------- -------- --------
Net asset value - end of period $ 10.18 $ 9.72 $ 9.75 $ 9.66
-------- -------- -------- --------
Total return [dbldag] 10.06% 4.87% 6.19% 5.90%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses ## 0.85% 0.92% 0.93% 0.75%
Net investment income 4.97% 5.14% 5.10% 5.51%
Portfolio turnover 15% 9% 6% 24%
Net assets at end of period (000 omitted) $134,072 $144,263 $172,907 $187,105
* For the period from the commencement of the Fund's investment operations [inception of Class A], February 3, 1992, through
January 31, 1993.
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994, are 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.
[dbldag] 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.
[dbldag][dbldag] For the year ended March 31, 1998, the per share distribution in excess of the net investment income was $0.002.
[dbldag][dbldag][dbldag] For the year ended January 31, 1994, the per share distribution from net realized gain on investments
and in excess of net realized gain on investments were $0.0015 and $0.0003, respectively.
[sec] 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 the fee had been incurred by the Fund, the net investment
income per share and the ratios would have been:
Net investment income $ 0.49 -- -- $ 0.52
Ratios (to average net assets):
Expenses## 0.92% -- -- 0.82%
Net investment income 4.90% -- -- 5.43%
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Arkansas Fund
- -----------------------------------------------------------------------------------------------------------------
Two Months
Ended Period Ended Period Ended
March 31, January 31, January 31,
1994 1994** 1994**
----------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.47 $ 9.88 $ 9.53
--------- -------- ---------
Income from investment operations# -
Net investment income[sec] $ 0.09 $ 0.56 $ 0.58
Net realized and unrealized gain (loss) on investments (0.77) 0.60 0.35
--------- -------- ---------
Total from investment operations $ (0.68) $ 1.16 $ 0.93
--------- -------- ---------
Less distributions declared to shareholders -
From net investment income $ (0.08) $ (0.55) $ (0.58)
From net realized gain on investments[dbldag][dbldag][dbldag] -- (0.00) --
In excess of net investment income[dbldag][dbldag] (0.02) (0.02) --
In excess of net realized gain on investments[dbldag][dbldag][dbldag] -- (0.00) --
--------- -------- ---------
Total distributions declared to shareholders $ (0.10) $ (0.57) $ (0.58)
--------- -------- ---------
Net asset value - end of period $ 9.69 $ 10.47 $ 9.88
--------- -------- ---------
Total return [dbldag] (6.61)%++ 11.95% 10.11%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses ## 0.75%+ 0.63% 0.16%+
Net investment income 5.21%+ 5.30% 6.04%+
Portfolio turnover 1% 3% 10%
Net assets at end of period (000 omitted) $ 195,042 $203,542 $124,644
* For the period from the commencement of the Fund's investment operations [inception of Class A], February 3, 1992,
through January 31, 1993.
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994, are 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.
[dbldag] 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.
[dbldag][dbldag] For the year ended March 31, 1998, the per share distribution in excess of the net investment income
was $0.002.
[dbldag][dbldag][dbldag] For the year ended January 31, 1994, the per share distribution from net realized gain on
investments and in excess of net realized gain on investments were
$0.0015 and $0.0003, respectively.
[sec]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 the fee had been incurred by the Fund, the net investment income per share and the ratios would have
been:
Net investment income $ 0.09 $ 0.53 $ 0.52
Ratios (to average net assets):
Expenses## 0.96%+ 0.91% 0.75%+
Net investment income 5.01%+ 5.01% 5.45%+
</TABLE>
See notes to financial statements
36
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Arkansas Fund
- ------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
--------------------------------------------
1998 1997 1996 1995
--------------------------------------------
Class B
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.72 $ 9.75 $ 9.65 $ 9.69
-------- ------ ------- ------
Income from investment operations# -
Net investment income[sec] $ 0.42 $ 0.42 $ 0.42 $ 0.42
Net realized and unrealized gain (loss) on investments 0.46 (0.03) 0.10 0.01
-------- ------ ------ -------
Total from investment operations $ 0.88 $ 0.39 $ 0.52 $ 0.43
-------- ------ ------- ------
Less distributions declared to shareholders -
From net investment income $ (0.42) $(0.42) $ (0.42) $ (0.42)
From net realized gain on investments[dbldag][dbldag][dbldag] -- -- -- --
In excess of net investment income[dbldag][dbldag] (0.00) -- -- --
In excess of net realized gain on investments[dbldag][dbldag][dbldag] -- -- -- (0.05)
-------- ------ ------- -------
Total distributions declared to shareholders $ (0.42) $(0.42) $ (0.42) $ (0.47)
-------- ------ ------- -------
Net asset value - end of period $ 10.18 $ 9.72 $ 9.75 $ 9.65
-------- ------ ------- -------
Total return 9.18% 4.05% 5.43% 4.67%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.65% 1.71% 1.76% 1.84%
Net investment income 4.15% 4.34% 4.27% 4.40%
Portfolio turnover 15% 9% 6% 24%
Net assets at end of period (000 omitted) $ 7,370 $7,548 $ 7,950 $ 7,231
**For the period from the commencement of the Fund's offering of Class B shares, September 7, 1993, through January
31, 1994.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are 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.
[dbldag][dbldag] For the years ended March 31, 1998, and March 31, 1994, and the period ended January 31, 1994, the per share
distributions in excess of net investment income were $0.001, $0.002 and $0.004, respectively.
[dbldag][dbldag][dbldag] For the period ended January 31, 1994, the per share distribution from net realized gain on
investments and in excess of realized gain on investments were $0.0015 and $0.0003, respectively.
[sec] 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 the fee had been incurred by the Fund, the net investment income
per share and the ratios would have been:
Net investment income $ 0.41 -- -- $ 0.41
Ratios (to average net assets)
Expenses## 1.72% -- -- 1.91%
Net investment income 4.08% -- -- 4.33%
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Arkansas Fund
- -------------------------------------------------------------------------------------------------------------
Two Months
Ended Period Ended
March 31, January 31,
1994 1994**
-----------------------------
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.47 $ 10.42
--------- ---------
Income from investment operations# -
Net investment income[sec] $ 0.07 $ 0.23
Net realized and unrealized gain (loss) on investments (0.78) (0.04)
--------- ---------
Total from investment operations $ (0.71) $ 0.19
--------- ---------
Less distributions declared to shareholders -
From net investment income $ (0.07) $ (0.14)
From net realized gain on investments[dbldag][dbldag][dbldag] -- (0.00)
In excess of net investment income[dbldag][dbldag] (0.00) (0.00)
In excess of net realized gain on investments[dbldag][dbldag][dbldag] -- (0.00)
--------- ---------
Total distributions declared to shareholders $ (0.07) $ (0.14)
--------- ---------
Net asset value - end of period $ 9.69 $ 10.47
--------- ---------
Total return (6.81)%++ 2.18%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.82%+ 1.75%+
Net investment income 4.11%+ 3.87%+
Portfolio turnover 1% 3%
Net assets at end of period (000 omitted) $ 5,895 $ 5,179
**For the period from the commencement of the Fund's offering of Class B shares, September 7, 1993,
through January 31, 1994.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are 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.
[dbldag][dbldag]For the years ended March 31, 1998, and March 31, 1994, and the period ended January
31, 1994, the per share distributions in excess of net investment income were $0.001, $0.002 and
$0.004, respectively.
[dbldag][dbldag][dbldag]For the period ended January 31, 1994, the per share distribution from net
realized gain on investments and in excess of realized gain on investments were $0.0015
and $0.0003, respectively.
[sec]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 the fee had been
incurred by the Fund, the net investment income per share and the ratios would have been:
Net investment income $0.07 $0.12
Ratios (to average net assets)
Expenses## 2.02%+ 3.44%+
Net investment income 3.91%+ 2.18%+
</TABLE>
See notes to financial statements
37
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
California Fund
- ---------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------------
1998 1997 1996 1995
---------------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 5.47 $ 5.52 $ 5.41 $ 5.47
------- -------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.29 $ 0.30 $ 0.30 $ 0.31
Net realized and unrealized gain (loss) on investments 0.33 (0.05) 0.11 (0.05)
------- -------- -------- --------
Total from investment operations $ 0.62 $ 0.25 $ 0.41 $ 0.26
------- -------- -------- --------
Less distributions declared to shareholders -
$ (0.29) $ (0.30) $ (0.30) $ (0.31)
From net realized gain on investments -- -- -- --
In excess of net investment income[dbldag][dbldag] -- -- (0.00) (0.00)
In excess of net realized gain on investments -- -- -- (0.01)
-------- --------- --------- ---------
Total distributions declared to shareholders $ (0.29) $ (0.30) $ (0.30) $ (0.32)
-------- --------- --------- ---------
Net asset value - end of period $ 5.80 $ 5.47 $ 5.52 $ 5.41
-------- --------- --------- ---------
Total return[dbldag] 11.51% 4.55% 7.86% 4.85%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 0.64% 0.66% 0.66% 0.69%
Net investment income 5.07% 5.36% 5.48% 5.80%
Portfolio turnover 49% 78% 69% 57%
Net assets at end of period (000 omitted) $222,421 $232,612 $259,817 $272,161
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are 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.
[dbldag]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.
[dbldag][dbldag]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.
[sec]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 $ 0.28 $ 0.29 $ 0.29 $ 0.30
Ratios (to average net assets):
Expenses## 0.79% 0.81% 0.81% 0.84%
Net investment income 4.92% 5.21% 5.33% 5.65%
<CAPTION>
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
Two Months
Ended Period Ended
March 31, January 31,
1994 1994
------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 5.95 $ 5.88
-------- ---------
Income from investment operations# -
Net investment income[sec] $ 0.05 $ 0.30
Net realized and unrealized gain (loss) on investments (0.48) 0.14
-------- --------
Total from investment operations $ (0.43) $ 0.44
-------- --------
Less distributions declared to shareholders -
From net investment income $ (0.04) $ (0.29)
From net realized gain on investments -- (0.07)
In excess of net investment income[dbldag][dbldag] (0.01) (0.01)
In excess of net realized gain on investments -- --
-------- --------
Total distributions declared to shareholders $ (0.05) $ (0.37)
-------- --------
Net asset value - end of period $ 5.47 $ 5.95
-------- --------
Total return[dbldag] (7.21)%++ 7.64%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 0.68%+ 0.60%+
Net investment income 5.27%+ 4.99%+
Portfolio turnover 8% 38%
Net assets at end of period (000 omitted) $313,790 $356,419
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are 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.
[dbldag]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.
[dbldag][dbldag]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.
[sec]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 $ 0.05 $ 0.29
Ratios (to average net assets):
Expenses## 0.83%+ 0.78%+
Net investment income 5.12%+ 4.82%+
</TABLE>
See notes to financial statements
38
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
California Fund
- ------------------------------------------------------------------------------
Year Ended February 28, 1993
- ------------------------------------------------------------------------------
Class A
- ------------------------------------------------------------------------------
<S> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 5.42
-------
Income from investment operations -
Net investment income[sec] $ 0.34
Net realized and unrealized gain (loss) on investments 0.47
-------
Total from investment operations $ 0.81
-------
Less distributions declared to shareholders -
From net investment income $ (0.34)
From net realized gain on investments (0.01)
--------
Total distributions declared to shareholders $ (0.35)
--------
Net asset value - end of period $ 5.88
--------
Total return[dbldag] 15.55%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses 0.39%
Net investment income 6.18%
Portfolio turnover 64%
Net assets at end of period (000 omitted) $272,179
[dbldag]Total returns for Class A shares do not include the applicable sales
charge (except for reinvested dividends prior to October 1, 1989). If the
charge had been included, the results would have been lower.
[sec]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 $ 0.32
Ratios (to average net assets):
Expenses 0.77%
Net investment income 5.80%
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended February 28, 1992 1991 1990 1989 1988
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 5.26 $ 5.19 $ 5.06 $ 5.08 $ 5.38
-------- -------- -------- ------- -------
Income from investment operations -
Net investment income[sec] $ 0.35 $ 0.33 $ 0.33 $ 0.32 $ 0.31
Net realized and unrealized gain (loss) on investments 0.20 0.07 0.13 (0.02) (0.29)
-------- -------- -------- ------- -------
Total from investment operations $ 0.55 $ 0.40 $ 0.46 $ 0.30 $ 0.02
-------- -------- ------- ------- --------
Less distributions declared to shareholders -
From net investment income $ (0.37) $ (0.33) $ (0.33) $ (0.32) $ (0.31)
From net realized gain on investments (0.02) -- -- -- (0.01)
-------- ------- ------- ------- -------
Total distributions declared to shareholders $ (0.39) $ (0.33) $ (0.33) $ (0.32) $ (0.32)
-------- ------- ------- ------- -------
Net asset value - end of period $ 5.42 $ 5.26 $ 5.19 $ 5.06 $ 5.08
-------- ------- ------- ------- -------
Total return[dbldag] 10.69% 8.03% 9.28% 6.07% 0.83%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses 0.40% 0.87% 1.00% 1.28% 1.20%
Net investment income 6.53% 6.39% 6.35% 6.35% 6.33%
Portfolio turnover 73% 102% 243% 188% 240%
Net assets at end of period (000 omitted) $177,291 $84,551 $68,879 $59,212 $59,479
[dbldag]Total returns for Class A shares do not include the applicable sales charge
(except for reinvested dividends prior to October 1, 1989). If the charge had been
included, the results would have been lower.
[sec]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 $ 0.33 -- -- -- --
Ratios (to average net assets):
Expenses 0.79% -- -- -- --
Net investment income 6.14% -- -- -- --
</TABLE>
See notes to financial statements
39
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
California Fund
- --------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
--------------------------------------------------
1998 1997 1996 1995
--------------------------------------------------
Class B
--------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 5.47 $ 5.52 $ 5.41 $ 5.47
-------- -------- -------- -------
Income from investment operations# -
Net investment income[sec] $ 0.24 $ 0.25 0.26 $ 0.25
Net realized and unrealized gain (loss) on investments 0.33 (0.05) 0.11 (0.05)
-------- -------- -------- -------
Total from investment operations $ 0.57 0.20 $ 0.37 $ 0.20
-------- -------- -------- -------
Less distributions declared to shareholders -
From net investment income $ (0.24) $ (0.25) $ (0.26) $ (0.25)
From net realized gain on investments -- -- -- --
In excess of net investment income[dbldag][dbldag] -- -- (0.00) --
In excess of net realized gain on investments -- -- -- (0.01)
-------- ------- ------- -------
Total distributions declared to shareholders $ (0.24) $ (0.25) $ (0.26) $ (0.26)
-------- -------- ------- -------
Net asset value - end of period $ 5.80 $ 5.47 $ 5.52 $ 5.41
-------- ------- ------- -------
Total return[dbldag] 10.62% 3.64% 6.93% 3.73%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.44% 1.54% 1.54% 1.76%
Net investment income 4.26% 4.48% 4.59% 4.72%
Portfolio turnover 49% 78% 69% 57%
Net assets at end of period (000 omitted) $ 43,790 $36,694 $34,675 $29,057
**For the period from the inception of Class B, September 7, 1993, thugh January 31, 1994.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are 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.
[dbldag][dbldag]For the year ended March 31, 1996, and the two months ended March 31, 1994, and the period ended
Jauary 31, 1994, the per share distributions in excess of net investment income were $0.0041, $0.002 and $0.003,
respectively.
[sec]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 $ 0.23 $ 0.24 $ 0.24 $ 0.04
Ratios (to average net assets):
Expenses## 1.59% 1.69% 1.91% 1.83%
Net investment income 4.11% 4.33% 4.57% 4.04%
<CAPTION>
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
Two Months
Ended Period Ended
March 31, January 31,
1994 1994**
---------------------------------
---------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 5.95 $ 6.02
------- -------
Income from investment operations# -
Net investment income[sec] $ 0.04 $ 0.10
Net realized and unrealized gain (loss) on investments (0.48) --
------- --------
Total from investment operations $ (0.44) $ 0.10
------- --------
Less distributions declared to shareholders -
From net investment income $ (0.04) $ (0.10)
From net realized gain on investments -- (0.07)
In excess of net investment income[dbldag][dbldag] (0.00) (0.00)
In excess of net realized gain on investments -- --
------- --------
Total distributions declared to shareholders $ (0.04) $ (0.17)
------- --------
Net asset value - end of period 5.47 $ 5.95
------- --------
Total return[dbldag] (7.38)%++ 1.68%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.69%+ 1.60%+
Net investment income 4.18%+ 3.64%+
Portfolio turnover 8% 38%
Net assets at end of period (000 omitted) $21,252 $19,360
**For the period from the inception of Class B, September 7, 1993, through January 31, 1994.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are 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.
[dbldag][dbldag]For the year ended March 31, 1996, and the two months ended March 31, 1994, and the
period ended Jauary 31, 1994, the per share distributions in excess of net investment income were
$0.0041, $0.002 and $0.003, respectively.
[sec]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 $ 0.09 --
Ratios (to average net assets):
Expenses## 1.81%+ --
Net investment income 3.43%+ --
</TABLE>
See notes to financial statements
40
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
California Fund
- --------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
--------------------------------------------------
1998 1997 1996 1995
--------------------------------------------------
Class C
--------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 5.48 $ 5.53 $ 5.42 $ 5.48
------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] 0.23 $ 0.24 $ 0.25 $ 0.26
Net realized and unrealized gain (loss) on investments 0.33 (0.05) 0.11 (0.06)
------- ------- ------- -------
Total from investment operations $ 0.56 $ 0.19 $ 0.36 $ 0.20
------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.23) $ (0.24) $ (0.25) $ (0.25)
In excess of net investment income[dbldag][dbldag] -- -- (0.00) --
In excess of net realized gain on investments -- -- -- (0.01)
------- ------- ------- -------
Total distributions declared to shareholders $ (0.23) $ (0.24) $ (0.25) $ (0.26)
------- ------- ------- -------
Net asset value - end of period $ 5.81 $ 5.48 $ 5.53 $ 5.42
------- ------- ------- -------
Total return[dbldag] 10.39% 3.51% 6.77% 3.79%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.64% 1.66% 1.67% 1.69%
Net investment income 4.08% 4.37% 4.47% 4.79%
Portfolio turnover 49% 78% 69% 57%
Net assets at end of period (000 omitted) $ 4,396 $ 3,856 $ 4,353 $ 3,858
***For the period from the inception of Class C, January 3, 1994, through January 31, 1994.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are 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.
[dbldag][dbldag]For the year ended March 31, 1996, and the two months ended March 31, 1994, and the period ended
Jauary 31, 1994, the per share distributions in excess of net investment income were $0.004, $0.001 and $0.003,
respectively.
[sec]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 $ 0.22 $ 0.23 $ 0.24 $ 0.25
Ratios (to average net assets):
Expenses## 1.79% 1.81% 1.82% 1.84%
Net investment income 3.93% 4.22% 4.32% 4.64%
<CAPTION>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Two Months
Ended Period Ended
March 31, January 31,
1994 1994***
-------------------------------
-------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 5.95 $ 5.89
------- ------
Income from investment operations# -
Net investment income[sec] $ 0.03 $ 0.01
Net realized and unrealized gain (loss) on investments (0.46) 0.06
------- -------
Total from investment operations $ (0.43) $ 0.07
------- ------
Less distributions declared to shareholders -
From net investment income $ (0.04) $(0.01)
In excess of net investment income[dbldag][dbldag] (0.00) (0.00)
In excess of net realized gain on investments -- --
------- -------
Total distributions declared to shareholders $ (0.04) $ 0.01)
------- --------
Net asset value - end of period $ 5.48 $ 5.95
------- --------
Total return[dbldag] (7.22)%++ 1.25%+
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.64%+ 2.02%+
Net investment income 3.92%+ 1.78%+
Portfolio turnover 8% 38%
Net assets at end of period (000 omitted) $ 1,701 $ 917
***For the period from the inception of Class C, January 3, 1994, through January 31, 1994.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are 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.
[dbldag][dbldag]For the year ended March 31, 1996, and the two months ended March 31, 1994, and
the period ended Jauary 31, 1994, the per share distributions in excess of net investment
income were $0.004, $0.001 and $0.003, respectively.
[sec]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 $ 0.03 --
Ratios (to average net assets):
Expenses## 1.80%+ 3.53%+
Net investment income 3.77%+ 0.27%+
</TABLE>
See notes to financial statements
41
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Florida Fund
- --------------------------------------------------------------------------------------------------------------
Year Ended March 31,
--------------------------------------------
1998 1997 1996 1995
--------------------------------------------
Class A
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.64 $ 9.82 $ 9.60 $ 9.65
------- ------- ------ ------
Income from investment operations# -
Net investment income[sec] $ 0.50 $ 0.51 $ 0.52 $ 0.54
Net realized and unrealized gain (loss) on investments 0.46 (0.18) 0.22 0.02
------- ------- ------ ------
Total from investment operations $ 0.96 $ 0.33 $ 0.74 $ 0.56
------- ------- ------ ------
Less distributions declared to shareholders -
From net investment income $ (0.50) $ (0.51) $ (0.52) $ (0.54)
From net realized gain on investments -- -- -- (0.04)
In excess of net investment income[dbldag][dbldag] -- -- (0.00) --
In excess of net realized gain on investments -- -- -- (0.03)
-------- ------- ------- -------
Total distributions declared to shareholders $ (0.50) $ (0.51) $ (0.52) $ (0.61)
-------- ------- ------- -------
Net asset value - end of period $ 10.10 $ 9.64 $ 9.82 $ 9.60
-------- ------- ------- -------
Total return[dbldag] 10.16% 3.43% 7.81% 6.07%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 0.78% 0.86% 0.86% 0.60%
Net investment income 5.03% 5.26% 5.26% 5.75%
Portfolio Turnover 14% 24% 56% 131%
Net assets at end of period (000 omitted) $ 77,711 $80,342 $87,553 $89,894
*For the period from the commencement of the Fund's investment operations [inception of Class A], February 3,
1992, through January 31, 1993.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are based on average shares outstanding.
##For the fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction
for fees paid indirectly.
[dbldag]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.
[dbldag][dbldag]For the year ended March 31, 1996, the per share distributions in excess of the net investment
income was $0.0015.
[sec]The investment adviser and/or 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 $ 0.49 -- $ 0.52 $ 0.52
Ratios (to average net assets):
Expenses## 0.85% -- 0.90% 0.83%
Net investment income 4.96% -- 5.22% 5.52%
<CAPTION>
Two Months
Ended Year Ended Period Ended
March 31, January 31, January 31,
1994 1994 1993*
-----------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.63 $ 9.89 $ 9.53
--------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.09 $ 0.57 $ 0.58
Net realized and unrealized gain (loss) on investments (0.98) 0.86 0.36
--------- ------- -------
Total from investment operations $ (0.89) $ 1.43 $ 0.94
--------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.08) $ (0.57) $ (0.58)
From net realized gain on investments -- (0.11) --
In excess of net investment income[dbldag][dbldag] (0.01) (0.01) --
In excess of net realized gain on investments -- -- --
--------- -------- -------
Total distributions declared to shareholders $ (0.09) $ (0.69) $ (0.58)
--------- -------- -------
Net asset value - end of period $ 9.65 $ 10.63 $ 9.89
--------- -------- -------
Total return[dbldag] (8.39)%++ 14.71% 10.28%+
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 0.77%+ 0.49% 0.05%+
Net investment income 5.15%+ 5.42% 6.27%+
Portfolio Turnover 19% 53% 54%
Net assets at end of period (000 omitted) $ 108,579 $124,131 $74,329
*For the period from the commencement of the Fund's investment operations [inception of Class A], February 3,
1992, through January 31, 1993.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are based on average shares outstanding.
##For the fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction
for fees paid indirectly.
[dbldag]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.
[dbldag][dbldag]For the year ended March 31, 1996, the per share distributions in excess of the net investment
income was $0.0015.
[sec]The investment adviser and/or 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 $ 0.08 $ 0.52 $ 0.51
Ratios (to average net assets):
Expenses## 1.12%+ 0.93% 0.81%+
Net investment income 4.80%+ 4.97% 5.51%+
</TABLE>
See notes to financial statements
42
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Florida Fund
- ------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
------------------------------------------------
1998 1997 1996 1995
------------------------------------------------
Class B
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.64 $ 9.82 $ 9.60 $ 9.64
-------- -------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.42 $ 0.43 $ 0.43 $ 0.43
Net realized and unrealized gain (loss) on investments 0.45 (0.18) 0.22 0.04
-------- -------- -------- --------
Total from investment operations $ 0.87 $ 0.25 $ 0.65 $ 0.47
-------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.42) $ (0.43) $ (0.43) $ (0.44)
From net realized gain on investments -- -- -- (0.04)
In excess of net investment income[dbldag][dbldag] -- -- (0.00) --
In excess of net realized gain on investments -- -- -- (0.03)
--------- --------- --------- ---------
Total distributions declared to shareholders $ (0.42) $ (0.43) $ (0.43) $ (0.51)
--------- --------- --------- ---------
Net asset value - end of period $ 10.09 $ 9.64 $ 9.82 $ 9.60
--------- --------- --------- ---------
Total return 9.18% 2.56% 6.88% 5.06%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.58% 1.72% 1.74% 1.68%
Net investment income 4.22% 4.40% 4.36% 4.63%
Portfolio Turnover 14% 24% 56% 131%
Net assets at end of period (000 omitted) $ 16,719 $ 14,701 $ 14,448 $ 12,667
**For the period from the inception of Class B, September 7, 1993, through January 31, 1994.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are based on average shares outstanding.
##For the fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction
for fees paid indirectly.
[dbldag][dbldag]For the year ended March 31, 1996, the per share distributions in excess of the net investment
income was $0.0012.
[sec]The investment adviser and/or 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 $ 0.41 -- $ 0.43 $ 0.41
Ratios (to average net assets):
Expenses## 1.65% -- 1.78% 1.91%
Net investment income 4.15% -- 4.33% 4.40%
<CAPTION>
Two Months
Ended Period Ended
March 31, January 31,
1994 1994**
-----------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.62 $ 10.69
---------- ---------
Income from investment operations# -
Net investment income[sec] $ 0.07 $ 0.18
Net realized and unrealized gain (loss) on investments (0.98) 0.03
---------- ---------
Total from investment operations $ (0.91) $ 0.21
---------- ---------
Less distributions declared to shareholders -
From net investment income $ (0.06) $ (0.17)
From net realized gain on investments -- (0.10)
In excess of net investment income[dbldag][dbldag] (0.01) (0.01)
In excess of net realized gain on investments -- --
---------- ---------
Total distributions declared to shareholders $ (0.07) $ (0.28)
---------- ---------
Net asset value - end of period $ 9.64 $ 10.62
---------- ---------
Total return (8.55)%++ 4.87%+
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.82%+ 1.64%+
Net investment income 4.08%+ 3.82%+
Portfolio Turnover 19% 53%
Net assets at end of period (000 omitted) $ 7,995 $ 7,244
**For the period from the inception of Class B, September 7, 1993, through January 31, 1994.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are based on average shares
outstanding.
##For the fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction
for fees paid indirectly.
[dbldag][dbldag]For the year ended March 31, 1996, the per share distributions in excess of the net investment
income was $0.0012.
[sec]The investment adviser and/or 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 $ 0.06 $ 0.16
Ratios (to average net assets):
Expenses## 2.17%+ 2.09%+
Net investment income 3.72%+ 3.38%+
</TABLE>
See notes to financial statements
43
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Georgia Fund
- -----------------------------------------------------------------------------------------------------------------
Year Ended March 31,
-----------------------------------------------
1998 1997 1996 1995
-----------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.38 $ 10.47 $ 10.35 $ 10.38
-------- ------- ------- --------
Income from investment operations# -
Net investment income[sec] $ 0.56 $ 0.56 $ 0.54 $ 0.57
Net realized and unrealized gain (loss) on investments 0.56 (0.10) 0.12 --
-------- ------- ------- --------
Total from investment operations $ 1.12 $ 0.46 $ 0.66 $ 0.57
-------- ------- ------- --------
Less distributions declared to shareholders -
From net investment income $ (0.55) $ (0.55) $ (0.54) $ (0.56)
From net realized gain on investments -- -- -- (0.01)
In excess of net investment income[dbldag][dbldag] -- -- (0.00) --
In excess of net realized gain on investments -- -- -- (0.03)
--------- -------- -------- ---------
Total distributions declared to shareholders $ (0.55) $ (0.55) $ (0.54) $ (0.60)
--------- -------- -------- ---------
Net asset value - end of period $ 10.95 $ 10.38 $ 10.47 $ 10.35
--------- -------- -------- ---------
Total return[dbldag] 11.02% 4.47% 6.48% 5.65%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.03% 1.03% 1.17% 1.14%
Net investment income 5.14% 5.34% 5.11% 5.50%
Portfolio turnover 18% 27% 65% 56%
Net assets at end of period (000 omitted) $ 59,546 $59,843 $68,183 $ 74,432
+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.
[dbldag]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.
[dbldag][dbldag]For the year ended March 31, 1996, the per share distributions in excess of net investment
income was $0.003.
[sec]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 $ 0.55 $ 0.55 $ 0.53 $ 0.56
Ratios (to average net assets):
Expenses## 1.13% 1.10% 1.27% 1.24%
Net investment income 5.04% 5.27% 5.01% 5.40%
<CAPTION>
Two Months
Ended
March 31,
1994
----------
<S> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.30
-------
Income from investment operations# -
Net investment income[sec] $ 0.09
Net realized and unrealized gain (loss) on investments (0.92)
-------
Total from investment operations $ (0.83)
-------
Less distributions declared to shareholders -
From net investment income $ (0.06)
From net realized gain on investments --
In excess of net investment income[dbldag][dbldag] (0.03)
In excess of net realized gain on investments --
-------
Total distributions declared to shareholders $ (0.09)
-------
Net asset value - end of period $ 10.38
-------
Total return[dbldag] (7.34)%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.18%+
Net investment income 5.05%+
Portfolio turnover 5%
Net assets at end of period (000 omitted) $85,878
+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.
[dbldag]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.
[dbldag][dbldag]For the year ended March 31, 1996, the per share distributions in excess of net investment
income was $0.003.
[sec]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 $ 0.09
Ratios (to average net assets):
Expenses## 1.28%+
Net investment income 4.95%+
</TABLE>
See notes to financial statements
44
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Georgia Fund
- -----------------------------------------------------------------------------------------------------------------------------
Year Ended January 31,
-----------------------------------------------------------
1994 1993 1992 1991 1990
-----------------------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.57 $ 10.22 $ 9.83 $ 9.73 $ 9.73
------- ------- ------- -------- --------
Income from investment operations -
Net investment income[sec] $ 0.57 $ 0.58 $ 0.61 $ 0.63 $ 0.66
Net realized gain on investments 0.75 0.38 0.46 0.12 0.02
------- ------- ------- -------- --------
Total from investment operations $ 1.32 $ 0.96 $ 1.07 $ 0.75 $ 0.68
------- ------- ------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.55) $ (0.60) $ (0.66) $ (0.63) $ (0.66)
From net realized gain on investments (0.01) (0.01) (0.02) (0.02) (0.02)
In excess of net investment income (0.03) -- -- -- --
-------- -------- -------- --------- ---------
Total distributions declared to shareholders $ (0.59) $ (0.61) $ (0.68) $ (0.65) $ (0.68)
-------- -------- -------- --------- ---------
Net asset value - end of period $ 11.30 $ 10.57 $ 10.22 $ 9.83 $ 9.73
-------- -------- -------- --------- ---------
Total return[dbldag] 12.71% 9.56% 11.29% 8.06% 7.19%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses 1.21% 1.08% 0.99% 0.74% 0.42%
Net investment income 5.10% 5.75% 6.08% 6.46% 6.72%
Portfolio turnover 14% 27% 36% 71% 99%
Net assets at end of period (000 omitted) $94,407 $64,649 $47,869 $ 29,214 $ 12,628
*For the period from the commencement of the Fund's investment operations [inception of Class A], June 6,
1988, through January 31, 1989.
+Annualized.
[dbldag]Total returns for Class A shares do not include the applicable sales charge (except for reinvested
dividends prior to October 1, 1989). If the charge had been included, the results would have been lower.
[sec]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 $ 0.56 $ 0.57 $ 0.60 $ 0.59 $ 0.57
Ratios (to average net assets):
Expenses 1.31% 1.18% 1.09% 1.11% 1.31%
Net investment income 5.00% 5.65% 5.98% 6.09% 5.83%
<CAPTION>
Period Ended
January 31,
1989*
-------------
<S> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.53
--------
Income from investment operations -
Net investment income[sec] $ 0.32
Net realized gain on investments 0.14
--------
Total from investment operations $ 0.46
--------
Less distributions declared to shareholders -
From net investment income $ (0.26)
From net realized gain on investments --
In excess of net investment income --
--------
Total distributions declared to shareholders $ (0.26)
--------
Net asset value - end of period $ 9.73
--------
Total return[dbldag] 7.57%+
Ratios (to average net assets)/Supplemental data[sec]:
Expenses 0.40%+
Net investment income 6.18%+
Portfolio turnover --
Net assets at end of period (000 omitted) $ 4,383
*For the period from the commencement of the Fund's investment operations
[inception of Class A], June 6, 1988, through January 31, 1989.
+Annualized.
[dbldag]Total returns for Class A shares do not include the applicable sales
charge (except for reinvested dividends prior to October 1, 1989). If the
charge had been included, the results would have been lower.
[sec]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
Ratios (to average net assets):
Expenses 1.07%+
Net investment income 5.51%+
</TABLE>
See notes to financial statements
45
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Georgia Fund
- ---------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------
1998 1997 1996 1995
---------------------------------------------
Class B
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.38 $ 10.47 $ 10.36 $ 10.38
------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.48 $ 0.47 $ 0.45 $ 0.47
Net realized and unrealized gain (loss) on investments 0.56 (0.09) 0.12 0.02
------- ------- ------- -------
Total from investment operations $ 1.04 $ 0.38 $ 0.57 $ 0.49
------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.47) $ (0.47) $ (0.46) $ (0.47)
From net realized gain on investments -- -- -- (0.01)
In excess of net investment income[dbldag][dbldag] -- -- (0.00) --
In excess of net realized gain on investments -- -- -- (0.03)
-------- -------- -------- --------
Total distributions declared to shareholders $ (0.47) $ (0.47) $ (0.46) $ (0.51)
-------- -------- -------- --------
Net asset value - end of period $ 10.95 $ 10.38 $ 10.47 $ 10.36
-------- -------- -------- --------
Total return[dbldag] 10.19% 3.63% 5.52% 4.88%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.77% 1.83% 2.00% 1.96%
Net investment income 4.39% 4.53% 4.27% 4.66%
Portfolio turnover 18% 27% 65% 56%
Net assets at end of period (000 omitted) $10,871 $ 9,995 $10,205 $ 8,695
**For the period from the inception of Class B, September 7, 1993, through 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.
[dbldag][dbldag]For the year ended March 31, 1996, the per share distributions in excess of net investment
income was $0.002.
[sec]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 $ 0.47 $ 0.47 -- --
Ratios (to average net assets)
Expenses## 1.87% 1.90% -- --
Net investment income 4.29% 4.46% -- --
<CAPTION>
Two Months
Ended Period Ended
March 31, January 31,
1994 1994**
------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $11.30 $ 11.26
------ -------
Income from investment operations# -
Net investment income[sec] $ 0.07 $ 0.19
Net realized and unrealized gain (loss) on investments (0.91) 0.05
------ -------
Total from investment operations $(0.84) $ 0.24
------ -------
Less distributions declared to shareholders -
From net investment income $(0.07) $ (0.18)
From net realized gain on investments -- (0.01)
In excess of net investment income[dbldag][dbldag] (0.01) (0.01)
In excess of net realized gain on investments -- --
------ -------
Total distributions declared to shareholders $(0.08) $ (0.20)
------ -------
Net asset value - end of period $10.38 $ 11.30
------ -------
Total return[dbldag] (7.47)%++ 5.34%+
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.99%+ 1.97%+
Net investment income 4.17%+ 3.83%+
Portfolio turnover 5% 14%
Net assets at end of period (000 omitted) $6,631 $ 5,766
**For the period from the inception of Class B, September 7, 1993, through 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.
[dbldag][dbldag]For the year ended March 31, 1996, the per share distributions in excess of net investment
income was $0.002.
[sec]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 -- --
Ratios (to average net assets)
Expenses## -- --
Net investment income -- --
</TABLE>
See notes to financial statements
46
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Maryland Fund
- -----------------------------------------------------------------------------------------------------------------
Year Ended March 31,
-----------------------------------------------
1998 1997 1996 1995
-----------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.89 $ 11.04 $ 10.94 $ 10.89
------- ------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.54 $ 0.57 $ 0.57 $ 0.59
Net realized and unrealized gain (loss) on investments 0.59 (0.16) 0.09 0.09
------- -------- -------- --------
Total from investment operations $ 1.13 $ 0.41 $ 0.66 $ 0.68
------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.54) $ (0.56) $ (0.56) $ (0.59)
From net realized gain on investments -- -- -- --
In excess of net investment income[dbldag][dbldag] (0.01) -- -- (0.00)
In excess of net realized gain on investments -- -- -- (0.04)
-------- -------- -------- --------
Total distributions declared to shareholders $ (0.55) $ (0.56) $ (0.56) $ (0.63)
-------- -------- -------- --------
Net asset value - end of period $ 11.47 $ 10.89 $ 11.04 $ 10.94
-------- -------- -------- --------
Total return[dbldag] 10.57% 3.75% 6.17% 6.51%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.09% 1.12% 1.19% 1.21%
Net investment income 4.79% 5.21% 5.10% 5.46%
Portfolio turnover 21% 22% 15% 31%
Net assets at end of period (000 omitted) $126,018 $126,405 $139,297 $145,361
+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.
[dbldag]Total returns for Class A shares do not include the applicable sales charge. If the charge had been
included, the
[dbldag][dbldag]For the year ended March 31, 1995, the per share distributions in excess of net investment
income was $0.003.
[sec]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 $ 0.53 $ 0.57 -- --
Ratios (to average net assets):
Expenses## 1.19% 1.19% -- --
Net investment income 4.69% 5.14% -- --
<CAPTION>
Two Months
Ended Year Ended
March 31, January 31,
1994 1994
---------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.81 $ 11.40
--------- -------
Income from investment operations# -
Net investment income[sec] $ 0.10 $ 0.62
Net realized and unrealized gain (loss) on investments (0.92) 0.53
--------- -------
Total from investment operations $ (0.82) $ 1.15
--------- -------
Less distributions declared to shareholders -
From net investment income $ (0.06) $ (0.61)
From net realized gain on investments -- (0.07)
In excess of net investment income[dbldag][dbldag] (0.04) (0.04)
In excess of net realized gain on investments -- (0.02)
--------- --------
Total distributions declared to shareholders $ (0.10) $ (0.74)
--------- --------
Net asset value - end of period $ 10.89 $ 11.81
--------- --------
Total return[dbldag] (6.96)%++ 10.27%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.23%+ 1.25%
Net investment income 4.97%+ 5.42%
Portfolio turnover 1% 25%
Net assets at end of period (000 omitted) $ 161,290 $173,419
+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.
[dbldag]Total returns for Class A shares do not include the applicable sales charge. If the charge had been
included, the
[dbldag][dbldag]For the year ended March 31, 1995, the per share distributions in excess of net investment
income was $0.003.
[sec]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 -- --
Ratios (to average net assets):
Expenses## -- --
Net investment income -- --
</TABLE>
See notes to financial statements
47
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Maryland Fund
- ---------------------------------------------------------------------------
Year Ended January 31, 1993
- ---------------------------------------------------------------------------
Class A
- ---------------------------------------------------------------------------
<S> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.20
-------
Income from investment operations -
Net investment income $ 0.67
Net realized and unrealized gain (loss) on investments 0.24
-------
Total from investment operations $ 0.91
-------
Less distributions declared to shareholders -
From net investment income $ (0.69)
From net realized gain on investments $ (0.02)
Paid in captial --
--------
Total distributions declared to shareholders $ (0.71)
--------
Net asset value - end of period $ 11.40
--------
Total return[dbldag] 8.34%
Ratios (to average net assets)/Supplemental data:
Expenses 1.14%
Net investment income 6.13%
Portfolio turnover 5%
Net assets at end of period (000 omitted) $145,794
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Year Ended January 31, 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.97 $ 10.79 $ 10.76 $ 10.62 $ 11.20
------- ------- ------- ------- -------
Income from investment operations -
Net investment income $ 0.70 $ 0.70 $ 0.69 $ 0.69 $ 0.68
Net realized and unrealized gain (loss) on investments 0.31 0.19 0.04 0.14 (0.57)
------- ------- ------- ------- -------
Total from investment operations $ 1.01 $ 0.89 $ 0.73 $ 0.83 $ 0.11
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.76) $ (0.70) $ (0.69) $ (0.69) $ (0.67)
From net realized gain on investments $ (0.02) $ (0.01) $ (0.01) -- (0.01)
Paid in captial -- -- -- -- $ (0.01)
-------- -------- -------- -------- --------
Total distributions declared to shareholders $ (0.78) $ (0.71) $ (0.70) $ (0.69) $ (0.69)
-------- -------- -------- -------- --------
Net asset value - end of period $ 11.20 $ 10.97 $ 10.79 $ 10.76 $ 10.62
-------- -------- -------- -------- --------
Total return[dbldag] 9.55% 8.51% 6.90% 8.15% 1.25%
Ratios (to average net assets)/Supplemental data:
Expenses 1.16% 1.17% 1.18% 1.14% 1.10%
Net investment income 6.32% 6.45% 6.33% 6.52% 6.47%
Portfolio turnover 9% 41% 58% 34% 13%
Net assets at end of period (000 omitted) $119,120 $101,742 $93,175 $84,380 $79,906
[dbldag]Total returns for Class A shares do not include the applicable sales charge (except for reinvested
dividends prior to October 1, 1989). If the charge had been included, the results would have been lower.
</TABLE>
See notes to financial statements
48
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Maryland Fund
- ---------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------
1998 1997 1996 1995
---------------------------------------------
Class B
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.88 $ 11.03 $ 10.93 $ 10.88
------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.47 $ 0.50 $ 0.48 $ 0.51
Net realized and unrealized gain (loss) on investments 0.60 (0.17) 0.10 0.09
------- ------- ------- -------
Total from investment operations $ 1.07 $ 0.33 $ 0.58 $ 0.60
------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.47) $ (0.48) $ (0.48) $ (0.51)
From net realized gain on investments -- -- -- --
In excess of net investment income[dbldag][dbldag] (0.01) -- -- (0.00)
In excess of net realized gain on investments -- -- -- (0.04)
-------- -------- -------- --------
Total distributions declared to shareholders $ (0.48) $ (0.48) $ (0.48) $ (0.55)
-------- -------- -------- --------
Net asset value - end of period $ 11.47 $ 10.88 $ 11.03 $ 10.93
-------- -------- -------- --------
Total return 9.96% 3.03% 5.41% 5.75%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.74% 1.82% 1.91% 1.93%
Net investment income 4.12% 4.50% 4.36% 4.73%
Portfolio turnover 21% 22% 15% 31%
Net assets at end of period (000 omitted) $21,622 $17,379 $13,694 $11,168
**For the period from the inception of Class B, September 7, 1993, through 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.
[dbldag][dbldag]For the year ended March 31, 1995, the per share distributions in excess of net investment
income was $0.003.
[sec]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 $ 0.46 $ 0.49 -- --
Ratios (to average net assets):
Expenses## 1.84% 1.89% -- --
Net investment income 4.02% 4.43% -- --
<CAPTION>
Two Months
Ended Period Ended
March 31, January 31,
1994 1994**
---------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.80 $ 11.88
--------- -------
Income from investment operations# -
Net investment income[sec] $ 0.08 $ 0.22
Net realized and unrealized gain (loss) on investments (0.91) (0.01)
--------- -------
Total from investment operations $ (0.83) $ 0.21
--------- -------
Less distributions declared to shareholders -
From net investment income $ (0.08) $ (0.21)
From net realized gain on investments -- (0.05)
In excess of net investment income[dbldag][dbldag] (0.01) (0.01)
In excess of net realized gain on investments -- (0.02)
--------- -------
Total distributions declared to shareholders $ (0.09) $ (0.29)
--------- -------
Net asset value - end of period $ 10.88 $ 11.80
--------- -------
Total return (7.08)%++ 4.45%+
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.95%+ 1.81%+
Net investment income 4.19%+ 4.23%+
Portfolio turnover 1% 25%
Net assets at end of period (000 omitted) $ 6,478 $ 5,345
**For the period from the inception of Class B, September 7, 1993, through 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.
[dbldag][dbldag]For the year ended March 31, 1995, the per share distributions in excess of net investment
income was $0.003.
[sec]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 -- --
Ratios (to average net assets):
Expenses## -- --
Net investment income -- --
</TABLE>
See notes to financial statements
49
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Massachusetts Fund
- -----------------------------------------------------------------------------------------------------------------
Year Ended March 31,
-----------------------------------------------
1998 1997 1996 1995
-----------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.86 $ 10.98 $ 10.84 $ 10.90
------- -------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.58 $ 0.61 $ 0.60 $ 0.64
Net realized and unrealized gain (loss) on investments 0.48 (0.14) 0.14 (0.03)
------- -------- -------- --------
Total from investment operations $ 1.06 $ 0.47 $ 0.74 $ 0.61
------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.58) $ (0.59) $ (0.60) $ (0.64)
From net realized gain on investments -- -- -- (0.02)
In excess of net investment income[dbldag][dbldag] (0.00) -- (0.00) --
In excess of net realized gain on investments -- -- -- (0.01)
-------- --------- --------- ---------
Total distributions declared to shareholders $ (0.58) $ (0.59) $ (0.60) $ (0.67)
-------- --------- --------- ---------
Net asset value - end of period $ 11.34 $ 10.86 $ 10.98 $ 10.84
-------- --------- --------- ---------
Total return[dbldag] 9.99% 4.39% 6.95% 5.89%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses ## 1.06% 1.12% 1.17% 1.17%
Net investment income 5.18% 5.55% 5.44% 6.01%
Portfolio turnover 24% 33% 31% 31%
Net assets at end of period (000 omitted) $237,861 $ 234,874 $249,497 $262,551
+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.
[dbldag]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.
[dbldag][dbldag]For the years ended March 31, 1998 and March 31, 1996, the per share distributions in excess
of net investment income were $0.002 and $0.002, respectively.
[sec] The investment advisor 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 $ 0.57 $ 0.60 -- --
Ratios (to average net assets):
Expenses## 1.16% 1.19% -- --
Net investment income 5.08% 5.48% -- --
<CAPTION>
Two Months
Ended Period Ended
March 31, January 31,
1994 1994
----------------- -------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.75 $ 11.41
---------- --------
Income from investment operations# -
Net investment income[sec] $ 0.11 $ 0.64
Net realized and unrealized gain (loss) on investments (0.85) 0.58
---------- --------
Total from investment operations $ (0.74) $ 1.22
---------- --------
Less distributions declared to shareholders -
From net investment income $ (0.07) $ (0.64)
From net realized gain on investments -- (0.20)
In excess of net investment income[dbldag][dbldag] (0.04) (0.04)
In excess of net realized gain on investments -- --
---------- ---------
Total distributions declared to shareholders $ (0.11) $ (0.88)
---------- ---------
Net asset value - end of period $ 10.90 $ 11.75
---------- ---------
Total return[dbldag] (6.34)%++ 11.02%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses ## 1.19%+ 1.19%
Net investment income 5.64%+ 5.71%
Portfolio turnover 4% 30%
Net assets at end of period (000 omitted) $ 277,748 $300,894
+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.
[dbldag]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.
[dbldag][dbldag]For the years ended March 31, 1998 and March 31, 1996, the per share distributions in excess
of net investment income were $0.002 and $0.002, respectively.
[sec] The investment advisor 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 -- --
Ratios (to average net assets):
Expenses## -- --
Net investment income -- --
</TABLE>
See notes to financial statements
50
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Massachusetts Fund
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended January 31, 1993 1992 1991 1990 1989
- ---------------------------------------------------------------------------------------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.05 $ 10.68 $ 10.58 $ 10.65 $ 10.60
-------- -------- -------- -------- --------
Income from investment operations -
Net investment income $ 0.68 $ 0.73 $ 0.71 $ 0.72 $ 0.72
Net realized and unrealized gain (loss) on investments 0.39 0.43 0.11 (0.07) 0.05
-------- -------- -------- -------- --------
Total from investment operations $ 1.07 $ 1.16 $ 0.82 $ 0.65 $ 0.77
-------- -------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.71) $ (0.78) $ (0.72) $ (0.72) $ (0.72)
From net realized gain on investments -- (0.01) -- -- --
--------- --------- --------- --------- ---------
Total distributions declared to shareholders $ (0.71) $ (0.79) $ (0.72) $ (0.72) $ (0.72)
--------- --------- --------- --------- ---------
Net asset value - end of period $ 11.41 $ 11.05 $ 10.68 $ 10.58 $ 10.65
--------- --------- --------- --------- ---------
Total return[dbldag] 10.03% 11.23% 8.12% 6.28% 7.65%
Ratios (to average net assets)/Supplemental data:
Expenses 1.08% 1.06% 1.07% 1.10% 1.07%
Net investment income 6.33% 6.65% 6.74% 6.75% 6.90%
Portfolio turnover 32% 51% 43% 52% 26%
Net assets at end of period (000 omitted) $270,778 $239,311 $213,679 $215,381 $212,763
[dbldag]Total returns for Class A shares do not include the applicable sales charge (except for dividends
prior to October 1, 1989). If the charge had been included, the results would have been lower.
</TABLE>
See notes to financial statements
51
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Massachusetts Fund
- ----------------------------------------------------------------------------------------------------------------
Year Ended March 31,
----------------------------------------------
1998 1997 1996 1995
----------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.87 $ 10.99 $ 10.84 $ 10.90
------- -------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.51 $ 0.53 $ 0.52 $ 0.55
Net realized and unrealized gain (loss) on investments 0.48 (0.13) 0.15 (0.02)
------- -------- -------- --------
Total from investment operations $ 0.99 $ 0.40 $ 0.67 $ 0.53
------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.51) $ (0.52) $ (0.52) $ (0.56)
From net realized gain on investments -- -- -- (0.02)
In excess of net investment income[dbldag][dbldag] (0.00) -- (0.00) --
In excess of net realized gain on investments -- -- -- (0.01)
-------- --------- --------- ---------
Total distributions declared to shareholders $ (0.51) $ (0.52) $ (0.52) $ (0.59)
-------- --------- --------- ---------
Net asset value - end of period $ 11.35 $ 10.87 $ 10.99 $ 10.84
-------- --------- --------- ---------
Total return 9.25% 3.66% 6.27% 5.13%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.71% 1.81% 1.90% 1.89%
Net investment income 4.52% 4.81% 4.71% 5.27%
Portfolio turnover 24% 33% 51% 31%
Net assets at end of period (000 omitted) $18,750 $ 15,204 $ 11,316 $ 8,676
*For the period from the commencement of the Fund's offering of Class B shares, September 7, 1993, through 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.
[dbldag][dbldag]For the years ended March 31, 1998 and March 31, 1996, the per share distributions in excess of net
investment income were $0.0016 and $0.0013, respectively.
[sec]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 $ 0.50 $ 0.52 -- --
Ratios (to average net assets):
Expenses## 1.81% 1.88% -- --
Net investment income 4.42% 4.74% -- --
<CAPTION>
Two Months
Ended Period Ended
March 31, January 31,
1994 1994*
----------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.75 $ 11.91
---------- --------
Income from investment operations# -
Net investment income[sec] $ 0.09 $ 0.23
Net realized and unrealized gain (loss) on investments (0.85) 0.04
---------- --------
Total from investment operations $ (0.76) $ 0.27
---------- --------
Less distributions declared to shareholders -
From net investment income $ (0.09) $ (0.22)
From net realized gain on investments -- (0.20)
In excess of net investment income[dbldag][dbldag] -- (0.01)
In excess of net realized gain on investments -- --
---------- --------
Total distributions declared to shareholders $ (0.09) $ (0.43)
---------- --------
Net asset value - end of period $ 10.90 $ 11.75
---------- --------
Total return (6.46)%++ 5.89%+
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.91%+ 1.81%+
Net investment income 4.89%+ 4.62%+
Portfolio turnover 4% 30%
Net assets at end of period (000 omitted) $ 4,993 $ 4,191
*For the period from the commencement of the Fund's offering of Class B shares, September 7, 1993, through
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.
[dbldag][dbldag]For the years ended March 31, 1998 and March 31, 1996, the per share distributions in excess
of net investment income were $0.0016 and $0.0013, respectively.
[sec]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 -- --
Ratios (to average net assets):
Expenses## -- --
Net investment income -- --
</TABLE>
See notes to financial statements
52
<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
16 Funds, as follows: MFS Municipal Income Fund, MFS Alabama Municipal Bond
Fund* (Alabama Fund), MFS Arkansas Municipal Bond Fund* (Arkansas Fund), MFS
California Municipal Bond Fund* (California Fund), MFS Florida Municipal Bond
Fund* (Florida Fund), MFS Georgia Municipal Bond Fund* (Georgia Fund), MFS
Maryland Municipal Bond Fund* (Maryland Fund), MFS Massachusetts Municipal Bond
Fund* (Massachusetts Fund), MFS Mississippi Municipal Bond Fund, MFS New York
Municipal Bond Fund, MFS North Carolina Municipal Bond Fund, MFS Pennsylvania
Municipal Bond Fund, MFS South Carolina Municipal Bond Fund, MFS Tennessee
Municipal Bond Fund, MFS Virginia Municipal Bond Fund, and MFS West Virginia
Municipal Bond Fund. 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 and forward
contracts, are valued on the basis of valuations furnished by dealers or by a
pricing service with consideration to factors such as institutional-size
trading in similar groups of securities, yield, quality, coupon rate, maturity,
type of issue, trading characteristics and other market data, without exclusive
reliance upon exchange or over-the-counter prices. Short-term obligations,
which mature in 60 days or less, are valued at amortized cost, which
approximates market value. Futures contracts listed on commodities exchanges
are reported at market value using closing settlement prices. Securities for
which there are no such quotations or valuations are valued at fair value as
determined in good faith by or at the direction of the Trustees.
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
with the broker either in cash or securities an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received by
the Fund each day, depending on the daily fluctuations in the value of the
contract, and are recorded for financial statement purposes as unrealized gains
or losses by the Fund. 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.
Indexed Securities - Each Fund may invest 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.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and original issue discount is amortized or accreted for financial statement
and tax reporting purposes as required by federal income tax regulations.
Interest payments received in additional securities are recorded on the
ex-interest date in an amount equal to the value of the security on such date.
Some securities may be purchased on a "when-issued" or "forward delivery"
basis, which means that the securities will be delivered to the Fund at a
future date, usually beyond customary settlement time.
Fees Paid Indirectly - The Trust's custodian fee is calculated as a percentage
of each Fund's average daily net assets. The fee is reduced according to an
arrangement that measures 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
53
<PAGE>
Notes to Financial Statements - continued
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. 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 net realized gains.
During the year ended March 31, 1998, the following amounts were reclassified
from accumulated undistributed (distribution in excess) net investment income
to accumulated net realized gain (loss) on investments due to differences
between book and tax accounting for accrued market discount on disposal of
securities:
<TABLE>
<CAPTION>
Alabama Arkansas California Florida Georgia Maryland Massachusetts
Fund Fund Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$28,902 $3,498 $52,809 -- -- $62,457 $39,030
</TABLE>
These changes had no effect on the net assets or net asset value per share of
the Funds.
At March 31, 1998, 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>
Arkansas California Florida Georgia Maryland Massachusetts
Expiration Date Fund Fund Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
March 31, 2002 $ -- $ -- $ -- $ -- $ -- $ --
March 31, 2003 -- 7,496,770 5,923,777 1,531,967 -- 1,413,007
March 31, 2004 7,076,376 403,290 -- 1,339,129 3,351,077 1,732,935
March 31, 2005 215,971 588,165 1,290,661 -- 1,055,172 405,182
March 31, 2006 -- -- 781,761 -- -- --
----------- ---------- ----------- ----------- ----------- ------------
Total $7,292,347 $8,488,225 $7,996,199 $2,871,096 $4,406,249 $3,551,124
</TABLE>
Multiple Classes of Shares of Beneficial Interest - Each Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on the value
of settled shares outstanding of each class, without distinction between share
classes. Dividends are declared separately for each class. No class has
preferential dividend rights; differences in per share dividend rates are
generally due to differences in separate class expenses. Class B shares will
convert to Class A shares approximately eight years after purchase.
(3) Transactions with Affiliates
Investment Adviser - The 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 has voluntarily
agreed to waive a portion of its fee, with respect to each Fund, which is
reflected as a reduction of expenses in the Statement of Operations.
Administrator - The Trust has an administrative services agreement with MFS to
provide the Trust with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, each Fund pays MFS an administrative fee
at the following annual percentages of each Fund's average daily net assets:
<TABLE>
<S> <C>
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
</TABLE>
54
<PAGE>
Notes to Financial Statements - continued
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 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, 1998, is a net periodic
pension expense for each Fund, as follows:
<TABLE>
<CAPTION>
Alabama Arkansas California Florida Georgia Maryland Massachusetts
Fund Fund Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$4,668 $4,264 $3,680 $4,239 $5,555 $5,425 $5,336
</TABLE>
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$14,663, $23,166, $45,709, $18,009, $16,416, $40,185, and $43,427 for the year
ended March 31, 1998 as its portion of the sales charge on sales of Class A
shares of the Alabama, Arkansas, California, Florida, Georgia, Maryland, and
Massachusetts Funds, respectively.
The Trustees have adopted a distribution plan for Class A, Class B, and Class C
shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
Each Fund's distribution plan provides that the Fund will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service fee
paid to each securities dealer that enters into a sales agreement with MFD of
up to 0.25% per annum of the Fund's average daily net assets which are
attributable to that securities dealer and 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. MFD retains the service fee for accounts not attributable to a
securities dealer, which amounted to $56,164, $31,646, $14,977, $47,562, and
$164,611 for the Alabama, Arkansas, California, Maryland and Massachusetts
Funds, for the year ended March 31, 1998. Fees incurred under the distribution
plan during the year ended March 31, 1998, were 0.25%, 0.10%, 0.25%, 0.35%, and
0.35% of each Fund's average daily net assets attributable to Class A shares on
an annualized basis for the Alabama, Arkansas, California, Maryland and
Massachusetts Funds, respectively. Payments of the 0.10% per annum distribution
fee will commence on such date as the Trustees may determine for the Alabama,
Arkansas, and Georgia Funds. Payments of the 0.35% per annum distribution and
service fee by the California and Florida Funds will commence on such date as
the Trustees may determine. In the case of the Arkansas Fund, 0.10% of the
service fee is currently being paid by the Fund; payment of the remaining
portion of the service fee will become payable on such date as the Trustees may
determine.
Each Fund's distribution plan provides that the Fund will pay MFD a
distribution fee of 0.75% per annum, and a service fee of up to 0.25% per
annum, of the Fund's average daily net assets attributable to Class B and Class
C shares. 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. Except in the case of the up to 0.25% per annum
first year service fee, payments by the California and Florida Funds will
commence on such date to be determined by the Trustees. With the exception of
the up to 0.25% per annum first year service fee, the Arkansas Fund service fee
is currently 0.10% per annum on Class B shares held over one year. The service
fee is intended to be 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 $8,421, $2,873,
$84,822, $6,315, $5,165, and $2,218 for the Alabama, Arkansas, California,
Georgia, Maryland, and Massachusetts Funds, respectively for Class B shares.
MFD retains the service fee for accounts not attributable to a securities
dealer, which amounted to $2,944 for the California Fund Class C shares. Fees
incurred under the distribution plan during the year ended March 31, 1998, were
1.00%, 0.90%, 0.81%, 0.80%, 1.00%, 1.00%, and 1.00%, of each of the Fund's
average daily net assets attributable to Class B shares for the Alabama,
Arkansas, California, Florida, Georgia, Maryland and Massachusetts Funds,
respectively, on an annualized basis. Fees incurred under the distribution plan
during the year ended March 31, 1998 were 1.00% of the Fund's average daily net
assets attributable to Class C shares for the California Fund on an annualized
basis.
Certain Class A shares and Class C shares are subject to a contingent deferred
sales charge in the event of a shareholder redemption within 12 months
following purchase. A contingent deferred sales charge is imposed on
shareholder redemptions of Class B shares in the event of a shareholder
redemption within six years of purchase. MFD receives all contingent deferred
sales charges. Contingent deferred sales charges imposed during the year ended
March 31, 1998, on Class A, Class B, and Class C shares were as follows:
<TABLE>
<CAPTION>
Alabama Arkansas California Florida Georgia Maryland Massachusetts
CDSC imposed Fund Fund Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A $ -- $ 2 $14,977 $ 12 $ -- $ 1 $ --
Class B $8,330 $25,612 $84,822 $41,233 $46,591 $49,229 $36,343
Class C $ -- $ -- $ 2,944 $ -- $ -- $ -- $ --
</TABLE>
55
<PAGE>
Notes to Financial Statements - continued
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of each Fund's average daily net assets at an effective annual rate
of 0.1125%. Prior to January 1, 1998, the fee was calculated as a percentage of
the average daily net assets at an effective annual rate of up to 0.13%.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions and short-term obligations were as follows (000
omitted):
<TABLE>
<CAPTION>
Alabama Arkansas California Florida Georgia Maryland Massachusetts
Fund Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Purchases $17,533 $20,866 $128,109 $13,381 $12,088 $30,123 $59,811
Sales 20,391 40,387 142,368 15,884 14,283 36,434 65,687
</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>
Alabama Arkansas California Florida Georgia Maryland Massachusetts
Fund Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate cost $76,842 $128,594 $238,724 $85,460 $62,233 $134,876 $231,031
------- -------- -------- ------- ------- -------- --------
Gross unrealized appreciation $ 6,681 $ 11,605 $ 23,671 $ 8,825 $ 7,078 $ 13,027 $ 23,412
Gross unrealized depreciation (36) (205) (108) (65) (9) (10) (2,344)
------- -------- -------- ------- --------- -------- --------
Net unrealized appreciation $ 6,645 $ 11,400 $ 23,563 $ 8,760 $ 7,069 $ 13,017 $ 21,068
------- -------- -------- ------- -------- -------- --------
</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) for each
fund. Transactions in each Fund's shares were as follows:
<TABLE>
<CAPTION>
Alabama Fund Arkansas Fund California Fund
Class A Shares -------------------------- -------------------------- -------------------------
Year Ended March 31, 1998 (000 Omitted) Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 248 $ 2,668 551 $ 5,518 6,423 $ 36,766
Shares issued to shareholders in reinvestment
of distributions 186 2,008 313 3,146 825 4,716
Shares reacquired (781) (8,405) (2,535) (25,349) (11,403) (65,027)
---- -------- ------ --------- ------- ----------
Net decrease (347) $ (3,729) (1,671) $ (16,685) (4,155) $ (23,545)
---- -------- ------ --------- ------- ----------
</TABLE>
<TABLE>
<CAPTION>
Year Ended March 31, 1997 (000 Omitted) Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 241 $ 2,533 892 $ 8,719 25,463 $ 140,414
Shares issued to shareholders in reinvestment
of distributions 192 2,024 368 3,589 1,024 5,658
Shares reacquired (933) (9,831) (4,159) (40,524) (31,073) (171,472)
----- -------- ------ --------- ------- ----------
Net decrease (500) $ (5,274) (2,899) $ (28,216) (4,586) $ (25,400)
----- -------- ------ --------- ------- ----------
</TABLE>
<TABLE>
<CAPTION>
Florida Fund Georgia Fund Maryland Fund
------------------------ -------------------- ------------------------
Year Ended March 31, 1998 (000 Omitted) Shares Amount Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 1,398 $ 14,053 285 $ 3,091 557 $ 6,253
Shares issued to shareholders in reinvestment
of distributions 151 1,503 150 1,625 285 3,232
Shares reacquired (2,188) (21,913) (761) (8,210) (1,469) (16,503)
------ --------- ---- -------- ------ ---------
Net decrease (639) $ (6,357) (326) $ (3,494) (627) $ (7,018)
------ --------- ---- -------- ------ ---------
</TABLE>
<TABLE>
<CAPTION>
Year Ended March 31, 1997 (000 Omitted) Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 4,179 $ 40,872 285 $ 2,988 483 $ 5,314
Shares issued to shareholders in reinvestment
of distributions 175 1,710 169 1,776 323 3,556
Shares reacquired (4,933) (48,215) (1,204) (12,622) (1,816) (19,969)
------ --------- ------ --------- ------ ---------
Net decrease (579) $ (5,633) (750) $ (7,858) (1,010) $ (11,099)
------ --------- ------ --------- ------ ---------
</TABLE>
56
<PAGE>
Notes to Financial Statements - continued
<TABLE>
<CAPTION>
Massachusetts Fund
Class A Shares ----------------------------
Year Ended March 31, 1998 (000 Omitted) Shares Amount
- --------------------------------------------------------------------------
<S> <C> <C>
Shares sold 5,740 $ 64,430
Shares issued to shareholders in reinvestment
of distributions 519 5,838
Shares reacquired (6,917) (77,656)
------ ---------
Net decrease (658) $ (7,388)
------ ---------
Year Ended March 31, 1997 (000 Omitted) Shares Amount
- --------------------------------------------------------------------------
Shares sold 5,022 $ 54,988
Shares issued to shareholders in reinvestment
of distributions 543 5,952
Shares reacquired (6,660) (72,947)
------ ---------
Net decrease (1,095) $ (12,007)
------ ---------
</TABLE>
<TABLE>
<CAPTION>
Alabama Fund Arkansas Fund California Fund
Class B Shares -------------------------- -------------------------- -----------------------
Year Ended March 31, 1998 (000 Omitted) Shares Amount Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 132 $ 1,419 99 $ 997 1,926 $ 11,020
Shares issued to shareholders in reinvestment
of distributions 17 184 14 145 139 796
Shares reacquired (96) (1,032) (165) (1,670) (1,220) (6,978)
--- -------- ---- -------- ------ --------
Net increase (decrease) 53 $ 571 (52) $ (528) 845 $ 4,838
--- -------- ---- -------- ------ --------
Year Ended March 31, 1997 (000 Omitted) Shares Amount Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------
Shares sold 137 $ 1,447 93 $ 908 1,772 $ 9,775
Shares issued to shareholders in reinvestment
of distributions 15 156 16 158 136 753
Shares reacquired (41) (437) (148) (1,448) (1,490) (8,212)
----- -------- ----- -------- ------ --------
Net increase (decrease) 111 $ 1,166 (39) $ (382) 418 $ 2,316
----- -------- ----- -------- ------ --------
</TABLE>
<TABLE>
<CAPTION>
Florida Fund Georgia Fund Maryland Fund
-------------------------- -------------------------- ------------------------
Year Ended March 31, 1998 (000 Omitted) Shares Amount Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 413 $ 4,149 228 $ 2,467 512 $ 5,761
Shares issued to shareholders in reinvestment
of distributions 22 217 20 216 42 472
Shares reacquired (304) (3,055) (218) (2,355) (265) (2,997)
---- -------- ---- -------- ---- --------
Net increase 131 $ 1,311 30 $ 328 289 $ 3,236
---- -------- ---- -------- ---- --------
Year Ended March 31, 1997 (000 Omitted) Shares Amount Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------
Shares sold 298 $ 2,980 201 $ 2,101 542 $ 5,964
Shares issued to shareholders in reinvestment
of distributions 25 243 22 225 34 379
Shares reacquired (269) (2,696) (236) (2,459) (220) (2,424)
----- -------- ----- -------- ----- --------
Net increase (decrease) 54 $ 527 (13) $ (133) 356 $ 3,919
----- -------- ----- -------- ----- --------
</TABLE>
<TABLE>
<CAPTION>
Massachusetts Fund
----------------------
Year Ended March 31, 1998 (000 Omitted) Shares Amount
- ---------------------------------------------------------------
<S> <C> <C>
Shares sold 413 $ 4,647
Shares issued to shareholders in
reinvestment of distributions 40 446
Shares reacquired (200) (2,240)
---- --------
Net increase 253 $ 2,853
---- --------
</TABLE>
57
<PAGE>
Notes to Financial Statements - continued
<TABLE>
<CAPTION>
Massachusetts Fund
Class B Shares (continued) ----------------------
Year Ended March 31, 1997 (000 Omitted) Shares Amount
- -----------------------------------------------------------------------
<S> <C> <C>
Shares sold 546 $ 5,976
Shares issued to shareholders in reinvestment
of distributions 35 383
Shares reacquired (212) (2,324)
---- --------
Net increase 369 $ 4,035
---- --------
</TABLE>
<TABLE>
<CAPTION>
California Fund
Class C Shares --------------------------
Year Ended March 31, 1998 (000 Omitted) Shares Amount
- ---------------------------------------------------------------------------
<S> <C> <C>
Shares sold 354 $ 2,022
Shares issued to shareholders in reinvestment
of distributions 16 91
Shares reacquired (317) (1,794)
---- --------
Net increase 53 $ 319
---- --------
Year Ended March 31, 1997 (000 Omitted) Shares Amount
- ---------------------------------------------------------------------------
Shares sold 312 $ 1,727
Shares issued to shareholders in reinvestment
of distributions 14 80
Shares reacquired (411) (2,275)
----- --------
Net decrease (85) $ (468)
----- --------
</TABLE>
(6) Line of Credit
The Trust and other affiliated funds participate in a $805 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of Fund
shares. Interest is charged to each fund, based on its borrowings, at a rate
equal to the bank's base rate. In addition, a commitment fee, based on the
average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated to
each of the Funds for the year ended March 31, 1998, ranged from $395 to
$1,440.
(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
Fund Description Expiration Contracts Position Appreciation
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alabama Fund Municipal Bond Index June 1998 30 Long $2,615
</TABLE>
At March 31, 1998, the Alabama Fund had sufficient cash and/or securities to
cover margin requirements on open futures contracts.
58
<PAGE>
Independent Auditors' Report
To The Trustees of MFS Municipal 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 Alabama Municipal Bond Fund,
MFS Arkansas Municipal Bond Fund, MFS California Municipal Bond Fund, MFS
Florida Municipal Bond Fund, MFS Georgia Municipal Bond Fund, MFS Maryland
Municipal Bond Fund and MFS Massachusetts Municipal Bond Fund (portfolios of
MFS Municipal Series Trust) as of March 31, 1998, the related statements of
operations for the year then ended, the statements of changes in net assets for
the years ended March 31, 1998 and 1997, and the financial highlights for each
of the years in the four-year period ended March 31, 1998, the two months ended
March 31, 1994, and each of the years in the six-year period ended January 31,
1994, (except for MFS California Municipal Bond Fund which is for each of the
years in the four-year period ended March 31, 1998, the two months ended March
31, 1994, the eleven months ended January 31, 1994, and for each of the years
in the six-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, 1998 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, 1998, the
results of their operations, the changes in their net assets, and their
financial highlights for the respective stated periods in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
May 8, 1998
59
<PAGE>
Good News!
[GRAPHIC]
ROTH
ANOTHER MFS IRA CHOICE
TRADITIONAL
Now two MFS IRA choices.
Here's good news for millions of Americans. Recent tax legislation has brought
about the introduction of the new Roth Individual Retirement Account (IRA) and,
along with it, some attractive new advantages for investors -- like added
flexibility and earnings that are never taxed.*
But along with Roth IRAs have come many questions as well . . . about how the
account works, about how it compares to traditional IRAs, and about whether it
fits in with your specific situation.
If you'd like answers to questions like these, may we suggest two convenient
ways to get all the details on this new financial planning opportunity
[bullet] Call your financial adviser, who can help you determine whether an IRA
is right for you and which IRA would be most suitable.
[bullet] Or ask us to send you the MFS IRA Choices kit, which compares the
traditional IRA to the Roth IRA. Call 1-800-637-1255 any business day
from 8 a.m. to 6 p.m. Eastern time or visit our Web site at
www.mfs.com.
*Certain withdrawals taken prior to age 591/2 are subject to a 10% federal
penalty tax.
This material is not intended to replace the advice of a qualified attorney,
tax adviser, financial adviser, or insurance agent. Before making any financial
commitment regarding the issues discussed here, consult with the appropriate
professional adviser.
60
<PAGE>
MFS(R) Municipal Series Trust
Trustees
Richard B. Bailey* - Private Investor;
Former Chairman and Director (until 1991),
MFS Investment Management
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.
Abby M. O'Neill - Private Investor
Walter E. Robb, III - President and Treasurer, Benchmark
Advisors, Inc. (corporate financial consultants); President,
Benchmark Consulting Group, Inc. (office services)
Arnold D. Scott* - Senior Executive Vice President,
Director, and Secretary, MFS Investment Management
Jeffrey L. Shames* - Chairman, Chief Executive Officer,
and Director, MFS Investment Management
J. Dale Sherratt - President, Insight Resources, Inc.
(acquisition planning specialists)
Ward Smith - Former Chairman (until 1994), NACCO
Industries (holding company)
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
John P. Kihn*
David B. Smith*
Treasurer
W. Thomas London*
Assistant Treasurers
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
*Affiliated with the Investment Adviser
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.
World Wide Web
www.mfs.com
[DALBAR logo]DALBAR
MFS NUMBER 1 MFS
TOP-RATED SERVICE
For the fourth year in a row, MFS earned a #1 ranking in the DALBAR, Inc.
Broker/Dealer Survey, Main Office Operations Service Quality Category. The firm
achieved a 3.42 overall score on a scale of 1 to 4 in the 1997 survey. A total
of 111 firms responded, offering input on the quality of service they received
from 29 mutual fund companies nationwide. The survey contained questions about
service quality in 11 categories, including "knowledge of phone service
contact," "keeping you informed," and "ease of doing business" with the firm.
61
<PAGE>
[back cover]
MFS(R) Municipal Bulk Rate
Series Trust U.S. Postage
Paid
MFS(R) Alabama Municipal Bond Fund MFS
MFS(R) Arkansas Municipal Bond Fund
MFS(R) California Municipal Bond Fund
MFS(R) Florida Municipal Bond
Fund MFS(R) Georgia Municipal Bond Fund
MFS(R) Maryland Municipal Bond
Fund MFS(R) Massachusetts Municipal Bond Fund
[MFS Logo]
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
[End MFS Logo]
500 Boylston Street
Boston, MA 02116-3741
[Dalbar logo]
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40/240
45/245
(C)1998 MFS Fund Distributors, Inc., 500 Boylston Street, MST-2A-5/98/39M
Boston, MA 02116-3741
