[MFS 75 YEARS LOGO]
MFS(R) Municipal
Series Trust
Annual Report o March 31, 1999
For the States of: Alabama, Arkansas,
California, Florida, Georgia, Maryland,
and Massachusetts
Diversifying your investment portfolio (see page 60)
<PAGE>
Table of Contents
<TABLE>
<S> <C>
Letter from the Chairman .................... 1
Management Review and Outlook ............... 2
Performance Summary ......................... 4
Portfolio of Investments .................... 13
Financial Statements ........................ 27
Notes to Financial Statements ............... 50
Independent Auditors' Report ................ 56
MFS' Year 2000 Readiness Disclosure ......... 58
Trustees and Officers ....................... 61
</TABLE>
MFS Celebrates its Diamond Anniversary!
March 21, 1999, marked the 75th anniversary of MFS' invention of the mutual
fund. The mutual fund industry has brought the power of investing to every
American, offering them the opportunity for college degrees, home ownership, and
comfortable retirement. Imagine today's world without mutual funds. We couldn't.
And while the years ahead will bring a number of challenges, our 75 years of
experience will help guide a new generation of investors into the future.
[MFS 75 years EXPERIENCE THE FUTURE (SM) LOGO]
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------
<PAGE>
Letter from the Chairman
Dear Shareholders,
[PHOTO OF JEFFREY L. SHAMES]
Since we launched Massachusetts Investors Trust, the nation's first mutual fund,
75 years ago, MFS has weathered numerous market and economic cycles, from the
occasional recession to long periods of growth and prosperity. Throughout that
time, we have tried to give investors a realistic assessment of the investment
markets and, when necessary, to sound a note of caution -- even when market
conditions appear quite favorable.
Although the equity markets have overcome last year's volatility, we still
think stocks are overdue for a correction that will rid them of the excesses
that have developed. Perhaps the most glaring measure of those excesses is the
high level of valuations, that is, the amount equity investors are paying for
each dollar of earnings. By mid-March, the price-to-earnings (P/E) ratio of the
average stock in the Standard & Poor's 500 Composite Index, a popular,
unmanaged index of common stock total return performance, was almost 28% higher
than it was a year ago. While P/E ratios keep going up, earnings have
essentially been flat, and we believe they are likely to stay that way, for a
few months at least. This leaves stock prices vulnerable to negative events
such as a domestic or international crisis, a sudden increase in interest
rates, or a slowing economy, any of which could lead to lower corporate
earnings.
While risks in the overall market have increased, one industry calls for
particular attention. For several months, Internet-related stocks have
exhibited extreme price volatility. The Internet's potential impact on the way
individuals and companies communicate and conduct business is certainly great,
but we feel that most of the recent run-up in the share prices of these
companies is unjustified. Many of them have not yet reported any profits, and
there is no way of knowing which of today's "hot" Internet stocks will be
successful -- or even in existence -- a few years from now. Therefore, we think
the frenzy surrounding even the best-known Internet stocks is purely
speculative.
However, there are some established companies offering Internet-related
products and services that may generate revenue. These include companies that
provide networking equipment, that make servers to store information, and that
help customers make better use of Internet services. Because they already have
profitable businesses as well as the potential to use the Internet to increase
their opportunities to generate revenue, these companies have been the focus of
our research efforts.
Although we think valuations for the overall equity market, and especially for
Internet stocks, are excessive, we see this situation as an opportunity for our
portfolio managers to capitalize on MFS(R) Original Research(SM). This is a
fundamental, company-by-company process that helps us find investments that we
believe are most likely to achieve long-term earnings growth, through both
negative and positive market cycles.
We also rely heavily on our research process when investing in the fixed-income
markets. Last year, turmoil in emerging markets and volatility in the U.S.
stock market helped create a "flight to quality," meaning that investors moved
toward U.S. Treasury securities, which are seen as carrying less risk, and away
from almost everything else. As a result, yields on non-Treasury securities
increased, while yields on Treasuries fell. Some of these yield spreads, or
differentials, have narrowed, but they have not returned to the levels seen
before last year's market turmoil. We think this has created opportunities for
our portfolio managers to find attractive yields in these markets.
Individual investors, meanwhile, should realize that the tremendous increases
in the broad stock market averages of the past several years are a historical
aberration and should rein in their expectations for future market performance.
If they are not already diversified across a range of investments, including
growth stock funds, value-oriented funds, and fixed-income funds, investors may
want to talk to their financial advisers about developing well-diversified
portfolios with greater potential to weather unexpected changes in the markets.
Doing so may help investors more effectively meet their long-term financial
goals. We appreciate your confidence and welcome any questions or comments you
may have.
Respectfully,
/s/ Jeffrey L. Shames
- ---------------------
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
April 16, 1999
1
<PAGE>
Management Review and Outlook
Dear Shareholders,
The past 12 months have been generally positive for investors in domestic
fixed-income securities. Bond prices, including prices of municipal bonds,
increased as interest rates, which move in the opposite direction, declined.
The yield on the 30-year U.S. Treasury bond benchmark fell 0.26% -- beginning
the period at 5.94% and ending at 5.68%. However, this modest decline belies
the level of volatility in the fixed-income markets during the period. Treasury
rates rose in April 1998, peaking at 6.08%, due to investor concerns that
strong growth in the domestic economy, combined with low unemployment, would
lead to higher inflation. In the following months, the crisis in the emerging
markets of Southeast Asia and Russia, along with signals of a moderation in the
domestic economy, spurred demand for Treasuries, which are viewed as safer than
other taxable securities. By October, these factors, as well as three
interest-rate reductions by the Federal Reserve Board and a correction in the
equity markets, pushed interest rates on 30-year Treasuries to 4.71%, their
lowest level in 31 years. However, due to the aforementioned inflation fears,
by March 31, 1999, the Treasury yield had climbed to 5.68%. In addition,
worldwide economic fundamentals appeared to have strengthened.
In the municipal market, yields on long-term, high-grade "AAA"-rated municipal
bonds also fell during the period, but by a smaller amount, from 5.05% to 4.97%.
Although yields on municipal bonds generally followed the same path as Treasury
securities, municipal bonds underperformed Treasuries, mainly because of a large
increase in new, tax-exempt securities. Some $285 billion in new municipal bonds
was issued in 1998, the second-highest year on record. The supply of new issues,
however, exceeded the demand for them. By the fall, the ratio of municipal bonds
and Treasury yields was close to 100%, the highest since 1986, making income
from municipal investments attractive to people in almost all tax brackets.
(Principal value and interest on Treasury securities are guaranteed by the U.S.
government if held to maturity.)
Given the backdrop of strong economic growth and conservative financial
management at state and local levels, the credit quality of most issuers
remained healthy. As a result, there was a narrow yield differential -- only
about 0.30% -- between high- and low-rated bonds. With such a narrow range in
yield we feel there are very few opportunities where we may be compensated for
purchasing lower-quality credits.
Our plan for the coming year, therefore, is twofold. In addition to focusing on
higher-rated bonds, we will purchase bonds maturing in 15 to 20 years to avoid
the extra risk of bonds maturing in more than 20 years. Although yields on
longer-maturity bonds may appear attractive, their prices will fall more if
interest rates rise. We carefully are maintaining our exposure to cyclical
industries, such as manufacturing, because companies with low credit ratings
could have problems if the economy were unable to sustain last year's
high-growth rate. In particular, we are taking a cautious approach to the
health care sector, which is experiencing problems associated with the
tightening of rules regarding Medicare reimbursement, and the electric utility
sector, in which impending deregulation has created uncertainty for many
issuers. At the same time, we have increased our positions in high-quality
general-obligation and revenue bonds being issued to pay for such essential
services as water and sewer systems.
Using our research-driven, bottom-up approach to fundamental credit analysis to
try to identify opportunities in the marketplace, we will continue our
systematic approach to municipal investing.
Respectfully,
/s/ Michael L. Dawson /s/ John P. Kihn
- --------------------- -----------------
Michael L. Dawson John P. Kihn
Portfolio Manager Portfolio Manager
The opinions expressed in this report are those of the portfolio managers and
are current 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.
Note to Shareholders: Effective May 1, 1999, Christopher J. Mier joins Michael
L. Dawson as portfolio manager of the following MFS(R) Municipal Series Trust
state funds: Alabama, Arkansas, California, Florida, Maryland, and
Massachusetts. Also effective May 1, 1999, Geoffrey L. Schechter joins Mr.
Dawson as portfolio manager of the Trust's Georgia fund.
2
<PAGE>
Management Review and Outlook - continued
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' PROFILES
- --------------------------------------------------------------------------------
Michael L. Dawson is Assistant Vice President and a portfolio manager of all
state municipal bond funds at MFS Investment Management(R). He joined MFS in
1998 and became portfolio manager in 1999. Prior to joining MFS, Mr. Dawson
worked in institutional sales -- fixed income for Fidelity Capital Markets and
Goldman Sachs. Prior to that, he was a research analyst in the municipal bond
group at Franklin Templeton. He is a graduate of Santa Clara University and is
a candidate for an M.B.A. degree from Babson College in May 1999.
John P. Kihn is Vice President of MFS Investment Management(R) and portfolio
manager of MFS(R) Municipal Income Fund and MFS(R) Municipal Limited Maturity
Fund. He is also a portfolio manager of all state municipal bond funds. Mr.
Kihn joined MFS as a quantitative analyst in 1997 and was named portfolio
manager later that year. He previously had worked as a senior quantitative
analyst with a major investment management firm. Mr. Kihn earned a bachelor's
degree in economics from the University of California, Berkeley, 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.
All portfolio managers at MFS Investment Management are supported by an
investment staff of over 100 professionals utilizing MFS(R) Original
Research(SM), a company-oriented, bottom-up process of selecting securities.
- --------------------------------------------------------------------------------
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.
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 relevant state
municipal debt fund as tracked by Lipper Analytical Services, Inc., an
independent firm that reports mutual fund performance. For those states where
Lipper does not track state-specific fund performance, we have provided the
average "other state" municipal debt fund returns. Each Fund's results have
also 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. It is not possible to invest directly in an index.
The portfolio of each Fund will tend to be structured with respect to maturity,
coupon, and sector selection 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, 1999, were 5.03%
for Class A shares and 4.25% for Class B shares. These returns compare to a
4.02% return for the average Alabama municipal debt fund as tracked by Lipper
and to a 6.27% return for the Lehman Index over the same period.
Arkansas
The Fund's total returns for the fiscal year ended March 31, 1999, were 4.60%
for Class A shares and 3.91% for Class B shares. These returns compare to a
4.86% return for the average "other state" municipal debt fund as tracked by
Lipper and to a 6.27% return for the Lehman Index over the same period.
California
The Fund's total returns for the fiscal year ended March 31, 1999, were 6.59%
for Class A shares, 5.74% for Class B shares, and 5.54% for Class C shares.
These returns compare to a 5.58% return for the average California municipal
debt fund as tracked by Lipper and to a 6.27% return for the Lehman Index over
the same period.
Florida
The Fund's total returns for the fiscal year ended March 31, 1999, were 5.25%
for Class A shares and 4.42% for Class B shares. These returns compare to a
4.89% return for the average Florida municipal debt fund as tracked by Lipper
and to a 6.27% return for the Lehman Index over the same period.
Georgia
The Fund's total returns for the fiscal year ended March 31, 1999, were 4.90%
for Class A shares and 4.22% for Class B shares. These returns compare to a
4.99% return for the average Georgia municipal debt fund as tracked by Lipper
and to a 6.27% return for the Lehman Index over the same period.
Maryland
The Fund's total returns for the fiscal year ended March 31, 1999, were 4.94%
for Class A shares and 4.18% for Class B shares. These returns compare to a
4.92% return for the average Maryland municipal debt fund as tracked by Lipper
and to a 6.27% return for the Lehman Index over the same period.
Massachusetts
The Fund's total returns for the fiscal year ended March 31, 1999, were 5.11%
for Class A shares and 4.43% for Class B shares. These returns compare to a
4.96% return for the average Massachusetts municipal debt fund as tracked by
Lipper and to a 6.27% return for the Lehman Index over the same period.
4
<PAGE>
Performance Summary - continued
- --------------------------------------------------------------------------------
FUND FACTS
- --------------------------------------------------------------------------------
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>
<CAPTION>
Commencement of investment operations: Class inception:
<S> <C> <C> <C> <C>
Alabama February 1, 1990 Alabama Class A February 1, 1990
Arkansas February 3, 1992 Class B September 7, 1993
California June 18, 1985 Arkansas Class A February 3, 1992
Florida February 3, 1992 Class B September 7, 1993
Georgia June 6, 1988 California Class A June 18, 1985
Maryland October 31, 1984 Class B September 7, 1993
Massachusetts April 9, 1985 Class C January 3, 1994
Florida Class A February 3, 1992
Net assets as of March 31, 1999: Class B September 7, 1993
Georgia Class A June 6, 1988
Alabama $ 85.3 million Class B September 7, 1993
Arkansas $135.3 million Maryland Class A October 31, 1984
California $298.5 million Class B September 7, 1993
Florida $ 98.4 million Massachusetts Class A April 9, 1985
Georgia $ 71.5 million Class B September 7, 1993
Maryland $160.2 million
Massachusetts $265.6 million
</TABLE>
5
<PAGE>
Performance Summary - continued
The following information illustrates the historical performance of the Fund's
original share class in comparison to various market indicators. Performance
results include the deduction of the maximum applicable sales charge and
reflect the percentage change in net asset value, including reinvestment of
dividends. 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. (See Notes to Performance Summary for more information.)
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 28, 1990, through March 31, 1999)
BEGIN PLOT POINTS]
<TABLE>
<CAPTION>
MFS Alabama Municipal Lehman Brothers
Bond Fund - Class A Municipal Bond Index
<S> <C> <C>
2/90 9,522 10,000
3/91 10,248 10,926
3/93 12,798 13,522
3/95 14,024 14,864
3/97 15,915 16,989
3/99 18,340 19,985
</TABLE>
[END PLOT POINTS]
Average Annual Total Rates of Return as of March 31, 1999
<TABLE>
<CAPTION>
Class A Investment Results
-----------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
========================================================================================
<S> <C> <C> <C> <C>
Average Annual Total Return +5.03% +6.84% +6.83% +7.45%
- ----------------------------------------------------------------------------------------
SEC Results +0.04% +5.12% +5.80% +6.88%
- ----------------------------------------------------------------------------------------
Comparative Indices
-----------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
========================================================================================
Average Alabama municipal debt fund+ +4.02% +6.13% +6.30% +7.35%
- ----------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index++ +6.27% +7.45% +7.63% +7.91%
- ----------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
-----------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
========================================================================================
<S> <C> <C> <C> <C>
Average Annual Total Return +4.25% +6.02% +5.99% +6.93%
- ----------------------------------------------------------------------------------------
SEC Results +0.26% +5.13% +5.67% +6.93%
- ----------------------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Fund's investment operations,
February 1, 1990, through March 31, 1999. Index results are from February 28,
1990.
+Source: Lipper Analytical Services, Inc.
++Source: Wiesenberger(R).
Notes to Performance Summary:
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.
Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Past performance
is no guarantee of future results.
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. See the
prospectus for details.
6
<PAGE>
Performance Summary - continued
MFS(R) ARKANSAS MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the period from February 28, 1992, through March 31, 1999)
[BEGIN PLOT POINTS]
<TABLE>
<CAPTION>
MFS Arkansas Municipal Lehman Brothers
Bond Fund - Class A Municipal Bond Index
<S> <C> <C>
2/92 9,529 10,000
3/93 10,813 11,256
3/95 11,634 12,373
3/97 12,956 14,142
3/99 14,915 16,636
</TABLE>
[END PLOT POINTS]
Average Annual Total Rates of Return as of March 31, 1999
<TABLE>
<CAPTION>
Class A Investment Results
-----------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
============================================================================================
<S> <C> <C> <C> <C>
Average Annual Total Return +4.60% +6.48% +6.31% +6.44%
- --------------------------------------------------------------------------------------------
SEC Results -0.37% +4.77% +5.28% +5.72%
- --------------------------------------------------------------------------------------------
Comparative Indices
-----------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
============================================================================================
<S> <C> <C> <C> <C>
Average "other state" municipal debt fund+ +4.86% +6.50% +6.45% +6.36%
- --------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index++ +6.27% +7.45% +7.63% +7.44%
- --------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
-----------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
============================================================================================
<S> <C> <C> <C> <C>
Average Annual Total Return +3.91% +5.68% +5.43% +5.73%
- --------------------------------------------------------------------------------------------
SEC Results -0.07% +4.78% +5.10% +5.73%
- --------------------------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Fund's investment operations,
February 3, 1992, through March 31, 1999. Index results are from February 28,
1992.
+Source: Lipper Analytical Services, Inc.
++Source: Wiesenberger(R).
Notes to Performance Summary:
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.
Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Past performance
is no guarantee of future results.
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. See the
prospectus for details.
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, 1999)
[BEGIN PLOT POINTS]
<TABLE>
<CAPTION>
MFS California Municipal Lehman Brothers
Bond Fund - Class A Municipal Bond Index
<S> <C> <C>
3/94 9,530 10,000
3/95 9,992 10,743
3/96 10,777 11,644
3/97 11,268 12,279
3/98 12,565 13,593
3/99 13,393 14,445
</TABLE>
[END PLOT POINTS]
Growth of a Hypothetical $10,000 Investment
(For the 10-year period ended March 31, 1999)
[BEGIN PLOT POINTS]
<TABLE>
<CAPTION>
MFS California Municipal Lehman Brothers
Bond Fund - Class A Municipal Bond Index
<S> <C> <C>
3/89 9,526 10,000
3/91 11,289 12,076
3/93 14,218 14,946
3/95 15,102 16,428
3/97 17,030 18,777
3/99 20,241 22,089
</TABLE>
[END PLOT POINTS]
Average Annual Total Rates of Return as of March 31, 1999
<TABLE>
<CAPTION>
Class A Investment Results
-----------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
============================================================================================
<S> <C> <C> <C> <C>
Average Annual Total Return +6.59% +7.51% +7.04% +7.83%
- --------------------------------------------------------------------------------------------
SEC Results +1.52% +5.78% +6.01% +7.30%
- --------------------------------------------------------------------------------------------
Class C Investment Results
-----------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
============================================================================================
Average Annual Total Return +5.54% +6.44% +5.97% +7.27%
- --------------------------------------------------------------------------------------------
SEC Results +4.54% +6.44% +5.97% +7.27%
- --------------------------------------------------------------------------------------------
Comparative Indices
-----------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
============================================================================================
Average California municipal debt fund+ +5.58% +7.20% +7.05% +7.61%
- --------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index++ +6.27% +7.45% +7.63% +8.25%
- --------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
-----------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
============================================================================================
<S> <C> <C> <C> <C>
Average Annual Total Return +5.74% +6.63% +6.10% +7.29%
- --------------------------------------------------------------------------------------------
SEC Results +1.74% +5.74% +5.78% +7.29%
- --------------------------------------------------------------------------------------------
</TABLE>
+Source: Lipper Analytical Services, Inc.
++Source: Wiesenberger(R).
Notes to Performance Summary:
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.
Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Past performance
is no guarantee of future results.
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. See the
prospectus for details.
8
<PAGE>
Performance Summary - continued
MFS(R) FLORIDA MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the period from February 28, 1992, through March 31, 1999)
[BEGIN PLOT POINTS]
<TABLE>
<CAPTION>
MFS Florida Municipal Lehman Brothers
Bond Fund - Class A Municipal Bond Index
<S> <C> <C>
3/92 9,529 10,000
3/93 10,888 11,256
3/95 11,736 12,373
3/97 13,087 14,142
3/99 15,174 16,636
</TABLE>
[END PLOT POINTS]
Average Annual Total Rates of Return as of March 31, 1999
<TABLE>
<CAPTION>
Class A Investment Results
-----------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
============================================================================================
<S> <C> <C> <C> <C>
Average Annual Total Return +5.25% +6.24% +6.52% +6.68%
- --------------------------------------------------------------------------------------------
SEC Results +0.25% +4.53% +5.49% +5.96%
- --------------------------------------------------------------------------------------------
Comparative Indices
-----------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
============================================================================================
Average Florida municipal debt fund+ +4.89% +6.60% +6.85% +6.87%
- --------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index++ +6.27% +7.45% +7.63% +7.44%
- --------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
-----------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
============================================================================================
<S> <C> <C> <C> <C>
Average Annual Total Return +4.42% +5.35% +5.59% +5.92%
- --------------------------------------------------------------------------------------------
SEC Results +0.42% +4.44% +5.27% +5.92%
- --------------------------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Fund's investment operations,
February 3, 1992, through March 31, 1999. Index results are from February 28,
1992.
+Source: Lipper Analytical Services, Inc.
++Source: Wiesenberger(R).
Notes to Performance Summary:
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.
Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Past performance
is no guarantee of future results.
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. See the
prospectus for details.
9
<PAGE>
Performance Summary - continued
MFS(R) GEORGIA MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the 5-year period ended March 31, 1999)
[BEGIN PLOT POINTS]
<TABLE>
<CAPTION>
MFS Georgia Municipal Lehman Brothers
Bond Fund - Class A Municipal Bond Index
<S> <C> <C>
3/94 9,523 10,000
3/95 10,061 10,743
3/96 10,713 11,644
3/97 11,192 12,279
3/98 12,425 13,593
3/99 13,034 14,445
</TABLE>
[END PLOT POINTS]
Growth of a Hypothetical $10,000 Investment
(For the 10-year period ended March 31, 1999)
[BEGIN PLOT POINTS]
<TABLE>
<CAPTION>
MFS Georgia Municipal Lehman Brothers
Bond Fund - Class A Municipal Bond Index
<S> <C> <C>
3/89 9,522 10,000
3/91 11,225 12,076
3/93 13,889 14,946
3/95 14,934 16,428
3/97 16,612 18,777
3/99 19,347 22,089
</TABLE>
[END PLOT POINTS]
Average Annual Total Rates of Return as of March 31, 1999
<TABLE>
<CAPTION>
Class A Investment Results
-----------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
============================================================================================
<S> <C> <C> <C> <C>
Average Annual Total Return +4.90% +6.76% +6.48% +7.35%
- --------------------------------------------------------------------------------------------
SEC Results -0.08% +5.04% +5.45% +6.83%
- --------------------------------------------------------------------------------------------
Comparative Indices
-----------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
============================================================================================
<S> <C> <C> <C> <C>
Average Georgia municipal debt fund+ +4.99% +6.79% +6.78% +7.54%
- --------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index++ +6.27% +7.45% +7.63% +8.25%
- --------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
-----------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
============================================================================================
<S> <C> <C> <C> <C>
Average Annual Total Return +4.22% +5.97% +5.66% +6.88%
- --------------------------------------------------------------------------------------------
SEC Results +0.22% +5.08% +5.34% +6.88%
- --------------------------------------------------------------------------------------------
</TABLE>
+Source: Lipper Analytical Services, Inc.
++Source: Wiesenberger(R).
Notes to Performance Summary:
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.
Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Past performance
is no guarantee of future results.
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. See the
prospectus for details.
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, 1999)
[BEGIN PLOT POINTS]
<TABLE>
<CAPTION>
MFS Maryland Municipal Lehman Brothers
Bond Fund - Class A Municipal Bond Index
<S> <C> <C>
3/94 9,528 10,000
3/95 10,148 10,743
3/96 10,774 11,644
3/97 11,178 12,279
3/98 12,359 13,593
3/99 12,970 14,445
</TABLE>
[END PLOT POINTS]
Growth of a Hypothetical $10,000 Investment
(For the 10-year period ended March 31, 1999)
[BEGIN PLOT POINTS]
<TABLE>
<CAPTION>
MFS Maryland Municipal Lehman Brothers
Bond Fund - Class A Municipal Bond Index
<S> <C> <C>
3/89 9,523 10,000
3/91 11,222 12,076
3/93 13,471 14,946
3/95 14,401 16,428
3/97 15,863 18,777
3/99 18,405 22,089
</TABLE>
[END PLOT POINTS]
Average Annual Total Rates of Return as of March 31, 1999
<TABLE>
<CAPTION>
Class A Investment Results
-----------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
============================================================================================
<S> <C> <C> <C> <C>
Average Annual Total Return +4.94% +6.38% +6.36% +6.81%
- --------------------------------------------------------------------------------------------
SEC Results -0.04% +4.67% +5.33% +6.29%
- --------------------------------------------------------------------------------------------
Comparative Indices
-----------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
============================================================================================
Average Maryland municipal debt fund+ +4.92% +6.39% +6.50% +7.31%
- --------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index++ +6.27% +7.45% +7.63% +8.25%
- --------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
-----------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
============================================================================================
<S> <C> <C> <C> <C>
Average Annual Total Return +4.18% +5.68% +5.64% +6.39%
- --------------------------------------------------------------------------------------------
SEC Results +0.18% +4.77% +5.32% +6.39%
- --------------------------------------------------------------------------------------------
</TABLE>
+Source: Lipper Analytical Services, Inc.
++Source: Wiesenberger(R).
Notes to Performance Summary:
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.
Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Past performance
is no guarantee of future results.
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. See the
prospectus for details.
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, 1999)
[BEGIN PLOT POINTS]
<TABLE>
<CAPTION>
MFS Massachusetts Municipal Lehman Brothers
Bond Fund - Class A Municipal Bond Index
<S> <C> <C>
3/94 9,528 10,000
3/95 10,089 10,743
3/96 10,790 11,644
3/97 11,264 12,279
3/98 12,386 13,593
3/99 13,019 14,445
</TABLE>
[END PLOT POINTS]
Growth of a Hypothetical $10,000 Investment
(For the 10-year period ended March 31, 1999)
[BEGIN PLOT POINTS]
<TABLE>
<CAPTION>
MFS Massachusetts Municipal Lehman Brothers
Bond Fund - Class A Municipal Bond Index
<S> <C> <C>
3/89 9,527 10,000
3/91 11,146 12,076
3/93 13,788 14,946
3/95 14,836 16,428
3/97 16,563 18,777
3/99 19,145 22,089
</TABLE>
[END PLOT POINTS]
Average Annual Total Rates of Return as of March 31, 1999
<TABLE>
<CAPTION>
Class A Investment Results
-----------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
============================================================================================
<S> <C> <C> <C> <C>
Average Annual Total Return +5.11% +6.46% +6.44% +7.23%
- --------------------------------------------------------------------------------------------
SEC Results +0.12% +4.75% +5.41% +6.71%
- --------------------------------------------------------------------------------------------
Comparative Indices
-----------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
============================================================================================
Average Massachusetts municipal debt fund+ +4.96% +6.69% +6.80% +7.57%
- --------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index++ +6.27% +7.45% +7.63% +8.25%
- --------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
-----------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
============================================================================================
<S> <C> <C> <C> <C>
Average Annual Total Return +4.43% +5.75% +5.73% +6.83%
- --------------------------------------------------------------------------------------------
SEC Results +0.43% +4.85% +5.41% +6.83%
- --------------------------------------------------------------------------------------------
</TABLE>
+Source: Lipper Analytical Services, Inc.
++Source: Wiesenberger(R).
Notes to Performance Summary:
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.
Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Past performance
is no guarantee of future results.
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. See the
prospectus for details.
12
<PAGE>
Portfolio of Investments - March 31, 1999
MFS ALABAMA MUNICIPAL BOND FUND
Municipal Bonds - 99.8%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 17.1%
Birmingham, AL, 5s, 2019 $1,000 $ 997,490
Commonwealth of Puerto Rico, 5s, 2015 1,300 1,302,093
Florence, AL, FSA, 5s, 2018 850 849,626
Huntsville, AL, 5.25s, 2013 1,705 1,774,939
Huntsville, AL, 5.5s, 2020 1,000 1,034,860
Macon County, AL, Limited Obligation Rev.,
AMBAC, 5.05s, 2019 1,000 996,190
Puerto Rico Public Buildings Authority,
Government Facilities, AMBAC, 6.25s, 2013 2,000 2,353,060
Russell County, AL, AMBAC, 5s, 2017 1,595 1,596,818
Shelby County, AL, MBIA, 0s, 2011 3,000 1,460,250
Shelby County, AL, 7.4s, 2007 1,000 1,100,550
Shelby County, AL, 7.7s, 2017 800 887,200
State of Alabama, 7.1s, 2010 250 266,098
-----------
$14,619,174
- --------------------------------------------------------------------------------------
State and Local Appropriation - 3.1%
Lawrence County, AL, Public Building Authority
(County Jail), AMBAC, 5s, 2027 $1,000 $ 979,370
Puerto Rico Public Buildings Authority, Education
& Health, 5.6s, 2008+ 500 543,680
Puerto Rico Public Buildings Authority, Education
& Health, 5.5s, 2021+ 500 532,660
Puerto Rico Public Finance Corp., 5.375s, 2016 500 569,030
-----------
$ 2,624,740
- --------------------------------------------------------------------------------------
Refunded and Special Obligations - 10.3%
Alabama Agriculture & Mechanics University
Rev., MBIA, 5.75s, 2005 $ 500 $ 558,420
Alabama Building Renovation Finance Authority
Rev. (Fitch Light), 7.45s, 2000 1,500 1,600,350
Baldwin County, AL, Eastern Shore Health Care
Authority (Thomas Hospital), 8.5s, 2001 1,000 1,111,740
Birmingham, AL, Waterworks & Sewer Board
Rev., 5.375s, 2006 2,000 2,181,540
Gadsden East, AL, Medical Clinic Board Rev.
(Baptist Hospital of Gadsden Inc.), 7.8s, 2001 2,000 2,240,820
Montgomery County, AL, Department of Human
Resources Rev., 7s, 2001+ 1,000 1,083,230
-----------
$ 8,776,100
- --------------------------------------------------------------------------------------
Airport and Port Revenue - 6.6%
Alabama Docks Department, Docks Facilities Rev.,
MBIA, 5.375s, 2017 $1,000 $ 1,024,130
Alabama Docks Department Docks Facilities Rev.,
MBIA, 5.5s, 2022 1,000 1,042,030
Birmingham, AL, AMBAC, 5.5s, 2013[sec][sec] 1,465 1,498,460
Mobile, AL, Airport Authority Rev., 7.375s, 2012 1,000 1,061,700
Mobile, AL, Airport Authority Rev., 8.875s, 2015 952 1,009,682
-----------
$ 5,636,002
- --------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 3.0%
DeKalb & Cherokee County, AL, Gas Rev.,
AMBAC, 5.4s, 2016 $2,000 $ 2,067,400
Puerto Rico Electric Power Authority Rev.,
5s, 2028 500 490,290
-----------
$ 2,557,690
- --------------------------------------------------------------------------------------
Health Care Revenue - 7.0%
Alabama Special Care Facilities Financing
Authority (Daughters of Charity), FGIC, 5s, 2025 $1,000 $ 963,110
Baldwin County, AL, Eastern Shore Health Care
(Thomas Hospital), 6.75s, 2015 1,000 1,090,230
Municipal Bonds - continued
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
Health Care Revenue - continued
Cullman, AL, Medical Park South Clinic, "A",
6.5s, 2023 $1,000 $ 1,057,280
Montgomery, AL, Medical Clinic Board Rev.
(Jackson Hospital & Clinic), 7s, 2015 2,030 2,111,667
Valley, AL, Special Care Facilities Finance
Authority Rev. (Lanier Memorial Hospital),
5.65s, 2022 735 734,625
-----------
$ 5,956,912
- --------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 9.7%
Butler, AL, Industrial Development Board, Solid
Waste Rev. (James River Corp.), 8s, 2028 $1,000 $ 1,136,390
Camden, AL, Industrial Development Board
Pollution Control Rev. (Macmillian Bloedel),
7.75s, 2009 500 530,440
Courtland, AL, Industrial Development Board,
Solid Waste Disposal Rev. (Champion
International Corp.), 5.9s, 2017 1,000 1,026,300
Courtland, AL, Industrial Development Board,
Solid Waste Disposal Rev. (Champion
International Corp.), 7.75s, 2020 1,485 1,546,479
Mobile, AL, Industrial Development Board,
Dock & Wharf Rev. (Ideal Basic Industries Inc.),
6.75s, 2004 270 272,022
Mobile, AL, Industrial Development Board, Dock
& Wharf Rev. (Ideal Basic Industries Inc.),
6.875s, 2009 1,075 1,083,439
Piedmont, AL, Industrial Development Board Rev.
(Springs Industries Project), 8.25s, 2010 1,000 1,066,460
Tarrant City, AL, Industrial Development Board
Rev. (Vulcan Materials Co.), 7.5s, 2011 1,500 1,600,920
-----------
$ 8,262,450
- --------------------------------------------------------------------------------------
Insured Health Care Revenue - 8.9%
Alabama Special Care Facilities Financing
Authority (Daughters of Charity), AMBAC,
5s, 2025 $1,500 $ 1,459,335
Huntsville, AL, Health Care Authority, MBIA,
5s, 2023 1,000 975,380
Huntsville, AL, Health Care Facilities Rev., MBIA,
6.375s, 2022 850 917,397
Lauderdale County & Florence, AL (Eliza Coffee
Memorial Hospital), MBIA, 5.75s, 2014 1,000 1,087,690
Montgomery, AL, Baptist Medical Center Special
Care Facilities Finance Authority Rev., MBIA,
5.25s, 2013 850 884,170
Montgomery, AL, Medical Clinic Board Rev.
(Jackson Hospital & Clinic), AMBAC,
5.875s, 2016 1,000 1,087,370
Montgomery, AL, Special Care Facilities (Baptist
Medical Hospital), FSA, 5.375s, 2019 1,150 1,176,588
-----------
$ 7,587,930
- --------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 2.2%
Alabama Housing Finance Authority, Multi-Family
Residential Development Rev. (St. Jude), FHA,
7.25s, 2023 $1,365 $ 1,464,317
Puerto Rico Housing Finance Corp., Multi-Family
Mortgage Rev., 7.5s, 2015 355 368,103
-----------
$ 1,832,420
- --------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 1.2%
Virgin Islands Public Finance Authority, 5.5s, 2018 $1,000 $ 1,007,220
- --------------------------------------------------------------------------------------
</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 - 4.8%
Alabama Housing Finance Authority, Single Family
Mortgage Rev., Collateral Home Mortgage
Program, 5.7s, 2015 $1,605 $ 1,678,156
Alabama Housing Finance Authority, Single Family
Mortgage Rev., GNMA, 6.55s, 2014 985 1,049,695
Alabama Housing Finance Authority, Single Family
Mortgage Rev., GNMA, 7.4s, 2022 565 582,837
Alabama Housing Finance Authority, Single Family
Mortgage Rev., GNMA, 7.5s, 2022 345 359,507
Alabama Housing Finance Authority, Single Family
Mortgage Rev., GNMA, 7.6s, 2022 150 156,990
Alabama Housing Finance Authority, Single Family
Mortgage Rev., GNMA, 7.75s, 2022 265 275,404
-----------
$ 4,102,589
- --------------------------------------------------------------------------------------
Turnpike Revenue - 2.4%
Puerto Rico Highway & Transportation Authority
Highway Rev., FSA, 5s, 2016 $2,000 $ 2,026,920
- --------------------------------------------------------------------------------------
Universities - 7.2%
Alabama Agricultural & Mechanical University
Rev., MBIA, 5.25s, 2013 $1,000 $ 1,043,130
Alabama, Board of Education Rev. (Shelton State
Community College), MBIA, 6s, 2014 1,000 1,099,980
Alabama Board of Education Rev. (Southern
Union Community College), MBIA, 5s, 2018 1,000 991,350
Homewood, AL, Educational Building Authority,
Educational Facilities Rev. (Samford University),
6.5s, 2016 1,000 1,071,090
Montgomery, AL, Elderly Building Authority
Finance Rev. (Faulkner University), MBIA,
5s, 2023 2,000 1,964,200
-----------
$ 6,169,750
- --------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 12.8%
Alabama Water Pollution Control Authority,
AMBAC, 5.5s, 2020 $1,500 $ 1,545,585
Arab, AL, MBIA, 7.05s, 2016 1,000 1,085,550
Bessemer, AL, AMBAC, 5.75s, 2026 1,000 1,078,020
Birmingham, AL, Water & Sewer Rev., 5.125s,
2017 1,000 1,008,960
Birmingham, AL, Water & Sewer Rev., AMBAC,
5.125s, 2014 1,410 1,443,840
Fairview, AL, Water Authority Rev. (East Cullman),
AMBAC, 8s, 2020 955 992,818
Limestone County, AL, Water Authority Rev., FGIC,
5.5s, 2026 2,650 2,746,725
Madison, AL, Water & Waste Board, MBIA,
5.5s, 2019 1,000 1,038,930
-----------
$10,940,428
- --------------------------------------------------------------------------------------
Other - 3.5%
Birmingham, AL, 0s to 2000, 12.5s to 2010 $2,435 $ 2,997,412
- --------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $79,596,621) $85,097,737
- --------------------------------------------------------------------------------------
Floating Rate Demand Notes - 1.5%
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
District of Columbia Rev., due 08/15/38 $ 300 $ 300,000
St. Lucie County, FL, Pollution Control Rev. (Florida
Power & Light Co.), due 01/01/26 100 100,000
Stevenson, AL, Industrial Development Board,
Environmental Improvement Rev., due 04/01/16 900 900,000
- --------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 1,300,000
- --------------------------------------------------------------------------------------
Total Investments (Identified Cost, $80,896,621) $86,397,737
Other Assets, Less Liabilities - (1.3%) $(1,094,553)
- --------------------------------------------------------------------------------------
Net assets - 100.0% $85,303,184
- --------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
14 - MAL
<PAGE>
Portfolio of Investments - March 31, 1999
MFS ARKANSAS MUNICIPAL BOND FUND
Municipal Bonds - 98.4%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 6.6%
Arkansas College Savings, "A", 0s, 2015 $2,575 $ 1,156,458
Arkansas College Savings, "A", 0s, 2017 2,590 1,038,616
Arkansas College Savings, "B", 0s, 2012 1,200 643,188
Arkansas College Savings, "B", 0s, 2013 1,000 506,270
Arkansas College Savings, "B", 0s, 2014 1,150 547,550
Arkansas College Savings, "B", 0s, 2015 1,600 718,576
Arkansas College Savings, "B", 0s, 2016 1,000 425,260
Arkansas College Savings, "C", 0s, 2014 1,000 476,130
Arkansas Water Resources Development
Authority, 6.375s, 2021 1,000 1,066,030
Commonwealth of Puerto Rico, 5.5s, 2013 1,210 1,314,616
Commonwealth of Puerto Rico, 5.4s, 2025 1,000 1,036,960
-----------
$ 8,929,654
- --------------------------------------------------------------------------------------
State and Local Appropriation - 4.2%
Arkansas Development Finance Authority, Local
Government Rev., 7.1s, 2008+ $2,440 $ 2,612,142
Arkansas Development Finance Authority, Single
Family Mortgage Rev., 0s, 2011 5,000 2,055,600
Puerto Rico Public Finance Corp., AMBAC,
5.375s, 2016 1,000 1,077,570
-----------
$ 5,745,312
- --------------------------------------------------------------------------------------
Refunded and Special Obligations - 9.9%
Arkansas Development Finance Authority, Water
& Sewer Rev., MBIA, 7s, 2001 $2,050 $ 2,214,226
Arkansas Housing Development Agency, Single
Family Mortgage Rev., 8.375s, 2011 1,000 1,324,370
Arkansas Water Resources Development
Authority, 6.375s, 2012 1,000 1,066,340
Harrison, AR, Residential Housing Facilities Board,
Single Family Mortgage Rev., FGIC, 7.4s, 2011 4,000 5,001,120
North Little Rock, AR, Electric Rev., MBIA,
6.5s, 2002 1,000 1,100,730
Pulaski County, AR, Health Facilities Board Rev.
(Sisters of Charity), MBIA, 6s, 2002 1,000 1,093,760
Sherwood, AR, Residential Housing Facilities
Board, Single Family Mortgage Rev., MBIA,
7.5s, 2011 1,250 1,557,625
-----------
$13,358,171
- --------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 13.8%
Jefferson County, AR, Pollution Control Rev.
(Arkansas Power & Light), 6.3s, 2018 $1,050 $ 1,127,217
North Little Rock, AR, Electric Rev., MBIA,
6.5s, 2010 2,000 2,333,600
North Little Rock, AR, Electric Rev., MBIA,
6.5s, 2015 6,000 7,262,700
Pope County, AR, Solid Waste Disposal Rev.
(Arkansas Power & Light), 8s, 2020 1,780 1,910,723
Pope County, AR, Solid Waste Disposal Rev.
(Arkansas Power & Light), 8s, 2021 3,000 3,243,420
Puerto Rico Electric Power Authority Rev.,
MBIA, 5.25s, 2016 1,500 1,562,730
Virgin Islands Water & Power Authority, 5.3s, 2018 1,250 1,242,363
-----------
$18,682,753
- --------------------------------------------------------------------------------------
Health Care Revenue - 7.5%
Arkansas Development Finance Authority Rev.
(White River Medical Center), 5.55s, 2019 $ 500 $ 497,535
Baxter County, AR, Hospital Rev., 7.5s, 2021 3,145 3,438,083
Little Rock, AR, Health Facilities Board (Baptist
Medical Center), 6.9s, 2009 1,400 1,655,010
Municipal Bonds - continued
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
Health Care Revenue - continued
Little Rock, AR, Health Facilities Board (Baptist
Medical Center), 7s, 2017 $3,250 $ 3,512,567
Pulaski County, AR, Hospital Rev. (Children's
Hospital), 6.15s, 2017 1,000 1,046,700
-----------
$10,149,895
- --------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 7.6%
Blytheville, AR, Solid Waste Recycling & Sewage
Treatment Rev. (Nucor), 6.375s, 2023 $3,565 $ 3,808,026
Camden, AR, Environmental Improvement Rev.
(International Paper), 7.625s, 2018 1,000 1,152,820
Jonesboro, AR, Industrial Development Rev.
(Anheuser-Busch), 6.5s, 2012 3,500 3,819,585
Little River County, AR (Georgia Pacific Corp.),
5.6s, 2026 1,000 1,004,250
Pine Bluff, AR, Environmental Improvement Rev.
(International Paper Company), 5.55s, 2022 500 502,690
-----------
$10,287,371
- --------------------------------------------------------------------------------------
Insured Health Care Revenue - 9.0%
Arkansas Development Finance Authority, Health
Facilities Rev. (Sisters of Mercy), MBIA, 5s, 2013 $6,340 $ 6,627,012
Arkansas Development Finance Authority, Health
Facilities Rev. (Sisters of Mercy), MBIA, 5s, 2019 5,500 5,498,515
-----------
$12,125,527
- --------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 0.4%
West Memphis, AR, Public Facilities Board
Mortgage Rev., AMBAC, 0s, 2011 $1,090 $ 530,503
- --------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 5.1%
Little Rock, AR, Hotel & Restaurant Gross
Receipts Tax Rev., 7.375s, 2015 $4,790 $ 5,956,413
Virgin Islands Public Finance Authority, 5.5s, 2022 1,000 1,001,270
-----------
$ 6,957,683
- --------------------------------------------------------------------------------------
Single Family Housing Revenue - 13.7%
Arkansas Development Finance Authority, Single
Family Mortgage Rev., GNMA, 7.4s, 2023 $1,050 $ 1,101,051
Arkansas Development Finance Authority, Single
Family Mortgage Rev., GNMA, 6.7s, 2027 2,765 2,937,508
Arkansas Development Finance Authority, Single
Family Mortgage Rev., GNMA, 7.45s, 2027 1,695 1,871,670
Arkansas Housing Development Agency,
Residential Mortgage Rev., 0s, 2015 10,825 1,932,262
Jefferson County, AR, Health Care & Residential
Facilities Board, 7.25s, 2011 730 768,617
Lonoke County, AR, Residential Housing Facilities
Board, 7.375s, 2011 159 170,968
Lonoke County, AR, Residential Housing Facilities
Board, FNMA, 7.9s, 2011 661 726,131
Mississippi County, AR, Public Facilities Board,
Mortgage Rev., 7.2s, 2010 805 885,315
North Little Rock, AR, Residential Housing
Facilities Board, 0s, 2010 13,646 6,213,160
Pulaski County, AR, Public Facilities Board Rev.,
FNMA, 0s, 2014 2,750 1,261,920
Saline County, AR, Residential Housing Facilities
Board, 7.875s, 2011 650 694,785
-----------
$18,563,387
- --------------------------------------------------------------------------------------
Student Loan Revenue - 2.4%
Arkansas Student Loan Authority Rev., 7.15s, 2002 $ 280 $ 295,828
Arkansas Student Loan Authority Rev., 6.75s, 2006 830 865,483
</TABLE>
15 - MAR
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
Student Loan Revenue - continued
Arkansas Student Loan Authority Rev., "B",
6.25s, 2010 $2,000 $ 2,131,460
------------
$ 3,292,771
- ----------------------------------------------------------------------------------
Turnpike Revenue - 3.5%
Puerto Rico Highway & Transportation Authority
Highway Rev., FSA, 5s, 2016 $4,605 $ 4,666,983
- ----------------------------------------------------------------------------------
Universities - 4.1%
Arkansas State University Rev., AMBAC, 5s, 2019 $1,000 $ 992,470
Conway, AR, Public Facilities Rev. (Hendrix
College), 5.85s, 2016 1,000 1,038,620
Pope County, AR, Residential Housing Facilities
Board (Arkansas Tech University), 6s, 2027 1,000 994,690
University of Arkansas Rev., MBIA, 5.05s, 2019 2,500 2,511,350
------------
$ 5,537,130
- ----------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 10.6%
Arkansas Development Finance Authority,
Revolving Loan Fund, 5.85s, 2019 $2,130 $ 2,222,442
Arkansas Development Finance Authority, Waste
Water Systems Rev., 4.875s, 2017 1,500 1,484,655
Arkansas Development Finance Authority, Water
& Sewer Rev., MBIA, 5s, 2012 1,000 1,016,130
Beaver, AR, Water District, Benton & Washington
Counties, Water & Sewer Rev., MBIA, 5.85s,
2008 2,000 2,146,300
Fort Smith, AR, Water & Sewer Rev., MBIA, 6s,
2012 2,250 2,454,435
Russellville, AR, Water Systems Rev., AMBAC,
6.25s, 2012 1,365 1,462,052
South Sebastian County, AR, Water Users Assn.,
5.95s, 2013 2,425 2,502,624
South Sebastian County, AR, Water Users Assn.,
6.15s, 2023 1,000 1,030,730
------------
$ 14,319,368
- ----------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $122,930,355) $133,146,508
- ----------------------------------------------------------------------------------
Floating Rate Demand Notes - 0.6%
- ----------------------------------------------------------------------------------
District of Columbia Rev., due 08/15/38 $ 100 $ 100,000
Uinta County, WY, Pollution Control Rev. (Chevron
USA, Inc.), due 08/15/20 700 700,000
- ----------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 800,000
- ----------------------------------------------------------------------------------
Total Investments (Identified Cost, $123,730,355) $133,946,508
Other Assets, Less Liabilities - 1.0% 1,306,302
- ----------------------------------------------------------------------------------
Net assets - 100.0% $135,252,810
- ----------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
MFS CALIFORNIA MUNICIPAL BOND FUND
Municipal Bonds - 96.9%
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 11.8%
Commonwealth of Puerto Rico, 5.5s, 2009 $2,500 $ 2,717,075
Corona, CA, Unified School District, "A", FSA,
5.375s, 2018 1,350 1,401,367
Los Angeles, CA, Unified School District, FGIC,
5s, 2021 4,500 4,464,180
Lucia Mar, CA, Unified School District, FGIC,
0s, 2013 1,350 685,665
Paramount, CA, Unified School District,"A", FSA,
5.125s, 2019 2,000 2,017,200
State of California, 10s, 2007 1,055 1,492,277
State of California, 6.5s, 2010 1,235 1,463,981
State of California, 5s, 2015 2,575 2,617,616
State of California, 6.314s, 2015++++ 5,000 4,986,050
State of California, AMBAC, 7.2s, 2008 1,600 1,960,928
State of California, AMBAC, 6.3s, 2010 6,000 7,023,420
State of California, AMBAC, 7s, 2010 2,000 2,458,340
Walnut Valley, CA, AMBAC, 6s, 2011 1,600 1,834,416
-----------
$35,122,515
- ----------------------------------------------------------------------------------
State and Local Appropriation - 15.4%
Banning, CA, Certificates of Participation, Water
System Improvement, AMBAC, 8s, 2019 $1,000 $ 1,346,120
California Public Works Board (California State
University Trustees), 5.25s, 2013 1,500 1,577,400
California Public Works Board, Lease Rev.,
5.55s, 2010 4,000 4,415,360
California Public Works Board, Lease Rev., MBIA,
5.5s, 2015 4,500 4,919,805
California Public Works Board, Lease Rev.
(Department of Corrections), 7.4s, 2010 5,000 6,301,350
Fortuna, Parlier & Susanville, CA, Certificates of
Participation, "B", 7.375s, 2017 930 984,293
Grossmont, CA, Union High School District,
Certificates of Participation, MBIA, 0s, 2006 6,000 4,391,940
Los Angeles, CA, Building Authority Rev., MBIA,
5.625s, 2011 3,375 3,744,562
Los Angeles, CA, Convention & Exhibition Center
Authority, Certificates of Participation, AMBAC,
0s, 2005 2,400 1,860,384
Modesto, CA, Irrigation District, Certificates of
Participation, AMBAC, 4.75s, 2015 1,055 1,045,357
Pasadena, CA, Certificates of Participation
(Pasadena Parking Facilities), 6.25s, 2018 3,460 3,986,647
Pomona, CA, Public Financing Authority Rev.,
6.25s, 2010 4,020 4,525,033
San Joaquin County, CA, Certificates of
Participation (General Hospital), 6.625s, 2020 2,000 2,165,680
Tulare County, CA, Certificates of Participation
(Capital Improvements Program), MBIA, 6s, 2016 1,000 1,141,900
Visalia, CA, Utility Systems Department,
Certificates of Participation, MBIA, 0s, 2005 4,655 3,566,289
-----------
$45,972,120
- ----------------------------------------------------------------------------------
Refunded and Special Obligations - 16.8%
California Health Facilities Financing Authority
Rev. (AIDS Hospice Foundation), 7.15s, 2000 $2,785 $ 2,922,830
California Health Facilities Financing Authority
Rev. (St. Joseph's Hospital), CHFC, 6.75s, 2001 2,710 2,953,981
California Statewide Community Development
Authority, Certificates of Participation, CHFC,
0s, 2007 3,645 2,573,115
</TABLE>
16 - MCA
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
Refunded and Special Obligations - continued
California Statewide Community Development
Authority, Certificates of Participation, CHFC,
0s, 2008 $6,345 $ 4,275,959
California Statewide Community Development
Authority (St. Joseph's Hospital), 6.625s, 2004 4,205 4,848,197
Central Valley, CA, 6.2s, 2003 3,000 3,355,320
Corona, CA, Certificates of Participation (Corona
Community Hospital), 8s, 2005 585 712,758
Desert Hospital District, CA, Hospital Rev. (Desert
Hospital Corp.), 8.874s, 2002,++++ 3,000 3,614,640
Emeryville, CA, Public Financing Authority Rev.,
Redevelopment Project, 6.5s, 2002 770 849,310
Los Angeles, CA, Convention & Exhibition Center
Authority, Certificates of Participation, 9s, 2005 1,900 2,465,440
Mojave, CA, Water Agency Rev. (Morongo Basin),
6.6s, 2002 1,400 1,560,510
Northern California Power Agency, Public Power
Rev., 5.85s, 2010 870 977,271
Pomona, CA, Public Financing Authority Rev.,
5.75s, 2004 855 944,801
Pomona, CA, Single Family Mortgage Rev.,
FHLMC, GNMA, 7.5s, 2000 2,000 2,613,020
Pomona, CA, Single Family Mortgage Rev., FNMA,
GNMA, 7.375s, 2010 2,000 2,398,140
Southern California Public Power Transmission
Rev., "A", 0s, 2005 3,795 2,959,037
Thousand Oaks, CA, Redevelopment Agency
(Shadow Hills Project), 7s, 2021 8,900 10,082,810
-----------
$50,107,139
- --------------------------------------------------------------------------------------
Airport and Port Revenue - 7.2%
Los Angeles, CA, Department of Airport Rev.
(Ontario International Airport), FGIC, 6s, 2017 $4,100 $ 4,489,910
Los Angeles, CA, Harbor Department Rev.,
6.625s, 2025 2,000 2,178,300
Port Oakland, CA, Port Rev., MBIA, 0s, 2009 7,000 4,428,480
Port Oakland, CA, Port Rev., MBIA, 6.5s, 2016 1,000 1,098,660
San Francisco, CA, City & County Airport
Commission, International Airport Rev., FSA,
5s, 2018 5,000 4,951,100
San Francisco, CA, City & County Airports
Commission, International Airport Rev., 6.5s, 2019 4,000 4,464,120
-----------
$21,610,570
- --------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 4.4%
California Pollution Control Financing Authority
Rev. (Pacific Gas & Electric Co.), 6.625s, 2009 $1,000 $ 1,079,120
Imperial Irrigation District, CA, Electric Rev.,
MBIA, 5s, 2018 5,000 5,005,800
Kings River Conservation District, CA, Pine Flat
Power Rev., 5.125s, 2016 1,500 1,544,085
Los Angeles, CA, Department of Water & Power,
Electric Plant Rev., 7.1s, 2031 1,050 1,126,608
Northern California Power Agency, Public Power
Rev., Public Power Rev., 5.85s, 2010 880 974,503
Southern California Public Power Authority Rev.
(Southern Transmission Project), 0s, 2005 4,205 3,285,535
-----------
$13,015,651
- --------------------------------------------------------------------------------------
Municipal Bonds - continued
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Revenue (Corporate Guarantee) - 1.3%
California Pollution Control Financing Authority
Rev. (Control Revenue), 6.7s, 2007 $2,750 $ 2,921,573
California Pollution Control Financing Authority
Rev. (Frito-Lay, Inc.), 6.375s, 2004 1,025 1,093,839
-----------
$ 4,015,412
- --------------------------------------------------------------------------------------
Insured Health Care Revenue - 3.3%
Abag, CA, Finance Authority (Rhoda Haas
Goldman Plaza), CHFC, 5.125s, 2015 $2,250 $ 2,276,572
California Health Facilities Financing Authority
Rev., CMI, 5.25s, 2018 1,000 1,007,270
California Health Facilities Financing Authority
Rev. (Little Company Mary Health Services),
AMBAC, 5s, 2014 2,585 2,640,759
California Health Facilities Financing Authority
Rev. (Little Company Mary Health Services),
AMBAC, 5s, 2015 2,715 2,754,313
California Statewide Community Development
Authority, MBIA, 6s, 2011 1,015 1,157,039
-----------
$ 9,835,953
- --------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 3.9%
California Housing Finance Agency (Multi-Unit
Rental Housing), 6.7s, 2015 $2,750 $ 2,931,693
California Statewide Community Development
Authority (Irvine Apartments), 5.25s, 2025 3,000 3,061,500
Palmdale, CA, Multi-Family Housing Rev., FNMA,
7.375s, 2024 1,000 1,075,200
Yolo County, CA, Housing Authority Mortgage Rev.
(Walnut Park Apartments), FHA, 7.2s, 2033 4,150 4,486,067
-----------
$11,554,460
- --------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 1.7%
Virgin Islands Public Finance Authority,
5.875s, 2018 $3,000 $ 3,096,240
Virgin Islands Public Finance Authority, 5.5s, 2022 2,000 2,002,540
-----------
$ 5,098,780
- --------------------------------------------------------------------------------------
Single Family Housing Revenue - 1.3%
California Housing Finance Agency, 7.75s, 2010 $ 400 $ 414,384
California Housing Finance Agency, MBIA,
6s, 2010 1,400 1,473,178
California Rural Home Mortgage Finance
Authority, GNMA, 0s to 1999, 5.75s to 2029 1,500 1,655,715
San Bernardino County, CA, Single Family
Mortgage Rev., GNMA, 7.65s, 2023 105 114,444
Southern California Home Finance Authority,
Single Family Mortgage Rev., GNMA,
7.625s, 2023 130 135,666
-----------
$ 3,793,387
- --------------------------------------------------------------------------------------
Special Assessment District - 6.7%
Anaheim, CA, Public Finance Authority Rev.,
MBIA, 0s, 2006 $5,000 $ 3,667,050
Brea, CA, Public Finance Authority Rev., MBIA,
0s, 2005 2,235 1,740,574
Brea, CA, Public Finance Authority Rev., MBIA,
0s, 2006 3,415 2,538,540
Commerce, CA, Community Development
Commission, MBIA, 5.5s, 2010 3,545 3,890,248
Concord, CA, Redevelopment Agency, Tax
Allocation, BIGI, 8s, 2018 40 40,814
Emeryville, CA, Public Financing Authority Rev.,
Redevelopment Project, 6.5s, 2021 1,230 1,321,795
</TABLE>
17 - MCA
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
Special Assessment District - continued
Pomona, CA, Public Financing Authority Rev.,
5.75s, 2020 $1,645 $ 1,733,764
San Jose, CA, Redevelopment Agency, MBIA,
6s, 2010 1,000 1,144,940
Santa Cruz County, CA, Redevelopment Agency
(Oak/Soquel Community), 5.6s, 2017 1,455 1,550,012
Walnut Valley, CA, Public Finance Authority
(Walnut Improvement), MBIA, 0s, 2007 1,150 811,555
Walnut Valley, CA, Public Finance Authority
(Walnut Improvement), MBIA, 0s, 2008 1,125 755,460
Walnut Valley, CA, Public Finance Authority
(Walnut Improvement), MBIA, 0s, 2009 1,175 748,733
-----------
$19,943,485
- --------------------------------------------------------------------------------------
Turnpike Revenue - 5.0%
Commonwealth of Puerto Rico, Highway &
Transportation Authority Rev., FSA, 5.5s, 2015 $1,000 $ 1,092,410
Commonwealth of Puerto Rico, Highway &
Transportation Authority Rev., MBIA, 5.5s, 2013 3,000 3,295,590
Foothill/Eastern Transportation Corridor Agency,
CA, 0s, 2011 5,000 4,181,000
Foothill/Eastern Transportation Corridor Agency,
CA, 0s, 2020 10,000 3,299,900
Los Angeles County, CA, Metropolitan
Transportation Authority, Sales Tax Rev., FSA,
5s, 2019 3,000 2,992,230
-----------
$14,861,130
- --------------------------------------------------------------------------------------
Universities - 2.6%
California Community College Financing Authority
Lease Rev., MBIA, 5s, 2013 $1,760 $ 1,809,931
California Educational Facilities Authority Rev.
(California Western School of Law), MBIA,
5s, 2018 1,000 1,001,170
California Educational Facilities Authority Rev.
(College & University), 6s, 2012 1,400 1,510,782
California Educational Facilities Authority Rev.
(College & University), 6.3s, 2021 1,000 1,083,160
California Educational Facilities Authority Rev.
(L.A. College of Chiropractic), 5.6s, 2017 500 520,415
Los Angeles, CA, Certificates of Participation,
5.7s, 2018 1,900 1,942,142
-----------
$ 7,867,600
- --------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 13.1%
California Department of Water Resources,
Central Valley Project Rev., 7s, 2012 $1,495 $ 1,878,198
California Department of Water Resources,
Central Valley Project Rev., 5.125s, 2015 1,250 1,290,363
Fairfield-Suisun, CA, Sewer District Rev., MBIA,
0s, 2006 2,080 1,561,851
Los Angeles, CA, Wastewater Systems Rev., FGIC,
5s, 2015 3,580 3,645,872
Metropolitan Water District, Linked Savers, RIBS,
5.75s, 2018 10,000 11,069,100
Metropolitan Water District, Waterworks Rev.,
5s, 2020 6,500 6,457,685
Modesto, CA, Irrigation District, Financing
Authority Rev., AMBAC, 5s, 2017 3,000 3,027,300
Sacramento, CA, Cogeneration Authority Project
Rev., MBIA, 5s, 2016 1,000 1,013,280
San Diego County, CA, Water Authority Rev.,
5s, 2017 2,000 2,016,340
Municipal Bonds - continued
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
Water and Sewer Utility Revenue - continued
San Diego, CA, Water Utilities Network Systems
Rev., FGIC, 5.375s, 2014 $2,540 $ 2,683,281
San Diego, CA, Water Utilities Network Systems
Rev., FGIC, 5s, 2016 4,500 4,540,590
------------
$ 39,183,860
- --------------------------------------------------------------------------------------
Other - 2.4%
Anaheim, CA, Public Finance Authority Rev., FSA,
6s, 2024 $1,000 $ 1,152,750
California Public Capital Improvements Financing
Authority Rev., MBIA, 8.1s, 2018 1,780 1,812,307
Marin, CA, Emergency Radio Authority Rev.,
AMBAC, 5s, 2015 1,530 1,560,569
South Coast Air Quality Management District Rev.,
AMBAC, 0s, 2005 3,480 2,710,155
------------
$ 7,235,781
- --------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $264,174,640) $289,217,843
- --------------------------------------------------------------------------------------
Floating Rate Demand Notes - 3.0%
- --------------------------------------------------------------------------------------
California Economic Development Financing
Authority Rev., due 04/01/08 $ 200 $ 200,000
California Health Facilities Financing Authority
Rev. (St. Joseph's Hospital), due 07/01/13 600 600,000
California Pollution Control Financing Authority
Rev. (Control Revenue), due 11/01/00 - 10/01/06 1,700 1,700,000
California Pollution Control Financing Authority
Rev. (Shell Oil), due 10/01/10 - 10/01/11 700 700,000
California Statewide Community Development
Authority (Sutter Health), due 07/01/15 4,400 4,400,000
California Statewide Economic Development
Finance, due 04/01/08 1,400 1,400,000
- --------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 9,000,000
- --------------------------------------------------------------------------------------
Total Investments (Identified Cost, $273,174,640) $298,217,843
Other Assets, Less Liabilities - 0.1% 320,668
- --------------------------------------------------------------------------------------
Net assets - 100.0% $298,538,511
- --------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
18 - MCA
<PAGE>
Portfolio of Investments - March 31, 1999
MFS FLORIDA MUNICIPAL BOND FUND
Municipal Bonds - 96.5%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 12.8%
Dade County, FL, AMBAC, 7.125s, 2016 $2,380 $ 3,008,701
Florida Board of Education, Capital Outlay,
9.125s, 2014 2,600 3,723,330
Orlando, FL, Capital Improvement Special Rev.,
5s, 2017 3,575 3,553,443
Palm Beach County, FL, 6.5s, 2010 2,000 2,347,080
-----------
$12,632,554
- --------------------------------------------------------------------------------------
State and Local Appropriation - 1.0%
Miami-Dade County, FL, Florida School Board,
FSA, 5s, 2017 $1,000 $ 1,000,390
- --------------------------------------------------------------------------------------
Refunded and Special Obligations - 13.3%
Altamonte Springs, FL, Health Facilities Rev.,
5.7s, 2012 $1,175 $ 1,292,383
Bay County, FL, School Board, Certificates of
Participation, AMBAC, 6.75s, 2004+ 1,000 1,145,960
Brevard County, FL, Health Facilities Authority
Rev. (Wuesthoff Memorial), MBIA, 7.2s, 2002 1,000 1,116,010
Charlotte County, FL, Utility Rev., FGIC, 6.875s,
2003 500 571,310
Escambia County, FL, Health Facility Rev. (Baptist
Hospital), 6.75s, 2003 785 876,751
Florida Board of Education, Capital Outlay,
9.125s, 2014 400 566,260
Florida Turnpike Authority Rev., "A" (Fitch Light),
AMBAC, 7.125s, 2001 1,250 1,368,262
Hillsborough County, FL, Capital Improvement
Rev., (County Center), 6.75s, 2002 1,500 1,659,990
Palm Beach County, FL, School Board,
Certification of Participation, AMBAC,
6.375s, 2004+ 2,000 2,253,940
Port St. Lucie, FL, Utility Rev., Capital
Appreciation, FGIC, 0s, 2006 2,405 721,043
Puerto Rico Electric Power Authority Rev.,
7s, 2001 240 262,613
Puerto Rico Highway & Transportation Authority,
Highway Rev., 6.625s, 2002 100 110,330
Tampa, FL, Allegheny Health System (St.
Joseph's), MBIA, 6.5s, 2004 1,000 1,145,120
-----------
$13,089,972
- --------------------------------------------------------------------------------------
Airport and Port Revenue - 9.3%
Broward County, FL, Airport Systems Rev.,
AMBAC, 4.8s, 2014 $1,500 $ 1,481,970
Hillsborough County, FL, Aviation Authority Rev.,
(Delta Airlines), 6.8s, 2024 1,500 1,612,575
Hillsborough County, FL, Aviation Authority Rev.
(Tampa International), FGIC, 5.875s, 2015 750 820,717
Hillsborough County, FL, Aviation Authority Rev.
(US Air), 8.6s, 2022 2,400 2,663,496
Miami-Dade County, FL, Florida Aviation Rev.,
MBIA, 5.25s, 2018 1,500 1,513,590
Pensacola FL, Airport Rev., MBIA, 5.625s, 2014 1,000 1,066,100
-----------
$ 9,158,448
- --------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 17.0%
Escambia County, FL, Utility Systems Rev., FGIC,
0s, 2015 $1,000 $ 463,440
Escambia County, FL, Utility Systems Rev., FGIC,
6.25s, 2015 1,500 1,739,925
Hillsborough County, FL, Industrial Development
Authority, Pollution Control Rev. (Tampa Electric
Co.), 8s, 2022 3,000 3,427,680
Municipal Bonds - continued
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
Electric and Gas Utility Revenue - continued
Lakeland, FL, Electricity & Water Rev., Capital
Appreciation, 0s, 2011 $5,000 $ 2,762,500
Lakeland, FL, Electricity & Water Rev., Capital
Appreciation, 0s, 2012 3,000 1,559,970
Orlando, FL, Utility Commission, Water and
Electric Rev., 6.75s, 2017 1,500 1,803,720
Puerto Rico Electric Power Authority Rev., FSA,
6s, 2016 2,000 2,189,240
Puerto Rico Electric Power Authority Rev., MBIA,
6.125s, 2008 2,400 2,745,504
-----------
$16,691,979
- --------------------------------------------------------------------------------------
Health Care Revenue - 8.0%
Brevard County, FL, Health Facilities Authority
Rev. (Friendly Village), 9.25s, 2012 $ 350 $ 357,948
Escambia County, FL, Health Facility Rev. (Baptist
Hospital), 6.75s, 2014 215 238,076
Escambia County, FL, Health Facility Rev. (Baptist
Hospital), "B", 6s, 2014 2,500 2,622,600
Highlands County, FL, Health Facilities Authority
Rev. (Adventist Health Systems), 5.25s, 2013 1,000 1,001,280
Jacksonville, FL, Health Facilities Authority,
Industrial Development Rev. (National
Benevolent), 6.4s, 2016 1,825 1,962,787
Jacksonville, FL, Health Facilities Authority,
Industrial Development Rev. (National Cypress),
7s, 2014 1,250 1,366,463
Orange County, FL, Industrial Development Rev.
(Friendly Village), 9.25s, 2012 335 339,908
-----------
$ 7,889,062
- --------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 2.2%
Escambia County, FL, Industrial Development Rev.
(Champion International), 6.8s, 2012 $1,000 $ 1,090,770
Escambia County, FL, Pollution Control Rev.
(Champion International), 6.95s, 2007 1,000 1,088,670
-----------
$ 2,179,440
- --------------------------------------------------------------------------------------
Insured Health Care Revenue - 6.9%
Brevard County, FL, Health Facilities Authority
Rev. (Wuesthoff Memorial), MBIA, 6.5s, 2007 $1,000 $ 1,083,930
Charlotte County, FL, Health Care Facilities Rev.
(Bon Secours), FSA, 8.329s, 2027++++ 2,500 2,877,900
Hillsborough County, FL, Industrial Development
Rev. (University Community Hospital), MBIA,
6.5s, 2019 1,000 1,198,970
Jacksonville, FL, Hospital Rev. (University Medical
Center), CONNIE LEE, 6.6s, 2013 500 541,565
Tallahassee, FL, Health Facilities Rev. (Tallahassee
Memorial Regional Medical Center), MBIA,
6.625s, 2013 1,000 1,131,600
-----------
$ 6,833,965
- --------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 4.6%
Jacksonville, FL, Excise Taxes Rev., FGIC, 0s, 2010 $1,000 $ 588,540
Jacksonville, FL, Excise Taxes Rev., FGIC, 0s, 2011 1,000 555,210
Miami-Dade County, FL, Public Services Tax Rev.,
FSA, 5.25s, 2016 1,685 1,732,702
Puerto Rico Toll & Transportation Authority, MBIA,
5.5s, 2015 1,500 1,638,615
-----------
$ 4,515,067
- --------------------------------------------------------------------------------------
</TABLE>
19 - MFL
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
Single Family Housing Revenue - 1.4%
Dade County, FL, Housing Finance Authority,
Mortgage Rev., "D", FSA, 6.95s, 2012 $ 410 $ 432,468
Dade County, FL, Housing Finance Authority,
Mortgage Rev., "E", GNMA, 7s, 2024 75 78,395
Lee County, FL, Housing Financing Authority Rev.,
GNMA, 6.5s, 2031 750 829,080
-----------
$ 1,339,943
- --------------------------------------------------------------------------------------
Solid Waste Revenue - 3.4%
Dade County, FL, Solid Waste Special Obligation,
AMBAC, 5.125s, 2010 $1,250 $ 1,323,900
Palm Beach County, FL, Solid Waste Authority Rev.,
Improvement Series, "B", AMBAC, 5.375s, 2011 1,000 1,056,290
Tampa Bay, FL, Solid Waste System Rev. (McKay
Bay Refuse), AMBAC, 4.75s, 2017 1,000 965,300
-----------
$ 3,345,490
- --------------------------------------------------------------------------------------
Special Assessment District - 2.0%
Arbor Greene, FL, Community Development
District, 5.75s, 2006 $ 985 $ 984,192
Heritage Isles, FL, Community Development
District, 5.75s, 2005 1,000 1,003,040
-----------
$ 1,987,232
- --------------------------------------------------------------------------------------
Turnpike Revenue - 1.5%
Florida Mid Bay Bridge Authority Rev., AMBAC,
0s, 2018 $1,000 $ 367,910
Orlando & Orange County, FL, Expressway Rev.,
FGIC, 6.824s, 2004++++ 1,000 1,112,610
-----------
$ 1,480,520
- --------------------------------------------------------------------------------------
Universities - 1.2%
Florida Housing Finance Corp. Rev. (Crossing at
University Apartments), AMBAC, 5.1s, 2018 $1,250 $ 1,236,225
- --------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 8.8%
Lee County, FL, Industrial Development Authority
Rev. (Bonita Springs Utilities Project), MBIA,
6.05s, 2015 $1,000 $ 1,098,950
Miramar, FL, Wastewater Improvement Rev., FGIC,
6.75s, 2016 955 1,094,459
Seminole, FL, Water & Sewer Improvement Rev.,
MBIA, 6s, 2019 3,000 3,407,250
Tampa Bay, FL, Utility System Rev., FGIC, 5.125s, 2018 3,000 3,033,930
-----------
$ 8,634,589
- --------------------------------------------------------------------------------------
Other - 3.1%
Florida Department of Environmental Preservation
Rev., MBIA, 5.5s, 2012 $2,295 $ 2,456,339
Palm Beach County, FL, Criminal Justice, FGIC,
5.75s, 2013 500 558,670
-----------
$ 3,015,009
- --------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $87,228,485) $95,029,885
- --------------------------------------------------------------------------------------
Floating Rate Demand Notes - 0.9%
- --------------------------------------------------------------------------------------
Pinellas County, FL, Health Facility Authority, due
12/01/15, at Identified Cost $ 900 $ 900,000
- --------------------------------------------------------------------------------------
Total Investments (Identified Cost, $88,128,485) $95,929,885
Other Assets, Less Liabilities - 2.6% 2,510,384
- --------------------------------------------------------------------------------------
Net assets - 100.0% $98,440,269
- --------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
MFS GEORGIA MUNICIPAL BOND FUND
Municipal Bonds - 95.3%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 10.7%
Dalton, GA, Development Authority Rev., MBIA,
5.5s, 2017 $1,000 $1,070,780
Fulton County, GA, School District, 6.375s, 2010 2,000 2,325,360
Fulton County, GA, School District, 6.375s, 2012 1,000 1,168,390
Fulton County, GA, School District, 6.375s, 2016 1,000 1,176,940
Marietta, GA, 5s, 2013 750 768,563
State of Georgia, 6.25s, 2011 1,000 1,166,930
----------
$7,676,963
- --------------------------------------------------------------------------------------
State and Local Appropriation - 7.2%
Georgia Municipal Assn., Installment Sale
Program (Atlanta Detention Center), FSA,
5s, 2014 $4,350 $4,409,595
Marietta, GA, 5s, 2015 750 760,920
----------
$5,170,515
- --------------------------------------------------------------------------------------
Refunded and Special Obligations - 5.6%
Fulton County, GA, Water & Sewage Rev., FGIC,
6.375s, 2014 $3,150 $3,672,491
Territory of Virgin Islands, 7.75s, 2001 335 362,292
----------
$4,034,783
- --------------------------------------------------------------------------------------
Airport and Port Revenue - 13.2%
Atlanta, GA, Airport Facilities Rev., AMBAC,
0s, 2010 $6,000 $3,461,160
Atlanta, GA, Airport Facilities Rev., MBIA, 0s, 2010 5,100 2,941,986
Commonwealth of Puerto Rico, Ports Authority
(American Airlines), 6.25s, 2026 1,425 1,528,825
Fulton County, GA, Development Authority,
5.3s, 2013 1,500 1,487,790
----------
$9,419,761
- --------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 11.9%
Appling County, GA, Development Authority
(Ogelthorpe Power Corp.), MBIA, 7.15s, 2021 $1,400 $1,589,210
Commonwealth of Puerto Rico, Electric Power
Authority, Power Rev., MBIA, 5.25s, 2016 1,000 1,041,820
Georgia Municipal Electric Authority, Power Rev.,
AMBAC, 5.5s, 2009 1,225 1,329,162
Georgia Municipal Electric Authority, Power Rev.,
AMBAC, 0s, 2013 1,675 860,514
Georgia Municipal Electric Authority, Power Rev.,
MBIA, 6.5s, 2020 1,250 1,485,025
Georgia Municipal Gas Authority, Gas Rev. (City
Of Toccoa), AMBAC, 5s, 2019 1,000 989,910
Monroe County, GA, Development Authority,
Pollution Control Rev. (Oglethorpe Power),
6.8s, 2012 1,000 1,171,890
----------
$8,467,531
- --------------------------------------------------------------------------------------
Health Care Revenue - 4.2%
Richmond County, GA, Development Authority,
Nursing Home Refunding (Beverly Enterprises),
8.75s, 2011 $1,190 $1,316,568
Royston, GA, Hospital Authority Rev. (Cobb
Health), 7.375s, 2014 1,565 1,651,451
----------
$2,968,019
- --------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 11.8%
Adel County, GA, Industrial Development
Authority, Pollution Control Rev. (Weyerhaeuser
Co.), 9s, 2006 $1,000 $1,003,170
</TABLE>
20 - MGA
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Revenue (Corporate Guarantee) - continued
Cartersville, GA, Developement Authority Rev.,
Water & Wastewater Facilities (Anheuser-Busch
Cos., Inc.), 5.625s, 2009 $1,500 1,610,850
Emanuel County, GA, Development Authority
(Figgie Properties), 7.95s, 2004 475 478,781
Savannah, GA, Economic Development Authority,
Industrial Development Rev. (Hershey Foods
Corp.), 6.6s, 2012 1,150 1,245,462
Savannah, GA, Economic Development Authority,
Industrial Development Rev. (Stone Container
Corp.), 7.4s, 2026 1,750 1,929,112
Savannah, GA, Economic Development Authority,
Industrial Development Rev. (Union Camp Corp.),
6.15s, 2017 1,000 1,115,980
Wayne County, GA, Solid Waste Rev. (ITT-
Rayonier, Inc.), 8s, 2015 1,000 1,059,950
----------
8,443,305
- --------------------------------------------------------------------------------------
Insured Health Care Revenue - 8.0%
Albany-Dougherty County, GA, Hospital Authority
Rev. (Phoebe Putney Memorial Hospital, Inc.),
7.37s, 2013++++ $1,550 $ 1,743,595
Chatham County, GA, Hospital Authority Rev.,
AMBAC, 5.25s, 2011 1,100 1,148,873
Savannah, GA, Hospital Authority Rev. (St.
Josephs/Candler Health Systems), FSA, 5s, 2018 2,900 2,857,370
-----------
$ 5,749,838
- --------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 5.7%
Cobb County, GA, Housing Authority Rev.
(Signature Place Project), 6.875s, 2017 $1,445 $ 1,533,521
Hinesville, GA, Leased Housing Corp. Rev.
(Baytree Apartments), FHA, 6.7s, 2017 900 964,881
St. Mary's, GA, Housing Authority (Cumberland
Oaks Apartments), FNMA, 7.375s, 2022 1,470 1,538,575
-----------
$ 4,036,977
- --------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 1.4%
Territory of Virgin Islands, Finance Authority,
5.5s, 2018 $1,000 $ 1,007,220
- --------------------------------------------------------------------------------------
Single Family Housing Revenue - 2.2%
DeKalb County, GA, Housing Authority Rev.,
GNMA, 7.75s, 2022 $ 470 $ 485,322
Georgia Housing & Finance Authority Rev., 0s,
2031 5,490 508,649
Georgia Residential Finance Authority Rev., FHA,
8s, 2020 275 286,011
Georgia Residential Finance Authority Rev., FHA,
7.25s, 2021 300 318,561
-----------
$ 1,598,543
- --------------------------------------------------------------------------------------
Universities - 2.6%
Marietta, GA, Development Authority Rev.
(Southern Polytech), 6.25s, 2027 $1,000 $ 1,012,900
Private Colleges & Universities Authority, Georgia
Rev. (Agnes Scott College), MBIA, 5.25s, 2013 790 825,858
-----------
$ 1,838,758
- --------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 10.8%
Brunswick, GA, Water and Sewer Rev., MBIA,
6.1s, 2014 $1,000 $ 1,151,540
Carroll County, GA, Water Authority, Water &
Sewer Rev., AMBAC, 5.25s, 2015 1,000 1,034,330
Municipal Bonds - continued
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
Water and Sewer Utility Revenue - continued
Cartersville, GA, Water and Sewer Rev., AMBAC,
7.2s, 2012 $2,225 $ 2,379,571
Fulton County, GA, Water & Sewage Rev., FGIC,
6.375s, 2014 100 116,599
Macon, GA, Water Authority, Water & Sewer
Rev., 5.25s, 2012 1,000 1,040,810
Macon, GA, Water Authority, Water & Sewer
Rev., 5.25s, 2014 1,000 1,037,230
Paulding County, GA, Water & Sewer Rev.,
AMBAC, 5.25s, 2015 935 967,930
-----------
$ 7,728,010
- --------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $63,271,182) $68,140,223
- --------------------------------------------------------------------------------------
Floating Rate Demand Notes - 0.7%
- --------------------------------------------------------------------------------------
Georgia Hospital Financing Authority Rev.
(Hospital Loan Program), due 03/01/01, at
Identified Cost $ 500 $ 500,000
- --------------------------------------------------------------------------------------
Total Investments (Identified Cost, $63,771,182) $68,640,223
Other Assets, Less Liabilities - 4.0% 2,836,896
- --------------------------------------------------------------------------------------
Net assets - 100.0% $71,477,119
- --------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
21 - MGA
<PAGE>
Portfolio of Investments - March 31, 1999
MFS MARYLAND MUNICIPAL BOND FUND
Municipal Bonds - 97.6%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 13.4%
Anne Arundel County, MD, 4.9s, 2011### $1,005 $ 1,025,291
Baltimore, MD, Consolidated Public Improvement,
7.15s, 2009 2,120 2,602,236
Baltimore, MD, Consolidated Public Improvement,
FGIC, 5.3s, 2009 700 748,685
Baltimore, MD, Consolidated Public Improvement,
FGIC, 5.3s, 2010 815 868,325
Baltimore, MD, Consolidated Public Improvement,
FGIC, 5.375s, 2011 900 966,483
Baltimore, MD, Consolidated Public Improvement,
FGIC, 5.375s, 2013 770 819,111
Baltimore, MD, Consolidated Public Improvement,
MBIA, 7s, 2009 1,000 1,215,890
Commonwealth of Puerto Rico, MBIA, 5.75s, 2010 2,000 2,238,460
Howard County, MD, Metropolitan District,
0s, 2008 1,975 1,325,087
Montgomery County, MD, Public Improvement,
0s, 2009 4,000 2,564,720
Prince George's County, MD, 0s, 2007 5,110 3,590,235
State of Maryland, 9s, 1999 350 358,393
State of Maryland, 5s, 2007 1,000 1,058,700
Washington, MD, Suburban Sanitation District,
6.1s, 2015 1,070 1,163,336
Washington, MD, Suburban Sanitation District,
5.25s, 2016 865 883,926
-----------
$21,428,878
- --------------------------------------------------------------------------------------
State and Local Appropriation - 11.0%
Calvert County, MD, Community Lease Rev.,
7.2s, 2010+ $ 750 $ 799,020
Howard County, MD, Certificates of Participation,
8.15s, 2021+ 450 629,748
Howard County, MD, Certificates of Participation,
"A", 8s, 2019+ 805 1,096,201
Howard County, MD, Certificates of Participation,
"B", 8s, 2019+ 385 524,270
Howard County, MD, Certificates of Participation,
"C", 8s, 2019+ 680 925,983
Maryland Stadium Authority, Sports Facilities
Leasing Rev., AMBAC, 5.875s, 2012+ 1,000 1,094,210
Prince George's County, MD, Certificates of
Participation, MBIA, 0s, 2005+ 2,495 1,923,595
Prince George's County, MD, Certificates of
Participation, MBIA, 0s, 2006+ 2,490 1,829,901
Prince George's County, MD, Certificates of
Participation, MBIA, 0s, 2011+ 3,675 2,069,760
Prince George's County, MD, Equipment
Acquisition Program, MBIA, 3.8s, 2003 2,000 1,999,960
Prince George's County, MD, Industrial
Development Authority, MBIA, 0s, 2004+ 980 792,869
Prince George's County, MD, Industrial
Development Authority, MBIA, 0s, 2006+ 1,800 1,322,820
Prince George's County, MD, Industrial
Development Authority, MBIA, 0s, 2009+ 1,500 945,615
Puerto Rico Public Finance Corp., 5.375s, 2016 1,520 1,729,851
-----------
$17,683,803
- --------------------------------------------------------------------------------------
Refunded and Special Obligations - 13.4%
Commonwealth of Puerto Rico, 6.5s, 2004 $2,000 $ 2,275,640
Commonwealth of Puerto Rico, Public
Improvement Rev., 6.8s, 2002 1,500 1,662,900
Municipal Bonds - continued
<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 $ 1,204,882
Maryland Health & Higher Education Facilities
Authority Rev. (Kennedy Institute), 6.75s, 2001 500 533,510
Maryland Health & Higher Education Facilities
Authority Rev. (Sinai Hospital/Baltimore),
AMBAC, 7s, 2000 1,500 1,594,440
Maryland Health & Higher Education Facilities
Authority Rev. (University of Maryland Medical
System), FGIC, 6.5s, 2001 1,000 1,062,810
Maryland Health & Higher Education Facilities
Authority Rev. (University of Maryland Medical
System), FGIC, 7s, 2001 1,840 2,009,188
Maryland Health & Higher Educational Facilities
Authority Rev. (Howard County General
Hospital), 5.5s, 2021 4,000 4,196,800
Morgan, MD, State University Academic &
Auxiliary Facilities & Fees Rev., MBIA, 0s, 2006 1,135 835,428
Morgan, MD, State University Academic &
Auxiliary Facilities & Fees Rev., MBIA, 0s, 2008 1,400 934,052
Prince George's County, MD, Hospital Rev.
(Dimensions Health Corp.), 7.25s, 2002 2,000 2,246,760
Puerto Rico Aqueduct & Sewer Authority Rev.,
10.25s, 2009 500 671,700
Puerto Rico Electric Power Authority Rev.,
7s, 2001 1,000 1,094,220
Washington, MD, Suburban Sanitation District,
6.9s, 2001 1,045 1,136,249
-----------
$21,458,579
- --------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 1.3%
Prince George's County, MD (Potomac Electric),
5.75s, 2010 $2,000 $ 2,188,040
- --------------------------------------------------------------------------------------
Health Care Revenue - 3.8%
Berlin, MD, Hospital Rev. (Atlantic General
Hospital), 8.375s, 2022 $1,327 $ 1,415,386
Maryland Health & Higher Education Facilities
Authority Rev. (Bradford Oaks Center), 6.375s,
2027 1,500 1,533,765
Maryland Health & Higher Education Facilities
Authority Rev. (Doctors Community Hospital),
5.5s, 2024 2,000 1,989,400
Maryland Health & Higher Education Facilities
Authority Rev. (Johns Hopkins Hospital), 0s, 2010 2,000 1,195,960
-----------
$ 6,134,511
- --------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 2.7%
Baltimore, MD, Port Facilities Rev. (DuPont (E.I.)
de Nemours), 6.5s, 2011 $1,500 $ 1,642,305
Cecil County, MD, Commissioners Industrial
Development Rev. Board, 5.25s, 2006 1,000 1,051,880
Northeast Maryland Waste Disposal Authority
Resources Recovery Rev. (Baltimore Resco
Retrofit), 5s, 2012 1,000 983,870
Upper Potomac, MD, River Commission, Pollution
Control Rev. (Westvaco), 10.5s, 2004 150 151,703
Upper Potomac, MD, River Commission, Pollution
Control Rev. (Westvaco), 9.125s, 2015 500 508,830
-----------
$ 4,338,588
- --------------------------------------------------------------------------------------
</TABLE>
22 - MMD
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
Insured Health Care Revenue - 10.8%
Maryland Health & Higher Education Facilities
Authority Rev. (Frederick Memorial Hospital),
FGIC, 5.25s, 2013 $4,550 $ 4,767,808
Maryland Health & Higher Education Facilities
Authority Rev. (Mercy Medical Center), FSA,
5.625s, 2017 1,800 1,899,090
Maryland Health & Higher Educational Authority
Rev. (Anne Arundel Medical Center), FSA,
5.1s, 2018 1,400 1,405,278
Maryland Health & Higher Educational Authority
Rev. (Upper Chesapeake Hospital), FSA, 5.5s,
2020 2,000 2,072,120
Maryland Health & Higher Educational Facilities
Authority Rev. (Medlantic/Helix), AMBAC,
5.25s, 2013 2,145 2,228,655
Maryland Health & Higher Educational Facilities
Authority Rev. (Memorial Hospital at Easton),
MBIA, 5.25s, 2011 1,615 1,693,764
Maryland Health & Higher Educational Facilities
Authority Rev. (Memorial Hospital at Easton),
MBIA, 5.25s, 2013 1,470 1,524,669
Maryland Industrial Development Finance
Authority, Economic Development Rev. (Bon
Secours Health System), FSA, 8.228s, 2022++++ 1,400 1,752,828
-----------
$17,344,212
- --------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 3.2%
Baltimore, MD, City Housing, FHA, 7.75s, 2009 $ 880 $ 887,700
Baltimore, MD, City Housing, FNMA, 7.25s, 2023 1,200 1,225,140
Maryland Community Development Administration,
7.375s, 2021 330 348,424
Maryland Community Development Administration,
0s, 2032 11,605 914,822
Maryland Community Development Administration,
7.8s, 2032 1,190 1,243,574
Montgomery County, MD, Housing Opportunities
Commission, 7.375s, 2032 440 462,783
-----------
$ 5,082,443
- --------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 1.3%
Virgin Islands Public Finance Authority,
5.875s, 2018 $1,000 $ 1,032,080
Virgin Islands Public Finance Authority, 5.5s, 2022 1,000 1,001,270
-----------
$ 2,033,350
- --------------------------------------------------------------------------------------
Single Family Housing Revenue - 5.8%
Maryland Community Development Administration,
7.7s, 2015 $ 580 $ 601,060
Maryland Community Development Administration,
5.875s, 2016 2,000 2,096,940
Maryland Community Development Administration,
7.3s, 2025 1,250 1,334,062
Maryland Community Development Administration,
6.75s, 2026 2,250 2,394,810
Maryland Community Development Administration
Department, Housing & Community Dev., 5s, 2017 1,500 1,492,710
Montgomery County, MD, Housing Opportunities
Commission, 7.5s, 2017 365 380,035
Prince George's County, MD, Housing Authority
Rev., GNMA, 4.8s to 2000, 5.375s to 2018 1,000 1,001,690
-----------
$ 9,301,307
- --------------------------------------------------------------------------------------
Municipal Bonds - continued
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
Solid Waste Revenue - 5.0%
Northeast Maryland, Waste Disposal Authority
(Montgomery County), 6s, 2006 $1,000 $ 1,091,080
Northeast Maryland, Waste Disposal Authority
(Montgomery County), MBIA, 6.3s, 2016 2,000 2,163,060
Northeast Maryland Waste Disposal Authority
(Southwest County Resource Recovery), MBIA,
7.2s, 2005 1,000 1,147,850
Prince George's County, MD (Solid Waste
Management), FSA, 5.25s, 2013 3,500 3,593,975
-----------
$ 7,995,965
- --------------------------------------------------------------------------------------
Turnpike Revenue - 3.3%
Puerto Rico Commonwealth Highway &
Transportation Authority, Highway Rev., FSA,
5.5s, 2013 $1,850 $ 2,032,281
Puerto Rico Highway & Transportation Authority
Rev., 6.625s, 2012 1,000 1,086,640
Puerto Rico Highway & Transportation Authority
Rev., 5.5s, 2013 2,000 2,162,060
-----------
5,280,981
- --------------------------------------------------------------------------------------
Universities - 10.8%
Annapolis, MD, Economic Development Rev.
(St. John's College), 5.5s, 2018 $ 750 $ 755,123
Maryland Health & Higher Educational Facilities
Authority Rev. (John Hopkins University),
5.125s, 2020 6,000 6,071,340
Maryland Health & Higher Education Facilities
Authority Rev. (John Hopkins University),
5.625s, 2027 1,400 1,479,072
Maryland Health & Higher Education Facilities
Authority Rev. (Loyola College), MBIA, 5.5s, 2016 3,000 3,175,860
Maryland Health & Higher Education Facilities
Authority Rev. (Mount St. Mary's College),
6.5s, 2009 494 526,262
Morgan, MD, State University, Academic &
Auxiliary Facilities Rev., MBIA, 6.05s, 2015 1,500 1,705,950
University of Maryland, Auxiliary Facilities &
Tuition Rev., 0s, 2004 1,000 803,460
University of Maryland, Auxiliary Facilities &
Tuition Rev., 5s, 2009 1,385 1,452,782
University of Maryland Systems Auxiliary
Facilities & Tuition Rev., 5s, 2010 1,250 1,301,712
-----------
$17,271,561
- --------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 5.4%
Baltimore, MD, Wastewater Rev., FGIC, 6s, 2015 $1,000 $ 1,130,320
Baltimore, MD, Wastewater Rev., MBIA,
5.65s, 2020++++ 2,000 2,172,000
Baltimore, MD, Wastewater Rev., MBIA,
7.88s, 2020++++ 3,000 3,515,160
Baltimore, MD, FGIC, 5.375s, 2015 1,765 1,854,450
-----------
$ 8,671,930
- --------------------------------------------------------------------------------------
Other - 6.4%
Baltimore County, MD, 5.375s, 2013 $1,600 $ 1,623,680
Baltimore, MD, Convention Center Rev., MBIA,
5.5s, 2014 2,695 2,880,146
Maryland Industrial Development Finance
Authority (American Center for Physics),
6.625s, 2017 1,500 1,612,785
Maryland Industrial Development Finance
Authority (YMCA/Baltimore), 8s, 2012 2,825 3,206,629
</TABLE>
23 - MMD
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
Other - continued
Maryland Industrial Development Finance
Authority (YMCA/Baltimore), 8.25s, 2012 $ 835 $ 876,074
------------
$ 10,199,314
- ------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $144,098,806) $156,413,462
- ------------------------------------------------------------------------------------
Floating Rate Demand Notes - 0.9%
- ------------------------------------------------------------------------------------
Lincoln County, WY, Pollution Control Rev. (Exxon),
due 11/01/14 $ 400 $ 400,000
Maricopa County, AZ, Industrial Development
Authority (Samaritan Health Services Hospital),
due 12/01/08 1,000 1,000,000
- ------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 1,400,000
- ------------------------------------------------------------------------------------
Total Investments (Identified Cost, $145,498,806) $157,813,462
Other Assets, Less Liabilities - 1.5% 2,349,732
- ------------------------------------------------------------------------------------
Net assets - 100.0% $160,163,194
- ------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
MFS MASSACHUSETTS MUNICIPAL BOND FUND
Municipal Bonds - 97.9%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 17.5%
Belmont, MA, 5s, 2015 $ 2,165 $ 2,199,056
Central Berkshire, MA, Regional School District,
FSA, 5.25s, 2014 1,610 1,673,209
Central Berkshire, MA, Regional School District,
FSA, 5.25s, 2016 1,610 1,654,017
Central Berkshire, MA, Regional School District,
FSA, 5.25s, 2019 2,290 2,321,602
Commonwealth of Massachusetts, 0s, 2004 10,000 7,981,600
Commonwealth of Massachusetts, 0s, 2005 2,000 1,540,260
Commonwealth of Massachusetts, 0s, 2005 2,000 1,519,280
Commonwealth of Massachusetts, 5s, 2017 2,000 2,003,760
Commonwealth of Massachusetts, FGIC, 0s, 2006 4,000 2,970,440
Commonwealth of Massachusetts, FGIC, 7s, 2009 1,250 1,502,400
Commonwealth of Massachusetts, MBIA,
7.5s, 2004 2,850 3,263,934
Fitchburg, MA, MBIA, 5s, 2015 2,480 2,516,704
Haverhill, MA, FGIC, 5s, 2017 1,000 1,002,640
Holyoke, MA, 8s, 2001 380 401,842
Lawrence, MA, AMBAC, 9.75s, 2002 600 697,542
Lowell, MA, 8.4s, 2009 1,000 1,092,130
Lynn, MA, AMBAC, 5.125s, 2018 3,690 3,730,110
Malden, MA, MBIA, 5.1s, 2017 2,000 2,022,980
Northbridge, MA, 7.6s, 2001 325 350,344
Norton, MA, FGIC, 5.125s, 2014 1,000 1,027,180
Norton, MA, FGIC, 5.125s, 2015 1,000 1,020,970
Springfield, MA, FSA, 5.25s, 2014 2,000 2,085,840
Ware, MA, FGIC, 5s, 2018 2,000 1,999,100
-----------
$46,576,940
- ------------------------------------------------------------------------------------
State and Local Appropriation - 10.7%
Massachusetts Bay Transportation Authority,
(General Transportation System), 6.2s, 2016 $10,400 $11,941,176
Massachusetts Bay Transportation Authority,
FGIC, 5s, 2019 2,475 2,444,112
Massachusetts Bay Transportation Authority,
7s, 2021 5,000 6,196,800
Plymouth County, MA, Correctional Facilities,
AMBAC, 5.125s, 2018 5,000 5,027,100
Puerto Rico Public Finance Corp., AMBAC, 5.375s,
2016 2,500 2,845,150
-----------
$28,454,338
- ------------------------------------------------------------------------------------
Refunded and Special Obligations - 16.8%
Commonwealth of Massachusetts, AMBAC,
6.75s, 2001 $ 2,350 $ 2,559,174
Haverhill, MA, FGIC, 7s, 2002 1,250 1,395,250
Holyoke, MA, MBIA, 8s, 1999 1,700 1,858,032
Holyoke, MA, MBIA, 8.1s, 2002 500 578,960
Martha's Vineyard, MA, Land Bank (Land
Acquisition), 8.125s, 2001 3,500 3,847,620
Massachusetts Federally Assisted Housing,
0s, 2009 4,995 1,147,701
Massachusetts Health & Education Facilities
Authority (Brigham & Women's Hospital), MBIA,
6.75s, 2001 1,000 1,086,620
Massachusetts Health & Education Facilities
Authority (Fairview Extended Care Facility),
10.25s, 2001 2,000 2,278,080
Massachusetts Health & Education Facilities
Authority (Massachusetts Eye & Ear Infirmary),
7.375s, 2001 3,000 3,296,400
Massachusetts Health & Education Facilities
Authority (New England Deaconess Hospital),
6.875s, 2000 5,600 6,198,640
</TABLE>
24 - MMA
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
Refunded and Special Obligations - continued
Massachusetts Health & Education Facilities
Authority (Newton-Wellesley Hospital), 8s, 2000 $1,675 $ 1,800,558
Massachusetts Industrial Finance Agency (Dexter
School), 7.5s, 2001 1,585 1,738,270
Massachusetts Industrial Finance Agency (Dexter
School), 7.5s, 2001 2,900 3,180,430
Massachusetts Industrial Finance Agency
(Emerson College), 8.9s, 2000 1,000 1,107,130
Massachusetts Industrial Finance Agency (Vinfen
Corp.), 7.1s, 2003 645 743,530
Massachusetts Industrial Finance Agency, Tunnel
Rev. (Massachusetts Turnpike), 9s, 2000 7,910 8,679,959
Massachusetts Port Authority, 12.75s, 1999 410 475,776
Massachusetts Port Authority Rev., "C", ETM,
13s, 1999 780 1,297,670
Nantucket Island, MA, Land Bank, 7.75s, 2001 1,200 1,328,136
-----------
$44,597,936
- --------------------------------------------------------------------------------------
Airport and Port Revenue - 5.9%
Massachusetts Port Authority, 5s, 2015 $5,600 $ 5,628,336
Massachusetts Port Authority, FGIC, 7.5s, 2020 3,440 3,650,734
Massachusetts Port Authority (USAIR), MBIA,
5.625s, 2011 2,140 2,291,319
Puerto Rico Ports Authority (American Airlines),
6.3s, 2023 2,370 2,518,789
Puerto Rico Ports Authority (American Airlines),
6.25s, 2026 1,500 1,609,290
-----------
$15,698,468
- --------------------------------------------------------------------------------------
Health Care Revenue - 8.6%
Boston, MA, Industrial Development Finance
Authority Rev. (Stonehedge Convalescent
Center), 10.75s, 2011 $ 620 $ 643,132
Massachusetts Health & Education Facilities
Authority (Children's Hospital), 6.125s, 2012 2,285 2,431,240
Massachusetts Health & Education Facilities
Authority (Dana Farber), 6.25s, 2022 1,000 1,084,260
Massachusetts Health & Educational Facilities
(Jordan Hospital), 5.25s, 2018 2,655 2,585,280
Massachusetts Health & Education Facilities
Authority (North Adams Regional Hospital),
6.625s, 2018 1,000 1,080,440
Massachusetts Health & Educational Facilities
Authority Rev., Obligation Group A (Caritas
Christi), 5.7s, 2015 1,000 1,004,600
Massachusetts Industrial Finance Agency
(Beverly Enterprises), 8.375s, 2009 4,040 4,420,487
Massachusetts Industrial Finance Agency
(Evanswood), 7.625s, 2014 1,200 1,280,160
Massachusetts Industrial Finance Agency
(Massachusetts Biomedical Research), 0s, 2004 5,000 4,022,850
Massachusetts Industrial Finance Agency
(Massachusetts Biomedical Research), 0s, 2010 5,300 3,077,816
Massachusetts Industrial Finance Agency
(Needham/Hamilton House), 11s, 2010 400 416,316
Massachusetts Industrial Finance Agency (WNR,
Inc.), 9s, 2023 925 792,170
-----------
$22,838,751
- --------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 0.8%
Massachusetts Industrial Finance Agency (Welch
Foods Inc.), 5.6s, 2017 $1,700 $ 1,737,400
Municipal Bonds - continued
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Revenue (Corporate Guarantee) - continued
Springfield, MA, Industrial Development Finance
Agency (Terminal Building), 8s, 2001 $ 301 $ 307,536
-----------
$ 2,044,936
- --------------------------------------------------------------------------------------
Insured Health Care Revenue - 4.5%
Boston, MA, Industrial Development Finance
Authority Rev. (Alzheimers Center), FHA,
5.5s, 2012 $ 750 $ 780,187
Massachusetts Health & Education Facilities
Authority, (Partners Healthcare) MBIA, 5.375s,
2018 2,000 2,040,780
Massachusetts Health & Education Facilities
Authority (Beth Israel Hospital), AMBAC,
8.826s, 2025++++ 5,000 5,748,050
Massachusetts Health & Education Facilities
Authority (Newton Wellsley College), MBIA,
6.125s, 2015 1,000 1,108,700
Massachusetts Health & Educational Facilities
Authority Rev. (Central New England Health),
AMBAC, 5.5s, 2014 1,250 1,325,075
Massachusetts Health & Educational Facilities
Authority Rev. (UMass Memorial), AMBAC,
5.25s, 2014 1,000 1,035,060
-----------
$12,037,852
- --------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 1.1%
Massachusetts Housing Finance Agency, FNMA,
6.9s, 2025 $1,700 $ 1,835,898
Somerville, MA, Housing Authority Rev.
(Clarendon Hill), GMNA, 7.85s, 2010 910 949,194
-----------
$ 2,785,092
- --------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 3.5%
Commonwealth of Massachusetts, 5s, 2017 $3,250 $ 3,226,567
Virgin Islands Public Finance Authority, 5.875s,
2018 3,020 3,116,882
Virgin Islands Public Finance Authority, 5.5s, 2022 3,000 3,003,810
-----------
$ 9,347,259
- --------------------------------------------------------------------------------------
Single Family Housing Revenue - 1.6%
Massachusetts Housing Finance Agency,
7.95s, 2023 $ 200 $ 208,976
Massachusetts Housing Finance Agency,
6.6s, 2026 910 960,751
Massachusetts Industrial Finance Agency, MBIA,
6.35s, 2022 3,000 3,167,070
-----------
$ 4,336,797
- --------------------------------------------------------------------------------------
Solid Waste Revenue - 0.8%
Massachusetts Industrial Finance Agency (Ogden
Haverhill), 5.6s, 2019 $2,000 $ 2,013,600
- --------------------------------------------------------------------------------------
Turnpike Revenue - 1.2%
Massachusetts Turnpike Authority, Metropolitan
Highway Systems Rev., AMBAC, 5.25s, 2015 $3,080 $ 3,165,070
- --------------------------------------------------------------------------------------
Universities - 13.6%
Massachusetts Development Finance Agency
Rev. (Eastern Nazarine College), 5.625s, 2019 $1,800 $ 1,800,072
Massachusetts Development Finance Agency
Rev. (Williston Northampton School), 6.5s, 2028 1,000 1,014,480
Massachusetts Health & Education Facilities
Authority (Boston College), 5.25s, 2018 3,500 3,524,640
Massachusetts Health & Education Facilities
Authority (Boston College), 5.25s, 2023 4,350 4,366,965
</TABLE>
25 - MMA
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
Universities - continued
Massachusetts Health & Education Facilities
Authority (Boston University), MBIA, 9.801s, 2031 $5,000 $ 5,822,650
Massachusetts Health & Education Facilities
Authority (Wheaton College), 5.25s, 2019 1,000 999,260
Massachusetts Industrial Finance Agency Rev.
(Babson College), 5.25s, 2027 3,000 2,978,670
Massachusetts Industrial Finance Agency Rev.
(Belmont Hill School), 5.625s, 2020 1,250 1,284,962
Massachusetts Industrial Finance Agency Rev.
(Brandeis University), MBIA, 0s, 2004 1,000 801,290
Massachusetts Industrial Finance Agency Rev.
(Brandeis University), MBIA, 0s, 2005 1,000 763,900
Massachusetts Industrial Finance Agency Rev.
(Brandeis University), MBIA, 0s, 2009 1,000 625,850
Massachusetts Industrial Finance Agency Rev.
(Brandeis University), MBIA, 0s, 2010 1,000 591,860
Massachusetts Industrial Finance Agency Rev.
(Brandeis University), MBIA, 0s, 2011 500 279,310
Massachusetts Industrial Finance Agency Rev.
(Concord Academy), 5.5s, 2027 1,000 1,005,780
Massachusetts Industrial Finance Agency Rev.
(Curry College), 8s, 2010 530 573,704
Massachusetts Industrial Finance Agency Rev.
(Curry College), 8s, 2014 1,820 1,952,914
Massachusetts Industrial Finance Agency Rev.
(Groton School), 5s, 2018 3,060 3,022,852
Massachusetts Industrial Finance Agency Rev.
(Lesley College), 6.3s, 2025 2,000 2,237,760
Massachusetts Industrial Finance Agency Rev.
(Tabor Academy), 5.4s, 2018 1,000 1,003,830
Massachusetts Industrial Finance Agency Rev.
(Western New England College), AMBAC,
5s, 2018 1,555 1,543,431
------------
$ 36,194,180
- --------------------------------------------------------------------------------------
Municipal Bonds - continued
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
Water and Sewer Utility Revenue - 8.3%
Massachusetts Water Pollution Abatement,
5.125s, 2014 $1,000 $ 1,020,770
Massachusetts Water Pollution Abatement,
5.125s, 2016 1,600 1,629,376
Massachusetts Water Resources Authority,
5s, 2016 1,000 1,002,110
Massachusetts Water Resources Authority,
6.5s, 2019 8,470 9,954,792
Massachusetts Water Resources Authority,
AMBAC, 5.25s, 2015 5,000 5,249,400
Massachusetts Water Resources Authority,
MBIA, 5.25s, 2020 3,000 3,020,490
------------
$ 21,876,938
- --------------------------------------------------------------------------------------
Other - 3.0%
Commonwealth of Massachusetts, 5.125s, 2013 $4,000 $ 4,132,920
Massachusetts Health & Education Facilities
Authority (Learning Center for Deaf Children),
9.25s, 2014 2,250 2,332,373
Massachusetts Health & Education Facilities
Authority (Learning Center for Deaf Children),
8s, 2020 1,500 1,560,735
------------
$ 8,026,028
- --------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $238,970,730) $259,994,185
- --------------------------------------------------------------------------------------
Floating Rate Demand Notes - 0.2%
- --------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities
Authority, Variable Rate-Cap Assets Prog-Ser D,
due 01/01/35, at Identified Cost $ 500 $ 500,000
- --------------------------------------------------------------------------------------
Total Investments (Identified Cost, $239,470,730) $260,494,185
Other Assets, Less Liabilities - 1.9% 5,101,367
- --------------------------------------------------------------------------------------
Net assets - 100.0% $265,595,552
- --------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
Portfolio Footnotes:
++++ Inverse floating rate security.
+ Restricted security.
[sec][sec] When-issued security. At March 31, 1999, 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.
</TABLE>
26 - MMA
<PAGE>
Financial Statements
Statements of Assets and Liabilities
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Alabama Arkansas California
March 31, 1999 Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Investments -
Identified cost $ 80,896,621 $123,730,355 $273,174,640
Unrealized appreciation 5,501,116 10,216,153 25,043,203
------------ ------------ ------------
Total investments, at value $ 86,397,737 $133,946,508 $298,217,843
Cash 99,443 24,554 52,649
Receivable for Fund shares sold 136,670 73,805 605,477
Receivable for investments sold 1,322,637 19,460 35,000
Interest receivable 1,330,491 1,860,689 3,395,486
Other assets 1,093 1,834 3,606
------------ ------------ ------------
Total assets $ 89,288,071 $135,926,850 $302,310,061
------------ ------------ ------------
Liabilities:
Distributions payable $ 207,753 $ 292,626 $ 617,861
Payable for Fund shares reacquired 30,459 312,422 25,731
Payable for investments purchased 2,169,837 -- 3,002,083
Payable for when-issued investments purchased 1,506,753 -- --
Payable to affiliates -
Management fee 930 1,479 1,627
Shareholder servicing agent fee 122 416 915
Distribution and service fee 815 -- 7,023
Administrative fee 35 55 122
Accrued expenses and other liabilities 68,183 67,042 116,188
------------ ------------ ------------
Total liabilities $ 3,984,887 $ 674,040 $ 3,771,550
------------ ------------ ------------
Net assets $ 85,303,184 $135,252,810 $298,538,511
------------ ------------ ------------
Net assets consist of:
Paid-in capital $ 78,579,851 $131,872,306 $279,636,634
Unrealized appreciation on investments 5,501,116 10,216,153 25,043,203
Accumulated undistributed net realized gain (loss) on investments 987,396 (6,702,048) (5,796,121)
Accumulated undistributed (distributions in excess of)
net investment income 234,821 (133,601) (345,205)
------------ ------------ ------------
Total $ 85,303,184 $135,252,810 $298,538,511
------------ ------------ ------------
Shares of beneficial interest outstanding:
Class A 6,863,998 12,291,409 38,508,371
Class B 1,064,221 1,046,135 10,429,942
Class C -- -- 1,724,075
------------ ------------ ------------
Total shares of beneficial interest outstanding 7,928,219 13,337,544 50,662,388
------------ ------------ ------------
Net assets:
Class A $ 73,850,707 $124,643,621 $226,902,580
Class B 11,452,477 10,609,189 61,457,853
Class C -- -- 10,178,078
------------ ------------ ------------
Total net assets $ 85,303,184 $135,252,810 $298,538,511
------------ ------------ ------------
Class A shares:
Net asset value per share
(net assets [divided by] shares of beneficial interest outstanding) $10.76 $10.14 $5.89
------ ------ -----
Offering price per share (100 [divided by] 95.25 of net asset value
per share) $11.30 $10.65 $6.18
------ ------ -----
Class B shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) $10.76 $10.14 $5.89
------ ------ -----
Class C shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) -- -- $5.90
------ ------ -----
</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 Assets and Liabilities -- continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Florida Georgia Maryland Massachusetts
March 31, 1999 Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investments -
Identified cost $88,128,485 $63,771,182 $145,498,806 $239,470,730
Unrealized appreciation 7,801,400 4,869,041 12,314,656 21,023,455
----------- ----------- ------------ ------------
Total investments, at value $95,929,885 $68,640,223 $157,813,462 $260,494,185
Cash 74,660 24,175 7,713 22,902
Receivable for daily variation margin on open futures contracts -- -- 9,375 --
Receivable for Fund shares sold 102,700 76,724 135,911 358,759
Receivable for investments sold 1,014,062 1,965,006 5,607,318 9,944,449
Interest receivable 1,727,353 1,041,685 2,134,197 3,802,987
Other assets 1,282 946 1,979 3,385
----------- ----------- ------------ ------------
Total assets $98,849,942 $71,748,759 $165,709,955 $274,626,667
----------- ----------- ------------ ------------
Liabilities:
Distributions payable $ 231,175 $ 134,532 $ 261,712 $ 553,523
Payable for Fund shares reacquired 111,738 63,647 153,664 79,335
Payable for investments purchased -- -- 5,044,803 8,288,420
Payable to affiliates -
Management fee 1,076 780 1,748 2,899
Shareholder servicing agent fee 303 219 492 815
Distribution and service fee 2,998 786 2,041 2,989
Administrative fee 40 29 66 109
Accrued expenses and other liabilities 62,343 71,647 82,235 103,025
----------- ----------- ------------ ------------
Total liabilities $ 409,673 $ 271,640 $ 5,546,761 $ 9,031,115
----------- ----------- ------------ ------------
Net assets $98,440,269 $71,477,119 $160,163,194 $265,595,552
----------- ----------- ------------ ------------
Net assets consist of:
Paid-in capital $97,539,331 $67,428,093 $151,618,211 $248,444,053
Unrealized appreciation on investments 7,801,400 4,869,041 12,319,554 21,023,455
Accumulated undistributed net realized loss on investments (6,937,091) (778,520) (3,585,697) (3,793,185)
Accumulated undistributed (distributions in excess of) net
investment income 36,629 (41,495) (188,874) (78,771)
----------- ----------- ------------ ------------
Total $98,440,269 $71,477,119 $160,163,194 $265,595,552
----------- ----------- ------------ ------------
Shares of beneficial interest outstanding:
Class A 7,673,869 5,205,555 11,427,384 21,149,066
Class B 2,057,819 1,334,573 2,517,635 2,256,035
----------- ----------- ------------ ------------
Total shares of beneficial interest outstanding 9,731,688 6,540,128 13,945,019 23,405,101
----------- ----------- ------------ ------------
Net assets:
Class A $77,627,624 $56,885,881 $131,261,373 $239,979,720
Class B 20,812,645 14,591,238 28,901,821 25,615,832
----------- ----------- ------------ ------------
Total net assets $98,440,269 $71,477,119 $160,163,194 $265,595,552
----------- ----------- ------------ ------------
Class A shares:
Net asset value per share
(net assets [divided by] shares of beneficial interest outstanding) $ 10.12 $ 10.93 $ 11.49 $ 11.35
----------- ----------- ------------ ------------
Offering price per share (100 [divided by] 95.25 of net asset value
per share) $ 10.62 $ 11.48 $ 12.06 $ 11.92
----------- ----------- ------------ ------------
Class B shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) $ 10.11 $ 10.93 $ 11.48 $ 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 and
Class B shares.
See notes to financial statements
28
<PAGE>
Financial Statements - continued
Statements of Operations
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Alabama Arkansas California
Year Ended March 31, 1999 Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income:
Interest income $ 5,009,018 $ 7,813,468 $15,385,109
----------- ----------- -----------
Expenses -
Management fee $ 459,337 $ 753,424 $ 1,558,027
Trustees' compensation 21,168 17,967 16,934
Shareholder servicing agent fee 93,747 153,988 318,592
Distribution and service fee (Class A) 184,900 128,167 30,155
Distribution and service fee (Class B) 94,949 66,444 414,404
Distribution and service fee (Class C) -- -- 65,771
Administrative fee 10,459 17,168 35,033
Custodian fee 30,362 47,755 99,922
Printing 6,790 11,779 21,266
Postage 3,105 8,292 13,936
Auditing fees 31,458 30,458 30,458
Legal fees 1,451 1,858 4,465
Miscellaneous 29,586 48,716 61,699
----------- ----------- -----------
Total expenses $ 967,312 $ 1,286,016 $ 2,670,662
Fees paid indirectly (15,852) (22,289) (36,491)
Reduction of expenses by investment adviser (101,206) (165,631) (504,007)
----------- ----------- -----------
Net expenses $ 850,254 $ 1,098,096 $ 2,130,164
----------- ----------- -----------
Net investment income $ 4,158,764 $ 6,715,372 $13,254,945
----------- ----------- -----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 1,121,092 $ 547,248 $ 2,680,672
Futures contracts (104,650) 43,055 43,908
----------- ----------- -----------
Net realized gain on investments $ 1,016,442 $ 590,303 $ 2,724,580
----------- ----------- -----------
Change in unrealized appreciation (depreciation) -
Investments $(1,143,956) $(1,184,427) $ 1,479,688
Futures contracts (2,615) -- --
----------- ----------- -----------
Net unrealized gain (loss) on investments $(1,146,571) $(1,184,427) $ 1,479,688
----------- ----------- -----------
Net realized and unrealized gain (loss) on investments $ (130,129) $ (594,124) $ 4,204,268
----------- ----------- -----------
Increase in net assets from operations $ 4,028,635 $ 6,121,248 $17,459,213
----------- ----------- -----------
</TABLE>
See notes to financial statements
29
<PAGE>
Financial Statements - continued
Statements of Operations -- continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Florida Georgia Maryland Massachusetts
Year Ended March 31, 1999 Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income:
Interest income $5,375,708 $ 4,267,903 $8,773,396 $15,924,455
---------- ----------- ---------- -----------
Expenses -
Management fee $ 522,515 $ 395,179 $ 847,349 $ 1,437,726
Trustees' compensation 17,706 17,135 19,042 19,403
Shareholder servicing agent fee 106,803 80,775 173,209 293,874
Distribution and service fee (Class A) -- 147,756 452,561 836,875
Distribution and service fee (Class B) 147,374 126,969 246,599 221,142
Administrative fee 11,857 8,988 19,224 32,667
Custodian fee 37,572 30,766 54,309 87,539
Printing 7,441 7,458 19,459 22,386
Postage 4,851 2,772 12,117 12,953
Auditing fees 31,458 30,758 30,758 31,758
Legal fees 352 4,781 3,996 6,216
Miscellaneous 32,923 27,654 56,811 86,023
---------- ----------- ---------- -----------
Total expenses $ 920,852 $ 880,991 $1,935,434 $ 3,088,562
Fees paid indirectly (17,250) (15,725) (36,953) (32,460)
Reduction of expenses by investment adviser (115,587) (86,945) (187,289) (317,038)
---------- ----------- ---------- -----------
Net expenses $ 788,015 $ 778,321 $1,711,192 $ 2,739,064
---------- ----------- ---------- -----------
Net investment income $4,587,693 $ 3,489,582 $7,062,204 $13,185,391
---------- ----------- ---------- -----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $1,127,944 $ 2,074,538 $ 794,432 $ (193,992)
Futures contracts (68,836) 18,038 26,171 79,351
---------- ----------- ---------- -----------
Net realized gain (loss) on investments $1,059,108 $ 2,092,576 $ 820,603 $ (114,641)
---------- ----------- ---------- -----------
Change in unrealized appreciation (depreciation) -
Investments $ (958,281) $(2,200,188) $ (702,398) $ (228,393)
Futures contracts -- -- 4,898 --
---------- ----------- ---------- -----------
Net unrealized loss on investments $ (958,281) $(2,200,188) $ (697,500) $ (228,393)
---------- ----------- ---------- -----------
Net realized and unrealized gain (loss) on investments $ 100,827 $ (107,612) $ 123,103 $ (343,034)
---------- ----------- ---------- -----------
Increase in net assets from operations $4,688,520 $ 3,381,970 $7,185,307 $12,842,357
---------- ----------- ---------- -----------
</TABLE>
See notes to financial statements
30
<PAGE>
Financial Statements - continued
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Alabama Arkansas California
Year Ended March 31, 1999 Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 4,158,764 $ 6,715,372 $ 13,254,945
Net realized gain on investments 1,016,442 590,303 2,724,580
Net unrealized gain (loss) on investments (1,146,571) (1,184,427) 1,479,688
----------- ------------ ------------
Increase in net assets from operations $ 4,028,635 $ 6,121,248 $ 17,459,213
----------- ------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $(3,730,766) $ (6,318,426) $(10,947,288)
From net investment income (Class B) (406,822) (371,258) (2,054,879)
From net investment income (Class C) -- -- (252,778)
From net realized gain on investments (Class A) (201,655) -- --
From net realized gain on investments (Class B) (27,134) -- --
In excess of net investment income (Class A) -- -- (71,408)
In excess of net investment income (Class B) -- -- (13,404)
In excess of net investment income (Class C) -- -- (1,649)
----------- ------------ ------------
Total distributions declared to shareholders $(4,366,377) $ (6,689,684) $(13,341,406)
----------- ------------ ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 7,670,880 $ 10,671,454 $ 86,096,243
Net asset value of shares issued to shareholders in reinvestment
of distributions 1,798,701 3,098,920 5,808,413
Cost of shares reacquired (7,440,655) (19,391,453) (68,090,571)
----------- ------------ ------------
Net increase (decrease) in net assets from Fund share transactions $ 2,028,926 $ (5,621,079) $ 23,814,085
----------- ------------ ------------
Total increase (decrease) in net assets $ 1,691,184 $ (6,189,515) $ 27,931,892
Net assets:
At beginning of period 83,612,000 141,442,325 270,606,619
----------- ------------ ------------
At end of period $85,303,184 $135,252,810 $298,538,511
=========== ============ ============
Accumulated undistributed (distributions in excess of) net
investment income included in net assets at end of period $ 234,821 $ (133,601) $ (345,205)
=========== ============ ============
</TABLE>
See notes to financial statements
31
<PAGE>
Financial Statements - continued
Statements of Changes in Net Assets -- continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Florida Georgia Maryland Massachusetts
Year Ended March 31, 1999 Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 4,587,693 $ 3,489,582 $ 7,062,204 $ 13,185,391
Net realized gain (loss) on investments 1,059,108 2,092,576 820,603 (114,641)
Net unrealized loss on investments (958,281) (2,200,188) (697,500) (228,393)
------------ ------------ ------------ ------------
Increase in net assets from operations $ 4,688,520 $ 3,381,970 $ 7,185,307 $ 12,842,357
------------ ------------ ------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $ (3,800,176) $ (2,952,432) $ (6,056,412) $(11,808,364)
From net investment income (Class B) (760,880) (537,150) (992,797) (945,242)
In excess of net investment income (Class A) -- (9,402) -- --
In excess of net investment income (Class B) -- (1,711) -- --
------------ ------------ ------------ ------------
Total distributions declared to shareholders $ (4,561,056) $ (3,500,695) $ (7,049,209) $(12,753,606)
------------ ------------ ------------ ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 25,238,186 $ 10,300,409 $ 22,326,800 $ 45,386,831
Net asset value of shares issued to shareholders in
reinvestment of distributions 1,710,996 1,766,381 3,747,717 5,976,296
Cost of shares reacquired (23,066,502) (10,887,622) (13,687,036) (42,467,776)
------------ ------------ ------------ ------------
Net increase in net assets from Fund share transactions $ 3,882,680 $ 1,179,168 $ 12,387,481 $ 8,895,351
------------ ------------ ------------ ------------
Total increase in net assets $ 4,010,144 $ 1,060,443 $ 12,523,579 $ 8,984,102
Net assets:
At beginning of period 94,430,125 70,416,676 147,639,615 256,611,450
------------ ------------ ------------ ------------
At end of period $ 98,440,269 $ 71,477,119 $160,163,194 $265,595,552
------------ ------------ ------------ ------------
Accumulated undistributed (distributions in excess of)
net investment income included in net assets at end of period $ 36,629 $ (41,495) $ (188,874) $ (78,771)
------------ ------------ ------------ ------------
</TABLE>
See notes to financial statements
32
<PAGE>
Financial Statements - continued
Statements of Changes in Net Assets -- continued
<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
33
<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
34
<PAGE>
Financial Statements - continued
Financial Highlights
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Alabama Fund
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.80 $ 10.48 $ 10.52 $ 10.34 $ 10.27
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.54 $ 0.55 $ 0.56 $ 0.55 $ 0.56
Net realized and unrealized gain (loss) on investments (0.01) 0.45 0.04 0.18 0.09
------- ------- ------- ------- -------
Total from investment operations $ 0.53 $ 1.00 $ 0.60 $ 0.73 $ 0.65
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.54) $ (0.55) $ (0.55) $ (0.55) $ (0.55)
From net realized gain on investments (0.03) (0.13) (0.09) -- --
In excess of net realized gain on investments -- -- -- -- (0.03)
------- ------- ------- -------- --------
Total distributions declared to shareholders $ (0.57) $ (0.68) $ (0.64) $ (0.55) $ (0.58)
-------- -------- -------- -------- --------
Net asset value - end of period $ 10.76 $ 10.80 $ 10.48 $ 10.52 $ 10.34
-------- -------- -------- -------- --------
Total return++ 5.03% 9.72% 5.82% 7.13% 6.51%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 0.95% 1.04% 1.10% 1.14% 1.15%
Net investment income 5.04% 5.12% 5.28% 5.18% 5.47%
Portfolio turnover 23% 21% 22% 37% 30%
Net assets at end of period (000 omitted) $73,851 $75,538 $76,928 $82,484 $83,805
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash
maintained by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1,
1995, the Fund's expenses are calculated without reduction for this expense offset arrangement.
++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.
[sec]The investment adviser and/or the distributor voluntarily waived a portion of their fees 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 $ 0.54 -- $ 0.54 $ 0.55
Ratios (to average net assets):
Expenses## 1.07% 1.11% -- 1.24% 1.25%
Net investment income 4.92% 5.05% -- 5.08% 5.37%
</TABLE>
See notes to financial statements
35
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Alabama Fund
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------------
Class B
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.80 $ 10.48 $ 10.52 $ 10.34 $ 10.27
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.46 $ 0.47 $ 0.47 $ 0.46 $ 0.47
Net realized and unrealized gain (loss) on investments (0.01) 0.45 0.04 0.18 0.09
------- ------- ------- ------- -------
Total from investment operations $ 0.45 $ 0.92 $ 0.51 $ 0.64 $ 0.56
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.46) $ (0.47) $ (0.47) $ (0.46) $ (0.46)
From net realized gain on investments (0.03) (0.13) (0.08) -- --
In excess of net realized gain on investments -- -- -- -- (0.03)
------- ------- ------- ------- -------
Total distributions declared to shareholders $ (0.49) $ (0.60) $ (0.55) $ (0.46) $ (0.49)
------- ------- ------- ------- -------
Net asset value - end of period $ 10.76 $ 10.80 $ 10.48 $ 10.52 $ 10.34
------- ------- ------- ------- -------
Total return 4.25% 8.91% 4.98% 6.25% 5.64%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.69% 1.79% 1.90% 1.96% 1.97%
Net investment income 4.29% 4.36% 4.48% 4.34% 4.63%
Portfolio turnover 23% 21% 22% 37% 30%
Net assets at end of period (000 omitted) $11,452 $ 8,074 $ 7,281 $ 6,139 $ 4,396
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash
maintained by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1,
1995, the Fund's expenses are calculated without reduction for this expense offset arrangement.
[sec]The investment adviser and/or the distributor voluntarily waived a portion of their fees 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 $ 0.45 $ 0.46 -- -- --
Ratios (to average net assets):
Expenses## 1.81% 1.86% -- -- --
Net investment income 4.17% 4.29% -- -- --
</TABLE>
See notes to financial statements
36
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Arkansas Fund
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.18 $ 9.72 $ 9.75 $ 9.66 $ 9.69
-------- -------- -------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.50 $ 0.50 $ 0.50 $ 0.50 $ 0.53
Net realized and unrealized gain (loss) on investments (0.04) 0.46 (0.03) 0.09 0.02
-------- -------- -------- -------- --------
Total from investment operations $ 0.46 $ 0.96 $ 0.47 $ 0.59 $ 0.55
-------- -------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.50) $ (0.50) $ (0.50) $ (0.50) $ (0.53)
In excess of net investment income -- (0.00)+ -- -- --
In excess of net realized gain on investments -- -- -- -- (0.05)
-------- -------- -------- -------- --------
Total distributions declared to shareholders $ (0.50) $ (0.50) $ (0.50) $ (0.50) $ (0.58)
-------- -------- -------- -------- --------
Net asset value - end of period $ 10.14 $ 10.18 $ 9.72 $ 9.75 $ 9.66
-------- -------- -------- -------- --------
Total return++ 4.60% 10.06% 4.87% 6.19% 5.90%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 0.77% 0.85% 0.92% 0.93% 0.75%
Net investment income 4.92% 4.97% 5.14% 5.10% 5.51%
Portfolio turnover 12% 15% 9% 6% 24%
Net assets at end of period (000 omitted) $124,644 $134,072 $144,263 $172,907 $187,105
+Per share amount was less than $0.01.
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash maintained
by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1, 1995, the Fund's
expenses are calculated without reduction for this expense offset arrangement.
++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.
[sec]The investment adviser and/or the distributor voluntarily waived a portion of their fees 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 $ 0.49 -- -- $ 0.52
Ratios (to average net assets):
Expenses## 0.89% 0.92% -- -- 0.82%
Net investment income 4.80% 4.90% -- -- 5.43%
</TABLE>
See notes to financial statements
37
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Arkansas Fund
- -----------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------
Class B
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.18 $ 9.72 $ 9.75 $ 9.65 $ 9.69
------- ------- ------ ------ ------
Income from investment operations# -
Net investment income[sec] $ 0.43 $ 0.42 $ 0.42 $ 0.42 $ 0.42
Net realized and unrealized gain (loss) on investments (0.04) 0.46 (0.03) 0.10 0.01
------- ------- ------- ------ ------
Total from investment operations $ 0.39 $ 0.88 $ 0.39 $ 0.52 $ 0.43
------- ------- ------- ------ ------
Less distributions declared to shareholders -
From net investment income $ (0.43) $ (0.42) $(0.42) $(0.42) $(0.42)
In excess of net investment income -- 0.00+ -- -- --
In excess of net realized gain on investments -- -- -- -- (0.05)
------- ------- ------- ------- -------
Total distributions declared to shareholders $ (0.43) $ (0.42) $(0.42) $(0.42) $(0.47)
------- ------- ------- ------- -------
Net asset value - end of period $ 10.14 $ 10.18 $ 9.72 $ 9.75 $ 9.65
------- ------- ------- ------- -------
Total return 3.91% 9.18% 4.05% 5.43% 4.67%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.43% 1.65% 1.71% 1.76% 1.84%
Net investment income 4.26% 4.15% 4.34% 4.27% 4.40%
Portfolio turnover 12% 15% 9% 6% 24%
Net assets at end of period (000 omitted) $10,609 $ 7,370 $7,548 $7,950 $7,231
+Per share amount was less than $0.01.
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash
maintained by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1,
1995, the Fund's expenses are calculated without reduction for this expense offset arrangement.
[sec]The investment adviser and/or the distributor voluntarily waived a portion of their fees 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 $ 0.42 $ 0.41 -- -- $ 0.41
Ratios (to average net assets):
Expenses## 1.55% 1.72% -- -- 1.91%
Net investment income 4.14% 4.08% -- -- 4.33%
</TABLE>
See notes to financial statements
38
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
California Fund
- -----------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 5.80 $ 5.47 $ 5.52 $ 5.41 $ 5.47
-------- -------- -------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.29 $ 0.29 $ 0.30 $ 0.30 $ 0.31
Net realized and unrealized gain (loss) on investments 0.09 0.33 (0.05) 0.11 (0.05)
-------- -------- -------- -------- --------
Total from investment operations $ 0.38 $ 0.62 $ 0.25 $ 0.41 $ 0.26
-------- -------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.29) $ (0.29) $ (0.30) $ (0.30) $ (0.31)
From net realized gain on investments -- -- -- -- --
In excess of net investment income (0.00)+ -- -- (0.00)+ (0.00)+
In excess of net realized gain on investments -- -- -- -- (0.01)
-------- -------- -------- -------- --------
Total distributions declared to shareholders $ (0.29) $ (0.29) $ (0.30) $ (0.30) $ (0.32)
-------- -------- -------- -------- --------
Net asset value - end of period $ 5.89 $ 5.80 $ 5.47 $ 5.52 $ 5.41
-------- -------- -------- -------- --------
Total return++ 6.59% 11.51% 4.55% 7.86% 4.85%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 0.60% 0.64% 0.66% 0.66% 0.69%
Net investment income 4.82% 5.07% 5.36% 5.48% 5.80%
Portfolio turnover 26% 49% 78% 69% 57%
Net assets at end of period (000 omitted) $226,903 $222,421 $232,612 $259,817 $272,161
+Per share amount was less than $0.01.
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash
maintained by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1,
1995, the Fund's expenses are calculated without reduction for this expense offset arrangement.
++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.
[sec]The investment adviser and/or the distributor voluntarily waived a portion of their fees 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 $ 0.27 $ 0.28 $ 0.29 $ 0.29 $ 0.30
Ratios (to average net assets):
Expenses## 0.77% 0.79% 0.81% 0.81% 0.84%
Net investment income 4.65% 4.92% 5.21% 5.33% 5.65%
</TABLE>
See notes to financial statements
39
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
California Fund
- ------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
----------------------------------------------------
1999 1998 1997 1996 1995
----------------------------------------------------
Class B
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 5.80 $ 5.47 $ 5.52 $ 5.41 $ 5.47
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.24 $ 0.24 $ 0.25 $ 0.26 $ 0.25
Net realized and unrealized gain (loss) on investments 0.09 0.33 (0.05) 0.11 (0.05)
------- ------- ------- ------- -------
Total from investment operations $ 0.33 $ 0.57 $ 0.20 $ 0.37 $ 0.20
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.24) $ (0.24) $ (0.25) $ (0.26) $ (0.25)
From net realized gain on investments -- -- -- -- --
In excess of net investment income (0.00)+ -- -- (0.00)+ --
In excess of net realized gain on investments -- -- -- -- (0.01)
------- ------- ------- ------- -------
Total distributions declared to shareholders $ (0.24) $ (0.24) $ (0.25) $ (0.26) $ (0.26)
------- ------- ------- ------- -------
Net asset value - end of period $ 5.89 $ 5.80 $ 5.47 $ 5.52 $ 5.41
------- ------- ------- ------- -------
Total return 5.74% 10.62% 3.64% 6.93% 3.73%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.39% 1.44% 1.54% 1.54% 1.76%
Net investment income 4.02% 4.26% 4.48% 4.59% 4.72%
Portfolio turnover 26% 49% 78% 69% 57%
Net assets at end of period (000 omitted) $61,458 $43,790 $36,694 $34,675 $29,057
+Per share amount was less than $0.01.
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash
maintained by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1,
1995, the Fund's expenses are calculated without reduction for this expense offset arrangement.
[sec]The investment adviser and/or the distributor voluntarily waived a portion of their fees 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 $ 0.24 $ 0.04
Ratios (to average net assets):
Expenses## 1.56% 1.59% 1.69% 1.91% 1.83%
Net investment income 3.85% 4.11% 4.33% 4.57% 4.04%
</TABLE>
See notes to financial statements
40
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
California Fund
- ------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
----------------------------------------------------
1999 1998 1997 1996 1995
----------------------------------------------------
Class C
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 5.81 $ 5.48 $ 5.53 $ 5.42 $ 5.48
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.23 $ 0.23 $ 0.24 $ 0.25 $ 0.26
Net realized and unrealized gain (loss) on investments 0.09 0.33 (0.05) 0.11 (0.06)
------- ------- ------- ------- -------
Total from investment operations $ 0.32 $ 0.56 $ 0.19 $ 0.36 $ 0.20
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.23) $ (0.23) $ (0.24) $ (0.25) $ (0.25)
In excess of net investment income (0.00)+ -- -- (0.00)+ --
In excess of net realized gain on investments -- -- -- -- (0.01)
------- ------- ------- ------- -------
Total distributions declared to shareholders $ (0.23) $ (0.23) $ (0.24) $ (0.25) $ (0.26)
------- ------- ------- ------- -------
Net asset value - end of period $ 5.90 $ 5.81 $ 5.48 $ 5.53 $ 5.42
------- ------- ------- ------- -------
Total return 5.54% 10.39% 3.51% 6.77% 3.79%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.56% 1.64% 1.66% 1.67% 1.69%
Net investment income 3.84% 4.08% 4.37% 4.47% 4.79%
Portfolio turnover 26% 49% 78% 69% 57%
Net assets at end of period (000 omitted) $10,178 $ 4,396 $ 3,856 $ 4,353 $ 3,858
+Per share amount was less than $0.01.
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash
maintained by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1,
1995, the Fund's expenses are calculated without reduction for this expense offset arrangement.
[sec]The investment adviser and/or the distributor voluntarily waived a portion of their fees 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 $ 0.21 $ 0.22 $ 0.23 $ 0.24 $ 0.25
Ratios (to average net assets):
Expenses## 1.74% 1.79% 1.81% 1.82% 1.84%
Net investment income 3.66% 3.93% 4.22% 4.32% 4.64%
</TABLE>
See notes to financial statements
41
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Florida Fund
- ------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
----------------------------------------------------
1999 1998 1997 1996 1995
----------------------------------------------------
Class A
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.10 $ 9.64 $ 9.82 $ 9.60 $ 9.65
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.50 $ 0.50 $ 0.51 $ 0.52 $ 0.54
Net realized and unrealized gain (loss) on investments 0.02 0.46 (0.18) 0.22 0.02
------- ------- ------- ------- -------
Total from investment operations $ 0.52 $ 0.96 $ 0.33 $ 0.74 $ 0.56
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.50) $ (0.50) $ (0.51) $ (0.52) $ (0.54)
From net realized gain on investments -- -- -- -- (0.04)
In excess of net investment income -- -- -- (0.00)+ --
In excess of net realized gain on investments -- -- -- -- (0.03)
------- ------- ------- ------- -------
Total distributions declared to shareholders $ (0.50) $ (0.50) $ (0.51) $ (0.52) $ (0.61)
------- ------- ------- ------- -------
Net asset value - end of period $ 10.12 $ 10.10 $ 9.64 $ 9.82 $ 9.60
------- ------- ------- ------- -------
Total return++ 5.25% 10.16% 3.43% 7.81% 6.07%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 0.69% 0.78% 0.86% 0.86% 0.60%
Net investment income 4.96% 5.03% 5.26% 5.26% 5.75%
Portfolio turnover 23% 14% 24% 56% 131%
Net assets at end of period (000 omitted) $77,628 $77,711 $80,342 $87,553 $89,894
+Per share amount was less than $0.01
#Per share data are based on average shares outstanding.
##The Fund's expenses are calculated without reduction for fees paid indirectly. The Fund has an expense offset
arrangement which reduces the Fund's custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend dispersing agent. For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for this expense offset arrangement.
++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.
[sec]The investment adviser and/or distributor voluntarily waived a portion of their fees 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 $ 0.49 -- $ 0.52 $ 0.52
Ratios (to average net assets):
Expenses## 0.81% 0.85% -- 0.90% 0.83%
Net investment income 4.84% 4.96% -- 5.22% 5.52%
</TABLE>
See notes to financial statements
42
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Florida Fund
- ------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
----------------------------------------------------
1999 1998 1997 1996 1995
----------------------------------------------------
Class B
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.09 $ 9.64 $ 9.82 $ 9.60 $ 9.64
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.42 $ 0.42 $ 0.43 $ 0.43 $ 0.43
Net realized and unrealized gain (loss) on investments 0.02 0.45 (0.18) 0.22 0.04
------- ------- ------- ------- -------
Total from investment operations $ 0.44 $ 0.87 $ 0.25 $ 0.65 $ 0.47
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.42) $ (0.42) $ (0.43) $ (0.43) $ (0.44)
From net realized gain on investments -- -- -- -- (0.04)
In excess of net investment income -- -- -- (0.00)+ --
In excess of net realized gain on investments -- -- -- -- (0.03)
------- ------- ------- ------- -------
Total distributions declared to shareholders $ (0.42) $ (0.42) $ (0.43) $ (0.43) $ (0.51)
------- ------- ------- ------- -------
Net asset value - end of period $ 10.11 $ 10.09 $ 9.64 $ 9.82 $ 9.60
------- ------- ------- ------- -------
Total return 4.42% 9.18% 2.56% 6.88% 5.06%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.49% 1.58% 1.72% 1.74% 1.68%
Net investment income 4.16% 4.22% 4.40% 4.36% 4.63%
Portfolio turnover 23% 14% 24% 56% 131%
Net assets at end of period (000 omitted) $20,813 $16,719 $14,701 $14,448 $12,667
+Per share amount was less than $0.01
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash
maintained by the Fund with its custodian and dividend dispersing agent. For fiscal years ending after September 1,
1995, the Fund's expenses are calculated without reduction for this expense offset arrangement.
[sec]The investment adviser and/or distributor voluntarily waived a portion of their fees 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 $ 0.41 -- $ 0.43 $ 0.41
Ratios (to average net assets):
Expenses## 1.61% 1.65% -- 1.78% 1.91%
Net investment income 4.04% 4.15% -- 4.33% 4.40%
</TABLE>
See notes to financial statements
43
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Georgia Fund
- ------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
----------------------------------------------------
1999 1998 1997 1996 1995
----------------------------------------------------
Class A
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.95 $ 10.38 $ 10.47 $ 10.35 $ 10.38
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.55 $ 0.56 $ 0.56 $ 0.54 $ 0.57
Net realized and unrealized gain (loss) on investments (0.02) 0.56 (0.10) 0.12 --
------- ------- ------- ------- -------
Total from investment operations $ 0.53 $ 1.12 $ 0.46 $ 0.66 $ 0.57
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.55) $ (0.55) $ (0.55) $ (0.54) $ (0.56)
From net realized gain on investments -- -- -- -- (0.01)
In excess of net investment income (0.00)+ -- -- (0.00)+ --
In excess of net realized gain on investments -- -- -- -- (0.03)
------- ------- ------- ------- -------
Total distributions declared to shareholders $ (0.55) $ (0.55) $ (0.55) $ (0.54) $ (0.60)
------- ------- ------- ------- -------
Net asset value - end of period $ 10.93 $ 10.95 $ 10.38 $ 10.47 $ 10.35
------- ------- ------- ------- -------
Total return++ 4.90% 11.02% 4.47% 6.48% 5.65%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 0.97% 1.03% 1.03% 1.17% 1.14%
Net investment income 4.97% 5.14% 5.34% 5.11% 5.50%
Portfolio turnover 35% 18% 27% 65% 56%
Net assets at end of period (000 omitted) $56,886 $59,546 $59,843 $68,183 $74,432
+Per share amount was less than $0.01.
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash
maintained by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1,
1995, the Fund's expenses are calculated without reduction for this expense offset arrangement.
++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.
[sec]The investment adviser and/or the distributor voluntarily waived a portion of their fees 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 $ 0.54 $ 0.55 $ 0.55 0.53 $ 0.56
Ratios (to average net assets):
Expenses## 1.09% 1.13% 1.10% 1.27% 1.24%
Net investment income 4.85% 5.04% 5.27% 5.01% 5.40%
</TABLE>
See notes to financial statements
44
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Georgia Fund
- ------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
----------------------------------------------------
1999 1998 1997 1996 1995
----------------------------------------------------
Class B
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.95 $ 10.38 $ 10.47 $ 10.36 $ 10.38
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.47 $ 0.48 $ 0.47 $ 0.45 $ 0.47
Net realized and unrealized gain (loss) on investments (0.02) 0.56 (0.09) 0.12 0.02
------- ------- ------- ------- -------
Total from investment operations $ 0.45 $ 1.04 $ 0.38 $ 0.57 $ 0.49
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.47) $ (0.47) $ (0.47) $ (0.46) $ (0.47)
From net realized gain on investments -- -- -- -- (0.01)
In excess of net investment income (0.00)+ -- -- (0.00)+ --
In excess of net realized gain on investments -- -- -- -- (0.03)
------- ------- ------- ------- -------
Total distributions declared to shareholders $ (0.47) $ (0.47) $ (0.47) $ (0.46) $ (0.51)
------- ------- ------- ------- -------
Net asset value - end of period $ 10.93 $ 10.95 $ 10.38 $ 10.47 $ 10.36
------- ------- ------- ------- -------
Total return 4.22% 10.19% 3.63% 5.52% 4.88%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.72% 1.77% 1.83% 2.00% 1.96%
Net investment income 4.22% 4.39% 4.53% 4.27% 4.66%
Portfolio turnover 35% 18% 27% 65% 56%
Net assets at end of period (000 omitted) $14,591 $10,871 $ 9,995 $10,205 $ 8,695
+Per share data amount was less than $0.01.
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash
maintained by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1,
1995, the Fund's expenses are calculated without reduction for this expense offset arrangement.
[sec]The investment adviser and/or the distributor voluntarily waived a portion of their fees 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 $ 0.45 $ 0.47 $ 0.47 -- --
Ratios (to average net assets)
Expenses## 1.84% 1.87% 1.90% -- --
Net investment income 4.10% 4.29% 4.46% -- --
</TABLE>
See notes to financial statements
45
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Maryland Fund
- --------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
------------------------------------------------------
1999 1998 1997 1996 1995
------------------------------------------------------
Class A
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.47 $ 10.89 $ 11.04 $ 10.94 $ 10.89
-------- -------- -------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.54 $ 0.54 $ 0.57 $ 0.57 $ 0.59
Net realized and unrealized gain (loss) on investments 0.02 0.59 (0.16) 0.09 0.09
-------- -------- -------- -------- --------
Total from investment operations $ 0.56 $ 1.13 $ 0.41 $ 0.66 $ 0.68
-------- -------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.54) $ (0.54) $ (0.56) $ (0.56) $ (0.59)
In excess of net investment income -- (0.01) -- -- (0.00)+
In excess of net realized gain on investments -- -- -- -- (0.04)
-------- -------- -------- -------- --------
Total distributions declared to shareholders $ (0.54) $ (0.55) $ (0.56) $ (0.56) $ (0.63)
-------- -------- -------- -------- --------
Net asset value - end of period $ 11.49 $ 11.47 $ 10.89 $ 11.04 $ 10.94
-------- -------- -------- -------- --------
Total return++ 4.94% 10.57% 3.75% 6.17% 6.51%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.03% 1.09% 1.12% 1.19% 1.21%
Net investment income 4.67% 4.79% 5.21% 5.10% 5.46%
Portfolio turnover 14% 21% 22% 15% 31%
Net assets at end of period (000 omitted) $131,261 $126,018 $126,405 $139,297 $145,361
+Per share amount was less than $0.01.
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash
maintained by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1,
1995, the Fund's expenses are calculated without reduction for this expense offset arrangement.
++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.
[sec]The investment adviser and/or the distributor voluntarily waived a portion of their fees 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 $ 0.53 $ 0.57 -- --
Ratios (to average net assets):
Expenses## 1.15% 1.19% 1.19% -- --
Net investment income 4.55% 4.69% 5.14% -- --
</TABLE>
See notes to financial statements
46
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Maryland Fund
- -------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
------------------------------------------------------------
1999 1998 1997 1996 1995
------------------------------------------------------------
Class B
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.47 $ 10.88 $ 11.03 $ 10.93 $ 10.88
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.45 $ 0.47 $ 0.50 $ 0.48 $ 0.51
Net realized and unrealized gain (loss) on investments 0.02 0.60 (0.17) 0.10 0.09
------- ------- ------- ------- -------
Total from investment operations $ 0.47 $ 1.07 $ 0.33 $ 0.58 $ 0.60
------- ------ ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.46) $ (0.47) $ (0.48) $ (0.48) $ (0.51)
In excess of net investment income -- (0.01) -- -- (0.00)+
In excess of net realized gain on investments -- -- -- -- (0.04)
------- ------- ------- ------- -------
Total distributions declared to shareholders $ (0.46) $ (0.48) $ (0.48) $ (0.48) $ (0.55)
------- ------- ------- ------- -------
Net asset value - end of period $ 11.48 $ 11.47 $ 10.88 $ 11.03 $ 10.93
------- ------- ------- ------- -------
Total return 4.18% 9.96% 3.03% 5.41% 5.75%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.68% 1.74% 1.82% 1.91% 1.93%
Net investment income 4.01% 4.12% 4.50% 4.36% 4.73%
Portfolio turnover 14% 21% 22% 15% 31%
Net assets at end of period (000 omitted) $28,902 $21,622 $17,379 $13,694 $11,168
+Per share amount was less than $0.01.
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash
maintained by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1,
1995, the Fund's expenses are calculated without reduction for this expense offset arrangement.
[sec]The investment adviser and/or the distributor voluntarily waived a portion of their fees 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 $ 0.45 $ 0.46 $ 0.49 -- --
Ratios (to average net assets):
Expenses## 1.80% 1.84% 1.89% -- --
Net investment income 3.89% 4.02% 4.43% -- --
</TABLE>
See notes to financial statements
47
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Massachusetts Fund
- ------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
-----------------------------------------------------------
1999 1998 1997 1996 1995
-----------------------------------------------------------
Class A
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.34 $ 10.86 $ 10.98 $ 10.84 $ 10.90
-------- -------- -------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.58 $ 0.58 $ 0.61 $ 0.60 $ 0.64
Net realized and unrealized gain (loss) on investments (0.01) 0.48 (0.14) 0.14 (0.03)
-------- -------- -------- -------- --------
Total from investment operations $ 0.57 $ 1.06 $ 0.47 $ 0.74 $ 0.61
-------- -------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.56) $ (0.58) $ (0.59) $ (0.60) $ (0.64)
From net realized gain on investments -- -- -- -- (0.02)
In excess of net investment income -- (0.00)+ -- (0.00)+ --
In excess of net realized gain on investments -- -- -- -- (0.01)
-------- -------- -------- -------- --------
Total distributions declared to shareholders $ (0.56) $ (0.58) $ (0.59) $ (0.60) $ (0.67)
-------- -------- -------- -------- --------
Net asset value - end of period $ 11.35 $ 11.34 $ 10.86 $ 10.98 $ 10.84
-------- -------- -------- -------- --------
Total return++ 5.11% 9.99% 4.39% 6.95% 5.89%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.00% 1.06% 1.12% 1.17% 1.17%
Net investment income 5.08% 5.18% 5.55% 5.44% 6.01%
Portfolio turnover 28% 24% 33% 31% 31%
Net assets at end of period (000 omitted) $239,980 $237,861 $234,874 $249,497 $262,551
+Per share amount was less than $0.01.
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash
maintained by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1,
1995, the Fund's expenses are calculated without reduction for this expense offset arrangement.
++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.
[sec]The investment adviser and/or the distributor voluntarily waived a portion of their fees 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 $ 0.57 $ 0.60 -- --
Ratios (to average net assets):
Expenses## 1.12% 1.16% 1.19% -- --
Net investment income 4.96% 5.08% 5.48% -- --
</TABLE>
See notes to financial statements
48
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Massachusetts Fund
- -----------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
----------------------------------------------------------
1999 1998 1997 1996 1995
----------------------------------------------------------
Class B
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.35 $ 10.87 $ 10.99 $ 10.84 $ 10.90
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.50 $ 0.51 $ 0.53 $ 0.52 $ 0.55
Net realized and unrealized gain (loss) on investments (0.01) 0.48 (0.13) 0.15 (0.02)
------- ------- ------- ------- -------
Total from investment operations $ 0.49 $ 0.99 $ 0.40 $ 0.67 $ 0.53
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.49) $ (0.51) $ (0.52) $ (0.52) $ (0.56)
From net realized gain on investments -- -- -- -- (0.02)
In excess of net investment income -- (0.00)+ -- (0.00)+ --
In excess of net realized gain on investments -- -- -- -- (0.01)
------- ------- ------- ------- -------
Total distributions declared to shareholders $ (0.49) $ (0.51) $ (0.52) $ (0.52) $ (0.59)
------- ------- ------- ------- -------
Net asset value - end of period $ 11.35 $ 11.35 $ 10.87 $ 10.99 $ 10.84
------- ------- ------- ------- -------
Total return 4.43% 9.25% 3.66% 6.27% 5.13%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.64% 1.71% 1.81% 1.90% 1.89%
Net investment income 4.43% 4.52% 4.81% 4.71% 5.27%
Portfolio turnover 28% 24% 33% 51% 31%
Net assets at end of period (000 omitted) $25,616 $18,750 $15,204 $11,316 $ 8,676
+++Per share amount was less than $0.01.
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash
maintained by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1,
1995, the Fund's expenses are calculated without reduction for this expense offset arrangement.
[sec]The investment adviser and/or the distributor voluntarily waived a portion of their fees 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 $ 0.50 $ 0.52 -- --
Ratios (to average net assets):
Expenses## 1.76% 1.81% 1.88% -- --
Net investment income 4.31% 4.42% 4.74% -- --
</TABLE>
See notes to financial statements
49
<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(R) 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.
*These Funds are included within these financial statements.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Because
each Fund invests primarily in the securities of a single state and its
political subdivisions, each Fund is vulnerable to the effects of changes in
the legal and economic environment of the particular state.
Investment Valuations - Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues, are valued on the
basis of valuations furnished by dealers or by a pricing service with
consideration to factors such as institutional-size trading in similar groups
of securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics, and other market data, without exclusive reliance upon
exchange or over-the-counter prices. Short-term obligations, which mature in 60
days or less, are valued at amortized cost, which approximates market value.
Futures contracts, options, and options on futures contracts listed on
commodities exchanges are reported at market value using closing settlement
prices. Over-the-counter options on securities are valued by brokers.
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.
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.
Each Fund uses the effective interest method for reporting interest income on
payment-in-kind (PIK) bonds. Legal fees and other related expenses incurred to
preserve and protect the value of a security owned are added to the cost of the
security; other legal fees are expensed. Capital infusions, which are generally
non-recurring, incurred to protect or enhance the value of high-yield debt
securities, are reported as additions to the cost basis of the security. Costs
that are incurred to negotiate the terms or conditions of capital infusions or
that are expected to result in a plan of reorganization are reported as
realized losses. Ongoing costs incurred to protect or enhance an investment, or
costs incurred to pursue other claims or legal actions, are expensed.
Fees Paid Indirectly - The Trust's custody fee is calculated as a percentage of
each Fund's month end 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.
50
<PAGE>
Notes to Financial Statements - continued
Tax Matters and Distributions - The Trust's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net income,
including any net realized gain on investments. Accordingly, no provision for
federal income or excise tax is provided.
Each Fund files a tax return annually using tax accounting methods required
under provisions of the Code, which may differ from generally accepted
accounting principles, the basis on which these financial statements are
prepared. Accordingly, the amount of net investment income and net realized
gain reported on these financial statements may differ from that reported on
the 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.
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, 1999, the following amounts were reclassified due to
permanent differences between book and tax accounting for accrued market
discount on disposal of securities:
<TABLE>
<CAPTION>
Alabama Arkansas California Maryland Massachusetts
Fund Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (decrease):
Paid-in capital $ -- $ (41) $ (7,034) $ -- $ --
Accumulated undistributed net realized
gain (loss) on investments (26,457) -- (32,475) (88) (100,074)
Accumulated undistributed net investment
income (loss) 26,457 41 39,509 88 100,074
</TABLE>
These changes had no effect on the net assets or net asset value per share of
the Funds.
At March 31, 1999, the following Funds, for federal income tax purposes, had a
capital loss carryforward which may be applied against any net taxable realized
gains of each succeeding year until the earlier of their utilization or
expiration on:
<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, 2003 $ -- $4,804,665 $4,864,669 $ -- $ -- $1,413,006
March 31, 2004 6,486,073 403,290 -- 778,520 2,525,623 1,732,935
March 31, 2005 215,971 588,165 1,290,661 -- 1,055,172 405,183
March 31, 2006 -- -- 781,761 -- -- --
March 31, 2007 -- -- -- -- -- 242,062
---------- ---------- ---------- -------- ---------- ----------
Total $6,702,044 $5,796,120 $6,937,091 $778,520 $3,580,795 $3,793,186
</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.
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 Fund 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 of its independent Trustees and Mr. Bailey.
Included in Trustees' compensation for the year ended March 31, 1999, 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>
$ 8,441 $4,924 $5,633 $4,952 $5,519 $6,116 $6,136
</TABLE>
51
<PAGE>
Notes to Financial Statements - continued
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>
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$19,748, $36,328, $76,342, $37,542, $22,142, $62,533, and $64,725 for the year
ended March 31, 1999, 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 each Fund's average daily net assets attributable to
Class A shares which are attributable to that securities dealer and a
distribution fee to MFD of up to 0.10% per annum of each Fund's average daily
net assets attributable to Class A shares. MFD retains the service fee for
accounts not attributable to a securities dealer, which amounted to $4,105,
$4,208, $1,293, $0, $5,961, $20,641, and $58,009 for the Alabama, Arkansas,
California, Florida, Georgia, Maryland, and Massachusetts Funds, respectively,
for the year ended March 31, 1999. Payments of the 0.10% per annum Class A
distribution fee will be implemented on such date as the Trustees of the Trust
may determine for the Alabama, Arkansas, California, Florida, and Georgia
Funds. Payment of the 0.25% per annum Class A service fee by the Florida Fund
will commence on such date as the Trustees of the Trust may determine. In the
case of the Arkansas and California Funds, a portion of the service fee is
currently being paid by each Fund; payment of the remaining portion of the
Class A service fee will become payable on such date as the Trustees of the
Trust may determine. Fees incurred under the distribution plan during the year
ended March 31, 1999, were 0.25%, 0.10%, 0.01%, 0.00%, 0.25%, 0.35%, and 0.35%
of each of the Fund's average daily net assets attributable to Class A shares
on an annualized basis for Alabama, Arkansas, California, Florida, Georgia,
Maryland, and Massachusetts Funds, respectively.
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. 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 $526, $761, $126, $0, $2,374, $2,208, and $600 for
the Alabama, Arkansas, California, Florida, Georgia, Maryland, and
Massachusetts Funds, respectively, for Class B shares, for the year ended March
31, 1999. MFS retained no service fees with respect to California Class C
shares. Except in the case of the 0.25% per annum first year Class B service
fee, payments by the Florida Fund will be suspended until such date as the
Trustees of the Trust may determine. In the case of the Arkansas and California
Funds, except in the case of the 0.25% per annum first year Class B service
fee, the service fee is currently 0.10% per annum on Class B shares held over
one year. Fees incurred under the distribution plan during the year ended March
31, 1999, were 1.00%, 0.76%, 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 Alabama,
Arkansas, California, Florida, Georgia, Maryland, and Massachusetts Funds,
respectively, on an annualized basis. The fee incurred under the distribution
plan for the year ended March 31, 1999, was 1.00% of the California Fund's
average daily net assets attributable to Class C shares on an annualized basis.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months 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, 1999,
for 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 $ -- $ -- $ 974 $ -- $ 2,205 $ 3,442 $ --
Class B 6,416 21,721 112,036 57,452 29,187 51,486 53,610
Class C -- -- 4,652 -- -- -- --
</TABLE>
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of each Fund's average daily net assets at an effective annual rate
of 0.1125%.
52
<PAGE>
Notes to Financial Statements - continued
(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 $21,472 $16,541 $93,294 $22,234 $24,336 $36,784 $82,303
Sales 19,344 21,387 71,165 21,077 25,172 21,512 71,827
</TABLE>
The cost and unrealized appreciation or depreciation in value of the
investments owned by each Fund, as computed on a federal income tax basis, are
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> <C>
Aggregate cost $80,896,621 $123,730,355 $273,174,640 $88,128,485 $63,771,182 $145,502,399 $239,470,730
----------- ------------ ------------ ----------- ----------- ------------ ------------
Gross unrealized appreciation $ 5,595,625 $ 10,370,829 $ 25,454,373 $ 7,887,139 $ 5,015,597 $ 12,447,084 $ 21,129,321
Gross unrealized depreciation (94,509) (154,676) (411,170) (85,739) (146,556) (136,021) (105,866)
----------- ------------ ------------ ----------- ----------- ------------ ------------
Net unrealized appreciation
(depreciation) $ 5,501,116 $ 10,216,153 $ 25,043,203 $ 7,801,400 $ 4,869,041 $ 12,311,063 $ 21,023,455
----------- ------------ ------------ ----------- ----------- ------------ ------------
</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. Transactions in Fund shares
were as follows:
<TABLE>
<CAPTION>
Alabama Fund Arkansas Fund California Fund
Class A Shares --------------------- --------------------- -------------------
Year Ended March 31, 1999 (000 Omitted) Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 350 $ 3,786 645 $ 6,578 9,249 $ 54,429
Shares issued to shareholders in
reinvestment of distributions 147 1,585 287 2,920 805 4,733
Shares reacquired (626) (6,769) (1,805) (18,400) (9,889) (58,042)
----- -------- ------ --------- ------- ---------
Net increase (decrease) (129) $ (1,398) (873) $ (8,902) 165 $ 1,120
----- -------- ------ --------- ------- ---------
Year Ended March 31, 1998 (000 Omitted) Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------
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)
----- -------- ------ --------- ------- ---------
<CAPTION>
Florida Fund Georgia Fund Maryland Fund
--------------------- --------------------- -------------------
Year Ended March 31, 1999 (000 Omitted) Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 1,787 $ 18,187 446 $ 4,905 1,116 $ 12,890
Shares issued to shareholders in
reinvestment of distributions 144 1,465 140 1,543 276 3,173
Shares reacquired (1,954) (19,860) (821) (9,029) (950) (10,972)
------ --------- ---- -------- ----- ---------
Net increase (decrease) (23) $ (208) (235) $ (2,581) 442 $ 5,091
Year Ended March 31, 1998 (000 Omitted) Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
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>
53
<PAGE>
Notes to Financial Statements - continued
<TABLE>
<CAPTION>
Massachusetts Fund
---------------------
Year Ended March 31, 1999 (000 Omitted) Shares Amount
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold 3,151 $ 35,768
Shares issued to shareholders in
reinvestment of distributions 478 5,440
Shares reacquired (3,449) (39,192)
------ ---------
Net increase (decrease) 180 $ 2,016
------ ---------
Year Ended March 31, 1998 (000 Omitted) Shares Amount
- ----------------------------------------------------------------------------------------------------------------------
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)
------ ---------
</TABLE>
<TABLE>
<CAPTION>
Alabama Fund Arkansas Fund California Fund
Class B Shares --------------------- --------------------- -------------------
Year Ended March 31, 1999 (000 Omitted) Shares Amount Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 359 $ 3,885 401 $ 4,093 4,033 $ 23,717
Shares issued to shareholders in
reinvestment of distributions 20 214 18 179 160 941
Shares reacquired (62) (672) (97) (991) (1,312) (7,691)
----- -------- ----- -------- ------ --------
Net increase (decrease) 317 $ 3,427 322 $ 3,281 2,881 $ 16,967
----- -------- ----- -------- ------ --------
Year Ended March 31, 1998 (000 Omitted) Shares Amount Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------
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
----- -------- ----- -------- ------ --------
</TABLE>
<TABLE>
<CAPTION>
Florida Fund Georgia Fund Maryland Fund
--------------------- --------------------- -------------------
Year Ended March 31, 1999 (000 Omitted) Shares Amount Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 693 $ 7,051 491 $ 5,396 818 $ 9,437
Shares issued to shareholders in
reinvestment of distributions 24 246 20 223 50 574
Shares reacquired (316) (3,207) (169) (1,859) (236) (2,715)
---- -------- ---- -------- ---- --------
Net increase (decrease) 401 $ 4,090 342 $ 3,760 632 $ 7,296
---- -------- ---- -------- ---- --------
Year Ended March 31, 1998 (000 Omitted) Shares Amount Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------
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
----- -------- ----- -------- ----- --------
</TABLE>
<TABLE>
<CAPTION>
Massachusetts Fund
---------------------
Year Ended March 31, 1999 (000 Omitted) Shares Amount
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold 845 $ 9,619
Shares issued to shareholders in
reinvestment of distributions 47 536
Shares reacquired (288) (3,276)
---- --------
Net increase (decrease) 604 $ 6,879
---- --------
<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>
54
<PAGE>
Notes to Financial Statements - continued
<TABLE>
<CAPTION>
California Fund
Class C Shares -----------------------
Year Ended March 31, 1999 (000 Omitted) Shares Amount
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold 1,346 $ 7,950
Shares issued to shareholders in
reinvestment of distributions 23 135
Shares reacquired (401) (2,358)
----- --------
Net increase (decrease) 968 $ 5,727
----- --------
<CAPTION>
Year Ended March 31, 1998 (000 Omitted) Shares Amount
- ----------------------------------------------------------------------------------------------------------
Shares sold 354 $ 2,022
Shares issued to shareholders in
reinvestment of distributions 16 91
Shares reacquired (317) (1,794)
----- --------
Net increase 53 $ 319
----- --------
</TABLE>
(6) Line of Credit
The Trust and other affiliated funds participate in an $720 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
the Funds for the year ended March 31, 1999, ranged from $176 to $5,748.
(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>
Maryland Fund Municipal Bond Index June 1999 20 Short $4,898
</TABLE>
At March 31, 1999, the Fund had sufficient cash and/or securities to cover any
margin requirements under these contracts.
55
<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, 1999, the related statements of
operations for the year then ended, the statements of changes in net assets for
the years ended March 31, 1999 and 1998, and the financial highlights for each
of the years in the five-year period ended March 31, 1999. 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, 1999 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, 1999, the
results of its operations, the changes in its net assets, and its financial
highlights for the respective stated periods in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
May 7, 1999
56
<PAGE>
Federal Tax Information
In January 2000, shareholders will be mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1999.
For federal income tax purposes, approximately 99% of the total dividends paid
by each Fund from net investment income during the year ended March 31, 1999,
is designated as an exempt-interest dividend.
57
<PAGE>
MFS' Year 2000 Readiness Disclosure
MFS Investment Management(R), as an investment adviser and on behalf of the MFS
funds, is committed to the effective use of technology in managing our portfolio
investments, delivering high-quality service to MFS fund shareholders,
retirement plan participants, and MFS' institutional clients, and supporting the
financial advisers who sell our products. With that in mind, we created a
separately funded Year 2000 Program Management Office in 1996 comprised of a
specialized staff reporting directly to MFS senior management.
The Year 2000 (Y2K) problem arises because calendar-year fields in computers and
software applications traditionally have used two-digit codes so that, for
example, the year 1998 is coded as "98," with the "19" being implied. In the
year 2000, unless necessary corrections have been made, computer applications
may assume "00" refers to 1900 rather than 2000, thus resulting in systems
failures or miscalculations. To address this issue, our team of dedicated
business and technology managers, working with outside experts, is taking steps
to ascertain the Y2K readiness of MFS' internal systems and is working with our
external systems vendors to determine whether they expect their systems to be
ready.
MFS recognizes that fund shareholders and institutional clients also are
concerned about whether the companies whose securities are held in their
portfolios are addressing Y2K issues. As part of the MFS(R) Original
Research(SM) process of evaluating portfolio investments, one of the many
relevant factors that MFS' portfolio managers and research analysts may consider
is a company's Y2K readiness. Each year, MFS' research analysts and portfolio
managers conduct more than 1,000 on-site meetings with companies whose
securities are, or may be, held in fund and client portfolios, and host an
additional 1,500 meetings at MFS' headquarters. When assessing the Y2K readiness
of these companies, MFS' research analysts and portfolio managers may rely upon
discussions at these meetings as well as SEC disclosure documents and
third-party reports.
Y2K readiness is an enormously complex, worldwide issue. No company or
institution can guarantee that it will be unaffected by the Y2K issue. While MFS
is taking significant steps to protect the integrity of its internal systems,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on MFS, shareholders of MFS funds, participants in retirement
plans administered by MFS, or MFS' institutional clients.
If you have further questions regarding MFS' Year 2000 Readiness Program, please
visit our Web site at www.mfs.com or contact the MFS Year 2000 Program
Management Office by e-mail at [email protected] or by letter at 500 Boylston Street,
Boston, MA 02116-3741.
58
<PAGE>
MFS Family of Funds(R)
MFS offers a range of mutual funds to meet investors' varying financial needs
and goals. The funds are placed below in descending order of the level of risk
and reward each one offers in relation to the others in that asset class.(1) The
objective of the fund you choose should correspond to your financial needs and
goals.
HIGHER RISK/HIGHER REWARD POTENTIAL
BOND FUNDS
MFS(R) Global Governments Fund(2)
MFS(R) High Yield Opportunities Fund
MFS(R) High Income Fund
MFS(R) Municipal High Income Fund
MFS(R) Strategic Income Fund
MFS(R) Municipal State Funds
AL, AR, CA, FL, GA, MD, MA, MS,
NY, NC, PA, SC, TN, VA, WV
MFS(R) Municipal Income Fund
MFS(R) Bond Fund
MFS(R) Municipal Bond Fund
MFS(R) Government Securities Fund
MFS(R) Government Mortgage Fund
MFS(R) Intermediate Income Fund
MFS(R) Municipal Limited Maturity Fund
MFS(R) Limited Maturity Fund
MFS(R) Government Limited Maturity Fund
STOCK FUNDS
MFS(R)/Foreign & Colonial Emerging Markets Equity Fund
MFS(R) Managed Sectors Fund
MFS(R) New Discovery Fund
MFS(R) Emerging Growth Fund
MFS(R) Mid Cap Growth Fund
MFS(R) International Growth Fund
MFS(R) Research International Fund
MFS(R) Global Growth Fund(2)
MFS(R) Strategic Growth Fund
MFS(R) Research Fund
MFS(R) International Growth and Income Fund
MFS(R) Global Equity Fund(2)
MFS(R) Capital Opportunities Fund Massachusetts Investors Growth Stock Fund
MFS(R) Growth Opportunities Fund
MFS(R) Large Cap Growth Fund
MFS(R) Union Standard(R) Equity Fund
MFS(R) Research Growth and Income Fund Massachusetts Investors Trust
MFS(R) Equity Income Fund
MFS(R) Utilities Fund
MFS(R) Global Total Return Fund(2)
MFS(R) Total Return Fund
MFS(R) Global Asset Allocation Fund(2)
LOWER RISK/LOWER REWARD POTENTIAL
(1) For information on the specific risks, charges, and expenses associated with
any MFS fund, refer to the prospectus. Read it carefully before investing or
sending money.
(2) MFS "global" funds were formerly "world" funds. As of August 24, 1998, their
names changed but their objectives remain the same.
59
<PAGE>
Diversifying Your Investment Portfolio
[GRAPHIC OF GIRL WITH 3 NESTS PILED WITH EGGS]
Most experts agree that it's wise to diversify your investments, no matter what
your age or financial situation. Diversification - spreading your assets among a
variety of investment types - can help spread your risk as well.
No one type of investment performs well all the time. In fact, each type of
investment tends to follow its own cycle, so that when the price of one is
rising, the price of another may be declining. By including a range of
investments in your portfolio, the overall volatility - or change in value - of
that portfolio should be less than if you put everything in one type of
investment.
MFS offers a wide variety of investments to suit a wide range of needs. For more
information, talk to your financial adviser or request our We're MFS kit. For
details about a specific MFS fund, ask for a prospectus including charges and
expenses. Read the prospectus carefully before you invest or send money.
For more information, call MFS at 1-800-225-2606 any business day from 8 a.m. to
8 p.m. Eastern time or visit our Web site at www.mfs.com.
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.;
Chairman, Colonial Insurance Company, 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
Michael L. Dawson*
John P. Kihn*
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
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MFS(R) Municipal -----------------
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MFS(R) Alabama Municipal Bond Fund MFS
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MFS(R) Maryland Municipal Bond Fund
MFS(R) Massachusetts Municipal Bond Fund
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INVESTMENT MANAGEMENT
We invented the mutual fund(R)
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Boston, MA 02116-3741
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(C)1999 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
