MFS MUNICIPAL SERIES TRUST
500 BOYLSTON STREET o BOSTON o MASSACHUSETTS 02116-3741
617 o 954-5000
May 28, 1996
VIA EDGAR
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, DC 20549
Re: MFS Municipal Series Trust (the "Trust") (File No. 811-4096)
(the following are state series of the Trust):
MFS Alabama Municipal MFS Maryland Municipal MFS South Carolina
Bond Fund Bond Fund Municipal Bond Fund
MFS Arkansas MFS Massachusetts MFS Tennessee Municipal
Municipal Bond Fund Municipal Bond Fund Bond Fund
MFS California MFS Mississippi Municipal MFS Texas Municipal Bond
Municipal Bond Fund Bond Fund Fund
MFS Florida Municipal MFS New York Municipal MFS Virginia Municipal
Bond Fund Bond Fund Bond Fund
MFS Georgia Municipal MFS North Carolina MFS Washington Municipal
Bond Fund Municipal Bond Fund Bond Fund
MFS Louisian MFS Pennsylvania MFS West Virginia
Municipal Bond Fund Municipal Bond Fund Municipal Bond Fund
- -------------------------------------------------------------------------------
Ladies and Gentlemen:
On behalf of the Funds referenced above, pursuant to the requirements of
Section 30(b) of the Investment Company Act of 1940 and Rule 30b2-1 thereunder,
we hereby file a copy of each of the reports listed below:
<TABLE>
<CAPTION>
Fund Report Period Ended Coded
BOOK 1
<S> <C> <C> <C>
MFS Maryland Municipal Bond Fund Annual Report March 31, 1996 MST-2A-5/96-56M
MFS North Carolina Municipal Bond Fund Annual Report March 31, 1996 MST-2A-5/96-56M
MFS South Carolina Municipal Bond Fund Annual Report March 31, 1996 MST-2A-5/96-56M
MFS Tennessee Municipal Bond Fund Annual Report March 31, 1996 MST-2A-5/96-56M
MFS Virginia Municipal Bond Fund Annual Report March 31, 1996 MST-2A-5/96-56M
MFS West Virginia Municipal Bond Fund Annual Report March 31, 1996 MST-2A-5/96-56M
BOOK 2
MFS Alabama Municipal Bond Fund Annual Report March 31, 1996 MST-2B-4/96-32.5M
MFS Arkansas Municipal Bond Fund Annual Report March 31, 1996 MST-2B-4/96-32.5M
MFS Georgia Municipal Bond Fund Annual Report March 31, 1996 MST-2B-4/96-32.5M
MFS Massachusetts Municipal Bond Fund Annual Report March 31, 1996 MST-2B-4/96-32.5M
MFS New York Municipal Bond Fund Annual Report March 31, 1996 MST-2B-4/96-32.5M
MFS Pennsylvania Municipal Bond Fund Annual Report March 31, 1996 MST-2B-4/96-32.5M
BOOK 3
MFS California Municipal Bond Fund Annual Report March 31, 1996 MST-2C-5/96-25M
MFS Florida Municipal Bond Fund Annual Report March 31, 1996 MST-2C-5/96-25M
MFS Louisiana Municipal Bond Fund Annual Report March 31, 1996 MST-2C-5/96-25M
MFS Mississippi Municipal Bond Fund Annual Report March 31, 1996 MST-2C-5/96-25M
MFS Texas Municipal Bond Fund Annual Report March 31, 1996 MST-2C-5/96-25M
MFS Washington Municipal Bond Fund Annual Report March 31, 1996 MST-2C-5/96-25M
</TABLE>
Very truly yours,
JOHN F. MCNAMARA
John F. McNamara
Production Editor
/jfm
<PAGE>
[front cover]
[logo]
MFS(r)
THE FIRST NAME IN MUTUAL FUNDS
Annual Report for
Year Ended
March 31, 1996
MFS(r) Municipal Series Trust
For the States of: Maryland, North Carolina, South Carolina, Tennessee,
Virginia and West Virginia
[photo of bridge]
<PAGE>
MFS MUNICIPAL SERIES TRUST
Trustees
A. Keith Brodkin*
Chairman and President
Richard B. Bailey*
Private Investor; Former Chairman and Director
(until 1991), Massachusetts Financial Services
Company; Director, Cambridge Bancorp; Director,
Cambridge Trust Company
Marshall N. Cohan
Private Investor
Lawrence H. Cohn, M.D.
Chief of Cardiac Surgery, Brigham and Women's Hospital;
Professor of Surgery, Harvard Medical School
The Hon. Sir J. David Gibbons, KBE
Chief Executive Officer, Edmund Gibbons Ltd.;
Chairman, Bank of N.T. Butterfield & Son Ltd.
Abby M. O'Neill
Private Investor;
Director, Rockefeller Financial Services, Inc.
(investment adviser)
Walter E. Robb, III
President and Treasurer, Benchmark Advisors, Inc.
(corporate financial consultants); Trustee,
Landmark Funds (mutual funds)
Arnold D. Scott*
Senior Executive Vice President, Director and Secretary,
Massachusetts Financial Services Company
Jeffrey L. Shames*
President and Director, Massachusetts Financial
Services Company
J. Dale Sherratt
President, Insight Resources, Inc.
(acquisition planning specialists)
Ward Smith
Former Chairman (until 1994),
NACCO Industries;
Director, Sundstrand Corporation
Investment Adviser
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
Distributor
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
Portfolio Managers
David R. King*
Geoffrey L. Schechter*
David B. Smith*
*Affiliated with the Investment Adviser
Treasurer
W. Thomas London*
Assistant Treasurer
James O. Yost*
Secretary
Stephen E. Cavan*
Assistant Secretary
James R. Bordewick, Jr.*
Custodian
State Street Bank and Trust Company
Auditors
Deloitte & Touche llp
Investor Information
For MFS stock and bond market outlooks, call toll free: 1-800-637-4458
anytime from a touch-tone telephone.
For information on MFS mutual funds, call your financial adviser or, for an
information kit, call toll free: 1-800-637-2929 any business day from 9 a.m.
to 5 p.m. Eastern time (or leave a message anytime).
Investor Service
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
For general information, call toll free: 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
For service to speech- or hearing-impaired, call toll free: 1-800-637-6576
any business day from 9 a.m. to 5 p.m. Eastern time. (To use this service,
your phone must be equipped with a Telecommunications Device for the Deaf.)
For share prices, account balances and exchanges, call toll free:
1-800-MFS-TALK (1-800-637-8255) anytime from a touch-tone telephone.
[DALBAR MFS #1 logo]
Top-Rated Service
For the second year in a row, MFS earned a #1 ranking in DALBAR, Inc.'s
Broker/Dealer Survey, Main Office Operations Service Quality category. The
firm achieved a 3.49 overall score--on a scale of 1 to 4--in the 1995 survey.
A total of 71 firms responded, offering input on the quality of service they
received from 36 mutual fund companies nationwide. The survey contained
questions about service quality in 17 categories, including "knowledge of
phone service contacts," "accuracy of transaction processing," and "overall
ease of doing business with the firm."
<PAGE>
Letter to Shareholders
Dear Shareholders:
Declining interest rates and a favorable inflation outlook helped create
opportunities in the municipal market during the past 12 months. During the
fiscal year ended March 31, 1996, all classes of shares of the individual
state Funds available within the Trust generated positive total returns. For
the most part, these returns underperformed the 8.38% return of the Lehman
Brothers Municipal Bond Index (the Lehman Index), an unmanaged index of
municipal bond investments rated Baa or higher. However, although this index
is considered the benchmark for performance of municipal bonds, it is
comprised of municipal bonds issued nationwide, while each of the Funds in
the Trust is limited to investing in the bonds of a particular state. Because
individual indices do not exist for all of the states, we have provided a
discussion of each Fund's performance relative to the Lehman Index on the
following pages.
Economic Environment
We believe the U.S. economy will continue to show moderate growth in 1996,
although this growth may be somewhat uneven as we move from quarter to
quarter. Thus, while one quarter may experience an annualized rate of growth
in Gross Domestic Product (GDP) of less than 1%, another quarter may see
annualized growth in excess of 3%--but, for the year, we believe growth could
stay within our expected range of 2% to 2-1/2%. While some increase in
consumer spending has taken place in the early months of this year,
consumers, who represent two-thirds of the economy, remain in a somewhat
weakened position, due in part to an increase in consumer installment debt in
excess of 30% over the past two years. Meanwhile, growth is also being
constrained by ongoing economic doldrums in Europe and Japan, important
markets for U.S. exports. Here again, we are seeing a few tentative signs,
particularly in Japan, of modest recoveries that could lead to improved
prospects for U.S. exporters. Also, the "lag effect" of increases in
short-term interest rates by the Federal Reserve Board in 1994 and into 1995
is helping to keep growth in check. This lag effect can last up to two years,
and although the Fed did reduce short-term rates late last year and earlier
this year, we expect it to continue its diligent anti-inflationary policies.
At the same time, it appears that inflation is likely to remain under control
this year, due in part to a continued moderation in wage pressures and the
subdued level of economic growth. Finally, we believe the current upward
pressure on energy prices bears close scrutiny, as energy is an important
component of the inflation outlook.
Municipal Bond Market
Interest rates on municipal bonds experienced dramatic swings during the
fiscal year ended March 31, 1996. Rates declined by approximately 70 basis
points (0.70%) during the first nine months of the fiscal year, as a
combination of slowing economic growth and reduced inflationary pressures
enabled the Federal Reserve to begin lowering interest rates. Positive news
out of Washington, D.C. regarding the possibility of a balanced budget
provided further impetus for the rally in fixed-income securities. In the
fourth quarter of the fiscal year, interest rates on municipal securities
increased by about 55 basis points (0.55%) as signs of a reemergence in
economic growth and rising commodity prices raised inflationary concerns.
Further driving interest rates higher was the apparent failure of the federal
government to reach agreement on a balanced budget.
The overall 15-basis point (0.15%) decline in tax-exempt yields during the
fiscal year ended March 31, 1996 was dwarfed by the approximate 70-basis
point (0.70%) decline in yields on long-term U.S. Treasury securities during
the same period, driving the yield ratio of 30-year AAA-rated municipals to
U.S. Treasuries from 79% to 86%. The dramatic underperformance by tax-exempt
securities can be attributed to investors' fears concerning major tax reform,
more specifically, the potential of the implementation of a flat tax and the
removal of municipal bonds' special tax status. While these fears have
subsided somewhat recently as it appears that major tax reform is improbable,
tax-exempt securities are still trading at levels reflective of some modest
prospect of tax reform.
Supply continues to provide a positive foundation for the municipal bond
market. In 1995, new issuance totalled approximately $156 billion, a decline
of 5% from the previous year and nearly one-half of 1993's record level. More
importantly, during 1995 the outstanding supply of municipal bonds declined
by approximately $45 billion. It is expected that new issuance will again be
in the range of $160 billion, barring any sharp decline in interest rates,
and that the outstanding supply will again decline, by approximately $30
billion. Given the favorable technical outlook for municipal bonds and their
current yield ratios compared to U.S. Treasuries, we believe that tax-exempt
securities represent good value (although principal value and interest on
Treasury securities are guaranteed by the U.S. government if held to
maturity).
Portfolio Strategy
Although the structure of each Fund is impacted by the unique market dynamics
of its state, we strive to manage all the Funds in a similar style. We are
generally constructive on the municipal market, although recent volatility
and the aforementioned signs of growth have raised some concerns. Therefore,
we have shortened the durations of some of the longer-term Funds to lessen
their interest-rate sensitivity. We have also sought to purchase bonds that
came to market at relatively high yields, which tend to be relatively more
defensive and help us maintain dividend levels.
1
<PAGE>
Letter to Shareholders -- continued
The focus on credit issues in the municipal market has grown with the
Orange County, California bankruptcy filing, the deterioration of Washington,
D.C.'s financial condition, and many other local problems. At the same time,
with the volatility in interest rates, we feel it is appropriate to maintain
very high quality across the Funds' portfolios. Finally, the rapidly changing
credit landscape may present many opportunities that, with our research team,
we hope to identify and take advantage of to enhance the value of the Funds.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/ A Keith Brodkin
A. Keith Brodkin
Chairman and President
/s/ David R. King /s/ Geoffrey L. Schechter /s/ David B. Smith
David R. King, Geoffrey L. Schechter, and David B. Smith
Portfolio Managers
April 12, 1996
The performance of the individual state Funds listed below and on the
following page includes the reinvestment of distributions but excludes the
effects of any sales charges. Each Fund's results have been compared to the
Lehman Index.
The portfolio of each Fund will tend to be structured with respect to
maturity and coupon and sector distribution, reflecting our views on interest
rates, credit quality, and financing trends. However, each Fund's performance
will differ because of supply/demand and credit quality conditions, which
vary from state to state.
Maryland
For the 12 months ended March 31, 1996, the Fund provided total returns of
6.17% on Class A shares and 5.41% on Class B shares, underperforming the
8.38% return for the Lehman Index. The average Maryland state tax-exempt
funds returned 7.19% over the same period, as reported by Lipper Analytical
Services. The primary reason for the underperformance was the relatively
short duration of the Fund, which helped reduce the Fund's interest rate
sensitivity, but also prevented it from appreciating with the market.
Conversely, this defensive position has served the Fund well over the past
two months as interest rates have risen.
North Carolina
During the fiscal year ended March 31, 1996, Class A shares of the Fund
provided a total return of 6.56%, Class B shares returned 5.70%, and Class C
shares 5.87%, all of which underperformed the 8.38% return of the Lehman
Index, as well as the 6.71% average return for North Carolina state
tax-exempt funds, as reported by Lipper Analytical Services. The
underperformance is primarily attributable to the defensive posture that the
Fund maintained during the first two months of the fiscal year, when interest
rates were generally declining, and the more aggressive posture that the Fund
maintained during the fourth quarter of the fiscal year, a period marked by
rising interest rates. Also contributing to the underperformance was the
Fund's large holdings of bonds with above-market coupons, whose returns
generally trail the market in periods of declining interest rates.
South Carolina
The Fund's total returns for the 12 months ended March 31, 1996 were 6.20% on
Class A shares and 5.43% on Class B shares, lower than the 8.38% return for
the Lehman Index and the 7.42% return for the average South Carolina state
tax-exempt funds, as reported by Lipper Analytical Services. The Fund's
defensive structure during the first and second quarters prevented it from
fully participating in the market rally, while combined performance for the
third and fourth quarters essentially matched the market.
Tennessee
The Fund had total returns of 6.66% on Class A shares and 5.89% on Class B
shares for the fiscal year ended March 31, 1996. This compares to an 8.38%
return for the Lehman Index and a 6.93% return for the average Tennessee
state tax-exempt funds, according to Lipper Analytical Services. The Fund's
defensive structure, including its holdings of many older, higher-coupon
bonds, caused its performance to lag during the market rally. Conversely, the
Fund tends to do relatively better in flat and down markets, and also has a
higher dividend yield than it would have if it were more aggressively
structured.
2
<PAGE>
Virginia
The Fund's total returns for the fiscal year ended March 31, 1996 of 6.52%
for Class A shares, 5.85% for Class B shares, and 6.02% for Class C shares
underperformed the 8.38% return of the Lehman Index, as well as the average
Virginia tax-exempt municipal bond fund's return of 7.43%, as reported by
Lipper Analytical Services, over the same period.
The Fund endeavored to increase its interest rate sensitivity during the
period of falling interest rates by emphasizing long-term discounts in its
purchasing decisions. The timing and availability of discount bonds in both
the primary and secondary markets became an issue in this historically
low-issuance state. Many attractively structured new issues came to market at
the end of 1995, which, in retrospect, was the peak of the market. The Fund
participated in many of these issues, using them as a sizable source of
discount bonds. Although these positions added to performance for the third
quarter of the fiscal year, they detracted from performance in the fourth
quarter as general market interest rates rose precipitously.
West Virginia
The Fund's total returns for the fiscal year ended March 31, 1996 of 6.58%
for Class A shares and 5.81% for Class B shares underperformed the 8.38%
return of the Lehman Index. However, the Fund's Class A shares outperformed
the average other state tax-exempt municipal bond fund's return of 6.99%, as
reported by Lipper Analytical Services, over the same period.
As the oldest and largest fund in a predominantly low-issuance state with low
secondary-market volume, the Fund has concentrated on maintaining its
dividend over the period by emphasizing call protection and quality in its
investment decisions. This strategy tends to dampen price volatility in
changing interest rate environments; it can also help the Fund provide
attractive returns in both up and down markets.
Portfolio Manager Profiles
David King has been a member of the MFS investment staff since 1985. A
graduate of the University of New Hampshire and the Babson College Graduate
School of Business Administration, he began his career at MFS as a member of
the Fixed Income Department and was named Assistant Vice President -
Investments in 1987. In 1988 he was named Vice President - Investments. Mr.
King is a Chartered Financial Analyst (C.F.A.) and currently has portfolio
management responsibility for the Maryland, South Carolina and Tennessee
state Funds.
Geoffrey Schechter joined MFS in 1993 as an Investment Officer in the Fixed
Income Department. A graduate of the University of Texas and the Boston
University Graduate School of Business Administration, he was named Assistant
Vice President - Investments in 1994, Vice President - Investments in 1995
and currently has portfolio management responsibilities for the North
Carolina state Fund. Mr. Schechter is a Certified Public Accountant (C.P.A.)
and a C.F.A.
David Smith has been a member of the MFS investment staff since 1988. A
graduate of Union College and the Babson College Graduate School of Business
Administration, he began his career at MFS as a Senior Treasury Analyst in
the Corporate Treasury Department. He was named a Research Analyst in the
Fixed Income Department in 1989, Investment Officer in 1990, Assistant Vice
President - Investments in 1991 and Vice President - Investments in 1993. Mr.
Smith is a C.F.A. and currently has portfolio management responsibilities for
the Virginia and West Virginia state Funds.
Objective and Policies
The investment objective for each state Fund is to provide current income
exempt from federal income taxes and from the personal income taxes, if any,
of that state.
Each state Fund seeks to achieve its investment objective by investing its
assets primarily in municipal debt instruments. Each Fund may purchase
instruments, the interest on which may be subject to an alternative minimum
tax. Generally, each state Fund will invest at least two-thirds of its assets
in tax-exempt securities in the three highest grades (A or above) of
recognized rating agencies or comparable unrated securities. Each state Fund
may also enter into options and futures transactions and purchase securities
on a "when-issued" basis.
All results are historical and are not an indication of future results. The
investment return and principal value of an investment in a mutual fund will
vary with changes in market conditions, and shares, when redeemed, may be
worth more or less than their original cost.
3
<PAGE>
Performance
The following information illustrates the growth of a hypothetical $10,000
investment for each Fund's Class A shares during the periods indicated in
comparison to various market indicators. Fund results reflect the deduction
of the 4.75% maximum sales charge; benchmark comparisons are unmanaged and do
not reflect any fees or expenses. You cannot invest in an index. All results
reflect the reinvestment of all dividends and capital gains.
Please note that effective September 7, 1993, Class B shares were offered and
on January 3, 1994, Class C shares were offered for certain funds.
Information on the performance of these classes of shares appears on the
following pages.
Please note that the performance of other classes will be greater than or
less than the line shown, based on the differences in loads and fees paid by
shareholders investing in the different classes.
MFS MARYLAND MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 investment (For the 10-Year Period Ended
March 31, 1996)
[mountain chart]
Days MFS Maryland Lehman Brothers Consumer
Municipal Bond Fund-A Municipal Bond Index Price Index
4/1/86 0 9,525 10,000 10,000
3/31/87 365 10,638 11,097 10,304
3/31/88 731 10,681 11,376 10,705
3/31/89 1095 11,577 12,196 11,238
3/31/90 1460 12,562 13,482 11,826
3/31/91 1825 13,642 14,726 12,405
3/31/92 2191 14,808 16,197 12,800
3/31/93 2556 16,377 18,225 13,195
3/31/94 2921 16,437 18,648 13,526
3/31/95 3286 17,507 20,034 13,912
3/31/96 3652 18,588 21,713 14,307
[legend]
(solid rule) MFS Maryland Municipal Bond Fund (Class A)
(short dashed rule) Lehman Brothers Municipal Bond Index
(long dashed rule) Consumer Price Index
<TABLE>
<CAPTION>
Average Annual Total Returns 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------- -------- -------- -------- ----------
<S> <C> <C> <C> <C>
MFS Maryland Municipal Bond Fund (Class A) including 4.75% sales charge +1.09% +2.26% +5.35% +6.40%
- ------------------------------------------------------------------------- -------- -------- -------- ----------
MFS Maryland Municipal Bond Fund (Class A) at net asset value +6.17% +4.31% +6.38% +6.92%
- ------------------------------------------------------------------------- -------- -------- -------- ----------
MFS Maryland Municipal Bond Fund (Class B) with CDSC+ +1.41% -- -- +1.02%*
- ------------------------------------------------------------------------- -------- -------- -------- ----------
MFS Maryland Municipal Bond Fund (Class B) without CDSC +5.41% -- -- +2.08%*
- ------------------------------------------------------------------------- -------- -------- -------- ----------
Average Maryland tax-exempt municipal bond fund** +7.19% +5.13% +7.26% +6.74%
- ------------------------------------------------------------------------- -------- -------- -------- ----------
Lehman Brothers Municipal Bond Index** +8.38% +6.01% +8.08% +8.06%
- ------------------------------------------------------------------------- -------- -------- -------- ----------
Consumer Price Index(S)** +2.84% +2.73% +2.89% +3.65%
- ------------------------------------------------------------------------- -------- -------- -------- ----------
</TABLE>
+These returns reflect the current Class B contingent deferred sales charge
(CDSC) of 4% for the 1-year period and 3% for the period commencing
September 7, 1993.
*For the period from the commencement of offering of Class B shares,
September 7, 1993 to March 31, 1996.
**Source: Lipper Analytical Services, Inc.
(S) The Consumer Price Index is a popular measure of change in prices.
4
<PAGE>
Performance -- continued
MFS NORTH CAROLINA MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment (For the 10-Year Period Ended
March 31, 1996)
[mountain chart]
Days MFS North Carolina Lehman Brothers Consumer
Municipal Bond Fund-A Municipal Bond Index Price Index
4/1/86 0 9,525 10,000 10,000
3/31/87 365 10,540 11,097 10,304
3/31/88 731 10,511 11,376 10,705
3/31/89 1095 11,343 12,196 11,238
3/31/90 1460 12,319 13,482 11,826
3/31/91 1825 13,315 14,726 12,405
3/31/92 2191 14,393 16,197 12,800
3/31/93 2556 16,044 18,225 13,195
3/31/94 2921 16,253 18,648 13,526
3/31/95 3286 17,206 20,034 13,912
3/31/96 3652 18,335 21,713 14,307
[legend]
(solid rule) MFS North Carolina Municipal Bond Fund (Class A)
(short dashed rule) Lehman Brothers Municipal Bond Index
(long dashed rule) Consumer Price Index
<TABLE>
<CAPTION>
Average Annual Total Returns 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------- -------- -------- -------- ----------
<S> <C> <C> <C> <C>
MFS North Carolina Municipal Bond Fund (Class A) including 4.75% sales
charge +1.49% +2.86% +5.57% +6.25%
- ------------------------------------------------------------------------- -------- -------- -------- ----------
MFS North Carolina Municipal Bond Fund (Class A) at net asset value +6.56% +4.55% +6.61% +6.77%
- ------------------------------------------------------------------------- -------- -------- -------- ----------
MFS North Carolina Municipal Bond Fund (Class B) with CDSC+ +1.70% -- -- +1.18%*
- ------------------------------------------------------------------------- -------- -------- -------- ----------
MFS North Carolina Municipal Bond Fund (Class B) without CDSC +5.70% -- -- +2.25%*
- ------------------------------------------------------------------------- -------- -------- -------- ----------
MFS North Carolina Municipal Bond Fund (Class C) +5.87% -- -- +2.35%#
- ------------------------------------------------------------------------- -------- -------- -------- ----------
Average North Carolina tax-exempt municipal bond fund** +6.71% +4.88% +7.06% +6.66%
- ------------------------------------------------------------------------- -------- -------- -------- ----------
Lehman Brothers Municipal Bond Index** +8.38% +6.01% +8.08% +8.06%
- ------------------------------------------------------------------------- -------- -------- -------- ----------
Consumer Price Index(S)** +2.84% +2.73% +2.89% +3.65%
- ------------------------------------------------------------------------- -------- -------- -------- ----------
</TABLE>
+These returns reflect the current Class B contingent deferred sales charge
(CDSC) of 4% for the 1-year period and 3% for the period commencing
September 7, 1993.
*For the period from the commencement of offering of Class B shares,
September 7, 1993 to March 31, 1996.
**Source: Lipper Analytical Services, Inc.
#For the period from the commencement of offering of Class C shares, January
3, 1994 to March 31, 1996. Class C shares have no initial sales charge or
CDSC but, along with Class B shares, have higher annual fees and expenses
than Class A shares. Class C share purchases made on or after April 1, 1996,
will be subject to a 1% CDSC if redeemed within 12 months of purchase.
(section) The Consumer Price Index is a popular measure of change in prices.
MFS SOUTH CAROLINA MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment (For the 10-Year Period Ended
March 31, 1996)
[mountain chart]
Days MFS South Carolina Lehman Brothers Consumer
Municipal Bond Fund-A Municipal Bond Index Price Index
4/1/86 0 9,525 10,000 10,000
3/31/87 365 10,577 11,097 10,304
3/31/88 731 10,849 11,376 10,705
3/31/89 1095 11,759 12,196 11,238
3/31/90 1460 12,819 13,482 11,826
3/31/91 1825 13,846 14,726 12,405
3/31/92 2191 15,112 16,197 12,800
3/31/93 2556 16,884 18,225 13,195
3/31/94 2921 17,148 18,648 13,526
3/31/95 3286 18,337 20,034 13,912
3/31/96 3652 19,473 21,713 14,307
[legend]
(solid rule) MFS South Carolina Municipal Bond Fund (Class A)
(short dashed rule) Lehman Brothers Municipal Bond Index
(long dashed rule) Consumer Price Index
<TABLE>
<CAPTION>
Average Annual Total Returns 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------- -------- -------- -------- ----------
<S> <C> <C> <C> <C>
MFS South Carolina Municipal Bond Fund (Class A) including 4.75% sales
charge +1.17% +3.18% +6.02% +6.89%
- ------------------------------------------------------------------------- -------- -------- -------- ----------
MFS South Carolina Municipal Bond Fund (Class A) at net asset value +6.20% +4.87% +7.06% +7.41%
- ------------------------------------------------------------------------- -------- -------- -------- ----------
MFS South Carolina Municipal Bond Fund (Class B) with CDSC+ +1.43% -- -- +1.50%*
- ------------------------------------------------------------------------- -------- -------- -------- ----------
MFS South Carolina Municipal Bond Fund (Class B) without CDSC +5.43% -- -- +2.57%*
- ------------------------------------------------------------------------- -------- -------- -------- ----------
Average South Carolina tax-exempt municipal bond fund** +7.42% +4.91% +7.36% +7.41%
- ------------------------------------------------------------------------- -------- -------- -------- ----------
Lehman Brothers Municipal Bond Index** +8.38% +6.01% +8.08% +8.06%
- ------------------------------------------------------------------------- -------- -------- -------- ----------
Consumer Price Index(S)** +2.84% +2.73% +2.89% +3.65%
- ------------------------------------------------------------------------- -------- -------- -------- ----------
</TABLE>
+These returns reflect the current Class B contingent deferred sales charge
(CDSC) of 4% for the 1-year period and 3% for the period commencing
September 7, 1993.
*For the period from the commencement of offering of Class B shares,
September 7, 1993 to March 31, 1996.
**Source: Lipper Analytical Services, Inc.
(S) The Consumer Price Index is a popular measure of change in prices.
5
<PAGE>
Performance - continued
MFS TENNESSEE MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment (For the period from September 1,
1988 to March 31, 1996)
[mountain chart]
Days MFS Tennessee Lehman Brothers Consumer
Municipal Bond Fund-A Municipal Bond Index Price Index
9/1/88 0 9,525 10,000 10,000
3/31/89 211 9,791 10,440 10,277
3/31/90 576 10,831 11,541 10,815
3/31/91 941 11,625 12,606 11,345
3/31/92 1307 12,727 13,865 11,706
3/31/93 1672 14,146 15,601 12,067
3/31/94 2037 14,498 15,963 12,370
3/31/95 2402 15,347 17,149 12,723
3/31/96 2768 16,368 18,587 13,084
[legend]
(solid rule) MFS Tennessee Municipal Bond Fund (Class A)
(short dashed rule) Lehman Brothers Municipal Bond Index
(long dashed rule) Consumer Price Index
<TABLE>
<CAPTION>
Average Annual Total Returns Life of
Class
through
1 Year 3 Years 5 Years 3/31/96
- ------------------------------------------------------------------------- -------- -------- -------- ----------
<S> <C> <C> <C> <C>
MFS Tennessee Municipal Bond Fund (Class A) including 4.75% sales charge +1.61% +3.28% +6.08% +6.66%*
- ------------------------------------------------------------------------- -------- -------- -------- ----------
MFS Tennessee Municipal Bond Fund (Class A) at net asset value +6.66% +4.98% +7.11% +7.34%*
- ------------------------------------------------------------------------- -------- -------- -------- ----------
MFS Tennessee Municipal Bond Fund (Class B) with CDSC+ +1.89% -- -- +1.81%++
- ------------------------------------------------------------------------- -------- -------- -------- ----------
MFS Tennessee Municipal Bond Fund (Class B) without CDSC +5.89% -- -- +2.89%++
- ------------------------------------------------------------------------- -------- -------- -------- ----------
Average Tennessee tax-exempt municipal bond fund +6.93% +4.51% +7.21% +7.67%**
- ------------------------------------------------------------------------- -------- -------- -------- ----------
Lehman Brothers Municipal Bond Index +8.38% +6.01% +8.08% +8.52%**
- ------------------------------------------------------------------------- -------- -------- -------- ----------
Consumer Price Index(S) +2.84% +2.73% +2.89% +3.65%**
- ------------------------------------------------------------------------- -------- -------- -------- ----------
</TABLE>
*For the period from the commencement of offering of Class A shares, August
12, 1988 to March 31, 1996.
+These returns reflect the current Class B contingent deferred sales charge
(CDSC) of 4% for the 1-year period and 3% for the period commencing
September 7, 1993.
++For the period from the commencement of offering of Class B shares,
September 7, 1993 to March 31, 1996.
**Benchmark comparisons begin on September 1, 1988. Source: Lipper Analytical
Services, Inc.
(S) The Consumer Price Index is a popular measure of change in prices.
MFS VIRGINIA MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment (For the 10-Year Period Ended
March 31, 1996)
[mountain chart]
Days MFS Virginia Lehman Brothers Consumer
Municipal Bond Fund-A Municipal Bond Index Price Index
4/1/86 0 9,525 10,000 10,000
3/31/87 365 10,509 11,097 10,304
3/31/88 731 10,568 11,376 10,705
3/31/89 1095 11,575 12,196 11,238
3/31/90 1460 12,625 13,482 11,826
3/31/91 1825 13,687 14,726 12,405
3/31/92 2191 14,901 16,197 12,800
3/31/93 2556 16,590 18,225 13,195
3/31/94 2921 16,754 18,648 13,526
3/31/95 3286 17,703 20,034 13,912
3/31/96 3652 18,858 21,713 14,307
[legend]
(solid rule) MFS Virginia Municipal Bond Fund (Class A)
(short dashed rule) Lehman Brothers Municipal Bond Index
(long dashed rule) Consumer Price Index
<TABLE>
<CAPTION>
Average Annual Total Returns 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------- -------- -------- -------- ----------
<S> <C> <C> <C> <C>
MFS Virginia Municipal Bond Fund (Class A) including 4.75% sales charge +1.49% +2.69% +5.59% +6.55%
- ------------------------------------------------------------------------- -------- -------- -------- ----------
MFS Virginia Municipal Bond Fund (Class A) at net asset value +6.52% +4.36% +6.62% +7.07%
- ------------------------------------------------------------------------- -------- -------- -------- ----------
MFS Virginia Municipal Bond Fund (Class B) with CDSC+ +1.85% -- -- +1.02%*
- ------------------------------------------------------------------------- -------- -------- -------- ----------
MFS Virginia Municipal Bond Fund (Class B) without CDSC +5.85% -- -- +2.07%*
- ------------------------------------------------------------------------- -------- -------- -------- ----------
MFS Virginia Municipal Bond Fund (Class C) +6.02% -- -- +2.09%#
- ------------------------------------------------------------------------- -------- -------- -------- ----------
Average Virginia tax-exempt municipal bond fund** +7.43% +5.16% +7.37% +7.33%
- ------------------------------------------------------------------------- -------- -------- -------- ----------
Lehman Brothers Municipal Bond Index** +8.38% +6.01% +8.08% +8.06%
- ------------------------------------------------------------------------- -------- -------- -------- ----------
Consumer Price Index(S)** +2.84% +2.73% +2.89% +3.65%
- ------------------------------------------------------------------------- -------- -------- -------- ----------
</TABLE>
+These returns reflect the current Class B contingent deferred sales charge
(CDSC) of 4% for the 1-year period and 3% for the period commencing
September 7, 1993.
*For the period from the commencement of offering of Class B shares,
September 7, 1993 to March 31, 1996.
**Source: Lipper Analytical Services, Inc.
#For the period from the commencement of offering of Class C shares, January
3, 1994 to March 31, 1996. Class C shares have no initial sales charge or
CDSC but, along with Class B shares, have higher annual fees and expenses
than Class A shares. Class C share purchases made on or after April 1, 1996,
will be subject to a 1% CDSC if redeemed within 12 months of purchase.
(S) The Consumer Price Index is a popular measure of change in prices.
6
<PAGE>
Performance - continued
MFS WEST VIRGINIA MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment (For the 10-Year Period Ended
March 31, 1996)
[mountain chart]
Days MFS West Virginia Lehman Brothers Consumer
Municipal Bond Fund-A Municipal Bond Index Price Index
4/1/86 0 9,525 10,000 10,000
3/31/87 365 10,562 11,097 10,304
3/31/88 731 10,662 11,376 10,705
3/31/89 1095 11,603 12,196 11,238
3/31/90 1460 12,620 13,482 11,826
3/31/91 1825 13,678 14,726 12,405
3/31/92 2191 14,979 16,197 12,800
3/31/93 2556 16,702 18,225 13,195
3/31/94 2921 17,071 18,648 13,526
3/31/95 3286 18,107 20,034 13,912
3/31/96 3652 19,298 21,713 14,307
[legend]
(solid rule) MFS West Virginia Municipal Bond Fund (Class A)
(short dashed rule) Lehman Brothers Municipal Bond Index
(long dashed rule) Consumer Price Index
<TABLE>
<CAPTION>
Average Annual Total Returns 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------- -------- -------- -------- ----------
<S> <C> <C> <C> <C>
MFS West Virginia Municipal Bond Fund (Class A) including 4.75% sales
charge +1.51% +3.25% +6.09% +6.79%
- ------------------------------------------------------------------------- -------- -------- -------- ----------
MFS West Virginia Municipal Bond Fund (Class A) at net asset value +6.58% +4.93% +7.13% +7.32%
- ------------------------------------------------------------------------- -------- -------- -------- ----------
MFS West Virginia Municipal Bond Fund (Class B) with CDSC+ +1.81% -- -- +1.44%*
- ------------------------------------------------------------------------- -------- -------- -------- ----------
MFS West Virginia Municipal Bond Fund (Class B) without CDSC +5.81% -- -- +2.50%*
- ------------------------------------------------------------------------- -------- -------- -------- ----------
Average other state tax-exempt municipal bond fund** +6.99% +5.40% +6.79% +7.26%
- ------------------------------------------------------------------------- -------- -------- -------- ----------
Lehman Brothers Municipal Bond Index** +8.38% +6.01% +8.08% +8.06%
- ------------------------------------------------------------------------- -------- -------- -------- ----------
Consumer Price Index(S)** +2.84% +2.73% +2.89% +3.65%
- ------------------------------------------------------------------------- -------- -------- -------- ----------
</TABLE>
+These returns reflect the current Class B contingent deferred sales charge
(CDSC) of 4% for the 1-year period and 3% for the period commencing
September 7, 1993.
*For the period from the commencement of offering of Class B shares,
September 7, 1993 to March 31, 1996.
**Source: Lipper Analytical Services, Inc.
(S) The Consumer Price Index is a popular measure of change in prices.
Federal Income Tax Information on Distributions (For the 10-Year Period Ended
March 31, 1996)
The Maryland Municipal Bond Fund has designated $154,720 as a long-term
capital gain distribution for tax purposes.
Tax Form Summary
In January 1996, shareholders were mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1995.
Exempt-Interest Dividends
For federal income tax purposes, approximately 99% of the total dividends
paid by each Fund from net investment income during the year ended March 31,
1996 is designated as an exempt-interest dividend.
7
<PAGE>
Portfolio of Investments - March 31, 1996
MFS MARYLAND MUNICIPAL BOND FUND
Municipal Bonds - 97.5%
<TABLE>
<CAPTION>
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ---------------------------------------------------- ---------------- -----------------
<S> <C> <C> <C>
General Obligation - 13.7%
AA+ Anne Arundel County, MD, 4.9s, 2011 $1,005 $ 940,840
AAA Baltimore, MD, Consolidated Public Improvement,
FGIC, 5.3s, 2009 700 693,560
AAA Baltimore, MD, Consolidated Public Improvement,
MBIA, 7s, 2009 1,000 1,163,370
A Baltimore, MD, Consolidated Public Improvement,
7.15s, 2009 2,000 2,336,380
AAA Balitmore, MD, Consolidated Public Improvement,
FGIC, 5.3s, 2010 815 803,191
AAA Baltimore, MD, Consolidated Public Improvement,
FGIC, 5.375s, 2011 900 884,232
AAA Baltimore, MD, Consolidated Public Improvement,
FGIC, 5.375s, 2013 770 746,353
AA+ Howard County, MD, Metropolitan District, 0s, 2008 1,975 1,019,377
AAA Montgomery County, MD, Public Improvement, 0s, 2009 4,000 1,959,840
AA- Prince George's County, MD, 0s, 2007 5,110 2,840,649
AAA Prince George's County, MD,Public Improvement,
AMBAC, 5.5s, 2013 2,000 1,966,760
AAA Puerto Rico Commonwealth, MBIA, 5.375s, 2022 2,000 1,893,820
AAA State of Maryland, 9s, 1999 350 402,252
AA Washington Suburban Sanitation District, 6.1s, 2015 1,070 1,105,931
AA Washington Suburban Sanitation District, 5.25s, 2016 2,400 2,254,368
---------------
$21,010,923
- ---------- ---------------------------------------------------- -------------- ---------------
State and Local Appropriation - 14.3%
NR Calvert County, MD, Community Lease Rev., 7.2s, 2010 $ 750 $ 822,300
AA+ Howard County, MD, Certificates of Participation,
8.15s, 2021 450 592,236
AA+ Howard County, MD, Certificates of Participation,
"A", 8s, 2019 805 1,037,862
AA+ Howard County, MD, Certificates of Participation,
"B", 8s, 2019### 385 496,369
AA+ Howard County, MD, Certificates of Participation,
"C", 8s, 2019 680 876,704
AAA Maryland Stadium Authority, Sports Facilities
Leasing Rev., AMBAC,
5.875s, 2012 1,000 1,015,280
AA- Maryland Stadium Authority, Sports Facilities
Leasing Rev., 7.6s, 2019 2,580 2,831,111
AAA Prince George's County, MD, Certificates of
Participation, MBIA, 0s, 2005 2,495 1,556,381
AAA Prince George's County, MD, Certificates of
Participation, MBIA, 0s, 2006 2,490 1,468,726
AAA Prince George's County, MD, Certificates of
Participation, MBIA, 0s, 2011 3,675 1,558,090
AAA Prince George's County, MD, Industrial
Development Authority, MBIA, 0s, 2004 980 648,476
AAA Prince George's County, MD, Industrial
Development Authority, MBIA, 0s, 2006 1,800 1,061,730
AAA Prince George's County, MD, Industrial
Development Authority, MBIA, 0s, 2009 1,500 730,320
AAA Prince George's County, MD, Industrial
Development Authority, MBIA, 0s, 2010 2,730 1,250,204
AAA Prince George's County, MD, Industrial
Development Authority, MBIA, 0s, 2011 2,810 1,200,235
AAA Prince George's County, MD, Industrial
Development Authority, MBIA, 0s, 2012 2,480 975,186
State and Local Appropriation - continued
AAA Prince George's County, MD, Industrial
Development Authority, MBIA, 5.25s, 2019 $1,000 $ 919,310
A Puerto Rico Public Buildings Authority, Education &
Health, 6.285s, 2016 3,000 2,788,260
---------------
$21,828,780
- ---------- ---------------------------------------------------- -------------- ---------------
Refunded and Special Obligation - 12.0%
AAA Baltimore, MD, Water Utility Rev., MBIA, 6.5s, 2000 $ 540 $ 581,256
AAA Commonwealth of Puerto Rico, Public Improvement,
6.8s, 2002 1,500 1,698,510
AAA Howard County, MD, Metropolitan District, 7.15s,
2000 500 553,415
AAA Maryland Health & Higher Education Facilities
Authority Rev. (Sinai Hospital/ Baltimore), 7s,
2000 2,000 2,224,160
AAA Maryland Health & Higher Education Facilities
Authority Rev. (University of
Maryland Medical System), FGIC, 6.5s, 2001 1,000 1,087,550
AAA Maryland Health & Higher Education Facilities
Authority Rev. (University of
Maryland Medical System), FGIC, 7s, 2001 1,840 2,072,502
AAA Montomery County, MD, Rev. Authority, Lease Rev.
(Regional Indoor Swim Center Project), 7.6s 1998 750 810,330
AAA Morgan State University, MD, Academic & Auxiliary
Facilities & Fees Rev., MBIA, 0s, 2006 1,135 672,737
AAA Morgan State University, MD, Academic & Auxiliary
Facilities & Fees Rev., MBIA, 0s, 2008 1,400 740,488
NR Prince George's County, MD, Hospital
Rev. (Dimensions Health Corp.), 7.25s, 2002 2,000 2,302,940
AAA Puerto Rico Aqueduct & Sewer Authority, 10.25s, 2009 500 688,760
AAA Puerto Rico Electric Power Authority Rev., 8s, 1998 500 551,055
A- Puerto Rico Electric Power Authority Rev., 7s, 2001 1,000 1,133,890
AAA St. Mary's County, MD, 7.75s, 1996 2,050 2,135,608
AA Washington Suburban Sanitation District, MD, 6.9s,
2001 1,045 1,170,745
---------------
$18,423,946
- ---------- ---------------------------------------------------- -------------- ---------------
Solid Waste Revenue - 8.4%
NR Maryland Energy Financing Administration (Solid
Waste), 9s, 2016 $1,000 $ 1,012,360
AAA Northeast Maryland, Waste Disposal Authority
(Harford County Resource Recovery), MBIA, 7.2s,
2005 1,000 1,143,900
NR Northeast Maryland, Waste Disposal
Authority (Montgomery County), 6s, 2006 1,000 1,053,000
NR Northeast Maryland, Waste Disposal
Authority (Montgomery County), 6.3s, 2016 5,400 5,423,382
AAA Prince George's County, MD, FSA, 5.25s, 2013 4,500 4,202,595
---------------
$12,835,237
- ---------- ---------------------------------------------------- -------------- ---------------
Single Family Housing Revenue - 7.2%
NR Maryland Community Development Administration,
7.75s, 2009 $1,500 $ 1,552,845
NR Maryland Community Development Administration, 7.7s,
2015 655 688,215
8
<PAGE>
Portfolio of Investments -- continued
Municipal Bonds -- continued
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ---------------------------------------------------- ---------------- -----------------
Single Family Housing Revenue - continued
NR Maryland Community Development Administration,
8.25s, 2017 $ 1,300 $ 1,356,355
NR Maryland Community Development Administration,
7.625s, 2020 2,400 2,491,008
NR Maryland Community Development Administration,
8.25s, 2020 500 523,485
NR Maryland Community Development Administration,
6.75s, 2026 2,250 2,303,505
NR Maryland Community Development Administration,
7.625s, 2029 940 973,633
NR Maryland Community Development Administration,
7.85s, 2029 640 673,875
NR Montgomery County, MD, Housing Opportunities
Commission, 7.5s, 2017 365 382,713
---------------
$10,945,634
- ---------- ---------------------------------------------------- -------------- ---------------
Multi-Family Housing Revenue - 5.0%
BBB Baltimore, MD, City Housing Corp. Rev., 7.75s, 2009 $ 1,025 $ 1,045,162
AAA Baltimore, MD, City Housing Corp. Rev., 7.25s, 2023 1,235 1,281,769
NR Maryland Community Development Administration,
7.375s, 2021 330 341,395
NR Maryland Community Development Administration, 8.4s,
2029 1,320 1,365,528
NR Maryland Community Development Administration, 7.5s,
2031 65 67,222
NR Maryland Community Development Administration, 0s,
2032 11,605 698,272
NR Maryland Community Development Administration, 7.8s,
2032 1,190 1,248,048
AA Montgomery County, MD, Housing Opportunities
Commission, 6s, 2020 500 491,780
NR Montgomery County, MD, Housing
Opportunities Commission, 7.375s, 2032 1,045 1,076,151
---------------
$ 7,615,327
- ---------- ---------------------------------------------------- -------------- ---------------
Insured Health Care Revenue - 6.5%
AAA Maryland Health & Higher Education Facilities
Authority Rev. (Francis Scott Key Medical Center),
FGIC, 5s, 2013 $ 1,000 $ 921,190
AAA Maryland Health & Higher Education Facilities
Authority Rev. (Frederick Memorial Hospital),
FGIC, 5.25s, 2013 2,250 2,160,203
AAA Maryland Health & Higher Education Facilities
Authority Rev. (Mercy Medical Center), AMBAC,
5.5s, 2022 1,000 939,260
AAA Maryland Health & Higher Educational Facilities
Authority Rev. (University of Maryland), FGIC,
5.375s, 2013 1,000 948,330
AAA Maryland Health & Higher Educational Facilities
Authority Rev. (University of Maryland), FGIC, 5s,
2020 2,000 1,787,920
AAA Maryland Industrial Development Finance Authority,
Economic Development Rev., FSA, 7.62s, 2022++++ 1,500 1,515,000
AAA Maryland Industrial Development Finance Authority,
Economic Development Rev. (Bon Secours), FSA,
5.5s, 2024 1,700 1,629,620
---------------
$ 9,901,523
- ---------- ---------------------------------------------------- -------------- ---------------
Health Care Revenue - 12.5%
NR Berlin, MD, Hospital Rev. (Atlantic General
Hospital), 8.375s, 2022 $ 1,375 $ 1,456,689
Health Care Revenue - continued
BBB- Maryland Health & Higher Education Facilities
Authority Rev. (Doctors Community Hopital), 5.5s,
2024 $ 2,000 $ 1,668,080
NR Maryland Health & Higher Education Facilities
Authority Rev. (Francis Scott Key), 5.625s, 2025 1,500 1,418,970
AA- Maryland Health & Higher Education Facilities
Authority Rev. (Johns Hopkins Hospital), 0s, 2010 2,000 891,900
AA- Maryland Health & Higher Education Facilities
Authority Rev. (Johns Hopkins Hospital), 5s, 2023 1,500 1,321,605
NR Maryland Health & Higher Education Facilities
Authority Rev. (Medlantic Hospital Care Corp.),
8.375s, 2014 3,635 3,825,656
A Maryland Health & Higher Education Facilities
Authority Rev. (Peninsula Regional Medical), 5s,
2023 1,000 850,980
AA- Maryland Industrial Development Finance Authority,
Economic Development Rev.
(Holy Cross Health Systems Corp.), 5.5s, 2015 1,000 936,840
A Maryland Health & Higher Education Facilities
Authority Rev. (Good Samaritan Hospital), 5.75s,
2019 1,000 974,840
NR Prince George's County, MD, Hospital
Rev. (Dimensions Health Corp.), 5.3s, 2024 3,500 3,103,100
NR Prince George's County, MD, Hospital Rev. (Southeast
Healthcare System), 6.375s, 2023 2,900 2,642,045
---------------
$19,090,705
- ---------- ---------------------------------------------------- -------------- ---------------
Water and Sewer Utility Revenue - 3.8%
AAA Baltimore, MD, Wastewater Revenue, MBIA, 6s, 2015 $ 1,000 $ 1,048,980
AAA Baltimore, MD, Wastewater Revenue, MBIA, 5.65s,
2020++++ 2,000 1,953,540
AAA Baltimore, MD, Wastewater Revenue, MBIA, 7.21s,
2020++++ 3,000 2,850,000
---------------
$ 5,852,520
- ---------- ---------------------------------------------------- -------------- ---------------
Sales and Excise Tax Revenue - 0.6%
A Puerto Rico Highway & Transportation Authority Rev.,
5.5s, 2019 $ 1,000 $ 934,020
- ---------- ---------------------------------------------------- -------------- ---------------
Industrial Revenue (Corporate Guarantee) - 3.6%
NR Baltimore, MD, Industrial Rev. Board (Weyerhaeuser
Co.), 9s, 2006 $ 3,150 $ 3,251,934
AA Baltimore, MD, Port Facilities Rev. (E.I. du Pont de
Nemours & Co.), 6.5s, 2011 1,500 1,609,260
A Upper Potomac River Commission, MD, Pollution
Control Rev. (Westvaco Corp.), 10.5s, 2004 150 157,057
A Upper Potomac River Commission, MD, Pollution
Control Rev. (Westvaco Corp.), 9.125s, 2015 500 520,100
---------------
$ 5,538,351
- ---------- ---------------------------------------------------- -------------- ---------------
Universities - 1.9%
NR Maryland Health & Higher Education Facilities
Authority Rev. (Mt. St. Mary's College), 6.5s,
2009 $ 755 $ 672,012
AAA Morgan State University, MD, Academic & Auxiliary
Facilities, MBIA, 6.05s, 2015 1,500 1,584,105
9
<PAGE>
Portfolio of Investments -- continued
Municipal Bonds -- continued
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ---------------------------------------------------- ---------------- -----------------
Universities - continued
AA+ University of Maryland, Auxiliary Facilities &
Tuition Rev., 0s, 2004 $1,000 $ 656,670
---------------
$ 2,912,787
- ---------- ---------------------------------------------------- -------------- ---------------
Other - 8.0%
NR Baltimore County, MD, 5.375s, 2013 $1,600 $ 1,525,696
BBB Maryland Health & Higher Education Facilities
Authority Rev. (Kennedy Institute), 6.75s, 2022 500 502,180
BBB Maryland Industrial Development Finance Authority
(American Center for Physics), 6.625s, 2017 1,500 1,525,425
NR Maryland Industrial Development Finance Authority
(YMCA/Baltimore), 8s, 2012 2,825 2,918,310
NR Maryland Industrial Development Finance
Authority (YMCA/Baltimore), 8.25s, 2012 925 960,566
AAA Washington D.C., Metropolitan Area Transportation
Authority, Gross Rev., FGIC, 5.125s, 2009 1,100 1,065,988
AAA Washington D.C., Metropolitan Area Transportation
Authority, Gross Rev., FGIC, 5.25s, 2014 4,000 3,796,440
---------------
$ 12,294,605
- ---------- ---------------------------------------------------- -------------- ---------------
Total Municipal Bonds (Identified Cost, $141,631,650) $149,184,358
------------------------------------------------------------------------------------- -----------------
Floating Rate Demand Notes - 1.2%
Lincoln County, WY, Pollution Control Rev. (Exxon),
due 2014 $ 200 $ 200,000
Uinta County, WY, Pollution Control Rev. (Chevron
Corp.), due 2020 1,600 1,600,000
- ---------- ---------------------------------------------------- -------------- ---------------
Total Floating Rate Demand Notes, at Identified Cost $ 1,800,000
------------------------------------------------------------------------------------- -----------------
Total Investments (Identified Cost, $143,431,650) $150,984,358
Other Assets, Less Liabilities - 1.3% 2,006,238
Net Assets - 100.0% $152,990,596
------------------------------------------------------------------------------------- -----------------
</TABLE>
(section) Indexed security.
++++Inverse floating rate security.
###Security segregated as collateral for an open futures contract.
See notes to financial statements
Portfolio of Investments - March 31, 1996
MFS NORTH CAROLINA MUNICIPAL BOND FUND
Municipal Bonds - 98.1%
<TABLE>
<CAPTION>
S&P Bond
Rating Principal Amount
(Unaudited)Issuer (000 Omitted) Value
----------------------------------------------------------------- ---------------- -----------------
<S> <C> <C> <C>
General Obligation - 3.4%
AAA Charlotte, NC, Water & Sewer, 5.8s, 2013### $1,780 $ 1,843,813
AAA Charlotte, NC, Water & Sewer, 5.8s, 2014 5,050 5,198,268
AAA Charlotte, NC, Water & Sewer, 5.9s, 2019 2,820 2,893,235
AAA Durham, NC, 5.9s, 2013### 2,400 2,500,248
AAA Durham, NC, 5.9s, 2014 2,400 2,491,656
BBB+ Hertford County, NC, 9.5s, 2000 100 102,492
BBB+ Hertford County, NC, 9.5s, 2001 100 103,991
BBB+ Hertford County, NC, 9.5s, 2002 100 102,492
---------------
$15,236,195
- ---------- ---------------------------------------------------- -------------- ---------------
State and Local Appropriation - 12.3%
AAA Charlotte, NC, Certificates of Participation
(Convention Facilities Project), AMBAC, 0s, 2004 $3,435 $ 2,208,945
State and Local Appropriation - continued
AAA Charlotte, NC, Certificates of Participation
(Convention Facilities Project), AMBAC, 0s, 2005 $4,810 $ 2,912,166
AAA Charlotte, NC, Certificates of Participation
(Convention Facilities Project), AMBAC, 0s, 2006 1,075 611,578
AAA Charlotte, NC, Certificates of Participation
(Convention Facilities Project), AMBAC, 0s, 2008 3,000 1,494,420
AAA Charlotte, NC, Certificates of Participation
(Convention Facilities Project), AMBAC, 5.25s,
2013 3,750 3,550,650
AAA Charlotte, NC, Certificates of Participation
(Convention Facilities Project), AMBAC, 5.25s,
2020 2,600 2,403,752
AAA Charlotte, NC, Certificates of Participation
(Convention Facilities Project), AMBAC, 5s, 2021 3,500 3,115,350
AAA Cumberland County, NC, Certificates of Participation
(Civic Center), AMBAC, 6.375s, 2010 1,100 1,164,449
AAA Cumberland County, NC, Certificates of Participation
(Civic Center), AMBAC, 0s, 2011 425 172,261
AAA Cumberland County, NC, Certificates of Participation
(Civic Center), AMBAC, 0s, 2013 1,000 358,700
AAA Dare County, NC, MBIA, 6.6s, 2006 2,100 2,267,181
AA Durham, NC, Certificates of Participation
(Hospital & Office Facilities), 5.875s, 2009 1,460 1,517,699
AA Durham, NC, Certificates of Participation (New
Durham Corp.), 6.875s, 2009 1,750 1,919,663
AAA Franklin County, NC, Certificates of Participation
(Jail & School), FGIC, 6.625s, 2014 2,000 2,127,380
AA Greensboro, NC, Certificates of Participation
(Coliseum Arena Project), 6.25s, 2011 2,180 2,330,180
AAA Harnett County, NC, Certificates of Participation,
AMBAC, 6.2s, 2006 1,000 1,075,470
AAA Harnett County, NC, Certificates of Participation,
AMBAC, 6.2s, 2009 2,500 2,605,625
AAA Pasquotank County, NC, Certificates of
Participation, MBIA, 5s, 2015 3,000 2,730,270
BBB Puerto Rico Housing, Bank & Finance Agency, 7.5s,
2006 7,000 7,694,540
A Puerto Rico Public Buildings Authority, 5.5s, 2007 2,550 2,561,449
A Puerto Rico Public Buildings Authority, Education &
Health, 6.285s, 2016 6,500 6,041,230
AAA Randolph County, NC, Certificates of Participation,
MBIA, 5.3s, 2015 2,750 2,585,495
AAA Scotland County, NC, Certificates of Participation
(Jail/Courthouse Project), CGIC, 6.75s, 2011 1,000 1,066,720
AAA Union County, NC, Certificates of Participation,
FSA, 6.375s, 2012 1,000 1,052,920
---------------
$55,568,093
- ---------- ---------------------------------------------------- -------------- ---------------
Refunded and Special Obligation - 13.1%
NR Chapel Hill, NC, Parking Facilities Rev. (Rosemary
Street Project), 8.125s, 2000 $1,670 $ 1,941,292
NR Chapel Hill, NC, Parking Facilities Rev. (Rosemary
Street Project), 8.25s, 2000 3,305 3,859,050
10
<PAGE>
Portfolio of Investments -- continued
Municipal Bonds -- continued
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ---------------------------------------------------- ---------------- -----------------
Refunded and Special Obligation - continued
AAA Charlotte, NC, Certificates of Participation
(Convention Facilities Project), AMBAC, 6.75s,
2021 $ 4,250 $ 4,766,205
AAA Craven, NC, Regional Medical Authority, MBIA, 7.2s,
2000 1,500 1,687,695
AAA Dare County, NC, School Bonds, MBIA, 6.9s, 2000 800 881,552
AAA Dare County, NC, School Bonds, MBIA, 6.9s, 2000 800 881,552
AAA Dare County, NC, School Bonds, MBIA, 6.9s, 2000 500 550,970
AAA Fayetteville, NC, Public Works Rev., FGIC, 7s, 2000 2,000 2,210,980
AAA Greensboro, NC, 6.3s, 2011 4,165 4,568,547
BBB+ North Carolina Eastern Municipal Power Agency,
7.75s, 1999 2,900 3,211,692
BBB+ North Carolina Eastern Municipal Power Agency, 7.5s,
2010 2,595 3,109,770
A- North Carolina Eastern Municipal Power Agency, 5s,
2017 8,165 7,604,799
A+ North Carolina Medical Care Commission, Hospital
Rev. (Carolina Medicorp), 7.25s, 2019 1,400 1,534,946
A+ North Carolina Medical Care Commission, Hospital
Rev. (Gaston Health Care), 0s, 2007 500 246,220
NR North Carolina Medical Care Commission, Hospital
Rev. (Presbyterian Health), 7.3s, 2000 1,000 1,129,160
NR North Carolina Medical Care Commission, Hospital
Rev. (Presbyterian Health), 7.375s, 2000 12,315 13,942,797
AAA North Carolina Municipal Power Agency, No. 1 Catawba
Electric Rev., AMBAC, 7.625s, 1998 820 884,108
NR Pender County, NC, Certificates of Participation
(Pender County Prison), 7.6s, 2001 1,900 2,184,354
NR Pender County, NC, Certificates of Participation
(Pender County Prison), 7.7s, 2001 1,000 1,154,200
AAA Pitt County, NC, Hospital Rev. (Pitt Memorial
Hospital), 6.75s, 2001 2,800 3,147,564
---------------
$59,497,453
- ---------- ---------------------------------------------------- -------------- ---------------
Solid Waste Revenue - 0.3%
NR Iredell, NC, Solid Waste Systems Rev., 6.25s, 2012 $ 1,250 $ 1,278,013
- ---------- ---------------------------------------------------- -------------- ---------------
Single Family Housing Revenue - 4.3%
A+ North Carolina Housing Finance Agency, 6.7s, 2018 $ 1,800 $ 1,865,610
A+ North Carolina Housing Finance Agency, 8.125s, 2019 2,070 2,139,428
A+ North Carolina Housing Finance Agency, 7.7s, 2021 2,525 2,593,983
A+ North Carolina Housing Finance Agency, 7.8s, 2021 2,585 2,667,875
A+ North Carolina Housing Finance Agency, 7.85s, 2028 6,505 6,755,182
A+ North Carolina Housing Finance Agency, 7.6s, 2032 3,215 3,328,554
---------------
$19,350,632
- ---------- ---------------------------------------------------- -------------- ---------------
Multi-Family Housing Revenue - 4.2%
A Asheville, NC, Housing Authority
(Asheville Terrace Apartments), 7.1s, 2011 $ 5,000 $ 5,211,600
NR Charlotte, NC, Housing Authority (Merrywood Senior
Adult Project), 9.75s, 2019 6,710 6,575,800
AA North Carolina Housing Finance Agency, 6.9s, 2024 4,880 5,101,064
NR Salisbury, NC, Housing Corp., (Yadkin Senior
Citizens), 6.75s, 2022 2,140 2,162,898
---------------
$19,051,362
- ---------- ---------------------------------------------------- -------------- ---------------
Insured Health Care Revenue - 4.2%
AAA Cumberland County, NC, Hospital Facilities Rev.
(Cumberland County Hospital), MBIA, 0s, 2009 $ 1,800 $ 836,460
AAA Cumberland County, NC, Hospital Facilities Rev.
(Cumberland County Hospital), MBIA, 6s, 2021 4,000 4,069,760
AAA North Carolina Medical Care Commission, Hospital
Rev. (Moore Regional), FGIC, 5.2s, 2013 6,750 6,278,985
AAA North Carolina Medical Care Commission, Hospital
Rev. (Moore Regional), FGIC, 5s, 2018 4,800 4,309,296
AAA Wake County, NC, Hospital Rev., MBIA, 5.125s, 2013 4,000 3,729,800
---------------
$19,224,301
- ---------- ---------------------------------------------------- -------------- ---------------
Health Care Revenue - 20.1%
A+ North Carolina Medical Care Commission, Hospital
Rev. (Carolina Medicorp), 5.5s, 2015 $ 2,250 $ 2,120,580
AA North Carolina Medical Care Commission, Hospital
Rev. (Carolina Medicorp), 6s, 2021 19,000 18,984,230
A+ North Carolina Medical Care Commission, Hospital
Rev. (Gaston Health Care), 5.5s, 2019 5,500 5,120,170
NR North Carolina Medical Care Commission, Hospital
Rev. (Halifax Memorial), 6.75s, 2014 1,355 1,371,314
NR North Carolina Medical Care Commission, Hospital
Rev. (Halifax Memorial), 6.75s, 2024 4,500 4,536,855
A North Carolina Medical Care Commission, Hospital
Rev. (Mercy Hospital), 6.5s, 2015 1,650 1,654,092
A North Carolina Medical Care Commission, Hospital
Rev. (Moore Memorial Hospital), 9.1s, 1999 800 829,288
AA North Carolina Medical Care Commission, Hospital
Rev. (Presbyterian Hospital), 5.5s, 2014 9,750 9,332,408
A+ North Carolina Medical Care Commission, Hospital
Rev. (Rex Hospital), 6.25s, 2017 5,750 5,888,173
NR North Carolina Medical Care Commission, Hospital
Rev. (Valdese General), 8.75s, 2016 5,575 5,960,121
BBB Northern Hospital District, Surry County,
NC, Health Care Facilities Rev., 7.875s, 2021 4,530 4,664,315
AA- Pitt County, NC, Rev. (Memorial Hospital), 5.25s,
2021## 20,000 18,289,800
AA University of North Carolina, Chapel
Hill, University Hospital Rev., 5.25s, 2019 3,000 2,795,520
11
<PAGE>
Portfolio of Investments -- continued
Municipal Bonds -- continued
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ---------------------------------------------------- ---------------- -----------------
Health Care Revenue - continued
AA University of North Carolina, Chapel
Hill, University Hospital Rev., 5.25s, 2026 $10,500 $ 9,629,970
---------------
$ 91,176,836
- ---------- ---------------------------------------------------- -------------- ---------------
Electric and Gas Utility Revenue - 15.3%
A New Hanover County, NC, Industrial Facilities Rev.
(Carolina Power & Light Co.), 6.9s, 2009 $ 1,000 $ 1,062,730
BBB+ North Carolina Eastern Municipal Power Agency, 7s,
2007 5,000 5,434,500
BBB+ North Carolina Eastern Municipal Power Agency,
7.25s, 2007 5,000 5,533,000
BBB+ North Carolina Eastern Municipal Power Agency, 7.5s,
2010 3,005 3,424,799
AAA North Carolina Eastern Municipal Power Agency,
AMBAC, 6s, 2018 14,245 14,628,618
AAA North Carolina Eastern Municipal Power Agency, FSA,
5.75s, 2019 2,500 2,428,650
AAA North Carolina Municipal Power Agency,
No. 1, Catawba Electric Rev., MBIA, 0s, 2008 10,150 5,287,135
AAA North Carolina Municipal Power Agency,
No. 1, Catawba Electric Rev., MBIA, 0s, 2009 10,000 4,885,300
AAA North Carolina Municipal Power Agency, No. 1,
Catawba Electric Rev., MBIA, 6s, 2011 5,000 5,248,700
AAA North Carolina Municipal Power Agency, No. 1,
Catawba Electric Rev., MBIA, 6.72s, 2012++++ 3,000 2,787,000
AAA North Carolina Municipal Power Agency, No. 1,
Catawba Electric Rev., AMBAC, 7.625s, 2014 180 190,427
AAA North Carolina Municipal Power Agency,
No. 1, Catawba Electric Rev., FSA, 6.2s, 2018 4,300 4,390,085
AAA North Carolina Municipal Power Agency, No. 1,
Catawba Electric Rev., AMBAC, 5.375s, 2020 7,000 6,549,690
AAA Puerto Rico Electric Power Authority Rev., FSA, 6s,
2016 5,000 5,073,500
A Wake County, NC, Industrial Facilities
Rev. (Carolina Power & Light), 6.9s, 2009 2,000 2,125,460
---------------
$ 69,049,594
- ---------- ---------------------------------------------------- -------------- ---------------
Water and Sewer Utility Revenue - 3.2%
AAA Concord, NC, Utilities System Revenue, MBIA, 5.5s,
2019 $ 3,000 $ 2,884,650
AAA Kanapolis, NC, Certificates of Participation, MBIA,
7.375s, 2010 5,000 5,380,550
AA+ Winston-Salem, NC, Water & Sewer Systems Rev.,
6.25s, 2012 4,000 4,155,400
AA+ Winston-Salem, NC, Water & Sewer Systems Rev., 5.7s,
2017 2,250 2,216,947
---------------
$ 14,637,547
- ---------- ---------------------------------------------------- -------------- ---------------
Sales and Excise Tax Revenue - 1.1%
A Puerto Rico Highway & Transportation Authority Rev.,
6.625s, 2018 $ 2,715 $ 2,990,763
A Puerto Rico Highway & Transportation Authority Rev.,
5s, 2036 2,000 1,671,300
---------------
$ 4,662,063
- ---------- ---------------------------------------------------- -------------- ---------------
Industrial Revenue (Corporate Guarantee) - 10.7%
NR Alamance County, NC, Industrial Facilities &
Pollution Control Finance
Authority (A.O. Smith Corp.), 7.375s, 2009 $ 1,000 $ 1,000,990
NR Chatham County, NC, Industrial Facilities &
Pollution Control, 9s, 2006 1,260 1,300,774
Industrial Revenue (Corporate Guarantee) - continued
A Craven County, NC, Industrial Facilities & Pollution
Control Finance Authority (Weyerhaeuser Co.),
6.35s, 2010 $ 5,000 $ 5,138,900
NR Gaston County, NC, Industrial Facilities & Pollution
Control Finance Authority
(Combustion Engineering, Inc.), 8.85s, 2015 1,000 1,134,980
BBB Halifax County, NC, Industrial Facilities &
Pollution Control Finance Authority
(Champion International Corp.), 8.149s, 2019 1,500 1,633,710
BBB Haywood County, NC, Industrial Facilities &
Pollution Control Finance Authority (Champion
International Corp.), 8.1s, 2009 2,500 2,707,075
BBB Haywood County, NC, Industrial Facilities &
Pollution Control Finance Authority (Champion
International Corp.), 5.5s, 2018 5,200 4,772,144
NR Haywood County, NC, Industrial Facilities &
Pollution Control Finance Authority (Champion
International Corp.), 6s, 2020 3,100 3,100,000
BBB Haywood County, NC, Industrial Facilities &
Pollution Control Finance Authority (Champion
International Corp.), 5.75s, 2025 3,500 3,220,700
NR Henderson County, NC, Industrial Facilities &
Pollution Control Finance Authority (Figgie
International Real Estate), 8s, 2009 1,400 1,413,244
A Martin County, NC, Industrial Facilities & Pollution
Control Finance Authority (Weyerhaeuser Co.),
7.25s, 2014 7,000 7,625,730
A Martin County, NC, Industrial Facilities & Pollution
Control Finance Authority (Weyerhaeuser Co.),
6.8s, 2024 7,500 7,780,050
A Martin County, NC, Industrial Facilities & Pollution
Control Finance Authority (Weyerhaeuser Co.), 6s,
2025 2,000 1,917,420
AAA Mecklenburg County, NC, Industrial Facilities &
Pollution Control Finance Authority (Precision
Steel), 7.75s, 2014 2,600 2,828,514
NR Surry County, NC, Industrial Facilities & Pollution
Control Finance Authority (Weyerhaeuser Co.),
9.25s, 2002 1,500 1,757,160
NR Wake County, NC, Industrial Facilities & Pollution
Control Finance Authority (Mallinkcodt), 6.75s,
2012 1,100 1,154,142
---------------
$ 48,485,533
- ---------- ---------------------------------------------------- -------------- ---------------
Universities - 5.9%
AAA Appalachian State University, NC, MBIA, 6.1s, 2014 $ 1,140 $ 1,175,830
AAA Appalachian State University, NC, MBIA, 6.125s, 2019 4,870 5,013,422
AA+ North Carolina Education Facilities Finance Agency
(Duke University), 6.75s, 2021 11,500 12,259,115
AA University of North Carolina (Chapel Hill), 0s, 2012 9,105 3,396,438
AA University of North Carolina (Chapel Hill), 0s, 2013 4,285 1,485,952
AAA University of North Carolina (Charlotte), MBIA,
5.5s, 2021 3,455 3,300,872
---------------
$ 26,631,629
- ---------- ---------------------------------------------------- -------------- ---------------
Total Municipal Bonds (Identified Cost, $422,976,444) $443,849,251
------------------------------------------------------------------------------------- -----------------
</TABLE>
12
<PAGE>
Portfolio of Investments -- continued
Floating Rate Demand Note -- 0.1%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- ---------- ---------------------------------------------------- ---------------- -----------------
<S> <C> <C> <C>
Wake County, NC, Industrial Facilities & Pollution
Control Rev. (Carolina Power & Light Co.), due
2017, at Identified Cost $ 600 $ 600,000
- ---------- ---------------------------------------------------- -------------- ---------------
Total Investments (Identified Cost, $423,576,444) $444,449,251
Other Assets, Less Liabilities - 1.8% 8,096,301
Net Assets - 100.0% $452,545,552
------------------------------------------------------------------------------------- -----------------
</TABLE>
(section) Indexed security.
++++Inverse floating rate security.
+Restricted security
###Security segregated as collateral for an open futures contract.
See notes to financial statements
Portfolio of Investments - March 31, 1996
MFS SOUTH CAROLINA MUNICIPAL BOND FUND
Municipal Bonds - 96.6%
<TABLE>
<CAPTION>
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
----------------------------------------------------------------- ---------------- -----------------
<S> <C> <C> <C>
General Obligation - 2.6%
AA Charleston County, SC, 5.5s, 2014 $1,250 $ 1,234,037
A Commonwealth of Puerto Rico, 5.25s, 2018 500 457,040
AAA Dorchester County, SC, FGIC, 5.2s, 2017 2,250 2,084,737
A Puerto Rico Public Buildings Authority, 5.7s, 2009 1,000 1,005,120
---------------
$ 4,780,934
- ---------- ---------------------------------------------------- -------------- ---------------
State and Local Appropriation - 7.4%
AAA Berkeley County, SC, School District, AMBAC, 6.3s,
2016 $ 1,800 $ 1,873,854
AAA Greenville County, SC, Certificates of Participation
(Courthouse & Detention Center), 5.7s, 2017 1,000 970,160
AAA Greenville County, SC, Certificates of Participation
(Greenville Tech College), AMBAC, 5.9s, 2019 1,100 1,093,136
AAA Hilton Head Island, SC, Public Finance Corp.,
Certificates of Participation, AMBAC, 5.75s, 2014 2,000 1,979,740
AAA Lexington County, SC, School District No. 1,
Certificates of Participation
(Gilbert Middle School), MBIA, 6.65s, 2012 1,000 1,054,810
BBB+ Myrtle Beach, SC, Public Finance Corp., Certificates
of Participation (Convention Center), 6.875s, 2017 2,500 2,588,000
AAA North Charleston, SC, Certificates of
Participation (Coliseum), FGIC, 6s, 2016 1,355 1,380,839
A Puerto Rico Public Buildings Authority, 5.5s, 2021 1,000 942,720
NR Williamsburg County, SC, School District Public
Facilities Corp., Certificates of Participation,
7.5s, 2006 175 172,483
NR Williamsburg County, SC, School District Public
Facilities Corp., Certificates of Participation,
7.5s, 2007 190 187,125
NR Williamsburg County, SC, School District Public
Facilities Corp., Certificates of Participation,
7.5s, 2008 205 201,754
NR Williamsburg County, SC, School District Public
Facilities Corp., Certificates of Participation,
7.5s, 2009 220 216,374
State and Local Appropriation - continued
NR Williamsburg County, SC, School District Public
Facilities Corp., Certificates of Participation,
7.5s, 2012 $ 270 $ 256,734
NR Williamsburg County, SC, School District Public
Facilities Corp., Certificates of Participation,
7.5s, 2014 315 298,686
NR Williamsburg County, SC, School District Public
Facilities Corp., Certificates of Participation,
7.5s, 2018 635 599,433
---------------
$13,815,848
- ---------- ---------------------------------------------------- -------------- ---------------
Refunded and Special Obligation - 19.5%
NR Anderson County, SC, 7.75s, 1997 $ 500 $ 533,540
A+ Calhoun, SC, Solid Waste Disposal Rev. (Eastman
Kodak), 6.75s, 2017 1,000 1,119,940
AA Charlestown County, SC, Alumax Project, 6.5s, 2001 1,315 1,446,131
AAA Charlestown County, SC, Certificates of
Participation (Charlestown Public Facilities
Corp.), MBIA, 7.1s, 2001 2,000 2,258,840
AA Columbia, SC, Waterworks & Sewer Rev., 0s, 2004 1,500 1,029,150
AA Columbia, SC, Waterworks & Sewer Rev., 0s, 2006 2,045 1,237,490
AAA Commonwealth of Puerto Rico, Public Improvement,
6.8s, 2002 425 481,244
AAA Greenville Hospital System, SC, Hospital Facilities
Rev., "A", FGIC, 7.8s, 1998 1,950 2,126,007
AAA Greenville Hospital System, SC, Hospital Facilities
Rev., "B", FGIC, 7.8s, 1998 1,500 1,635,390
AAA Greenwood County, SC, Hospital Rev.
(Self Memorial Hospital), BIGI, 8.25s, 1997 500 540,715
AAA Greenwood County, SC, Hospital Rev.
(Self Memorial Hospital), BIGI, 8.375s, 1997 1,000 1,083,230
AAA Laurens, SC, Utility Systems Rev., FGIC, 7.625s,
1998 1,100 1,196,250
AAA Lexington County, SC, School District No. 1,
Certificates of Participation, (White Knoll Middle
School), CGIC, 7.65s, 1999 1,400 1,553,734
AAA Myrtle Beach, SC, Water & Sewer Rev., 6s, 2000 1,780 1,874,678
AAA Myrtle Beach, SC, Water & Sewer Rev., 6s, 2000 1,750 1,843,082
AAA North Charleston, SC, Sewer Rev., MBIA, 7.75s, 1998 1,250 1,371,475
AAA Puerto Rico Aqueduct & Sewer Authority, 9s, 2005 750 972,112
AAA Puerto Rico Highway & Transportation Authority,
Highway Rev., 6.625s, 2002 300 336,876
AA Richland County, SC, 6.25s, 2000 1,260 1,357,020
AAA Richland County, SC, Certificates of Participation,
FGIC, 0s, 2005 1,160 745,427
AAA Richland County, SC, Certificates of Participation,
FGIC, 0s, 2006 1,160 702,310
AAA Richland County, SC, Certificates of Participation,
FGIC, 0s, 2007 1,160 660,399
NR South Carolina Jobs, Economic Development Authority
(Carolina Hospital System Project), 7.55s, 2002 2,000 2,335,880
AAA South Carolina Public Service Authority, "C", 7.1s,
2001 1,220 1,379,795
AAA South Carolina Public Service Authority (Santee
Cooper), 6.625s, 2002 4,000 4,472,000
13
<PAGE>
Portfolio of Investments -- continued
Municipal Bonds -- continued
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ---------------------------------------------------- ---------------- -----------------
Refunded and Special Obligation - continued
A- Spartanburg County, SC, Hospital Facilities Rev.
(Mary Black Hospital), 8.25s, 1998 $ 500 $ 555,235
AAA York County, SC, School District No. 3, MBIA, 7.5s,
1998 575 624,898
AAA York, SC, Water & Sewer Rev., AMBAC, 7.875s, 1996 620 641,266
---------------
$36,114,114
- ---------- ---------------------------------------------------- -------------- ---------------
Solid Waste Revenue - 1.0%
A Charleston County, SC, Resource
Recovery Rev. (Foster Wheeler), 9.25s, 2010 $1,750 $ 1,907,377
- ---------- ---------------------------------------------------- -------------- ---------------
Single Family Housing Revenue - 6.2%
AA South Carolina Housing Finance & Development
Authority, 8.6s, 2019 $1,000 $ 1,035,950
AA South Carolina Housing Finance & Development
Authority, 7.55s, 2011 1,750 1,815,415
AA South Carolina Housing Finance & Development
Authority, 7.75s, 2022 2,650 2,766,573
AA South Carolina Housing Finance & Development
Authority, 7.8s, 2022 1,000 1,039,430
AA South Carolina Housing Finance & Development
Authority, 7.9s, 2032 4,610 4,809,428
---------------
$11,466,796
- ---------- ---------------------------------------------------- -------------- ---------------
Multi-Family Housing Revenue - 2.3%
AA South Carolina Housing Finance & Development
Authority (Fairway Apartments), 7.625s, 2033 $1,975 $ 2,070,748
BBB+ South Carolina Housing Finance & Development
Authority (Hunting Ridge Apartments), 6.75s, 2025 1,000 992,320
AA- South Carolina Housing Finance & Development
Authority (Runaway Bay Apartments), 6.125s, 2015 1,300 1,266,876
---------------
$ 4,329,944
- ---------- ---------------------------------------------------- -------------- ---------------
Insured Health Care Revenue - 9.3%
AAA Charleston County, SC, Hospital Rev. (Medical
Society Health Project), MBIA, 5.5s, 2019 $2,550 $ 2,390,319
AAA Charleston County, SC, Hospital Rev. (Medical
Society Health Project), MBIA, 5s, 2022 2,450 2,129,687
AAA Charleston County, SC, Hospital Rev. (Medical
Society Health Project), 5.625s, 2025 1,000 941,920
AAA Greenwood County, SC, Hospital Rev.
(Self Memorial Hospital), MBIA, 5.875s, 2017 1,000 1,000,540
AAA Pickens & Richland Counties, SC, Hospital Rev.
(Baptist Hospital), AMBAC, 5.75s, 2021 3,635 3,544,888
AAA South Carolina Jobs, Economic Development Authority,
Hospital Facilities Rev. (Anderson Area Medical
Center), MBIA, 5.25s, 2015 1,750 1,611,890
AAA South Carolina Jobs, Economic Development Authority,
Hospital Facilities Rev. (Tuomey Regional Medical
Center), MBIA, 5.75s, 2015 1,000 982,550
AAA South Carolina Jobs, Economic Development Authority,
Hospital Facilities Rev. (Tuomey Regional Medical
Center), MBIA, 5.5s, 2020 2,390 2,257,737
Insured Health Care Revenue - continued
AAA Spartanburg County Health Services District Inc.,
Hospital Rev., AMBAC, 5.5s, 2015 $1,000 $ 955,540
AAA Spartanburg County Health Services District Inc.,
Hospital Rev., AMBAC, 5.3s, 2020 1,500 1,385,055
---------------
$17,200,126
- ---------- ---------------------------------------------------- -------------- ---------------
Health Care Revenue - 7.5%
NR Charlestown County, SC, First Mortgage
Rev. (Driftwood Health Care), 12.5s, 2014 $2,085 $ 2,120,382
NR Greenville County, SC, First Mortgage Rev. (Chestnut
Hill), 10.125s, 2016 1,925 1,925,000
AA- Greenville Hospital System, SC, Hospital Facilities
Rev., 6s, 2020 5,400 5,298,372
NR Horry County, SC, Hospital Facilities Rev. (Conway
Hospital), 6.75s, 2012 4,500 4,570,515
---------------
$13,914,269
- ---------- ---------------------------------------------------- -------------- ---------------
Electric and Gas Utility Revenue - 11.9%
A Colleton & Dorchester Counties, SC, Pollution
Control Rev., 6.6s, 2014 $3,000 $ 3,165,030
A Fairfield County, SC, Pollution Control
Rev. (South Carolina Electric Co.), 6.5s, 2014 1,250 1,329,512
AAA Piedmont Municipal Power Agency, SC, Electric Rev.,
FGIC, 6.25s, 2021 4,600 4,863,902
AAA Piedmont Municipal Power Agency, SC, Electric Rev.,
FGIC, 5s, 2022 2,300 2,010,844
A- Puerto Rico Electric Power Authority, 6.125s, 2008 1,025 1,074,548
A- Puerto Rico Electric Power Authority, 5.5s, 2020 1,000 932,770
AAA Puerto Rico Telephone Authority Rev.,
AMBAC, 5.59s, 2004S. 1,000 941,000
AAA South Carolina Public Service Authority, MBIA,
6.923s, 2013++++ 3,000 2,775,000
AAA South Carolina Public Service Authority, FGIC,
5.875s, 2023 5,000 4,989,850
---------------
$22,082,456
- ---------- ---------------------------------------------------- -------------- ---------------
Water and Sewer Utility Revenue - 17.4%
AAA Cayce, SC, Waterworks & Sewer Rev., AMBAC, 5.25s,
2015 $1,500 $ 1,389,945
AA- Charleston County, SC, Waterworks & Sewer Rev., 6s,
2012 2,000 2,047,020
AAA Charleston County, SC, Waterworks & Sewer Rev.,
MBIA, 5s, 2022 3,150 2,780,380
AA Columbia, SC, Waterworks & Sewer Rev., 0s, 2005 2,245 1,443,900
AA Columbia, SC, Waterworks & Sewer Rev., 0s, 2006 9,330 5,654,166
AA Columbia, SC, Waterworks & Sewer Rev., 5.375s, 2012 3,500 3,448,725
NR Laurens County, SC, Water & Sewer
Commission, Sewer System Rev., 5.5s, 2014 1,080 1,032,156
AAA Laurens County, SC, Public Utility Systems
Refunding, FGIC, 5s, 2018 2,395 2,113,590
AAA Myrtle Beach, SC, Water & Sewer Rev., AMBAC, 5.5s,
2013 1,000 979,290
A Puerto Rico Commonwealth Aqueduct & Sewer Authority
Rev., 5s, 2015 1,000 898,060
AAA Rock Hill, SC, Utility Systems Rev., AMBAC, 5s, 2020 1,285 1,139,540
AAA St. Andrews, SC, Public Services District, Sewer
System Rev., FGIC, 7.75s, 2018 1,000 1,065,190
14
<PAGE>
Portfolio of Investments -- continued
Municipal Bonds -- continued
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ---------------------------------------------------- ---------------- -----------------
Water and Sewer Utility Revenue - continued
A+ South Carolina Resources Authority (Local Government
Program), 7.25s, 2020 $3,000 $ 3,207,450
AAA Union, SC, Combined Public Utility System Rev.,
FGIC, 5s, 2021 650 580,750
AAA Western Carolina Regional Sewer Authority, AMBAC,
0s, 2007 4,400 2,433,820
NR York County, SC, Water & Sewer Rev., 6.5s, 2025 2,000 1,981,760
---------------
$ 32,195,742
- ---------- ---------------------------------------------------- -------------- ---------------
Sales and Excise Tax Revenue - 0.8%
A Puerto Rico Highway & Transportation Authority Rev.,
5.5s, 2019 $1,500 $ 1,401,030
- ---------- ---------------------------------------------------- -------------- ---------------
Industrial Revenue (Corporate Guarantee) - 10.1%
BBB+ Chester County, SC, Industrial Rev. (Springs
Industries, Inc.), 7.35s, 2014 $1,000 $ 1,072,000
BBB+ Chester County, SC, Industrial Rev. (Springs
Industries, Inc.), 7.8s, 2014 1,025 1,110,464
AA- Darlington County, SC, Industrial
Development Rev. (Nucor Corp.), 5.75s, 2023 2,000 1,892,100
A+ Darlington County, SC, Industrial Development Rev.
(Sunoco Products Co.), 6.125s, 2025 1,500 1,502,715
NR Fairfield County, SC, Industrial Rev. (Rite Aid,
Inc.), 7.9s, 2016 2,950 3,044,872
NR Greenville County, SC, Industrial Rev. (Kroger Co.),
7.85s, 2015 500 543,115
NR Lexington County, SC, Industrial Rev. (J.B. White &
Co.), 8s, 2005 655 699,409
AA- Oconee County, SC, Pollution Control Rev. (Duke
Power Co.), 7.5s, 2017 1,000 1,090,590
A- Richland County, SC, Pollution Control Rev. (Union
Camp Corp.), 6.55s, 2020 1,800 1,886,850
A- Richland County, SC, Solid Waste Facilities Rev.
(Union Camp Corp.), 6.75s, 2022 2,000 2,097,620
A+ York City, SC, Industrial Rev. (Hoechst Celanese),
5.7s, 2024 4,000 3,771,680
---------------
$ 18,711,415
- ---------- ---------------------------------------------------- -------------- ---------------
Universities - 0.6%
AAA Coastal Carolina University, 6.875s, 2026 $1,000 $ 1,078,710
- ---------- ---------------------------------------------------- -------------- ---------------
Total Municipal Bonds (Identified Cost, $170,214,802) $178,998,761
------------------------------------------------------------------------------------- -----------------
Floating Rate Demand Notes - 1.9%
Charleston County, SC, Industrial Rev. (Massey
Coal), due 2007 $3,200 $ 3,200,000
Lincoln County, WY, Pollution Control Rev. (Exxon),
due 2014 200 200,000
Uinta County, WY, Pollution Control Rev. (Chevron),
due 2020 100 100,000
- ---------- ---------------------------------------------------- -------------- ---------------
Total Floating Rate Demand Notes, at Identified Cost and Value $ 3,500,000
------------------------------------------------------------------------------------- -----------------
Total Investments (Identified Cost, $173,714,802) $182,498,761
Other Assets, Less Liabilities - 1.5% 2,721,889
Net Assets - 100.0% $185,220,650
------------------------------------------------------------------------------------- -----------------
</TABLE>
(section) Indexed security.
++++Inverse floating rate security.
See notes to financial statements
Portfolio of Investments - March 31, 1996
MFS TENNESSEE MUNICIPAL BOND FUND
Municipal Bonds - 96.2%
<TABLE>
<CAPTION>
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
----------------------------------------------------------------- ---------------- -----------------
<S> <C> <C> <C>
General Obligation - 9.8%
AAA Huntington, TN, School District, AMBAC, 5.35s, 2021 $1,050 $ 989,468
AA Metropolitan Government of Nashville & Davidson
County, TN, 6.125s, 2014 1,000 1,036,570
AA Metropolitan Government of Nashville & Davidson
County, TN, 6.125s, 2019 3,255 3,363,294
AA Metropolitan Government of Nashville & Davidson
County, TN, 6.15s, 2025 1,000 1,031,580
AAA Puerto Rico Commonwealth, MBIA, 5.375s, 2022 1,000 946,910
AA- Rutherford County, TN, 0s, 2015 1,500 481,035
AAA Sevier County, TN, Public Building Authority, AMBAC,
5.6s, 2015 800 772,328
AA+ Shelby County, TN, 5.125s, 2015 1,000 934,710
NR Territory of Virgin Islands, 7.75s, 2006 415 455,068
AAA Union County, TN, AMBAC, 5.25s, 2020 1,000 927,940
AAA Weakley County, TN, School, FGIC, 5.1s, 2015 1,125 1,041,773
---------------
$11,980,676
- ---------- ---------------------------------------------------- -------------- ---------------
State and Local Appropriation - 3.2%
AAA Gatlinburg, TN, Public Building Authority
(Gatlinburg Convention Center), AMBAC, 6.9s, 2012 $1,000 $ 1,073,580
A Puerto Rico Public Buildings Authority, Education &
Health, 6.285s, 2016 2,000 1,858,840
A Puerto Rico Public Buildings Authority, 5.5s, 2021 1,000 942,720
---------------
$ 3,875,140
- ---------- ---------------------------------------------------- -------------- ---------------
Refunded and Special Obligation - 21.8%
AAA Bristol, TN, Health & Educational Facilities Board
Rev. (Bristol Memorial), FGIC, 7s, 2001 $ 500 $ 560,185
AAA Gladeville, TN, Utility District, Waterworks Rev.,
FGIC, 7.4s, 2000 500 558,405
AAA Knox County, TN, Health, Educational & Housing
Facilities Board (Fort Sanders), MBIA, 8s, 2008 2,000 2,148,760
AAA Knox County, TN, Health, Educational & Housing
Facilities Board (Mercy Health), AMBAC, 7.6s, 1999 3,500 3,893,610
NR Knox County, TN, Industrial Development Board, 0s,
2016 8,325 2,210,870
NR Memphis, TN, Electric Systems Rev., 6.75s, 2000 1,500 1,637,640
AAA Memphis-Shelby County, TN, Airport Authority, MBIA,
8s, 2008 3,500 3,781,750
AAA Mt. Juliet, TN, Public Building Authority (Madison),
MBIA, 7.7s, 2004 1,100 1,377,662
AAA Mt. Juliet, TN, Public Building Authority (Madison),
MBIA, 7.8s, 2004 3,500 4,406,010
NR Mt. Juliet, TN, Public Building Authority (Poplar
Grove), 8.375s, 1999 1,430 1,606,777
NR New Tazewell, TN, Health, Educational & Housing
Facilities Board (Lincoln), 7.25s, 1997 2,000 2,105,220
AAA Puerto Rico Highway & Transportation Authority Rev.,
8.125s, 1998 670 740,189
AAA Shelby County, TN, 6.5s, 1999 1,120 1,208,077
NR Wilson County, TN, Water & Wastewater Authority,
Waterworks Rev., 8s, 1999 500 558,190
---------------
$26,793,345
- ---------- ---------------------------------------------------- -------------- ---------------
15
<PAGE>
Portfolio of Investments -- continued
Municipal Bonds -- continued
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ---------------------------------------------------- ---------------- -----------------
Single Family Housing Revenue - 4.0%
A Shelby County, TN, Single Family Mortgage Rev., FHA,
0s, 2015 $10,000 $ 1,516,900
A+ Tennessee Housing Development Agency, 7.4s, 2016 305 315,754
A+ Tennessee Housing Development Agency, 8.125s, 2021 135 132,883
A+ Tennessee Housing Development Agency, 7.65s, 2022 1,000 1,037,800
A+ Tennessee Housing Development Agency, 7.375s, 2023 1,000 1,037,910
A+ Tennessee Housing Development Agency, 7.125s, 2026 800 843,088
---------------
$ 4,884,335
- ---------- ---------------------------------------------------- -------------- ---------------
Multi-Family Housing Revenue - 4.9%
AAA Franklin, TN, Industrial Development Rev., FHA,
6.75s, 2027 $ 1,000 $ 1,031,440
NR Jackson, TN, Health, Education &
Housing Facilities Board, FHA, 7.1s, 2028 1,610 1,678,667
AAA Metropolitan Government of Nashville & Davidson
County, TN, Health & Education, FHA, 7.25s, 2032 495 514,864
NR Metropolitan Government of Nashville & Davidson
County, TN, Industrial, FHA, 6.95s, 2026 1,000 1,036,000
A+ Metropolitan Government of Nashville & Davidson
County, TN, Industrial, FHA, 7.7s, 2029 1,000 1,044,580
AA- Metropolitan Government of Nashville & Davidson
County, TN, Industrial, FHA, 7.5s, 2029 695 725,684
---------------
$ 6,031,235
- ---------- ---------------------------------------------------- -------------- ---------------
Insured Health Care Revenue - 10.7%
AAA Bristol, TN, Health & Educational Facilities Board
Rev. (Bristol Memorial), FGIC, 8.87s, 2021 $ 1,325 $ 1,373,005
AAA Bristol, TN, Health & Educational Facilities Board
Rev. (Bristol Memorial), FGIC, 5.25s, 2021 1,000 916,120
AAA Chattanooga-Hamilton County, TN, Hospital Authority
(Erlanger Medical Center), FSA, 5.5s, 2013 1,500 1,458,690
AAA Jackson, TN, Hospital Refunding
(General Hospital), AMBAC, 5.625s, 2015 2,000 1,941,820
AAA Johnson City, TN, Health & Education Financing
Authority (Johnson City
Medical Center Hospital), MBIA, 5.25s, 2016 2,625 2,415,551
AAA Knox County, TN, Health, Educational & Housing
Facilities Board (Fort Sanders), MBIA, 5.75s, 2014 3,250 3,263,585
AAA Knox County, TN, Health, Educational & Housing
Facilities Board, (Fort Sanders), MBIA, 5.25s,
2023 2,000 1,823,480
---------------
$13,192,251
- ---------- ---------------------------------------------------- -------------- ---------------
Health Care Revenue - 4.8%
NR Clarksville, TN, Hospital Rev. (Clarksville Memorial
Hospital), 6.375s, 2018 $ 1,000 $ 974,730
A Cookeville, TN, Industrial Development Board,
Hospital Rev. (Cookville General), 5.75s, 2010 2,000 1,839,660
NR Knox County, TN, Health, Educational & Housing
Facilities Board (Baptist East), 8.5s, 2004 1,300 1,373,138
Health Care Revenue - continued
NR Knox County, TN, Health, Educational & Housing
Facilities Board (Baptist East), 8.6s, 2016 $ 710 $ 747,879
BBB+ Knox County, TN, Health, Educational & Housing
Facilities Board (East Tennessee Children's),
6.5s, 2012 1,000 997,490
---------------
$ 5,932,897
- ---------- ---------------------------------------------------- -------------- ---------------
Electric and Gas Utility Revenue - 1.5%
AAA Puerto Rico Telephone Authority Rev.,
AMBAC, 5.59s, 2004S. $ 2,000 $ 1,882,000
- ---------- ---------------------------------------------------- -------------- ---------------
Water and Sewer Utility Revenue - 18.7%
AAA Madison, TN, Utility Waterworks Refunding, MBIA, 5s,
2019 $ 2,750 $ 2,495,708
AAA Metropolitan Government of Nashville & Davidson
County, TN, Water & Sewer Rev., FGIC, 6.5s, 2010 1,000 1,108,520
AAA Metropolitan Government of Nashville & Davidson
County, TN, Water & Sewer Rev., FGIC, 5.2s, 2013 2,000 1,923,720
AAA Metropolitan Government of Nashville & Davidson
County, TN, Water & Sewer Rev., FGIC, 5.1s, 2016 2,200 2,019,820
AAA Metropolitan Government of Nashville & Davidson
County, TN, Water & Sewer Rev., RIBS, AMBAC,
8.054s, 2022++++ 1,000 1,006,000
NR Mt. Juliet, TN, Public Building Authority
(Cumberland), 7.55s, 2024 2,045 2,189,929
AAA Mt. Juliet, TN, Public Building
Authority (Hermitage), MBIA, 7.5s, 2009 300 319,815
NR Mt. Juliet, TN, Public Building Authority
(Milcroft), 7.55s, 2024 1,215 1,301,107
NR Mt. Juliet, TN, Public Building Authority (New
Market), 8.375s, 2024 565 607,228
NR Mt. Juliet, TN, Public Building Authority (Tipton),
7.5s, 2004 355 386,041
AAA North Anderson County, TN, Utility
District Waterworks Rev., MBIA, 5.6s, 2019 925 890,368
NR Poplar Grove, TN, Utility District, Waterworks Rev.,
6.375s, 2011 500 513,375
A Puerto Rico Commonwealth Aqueduct & Sewer Rev.,
6.25s, 2012 1,000 1,055,310
AAA West Knox Utility District, Knox County, TN, Water &
Sewer Rev., MBIA, 0s, 2002 1,315 936,149
AAA West Knox Utility District, Knox County, TN, Water &
Sewer Rev., MBIA, 0s, 2003 1,045 701,791
AAA West Knox Utility District, Knox County, TN, Water &
Sewer Rev., MBIA, 0s, 2004 1,920 1,213,977
AAA West Knox Utility District, Knox County, TN, Water &
Sewer Rev., MBIA, 0s, 2005 1,920 1,140,729
AAA West Knox Utility District, Knox County, TN, Water &
Sewer Rev., MBIA, 0s, 2006 1,920 1,080,998
AAA West Knox Utility District, Knox County, TN, Water &
Sewer Rev., MBIA, 0s, 2007 1,920 1,012,781
NR Wilson County, TN, Water & Wastewater Authority, 6s,
2014 1,000 1,013,480
---------------
$22,916,846
- ---------- ---------------------------------------------------- -------------- ---------------
16
<PAGE>
Portfolio of Investments -- continued
Municipal Bonds -- continued
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ---------------------------------------------------- ---------------- -----------------
Sales and Excise Tax Revenue - 1.6%
A Puerto Rico Commonwealth Highway &
Transportation Authority Rev., 5.5s, 2019 $1,000 $ 934,020
A- Tennessee Local Development Authority
Rev., Community Provider Loan, 7s, 2021 1,000 1,066,720
---------------
$ 2,000,740
- ---------- ---------------------------------------------------- -------------- ---------------
Industrial Revenue (Corporate Guarantee) - 11.9%
BB Bristol, TN, Industrial Development Authority (Kmart
Corp.), 7.5s, 2008 $1,105 $ 944,344
AA- Humphreys County, TN, Certificates of Participation
(DuPont), 6.7s, 2024 1,750 1,850,730
NR Knox County, TN, Industrial
Development Board (Kroger Co.), 8.1s, 2003 2,000 2,213,060
NR Lawrenceburg, TN, Industrial Development Board
(Tridon, Inc.), 9.625s, 2006 1,000 1,025,390
A- Maury County, TN, Industrial Development Board,
Pollution Control Rev. (Saturn Corp.), 6.5s, 2024 1,500 1,552,410
BBB McMinn County, TN, Industrial Development Board,
Pollution Control Rev. (Bowater), 7.625s, 2016 1,000 1,061,710
BBB Memphis-Shelby County, TN, Airport Authority
(Federal Express Corp.), 7.875s, 2009 2,755 3,027,414
BBB Memphis-Shelby County, TN, Airport
Authority (Federal Express Corp.), 6.2s, 2014 1,000 968,700
NR Metropolitan Government of Nashville & Davidson
County, TN, IDR (Wilson Sporting), 7.75s, 2014 1,000 1,096,810
A- Puerto Rico Industrial, Medical & Environmental
Pollution Control Facilities, Finance Authority
Rev. (Baxter Travenol Laboratories), 8s, 2012 750 822,780
---------------
$ 14,563,348
- ---------- ---------------------------------------------------- -------------- ---------------
Universities - 3.3%
AA Jackson, TN, Health, Educational & Housing
Facilities Board (Lambuth University), 5.9s, 2015 $1,000 $ 999,510
AA Metropolitan Government of Nashville & Davidson
County, TN, Health, Educational & Housing
Facilities Board (Vanderbilt University), 5.125s,
2013 490 460,620
AA Metropolitan Government of Nashville & Davidson
County, TN, Health, Educational & Housing
Facilities Board (Vanderbilt University), 7.625s,
2016 1,000 1,076,600
AA Metropolitan Government of Nashville & Davidson
County, TN, Health, Educational & Housing
Facilities Board (Vanderbilt University), 5.2s,
2018 1,600 1,495,696
---------------
$ 4,032,426
- ---------- ---------------------------------------------------- -------------- ---------------
Total Municipal Bonds (Identified Cost, $112,560,572) $118,085,239
------------------------------------------------------------------------------------- -----------------
Floating Rate Demand Note - 2.2%
Uinta County, WY, Pollution Control Rev. (Chevron),
due 2020, at Identified Cost $2,700 $ 2,700,000
- ---------- ---------------------------------------------------- -------------- ---------------
</TABLE>
Call Option Purchased - 0.3%
<TABLE>
<CAPTION>
Principal Amount
of Contracts
Issuer/Expiration Date/Strike Price (000 Omitted) Value
----------------------------------------------------------------- ---------------- -----------------
<S> <C> <C>
State of New Jersey, "D"/2003/102
(Premium Paid, $125,600) $2,000 $ 382,000
----------------------------------------------------------------- ---------------- -----------------
Total Investments (Identified Cost, $115,386,172) $121,167,239
Other Assets, Less Liabilities - 1.3% 1,578,536
Net Assets - 100.0% $122,745,775
------------------------------------------------------------------------------------- -----------------
</TABLE>
(section) Indexed security.
++++Inverse floating rate security.
See notes to financial statements
Portfolio of Investments - March 31, 1996
MFS VIRGINIA MUNICIPAL BOND FUND
Municipal Bonds - 94.8%
<TABLE>
<CAPTION>
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
----------------------------------------------------------------- ---------------- -----------------
<S> <C> <C> <C>
General Obligation - 10.4%
AA Chesapeake, VA, Water & Sewer Rev., 5s, 2025 $13,100 $11,590,749
NR Lebanon, VA, 7.6s, 2005 375 381,712
NR Lebanon, VA, 7.75s, 2010 310 316,098
AA Norfolk, VA, 5.25s, 2013 3,000 2,861,490
AA- Portsmouth, VA, 6.375s, 2012 1,555 1,631,179
AA Richmond, VA, 6.25s, 2018 2,710 2,767,452
AA Richmond, VA, 0s, 2006 1,000 592,500
AA Richmond, VA, 0s, 2006 2,500 1,481,250
AA Richmond, VA, 0s, 2007 5,280 2,947,032
AA Richmond, VA, 0s, 2008 2,000 1,045,540
AA Richmond, VA, 0s, 2008 5,270 2,754,998
AA Richmond, VA, 0s, 2009 5,175 2,528,919
AA Roanoke, VA, 5s, 2012 3,165 2,975,037
AA Roanoke, VA, 5s, 2013 3,330 3,105,458
NR Roanoke, VA, 5s, 2014 3,505 3,242,055
A Suffolk, VA, 6.5s, 2006 1,250 1,308,650
AAA State of Virginia (Higher Educational Institute),
0s, 1996 1,000 993,660
AAA State of Virginia (Higher Educational Institute),
0s, 1998 1,295 1,186,621
AAA State of Virginia (Higher Educational Institute),
0s, 1999 1,300 1,135,173
AA Virginia, State Public School Authority, 6.5s, 2013 1,875 2,002,631
---------------
$46,848,204
- ---------- ---------------------------------------------------- -------------- ---------------
State and Local Appropriation - 7.8%
NR Chesterfield County, VA, Industrial Development
Authority, Public Facilities, 7.5s, 2008 $ 1,720 $ 1,754,108
AA Fairfax County, VA, Economic Development Authority,
Lease Rev., 5.25s, 2018+ 5,500 5,061,925
AA Henrico County, VA, Industrial Development
Authority, Lease Rev., 6.5s, 2010 5,000 5,458,300
NR New Kent County, VA, Industrial Development
Authority, Public Facilities, 7.5s, 2011 700 749,938
A Puerto Rico Public Buildings Authority, Education &
Health, 6.285s, 2016 6,500 6,041,230
AAA Puerto Rico Public Buildings Authority, Government
Facilities, 5.5s, 2021+ 1,000 960,420
AAA Virginia State Public Building Authority, 0s, 2007 13,305 7,234,993
17
<PAGE>
Portfolio of Investments -- continued
Municipal Bonds -- continued
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ---------------------------------------------------- ---------------- -----------------
State and Local Appropriation - continued
AAA Virginia State Public Building Authority, 0s, 2008 $10,650 $ 5,422,873
AA Virginia State Public Building Authority, 5.2s,
2015+ 2,610 2,451,573
---------------
$35,135,360
- ---------- ---------------------------------------------------- -------------- ---------------
Refunded and Special Obligation - 14.9%
NR Arlington County, VA, Industrial Development
Authority (Arlington Hospital), 7.125s, 2021 $ 4,450 $ 5,052,174
NR Carroll County, VA, Solid Waste Authority Rev.,
7.5s, 2001 2,265 2,605,882
NR Chesapeake, VA, Certificates of Participation,
7.75s, 1996 1,250 1,287,612
NR Chesapeake, VA, Industrial Development
Authority (Sentara Life Care Corp.), 10s, 1997 1,105 1,215,102
AA Chesapeake, VA, Public Improvement, 6.75s, 1999 2,500 2,726,975
AAA Commonwealth of Puerto Rico, 7.9s, 1996 1,660 1,727,861
AA- Hampton, VA, Public Improvement, 6.625s, 2000 1,500 1,631,265
NR Hopewell County, VA, Hospital Authority (John
Randolph Hospital), 8.85s, 1997 4,645 4,895,458
AAA Nelson County, VA, Service Authority, Water & Sewer
Rev., 7.875s, 1996 1,000 1,020,600
NR Newport News, VA, 6.5s, 2000 875 960,908
NR Newport News, VA, 6.5s, 2000 2,205 2,421,487
NR Newport News, VA, 6.5s, 2000 2,325 2,553,268
NR Norfolk, VA, Industrial Development
Authority (Sentara Life Care Corp.), 10s, 1997 4,230 4,651,477
AA Norfolk, VA, Industrial Development Authority
(Sentara Life Corp.), "B", 7.875s, 1998 1,000 1,105,520
AA Norfolk, VA, Industrial Development
Authority (Sentara Life Corp.), "B", 7.9s, 1998 2,000 2,212,240
AA- Portsmouth, VA, 6.9s, 2000 1,500 1,661,625
AAA Puerto Rico Aqueduct & Sewer Authority, 9s, 2005 4,150 5,379,022
AAA Puerto Rico Aqueduct & Sewer Authority, 10.25s, 2009 400 551,008
AAA Roanoke, VA, Industrial Development Authority,
Hospital Rev. (Memorial), 7.25s, 2010 1,750 1,962,853
A+ Roanoke, VA, Industrial Development Authority,
Hospital Rev. (Roanoke Memorial), 7.5s, 2020 1,245 1,408,332
AAA Southeastern Public Service Authority,
VA, Solid Waste System Rev., 9.25s, 1996 2,750 2,842,647
AAA State of Virginia, Public School Authority, 8.5s,
1997 500 527,145
AAA Virginia Beach, VA, Certificates of Participation
(Judicial Center Project), 7.25s, 2010 4,955 5,575,812
A+ Virginia Beach, VA, Hospital Facilities Rev.
(Virginia Beach General Hospital), 8.75s, 2017 2,875 3,148,384
A+ Virginia Beach, VA, Water & Sewer Rev., 6.625s, 2002 2,400 2,663,040
NR Virginia College Building Authority (Hampton
University), 7.75s, 2014 750 834,052
AA Virginia Resources Authority, Water & Sewer System
Rev., 7.875s, 1998 800 882,352
Refunded and Special Obligation - continued
NR Virginia Resources Authority, Water & Sewer System
Rev., 7.5s, 1999 $ 1,180 $ 1,306,602
AAA Virginia Transportation Board, Contract Rev. (Route
28), 7.7s, 1998 2,175 2,359,744
---------------
$67,170,447
- ---------- ---------------------------------------------------- -------------- ---------------
Solid Waste Revenue - 0.7%
AA State of Virginia Research Authority, Waste Disposal
System Rev., 5.5s, 2015 $ 3,230 $ 3,075,477
- ---------- ---------------------------------------------------- -------------- ---------------
Single Family Housing Revenue - 6.2%
AAA Puerto Rico Housing Finance Corp., 7.8s, 2021 $ 5 $ 5,216
AAA Virginia Housing Development Authority, 0s, 2010 560 136,663
AA+ Virginia Housing Development Authority, 6.1s, 2019 7,000 6,982,500
A+ Virginia Housing Development Authority, 7.1s, 2022 2,000 2,097,840
AA+ Virginia Housing Development Authority, 7.8s, 2038 2,500 2,580,650
NR Virginia State Housing Development Authority, 7.22s,
2019++++ 7,500 7,294,725
AA+ Virginia State Housing Development Authority,
6.125s, 2022 8,500 8,439,225
AA+ Virginia State Housing Development Authority, 0s,
2029 3,615 245,856
---------------
$27,782,675
- ---------- ---------------------------------------------------- -------------- ---------------
Multi-Family Housing Revenue - 3.6%
NR Alexandria, VA, Redevelopment &
Housing Authority (Jefferson Village), 9s, 2018 $ 4,000 $ 4,112,960
NR Fairfax County, VA, Redevelopment & Housing
Authority (Little River Glen), 8.95s, 2020 3,845 3,953,275
AAA Harrisonburg, VA, Redevelopment & Housing Authority
(Battery Heights), 7.375s, 2028 3,540 3,698,273
NR Norfolk, VA, Redevelopment & Housing Authority
(Dockside Apartments), 7.375s, 2028 2,000 2,100,020
AA Virginia Housing Development Authority, 6.5s, 2013 2,300 2,328,014
---------------
$16,192,542
- ---------- ---------------------------------------------------- -------------- ---------------
Insured Health Care Revenue - 8.7%
A Albemarle County, VA, Industrial Development
Authority, First Mortgage Rev., 8.9s, 2026### $ 2,150 $ 2,411,418
AAA Augusta County, VA, Industrial Development
Authority, 5.125s, 2021 3,000 2,732,310
A Front Royal-Warren County, VA, Industrial
Development Authority, 9.45s, 2024 1,000 1,095,250
AAA Hanover County, VA, Industrial Development
Authority, 6s, 2008 1,460 1,556,740
AAA Hanover County, VA, Industrial Development
Authority, 5.5s, 2025 6,000 5,666,940
AAA Hanover County, VA, Industrial Development
Authority, 5.5s, 2025 5,950 5,619,716
AAA Henrico County, VA, Industrial Development Authority
Rev. (Bon Secours), FSA, 7.651s, 2027++++ 8,700 8,813,100
AAA Peninsula Ports Authority, VA, Hospital Facilities
Rev. (Wittaker Memorial), 8.7s, 2023 2,100 2,227,890
18
<PAGE>
Portfolio of Investments -- continued
Municipal Bonds -- continued
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ---------------------------------------------------- ---------------- -----------------
Insured Health Care Revenue - continued
AAA Roanoke, VA, Industrial Development Authority, 5s,
2024 $ 3,000 $ 2,634,360
AAA Roanoke, VA, Industrial Development Authority,
Hospital Rev. (Roanoke Memorial), 6.125s, 2017 6,000 6,280,860
---------------
$39,038,584
- ---------- ---------------------------------------------------- -------------- ---------------
Health Care Revenue - 4.5%
AA- Chesapeake, VA, Industrial Development Authority
(Sentara Life Care Corp.), 7.875s, 2008### $ 1,000 $ 1,091,360
AA- Chesapeake, VA, Industrial Development
Authority (Sentara Life Care Corp.), 8s, 2018 4,000 4,342,840
NR Fairfax, Fauquier & Loudoun Counties, VA, Health
Center Commission, Nursing, 9s, 2020 1,910 2,007,830
A+ Henrico County, VA, Industrial Development Authority
(St. John's Hospital), 8.875s, 2015 955 985,923
A+ Henrico County, VA, Industrial Development Authority
(St. Mary's Hospital), 7.5s, 2007 835 907,201
A+ Lynchburg, VA, Industrial Development
Authority (Central Health, Inc.), 8.125s, 2016 1,400 1,499,358
NR Martinsville, VA, Industrial Development Authority,
6.75s, 2004 1,230 1,218,943
AA- Norfolk, VA, Industrial Development Authority
(Sentara Life Corp.), "A", 7.875s, 2008 1,000 1,081,720
AA- Norfolk, VA, Industrial Development
Authority (Sentara Life Corp.), "A", 7.9s, 2018 2,000 2,128,640
BBB+ Peninsula Ports Authority, VA, Hospital Facilities
Rev. (Mary Immaculate), 7.375s, 2017 3,000 3,085,260
A Suffolk, VA, Industrial Development Authority
(Louise Obici Memorial Hospital), 7.875s, 2005 1,910 2,023,607
---------------
$20,372,682
- ---------- ---------------------------------------------------- -------------- ---------------
Electric and Gas Utility Revenue - 3.0%
A+ Halifax County, VA, Industrial Rev.
Authority (Old Dominion Electric), 6s, 2022 $ 5,000 $ 4,863,700
NR Pittsylvania County, VA, Industrial Development
Authority Rev., 7.5s, 2014 8,000 8,450,880
---------------
$13,314,580
- ---------- ---------------------------------------------------- -------------- ---------------
Water and Sewer Utility Revenue - 12.5%
AA Chesterfield County, VA, Water & Sewer Rev., 0s,
2004 $ 5,025 $ 3,258,763
AA Chesterfield County, VA, Water & Sewer Rev., 0s,
2005 4,815 2,941,532
AA Chesterfield County, VA, Water & Sewer Rev., 0s,
2006 4,000 2,297,480
AA Chesterfield County, VA, Water & Sewer Rev., 0s,
2007 6,000 3,215,580
AA Chesterfield County, VA, Water & Sewer Rev., 0s,
2008 6,135 3,077,685
AA Chesterfield County, VA, Water & Sewer Rev., 0s,
2009 6,135 2,875,290
AA Chesterfield County, VA, Water & Sewer Rev., 0s,
2010 9,005 3,935,095
AA- Fairfax County, VA, Water Authority Rev., 6s, 2022 16,000 16,132,640
AAA Hanover County, VA, Water and Sewer Systems, 5.25s,
2026 7,000 6,410,460
Water and Sewer Utility Revenue - continued
AAA Norfolk, VA, Water Rev., 5.875s, 2020 $ 2,000 $ 2,003,200
AAA Norfolk, VA, Water Rev., 5.9s, 2025 3,215 3,226,864
AAA Upper Occoquan Sewer Authority, 5s, 2025 8,000 7,042,160
---------------
$56,416,749
- ---------- ---------------------------------------------------- -------------- ---------------
Turnpike Revenue - 1.7%
AAA Chesapeake Bay, VA, Bridge & Tunnel Authority, 0s,
2005 $ 4,535 $ 2,790,476
AAA Chesapeake Bay, VA, Bridge & Tunnel Authority,
5.25s, 2019 5,000 4,626,650
---------------
$ 7,417,126
- ---------- ---------------------------------------------------- -------------- ---------------
Airport and Port Revenue - 8.0%
AAA Capital Region Airport Rev. (Richmond International
Airport), 5.625s, 2025 $ 6,000 $ 5,771,340
AA- Metropolitan Washington, D.C., Airport Rev., 7.6s,
2014 5,030 5,476,060
AAA Metropolitan Washington, D.C., Airport Rev., 8.2s,
2018 3,500 3,845,765
AAA Metropolitan Washington, D.C., Apartments, 5.75s,
2020 12,000 11,572,560
AA- Peninsula Airport Commission, VA, 7.3s, 2021 2,400 2,634,289
BB+ Puerto Rico Ports Authority Rev., (American
Airlines), 6.3s, 2023 2,000 2,012,760
A+ Virginia Port Authority, 8.2s, 2008 4,500 4,920,435
---------------
$36,233,209
- ---------- ---------------------------------------------------- -------------- ---------------
Sales and Excise Tax Revenue - 0.8%
AA Virginia State Transportation Board, Transportation
Contract Rev., 6.5s, 2018 $ 3,500 $ 3,652,845
- ---------- ---------------------------------------------------- -------------- ---------------
Industrial Revenue (Corporate Guarantee) - 3.8%
A- Halifax, VA, Industrial Development Authority (Tandy
Corp.), 8.25s, 2008 $ 3,500 $ 3,793,475
A- Isle Wight County, VA, Industrial Development
Authority (Union Camp), 6.55s, 2024 8,000 8,228,240
NR Lynchburg, VA, Industrial Development Authority
(Kroger Co.), 7.9s, 2011 1,000 1,079,950
NR Virginia Beach, VA, Development Authority (Beverly
Enterprises), 10s, 2010 1,360 1,513,382
BBB West Point, VA, Industrial Development Authority,
Solid Waste Disposal Rev.,
(Chesapeake Corp. Project), 6.375s, 2019 2,600 2,611,310
---------------
$17,226,357
- ---------- ---------------------------------------------------- -------------- ---------------
Universities - 6.3%
A+ Albemarle County, VA, Industrial Development
Authority Health Services Rev., 6.5s, 2022 $ 1,000 $ 1,015,750
A- Hampton Roads, VA, Medical College General Rev.,
6.875s, 2016 2,000 2,127,640
A- Hampton Roads, VA, Medical College General Rev.,
6.875s, 2016 1,500 1,595,730
NR Loudoun County, VA, Industrial Development
Authority, University Facilities, 6.25s, 2012 2,710 2,795,229
NR Rockingham County, VA, Industrial Development
Authority Rev. (Bridgewater), 6s, 2023 6,610 6,428,489
AA+ University of Virginia, University Rev., 5.375s,
2014 5,690 5,405,955
AA+ University of Virginia, University Rev., 5.375s,
2020 1,520 1,423,283
19
<PAGE>
Portfolio of Investments -- continued
Municipal Bonds -- continued
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ---------------------------------------------------- ---------------- -----------------
Universities - continued
AA Virginia College Building Authority, 5.75s, 2019 $5,000 $ 4,924,500
BBB- Virginia College Building Authority, Educational
Facilities Rev. (Marymount), 7s, 2022 2,500 2,634,200
---------------
$ 28,350,776
- ---------- ---------------------------------------------------- -------------- ---------------
Other - 1.9%
NR Danville, VA, Industrial Development Authority,
Industrial Development Rev., 8s, 2013 $3,115 $ 3,083,539
NR Loudoun, VA, Industrial Development Authority,
Industrial Development Rev., 7.125s, 2015 4,000 3,942,040
AAA Virginia State Peninsula Regional Jail
Authority, Jail Facilities Rev., 5.5s, 2018 1,500 1,427,490
---------------
$ 8,453,069
- ---------- ---------------------------------------------------- -------------- ---------------
Total Municipal Bonds (Identified Cost, $407,615,231) $426,680,682
------------------------------------------------------------------------------------- -----------------
Floating Rate Demand Notes - 2.1%
Peninsula Ports Authority, VA (Shell Oil Co.) due
12/01/05 $3,800 $ 3,800,000
Peninsula Ports Authority, VA (Shell Oil Co.) due
07/01/16 3,800 3,800,000
Peninsula Ports Authority, VA (Shell Oil Co.), due
08/15/20 1,900 1,900,000
- ---------- ---------------------------------------------------- -------------- ---------------
Total Floating Rate Demand Notes, at Identified Cost $ 9,500,000
------------------------------------------------------------------------------------- -----------------
Call Options Purchased - 0.3%
Issuer/Expiration Date/Strike Price Principal Amount
of Contracts
(000 Omitted)
----------------------------------------------------------------- ---------------- -----------------
Georgia Municipal Electric Authority/ 2003/102 $ 20 $ 594,000
State of New Jersey, "D"/2003/102 5 955,000
- ---------- ---------------------------------------------------- -------------- ---------------
Total Call Options Purchased (Premiums Paid, $576,800) $ 1,549,000
------------------------------------------------------------------------------------- -----------------
Total Investments (Identifed Cost, $417,692,031) $437,729,682
Other Assets, Less Liabilities - 2.8% 12,464,592
- -------------------------------------------------------------------------------------- ------------------
Net Assets - 100.0% $450,194,274
------------------------------------------------------------------------------------- -----------------
</TABLE>
(section) Indexed security.
++++Inverse floating rate security.
(dagger) Restricted security.
###Security segregated as collateral for an open futures contract.
See notes to financial statements
Portfolio of Investments - March 31, 1996
MFS WEST VIRGINIA MUNICIPAL BOND FUND
Municipal Bonds - 97.7%
<TABLE>
<CAPTION>
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
----------------------------------------------------------------- ---------------- -----------------
<S> <C> <C> <C>
General Obligation - 6.8%
AAA Cabell, WV, Board of Education, MBIA, 6s, 2006 $ 500 $ 535,065
NR Charleston, WV, Public Improvement, 7.2s, 2008 1,240 1,443,980
NR Charleston, WV, Public Improvement, 7.2s, 2009 1,140 1,324,817
AAA Jefferson County, WV, Board of Education, 6.85s,
2009 1,680 1,900,550
General Obligation - continued
AAA Monongalia County, WV, Board of Education, MBIA, 7s,
2005 $ 500 $ 567,760
AAA Ohio County, WV, Board of Education, MBIA, 5.25s,
2018 1,180 1,122,050
AAA State of West Virginia, Water
Development Authority Rev., FSA, 6.2s, 2024 3,000 3,075,630
---------------
$ 9,969,852
- ---------- ---------------------------------------------------- -------------- ---------------
State and Local Appropriation - 7.2%
A Puerto Rico Public Buildings Authority, Education &
Health, 6.285s, 2016S. $2,000 $ 1,858,840
AAA West Virginia Building Commission, Lease Rev. (West
Virginia Regional Jail), MBIA, 0s, 2007 3,150 1,705,568
AAA West Virginia Building Commission, Lease Rev. (West
Virginia Regional Jail), MBIA, 0s, 2008 3,050 1,545,283
AAA West Virginia Building Commission, Lease Rev. (West
Virginia Regional Jail), MBIA, 0s, 2009 2,500 1,167,750
AAA West Virginia Building Commission, Lease Rev. (West
Virginia Regional Jail), MBIA, 7s, 2015 1,000 1,087,690
A- West Virginia School Building Authority, 6.75s, 2015 3,000 3,191,970
---------------
$10,557,101
- ---------- ---------------------------------------------------- -------------- ---------------
Refunded and Special Obligation - 12.0%
BBB+ Charleston, WV, Parking Rev., 8.5s, 1996 $1,000 $ 1,027,650
AAA Kanawha County, WV, Building
Commission (St. Francis Hospital), 7.5s, 2007 265 308,820
AAA Puerto Rico Aqueduct & Sewer Authority, 9s, 2005 1,500 1,944,225
AAA Puerto Rico Electric Power Authority Rev., 8s, 1998 1,000 1,102,110
AAA Puerto Rico Highway & Transportation Authority,
Highway Rev., 6.625s, 2002 400 449,168
AAA South Charleston, WV, Hospital Rev. (Herbert J.
Thomas Memorial Hospital), BIGI, 8s, 1998 500 552,305
AAA West Virginia Hospital Finance Authority (Monongalia
General Hospital), 8.6s, 1997 1,000 1,057,070
AAA West Virginia Parkways, Economic Development &
Tourism Authority, FGIC, 0s, 2005 2,250 1,409,693
AAA West Virginia Parkways, Economic Development &
Tourism Authority, FGIC, 0s, 2006 2,500 1,474,425
AAA West Virginia Parkways, Economic Development &
Tourism Authority, FGIC, 0s, 2007 2,000 1,102,080
AAA West Virginia Parkways, Economic Development &
Tourism Authority, FGIC, 0s, 2008### 610 320,720
AAA West Virginia Resources Recovery Authority, Solid
Waste Disposal Rev., BIGI, 8.25s, 1996 700 719,138
BBB+ West Virginia Water Development Authority, 8.125s,
1998 1,750 1,942,955
AAA West Virginia Water Development Authority, 8.125s,
1998 2,015 2,237,174
BBB+ West Virginia Water Development Authority, 8.625s,
1998 750 841,747
20
<PAGE>
Portfolio of Investments -- continued
Municipal Bonds -- continued
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ---------------------------------------------------- ---------------- -----------------
Refunded and Special Obligation - continued
BBB+ West Virginia Water Development Authority, 7.4s,
2001 $ 750 $ 859,882
AAA West Virginia Water Development Authority, 7.1s,
2009 250 293,377
---------------
$17,642,539
- ---------- ---------------------------------------------------- -------------- ---------------
Single Family Housing Revenue - 9.0%
AAA Berkeley, Brooke & Fayette Counties, WV, FGIC, 9.1s,
2011 $ 80 $ 81,666
NR Berkeley County, WV, Residential Mortgage Rev.,
7.875s, 2012 305 311,527
NR Charles Town, WV, Residential Mortgage Rev., 6.2s,
2011 900 903,798
NR Mason County, WV, Rev., 0s, 2014 1,700 431,307
A+ West Virginia Housing Development Fund, 7.85s, 2014 840 864,192
AAA West Virginia Housing Development Fund, 0s, 2015 1,815 243,863
AA+ West Virginia Housing Development Fund, 7.95s, 2017 2,980 3,100,392
A+ West Virginia Housing Development Fund, 7.2s, 2018 5,000 5,220,350
A+ West Virginia Housing Development Fund, 7.2s, 2020 2,000 2,088,140
---------------
$13,245,235
- ---------- ---------------------------------------------------- -------------- ---------------
Multi-Family Housing Revenue - 1.0%
AAA Huntington, WV, Housing Corp., Multi- Family Rev.,
FNMA, 7.5s, 2024 $ 800 $ 838,024
NR Webster County, WV, Housing
Development Rev. (Circlebrook), 6.35s, 2008 555 560,306
---------------
$ 1,398,330
- ---------- ---------------------------------------------------- -------------- ---------------
Insured Health Care Revenue - 8.0%
AAA Monongalia County, WV, Building Commission, Hospital
Rev. (Monongalia General Hospital), 6.625s, 2011 $1,000 $ 1,068,300
AAA West Virginia Hospital Finance Authority (Cabell
Huntington Hospital), AMBAC, 6.25s, 2019 5,000 5,166,400
AAA West Virginia Hospital Finance Authority (West
Virginia University Hospital, Inc.), 5s, 2016 3,250 2,882,393
AAA West Virginia Hospital Finance Authority (West
Virginia University Medical Corp.), MBIA, 7.875s,
2007 1,500 1,604,010
AAA West Virginia Hospital Finance Authority (West
Virginia University Medical Corp.), MBIA, 7.875s,
2018 1,000 1,072,310
---------------
$11,793,413
- ---------- ---------------------------------------------------- -------------- ---------------
Health Care Revenue - 10.2%
BBB+ Berkeley County, WV, Building Commission, Hospital
Rev. (City Hospital Project), 6.5s, 2022 $2,500 $ 2,477,925
NR Hampshire County, WV, First Mortgage Rev. (Romney
Health Care), 9.5s, 2022 1,280 1,311,475
NR Monongalia County, WV, Health Facilities Rev.
(Beverly Enterprises, Inc.), 10s, 2007 865 951,820
NR Princeton, WV, Hospital Rev. (Princeton Community
Hospital), 6s, 2018 1,500 1,358,400
NR West Virginia Hospital Finance Authority
(Charleston Area Medical Center), 6.5s, 2023 2,000 2,044,260
Health Care Revenue - continued
BBB- West Virginia Hospital Finance Authority
(Fairmont General Hospital), 6.625s, 2019 $2,000 $ 1,898,900
BBB- West Virginia Hospital Finance Authority (Logan
General Hospital), 7.25s, 2020 5,000 4,947,200
---------------
$14,989,980
- ---------- ---------------------------------------------------- -------------- ---------------
Electric and Gas Utility Revenue - 11.3%
BBB+ Marshall County, WV, Pollution Control Rev. (Ohio
Power Co.), 6.85s, 2022 $2,000 $ 2,108,880
AAA Marshall County, WV, Pollution Control
Rev. (Ohio Power Co.), MBIA, 6.85s, 2022 3,150 3,366,090
AAA Mason County, WV, Pollution Control Rev.
(Appalachian Power), MBIA, 6.6s, 2022 7,000 7,324,380
NR McDowell County, WV, Industrial Development Rev.
(War Telephone Co.), 13.5s, 2001 500 503,140
AAA Putnam County, WV, Pollution Control Rev.
(Appalachian Power Co.), MBIA, 6.6s, 2019 3,200 3,359,360
---------------
$16,661,850
- ---------- ---------------------------------------------------- -------------- ---------------
Water and Sewer Utility Revenue - 11.1%
A Beckley, WV, Industrial Development Rev. (Beckley
Water Co.), 7s, 2017 $2,000 $ 2,125,200
AAA Charleston,WV, Sewer Rev., MBIA, 6.5s, 2017 2,260 2,392,843
A Puerto Rico Aqueduct & Sewer Authority Rev., 5s,
2019 5,100 4,498,914
AAA West Virginia Water Development Authority, CGIC,
7.5s, 2009 1,100 1,189,738
BBB+ West Virginia Water Development Authority, 7.625s,
2009 500 568,775
AAA West Virginia Water Development Authority, 5.375s,
2025 2,000 1,830,460
AAA West Virginia Water Development Authority, 5.25s,
2035 4,260 3,796,597
---------------
$16,402,527
- ---------- ---------------------------------------------------- -------------- ---------------
Turnpike Revenue - 1.9%
AAA West Virginia Parkways, Economic Development &
Tourism Authority, FGIC, 0s, 2006 $1,885 $ 1,090,680
AAA West Virginia State Parkways, Economic Development &
Tourism Authority, FGIC, 7.452s, 2019++++ 1,800 1,728,000
---------------
$ 2,818,680
- ---------- ---------------------------------------------------- -------------- ---------------
Sales and Excise Tax Revenue - 1.2%
A Puerto Rico Highway & Transportation Authority Rev.,
6.625s, 2018 $1,600 $ 1,762,512
- ---------- ---------------------------------------------------- -------------- ---------------
Industrial Revenue (Corporate Guarantee) - 12.3%
A Braxton County, WV, Solid Waste Disposal
(Weyerhaeuser), 6.5s, 2025 $2,000 $ 2,042,300
BBB+ Harrison County, WV, Commercial Development Rev.
(Kmart Corp.), 7.75s, 2009 625 540,587
NR Jackson County, WV, Pollution Control Rev. (Kaiser
Aluminum & Chemical Corp.), 6.5s, 2008 1,345 1,306,586
NR Kanawha County, WV, Commercial
Development Rev. (Kroger Co.), 8s, 2011 1,000 1,083,810
A Kanawha County, WV, Commercial Development Rev. (May
Dept. Stores Co.), 6.5s, 2003 3,000 3,241,560
BBB Kanawha County, WV, Pollution Control Rev. (Union
Carbide Corp.), 8s, 2020 2,000 2,174,580
21
<PAGE>
Portfolio of Investments -- continued
Municipal Bonds -- continued
S&P Bond
Rating Principal Amount
(Unaudited) Issuer (000 Omitted) Value
- ---------- ---------------------------------------------------- ---------------- -----------------
Industrial Revenue (Corporate Guarantee) - continued
NR Monongalia County, WV, Commercial
Development Rev. (Kroger Co.), 7.7s, 2012 $2,000 $ 2,146,300
NR Ohio County, WV, Industrial
Development Rev. (Kroger Co.), 8.125s, 2011 2,000 2,180,720
NR Putnam County, WV, Industrial Development Rev. (Rite
Aid Corp.), 10.375s, 2002 590 604,291
BBB South Charleston, WV, Pollution Control Rev. (Union
Carbide Corp.), 7.625s, 2005 2,500 2,837,900
---------------
$ 18,158,634
- ---------- ---------------------------------------------------- -------------- ---------------
Universities - 4.2%
AAA West Virginia University Rev. (West Virginia
University Dormitory Project), AMBAC, 6s, 2012 $5,000 $ 5,112,250
AAA West Virginia University Rev. (West Virginia
University Dormitory Project), MBIA, 6.75s, 2017 1,000 1,060,410
---------------
$ 6,172,660
- ---------- ---------------------------------------------------- -------------- ---------------
Other - 1.5%
NR West Virginia Hospital Finance Authority (General
Division Medical Building), 7.25s, 2014 $2,000 $ 2,170,960
- ---------- ---------------------------------------------------- -------------- ---------------
Total Municipal Bonds (Identified Cost, $136,698,183) $143,744,273
------------------------------------------------------------------------------------- -----------------
Floating Rate Demand Note - 0.5%
Uinta County, WY, Pollution Control Rev. (Chevron),
due 2020, at Identified Cost $ 700 $ 700,000
- ---------- ---------------------------------------------------- -------------- ---------------
Total Investments (Identified Cost, $137,398,183) $144,444,273
Other Assets, Less Liabilities - 1.8% 2,716,208
- -------------------------------------------------------------------------------------- -----------------
Net Assets - 100.0% $147,160,481
------------------------------------------------------------------------------------- -----------------
</TABLE>
(section) Indexed security.
(two double daggers) Inverse floating rate security.
###Security segregated as collateral for an open futures contract.
See notes to financial statements
22
<PAGE>
Financial Statements
Statements of Assets and Liabilities
<TABLE>
<CAPTION>
North South
Maryland Carolina Carolina Tennessee Virginia West Virginia
March 31, 1996 Fund Fund Fund Fund Fund Fund
- -------------------------------------- ----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investments -
Identified cost $143,431,650 $423,576,444 $173,714,802 $115,386,172 $417,692,031 $137,398,183
Unrealized appreciation 7,552,708 20,872,807 8,783,959 5,781,067 20,037,651 7,046,090
----------- ----------- ----------- ----------- ----------- -------------
Total, at value $150,984,358 $444,449,251 $182,498,761 $121,167,239 $437,729,682 $144,444,273
Cash 106,668 295,496 45,565 43,109 260,854 80,920
Receivable for Fund shares sold 273,660 3,387,614 382,832 122,594 3,115,437 169,146
Receivable for investments sold -- 47,596 5,000 110,000 15,589,915 105,923
Interest receivable 2,393,129 8,230,005 2,980,237 1,853,366 7,514,382 2,960,516
Other assets 2,091 6,074 2,363 1,662 9,054 1,778
----------- ----------- ----------- ----------- ----------- -------------
Total assets $153,759,906 $456,416,036 $185,914,758 $123,297,970 $464,219,324 $147,762,556
----------- ----------- ----------- ----------- ----------- -------------
Liabilities:
Distributions payable $ 283,912 $ 768,299 $ 339,531 $ 259,581 $ 940,453 $ 297,820
Payable for Fund shares reacquired 223,051 608,331 121,343 112,796 433,833 68,020
Payable for investments purchased -- 1,681,856 -- -- 11,867,622 --
Payable for daily variation margin on
open futures contracts 60,000 345,000 -- -- 300,000 37,500
Payable to affiliates -
Management fee 6,891 20,270 8,333 5,529 20,141 6,618
Shareholder servicing agent fee 1,370 5,721 2,377 1,582 3,905 1,878
Distribution fee 95,165 276,872 113,053 74,736 286,337 90,414
Accrued expenses and other
liabilities 98,921 164,135 109,471 97,971 172,759 99,825
----------- ----------- ----------- ----------- ----------- -------------
Total liabilities $ 769,310 $ 3,870,484 $ 694,108 $ 552,195 $ 14,025,050 $ 602,075
----------- ----------- ----------- ----------- ----------- -------------
Net assets $152,990,596 $452,545,552 $185,220,650 $122,745,775 $450,194,274 $147,160,481
=========== =========== =========== =========== =========== =============
Net assets consist of:
Paid-in capital $150,192,774 $443,483,840 $179,533,140 $118,157,021 $442,104,244 $143,444,561
Unrealized appreciation on
investments 7,839,469 20,732,187 8,783,959 5,781,067 19,971,623 7,022,212
Accumulated net realized loss
on investments (4,517,848) (10,635,444) (2,766,881) (1,016,275) (10,413,683) (2,860,835)
Accumulated distributions in excess
of net investment income (523,799) (1,035,031) (329,568) (176,038) (1,467,910) (445,457)
----------- ----------- ----------- ----------- ----------- -------------
Total $152,990,596 $452,545,552 $185,220,650 $122,745,775 $450,194,274 $147,160,481
=========== =========== =========== =========== =========== =============
Shares of beneficial interest
outstanding:
Class A 12,621,593 35,385,023 13,936,167 10,558,744 37,318,909 11,870,860
Class B 1,241,495 2,927,071 1,539,202 1,244,377 2,535,676 1,116,407
Class C -- 808,915 -- -- 300,294 --
----------- ----------- ----------- ----------- ----------- -------------
Total shares of beneficial
interest outstanding 13,863,088 39,121,009 15,475,369 11,803,121 40,154,879 12,987,267
=========== =========== =========== =========== =========== =============
Net assets:
Class A $139,296,706 $409,346,969 $166,800,593 $109,811,227 $418,407,978 $134,513,623
Class B 13,693,890 33,846,510 18,420,057 12,934,548 28,420,167 12,646,858
Class C -- 9,352,073 -- -- 3,366,129 --
----------- ----------- ----------- ----------- ----------- -------------
Total net assets $152,990,596 $452,545,552 $185,220,650 $122,745,775 $450,194,274 $147,160,481
=========== =========== =========== =========== =========== =============
Class A shares:
Net asset value and redemption price
per share (net assets / shares of
beneficial interest outstanding) $11.04 $11.57 $11.97 $10.40 $11.21 $11.33
=========== =========== =========== =========== =========== =============
Offering price per share (100/95.25
of net asset value per share) $11.59 $12.15 $12.57 $10.92 $11.77 $11.90
=========== =========== =========== =========== =========== =============
Class B shares:
Net asset value and offering price
per share (net assets / shares of
beneficial interest outstanding) $11.03 $11.56 $11.97 $10.39 $11.21 $11.33
=========== =========== =========== =========== =========== =============
Class C shares:
Net asset value, offering price, and
redemption price per share (net
assets / shares of beneficial
interest outstanding) $ -- $11.56 $ -- $ -- $11.21 $ --
=========== =========== =========== =========== =========== =============
</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
23
<PAGE>
Financial Statements - continued
Statements of Operations
<TABLE>
<CAPTION>
North South
Maryland Carolina Carolina Tennessee Virginia West Virginia
Year Ended March 31, 1996 Fund Fund Fund Fund Fund Fund
- -------------------------------------- ----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income:
Interest income $ 9,802,523 $28,627,320 $11,720,380 $8,040,838 $29,276,654 $9,360,013
--------- --------- --------- --------- --------- -----------
Expenses -
Management fee $ 863,230 $ 2,550,849 $ 1,031,063 $ 697,496 $ 2,540,788 $ 795,243
Trustees' compensation 15,915 15,915 15,915 15,915 15,915 15,915
Shareholder servicing agent fee
(Class A) 215,693 637,635 258,119 172,856 649,187 199,239
Shareholder servicing agent fee
(Class B) 28,081 66,041 33,850 25,477 55,843 25,881
Shareholder servicing agent fee
(Class C) -- 12,778 -- -- 3,929 --
Distribution and service fee
(Class A) 505,240 1,487,788 602,279 403,330 1,520,607 464,890
Distribution and service fee
(Class B) 127,644 301,823 153,865 115,801 253,832 117,640
Distribution and service fee
(Class C) -- 85,187 -- -- 26,194 --
Custodian fee 62,082 249,811 88,210 49,958 210,487 72,691
Printing 27,132 46,036 21,139 20,537 63,853 21,875
Postage 17,299 35,577 14,615 9,394 43,695 12,366
Auditing fees 31,580 22,430 31,580 34,455 31,580 31,580
Legal fees 2,914 4,260 3,176 580 5,650 4,856
Miscellaneous 50,745 171,353 88,275 55,320 182,565 78,438
--------- --------- --------- --------- --------- -----------
Total expenses $ 1,947,555 $ 5,687,843 $ 2,342,086 $1,601,119 $ 5,604,125 $1,840,614
Fees paid indirectly (18,103) (39,225) (8,800) (6,497) (35,176) (10,841)
--------- --------- --------- --------- --------- -----------
Net expenses $ 1,929,452 $ 5,648,618 $ 2,333,286 $1,594,622 $ 5,568,949 $1,829,773
--------- --------- --------- --------- --------- -----------
Net investment income $ 7,873,071 $22,978,702 $ 9,387,094 $6,446,216 $23,707,705 $7,530,240
--------- --------- --------- --------- --------- -----------
Realized and unrealized gain (loss)
on investments:
Realized gain (loss) (identified
cost basis) -
Investment transactions $ 1,144,173 $ 6,476,859 $ 1,397,129 $1,466,595 $ 4,307,568 $ 251,622
Futures contracts (2,712,836) (1,973,633) (1,424,174) (596,378) (406,452) (43,730)
--------- --------- --------- --------- --------- -----------
Net realized gain (loss) on
investments $(1,568,663) $ 4,503,226 $ (27,045) $ 870,217 $ 3,901,116 $ 207,892
--------- --------- --------- --------- --------- -----------
Change in unrealized appreciation
(depreciation) -
Investments $ 2,847,272 $ 1,476,394 $ 1,796,640 $ 922,874 $ 1,711,965 $1,196,561
Futures contracts 158,229 273,204 (73,449) (34,625) (66,028) (23,878)
--------- --------- --------- --------- --------- -----------
Net unrealized gain on
investments $ 3,005,501 $ 1,749,598 $ 1,723,191 $ 888,249 $ 1,645,937 $1,172,683
--------- --------- --------- --------- --------- -----------
Net realized and unrealized
gain on investments $ 1,436,838 $ 6,252,824 $ 1,696,146 $1,758,466 $ 5,547,053 $1,380,575
--------- --------- --------- --------- --------- -----------
Increase in net assets from
operations $ 9,309,909 $29,231,526 $11,083,240 $8,204,682 $29,254,758 $8,910,815
========= ========= ========= ========= ========= ===========
</TABLE>
See notes to financial statements
24
<PAGE>
Financial Statements -- continued
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
North South
Maryland Carolina Carolina Tennessee Virginia West Virginia
Year Ended March 31, 1996 Fund Fund Fund Fund Fund Fund
- -------------------------------------- ----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 7,873,071 $ 22,978,702 $ 9,387,094 $ 6,446,216 $ 23,707,705 $ 7,530,240
Net realized gain (loss) on
investments (1,568,663) 4,503,226 (27,045) 870,217 3,901,116 207,892
Net unrealized gain on investments 3,005,501 1,749,598 1,723,191 888,249 1,645,937 1,172,683
--------- --------- --------- --------- --------- -----------
Increase in net assets from
operations $ 9,309,909 $ 29,231,526 $ 11,083,240 $ 8,204,682 $ 29,254,758 $ 8,910,815
--------- --------- --------- --------- --------- -----------
Distributions declared to shareholders -
From net investment income
(Class A) $ (7,300,383) $ (21,314,451) $ (8,720,747) $ (5,935,131) $ (22,461,025) $ (6,996,162)
From net investment income
(Class B) (552,380) (1,292,311) (666,347) (511,085) (1,128,382) (534,078)
From net investment income
(Class C) -- (371,940) -- -- (118,298) --
In excess of net investment
income (Class A) -- (76,544) (7,833) (26,378) (205,431) (26,236)
In excess of net investment
income (Class B) -- (4,641) (598) (2,271) (10,320) (2,003)
In excess of net investment
income (Class C) -- (1,336) -- -- (1,082) --
--------- --------- --------- --------- --------- -----------
Total distributions declared to
shareholders $ (7,852,763) $ (23,061,223) $ (9,395,525) $ (6,474,865) $ (23,924,538) $ (7,558,479)
--------- --------- --------- --------- --------- -----------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 11,754,356 $ 97,550,746 $ 19,862,472 $ 9,264,655 $ 92,397,697 $ 17,491,754
Net asset value of shares issued to
shareholders in reinvestment of
distributions 4,256,011 13,374,416 5,148,735 3,118,511 12,033,414 4,098,096
Cost of shares reacquired (21,005,744) (128,090,675) (25,486,913) (18,945,783) (114,561,422) (13,443,792)
--------- --------- --------- --------- --------- -----------
Increase (decrease) in net assets
from Fund share transactions $ (4,995,377) $ (17,165,513) $ (475,706) $ (6,562,617) $ (10,130,311) $ 8,146,058
--------- --------- --------- --------- --------- -----------
Total increase (decrease) in net
assets $ (3,538,231) $ (10,995,210) $ 1,212,009 $ (4,832,800) $ (4,800,091) $ 9,498,394
Net assets:
At beginning of period 156,528,827 463,540,762 184,008,641 127,578,575 454,994,365 137,662,087
--------- --------- --------- --------- --------- -----------
At end of period $152,990,596 $ 452,545,552 $185,220,650 $122,745,775 $ 450,194,274 $147,160,481
========= ========= ========= ========= ========= ===========
Accumulated distributions in excess of
net investment income included in
net assets at end of period $ (523,799) $ (1,035,031) $ (329,568) $ (176,038) $ (1,467,910) $ (445,457)
========= ========= ========= ========= ========= ===========
</TABLE>
<TABLE>
<CAPTION>
North South
Maryland Carolina Carolina Tennessee Virginia West Virginia
Year Ended March 31, 1995 Fund Fund Fund Fund Fund Fund
- -------------------------------------- ----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 8,772,044 $ 25,142,344 $ 9,684,650 $ 6,896,351 $ 25,267,942 $ 7,516,720
Net realized loss on investments (1,923,431) (13,223,193) (2,073,916) (1,682,291) (13,703,623) (2,860,553)
Net unrealized gain on investments 2,635,697 13,773,515 4,304,353 1,666,615 12,561,701 3,004,520
--------- --------- --------- --------- --------- -----------
Increase in net assets from
operations $ 9,484,310 $ 25,692,666 $ 11,915,087 $ 6,880,675 $ 24,126,020 $ 7,660,687
--------- --------- --------- --------- --------- -----------
Distributions declared to shareholders -
From net investment income
(Class A) $ (8,333,922) $(23,735,358) $ (9,149,011) $ (6,505,625) $(24,093,973) $ (7,131,736)
From net investment income
(Class B) (438,122) (973,317) (535,639) (369,736) (877,432) (360,160)
From net investment income
(Class C) -- (383,161) -- -- (296,537) --
From net realized gain on
investments (Class A) -- (2,495,977) (887,817) (16,392) (1,715,754) --
From net realized gain on
investments (Class B) -- (103,677) (54,897) (887) (62,515) --
From net realized gain on
investments (Class C) -- (43,596) -- -- (5,815) --
In excess of net investment income
(Class A) (34,518) -- (4,241) -- (70,576) --
In excess of net investment income
(Class B) (1,815) -- (248) -- (2,570) --
In excess of net investment income
(Class C) -- -- -- -- (869) --
In excess of net realized gain on
investments (Class A) (551,221) (1,516,684) (433,734) (116,960) (328,083) (170,490)
In excess of net realized gain on
investments (Class B) (35,494) (62,999) (26,820) (6,328) (11,934) (8,251)
In excess of net realized gain on
investments (Class C) -- (26,491) -- -- (1,112) --
--------- --------- --------- --------- --------- -----------
Total distributions declared to
shareholders $ (9,395,092) $(29,341,260) $(11,092,407) $ (7,015,928) $(27,467,170) $ (7,670,637)
--------- --------- --------- --------- --------- -----------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 14,962,711 $ 54,114,282 $ 21,068,556 $ 18,228,934 $ 52,465,877 $ 14,859,231
Net asset value of shares issued to
shareholders in reinvestment of
distributions 5,220,027 17,432,937 6,185,730 3,344,948 13,994,379 4,136,605
Cost of shares reacquired (31,511,548) (87,206,798) (27,469,733) (16,270,748) (66,801,938) (17,506,211)
--------- --------- --------- --------- --------- -----------
Increase (decrease) in net assets
from Fund
share transactions $(11,328,810) $(15,659,579) $ (215,447) $ 5,303,134 $ (341,682) $
1,489,625
--------- --------- --------- --------- --------- -----------
Total increase (decrease) in net
assets $(11,239,592) $(19,308,173) $ 607,233 $ 5,167,881 $ (3,682,832) $ 1,479,675
Net assets:
At beginning of period 167,768,419 482,848,935 183,401,408 122,410,694 458,677,197 136,182,412
--------- --------- --------- --------- --------- -----------
At end of period $156,528,827 $463,540,762 $184,008,641 $127,578,575 $454,994,365 $137,662,087
========= ========= ========= ========= ========= ===========
Accumulated distributions in excess of
net investment income included in
net assets at end of period $ (650,261) $ (1,261,813) $ (437,589) $ (228,302) $ (1,521,124) $ (421,397)
========= ========= ========= ========= ========= ===========
</TABLE>
See notes to financial statements
25
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Maryland Fund
------------------------- ------------------- -------- ---------- ------- ------- ------- ------ --------
Two
Year Months
Ended Ended Year Ended
March 31, March 31, January 31,
------------------------- -------- ------- -------- ---------- ------- ------- ------- ------ --------
1996 1995 1994 1994 1993 1992 1991 1990 1989
------------------------- -------- ------- -------- ---------- ------- ------- ------- ------ --------
Class A
------------------------- -------- ------- -------- ---------- ------- ------- ------- ------ --------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value -
beginning of period $ 10.94 $ 10.89 $ 11.81 $ 11.40 $ 11.20 $ 10.97 $ 10.79 $ 10.76 $ 10.62
Income from investment
operations# -
Net investment income $ 0.57 $ 0.59 $ 0.10 $ 0.62 $ 0.67 $ 0.70 $ 0.70 $ 0.69 $ 0.69
Net realized and
unrealized gain
(loss) on investments 0.09 0.09 (0.92) 0.53 0.24 0.31 0.19 0.04 0.14
---- --- ---- ------ --- --- --- -- ----
Total from investment
operations $ 0.66 $ 0.68 $ (0.82) $ 1.15 $ 0.91 $ 1.01 $ 0.89 $ 0.73 $ 0.83
---- --- ---- ------ --- --- --- -- ----
Less distributions declared to
shareholders -
From net investment
income++++ $ (0.56) $ (0.59) $ (0.06) $ (0.61) $ (0.69) $ (0.76) $ (0.70) $ (0.69) $ (0.69)
From net realized gain
on investments -- -- -- (0.07) (0.02) (0.02) (0.01) (0.01) --
In excess of net
investment income -- -- (0.04) (0.04) -- -- -- -- --
In excess of net
realized gain on
investments -- (0.04) -- (0.02) -- -- -- -- --
---- --- ---- ------ --- --- --- -- ----
Total distributions
declared to
shareholders $ (0.56) $ (0.63) $ (0.10) $ (0.74) $ (0.71) $ (0.78) $ (0.71) $ (0.70) $ (0.69)
---- --- ---- ------ --- --- --- -- ----
Net asset value - end
of period $ 11.04 $ 10.94 $ 10.89 $ 11.81 $ 11.40 $ 11.20 $ 10.97 $ 10.79 $ 10.76
==== === ==== ====== === === === == ====
Total return++ 6.17% 6.51% (6.96)%+++ 10.27% 8.34% 9.55% 8.51% 6.90% 8.15%
Ratios (to average net
assets)/Supplemental data:
Expenses## 1.19% 1.21% 1.23%+ 1.25% 1.14% 1.16% 1.17% 1.18% 1.14%
Net investment income 5.10% 5.46% 4.97%+ 5.42% 6.13% 6.32% 6.45% 6.33% 6.52%
Portfolio turnover 15% 31% 1% 25% 5% 9% 41% 58% 34%
Net assets at end of
period (000 omitted) $139,297 $145,361 $161,290 $173,419 $145,794 $119,120 $101,742 $93,175 $84,380
</TABLE>
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on
average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
(double dagger) 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.
(two double daggers) For the year ended March 31, 1995, the per share
distribution in excess of net investment income was $0.003.
See notes to financial statements
26
<PAGE>
Financial Highlights - continued
<TABLE>
<CAPTION>
Maryland Fund
- -------------------------------------------- -------------------------------------------- --------------------- --------
Year Two Months
Year Ended Ended Ended Year Ended
January 31, March 31, March 31, January 31,
- -------------------------------------------- -------------------------------------------- ---------- ------- --------
1988 1987 1996 1995 1994 1994**
- -------------------------------------------- -------------------------------------------- ---------- ------- --------
Class A Class B
- -------------------------------------------- -------------------------------------------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.20 $ 10.44 $ 10.93 $ 10.88 $11.80 $11.88
Income from investment operations# -
Net investment income $ 0.68 $ 0.71 $ 0.48 $ 0.51 $ 0.08 $ 0.22
Net realized and unrealized gain (loss)
on investments (0.57) 0.78 0.10 0.09 (0.91) (0.01)
-------- ----- ------ -------- ------- ---------
Total from investment operations $ 0.11 $ 1.49 $ 0.58 $ 0.60 $(0.83) $ 0.21
-------- ----- ------ -------- ------- ---------
Less distributions declared to shareholders -
From net investment income++++ $ (0.67) $ (0.73) $ (0.48) $ (0.51) $(0.08) $(0.21)
From net realized gain on investments (0.01) -- -- -- -- (0.05)
In excess of net investment income -- -- -- -- (0.01) (0.01)
In excess of net realized gain on
investments -- -- -- (0.04) -- (0.02)
From paid-in capital (0.01) -- -- -- -- --
-------- ----- ------ -------- ------- ---------
Total distributions declared to
shareholders $ (0.69) $ (0.73) $ (0.48) $ (0.55) $(0.09) $(0.29)
-------- ----- ------ -------- ------- ---------
Net asset value - end of period $ 10.62 $ 11.20 $ 11.03 $ 10.93 $10.88 $11.80
======== ===== ====== ======== ======= =========
Total return++ 1.25% 14.86% 5.41% 5.75% (7.08)%+++ 4.45%+
Ratios (to average net assets)/Supplemental
data:
Expenses## 1.10% 1.10% 1.91% 1.93% 1.95%+ 1.81%+
Net investment income 6.47% 6.60% 4.36% 4.73% 4.19%+ 4.23%+
Portfolio turnover 13% 11% 15% 31% 1% 25%
Net assets at end of period (000 omitted) $79,906 $81,712 $13,694 $11,168 $6,478 $5,345
</TABLE>
**For the period from the commencement of offering of Class B shares,
September 7, 1993 to January 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on
average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
(double dagger) 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.
(two double daggers) For the year ended March 31, 1995, the per share
distribution in excess of net investment income was $0.003.
See notes to financial statements
27
<PAGE>
Financial Highlights - continued
<TABLE>
<CAPTION>
North Carolina Fund
------------------------- ------------------- -------- ---------- ------- ------- ------- ------ --------
Two
Year Months
Ended Ended Year Ended
March 31, March 31, January 31,
------------------------- -------- ------- -------- ---------- ------- ------- ------- ------ --------
1996 1995 1994 1994 1993 1992 1991 1990 1989
------------------------- -------- ------- -------- ---------- ------- ------- ------- ------ --------
Class A
------------------------- -------- ------- -------- ---------- ------- ------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -
beginning of period $ 11.42 $ 11.48 $ 12.37 $ 11.80 $ 11.45 $ 11.30 $ 11.18 $ 11.15 $ 11.13
------ ----- ------ -------- ----- ----- ----- ---- ------
Income from investment
operations# -
Net investment income $ 0.59 $ 0.61 $ 0.10 $ 0.64 $ 0.65 $ 0.70 $ 0.72 $ 0.73 $ 0.74
Net realized and
unrealized gain (loss)
on investments 0.15 0.03 (0.89) 0.58 0.37 0.26 0.17 0.03 0.02
------ ----- ------ -------- ----- ----- ----- ---- ------
Total from investment
operations $ 0.74 $ 0.64 $ (0.79) $ 1.22 $ 1.02 $ 0.96 $ 0.89 $ 0.76 $ 0.76
------ ----- ------ -------- ----- ----- ----- ---- ------
Less distributions declared to
shareholders -
From net investment
income++++++ $ (0.59) $ (0.60) $ (0.07) $ (0.61) $ (0.67) $ (0.76) $ (0.72) $ (0.73) $ (0.74)
From net realized gain
on investments -- (0.06) -- (0.01) -- (0.01) (0.05) -- --
In excess of net
investment income -- -- (0.03) (0.03) -- -- -- -- --
In excess of net
realized gain on
investments -- (0.04) -- -- -- -- -- -- --
From paid-in capital++++ -- -- -- -- -- (0.04) -- -- --
------ ----- ------ -------- ----- ----- ----- ---- ------
Total distributions
declared to
shareholders $ (0.59) $ (0.70) $ (0.10) $ (0.65) $ (0.67) $ (0.81) $ (0.77) $ (0.73) $ (0.74)
------ ----- ------ -------- ----- ----- ----- ---- ------
Net asset value - end of
period $ 11.57 $ 11.42 $ 11.48 $ 12.37 $ 11.80 $ 11.45 $ 11.30 $ 11.18 $ 11.15
====== ===== ====== ======== ===== ===== ===== ==== ======
Total return++ 6.56% 5.86% (6.39)%++ 10.59% 9.23% 8.82% 8.34% 6.97% 7.12%
Ratios (to average net
assets)/Supplemental data:
Expenses## 1.17% 1.16% 1.16%+ 1.19% 1.07% 1.09% 1.09% 1.12% 1.11%
Net investment income 5.04% 5.38% 4.96%+ 5.21% 5.80% 6.17% 6.47% 6.48% 6.70%
Portfolio turnover 30% 58% 2% 12% 2% 39% 44% 61% 25%
Net assets at end of
period (000 omitted) $409,347 $429,131 $460,321 $495,158 $398,352 $312,466 $226,806 $175,101 $129,287
</TABLE>
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on
average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
(double dagger) 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.
(two double daggers) For the year ended January 31, 1991, the per share
distribution from paid-in capital was $0.0005.
(three double daggers) For the year ended March 31, 1996, the per share
distribution in excess of net investment income was $0.002.
See notes to financial statements
28
<PAGE>
Financial Highlights - continued
<TABLE>
<CAPTION>
North Carolina Fund
- -------------------------------------------- -------------------------------------------------------------------------
Year Two Months
Year Ended Ended Ended Year Ended
January 31, March 31, March 31, January 31,
- -------------------------------------------- -------------------------------------------- ---------- ------- --------
1988 1987 1996 1995 1994 1994**
- -------------------------------------------- -------------------------------------------- ---------- ------- --------
Class A Class B
- -------------------------------------------- -------------------------------------------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.82 $ 11.09 $ 11.42 $ 11.47 $ 12.36 $ 12.36
-------- ----- ------ -------- ------- ---------
Income from investment operations# -
Net investment income $ 0.73 $ 0.75 $ 0.50 $ 0.52 $ 0.08 $ 0.22
Net realized and unrealized gain (loss) on
investments (0.69) 0.90 0.14 0.05 (0.89) 0.01
-------- ----- ------ -------- ------- ---------
Total from investment operations $ 0.04 $ 1.65 $ 0.64 $ 0.57 $ (0.81) $ 0.23
-------- ----- ------ -------- ------- ---------
Less distributions declared to shareholders -
From net investment income++++ $ (0.73) $ (0.76) $ (0.50) $ (0.52) $ (0.08) $ (0.21)
From net realized gain on investments -- (0.16) -- (0.06) -- (0.01)
In excess of net investment income -- -- -- -- -- (0.01)
In excess of net realized gain on
investments -- -- -- (0.04) -- --
-------- ----- ------ -------- ------- ---------
Total distributions declared to
shareholders $ (0.73) $ (0.92) $ (0.50) $ (0.62) $ (0.08) $ (0.23)
-------- ----- ------ -------- ------- ---------
Net asset value - end of period $ 11.13 $ 11.82 $ 11.56 $ 11.42 $ 11.47 $ 12.36
======== ===== ====== ======== ======= =========
Total return++ 0.65% 15.76% 5.70% 5.20% (6.51)%+++ 4.58%+
Ratios (to average net assets)/Supplemental
data:
Expenses## 1.08% 1.07% 1.90% 1.88% 1.88%+ 1.84%+
Net investment income 6.71% 6.63% 4.30% 4.64% 4.18%+ 4.03%+
Portfolio turnover 10% 10% 30% 58% 2% 12%
Net assets at end of period (000 omitted) $110,462 $105,668 $33,847 $26,260 $15,866 $13,379
</TABLE>
** For the period from the commencement of offering of Class B shares,
September 7, 1993 to January 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on
average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
(double dagger) 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.
(two double daggers) For the year ended March 31, 1996 and the two months
ended March 31, 1994, the per share distribution in excess of net investment
income for Class B shares was $0.002 and $0.004, respectively.
See notes to financial statements
29
<PAGE>
Financial Highlights - continued
<TABLE>
<CAPTION>
North Carolina Fund
- ----------------------------------------------------- -------------------- ---------- ------------
Two Months
Year Ended Ended Year Ended
March 31, March 31, January 31,
- ----------------------------------------------------- ---------- ------ ---------- ------------
1996 1995 1994 1994***
- ----------------------------------------------------- ---------- ------ ---------- ------------
Class C
- ----------------------------------------------------- ---------- ------ ---------- ------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $11.41 $11.47 $12.36 $12.24
-------- ---- -------- ----------
Income from investment operations# -
Net investment income $ 0.51 $ 0.53 $ 0.10 $ 0.02
Net realized and unrealized gain (loss) on
investments 0.15 0.04 (0.90) 0.12
-------- ---- -------- ----------
Total from investment operations $ 0.66 $ 0.57 $(0.80) $ 0.14
-------- ---- -------- ----------
Less distributions declared to shareholders -
From net investment income++++ $(0.51) $(0.53) $(0.09) $(0.02)
From net realized gain on investments -- (0.06) -- --
In excess of net realized gain on investments -- (0.04) -- --
-------- ---- -------- ----------
Total distributions declared to shareholders $(0.51) $(0.63) $(0.09) $(0.02)
-------- ---- -------- ----------
Net asset value - end of period $11.56 $11.41 $11.47 $12.36
======== ==== ======== ==========
Total return 5.87% 5.18% (6.50)%+++ 16.50%+
Ratios (to average net assets)/Supplemental data:
Expenses## 1.83% 1.81% 1.82%+ 1.44%+
Net investment income 4.38% 4.71% 4.25%+ 2.33%+
Portfolio turnover 30% 58% 2% 12%
Net assets at end of period (000 omitted) $9,352 $8,149 $6,661 $4,584
</TABLE>
*** For the period from the commencement of offering of Class C shares,
January 3, 1994 to January 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on
average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
(two double daggers) For the year ended March 31, 1996, the two months ended
March 31, 1994 and the year ended January 31, 1994, the per share
distribution in excess of net investment income was $0.002, $0.002 and
$0.003, respectively.
See notes to financial statements
30
<PAGE>
Financial Highlights - continued
<TABLE>
<CAPTION>
South Carolina Fund
------------------------- ------------------- -------- ---------- ------- ------- ------- ------ --------
Two
Year Months
Ended Ended Year Ended
March 31, March 31, January 31,
------------------------- -------- ------- -------- ---------- ------- ------- ------- ------ --------
1996 1995 1994 1994 1993 1992 1991 1990 1989
------------------------- -------- ------- -------- ---------- ------- ------- ------- ------ --------
Class A
------------------------- -------- ------- -------- ---------- ------- ------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -
beginning of period $ 11.86 $ 11.79 $ 12.74 $ 12.02 $ 11.74 $ 11.45 $ 11.30 $ 11.24 $ 11.14
------ ----- ------ -------- ----- ----- ----- ---- ------
Income from investment
operations# -
Net investment income $ 0.62 $ 0.63 $ 0.08 $ 0.63 $ 0.67 $ 0.70 $ 0.71 $ 0.72 $ 0.76
Net realized and
unrealized gain (loss)
on investments 0.11 0.15 (0.92) 0.74 0.34 0.40 0.21 0.06 0.11
------ ----- ------ -------- ----- ----- ----- ---- ------
Total from investment
operations $ 0.73 $ 0.78 $ (0.84) $ 1.37 $ 1.01 $ 1.10 $ 0.92 $ 0.78 $ 0.87
------ ----- ------ -------- ----- ----- ----- ---- ------
Less distributions declared to
shareholders -
From net investment
income++++ $ (0.62) $ (0.62) $ (0.08) $ (0.61) $ (0.69) $ (0.76) $ (0.71) $ (0.72) $ (0.77)
From net realized gain
on investments -- (0.06) -- (0.01) (0.04) (0.05) (0.06) -- --
In excess of net
investment income -- -- (0.03) (0.03) -- -- -- -- --
In excess of net
realized gain on
investments -- (0.03) -- -- -- -- -- -- --
------ ----- ------ -------- ----- ----- ----- ---- ------
Total distributions
declared to
shareholders $ (0.62) $ (0.71) $ (0.11) $ (0.65) $ (0.73) $ (0.81) $ (0.77) $ (0.72) $ (0.77)
------ ----- ------ -------- ----- ----- ----- ---- ------
Net asset value - end of
period $ 11.97 $ 11.86 $ 11.79 $ 12.74 $ 12.02 $ 11.74 $ 11.45 $ 11.30 $ 11.24
====== ===== ====== ======== ===== ===== ===== ==== ======
Total return++ 6.20% 6.93% (6.65)%+++ 11.69% 8.89% 9.95% 8.46% 7.13% 8.18%
Ratios (to average net
assets)/Supplemental data:
Expenses## 1.20% 1.19% 1.23%+ 1.22% 1.12% 1.15% 1.18% 1.21% 0.97%
Net investment income 5.10% 5.37% 5.09%+ 5.06% 5.74% 6.07% 6.30% 6.35% 6.90%
Portfolio turnover 18% 30% 4% 10% 11% 22% 47% 54% 27%
Net assets at end of
period (000 omitted) $166,801 $171,045 $173,316 $187,307 $144,539 $101,434 $75,922 $57,675 $45,391
</TABLE>
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on
average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
(double dagger) 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.
(two double daggers) For the year ended March 31, 1996, the per share
distribution in excess of net investment income was $0.0006 for Class A
shares.
See notes to financial statements
31
<PAGE>
Financial Highlights - continued
<TABLE>
<CAPTION>
South Carolina Fund
- -------------------------------------------- --------------------- ---------- ---------- --------- -----------
Two Months
Year Ended Year Ended Ended Year Ended
January 31, March 31, March 31, January 31,
- -------------------------------------------- ---------- ------- ---------- ---------- --------- -----------
1988 1987 1996 1995 1994 1994**
- -------------------------------------------- ---------- ------- ---------- ---------- --------- -----------
Class A Class B
- -------------------------------------------- ---------- ------- ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.54 $ 10.89 $ 11.86 $ 11.78 $ 12.73 $12.67
-------- ----- -------- -------- ------- ---------
Income from investment operations# -
Net investment income $ 0.77 $ 0.77 $ 0.52 $ 0.54 $ 0.08 $ 0.21
Net realized and unrealized gain (loss) on
investments (0.36) 0.69 0.12 0.17 (0.94) 0.06
-------- ----- -------- -------- ------- ---------
Total from investment operations $ 0.41 $ 1.46 $ 0.64 $ 0.71 $ (0.86) $ 0.27
-------- ----- -------- -------- ------- ---------
Less distributions declared to shareholders -
From net investment income++++ $ (0.77) $ (0.78) $ (0.53) $ (0.54) $ (0.08) $(0.20)
From net realized gain on investments -- (0.03) -- (0.06) -- --
In excess of net investment income -- -- -- -- (0.01) (0.01)
In excess of net realized gain on
investments -- -- -- (0.03) -- --
From paid-in capital (0.04) -- -- -- -- --
-------- ----- -------- -------- ------- ---------
Total distributions declared to
shareholders $ (0.81) $ (0.81) $ (0.53) $ (0.63) $ (0.09) $(0.21)
-------- ----- -------- -------- ------- ---------
Net asset value - end of period $ 11.14 $ 11.54 $ 11.97 $ 11.86 $ 11.78 $12.73
======== ===== ======== ======== ======= =========
Total return++ 3.92% 14.05% 5.43% 6.26% (6.77)%+++ 5.47%+
Ratios (to average net assets)/Supplemental data:
Expenses## 0.81% 0.99% 1.92% 1.90% 1.96%+ 1.90%+
Net investment income 7.07% 7.00% 4.35% 4.63% 4.29%+ 3.86%+
Portfolio turnover 12% 13% 18% 30% 4% 10%
Net assets at end of period (000 omitted) $34,025 $27,978 $18,420 $12,964 $10,085 $8,217
</TABLE>
** For the period from the commencement of offering of Class B shares,
September 7, 1993 to January 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on
average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
(double dagger) 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.
(two double daggers) For the year ended March 31, 1996 and March 31, 1995,
the per share distribution in excess of net investment income for Class B
shares was $0.0005 and $0.00436, respectively.
See notes to financial statements
32
<PAGE>
Financial Highlights - continued
<TABLE>
<CAPTION>
Tennessee Fund
- ---------------------------------------- ---------------------- --------- ---------- -------- -------- ----------
Two Months
Year Ended Ended Year Ended
March 31, March 31, January 31,
- ---------------------------------------- ---------- -------- --------- ---------- -------- -------- ----------
1996 1995 1994 1994 1993 1992 1991
- ---------------------------------------- ---------- -------- --------- ---------- -------- -------- ----------
Class A
-------------------------------------- -------- ------ ------- -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.27 $ 10.26 $ 10.94 $ 10.37 $ 10.10 $ 9.90 $ 9.80
-------- ------ ------- -------- ------ ------ --------
Income from investment operations# -
Net investment incomeS. $ 0.54 $ 0.56 $ 0.09 $ 0.57 $ 0.57 $ 0.61 $ 0.62
Net realized and unrealized gain (loss)
on investments 0.13 0.02 (0.68) 0.57 0.31 0.30 0.13
-------- ------ ------- -------- ------ ------ --------
Total from investment operations $ 0.67 $ 0.58 $ (0.59) $ 1.14 $ 0.88 $ 0.91 $ 0.75
-------- ------ ------- -------- ------ ------ --------
Less distributions declared to shareholders -
From net investment income++++++++ $ (0.54) $ (0.56) $ (0.07) $ (0.54) $ (0.57) $ (0.66) $ (0.63)
From net realized gain on
investments++++ -- -- -- -- (0.01) (0.05) (0.02)
In excess of net investment income -- -- (0.02) (0.03) (0.03) -- --
In excess of net realized gain on
investments -- (0.01) -- -- -- -- --
From paid-in capital++++++ -- -- -- -- -- -- --
-------- ------ ------- -------- ------ ------ --------
Total distributions declared to
shareholders $ (0.54) $ (0.57) $ (0.09) $ (0.57) $ (0.61) $ (0.71) $ (0.65)
-------- ------ ------- -------- ------ ------ --------
Net asset value - end of period $ 10.40 $ 10.27 $ 10.26 $ 10.94 $ 10.37 $ 10.10 $ 9.90
======== ====== ======= ======== ====== ====== ========
Total return++ 6.66% 5.86% (5.39)%+++ 11.20% 9.03% 9.50% 7.96%
Ratios (to average net assets)/Supplemental dataS.:
Expenses## 1.21% 1.22% 1.21%+ 1.29% 1.14% 1.15% 1.03%
Net investment income 5.18% 5.52% 5.31%+ 5.25% 5.89% 6.11% 6.37%
Portfolio turnover 20% 27% 4% 12% 9% 42% 58%
Net assets at end of period (000
omitted) $109,811 $117,572 $117,117 $123,050 $99,443 $87,898 $72,108
* For the period from the commencement of investment operations, August 12, 1988 to January 31, 1989.
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid indirectly.
(double dagger) 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.
(two double daggers) For the year ended March 31, 1995, the per share distribution from net realized gain on investments was
$0.0014.
(three double daggers) For the year ended January 31, 1991, the per share distribution from paid-in capital was $0.0013.
(four double daggers) For the year ended March 31, 1996, the per share distribution in excess of net investment income was
$0.0024.
(section) The investment adviser did not impose all or a portion of its advisory, distribution or expense reimbursement fees for
the periods indicated. If these fees had been incurred by the Fund, the net investment income per share and the ratios would have
been:
Net investment income -- -- -- -- $ 0.61 -- --
Ratios (to average net assets):
Expenses -- -- -- -- 1.17% -- --
Net investment income -- -- -- -- 6.23% -- --
</TABLE>
See notes to financial statements
33
<PAGE>
Financial Highlights - continued
<TABLE>
<CAPTION>
Tennessee Fund
- -------------------------------------------- --------------------- ---------- ---------- --------- -----------
Two Months
Year Ended Year Ended Ended Year Ended
January 31, March 31, March 31, January 31,
- -------------------------------------------- ---------- ------- ---------- ---------- --------- -----------
1990 1989* 1996 1995 1994 1994**
- -------------------------------------------- ---------- ------- ---------- ---------- --------- -----------
Class A Class B
- -------------------------------------------- --------------------- ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.68 $ 9.53 $ 10.26 $ 10.26 $10.95 $10.87
-------- ----- -------- -------- ------- ---------
Income from investment operations# -
Net investment incomeS. $ 0.67 $ 0.22 $ 0.46 $ 0.48 $ 0.08 $ 0.19
Net realized and unrealized gain (loss) on
investments 0.11 0.10 0.14 0.01 (0.69) 0.08
-------- ----- -------- -------- ------- ---------
Total from investment operations $ 0.78 $ 0.32 $ 0.60 $ 0.49 $(0.61) $ 0.27
-------- ----- -------- -------- ------- ---------
Less distributions declared to shareholders -
From net investment income++++++ $ (0.66) $ (0.17) $ (0.47) $ (0.48) $(0.08) $(0.19)
From net realized gain on investments++++ -- -- -- -- -- --
In excess of net realized gain on
investments -- -- -- (0.01) -- --
-------- ----- -------- -------- ------- ---------
Total distributions declared to
shareholders $ (0.66) $ (0.17) $ (0.47) $ (0.49) $(0.08) $(0.19)
-------- ----- -------- -------- ------- ---------
Net asset value - end of period $ 9.80 $ 9.68 $ 10.39 $ 10.26 $10.26 $10.95
======== ===== ======== ======== ======= =========
Total return 8.30% 3.43%+++ 5.89% 5.00% (5.59)%+++ 2.48%+++
Ratios (to average net assets)/Supplemental
data:
Expenses## 0.53% 0.40%+ 1.93% 1.94% 1.93%+ 1.93%+
Net investment income 6.70% 5.98%+ 4.43% 4.80% 4.49%+ 4.20%+
Portfolio turnover 78% 5% 20% 27% 4% 12%
Net assets at end of period (000 omitted) $56,048 $15,832 $12,935 $10,006 $5,294 $3,818
* For the period from the commencement of investment operations, August 12, 1988 to January 31, 1989.
** For the period from the commencement of offering of Class B shares, September 7, 1993 to January 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
(two double daggers) For the year ended March 31, 1995, the per share distribution from net realized gain on investments was
$0.0014.
(three double daggers) For the year ended March 31, 1996, the per share distribution in excess of net investment income was
$0.0021.
(section) Net investment income $ 0.60 $ 0.20 -- -- -- --
Ratios (to average net assets):
Expenses 1.24% 0.95%+ -- -- -- --
Net investment income 5.99% 5.43%+ -- -- -- --
</TABLE>
See notes to financial statements
34
<PAGE>
Financial Highlights - continued
<TABLE>
<CAPTION>
Virginia Fund
------------------------- ------------------- -------- ---------- ------- ------- ------- ------ --------
Two
Year Months
Ended Ended Year Ended
March 31, March 31, January 31,
------------------------- -------- ------- -------- ---------- ------- ------- ------- ------ --------
1996 1995 1994 1994 1993 1992 1991 1990 1989
------------------------- -------- ------- -------- ---------- ------- ------- ------- ------ --------
Class A
------------------------- -------- ------- -------- ---------- ------- ------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -
beginning of period $ 11.09 $ 11.15 $ 12.07 $ 11.72 $ 11.44 $ 11.16 $ 10.97 $ 10.91 $ 10.75
------ ----- ------ -------- ----- ----- ----- ---- ------
Income from investment
operations# -
Net investment income $ 0.59 $ 0.56 $ 0.10 $ 0.65 $ 0.68 $ 0.71 $ 0.73 $ 0.73 $ 0.74
Net realized and
unrealized gain (loss)
on investments 0.13 0.04 (0.92) 0.56 0.30 0.34 0.19 0.06 0.16
------ ----- ------ -------- ----- ----- ----- ---- ------
Total from investment
operations $ 0.72 $ 0.60 $ (0.82) $ 1.21 $ 0.98 $ 1.05 $ 0.92 $ 0.79 $ 0.90
------ ----- ------ -------- ----- ----- ----- ---- ------
Less distributions declared to
shareholders -
From net investment
income++++ $ (0.60) $ (0.61) $ (0.06) $ (0.62) $ (0.70) $ (0.77) $ (0.73) $ (0.73) $ (0.74)
From net realized gain
on investments++++++ -- (0.04) -- (0.20) -- -- -- -- --
In excess of net
investment income -- -- (0.04) (0.04) -- -- -- -- --
In excess of net
realized gain on
investments -- (0.01) -- -- -- -- -- -- --
------ ----- ------ -------- ----- ----- ----- ---- ------
Total distributions
declared to
shareholders $ (0.60) $ (0.66) $ (0.10) $ (0.86) $ (0.70) $ (0.77) $ (0.73) $ (0.73) $ (0.74)
------ ----- ------ -------- ----- ----- ----- ---- ------
Net asset value - end of
period $ 11.21 $ 11.09 $ 11.15 $ 12.07 $ 11.72 $ 11.44 $ 11.16 $ 10.97 $ 10.91
====== ===== ====== ======== ===== ===== ===== ==== ======
Total return++ 6.52% 5.67% (6.80)%+++ 10.67% 8.88% 9.76% 8.74% 7.46% 8.76%
Ratios (to average net
assets)/Supplemental data:
Expenses## 1.18% 1.16% 1.17%+ 1.18% 1.08% 1.08% 1.11% 1.12% 1.09%
Net investment income 5.20% 4.91% 5.33%+ 5.37% 6.02% 6.32% 6.64% 6.67% 6.91%
Portfolio turnover 42% 27% 5% 22% 20% 13% 38% 41% 38%
Net assets at end of
period (000 omitted) $418,408 $430,688 $443,580 $479,333 $399,696 $328,664 $275,202 $240,553 $207,680
</TABLE>
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on
average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
(double dagger) 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.
(two double daggers) For the year ended March 31, 1996 and March 31, 1995,
the per share distribution in excess of net investment income was $0.005 and
$0.003, respectively.
(three double daggers) For the year ended January 31, 1993, the per share
distribution from net realized gain on investments was $0.00348.
See notes to financial statements
35
<PAGE>
Financial Highlights - continued
<TABLE>
<CAPTION>
Virginia Fund
- -------------------------------------------- --------------------- ---------- ---------- --------- -----------
Two Months
Year Ended Year Ended Ended Year Ended
January 31, March 31, March 31, January 31,
- -------------------------------------------- ---------- ------- ---------- ---------- --------- -----------
1988 1987 1996 1995 1994 1994**
- -------------------------------------------- ---------- ------- ---------- ---------- --------- -----------
Class A Class B
- -------------------------------------------- ---------- ------- ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.38 $ 10.78 $ 11.08 $ 11.14 $ 12.06 $ 12.14
-------- ----- -------- -------- ------- ---------
Income from investment operations# -
Net investment income $ 0.72 $ 0.74 $ 0.51 $ 0.53 $ 0.09 $ 0.22
Net realized and unrealized gain (loss) on
investments (0.57) 0.61 0.13 (0.01) (0.92) 0.01
-------- ----- -------- -------- ------- ---------
Total from investment operations $ 0.15 $ 1.35 $ 0.64 $ 0.52 $ (0.83) $ 0.23
-------- ----- -------- -------- ------- ---------
Less distributions declared to shareholders -
From net investment income++++ $ (0.71) $ (0.75) $ (0.51) $ (0.53) $ (0.09) $ (0.21)
From net realized gain on investments (0.05) -- -- (0.04) -- (0.09)
In excess of net investment income -- -- -- -- -- (0.01)
In excess of net realized gain on
investments -- -- -- (0.01) -- --
From paid-in capital++++++ (0.02) -- -- -- -- --
-------- ----- -------- -------- ------- ---------
Total distributions declared to
shareholders $ (0.78) $ (0.75) $ (0.51) $ (0.58) $ (0.09) $ (0.31)
-------- ----- -------- -------- ------- ---------
Net asset value - end of period $ 10.75 $ 11.38 $ 11.21 $ 11.08 $ 11.14 $ 12.06
======== ===== ======== ======== ======= =========
Total return++ 1.61% 13.12% 5.85% 4.91% (6.92)%+++ 4.93%+
Ratios (to average net assets)/Supplemental data:
Expenses## 1.04% 1.02% 1.90% 1.88% 1.88%+ 1.82%+
Net investment income 6.75% 6.73% 4.46% 4.84% 4.52%+ 4.25%+
Portfolio turnover 11% 20% 42% 27% 5% 22%
Net assets at end of period (000 omitted) $192,104 $181,937 $28,420 $22,007 $13,337 $10,877
</TABLE>
** For the period from the commencement of offering of Class B shares,
September 7, 1993 to January 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on
average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
(double dagger) 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.
(two double daggers) For the year ended March 31, 1996, the year ended March
31, 1995 and the two months ended March 31, 1994, the per share distribution
in excess of net investment income was $0.002, $0.005 and $0.002,
respectively.
(three double daggers) For the year ended January 31, 1987 the per share
distribution from paid-in capital was $0.0005.
See notes to financial statements
36
<PAGE>
Financial Highlights - continued
<TABLE>
<CAPTION>
Virginia Fund
- ----------------------------------------------------- ------------------------ ---------- ------------
Two Months
Year Ended Ended Year Ended
March 31, March 31, January 31,
- ----------------------------------------------------- ---------- ---------- ---------- ------------
1996 1995 1994 1994***
- ----------------------------------------------------- ---------- ---------- ---------- ------------
Class C
- ----------------------------------------------------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $11.07 $11.14 $12.06 $11.94
-------- -------- -------- ----------
Income from investment operations# -
Net investment income $ 0.51 $ 0.56 $ 0.08 $ 0.02
Net realized and unrealized gain (loss) on
investments 0.15 (0.04) (0.91) 0.12
-------- -------- -------- ----------
Total from investment operations $ 0.66 $ 0.52 $(0.83) $ 0.14
-------- -------- -------- ----------
Less distributions declared to shareholders -
From net investment income++++ $(0.52) $(0.54) $(0.09) $(0.02)
From net realized gain on investments -- (0.04) -- --
In excess of net realized gain on investments -- (0.01) -- --
-------- -------- -------- ----------
Total distributions declared to shareholders $(0.52) $(0.59) $(0.09) $(0.02)
-------- -------- -------- ----------
Net asset value - end of period $11.21 $11.07 $11.14 $12.06
======== ======== ======== ==========
Total return 6.02% 4.85% (6.91)%+++ 17.05%+
Ratios (to average net assets)/Supplemental data:
Expenses## 1.83% 1.80% 1.82%+ 1.18%+
Net investment income 4.53% 4.90% 4.48%+ 1.79%+
Portfolio turnover 42% 27% 5% 22%
Net assets at end of period (000 omitted) $3,366 $2,300 $1,760 $ 833
</TABLE>
*** For the period from the commencement of offering of Class C shares,
January 3, 1994 to January 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on
average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
(two double daggers) For the years ended March 31, 1996, March 31, 1995 and
January 31, 1994, the per share distribution in excess of net investment
income was $0.005, $0.002 and $0.002, respectively.
See notes to financial statements
37
<PAGE>
Financial Highlights - continued
<TABLE>
<CAPTION>
West Virginia Fund
------------------------- ------------------- -------- ---------- ------- ------- ------- ------ --------
Two
Year Months
Ended Ended Year Ended
March 31, March 31, January 31,
------------------------- -------- ------- -------- ---------- ------- ------- ------- ------ --------
1996 1995 1994 1994 1993 1992 1991 1990 1989
------------------------- -------- ------- -------- ---------- ------- ------- ------- ------ --------
Class A
------------------------- -------- ------- -------- ---------- ------- ------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -
beginning of period $ 11.21 $ 11.19 $ 12.06 $ 11.50 $ 11.20 $ 10.93 $ 10.72 $ 10.68 $ 10.51
------ ----- ------ -------- ----- ----- ----- ---- ------
Income from investment
operations# -
Net investment income $ 0.61 $ 0.62 $ 0.01 $ 0.64 $ 0.66 $ 0.70 $ 0.71 $ 0.71 $ 0.77
Net realized and
unrealized gain (loss)
on investments 0.12 0.03 (0.78) 0.69 0.34 0.34 0.21 0.04 0.18
------ ----- ------ -------- ----- ----- ----- ---- ------
Total from investment
operations $ 0.73 $ 0.65 $ (0.77) $ 1.33 $ 1.00 $ 1.04 $ 0.92 $ 0.75 $ 0.95
------ ----- ------ -------- ----- ----- ----- ---- ------
Less distributions declared to
shareholders -
From net investment
income++++ $ (0.61) $ (0.62) $ (0.06) $ (0.61) $ (0.69) $ (0.76) $ (0.71) $ (0.71) $ (0.78)
From net realized gain
on investments -- -- -- (0.12) (0.01) (0.01) -- -- --
In excess of net
investment income -- -- (0.04) (0.04) -- -- -- -- --
In excess of net
realized gain on
investments -- (0.01) -- -- -- -- -- -- --
------ ----- ------ -------- ----- ----- ----- ---- ------
Total distributions
declared to
shareholders $ (0.61) $ (0.63) $ (0.10) $ (0.77) $ (0.70) $ (0.77) $ (0.71) $ (0.71) $ (0.78)
------ ----- ------ -------- ----- ----- ----- ---- ------
Net asset value - end of
period $ 11.33 $ 11.21 $ 11.19 $ 12.06 $ 11.50 $ 11.20 $ 10.93 $ 10.72 $ 10.68
====== ===== ====== ======== ===== ===== ===== ==== ======
Total return++ 6.58% 6.07% (6.37)%+++ 11.80% 9.12% 9.84% 8.91% 7.26% 9.43%
Ratios (to average net
assets)/Supplemental data:
Expenses## 1.22% 1.19% 1.30%+ 1.24% 1.15% 1.17% 1.21% 1.22% 0.86%
Net investment income 5.30% 5.62% 5.36%+ 5.30% 5.97% 6.33% 6.59% 6.63% 7.01%
Portfolio turnover 11% 23% 2% 26% 19% 14% 37% 34% 9%
Net assets at end of
period (000 omitted) $134,514 $127,616 $130,726 $141,190 $115,289 $80,440 $61,984 $52,398 $43,026
</TABLE>
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on
average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
(double dagger) 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.
(two double daggers) For the year ended March 31, 1996, the per share
distribution in excess of net investment income was $0.002.
See notes to financial statements
38
<PAGE>
Financial Highlights - continued
<TABLE>
<CAPTION>
West Virginia Fund
- -------------------------------------------- --------------------- ---------- ---------- --------- -----------
Two Months
Year Ended Year Ended Ended Year Ended
January 31, March 31, March 31, January 31,
- -------------------------------------------- ---------- ------- ---------- ---------- --------- -----------
1988 1987 1996 1995 1994 1994**
- -------------------------------------------- ---------- ------- ---------- ---------- --------- -----------
Class A Class B
- -------------------------------------------- ---------- ------- ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.30 $ 10.77 $ 11.21 $ 11.19 $12.06 $12.13
-------- ----- -------- -------- ------- ---------
Income from investment operations# -
Net investment income $ 0.77 $ 0.81 $ 0.52 $ 0.53 $ 0.01 $ 0.22
Net realized and unrealized gain (loss) on
investments (0.72) 0.56 0.12 0.04 (0.87) 0.05
-------- ----- -------- -------- ------- ---------
Total from investment operations $ 0.05 $ 1.37 $ 0.64 $ 0.57 $(0.86) $ 0.27
-------- ----- -------- -------- ------- ---------
Less distributions declared to shareholders -
From net investment income++++ $ (0.76) $ (0.81) $ (0.52) $ (0.54) $(0.01) $(0.21)
From net realized gain on investments (0.02) (0.03) -- -- -- (0.12)
In excess of net investment income -- -- -- -- -- (0.01)
In excess of net realized gain on
investments -- -- -- (0.01) -- --
From paid-in capital++++++ (0.06) -- -- -- -- --
-------- ----- -------- -------- ------- ---------
Total distributions declared to
shareholders $ (0.84) $ (0.84) $ (0.52) $ (0.55) $(0.01) $(0.34)
-------- ----- -------- -------- ------- ---------
Net asset value - end of period $ 10.51 $ 11.30 $ 11.33 $ 11.21 $11.19 $12.06
======== ===== ======== ======== ======= =========
Total return++ 0.76% 13.42% 5.81% 5.30% (6.48)%+++ 5.59%+
Ratios (to average net assets)/Supplemental data:
Expenses## 0.79% 0.87% 1.94% 1.91% 2.02%+ 1.89%+
Net investment income 7.32% 7.42% 4.56% 4.87% 4.56%+ 4.14%+
Portfolio turnover 11% 9% 11% 23% 2% 26%
Net assets at end of period (000 omitted) $36,276 $34,436 $12,647 $10,046 $5,456 $4,530
</TABLE>
** For the period from the commencement of offering of Class B shares,
September 7, 1993 to January 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to January 31, 1994 is based on
average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
(double dagger) 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.
(two double daggers) For the years ended March 31, 1996 and March 31, 1995,
the per share distribution in excess of net investment income for Class B
shares was $0.002 and $0.005.
(three double daggers) For the year ended January 31, 1987, the per share
distribution from paid-in capital was $0.0018.
See notes to financial statements
39
<PAGE>
Notes to Financial Statements
(1) Business and Organization
MFS Municipal Series Trust (the Trust) is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. The Trust presently
consists of nineteen Funds, as follows: MFS Municipal Income Fund, MFS
Alabama Municipal Bond Fund, MFS Arkansas Municipal Bond Fund, MFS California
Municipal Bond Fund, MFS Florida Municipal Bond Fund, MFS Georgia Municipal
Bond Fund, MFS Louisiana Municipal Bond Fund, MFS Maryland Municipal Bond
Fund* (Maryland Fund), MFS Massachusetts Municipal Bond Fund, MFS Mississippi
Municipal Bond Fund, MFS New York Municipal Bond Fund, MFS North Carolina
Municipal Bond Fund* (North Carolina Fund), MFS Pennsylvania Municipal Bond
Fund, MFS South Carolina Municipal Bond Fund* (South Carolina Fund), MFS
Tennessee Municipal Bond Fund* (Tennessee Fund), MFS Texas Municipal Bond
Fund, MFS Virginia Municipal Bond Fund* (Virginia Fund), MFS Washington
Municipal Bond Fund, and MFS West Virginia Municipal Bond Fund* (West
Virginia Fund). Each Fund, except MFS Municipal Income Fund, is
non-diversified.
The Funds denoted with an asterisk above are included within these financial
statements.
(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 effect 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 that particular state.
Investment Valuations - Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues, are valued on the
basis of valuations furnished by dealers or by a pricing service with
consideration to factors such as institutional-size trading in similar groups
of securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data, without exclusive reliance upon
exchange or over-the-counter prices. Short-term obligations, which mature in
60 days or less, are valued at amortized cost, which approximates market
value. Futures contracts, options and options on futures contracts listed on
commodities exchanges are valued at closing settlement prices.
Over-the-counter options are valued by brokers through the use of a pricing
model which takes into account closing bond valuations, implied volatility
and short-term repurchase rates. Securities for which there are no such
quotations or valuations are valued at fair value as determined in good faith
by or at the direction of the Trustees.
Futures Contracts - Each Fund may enter into futures contracts for the
delayed delivery of securities or contracts based on financial indices at a
fixed price on a future date. In entering such contracts, each Fund is
required to deposit either in cash or securities an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received
by the Fund each day, depending on the daily fluctuations in the value of the
underlying security, and are recorded for financial statement purposes as
unrealized gains or losses by the Fund. Each Fund's investment in futures
contracts is designed to hedge against anticipated future changes in interest
rates or securities prices. Investments in interest rate futures for purposes
other than hedging may be made to modify the duration of the portfolio
without incurring the additional transaction costs involved in buying and
selling the underlying securities. Investments in index contracts, or
contracts on related options, for purposes other than hedging may be made
when a Fund has cash on hand and wishes to participate in anticipated market
appreciation while the cash is being invested. Should interest rates move
unexpectedly, the Fund may not achieve the anticipated benefits of the
futures contracts and may realize a loss.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and original issue discount are amortized or accreted for financial statement
and tax reporting purposes as required by federal income tax regulations.
Each Fund uses the effective interest method for reporting interest income on
payment-in-kind (PIK) bonds, whereby interest income on PIK bonds is recorded
ratably by the Fund at a constant yield to maturity. 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 an addition
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 reported as operating expenses.
Fees Paid Indirectly - The Trust's custodian bank calculates its fee based on
each Fund's average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure the value of cash deposited with the custodian by each
Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Trust's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net income,
including any net realized gain on investments. Accordingly, no provision for
federal income or excise tax is provided. Each Fund files a tax return
annually using tax accounting methods required under provisions of the Code
which may differ from generally accepted accounting principles, the basis on
which these financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial
statements may differ from that reported on each Fund's tax return and,
consequently, the character of distributions to shareholders reported in the
financial highlights may differ from that reported to shareholders on Form
1099-DIV.
40
<PAGE>
Notes to Financial Statements - continued
Distributions paid by each Fund from net interest received on tax-exempt
municipal bonds are not includable by shareholders as gross income for
federal income tax purposes because each Fund intends to meet certain
requirements of the Code applicable to regulated investment companies, which
will enable each Fund to pay exempt-interest dividends. The portion of such
interest, if any, earned on private activity bonds issued after August 7,
1986 may be considered a tax-preference item to shareholders. Distributions
to shareholders are recorded on the ex- dividend date.
Each Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a tax return
of capital. Differences in the recognition or classification of income
between the financial statements and tax earnings and profits which result in
temporary over-distributions for financial statement purposes, are classified
as distributions in excess of net investment income or accumulated net
realized gains.
During the year ended March 31, 1996, the following amounts were reclassified
from accumulated net realized loss on investments to accumulated
distributions in excess of net investment income due to timing differences
between book and tax accounting for accrued market discount on disposal of
securities:
North West
Carolina Tennessee Virginia
Fund Fund Fund
================================== ========= ========= ==========
$309,303 $80,913 $4,179
With respect to the Maryland, South Carolina and Virginia Funds, the
following amounts were reclassified to accumulated distributions in excess of
net investment income and paid-in capital, respectively, from accumulated net
realized loss on investments due to timing differences between book and tax
accounting for accrued market discount on disposal of securities:
South
Maryland Carolina Virginia
Fund Fund Fund
=================================== ========= ========= ===========
Accumulated Undistributed Net
Investment Income $106,154 $116,452 $270,092
Paid-In Capital $154,720 $ 88,914 $ 80
These changes had no effect on the net assets or the net asset value per
share of the Funds.
At March 31, 1996, the following Funds, for federal income tax purposes, had
capital loss carryfowards which may be applied against any net taxable
realized gains of each succeeding year until the earlier of its utilization
or expiration.
<TABLE>
<CAPTION>
North South West
Maryland Carolina Carolina Tennessee Virginia Virginia
Expiration Date Fund Fund Fund Fund Fund Fund
================== ========= ========= ========= ========= ========= ===========
<S> <C> <C> <C> <C> <C> <C>
March 31, 2003 $ -- $9,803,419 $ -- $ 381,262 $ 6,639,093 $ 295,369
March 31, 2004 4,231,087 2,709,187 635,014 3,840,742 2,589,345
--------- --------- --------- --------- --------- -----------
Total $4,231,087 $9,803,419 $2,709,187 $1,016,276 $10,479,835 $2,884,714
========= ========= ========= ========= ========= ===========
</TABLE>
Multiple Classes of Shares of Beneficial Interest - Each Fund offers both
Class A and Class B shares. The North Carolina and Virginia Funds offer Class
C shares. The three classes of shares differ in their respective shareholder
servicing agent, distribution and service fees. All shareholders bear the
common expenses of the Fund pro rata based on the average daily net assets 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.
(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 Trust pays no compensation directly to its Trustees who are officers of
the investment adviser, or to officers of the Trust, all of whom receive
remuneration for their services to the Trust from MFS. Certain of the
officers and Trustees of the Trust are officers or directors of MFS, MFS Fund
Distributors, Inc. (MFD) and MFS Service Center, Inc. (MFSC). The Trust has
an unfunded defined benefit plan for all its independent Trustees and Mr.
Bailey. Included in Trustees' compensation for the year ended March 31, 1996
is a net periodic pension expense for each Fund, as follows:
<TABLE>
<CAPTION>
North South West
Maryland Carolina Carolina Tennessee Virginia Virginia
Fund Fund Fund Fund Fund Fund
================== ========= ========= ========= ========= ========= ===========
<S> <C> <C> <C> <C> <C> <C>
$4,445 $4,445 $4,445 $3,661 $4,445 $4,445
</TABLE>
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$38,119, $112,097, $53,628, $31,401, $91,953 and $56,110 as its portion of
the sales charge on sales of Class A shares of the Maryland, North Carolina,
South Carolina, Tennessee, Virginia and West Virginia Funds, respectively for
the year ended March 31, 1996.
41
<PAGE>
Notes to Financial Statements -- continued
The Trustees have adopted separate distribution plans for Class A, Class B
and Class C shares pursuant to Rule 12b-1 of the Investment Company Act of
1940 as follows:
The Class A distribution plan provides that each Fund will pay MFD up to
0.35% per annum of its average daily net assets attributable to Class A
shares in order that MFD may pay expenses on behalf of the Fund related to
the distribution and servicing of its shares. These expenses include a
service fee to each securities dealer that enters into a sales agreement with
MFD of up to 0.25% per annum of the Fund's average daily net assets
attributable to Class A shares which are attributable to that securities
dealer, a distribution fee to MFD of up to 0.10% per annum of the Fund's
average daily net assets attributable to Class A shares, commissions to
dealers and payments to MFD wholesalers for sales at or above a certain
dollar level, and other such distribution-related expenses that are approved
by the Fund. MFD retains the service fee for accounts not attributable to a
securities dealer which amounted to $19,467, $27,829, $11,668, $10,327,
$26,797 and $7,973 for the Maryland, North Carolina, South Carolina,
Tennessee, Virginia and West Virginia Funds for the year ended March 31,
1996. Fees incurred under the distribution plan during the year ended March
31, 1996 were 0.35% of each Fund's average daily net assets attributable to
Class A shares on an annualized basis.
The Class B and Class C distribution plans provide that each Fund will pay
MFD a distribution fee of 0.75% per annum, and a service fee of up to 0.25%
per annum, of the Fund's average daily net assets attributable to Class B and
Class C shares. MFD will pay to securities dealers that enter into a sales
agreement with MFD all or a portion of the service fee attributable to Class
B and Class C shares, and will pay to such securities dealers all of the
distribution fee attributable to Class C shares. The service fee is intended
to be additional consideration for services rendered by the dealer with
respect to Class B and Class C shares. MFD retains the service fee for
accounts not attributable to a securities dealer, which amounted to $742,
$1,180, $1,968, $851, $1,496 and $204 for the Maryland, North Carolina, South
Carolina, Tennessee, Virginia and West Virginia Funds, respectively for Class
B shares. MFD retains the service fee for accounts not attributable to a
securities dealer, which amounted to $716, and $2,214 for the North Carolina
and Virginia Funds, respectively for Class C shares. Fees incurred under the
distribution plans during the year ended March 31, 1996 were 1.00% of each of
the Fund's average daily net assets attributable to Class B and Class C
shares on an annualized basis.
A contingent deferred sales charge is imposed on shareholder redemptions of
Class A shares, on purchases of $1 million or more, in the event of a
shareholder redemption within twelve months following the share purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of
Class B shares in the event of a shareholder redemption within six years of
purchase. MFD receives all contingent deferred sales charges. Contingent
deferred sales charges imposed during the year ended March 31, 1996 on Class
A and Class B shares were as follows:
<TABLE>
<CAPTION>
North South West
Maryland Carolina Carolina Tennessee Virginia Virginia
CDSC Imposed Fund Fund Fund Fund Fund Fund
================== ========= ========= ========= ========= ========= ===========
<S> <C> <C> <C> <C> <C> <C>
Class A $ -- $ 2,053 $ 430 $ 4 $ -- $ 4
--------- --------- --------- --------- --------- -----------
Class B $59,233 $66,144 $37,842 $19,385 $46,610 $33,870
========= ========= ========= ========= ========= ===========
</TABLE>
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as
a percentage of the average daily net assets of each class of shares at an
effective annual rate of up to 0.15%, up to 0.22% and up to 0.15%
attributable to Class A, Class B and Class C shares, respectively.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions and short-term obligations, were as follows
(000 omitted):
<TABLE>
<CAPTION>
North South West
Maryland Carolina Carolina Tennessee Virginia Virginia
Fund Fund Fund Fund Fund Fund
================== ========= ========= ========= ========= ========= ===========
<S> <C> <C> <C> <C> <C> <C>
Purchases $22,530 $135,894 $32,879 $24,954 $185,350 $25,068
Sales 32,039 155,432 35,751 33,123 205,590 15,992
</TABLE>
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Funds, as computed on a federal income tax basis,
are as follows (000 omitted):
<TABLE>
<CAPTION>
North South West
Maryland Carolina Carolina Tennessee Virginia Virginia
Fund Fund Fund Fund Fund Fund
================== ========= ========= ========= ========= ========= ===========
<S> <C> <C> <C> <C> <C> <C>
Aggregate cost $143,432 $423,576 $173,715 $115,386 $417,692 $137,398
--------- --------- --------- --------- --------- -----------
Gross unrealized
appreciation $ 8,668 $ 24,093 $ 9,639 $ 6,694 $ 23,077 $ 8,354
Gross unrealized
depreciation (1,115) (3,220) (855) (913) (3,039) (1,308)
--------- --------- --------- --------- --------- -----------
Net unrealized
appreciation $ 7,553 $ 20,873 $ 8,784 $ 5,781 $ 20,038 $ 7,046
========= ========= ========= ========= ========= ===========
</TABLE>
(5) Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
42
<PAGE>
Notes to Financial Statements -- continued
<TABLE>
<CAPTION>
Class A Shares Maryland Fund North Carolina Fund South Carolina Fund
--------------------- --------------------- -----------------------
Year Ended March 31, 1996 (000 Omitted) Shares Amount Shares Amount Shares Amount
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Shares sold 576 $ 6,386 7,027 $ 82,500 1,071 $ 12,906
Shares issued to shareholders in reinvestment
of distributions 358 3,959 1,060 12,349 395 4,764
Shares reacquired (1,602) (17,764) (10,276) (120,480) (1,950) (23,552)
------- ------- ------- ------- ------- ---------
Net decrease (668) $ (7,419) (2,189) $ (25,631) (484) $ (5,882)
======= ======= ======= ======= ======= =========
Year Ended March 31, 1995 (000 Omitted) Shares Amount Shares Amount Shares Amount
=================================================================================================================================
Shares sold 793 $ 8,524 3,008 $ 33,720 1,422 $ 16,607
Shares issued to shareholders in reinvestment
of distributions 461 4,949 1,457 16,419 502 5,842
Shares reacquired (2,777) (29,402) (7,002) (77,840) (2,209) (25,465)
------- ------- ------- ------- ------- ---------
Net increase (decrease) (1,523) $(15,929) (2,537) $ (27,701) (285) $ (3,016)
======= ======= ======= ======= ======= =========
Tennessee Fund Virginia Fund West Virginia Fund
------------------- ------------------- ---------------------
Year Ended March 31, 1996 (000 Omitted) Shares Amount Shares Amount Shares Amount
=================================================================================================================================
Shares sold 527 $ 5,493 7,192 $ 82,090 1,206 $ 13,870
Shares issued to shareholders in reinvestment
of distributions 271 2,835 1,009 11,447 328 3,752
Shares reacquired (1,692) (17,696) (9,726) (111,003) (1,047) (11,988)
------- ------- ------- ------- ------- ---------
Net increase (decrease) (894) $ (9,368) (1,525) $ (17,466) 487 $ 5,634
======= ======= ======= ======= ======= =========
Year Ended March 31, 1995 (000 Omitted) Shares Amount Shares Amount Shares Amount
=================================================================================================================================
Shares sold 1,284 $ 13,091 2,822 $ 30,863 908 $ 10,025
Shares issued to shareholders in reinvestment
of distributions 311 3,153 1,219 13,336 355 3,917
Shares reacquired (1,555) (15,606) (4,988) (54,182) (1,557) (16,951)
------- ------- ------- ------- ------- ---------
Net decrease 40 $ 638 (947) $ (9,983) (294) $ (3,009)
======= ======= ======= ======= ======= =========
Class B Shares Maryland Fund North Carolina Fund South Carolina Fund
------------------- ------------------- ---------------------
Year Ended March 31, 1996 (000 Omitted) Shares Amount Shares Amount Shares Amount
=================================================================================================================================
Shares sold 485 $ 5,368 952 $ 11,119 575 $ 6,957
Shares issued to shareholders in reinvestment
of distributions 27 297 70 821 32 384
Shares reacquired (292) (3,242) (395) (4,599) (161) (1,935)
------- ------- ------- ------- ------- ---------
Net increase 220 $ 2,423 627 $ 7,341 446 $ 5,406
======= ======= ======= ======= ======= =========
Year Ended March 31, 1995 (000 Omitted) Shares Amount Shares Amount Shares Amount
=================================================================================================================================
Shares sold $
598 $ 6,438 1,174 13,233 383 $ 4,461
Shares issued to shareholders in reinvestment
of distributions 25 271 71 795 30 344
Shares reacquired (197) (2,109) (328) (3,609) (175) (2,005)
------- ------- ------- ------- ------- ---------
Net increase $
426 $ 4,600 917 10,419 238 $ 2,800
======= ======= ======= ======= ======= =========
Tennessee Fund Virginia Fund West Virginia Fund
------------------- ------------------- ---------------------
Year Ended March 31, 1996 (000 Omitted) Shares Amount Shares Amount Shares Amount
=================================================================================================================================
Shares sold 362 $ 3,771 706 $ 8,043 317 $ 3,621
Shares issued to shareholders in reinvestment
of distributions 27 284 43 494 30 346
Shares reacquired (120) (1,249) (199) (2,269) (127) (1,455)
------- ------- ------- ------- ------- ---------
Net increase 269 $ 2,806 550 $ 6,268 220 $ 2,512
======= ======= ======= ======= ======= =========
Year Ended March 31, 1995 (000 Omitted) Shares Amount Shares Amount Shares Amount
=================================================================================================================================
Shares sold 505 $ 5,138 440 $ 4,834 918 $ 10,079
Shares issued to shareholders in reinvestment
of distributions 19 192 20 220 37 408
Shares reacquired (65) (664) (51) (555) (166) (1,815)
------- ------- ------- ------- ------- ---------
Net increase 459 $ 4,666 409 $ 4,499 789 $ 8,672
======= ======= ======= ======= ======= =========
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
Class C Shares North Carolina Fund Virginia Fund
------------------- -------------------
Year Ended March 31, 1996 (000 Omitted) Shares Amount Shares Amount
=============================================== ======= ======= ======= =======
<S> <C> <C> <C> <C>
Shares sold 334 $ 3,931 199 $ 2,264
Shares issued to shareholders in reinvestment
of distributions 18 205 8 92
Shares reacquired (257) (3,011) (114) (1,289)
------- ------- ------- -------
Net increase 95 $ 1,125 93 $ 1,067
======= ======= ======= =======
North Carolina Fund West Virginia Fund
------------------- -------------------
Year Ended March 31, 1995 (000 Omitted) Shares Amount Shares Amount
=============================================== ======= ======= ======= =======
Shares sold 637 $ 7,160 1,049 $ 11,525
Shares issued to shareholders in reinvestment
of distributions 19 219 23 250
Shares reacquired (523) (5,757) (1,022) (10,805)
------- ------- ------- -------
Net increase 133 $ 1,622 50 $ 970
======= ======= ======= =======
</TABLE>
(6) Line of Credit
The Trust entered into an agreement which enables each of the Funds to
participate with other funds managed by MFS in an unsecured line of credit
with a bank which permits borrowings up to $350 million, collectively.
Borrowings may be made to temporarily finance the repurchase of Fund shares.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the bank's base rate. In addition, a commitment fee, based on the average
daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated
to each of the Funds for the year ended March 31, 1996 ranged from $1,565 to
$10,487.
(7) Financial Instruments
The Trust trades financial instruments with off-balance sheet risk in the
normal course of its investing activities in order to manage exposure to
market risks such as interest rates. These financial instruments include
futures contracts. The notional or contractual amounts of these instruments
represent the investment a Fund has in particular classes of financial
instruments and does not necessarily represent the amounts potentially
subject to risk. The measurement of the risks associated with these
instruments is meaningful only when all related and offsetting transactions
are considered.
Futures Contracts
<TABLE>
<CAPTION>
Unrealized
Appreciation
Fund Description Expiration Contracts Position (Depreciation)
====================== ======================== =========== ========== ========= =================
<S> <C> <C> <C> <C> <C>
Maryland Fund U.S. Treasury Bonds June 1996 80 Short $ 286,761
North Carolina Fund U.S. Treasury Bonds June 1996 230 Short $(140,620)
Virginia Fund U.S. Treasury Bonds June 1996 400 Short $ (66,028)
West Virginia Fund U.S. Treasury Bonds June 1996 50 Short $ (23,878)
</TABLE>
At March 31, 1996, each Fund had sufficient cash and/or securities to cover
margin requirements on open futures contracts.
The Trust also invests in indexed securities whose value may be linked to
interest rates, commodities, indices or other financial indicators. Indexed
securities are fixed-income securities whose interest rates (coupon-indexed
securities) rise and fall according to the change in one or more specified
underlying instruments. Indexed securities may be more volatile than the
underlying instrument itself. The following is a summary of such securities
held at March 31, 1996:
<TABLE>
<CAPTION>
Principal
(000 Unrealized
Fund Description Index Omitted) Value Depreciation
====================== ========================================== =============== ========== ======= =============
<S> <C> <C> <C> <C> <C>
Maryland Fund Puerto Rico Public Buildings Authority, PSA Municipal
6.285s, 2016 Swap $3,000 $2,788,260 $(211,740)
North Carolina Fund Puerto Rico Public Buildings Authority, PSA Municipal
6.285s, 2016 Swap $6,500 $6,041,230 $(458,770)
South Carolina Fund Puerto Rico Telephone Authority Rev.,
5.59s, 2004 J. J. Kenny $1,000 $ 941,000 $(59,000)
Tennessee Fund Puerto Rico Public Buildings Authority, PSA Municipal
6.285s, 2016 Swap $2,000 $1,858,840 $(141,160)
Puerto Rico Telephone Authority Rev.,
5.59s, 2004 J.J. Kenny 2,000 1,882,000 (118,000)
Virginia Fund Puerto Rico Public Buildings Authority, PSA Municipal
6.285s, 2016 Swap $6,500 $6,041,230 $(458,770)
West Virginia Fund Puerto Rico Public Buildings Authority, PSA Municipal
6.285s, 2016 Swap $2,000 $1,858,840 $(141,160)
</TABLE>
(8) Restricted Securities
Each Fund may invest not more than 15% of its net assets in securities which
are subject to legal or contractual restrictions on resale. At March 31,
1996, the North Carolina Fund and the Virginia Fund owned the following
restricted securities (constituting 1.17% and 1.88%, respectively, of net
assets) which may not be publicly sold without registration under the
Securities Act of 1933. The Funds do not have the right to demand that such
securities be registered. The value of these securities are determined by
valuations supplied by a pricing service or broker. These securities may be
offered and sold to "qualified institutional buyers" under Rule 144A of the
1933 Act.
44
<PAGE>
Notes to Financial Statements -- continued
<TABLE>
<CAPTION>
Par Amount
Date of (000
Fund Description Acquisition Omitted) Cost Value
====================== ========================================== =============== ========== ======= =============
<S> <C> <C> <C> <C> <C>
North Carolina Fund Pasquotank County, NC, Certificates of
Participation, MBIA, 5s, 2015 12/14/95 $3,000 $2,846,250 $2,730,270
Randolph County, NC, Certificates of
Participation, MBIA, 5.3s, 2015 11/16/95 2,750 2,644,486 2,585,495
Virginia Fund Fairfax County, VA, Economic Development
Authority, Lease Rev., 5.25s, 2018 6/7/95 $5,500 $5,284,895 $5,061,925
Puerto Rico Public Buildings Authority,
Government Facilities, 5.5s, 2021 3/19/96 1,000 954,000 960,420
Virginia State Public Building Authority,
5.2s, 2015 1/25/96 2,610 2,572,259 2,451,573
</TABLE>
Independent Auditors' Report
To the Trustees of MFS Municipal Series Trust and Shareholders of the
Portfolios of MFS Municipal Series Trust:
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of MFS Maryland Municipal Bond Fund,
MFS North Carolina 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 (portfolios of MFS Municipal Series
Trust) as of March 31, 1996, the related statements of operations for the
year then ended, the statements of changes in net assets for the years ended
March 31, 1996 and 1995, and the financial highlights for each of the years
in the two year period ended March 31, 1996, the two months ended March 31,
1994, and each of the years in the eight-year period ended January 31, 1994.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of the
securities owned at March 31, 1996 by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of each of the
aforementioned Funds of MFS Municipal Series Trust at March 31, 1996, the
results of their operations, the changes in their net assets, and their
financial highlights for the respective stated periods in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
April 29, 1996
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
<PAGE>
MFS(R) Municipal
Series Trust [DALBAR MFS #1 logo]
500 Boylston Street
Boston, MA 02116
MFS(R) Maryland Municipal Bond Fund
MFS(R) North Carolina Municipal Bond Fund
MFS(R) South Carolina Municipal Bond Fund
MFS(R) Tennessee Municipal Bond Fund
MFS(R) Virginia Municipal Bond Fund
MFS(R) West Virginia Municipal Bond Fund
Bulk Rate
U.S. Postage
P A I D
Permit #55638
Boston, MA
[logo]
MFS(R)
THE FIRST NAME IN MUTUAL FUNDS
40/240
41/241/341
42/242
43/243/343
44/244
MST-2A-5/96-56M53/253
