[FRONT COVER]
[MFS logo](SM) Semiannual Report
INVESTMENT MANAGEMENT September 30, 1996
MFS(R) Municipal Series Trust
For the States of: Mississippi, New York, North Carolina, Pennsylvania,
South Carolina, Tennessee, Virginia, and West Virginia
[Graphic: Silhouette of 2 businessmen talking
in front of a large picture window]
America learns how "We invented the mutual fund", (see page 60)
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Letter from the Chairman 1
Fund Managers' Overview 2
Fund Managers' Profiles 3
Fund Facts 3
Performance Summary 3
Portfolio of Investments 5
Financial Statements 22
Notes to Financial Statements 52
MFS Family of Funds(R) 59
Trustees and Officers 61
</TABLE>
- --------------------------------------------------------------------------------
Highlights
[bullet] Concerns that strong economic data might translate into higher
inflation helped create a period of significant volatility in the
fixed-income markets over the past six months.
[bullet] In this environment, the yield on long-term, high-grade municipal
bonds fluctuated from a low of 5.45% to a high of 6.00, before
settling at 5.55% on September 30, 1996.
[bullet] The supply of new issues remains moderate as state and local
governments continue to be conservative relative to new spending and
borrowing, while the fiscal condition of these governments is the
strongest it has been in several years.
[bullet] We have generally kept portfolio durations (a measure of interest
rate sensitivity) short, a strategy which has enhanced the relative
performance of the Funds given the increase in Treasury yields.
<PAGE>
Letter from the Chairman
Dear Shareholders:
As we enter the last quarter of 1996, the U.S. economy appears to have
settled into a pattern of moderate growth and inflation -- two factors that
we think can be important contributors to a favorable long-term investment
climate. During the first quarter of 1996, real (inflation-adjusted) economic
growth was 2.3% on an annualized basis, followed by a rate of 4.7% in the
second quarter. Real growth in gross domestic product has surpassed our
expectations this year, and we now expect that growth for all of 1996 could
exceed 2.5%. Although individual consumers appear to be carrying an excessive
debt load, the consumer sector itself, which represents two-thirds of the
economy, continues to be impressive in its support of the automobile and
housing markets. Consumer spending has also been positively impacted by
widespread job growth and, more recently, increasing wages. However, recent
statistics appear to be showing signs of a slowdown in consumer spending.
This is particularly true when considering overall retail sales, which have
been flat for several months. Furthermore, the economies of Europe and Japan
continue to be in the doldrums, weakening U.S. export markets while subduing
the capital spending plans of American corporations. While economic growth
should continue, we expect it could slacken toward the end of the year.
In the bond markets, persistent signs of economic weakness led to decreases
in short-term interest rates by the Federal Reserve Board in late 1995 and
early 1996. Should signs of more rapid economic growth and, particularly, of
higher inflation resurface, we would expect the Fed to maintain its
anti-inflationary stance. In the beginning of the year, bond markets traded
in a narrow range as investors shifted between concern for the lack of a
budget resolution in Washington and hope that sluggish economic reports and
low inflation might lead to lower interest rates. Later, fixed-income markets
began reacting to conflicting signals regarding the economy's strength with
more volatile trading patterns marked by an upward bias in interest rates.
Interest rates may move even higher over the coming months, but we believe
the current rise in bond yields is reaching a point where fixed-income
markets are equitably valued.
Finally, as you may notice, this report to shareholders incorporates a number
of changes which we hope you will find informative and useful. Following the
Fund Managers' Overview, we have added new information on the Funds'
holdings. Near the back of the report, telephone numbers and addresses are
listed if you would like to contact MFS.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/ A. Keith Brodkin
A. Keith Brodkin
Chairman and President
October 10, 1996
1
<PAGE>
Fund Managers' Overview
Dear Shareholders:
The six months ended September 30, 1996 marked a period of significant
volatility in the fixed-income markets. Yields on 30-year U.S. Treasury bonds
ranged from a low of 6.60% to a high of 7.19% before settling at 6.92% on
September 30. This represented an increase of approximately 30 basis points
(0.30%) from the beginning of the period. The increase in rates experienced
during this period was primarily a result of concerns that
greater-than-expected job growth and other strong economic data would
translate into higher inflation rates.
Municipal bonds experienced the same type of volatility during this period.
The yield on long-term, high-grade municipals fluctuated between a low of
5.45% and a high of 6.00% before settling at 5.55% on September 30. This
represented a decline of about 15 basis points (0.15%) from the beginning of
the period. Perhaps the most important aspect of the municipal market during
the past six months has been its dramatically favorable performance compared
to the U.S. Treasury market. The yield ratio of 30-year municipals rated
"AAA" by Standard & Poor's to comparable-maturity Treasuries has declined
from 86% to 80%. (Note that the principal value and interest on Treasury
securities are guaranteed by the U.S. government if held to maturity.) These
trends are attributable to the municipal market's favorable technical
position. New-issue supply remains moderate as state and local governments
continue to be conservative relative to new spending and borrowing. At the
same time, the surge in redeemed bonds has led to a decrease in the
outstanding tradable supply. On the demand side, property and casualty
insurance companies have been strong buyers and retail interest has remained
consistent. Further aiding the decline in yield ratios has been the apparent
collapse of support for extreme tax reform proposals.
The overall strength of municipal credits has also contributed to the
market's good relative performance. The fiscal condition of state and local
governments is the strongest it has been in several years, owing to a healthy
economy and generally sound fiscal practices. Most revenue bond issuers have
also posted favorable results. These trends, along with the continued
dramatic proliferation of bond insurance, have resulted in continued
historically narrow yield spreads in the market. Attractive values and
unusual opportunities in the investment-grade segment of the municipal market
have therefore diminished.
During the past six months, we have generally kept portfolio durations short
relative to the benchmark Lehman Brothers Municipal Bond Index (an unmanaged
index of national municipal bond investments rated "Baa" or higher),
primarily by hedging with Treasury futures contracts. This enhanced the
relative performance of the Funds given the increase in Treasury yields. We
expect to maintain this position into the foreseeable future. We have also
been seeking to increase the Funds' dividends by purchasing bonds with higher
book yields, or yields comparable to those at the time they were issued, and
bonds with better call protection, that is, those not imminently eligible to
be called by the issuer. Finally, in light of very narrow yield spreads, we
have tried to improve credit quality when possible. We feel these strategies
will enhance the Funds' performance potential and earnings sustainability.
We are pleased to report that we recently made some key additions to our
staff of municipal credit analysts, and we believe the group is now one of
the strongest in the industry. The depth and experience of this staff will be
invaluable to us as we examine important credit developments such as: the new
welfare reform bill's effect on specific municipal credits; the fiscal
ramifications of future efforts to balance the federal budget; the
increasingly competitive environment facing electric utilities as a result of
deregulation trends; and the effects of continuing cost pressures on the
changing health care industry.
Respectfully,
/s/ David R. King, Geoffrey L. Schechter and David B. Smith
David R. King, Geoffrey L. Schechter and David B. Smith
Fund Managers
2
<PAGE>
Fund Managers' 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
responsibilities for the Pennsylvania, 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 Mississippi, New
York and North Carolina state Funds. Mr. Schechter is a Certified Public
Accountant (C.P.A.) and a C.F.A.
David Smith has been a member of the MFS investment staff since 1988. A graduate
of Union College and the Babson College Graduate School of Business
Administration, he began his career at MFS as a Senior Treasury Analyst in the
Corporate Treasury Department. He was named a Research Analyst in the Fixed
Income Department in 1989, Investment Officer in 1990, Assistant Vice
President--Investments in 1991 and Vice President--Investments in 1993. Mr.
Smith is a C.F.A. and currently has portfolio management responsibilities for
the Virginia and West Virginia state Funds.
Fund Facts
Strategy: The investment objective for each state Fund is to
provide current income excempt from federal income
taxes and from the personal income taxes, if any,
of that state.
Commencement of Mississippi: August 6, 1992
investment operations: New York: June 6, 1988
North Carolina: October 31, 1984
Pennsylvania: February 1, 1993
South Carolina: October 31, 1984
Tennessee: August 12, 1988
Virginia: October 31, 1984
West Virginia: October 31, 1984
Size as of Mississippi: $84.2 million
September 30, 1996 New York: $155.9 million
(net assets): North Carolina: $439.6 million
Pennsylvania: $42.9 million
South Carolina: $179.2 million
Tennessee: $124.1 million
Virginia: $433.0 million
West Virginia: $146.3 million
Performance Summary
Because mutual funds like MFS Municipal Series Trust are designed for
investors with long-term goals, we have provided cumulative results as well
as the average annual total returns for Class A, Class B, and Class C shares
for the applicable time periods.
<TABLE>
<CAPTION>
Class A
------------------------------------------
MFS Mississippi Municipal Bond Fund* 6 Months 1 Year Life
- -------------------------------------- ----------- -------- -------------------
<S> <C> <C> <C> <C>
Cumulative Total Return +3.63% +7.00% +00.00% +26.32%
- -------------------------------------- ----------- -------- -------------------
Average Annual Total Return +3.63% +7.00% +5.66%
- -------------------------------------- ----------- -------- -------------------
SEC Results -- +1.96% +4.43%
- -------------------------------------- ----------- -------- -------------------
</TABLE>
<TABLE>
<CAPTION>
Class B
------------------------------------------
MFS Mississippi Municipal Bond Fund* 6 Months 1 Year Life
- -------------------------------------- ----------- -------- -------------------
<S> <C> <C> <C> <C>
Cumulative Total Return +3.06% +5.94% +00.00% +22.74%
- -------------------------------------- ----------- -------- -------------------
Average Annual Total Return +3.06% +5.94% +4.94%
- -------------------------------------- ----------- -------- -------------------
SEC Results -- +1.94% +4.53%
- -------------------------------------- ----------- -------- -------------------
</TABLE>
<TABLE>
<CAPTION>
Class A
------------------------------------------
MFS New York Municipal Bond Fund 6 Months 1 Year 5 Years Life
--------------------------------- ----------- -------- --------- ----------
<S> <C> <C> <C> <C>
Cumulative Total Return +3.00% +5.81% +41.77% +89.17%
--------------------------------- ----------- -------- --------- ----------
Average Annual Total Return +3.00% +5.81% +7.23% +7.96%
--------------------------------- ----------- -------- --------- ----------
SEC Results -- +0.79% +6.19% +7.33%
--------------------------------- ----------- -------- --------- ----------
</TABLE>
<TABLE>
<CAPTION>
Class B
------------------------------------------
MFS New York Municipal Bond Fund 6 Months 1 Year 5 Years Life
--------------------------------- ----------- -------- --------- ----------
<S> <C> <C> <C> <C>
Cumulative Total Return +2.58% +4.95% +38.17% +85.12%
--------------------------------- ----------- -------- --------- ----------
Average Annual Total Return +2.58% +4.95% +6.68% +7.63%
--------------------------------- ----------- -------- --------- ----------
SEC Results -- +0.95% +6.19% +7.33%
--------------------------------- ----------- -------- --------- ----------
</TABLE>
3
<PAGE>
Performance Summary - continued
<TABLE>
<CAPTION>
Class A
-------------------------------------------
MFS North Carolina Municipal Bond Fund* 6 Months 1 Year 5 Years 10 Years
---------------------------------------------------- -------- --------- -----------
<S> <C> <C> <C> <C>
Cumulative Total Return +3.44% +6.22% +35.34% +91.27%
---------------------------------------------------- -------- --------- -----------
Average Annual Total Return +3.44% +6.22% +6.24% +6.70%
---------------------------------------------------- -------- --------- -----------
SEC Results -- +1.14% +5.21% +6.18%
---------------------------------------------------- -------- --------- -----------
</TABLE>
<TABLE>
<CAPTION>
Class B
------------------------------------------
MFS North Carolina Municipal Bond Fund* 6 Months 1 Year 5 Years Life
---------------------------------------------------- -------- --------- ----------
<S> <C> <C> <C> <C>
Cumulative Total Return +3.16% +5.46% +32.31% +87.01%
---------------------------------------------------- -------- --------- ----------
Average Annual Total Return +3.16% +5.46% +5.76% +6.46%
---------------------------------------------------- -------- --------- ----------
SEC Results -- +1.46% +5.44% +6.46%
---------------------------------------------------- -------- --------- ----------
</TABLE>
<TABLE>
<CAPTION>
Class C
------------------------------------------
MFS North Carolina Municipal Bond Fund* 6 Months 1 Year 5 Years Life
---------------------------------------------------- -------- --------- ----------
<S> <C> <C> <C> <C>
Cumulative Total Return +3.20% +5.63% +32.69% +81.54%
---------------------------------------------------- -------- --------- ----------
Average Annual Total Return +3.20% +5.63% +5.82% +6.49%
---------------------------------------------------- -------- --------- ----------
SEC Results -- +4.63% +5.82% +6.49%
---------------------------------------------------- -------- --------- ----------
</TABLE>
<TABLE>
<CAPTION>
Class A
------------------------------------------
MFS Pennsylvania Municipal Bond Fund* 6 Months 1 Year Life
- --------------------------------------- ----------- -------- -------------------
<S> <C> <C> <C> <C>
Cumulative Total Return +3.38% +6.37% +00.00% +25.69%
- --------------------------------------- ----------- -------- -------------------
Average Annual Total Return +3.38% +6.37% +5.58%
- --------------------------------------- ----------- -------- -------------------
SEC Results -- +1.29% +4.19%
- --------------------------------------- ----------- -------- -------------------
</TABLE>
<TABLE>
<CAPTION>
Class B
------------------------------------------
MFS Pennsylvania Municipal Bond Fund* 6 Months 1 Year Life
- --------------------------------------- ----------- -------- -------------------
<S> <C> <C> <C> <C>
Cumulative Total Return +2.97% +5.52% +00.00% +25.29%
- --------------------------------------- ----------- -------- -------------------
Average Annual Total Return +2.97% +5.52% +4.84%
- --------------------------------------- ----------- -------- -------------------
SEC Results -- +1.52% +4.12%
- --------------------------------------- ----------- -------- -------------------
</TABLE>
<TABLE>
<CAPTION>
Class A
-------------------------------------------
MFS South Carolina Municipal Bond Fund* 6 Months 1 Year 5 Years 10 Years
---------------------------------------------------- -------- --------- -----------
<S> <C> <C> <C> <C>
Cumulative Total Return +2.84% +5.36% +37.07% +102.30%
---------------------------------------------------- -------- --------- -----------
Average Annual Total Return +2.84% +5.36% +6.51% +7.30%
---------------------------------------------------- -------- --------- -----------
SEC Results -- +0.33% +5.47% +6.78%
---------------------------------------------------- -------- --------- -----------
</TABLE>
<TABLE>
<CAPTION>
Class B
------------------------------------------
MFS South Carolina Municipal Bond Fund* 6 Months 1 Year 5 Years Life
---------------------------------------------------- -------- --------- ----------
<S> <C> <C> <C> <C>
Cumulative Total Return +2.47% +4.69% +34.01% +97.82%
---------------------------------------------------- -------- --------- ----------
Average Annual Total Return +2.47% +4.69% +6.03% +7.06%
---------------------------------------------------- -------- --------- ----------
SEC Results -- +0.69% +5.71% +7.06%
---------------------------------------------------- -------- --------- ----------
</TABLE>
<TABLE>
<CAPTION>
Class A
-----------------------------------------
MFS Tennessee Municipal Bond Fund* 6 Months 1 Year 5 Years Life
- ------------------------------------ ----------- -------- --------- ---------
<S> <C> <C> <C> <C>
Cumulative Total Return +2.31% +4.92% +36.69% --
- ------------------------------------ ----------- -------- --------- ---------
Average Annual Total Return +2.31% +4.92% +6.45% +7.17%
- ------------------------------------ ----------- -------- --------- ---------
SEC Results -- +0.08% +5.42% +6.53%
- ------------------------------------ ----------- -------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
Class B
-----------------------------------------
MFS Tennessee Municipal Bond Fund* 6 Months 1 Year 5 Years Life
- ------------------------------------ ----------- -------- --------- ---------
<S> <C> <C> <C> <C>
Cumulative Total Return +1.95% +4.07% +33.57% --
- ------------------------------------ ----------- -------- --------- ---------
Average Annual Total Return +1.95% +4.07% +5.96% +6.86%
- ------------------------------------ ----------- -------- --------- ---------
SEC Results -- +0.08% +5.64% +6.86%
- ------------------------------------ ----------- -------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
Class A
-------------------------------------------
MFS Virginia Municipal Bond Fund* 6 Months 1 Year 5 Years 10 Years
- ----------------------------------- ----------- -------- --------- -----------
<S> <C> <C> <C> <C>
Cumulative Total Return +2.55% +4.91% +33.95% +94.70%
- ----------------------------------- ----------- -------- --------- -----------
Average Annual Total Return +2.55% +4.91% +6.02% +6.89%
- ----------------------------------- ----------- -------- --------- -----------
SEC Results -- +0.08% +5.64% +6.86%
- ----------------------------------- ----------- -------- --------- -----------
</TABLE>
<TABLE>
<CAPTION>
Class B
------------------------------------------
MFS Virginia Municipal Bond Fund* 6 Months 1 Year 5 Years Life
- ----------------------------------- ----------- -------- --------- ----------
<S> <C> <C> <C> <C>
Cumulative Total Return +2.09% +4.07% +30.88% +60.20%
- ----------------------------------- ----------- -------- --------- ----------
Average Annual Total Return +2.09% +4.07% +5.53% +6.64%
- ----------------------------------- ----------- -------- --------- ----------
SEC Results -- -0.07% +5.00% +6.37%
- ----------------------------------- ----------- -------- --------- ----------
</TABLE>
<TABLE>
<CAPTION>
Class C
------------------------------------------
MFS Virginia Municipal Bond Fund* 6 Months 1 Year 5 Years Life
- ----------------------------------- ----------- -------- --------- ----------
<S> <C> <C> <C> <C>
Cumulative Total Return +2.22% +4.33% +31.32% +90.73%
- ----------------------------------- ----------- -------- --------- ----------
Average Annual Total Return +2.22% +4.33% +5.60% +6.67%
- ----------------------------------- ----------- -------- --------- ----------
SEC Results -- +3.33% +5.60% +6.67%
- ----------------------------------- ----------- -------- --------- ----------
</TABLE>
<TABLE>
<CAPTION>
Class A
-------------------------------------------
MFS West Virginia Municipal Bond Fund 6 Months 1 Year 5 Years 10 Years
- --------------------------------------- ----------- -------- --------------------
<S> <C> <C> <C> <C>
Cumulative Total Return +2.93% +5.28% +37.40% +98.01%
- --------------------------------------- ----------- -------- --------------------
Average Annual Total Return +2.93% +5.28% +6.56% +7.07%
- --------------------------------------- ----------- -------- --------------------
SEC Results -- +0.26% +5.33% +6.55%
- --------------------------------------- ----------- -------- --------------------
</TABLE>
<TABLE>
<CAPTION>
Class B
------------------------------------------
MFS West Virginia Municipal Bond Fund 6 Months 1 Year 5 Years Life
- --------------------------------------- ----------- -------- -------------------
<S> <C> <C> <C> <C>
Cumulative Total Return +2.57% +4.53% +34.33% +93.61%
- --------------------------------------- ----------- -------- -------------------
Average Annual Total Return +2.57% +4.53% +6.08% +6.83%
- --------------------------------------- ----------- -------- -------------------
SEC Results -- +0.53% +5.76% +6.83%
- --------------------------------------- ----------- -------- -------------------
</TABLE>
Class A SEC results include the maximum 4.75% sales charge. Class B SEC
results reflect the applicable contingent deferred sales charge (CDSC), which
declines over six years as follows: 4%, 4%, 3%, 3%, 2%, 1%, 0%. Class C
shares have no initial sales charge 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. See the prospectus for details.
Class B and Class C share performance includes the performance of each Fund's
Class A shares for periods prior to the commencement of offering of Class B
shares on September 7, 1993 and of Class C shares on January 3, 1994. Sales
charges and operating expenses for Class A, Class B, and Class C shares
differ. The Class A share performance, which is included within the Class B
and Class C share SEC performance, has been adjusted to reflect the CDSC
generally applicable to Class B and Class C shares rather than the initial
sales charge generally applicable to Class A shares. Class B and Class C
share performance has not been adjusted, however, to reflect differences in
operating expenses (e.g., Rule 12b-1 fees), which generally are lower for
Class A shares.
Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Past
performance is no guarantee of future results.
*Performance results reflect any applicable expense subsidies and waivers,
without which the performance results would have been less favorable.
Subsidies and waivers may be rescinded at any time. See prospectus for
details.
4
<PAGE>
Portfolio of Investments (Unaudited) - September 30, 1996
MFS MISSISSIPPI MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
Municipal Bonds - 97.5%
Principal Amount
Issuer (000 Omitted) Value
----------------------------------------------------------------------------
<S> <C> <C> <C>
General Obligation - 7.2%
Hinds County, MS, MBIA, 6.25s, 2010 $1,660 $ 1,776,017
Hinds County, MS, MBIA, 6.25s, 2011 1,285 1,372,778
Jackson County, MS, Road Improvement,
6.5s, 2008 425 446,505
State of Mississippi, 6.75s, 2014 1,800 1,960,200
Tupelo, MS, 5s, 2009 525 501,727
--------------
$ 6,057,227
----------------------------------------------------------------------------
State and Local Appropriation - 15.1%
Hinds Community College, MS, Conference
and Training Center, 6.5s, 2014 $1,320 $ 1,339,417
Hinds County, MS, School District,
Certificates of Participation (Utica
Project), 7.25s, 2012 1,000 1,094,110
Medical Center Educational Building
Corp., MS (University of Mississippi
Medical Center), MBIA, 5.65s, 2009 2,000 1,995,480
Medical Center Educational Building
Corp., MS (University of Mississippi
Medical Center), MBIA, 5.9s, 2023 3,250 3,245,613
State of Mississippi, Certificates of
Participation (Marshall County
Correctional Facility), MBIA, 5.625s,
2015 3,060 2,991,915
State of Mississippi, Certificates of
Participation (Rehabilitation
Services), 6.1s, 2014 2,000 2,013,840
--------------
$12,680,375
----------------------------------------------------------------------------
Refunded and Special Obligations - 8.5%
Commonwealth of Puerto Rico, Public
Improvement, 6.8s, 2002 $1,500 $ 1,682,115
Puerto Rico Highway & Transportation
Authority Rev., 6.625s, 2002 100 111,266
Puerto Rico Highway & Transportation
Authority Rev., 6.625s, 2018 1,900 2,114,054
State of Mississippi, 6s, 2002 3,000 3,207,390
--------------
$ 7,114,825
----------------------------------------------------------------------------
Airport and Port Revenue - 2.4%
Puerto Rico Ports Authority (American
Airlines), 6.25s, 2026 $2,000 $ 2,017,900
----------------------------------------------------------------------------
Electric and Gas Utility Revenue - 7.8%
Claiborne County, MS, Pollution Control
Rev. (System Energy Resources, Inc.),
7.3s, 2025 $1,000 $ 1,041,940
Claiborne County, MS, Pollution Control
Rev. (System Energy Resources, Inc.),
6.2s, 2026 3,300 3,191,760
Warren County, MS, Pollution Control
Rev. (Mississippi Power & Light), 7s,
2022 1,000 1,050,590
Washington County, MS, Pollution
Control Rev. (Mississippi Power &
Light), 7s, 2022 1,230 1,292,226
--------------
$ 6,576,516
----------------------------------------------------------------------------
Health Care Revenue - 3.1%
Adams County, MS, Hospital Rev.
(Jefferson Davis Memorial Hospital),
8s, 2016 $1,000 $ 1,144,270
Mississippi Hospital Equipment &
Facilities Authority Rev. (Magnolia
Regional Health Center), 7.375s,
2021### 1,500 1,448,955
--------------
$ 2,593,225
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 8.1%
Lowndes County, MS, Solid Waste
Disposal & Pollution Control Rev.
(Weyerhaeuser), 6.8s, 2022 $4,250 $ 4,746,485
Mississippi Business Finance Corp.
(Jackson Municipal Airport/Airborne
Freight), 7.15s, 2007 985 1,047,981
Warren County, MS, Pollution Control
Rev. (International Paper), 6.6s,
2019 1,000 1,023,910
--------------
$ 6,818,376
----------------------------------------------------------------------------
Insured Health Care Revenue - 18.5%
Alcorn County, Corinth, MS (Magnolia
Regional Health Center), AMBAC,
5.75s, 2013 $2,000 $ 2,005,560
Gulfport, MS, Hospital Facilities
(Memorial Hospital), MBIA, 6.125s,
2015 2,250 2,339,865
Gulfport, MS, Hospital Facilities
(Memorial Hospital), MBIA, 6.2s, 2018 1,000 1,041,700
Hinds County, MS, Rev. (Methodist
Hospital & Rehabilitation Center),
AMBAC, 5.6s, 2012 3,055 3,029,063
Mississippi Development Bank, Special
Obligation (Adams County Hospital),
FSA, 5.75s, 2016 1,000 985,870
Mississippi Hospital Equipment &
Facilities Authority Rev. (Baptist),
MBIA, 6.5s, 2010 1,190 1,283,915
Mississippi Hospital Equipment &
Facilities Authority Rev. (Baptist),
MBIA, 6s, 2013 750 768,502
Mississippi Hospital Equipment &
Facilities Authority Rev. (North
Mississippi Health Services), AMBAC,
5.25s, 2013 1,615 1,522,235
Mississippi Hospital Equipment &
Facilities Authority Rev. (Rush
Medical Foundation), Connie Lee,
6.7s, 2018### 2,500 2,635,675
--------------
$15,612,385
----------------------------------------------------------------------------
Multi-Family Housing Revenue - 4.7%
Gulfport, MS, Community Development
(Oakview Apartments), FNMA, 7.4s,
2025 $1,755 $ 1,867,214
Jackson, MS, Elderly Housing Corp.,
Mortgage Rev. (Delhaven Manor), "C",
FHA, 7.375s, 2024 1,975 2,094,310
--------------
$ 3,961,524
----------------------------------------------------------------------------
Single Family Housing Revenue - 6.4%
Mississippi Home Corp., GNMA, 6.5s,
2024 $2,650 $ 2,701,728
Mississippi Home Corp., GNMA, 6s, 2027 1,225 1,315,724
Mississippi Home Corp., GNMA, 6.625s,
2027 1,350 1,392,498
--------------
$ 5,409,950
----------------------------------------------------------------------------
Universities - 1.2%
University of Mississippi, Educational
Building Corp. (Athletic Facilities),
6.2s, 2016 $1,000 $ 1,014,840
----------------------------------------------------------------------------
Water and Sewer Utility Revenue - 13.6%
Clarksdale, MS, Sewer & Wastewater
Treatment System Rev., MBIA, 6.1s,
2012 $1,885 $ 1,935,367
Columbus, MS, Water & Sewer Rev., MBIA,
6.5s, 2013 1,000 1,078,420
5
<PAGE>
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
----------------------------------------------------------------------------
Water and Sewer Utility Revenue - continued
Gautier, MS, Utility District, Utility
Systems Rev., FGIC, 6.375s, 2019 $1,300 $ 1,361,126
Harrison County, MS, Wastewater
Management District, Wastewater
Treatment, FGIC, 6.5s, 2006 1,375 1,469,737
Harrison County, MS, Wastewater
Management District, Wastewater
Treatment, FGIC, 5.875s, 2025 3,000 3,008,610
Meridian, MS, Water & Sewer Rev.,
AMBAC, 6s, 2010 1,500 1,538,025
Meridian, MS, Water & Sewer Rev.,
AMBAC, 6.2s, 2012 650 678,100
Meridian, MS, Water & Sewer Rev.,
AMBAC, 6.2s, 2013 400 418,824
--------------
$11,488,209
----------------------------------------------------------------------------
Other - 0.9%
Jackson, MS, Redevelopment Authority
(Jackson Street Area), MBIA, 5.7s,
2013 $ 785 $ 777,393
----------------------------------------------------------------------------
Total Municipal Bonds
(Identified Cost, $78,896,311) $82,122,745
- ------------------------------------------------------------- --------------
Floating Rate Demand Note - 1.9%
Jackson County, MS, Pollution Control
Rev. (Chevron USA, Inc.), due
12/01/96, at Identified Cost $1,600 $ 1,600,000
----------------------------------------------------------------------------
Total Investments (Identified Cost, $80,496,311) $83,722,745
Other Assets, Less Liabilities - 0.6% 483,320
Net Assets - 100.0% $84,206,065
- ------------------------------------------------------------- --------------
</TABLE>
See portfolio footnotes and notes to financial statements
MFS NEW YORK MUNICIPAL BOND FUND
Municipal Bonds - 98.6%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
-----------------------------------------------------------------------------
<S> <C> <C> <C>
General Obligation - 12.5%
Brookhaven, NY, FGIC, 5.5s, 2013 $ 1,000 $ 981,240
Cheektowaga, NY, Central School
District, FGIC, 5.875s, 2014 650 655,148
Cheektowaga, NY, Central School
District, FGIC, 5.875s, 2015 750 755,940
New York, NY, 8.25s, 2001 160 183,697
New York, NY, 7.2s, 2008 1,000 1,075,390
New York, NY, 7.3s, 2010 515 555,000
New York, NY, 7.3s, 2011 5,000 5,420,950
New York, NY, 7.375s, 2013 1,600 1,734,800
New York, NY, 8s, 2015 10 11,299
New York, NY, 8s, 2018 60 67,984
Orangetown, NY, Housing Facilities
Rev., MBIA, 0s, 2030 21,170 2,738,551
Oswego County, NY, 6.7s, 2009 1,000 1,101,210
Port Byron, NY, Central School
District, AMBAC, 7.4s, 2012 500 597,135
Port Byron, NY, Central School
District, AMBAC, 7.4s, 2013 500 601,000
Port Byron, NY, Central School
District, AMBAC, 7.4s, 2014 500 604,660
Port Byron, NY, Central School
District, AMBAC, 7.4s, 2015 500 604,815
Territory of Virgin Islands, 7.75s,
2006 390 416,376
Washingtonville, NY, Central School
District, FGIC, 7.35s, 2008 550 645,409
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
-----------------------------------------------------------------------------
General Obligation - continued
Washingtonville, NY, Central School
District, FGIC, 7.35s, 2009 $ 550 $ 645,661
---------------
$19,396,265
-----------------------------------------------------------------------------
State and Local Appropriation - 17.9%
Metropolitan Transportation Authority,
NY, Service Contract, 7.375s, 2008 $ 2,000 $ 2,254,860
Metropolitan Transportation Authority,
NY, Service Contract, 0s, 2012 2,200 863,258
Metropolitan Transportation Authority,
NY, Service Contract, 5.75s, 2013 1,825 1,797,096
New York Dormitory Authority Rev. (City
University), 8.125s, 2008 1,500 1,625,775
New York Dormitory Authority Rev. (City
University), 5.75s, 2013 4,250 4,185,017
New York Dormitory Authority Rev. (City
University), 5.625s, 2016 1,450 1,395,161
New York Dormitory Authority Rev. (City
University), AMBAC, 5.75s, 2018 1,000 1,013,590
New York Dormitory Authority Rev. (City
University), AMBAC, 5.75s, 2018 800 810,872
New York Dormitory Authority Rev.
(State University), 5.875s, 2017 1,000 989,750
New York Local Government Assistance
Corp., 0s, 2014 3,750 1,346,663
New York Medical Care Facilities
Finance Agency, MBIA, 6s, 2025 1,300 1,323,374
New York Medical Care Facilities
Finance Agency, Mental Health
Services, 7.875s, 2008 245 272,871
New York Medical Care Facilities
Finance Agency, Mental Health
Services, 6.375s, 2014 1,000 1,018,310
New York Medical Care Facilities
Finance Agency, Mental Health
Services, 7.3s, 2021 250 276,020
New York Thruway Authority, 5.75s, 2016 1,500 1,460,400
New York Urban Development Corp.,
AMBAC, 5.6s, 2015 2,750 2,765,482
New York Urban Development Corp.
(Correctional Facilities), 0s, 2009 5,000 2,527,200
New York Urban Development Corp.
(Correctional Facilities), AMBAC, 0s,
2008 3,410 1,842,287
Troy, NY, Certificates of
Participation, Recreational
Facilities Rev., 9.75s, 2010**++ 905 90,500
---------------
$27,858,486
-----------------------------------------------------------------------------
Refunded and Special Obligations - 12.9%
New York, NY, 8s, 2001 $ 490 $ 566,092
New York, NY, 7.3s, 2010 365 422,783
New York, NY, 8.25s, 2016 1,840 2,160,215
New York Local Government Assistance
Corp., 7.25s, 2001 2,500 2,806,975
New York Medical Care Facilities
Finance Agency (Buffalo General
Hospital), FHA, 7.7s, 1998 500 541,735
New York Medical Care Facilities
Finance Agency (Catholic), FHA, 8.3s,
1998 515 553,167
New York Medical Care Facilities
Finance Agency (Long Island
Hospital), 8.1s, 1998 1,500 1,607,220
New York Medical Care Facilities
Finance Agency (Presbyterian
Hospital), FHA, 7.7s, 2000 750 846,870
6
<PAGE>
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
----------------------------------------------------------------------------
Refunded and Special Obligations - continued
New York Medical Care Facilities
Finance Agency (St. Luke's Hospital),
FHA, 7.45s, 2000 $ 2,600 $ 2,881,684
New York Medical Care Facilities
Finance Agency, Mental Health
Services, 7.875s, 2000 225 255,445
New York Medical Care Facilities
Finance Agency, Mental Health
Services, 7.875s, 2000 560 635,773
New York Medical Care Facilities
Finance Agency, Mental Health
Services, 7.3s, 2001 750 849,360
New York, NY, Municipal Water & Sewer
Finance Authority, 7s, 2001 530 586,259
New York, NY, Municipal Water & Sewer
Finance Authority, 7s, 2001 225 248,884
New York, NY, Municipal Water & Sewer
Finance Authority, 7.375s, 2001 2,000 2,256,220
New York Power Authority Rev. (General
Purpose), 8s, 1998 380 404,746
New York Urban Development Corp., State
Facilities Rev., 7.5s, 2001 1,000 1,132,840
Puerto Rico Aqueduct & Sewer Authority,
9s, 2005 250 315,725
Triborough Bridge & Tunnel Authority,
NY, 7.375s, 2000 1,000 1,098,770
---------------
$20,170,763
-----------------------------------------------------------------------------
Airport and Port Revenue - 1.9%
New York, NY, Industrial Development
Agency, Special Facilities Rev.
(American Airlines), 6.9s, 2024 $ 1,000 $ 1,046,820
New York, NY, Industrial Development
Authority, 6s, 2019 2,000 1,975,500
---------------
$ 3,022,320
-----------------------------------------------------------------------------
Electric and Gas Utility Revenue - 5.3%
New York Energy Research & Development
(Long Island Lighting), 7.15s, 2022 $ 2,700 $ 2,730,915
New York Power Authority, FGIC, 6.5s,
2008 2,500 2,774,350
Puerto Rico Electric Power, 0s, 2017 500 145,170
Virgin Islands Water & Power Authority,
Electric Systems Rev., 7.4s, 2011 2,450 2,591,096
---------------
$ 8,241,531
-----------------------------------------------------------------------------
Health Care Revenue - 2.6%
Albany, NY, Industrial Development
Authority, Civic Facilities Rev.,
8.25s, 2004### $ 1,965 $ 2,106,716
New York Medical Care Facilities
Finance Agency, Mental Health
Services (Huntington Mortgage), 6.5s,
2014 1,250 1,268,962
Tompkins County, NY, Industrial
Development Authority, 7.875s, 2024 700 702,702
---------------
$ 4,078,380
-----------------------------------------------------------------------------
Industrial Revenue
(Corporate Guarantee) - 3.2%
Allegany County, NY, Industrial
Development Authority, Solid Waste
Rev. (Atlantic Richfield), 6.625s,
2016 $ 1,000 $ 1,046,600
Fulton County, NY, Industrial
Development Agency (Crossroads
Incubator), 8.75s, 2009 1,120 1,192,027
Monroe County, NY, Industrial
Development Agency (Weyerhaeuser
Co.), 9s, 2006 1,000 1,014,470
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
-----------------------------------------------------------------------------
Industrial Revenue
(Corporate Guarantee) - continued
Port Authority, NY & NJ, Special
Obligation, 6.75s, 2019 $ 1,750 $ 1,760,658
---------------
$ 5,013,755
-----------------------------------------------------------------------------
Insured Health Care Revenue - 9.3%
New York Dormitory Authority Rev. (John
T. Mather Memorial Hospital), Connie
Lee, 5.25s, 2015 $ 1,900 $ 1,758,488
New York Dormitory Authority Rev. (Long
Beach Medical Center), MBIA, FHA,
5.55s, 2015 2,000 1,942,720
New York Dormitory Authority Rev. (St.
Vincent's Hospital), FHA, 7.375s,
2011 2,500 2,720,550
New York Medical Care Facilities
Finance Agency (Montefiore Medical),
AMBAC, 6.5s, 2029 2,550 2,731,458
New York Medical Care Facilities
Finance Agency (Montefiore Medical),
FHA, 7.25s, 2009 3,180 3,393,410
New York Medical Care Facilities
Finance Agency (Montefiore Medical),
FHA, 7.25s, 2024 1,750 1,860,565
---------------
$14,407,191
-----------------------------------------------------------------------------
Single Family Housing Revenue - 4.6%
New York Mortgage Agency Rev., 7.375s,
2011 $ 1,295 $ 1,368,776
New York Mortgage Agency Rev., 8.05s,
2011 630 681,245
New York Mortgage Agency Rev., 6.45s,
2017 2,355 2,450,495
New York Mortgage Agency Rev., 8.05s,
2021 325 342,241
New York Mortgage Agency Rev., 8.05s,
2022 555 592,219
New York Mortgage Agency Rev., 7.75s,
2023 995 1,056,043
New York, NY, Housing Development Corp.
(South Bronx Cooperatives), 8.1s,
2023 580 604,957
---------------
$ 7,095,976
-----------------------------------------------------------------------------
Turnpike Revenue - 10.0%
Buffalo & Fort Erie, NY, MBIA, 5.75s,
2025 $ 3,255 $ 3,232,573
Triborough Bridge & Tunnel Authority,
NY, 0s, 2012 360 143,590
Triborough Bridge & Tunnel Authority,
NY, 5.5s, 2017 8,000 7,998,880
Triborough Bridge & Tunnel Authority,
NY, MBIA, 0s, 2017 10,825 3,408,576
Virgin Islands Public Finance
Authority, Highway Rev., 7.7s, 2004 800 866,656
---------------
$15,650,275
-----------------------------------------------------------------------------
Universities - 4.7%
Hempstead Town, NY, Civic Facilities
Rev. (Hofstra University), MBIA,
5.8s, 2015 $ 1,500 $ 1,518,375
Islip, NY, Community Development Agency
Rev. (New York Institute of
Technology), 7.5s, 2026 2,000 2,030,060
New York Dormitory Authority Rev.
(Cornell University), 5.4s, 2013 1,000 979,050
New York Dormitory Authority Rev.
(Cornell University), 7.375s, 2020 1,500 1,653,180
New York Dormitory Authority Rev.
(Menorah Campus), FHA, 7.4s, 2031 1,095 1,205,978
---------------
$ 7,386,643
-----------------------------------------------------------------------------
7
<PAGE>
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
-----------------------------------------------------------------------------
Water and Sewer Utility Revenue - 12.3%
Buffalo, NY, Municipal Water Authority,
FGIC, 5s, 2025 $1,000 $ 895,080
New York Environmental Facilities
Corp., Pollution Control Rev., 5.75s,
2010 3,235 3,317,169
New York Environmental Facilities
Corp., Pollution Control Rev.,
6.875s, 2010 2,000 2,187,880
New York Environmental Facilities
Corp., Pollution Control Rev., 5.75s,
2012 1,100 1,131,867
New York Environmental Facilities
Corp., Water Facilities Rev., 8.85s,
2015 2,500 2,753,825
New York, NY, Municipal Water & Sewer
Finance Authority, 6s, 2010 620 642,667
New York, NY, Municipal Water & Sewer
Finance Authority, 7.1s, 2012 2,000 2,196,820
New York, NY, Municipal Water & Sewer
Finance Authority, 7s, 2015 745 813,585
New York, NY, Municipal Water & Sewer
Finance Authority, 7.6s, 2020 470 512,605
New York, NY, Municipal Water & Sewer
Finance Authority, 5.5s, 2023 1,500 1,419,735
Suffolk County, NY, Water Authority,
MBIA, 5.1s, 2012 1,895 1,829,016
Western Nassau County, NY, Water
Authority Rev., AMBAC, 5.65s, 2026 1,500 1,485,255
---------------
$ 19,185,504
-----------------------------------------------------------------------------
Other - 1.4%
Battery Park City Authority, NY, AMBAC,
5.5s, 2029 $1,000 $ 959,030
Dutchess, NY, Industrial Development
Agency, Civic Facilities Rev.,
8.625s, 2016 1,125 1,190,228
---------------
$ 2,149,258
-----------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $145,143,363) $153,656,347
- ------------------------------------------------------------- ---------------
Rights - 0.2%
Georgia Municipal Electric Authority,
due 2003 $ 1 $ 13,433
North Carolina Eastern Power Agency,
due 2003 5 115,850
State of New Jersey, "D", due 2003 2 232,900
-----------------------------------------------------------------------------
Total Rights (Identified Cost, $400,200) $ 362,183
- ------------------------------------------------------------- ---------------
Floating Rate Demand Note - 0.5%
New York City Municipal Water Finance
Authority, due 6/15/23, at Identified
Cost $ 800 $ 800,000
-----------------------------------------------------------------------------
Total Investments (Identified Cost, $146,343,563) $154,818,530
Other Assets, Less Liabilities - 0.7% 1,110,865
- ------------------------------------------------------------------------------
Net Assets - 100.0% $155,929,395
-----------------------------------------------------------------------------
</TABLE>
See portfolio footnotes and notes to financial statements
MFS NORTH CAROLINA MUNICIPAL BOND FUND
Municipal Bonds - 99.4%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
-----------------------------------------------------------------------------
<S> <C> <C> <C>
General Obligation - 3.9%
Charlotte, NC, Water & Sewer, 5.8s,
2013 $1,780 $ 1,832,243
Charlotte, NC, Water & Sewer, 5.8s,
2014### 5,050 5,198,217
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
-----------------------------------------------------------------------------
General Obligation - continued
Charlotte, NC, Water & Sewer, 5.6s,
2017 $2,035 $ 2,032,273
Charlotte, NC, Water & Sewer, 5.9s,
2019 2,820 2,893,715
Durham, NC, 5.9s, 2013 2,400 2,500,920
Durham, NC, 5.9s, 2014 2,400 2,500,920
Hertford County, NC, 9.5s, 2000 100 101,953
Hertford County, NC, 9.5s, 2001 100 103,931
Hertford County, NC, 9.5s, 2002 100 102,434
---------------
$17,266,606
-----------------------------------------------------------------------------
State and Local Appropriation - 9.5%
Charlotte, NC, Certificates of
Participation (Convention Facilities
Project), AMBAC, 0s, 2004 $3,435 $ 2,242,471
Charlotte, NC, Certificates of
Participation (Convention Facilities
Project), AMBAC, 0s, 2005 4,810 2,954,109
Charlotte, NC, Certificates of
Participation (Convention Facilities
Project), AMBAC, 0s, 2006 1,075 619,899
Charlotte, NC, Certificates of
Participation (Convention Facilities
Project), AMBAC, 0s, 2008 3,000 1,512,570
Charlotte, NC, Certificates of
Participation (Convention Facilities
Project), AMBAC, 5.25s, 2013 3,750 3,573,638
Cumberland County, NC, Certificates of
Participation (Civic Center), AMBAC,
6.375s, 2010 1,100 1,170,037
Cumberland County, NC, Certificates of
Participation (Civic Center), AMBAC,
0s, 2011 425 178,347
Cumberland County, NC, Certificates of
Participation (Civic Center), AMBAC,
0s, 2013 1,000 372,990
Dare County, NC, MBIA, 6.6s, 2006 2,100 2,250,633
Durham, NC, Certificates of
Participation (Hospital & Office
Facilities), 5.875s, 2009 1,460 1,497,697
Durham, NC, Certificates of
Participation (New Durham Corp.),
6.875s, 2009 1,750 1,899,100
Fayetteville, NC, Finance Corp.
(Municipal Building), MBIA, 5.625s,
2018 810 795,582
Franklin County, NC, Certificates of
Participation (Jail & School), FGIC,
6.625s, 2014 2,000 2,153,300
Greensboro, NC, Certificates of
Participation (Coliseum Arena
Project), 6.25s, 2011 2,180 2,260,900
Harnett County, NC, Certificates of
Participation, AMBAC, 6.2s, 2006 1,000 1,067,860
Harnett County, NC, Certificates of
Participation, AMBAC, 6.2s, 2009 1,500 1,565,820
Pasquotank County, NC, Certificates of
Participation, MBIA, 5s, 2015 3,250 2,979,372
Puerto Rico Housing, Bank & Finance
Agency, 7.5s, 2006 7,000 7,931,700
Puerto Rico Public Buildings Authority,
5.5s, 2007 2,550 2,552,729
Scotland County, NC, Certificates of
Participation (Jail/Courthouse
Project), FSA, 6.75s, 2011 1,000 1,066,450
Union County, NC, Certificates of
Participation, FSA, 6.375s, 2012 1,000 1,057,490
---------------
$41,702,694
-----------------------------------------------------------------------------
</TABLE>
8
<PAGE>
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
<TABLE>
Principal Amount
Issuer (000 Omitted) Value
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Refunded and Special Obligations - 14.3%
Chapel Hill, NC, Parking Facilities
Rev. (Rosemary Street Project),
8.125s, 2000 $ 1,670 $ 1,918,112
Chapel Hill, NC, Parking Facilities
Rev. (Rosemary Street Project),
8.25s, 2000 3,305 3,811,491
Charlotte, NC, Certificates of
Participation (Convention Facilities
Project), AMBAC, 6.75s, 2021 4,250 4,732,417
Craven, NC, Regional Medical Authority,
MBIA, 7.2s, 2000 1,500 1,671,675
Dare County, NC, School Bonds, MBIA,
6.9s, 2000 800 873,792
Dare County, NC, School Bonds, MBIA,
6.9s, 2000 800 873,792
Dare County, NC, School Bonds, MBIA,
6.9s, 2000 500 546,120
Fayetteville, NC, Public Works Rev.,
FGIC, 7s, 2000 2,000 2,190,740
Greensboro, NC, 6.3s, 2011 4,165 4,544,681
North Carolina Eastern Municipal Power
Agency, 7.75s, 1999 2,900 3,164,306
North Carolina Eastern Municipal Power
Agency, 7.5s, 2010 2,595 3,083,223
North Carolina Eastern Municipal Power
Agency, 5s, 2017 9,010 8,348,126
North Carolina Medical Care Commission,
Hospital Rev. (Carolina Medicorp),
7.25s, 2019 1,400 1,515,556
North Carolina Medical Care Commission,
Hospital Rev. (Gaston Health Care),
0s, 2007 500 254,135
North Carolina Medical Care Commission,
Hospital Rev. (Mercy Hospital), 6.5s,
2015 1,000 1,061,560
North Carolina Medical Care Commission,
Hospital Rev. (Presbyterian Health),
7.3s, 2000 1,000 1,118,070
North Carolina Medical Care Commission,
Hospital Rev. (Presbyterian Health),
7.375s, 2000 12,315 13,802,406
Pender County, NC, Certificates of
Participation (Pender County Prison),
7.6s, 2001 1,900 2,162,960
Pender County, NC, Certificates of
Participation (Pender County Prison),
7.7s, 2001 1,000 1,142,540
Pitt County, NC, Hospital Rev. (Pitt
Memorial Hospital), MBIA, 6.75s, 2001 2,800 3,124,688
Puerto Rico Highway & Transportation
Authority Rev., 6.625s, 2018 2,715 3,020,872
---------------
$62,961,262
-----------------------------------------------------------------------------
Airport and Port Revenue - 0.7%
Puerto Rico Ports Authority (American
Airlines), 6.25s, 2026 $ 3,200 $ 3,228,640
-----------------------------------------------------------------------------
Electric and Gas Utility Revenue - 15.6%
New Hanover County, NC, Industrial
Facilities Rev. (Carolina Power &
Light Co.), 6.9s, 2009 $ 1,000 $ 1,062,140
North Carolina Eastern Municipal Power
Agency, 7s, 2007 5,000 5,463,800
North Carolina Eastern Municipal Power
Agency, 7.25s, 2007 5,000 5,559,450
North Carolina Eastern Municipal Power
Agency, 7.5s, 2010 3,005 3,417,587
North Carolina Eastern Municipal Power
Agency, AMBAC, 6s, 2018 14,245 14,730,327
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
-----------------------------------------------------------------------------
Electric and Gas Utility Revenue - continued
North Carolina Eastern Municipal Power
Agency, FSA, 5.75s, 2019 $ 2,500 $ 2,462,650
North Carolina Municipal Power Agency,
No. 1, Catawba Electric Rev., AMBAC,
7.625s, 2014 180 189,535
North Carolina Municipal Power Agency,
No. 1, Catawba Electric Rev., AMBAC,
5.375s, 2020 2,500 2,374,175
North Carolina Municipal Power Agency,
No. 1, Catawba Electric Rev., FSA,
6.2s, 2018 4,300 4,445,426
North Carolina Municipal Power Agency,
No. 1, Catawba Electric Rev., MBIA,
0s, 2008 10,150 5,347,121
North Carolina Municipal Power Agency,
No. 1, Catawba Electric Rev., MBIA,
0s, 2009 10,000 4,935,200
North Carolina Municipal Power Agency,
No. 1, Catawba Electric Rev., MBIA,
6s, 2011 8,000 8,388,720
North Carolina Municipal Power Agency,
No. 1, Catawba Electric Rev., MBIA,
6.97s, 2012++++ 3,000 2,748,930
Puerto Rico Electric Power Authority
Rev., FSA, 6s, 2016 5,000 5,149,450
Wake County, NC, Industrial Facilities
Rev. (Carolina Power & Light), 6.9s,
2009 2,000 2,138,140
---------------
$68,412,651
-----------------------------------------------------------------------------
Health Care Revenue - 24.6%
Charlotte-Mecklenberg Hospital
Authority, NC, 6.25s, 2020 $ 1,750 $ 1,793,540
Charlotte-Mecklenberg Hospital
Authority, NC, "A", 5.75s, 2021 6,500 6,391,060
Charlotte-Mecklenberg Hospital
Authority, NC, "A", 5.875s, 2026 7,565 7,554,560
North Carolina Medical Care Commission,
Hospital Rev. (Carolina Medicorp),
6s, 2021 19,000 19,102,220
North Carolina Medical Care Commission,
Hospital Rev. (Gaston Health Care),
5.5s, 2015 8,040 7,793,092
North Carolina Medical Care Commission,
Hospital Rev. (Gaston Health Care),
5.5s, 2019 7,500 7,173,525
North Carolina Medical Care Commission,
Hospital Rev. (Halifax Memorial),
6.75s, 2014 1,355 1,381,260
North Carolina Medical Care Commission,
Hospital Rev. (Halifax Memorial),
6.75s, 2024 4,500 4,570,515
North Carolina Medical Care Commission,
Hospital Rev. (Moore Memorial
Hospital), 9.1s, 1999 800 829,808
North Carolina Medical Care Commission,
Hospital Rev. (Rex Hospital), 6.25s,
2017 6,850 7,067,967
North Carolina Medical Care Commission,
Hospital Rev. (Valdese General),
8.75s, 2016 5,475 6,161,510
Northern Hospital District, Surry
County, NC, Health Care Facilities
Rev., 7.875s, 2021 4,530 4,796,726
Pitt County, NC, Rev. (Memorial
Hospital), 5.5s, 2015 5,200 5,048,524
9
<PAGE>
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
-----------------------------------------------------------------------------
Health Care Revenue - continued
Pitt County, NC, Rev. (Memorial
Hospital), 5.25s, 2021 $18,300 $ 17,043,522
University of North Carolina, Chapel
Hill, University Hospital Rev.,
5.25s, 2019 1,500 1,404,195
University of North Carolina, Chapel
Hill, University Hospital Rev.,
5.25s, 2026 10,855 10,004,077
---------------
$108,116,101
-----------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 9.0%
Alamance County, NC, Industrial
Facilities & Pollution Control
Finance Authority (A.O. Smith Corp.),
7.375s, 2009 $ 1,000 $ 1,000,000
Chatham County, NC, Industrial
Facilities & Pollution Control, 9s,
2006 1,260 1,278,232
Gaston County, NC, Industrial
Facilities & Pollution Control
Finance Authority (Combustion
Engineering, Inc.), 8.85s, 2015 1,000 1,124,920
Halifax County, NC, Industrial
Facilities & Pollution Control
Finance Authority (Champion
International Corp.), 8.15s, 2019 1,500 1,626,645
Haywood County, NC, Industrial
Facilities & Pollution Control
Finance Authority (Champion
International Corp.), 8.1s, 2009 2,500 2,697,300
Haywood County, NC, Industrial
Facilities & Pollution Control
Finance Authority (Champion
International Corp.), 5.75s, 2025 11,000 10,293,470
Martin County, NC, Industrial
Facilities & Pollution Control
Finance Authority (Weyerhaeuser Co.),
7.25s, 2014 7,000 7,635,250
Martin County, NC, Industrial
Facilities & Pollution Control
Finance Authority (Weyerhaeuser Co.),
6.8s, 2024 7,500 8,031,675
Mecklenberg County, NC, Industrial
Facilities & Pollution Control
Finance Authority (Precision Steel),
7.75s, 2014 2,600 2,817,438
Surry County, NC, Industrial Facilities
& Pollution Control Finance Authority
(Weyerhaeuser Co.), 9.25s, 2002 1,500 1,752,720
Wake County, NC, Industrial Facilities
& Pollution Control Finance Authority
(Mallinkcodt), 6.75s, 2012 1,100 1,157,673
---------------
$ 39,415,323
-----------------------------------------------------------------------------
Insured Health Care Revenue - 5.4%
Cumberland County, NC, Hospital
Facilities Rev. (Cumberland County
Hospital), MBIA, 0s, 2009 $ 1,800 $ 846,468
Cumberland County, NC, Hospital
Facilities Rev. (Cumberland County
Hospital), MBIA, 6s, 2021 4,000 4,056,880
New Hanover County, NC, Hospital Rev.
(New Hanover Regional Medical
Center), AMBAC, 5.75s, 2026 4,625 4,567,049
North Carolina Medical Care Commission,
Hospital Rev. (Moore Regional), FGIC,
5.2s, 2013 6,750 6,391,305
North Carolina Medical Care Commission,
Hospital Rev. (Moore Regional), FGIC,
5s, 2018 4,800 4,331,184
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
-----------------------------------------------------------------------------
Insured Health Care Revenue - continued
Wake County, NC, Hospital Rev., MBIA,
5.125s, 2013 $ 4,000 $ 3,755,000
---------------
$ 23,947,886
-----------------------------------------------------------------------------
Multi-Family Housing Revenue - 4.0%
Asheville, NC, Housing Authority
(Asheville Terrace Apartments), 7.1s,
2011 $ 5,000 $ 5,231,150
North Carolina Housing Finance Agency,
FHA, 6.9s, 2024 4,880 5,132,979
North Carolina Housing Finance Agency,
FHA, 6.05s, 2028 5,000 5,015,250
Salisbury, NC, Housing Corp. (Yadkin
Senior Citizens), FNMA, 6.75s, 2022 2,120 2,153,878
---------------
$ 17,533,257
-----------------------------------------------------------------------------
Single Family Housing Revenue - 4.1%
North Carolina Housing Finance Agency,
6.7s, 2018 $ 1,800 $ 1,878,408
North Carolina Housing Finance Agency,
8.125s, 2019 1,950 2,019,069
North Carolina Housing Finance Agency,
7.7s, 2021 2,345 2,422,690
North Carolina Housing Finance Agency,
7.8s, 2021 2,325 2,399,447
North Carolina Housing Finance Agency,
7.85s, 2028 6,055 6,292,598
North Carolina Housing Finance Agency,
7.6s, 2032 2,995 3,114,770
---------------
$ 18,126,982
-----------------------------------------------------------------------------
Solid Waste Revenue - 0.3%
Iredell, NC, Solid Waste Systems Rev.,
6.25s, 2012 $ 1,250 $ 1,273,400
-----------------------------------------------------------------------------
Universities - 5.3%
Appalachian State University, NC, MBIA,
6.1s, 2014 $ 1,140 $ 1,179,570
Appalachian State University, NC, MBIA,
6.125s, 2019 4,370 4,513,292
North Carolina Education Facilities
Finance Agency (Duke University),
6.75s, 2021 11,500 12,466,805
University of North Carolina (Chapel
Hill), 0s, 2012 9,105 3,486,942
University of North Carolina (Chapel
Hill), 0s, 2013 4,285 1,530,216
---------------
$ 23,176,825
-----------------------------------------------------------------------------
Water and Sewer Utility Revenue - 2.7%
Asheville, NC, Water System Rev., FGIC,
5.7s, 2025 $ 2,500 $ 2,475,650
Kanapolis, NC, Certificates of
Participation, MBIA, 7.375s, 2010 5,000 5,361,300
Winston-Salem, NC, Water & Sewer
Systems Rev., 6.25s, 2012 4,000 4,172,480
---------------
$ 12,009,430
-----------------------------------------------------------------------------
Total Investments (Identified Cost, $412,495,007) $437,171,057
Other Assets, Less Liabilities - 0.6% 2,473,285
- -----------------------------------------------------------------------------
Net Assets - 100.0% $439,644,342
- ------------------------------------------------------------- ---------------
See portfolio footnotes and notes to financial statements
</TABLE>
10
<PAGE>
Portfolio of Investments (Unaudited) - September 30, 1996
MFS PENNSYLVANIA MUNICIPAL BOND FUND
Municipal Bonds - 97.8%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
General Obligation - 15.6%
Bedford, PA, Area School District, MBIA,
5.5s, 2017 $ 500 $ 485,545
Berks County, PA, FGIC, 0s, 2018 2,200 617,958
Central Greene Pennsylvania School
District, AMBAC, 5.25s, 2024 750 699,608
Dauphin County, PA, General Authority
Rev., 5.8s, 2026 400 390,196
Dauphin County, PA, General Authority
Rev., MBIA, 0s, 2020 940 229,576
Greene County, PA, 6s, 2010 100 99,463
Montour, PA, MBIA, 0s, 2019 1,190 329,214
Northeastern York County, PA, School
District, FGIC, 0s, 2012 415 173,233
Oley Valley, PA, School District, AMBAC,
2011 810 355,703
Pittsburgh, PA, Public Improvement, FGIC,
5.25s, 2011 750 720,203
Pottsgrove, PA, School District, AMBAC,
5.3s, 2014 1,000 968,100
Puerto Rico Aqueduct & Sewer Authority
Rev., 5s, 2019 500 450,900
Southeastern Area, PA, Special Schools
Authority Rev., 0s, 2007 360 184,705
Southern Fulton, PA, School District, 0s,
2016 460 143,902
State of Pennsylvania, 6.25s, 2010 300 325,260
Valley View, PA, School District, FGIC,
5.5s, 2014 500 490,835
------------
$6,664,401
- -----------------------------------------------------------------------------
State and Local Appropriation - 1.0%
Philadelphia, PA, Municipal Authority Rev.
(Justice Lease), 8.625s, 2016 $ 400 $ 432,484
- -----------------------------------------------------------------------------
Refunded and Special Obligations - 12.4%
Allegheny County, PA, Sanitation
Authority, FGIC, 7.45s, 2009 $ 200 $ 215,144
Allegheny County, PA, Sanitation
Authority, FGIC, 0s, 2014 2,835 998,373
Bethlehem, PA, Water Authority Rev., MBIA,
6.1s, 2018 500 535,435
Philadelphia, PA, Gas Works Rev., 6s, 2013 1,645 1,722,052
Philadelphia, PA, Hospital & Higher
Educational Facilities, 7.25s, 2031 500 561,660
Puerto Rico Highways & Transportation
Authority Rev., 6.5s, 2022 250 276,605
Schuylkill County, PA, Redevelopment
Authority Rev., FGIC, 7s, 2007### 300 329,826
Westmoreland County, PA, FGIC, ETM, 0s,
2018 1,000 276,200
Westmoreland County, PA, MBIA, ETM, 5.25s,
2009 400 397,624
------------
$5,312,919
- -----------------------------------------------------------------------------
Airport and Port Revenue - 2.9%
Allegheny County, PA, Airport Rev.
(Greater Pittsburgh), FGIC, 7.75s,
2019### $ 750 $ 770,880
Dauphin County, PA, Airport Rev. (Harris
International), 5.5s, 2014 500 480,750
------------
$1,251,630
- -----------------------------------------------------------------------------
Electric and Gas Utility Revenue - 4.3%
Luzerne County, PA, Industrial Development
Authority, 6.05s, 2019 $ 300 $ 288,222
Luzerne County, PA, Industrial Development
Authority, AMBAC, 7.2s, 2017 500 554,925
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
Electric and Gas Utility Revenue - continued
Philadelphia, PA, Gas Works Rev., 6.375s,
2014 $ 750 $ 769,942
Philadelphia, PA, Gas Works Rev., 5.25s,
2015 250 228,418
------------
$1,841,507
- -----------------------------------------------------------------------------
Health Care Revenue - 8.2%
Butler County, PA, Industrial Development
Authority (Sherwood Oaks), 5.75s, 2011 $ 400 $ 376,280
Chester County, PA, Health & Education
(Main Line), 5.5s, 2015 335 318,756
Cumberland County, PA, Municipal Refunding
(Carlisle Hospital), 6.8s, 2023 500 495,025
Montgomery County, PA, Industrial
Development Authority, Health Facilities
Rev., 8.5s, 2023 210 206,587
Pennsylvania Higher Education Rev., 5.7s,
2011 300 300,456
Philadelphia, PA, Health & Educational
Facilities (Jeans Health), 6.6s, 2010 500 510,955
Philadelphia, PA, Health & Educational
Facilities Authority (Children's
Hospital), 5.375s, 2014 500 475,120
Philadelphia, PA, Health & Educational
Facilities Authority (Temple
University), 6.625s, 2023 250 254,055
Philadelphia, PA, Hospitals & Higher
Educational Facilities (Graduate
Health), 6.25s, 2018 300 280,290
Union County, PA, Hospital Authority Rev.
(Evangelical Community Hospital),
5.875s, 2023 300 275,937
------------
$3,493,461
- -----------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 6.8%
Beaver County, PA, Industrial Development
Rev. (J. Ray McDermott Project), 6.8s,
2009 $ 835 $ 841,279
Erie County, PA, Industrial Development
Authority, Environmental Improvement
(International Paper), 7.625s, 2018 250 279,705
Hampden, PA, Industrial Development
Authority (Kmart), 5.75s, 2008 250 182,855
New Morgan, PA, Industrial Development
Authority (Browning Ferris Co.), 6.5s,
2019 500 514,815
Northampton County, PA, Industrial
Development Authority (Bethlehem Steel),
7.55s, 2017 800 826,136
Pennsylvania Economic Development
Authority (MacMillan Bloedel), 7.6s,
2020 250 276,200
------------
$2,920,990
- -----------------------------------------------------------------------------
Insured Health Care Revenue - 11.9%
Allegheny County, PA, Hospital Authority
(Magee Women's), FGIC, 0s, 2015### $1,000 $ 327,700
Allegheny County, PA, Hospital Authority
(South Hills Health System), MBIA, 5.8s,
2016 500 501,860
Allegheny County, PA, Hospital Authority
(University of Pittsburgh), MBIA, 5.35s,
2015### 400 381,476
11
<PAGE>
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
Insured Health Care Revenue - continued
Blair County, PA, Hospital Authority
(Altoona), AMBAC, 5.5s, 2008### $ 470 $ 470,982
Butler County, PA, Hospital Authority
(Butler Memorial Hospital), FSA, 5.25s,
2016 400 372,020
Dauphin County, PA, General Authority
Hospital Rev. (Hapsco Project), MBIA,
5.8s, 2002 355 371,983
Dauphin County, PA, General Authority
Hospital Rev. (Hapsco Project), MBIA,
5.5s, 2013 1,000 973,050
Delaware County, PA, Hospital Rev. (Crozer
Chester), MBIA, 5.3s, 2020 500 464,575
Doylestown, PA, Hospital Authority Rev.,
AMBAC, 5s, 2023 500 444,690
Lancaster County, PA, Hospital Rev.
(Masonic), AMBAC, 5s, 2020 400 357,720
Lehigh County, PA, Hospital Rev. (Lehigh
Valley), MBIA, 7s, 2016 250 287,228
Sayre, PA, Health Care Facilities, AMBAC,
6.375s, 2022 160 166,570
------------
$ 5,119,854
- -----------------------------------------------------------------------------
Multi-Family Housing Revenue - 3.9%
Montgomery County, PA, Redevelopment
Authority (KBF Associates), 6.5s, 2025 $ 250 $ 243,935
Pennsylvania Housing Finance Agency,
5.75s, 2014 275 273,375
Pennsylvania Housing Finance Agency, 5.8s,
2022 800 789,472
Pittsburgh, PA, Urban Development Corp.,
5.5s, 2010 400 383,528
------------
$ 1,690,310
- -----------------------------------------------------------------------------
Sales and Excise Tax Revenue - 2.3%
Commonwealth of Puerto Rico, MBIA, 5.5s,
2015 $ 500 $ 499,905
Puerto Rico Highway & Transportation
Authority, 5.5s, 2013 500 492,335
------------
$ 992,240
- -----------------------------------------------------------------------------
Single Family Housing Revenue - 4.6%
Pennsylvania Housing Finance Agency,
6.75s, 2014 $ 500 $ 522,040
Pennsylvania Housing Finance Agency, 6.4s,
2016 500 514,155
Pennsylvania Housing Finance Agency,
6.65s, 2021 250 258,543
Pennsylvania Housing Finance Agency,
6.125s, 2024 490 492,450
Philadelphia, PA, Redevelopment Authority,
6.1s, 2010 200 198,170
------------
$ 1,985,358
- -----------------------------------------------------------------------------
Solid Waste Revenue - 2.3%
Harrisburg, PA, 5.875s, 2021 $1,000 $ 981,380
- -----------------------------------------------------------------------------
Turnpike Revenue - 5.2%
Delaware River Junction, Port Authority
Rev., FGIC, 5.4s, 2014 $ 250 $ 246,352
Delaware River Junction, Toll Bridge
(Pennsylvania Bridge), FGIC, 6.25s, 2012 1,000 1,041,650
Puerto Rico Highway & Transportation
Authority, FSA, 5.25s, 2015 1,000 959,470
------------
$ 2,247,472
- -----------------------------------------------------------------------------
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
Universities - 5.5%
Cumberland County, PA, Municipal Authority
(Messiah College), AMBAC, 5.125s, 2015 $ 300 $ 280,095
Pennsylvania Higher Education Facilities
Authority Rev. (Thomas Jefferson
University), 6s, 2019 625 632,625
Pennsylvania Higher Education Facilities
Authority Rev. (University of
Pennsylvania), 7s, 2008 400 446,956
Pennsylvania Public School Building
Authority (Westmoreland), MBIA, 5.5s,
2015 1,000 974,540
------------
$ 2,334,216
- -----------------------------------------------------------------------------
Water and Sewer Utility Revenue - 6.3%
Center Township, PA, Sewer Refunding,
MBIA, 5.5s, 2016 $ 300 $ 292,947
Lancaster, PA, Sewer Authority, FGIC,
6.85s, 2011 250 257,622
Meadville, PA, Area Water Authority, FSA,
5.125s, 2014 250 233,748
Philadelphia, PA, Water Rev., 5.75s, 2013 275 267,437
Philadelphia, PA, Water Rev., FSA, 5.75s,
2013 300 299,796
Philadelphia, PA, Water Rev., MBIA, 5.5s,
2014 1,000 975,360
Smithfield, PA, Sewer Authority, 6.2s,
2018 350 351,652
------------
$ 2,678,562
- -----------------------------------------------------------------------------
Other - 4.6%
Pennsylvania Convention Center Rev.,
6.75s, 2019 $ 250 $ 261,688
Pennsylvania Finance Authority Rev., 6.6s,
2009 900 952,515
Pennsylvania Industrial Development
Authority, AMBAC, 7s, 2007 300 340,527
Pennsylvania Industrial Development
Authority, AMBAC, 5.8s, 2009 400 413,296
------------
$ 1,968,026
- -----------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $41,404,930) $41,914,810
- ---------------------------------------------------------------- ------------
Floating Rate Demand Notes - 0.5%
Allegheny County, PA, Hospital Development
Authority Rev., due 3/01/20 $ 125 $ 125,000
Allegheny County, PA, Hospital Development
Authority Rev. (Presbyterian), due
3/01/20 100 100,000
- -----------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 225,000
- ---------------------------------------------------------------- ------------
Total Investments (Identified Cost, $41,629,930) $42,139,810
Other Assets, Less Liabilities - 1.7% 735,124
- ------------------------------------------------------------------------------
Net Assets - 100.0% $42,874,934
- ---------------------------------------------------------------- ------------
</TABLE>
See portfolio footnotes and notes to financial statements
12
<PAGE>
Portfolio of Investments (Unaudited) - September 30, 1996
MFS SOUTH CAROLINA MUNICIPAL BOND FUND
Municipal Bons - 97.7%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
General Obligation - 2.8%
Charleston County, SC, 5.5s, 2014 $1,250 $ 1,243,963
Commonwealth of Puerto Rico, Aqueduct &
Sewer Authority Rev., 5s, 2015 1,000 916,520
Commonwealth of Puerto Rico, Public
Improvements Rev., 5.25s, 2018 500 467,345
Puerto Rico Aqueduct & Sewer Authority
Rev., 5s, 2019 1,500 1,352,700
Puerto Rico Public Buildings Authority,
5.7s, 2009 1,000 1,001,340
-------------
$ 4,981,868
- -----------------------------------------------------------------------------
State and Local Appropriation - 7.9%
Berkeley County, SC, School District,
AMBAC, 6.3s, 2016### $1,800 $ 1,897,524
Greenville County, SC, Certificates of
Participation (Courthouse & Detention
Center), AMBAC, 5.7s, 2017 3,000 2,946,420
Greenville County, SC, Certificates of
Participation (Greenville Technical
College), AMBAC, 5.9s, 2019 850 852,890
Hilton Head Island, SC, Public Finance
Corp., Certificates of Participation,
AMBAC, 5.75s, 2014 2,000 2,000,480
Lexington County, SC, School District No.
1, Certificates of Participation
(Gilbert Middle School), MBIA, 6.65s,
2012 1,000 1,054,670
Myrtle Beach, SC, Public Finance Corp.,
Certificates of Participation
(Convention Center), 6.875s, 2017 2,500 2,594,400
Puerto Rico Public Buildings Authority,
5.5s, 2021 1,000 963,310
Williamsburg County, SC, School District
Public Facilities Corp., Certificates
of Participation, 7.5s, 2006 175 172,088
Williamsburg County, SC, School District
Public Facilities Corp., Certificates
of Participation, 7.5s, 2007 190 186,656
Williamsburg County, SC, School District
Public Facilities Corp., Certificates
of Participation, 7.5s, 2008 205 201,209
Williamsburg County, SC, School District
Public Facilities Corp., Certificates
of Participation, 7.5s, 2009 220 215,750
Williamsburg County, SC, School District
Public Facilities Corp., Certificates
of Participation, 7.5s, 2012 270 256,017
Williamsburg County, SC, School District
Public Facilities Corp., Certificates
of Participation, 7.5s, 2014 315 297,751
Williamsburg County, SC, School District
Public Facilities Corp., Certificates
of Participation, 7.5s, 2018 635 597,249
-------------
$14,236,414
- -----------------------------------------------------------------------------
Refunded and Special Obligations - 19.7%
Anderson County, SC, 7.75s, 1997### $ 500 $ 524,555
Calhoun, SC, Solid Waste Disposal Rev.
(Eastman Kodak), 6.75s, 2017### 1,000 1,111,970
Charlestown County, SC, Alumax Project,
6.5s, 2001 1,315 1,437,019
Charlestown County, SC, Certificates of
Participation (Charlestown Public
Facilities Corp.), MBIA, 7.1s, 2001 2,000 2,239,800
Columbia, SC, Waterworks & Sewer Rev.,
0s, 2004 1,500 1,050,690
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
Refunded and Special Obligations - continued
Columbia, SC, Waterworks & Sewer Rev.,
0s, 2006 $2,045 $ 1,264,014
Commonwealth of Puerto Rico, Public
Improvement Rev., 6.8s, 2002 425 476,599
Greenville Hospital System, SC, Hospital
Facilities Rev., "A", FGIC, 7.8s, 1998 1,950 2,095,626
Greenville Hospital System, SC, Hospital
Facilities Rev., "B", FGIC, 7.8s, 1998 1,500 1,612,020
Greenwood County, SC, Hospital Rev. (Self
Memorial Hospital), BIGI, 8.25s, 1997 500 531,140
Greenwood County, SC, Hospital Rev. (Self
Memorial Hospital), BIGI, 8.375s, 1997 1,000 1,063,490
Laurens, SC, Utility Systems Rev., FGIC,
7.625s, 1998 1,100 1,178,540
Lexington County, SC, School Distric No.
1, Certificates of Participation (White
Knoll Middle School), CGIC, 7.65s, 1999 1,400 1,531,516
Myrtle Beach, SC, Water & Sewer Rev.,
MBIA, 6s, 2000 1,750 1,832,058
Myrtle Beach, SC, Water & Sewer Rev.,
MBIA, 6s, 2000 1,780 1,863,464
North Charleston, SC, Sewer Rev., MBIA,
7.75s, 1998 1,250 1,352,663
Puerto Rico Aqueduct & Sewer Authority,
9s, 2005 750 947,175
Puerto Rico Highway & Transportation
Authority, 6.625s, 2002 300 333,798
Richland County, SC, 6.25s, 2000 1,260 1,348,515
Richland County, SC, Certificates of
Participation, FGIC, 0s, 2005 1,160 761,181
Richland County, SC, Certificates of
Participation, FGIC, 0s, 2006 1,160 717,158
Richland County, SC, Certificates of
Participation, FGIC, 0s, 2007 1,160 674,366
South Carolina Jobs Economic Development
Authority (Carolina Hospital System
Project), 7.55s, 2022 2,000 2,315,860
South Carolina Public Service Authority
(Santee Cooper), 6.625s, 2002 4,000 4,444,600
South Carolina Public Service Authority,
"C" (Santee Cooper), 7.1s, 2001 1,220 1,368,218
Spartanburg County, SC, Hospital
Facilities Rev. (Mary Black Hospital),
8.25s, 1998 500 547,050
York County, SC, School District No. 3,
MBIA, 7.5s, 1998 575 616,785
-------------
$35,239,870
- -----------------------------------------------------------------------------
Airport and Port Revenue - 0.5%
Richland Lexington, SC, Airport Rev.
(Columbia Airport), "A", AMBAC, 5.7s,
2026 $1,000 $ 965,530
- -----------------------------------------------------------------------------
Electric and Gas Utility Revenue - 12.5%
Colleton & Dorchester Counties, SC,
Pollution Control Rev., 6.6s, 2014 $3,000 $ 3,179,820
Fairfield County, SC, Pollution Control
Rev. (South Carolina Electric Co.),
6.5s, 2014 1,250 1,327,187
Oconee County, SC, Pollution Control Rev.
(Duke Power Co.), 7.5s, 2017 1,000 1,083,470
Piedmont Municipal Power Agency, SC,
Electric Rev., FGIC, 6.25s, 2021 4,600 4,955,672
13
<PAGE>
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
Electric and Gas Utility Revenue - continued
Piedmont Municipal Power Agency, SC,
Electric Rev., FGIC, 5s, 2022 $2,300 $,2,040,675
Puerto Rico Electric Power Authority
Rev., 6.125s, 2008 1,025 1,086,705
Puerto Rico Electric Power Authority
Rev., 5.5s, 2020 1,000 965,740
Puerto Rico Telephone Authority Rev.,
AMBAC, 5.05s, 2004(S) 1,000 930,210
South Carolina Public Service Authority,
FGIC, 5.875s, 2023 2,000 2,011,180
South Carolina Public Service Authority,
MBIA, 6.923s, 2013++++ 3,000 2,823,150
South Carolina Public Service Authority
Rev., "A", 5.75s, 2022 1,000 993,370
South Carolina Public Service Authority
Rev., "B", AMBAC, 5.5s, 2023 1,000 961,060
-------------
$22,358,239
- -----------------------------------------------------------------------------
Health Care Revenue - 6.7%
Greenville County, SC, First Mortgage
Rev. (Chestnut Hill), 10.125s, 2016 $1,895 $ 1,895,000
Greenville Hospital System, SC, Hospital
Facilities Rev., 6s, 2020 5,400 5,475,168
Horry County, SC, Hospital Facilities
Rev. (Conway Hospital), 6.75s, 2012 4,500 4,602,465
-------------
$11,972,633
- -----------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 10.5%
Chester County, SC, Industrial
Development Rev. (Springs Industries,
Inc.), 7.35s, 2014 $1,000 $ 1,074,660
Chester County, SC, Industrial
Development Rev. (Springs Industries,
Inc.), 7.8s, 2014 1,025 1,110,034
Darlington County, SC, Industrial
Development Rev. (Nucor Corp.), 5.75s,
2023 2,000 1,928,520
Darlington County, SC, Industrial
Development Rev. (Sonoco Products Co.),
6.125s, 2025 1,500 1,527,285
Fairfield County, SC, Industrial
Development Rev. (Rite Aid, Inc.),
7.9s, 2016 2,950 3,017,998
Florence County, SC, Industrial
Development Rev. (Stone Container
Corp.), 7.375s, 2007 1,000 1,034,810
Greenville County, SC, Industrial
Development Rev. (Kroger Co.), 7.85s,
2015 500 539,385
Lexington County, SC, Industrial Rev.
(J.B. White & Co.), 8s, 2005 630 684,016
Richland County, SC, Pollution Control
Rev. (Union Camp Corp.), 6.55s, 2020 1,800 1,893,330
Richland County, SC, Solid Waste
Facilities Rev. (Union Camp Corp.),
6.75s, 2022 2,000 2,103,780
York City, SC, Industrial Development
Rev. (Hoechst Celanese), 5.7s, 2024 4,000 3,829,520
-------------
$18,743,338
- -----------------------------------------------------------------------------
Insured Health Care Revenue - 9.3%
Charleston County, SC (Medical Society
Health Project), MBIA, 5.5s, 2019 $2,550 $ 2,422,372
Charleston County, SC, Hospital
Facilities Rev. (Medical Society Health
Project), MBIA, 5s, 2022 2,450 2,146,788
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
Insured Health Care Revenue - continued
Pickens & Richland Counties, SC, Hospital
Facilities Rev. (Baptist Hospital),
AMBAC, 5.75s, 2021 $3,000 $ 2,984,160
South Carolina Jobs Economic Development
Authority, Hospital Facilities Rev.
(Anderson Area Medical Center), MBIA,
5.25s, 2015 1,750 1,647,433
South Carolina Jobs Economic Development
Authority, Hospital Facilities Rev.
(Tuomey Regional Medical Center), MBIA,
5.5s, 2020 4,390 4,209,000
Spartanburg County, SC, Health Service
Rev., AMBAC, 5.3s, 2025 1,000 934,660
Spartanburg County, SC, Hospital
Facilities Rev., Health Services
District, Inc., AMBAC, 5.5s, 2015 1,000 967,130
Spartanburg County, SC, Hospital
Facilities Rev., Health Services
District, Inc., AMBAC, 5.3s, 2020 1,500 1,404,270
-------------
$16,715,813
- -----------------------------------------------------------------------------
Multi-Family Housing Revenue - 2.4%
South Carolina Housing Finance &
Development Authority (Fairway
Apartments), FHA, 7.625s, 2033 $1,960 $ 2,057,706
South Carolina Housing Finance &
Development Authority (Hunting Ridge
Apartments), 6.75s, 2025 1,000 1,004,930
South Carolina Housing Finance &
Development Authority (Runaway Bay
Apartments), 6.125s, 2015 1,300 1,280,032
-------------
$ 4,342,668
- -----------------------------------------------------------------------------
Single Family Housing Revenue - 6.2%
South Carolina Housing Finance &
Development Authority Rev., 7.55s, 2011 $1,750 $ 1,816,220
South Carolina Housing Finance &
Development Authority Rev., 8.6s, 2019 620 641,018
South Carolina Housing Finance &
Development Authority Rev., 7.75s, 2022 2,650 2,768,693
South Carolina Housing Finance &
Development Authority Rev., 7.8s, 2022 1,000 1,039,750
South Carolina Housing Finance &
Development Authority Rev., 7.9s, 2032 4,610 4,813,301
-------------
$11,078,982
- -----------------------------------------------------------------------------
Solid Waste Revenue - 1.1%
Charleston County, SC, Resource Recovery
Rev. (Foster Wheeler), 9.25s, 2010 $1,750 $ 1,884,225
- -----------------------------------------------------------------------------
Universities - 0.6%
Coastal Carolina University, SC, MBIA,
6.875s, 2026 $1,000 $ 1,088,980
- -----------------------------------------------------------------------------
Water and Sewer Utility Revenue - 17.5%
Cayce, SC, Waterworks & Sewer Rev.,
AMBAC, 5.25s, 2015 $1,500 $ 1,407,705
Charleston County, SC, Waterworks & Sewer
Rev., 6s, 2012 2,000 2,056,380
Charleston County, SC, Waterworks & Sewer
Rev., MBIA, 5s, 2022 3,150 2,802,429
Columbia, SC, Waterworks & Sewer Rev.,
0s, 2005 2,245 1,474,359
Columbia, SC, Waterworks & Sewer Rev.,
0s, 2006 9,330 5,773,497
14
<PAGE>
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
Water and Sewer Utility Revenue - continued
Columbia, SC, Waterworks & Sewer Rev.,
5.375s, 2012 $3,500 $ 3,461,115
Laurens County, SC, Public Utility
Systems, FGIC, 5s, 2018 1,000 889,350
Laurens County, SC, Water & Sewer
Commission, Sewer System Rev., 5.5s,
2014 1,080 1,028,581
Myrtle Beach, SC, Water & Sewer Rev.,
MBIA, 5.5s, 2013 1,000 984,880
South Carolina Water Resources Authority
Rev. (Local Government Program), 7.25s,
2020 3,000 3,200,220
Spartanburg, SC, Waterworks Rev., FGIC,
6.05s, 2018 2,750 2,825,268
St. Andrews, SC, Public Services
District, Sewer System Rev., FGIC,
7.75s, 2018 1,000 1,055,090
Western Carolina Regional Sewer Authority
Rev., AMBAC, 0s, 2007 4,400 2,467,872
York County, SC, Water & Sewer Rev.,
6.5s, 2025 2,000 2,001,360
-------------
$ 31,428,106
- -----------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $165,530,875) $175,036,666
- -----------------------------------------------------------------------------
Floating Rate Demand Notes - 1.0%
Berkeley County, SC, Pollution Control
(Amoco Chemical Co.), due 7/01/12 $ 500 $ 500,000
Charleston County, SC, Industrial
Development Rev. (Massey Coal), due
1/01/07 1,300 1,300,000
- -----------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 1,800,000
- -----------------------------------------------------------------------------
Total Investments (Identified Cost, $167,330,875) $176,836,666
Other Assets, Less Liabilities - 1.3% 2,355,599
- ------------------------------------------------------------------------------
Net Assets - 100.0% $179,192,265
- -----------------------------------------------------------------------------
</TABLE>
See portfolio footnotes and notes to financial statements
MFS TENNESSEE MUNICIPAL BOND FUND
Municipal Bonds - 97.0%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
-----------------------------------------------------------------------------
<S> <C> <C> <C>
General Obligation - 10.5%
Commonwealth of Puerto Rico, MBIA,
5.375s, 2022 $1,000 $ 952,500
Huntington, TN, School District, AMBAC,
5.35s, 2021 1,050 1,004,567
McKenzie, TN, High School District,
FSA, 5.625s, 2017 1,500 1,488,120
Memphis, TN, 5.25s, 2012 2,800 2,685,424
Metropolitan Government of Nashville &
Davidson County, TN, 6.125s, 2019 2,255 2,320,372
Metropolitan Government of Nashville &
Davidson County, TN, Health &
Education, 6.125s, 2014 1,000 1,032,120
Rutherford County, TN, 0s, 2015 1,500 501,915
Sevier County, TN, Public Building
Authority, AMBAC, 5.6s, 2015 800 781,616
Shelby County, TN, 5.125s, 2015 1,000 941,110
Territory of Virgin Islands, 7.75s,
2006 390 416,376
Union County, TN, AMBAC, 5.25s, 2020 1,000 942,090
---------------
$13,066,210
-----------------------------------------------------------------------------
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
State and Local Appropriation - 3.1%
Gatlinburg, TN, Public Building
Authority (Gatlinburg Convention
Center), AMBAC, 6.9s, 2012 $1,000 $ 1,074,060
Puerto Rico Public Buildings Authority,
5.5s, 2021 1,000 963,310
Puerto Rico Public Buildings Authority,
Education & Health, 5.91s, 2016(S) 2,000 1,845,240
---------------
$ 3,882,610
-----------------------------------------------------------------------------
Refunded and Special Obligations - 21.3%
Bristol, TN, Health & Educational
Facilities Board Rev. (Bristol
Memorial), FGIC, 7s, 2001 $ 500 $ 555,570
Gladeville, TN, Utility District,
Waterworks Rev., FGIC, 7.4s, 2000 500 552,470
Knox County, TN, Health, Education &
Housing Facilities Board (Fort
Sanders), MBIA, 8s, 2008 2,000 2,116,900
Knox County, TN, Health, Education &
Housing Facilities Board (Mercy
Health), AMBAC, 7.6s, 1999 3,500 3,829,070
Knox County, TN, Industrial Development
Board, 0s, 2016 8,325 2,202,129
Memphis, TN, Electric Systems Rev.,
6.75s, 2000 1,500 1,624,275
Memphis-Shelby County, TN, Airport
Authority, MBIA, 8s, 2008 3,500 3,723,755
Mt. Juliet, TN, Public Building
Authority (Madison), MBIA, 7.7s, 2004 1,100 1,368,719
Mt. Juliet, TN, Public Building
Authority (Madison), MBIA, 7.8s, 2004 3,500 4,376,400
Mt. Juliet, TN, Public Building
Authority (Poplar Grove), 8.375s,
1999 1,430 1,580,164
New Tazewell, TN, Health, Educational &
Housing Facilities Board (Lincoln),
7.25s, 1997 2,000 2,073,740
Puerto Rico Highway & Transportation
Authority Rev., 8.125s, 1998 670 727,962
Shelby County, TN, 6.5s, 1999 1,120 1,196,014
Wilson County, TN, Water & Wastewater
Authority, 8s, 1999 500 549,725
---------------
$26,476,893
-----------------------------------------------------------------------------
Electric and Gas Utility Revenue - 5.3%
Lawrenceburg, TN, Electric Rev., MBIA,
5.5s, 2026 $1,255 $ 1,208,841
Metropolitan Government of Nashville,
TN, MBIA, 0s, 2010 2,480 1,144,471
Metropolitan Government of Nashville,
TN, MBIA, 0s, 2012 3,305 1,347,118
Metropolitan Government of Nashville,
TN, 5.625s, 2014 1,000 995,910
Puerto Rico Telephone Authority Rev.,
AMBAC, 5.05s, 2004 2,000 1,860,420
---------------
$ 6,556,760
-----------------------------------------------------------------------------
Health Care Revenue - 4.1%
Cookeville, TN, Industrial Development
Board, Hospital Rev. (Cookeville
General), 5.75s, 2010 $2,000 $ 1,931,540
Knox County, TN, Health, Educational &
Housing Facilities Board (Baptist
East), 8.5s, 2004 1,300 1,364,792
Knox County, TN, Health, Educational &
Housing Facilities Board (Baptist
East), 8.6s, 2016 710 743,640
15
<PAGE>
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
Health Care Revenue - continued
Knox County, TN, Health, Educational &
Housing Facilities Board (East
Tennessee Children's), 6.5s, 2012 $ 1,000 $ 1,005,540
---------------
$ 5,045,512
-----------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 11.8%
Bristol, TN, Industrial Development
Authority (Kmart Corp.), 7.5s, 2008 $ 1,105 $ 955,604
Humphreys County, TN, Certificates of
Participation (DuPont), 6.7s, 2024 1,750 1,865,307
Knox County, TN, Industrial Development
Board (Kroger Co.), 8.1s, 2003 2,000 2,205,540
Lawrenceburg, TN, Industrial
Development Board (Tridon, Inc.),
9.875s, 2006 1,000 1,021,860
Maury County, TN, Industrial
Development Board, Pollution Control
Rev. (Saturn Corp.), 6.5s, 2024 1,500 1,559,535
McMinn County, TN, Industrial
Development Board, Pollution Control
Rev. (Bowater), 7.625s, 2016 1,000 1,068,960
Memphis-Shelby County, TN, Airport
Authority (Federal Express Corp.),
7.875s, 2009 2,755 3,029,122
Memphis-Shelby County, TN, Airport
Authority (Federal Express Corp.),
6.2s, 2014 1,000 996,310
Metropolitan Government of Nashville &
Davidson County, TN (Wilson
Sporting), 7.75s, 2014 1,000 1,086,840
Puerto Rico Industrial, Medical &
Environmental Pollution Control
Facilities, Finance Authority Rev.
(Baxter Travenol Laboratories), 8s,
2012 750 814,838
---------------
$14,603,916
-----------------------------------------------------------------------------
Insured Health Care Revenue - 8.5%
Bristol, TN, Health & Educational
Facilities Board Rev. (Bristol
Memorial), FGIC, 8.87s, 2021 $ 1,825 $ 1,826,186
Jackson, TN, Hospital Refunding
(General Hospital), AMBAC, 5.625s,
2015 500 492,870
Johnson City, TN, Health & Education
Financing Authority (Johnson City
Medical Center Hospital), MBIA,
5.25s, 2016 2,375 2,214,118
Knox County, TN, Health, Educational &
Housing Facilities Board (Fort
Sanders), MBIA, 5.75s, 2014 3,250 3,299,075
Knox County, TN, Health, Educational &
Housing Facilities Board (Fort
Sanders), MBIA, 5.25s, 2023 2,000 1,849,940
Metropolitan Government of Nashville &
Davidson County, TN, Health &
Education (Meharry Medical College),
AMBAC, 5s, 2024 1,000 899,800
---------------
$10,581,989
-----------------------------------------------------------------------------
Multi-Family Housing Revenue - 4.9%
Franklin, TN, Industrial Development
Rev., FHA, 6.75s, 2027 $ 1,000 $ 1,041,410
Jackson, TN, Health, Education &
Housing Facilities Board, FHA, 7.1s,
2028 1,610 1,685,058
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
Multi-Family Housing Revenue - continued
Metropolitan Government of Nashville &
Davidson County, TN, Health &
Education, FHA, 7.25s, 2032 $ 495 $ 516,993
Metropolitan Government of Nashville &
Davidson County, TN, Industrial, FHA,
6.95s, 2026 1,000 1,043,970
Metropolitan Government of Nashville &
Davidson County, TN, Industrial, FHA,
7.5s, 2029 695 726,560
Metropolitan Government of Nashville &
Davidson County, TN, Industrial, FHA,
7.7s, 2029 1,000 1,045,440
---------------
$ 6,059,431
-----------------------------------------------------------------------------
Sales and Excise Tax Revenue - 1.2%
Puerto Rico Highway & Transportation
Authority Rev., 5.5s, 2026 $ 400 $ 381,456
Tennessee Local Development Authority
Rev., Community Provider Loan, 7s,
2021 1,000 1,067,520
---------------
$ 1,448,976
-----------------------------------------------------------------------------
Single Family Housing Revenue - 3.8%
Shelby County, TN, Single Family
Mortgage Rev., FHA, 0s, 2015 $10,000 $ 1,513,200
Tennessee Housing Development Agency,
7.65s, 2022 980 1,019,170
Tennessee Housing Development Agency,
7.375s, 2023 1,000 1,040,090
Tennessee Housing Development Agency,
7.125s, 2026 800 847,152
Tennessee Housing Development Agency,
Homeownership, 7.4s, 2016 270 280,147
---------------
$ 4,699,759
-----------------------------------------------------------------------------
Universities - 3.3%
Jackson, TN, Health, Educational &
Housing Facilities Board (Lambuth
University), Asset Guaranty, 5.9s,
2015 $ 1,000 $ 998,680
Metropolitan Government of Nashville &
Davidson County, TN, Health,
Educational & Housing Facilities
Board (Vanderbilt University),
5.125s, 2013 490 467,754
Metropolitan Government of Nashville &
Davidson County, TN, Health,
Educational & Housing Facilities
Board (Vanderbilt University),
7.625s, 2016 1,000 1,063,770
Metropolitan Government of Nashville &
Davidson County, TN, Health,
Educational & Housing Facilities
Board (Vanderbilt University), 5.2s,
2018 1,600 1,521,744
---------------
$ 4,051,948
-----------------------------------------------------------------------------
Water and Sewer Utility Revenue - 19.2%
Madison, TN, Utility Waterworks
Refunding, MBIA, 5s, 2019 $ 2,750 $ 2,514,627
Metropolitan Government of Nashville,
TN, Water & Sewer Rev., AMBAC,
6.075s, 2022 2,000 2,014,740
Metropolitan Government of Nashville &
Davidson County, TN, Water & Sewer
Rev., FGIC, 5.2s, 2013 2,000 1,931,320
Metropolitan Government of Nashville &
Davidson County, TN, Water & Sewer
Rev., FGIC, 5.1s, 2016 2,565 2,394,453
Metropolitan Government of Nashville &
Davidson County, TN, Water & Sewer
Rev., RIBS, AMBAC, 8.254s, 2022 1,000 1,008,030
16
<PAGE>
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
Water and Sewer Utility Revenue - continued
Mt. Juliet, TN, Public Building
Authority (Cumberland), 7.55s, 2024 $1,215 $ 1,291,096
Mt. Juliet, TN, Public Building
Authority (Hermitage), MBIA, 7.5s,
2009 300 317,790
Mt. Juliet, TN, Public Building
Authority (Milcroft), 7.55s, 2024 2,045 2,173,078
Mt. Juliet, TN, Public Building
Authority (New Market), 8.375s, 2024 565 600,601
Mt. Juliet, TN, Public Building
Authority (Tipton), 7.5s, 2004 355 381,135
North Anderson County, TN, Utility
District Waterworks Rev., MBIA, 5.6s,
2019 500 489,360
Poplar Grove, TN, Utility District,
Waterworks Rev., 6.375s, 2011 500 509,350
Puerto Rico Aqueduct & Sewer Rev.,
6.25s, 2012 1,000 1,075,870
West Knox Utility District, TN, Water &
Sewer Rev., MBIA, 0s, 2002 1,315 952,770
West Knox Utility District, TN, Water &
Sewer Rev., MBIA, 0s, 2003 1,045 713,693
West Knox Utility District, TN, Water &
Sewer Rev., MBIA, 0s, 2004 1,920 1,233,619
West Knox Utility District, TN, Water &
Sewer Rev., MBIA, 0s, 2005 1,920 1,158,298
West Knox Utility District, TN, Water &
Sewer Rev., MBIA, 0s, 2006 1,920 1,096,243
West Knox Utility District, TN, Water &
Sewer Rev., MBIA, 0s, 2007 1,920 1,026,298
Wilson County, TN, Water & Wastewater
Authority, 6s, 2014 1,000 1,003,260
---------------
$ 23,885,631
-----------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $114,915,493) $120,359,635
- ------------------------------------------------------------- ---------------
Right - 0.2%
State of New Jersey, "D", due 2003
(Identified Cost, $125,600) $ 2 $ 232,900
-----------------------------------------------------------------------------
Floating Rate Demand Note - 1.3%
Uinta County, WY, Pollution Control
Rev. (Chevron), due 8/15/20, at
Identified Cost $1,600 $ 1,600,000
-----------------------------------------------------------------------------
Total Investments (Identified Cost, $116,641,093) $122,192,535
Other Assets, Less Liabilities - 1.5% 1,885,035
- -----------------------------------------------------------------------------
Net Assets - 100.0% $124,077,570
- ------------------------------------------------------------- ---------------
</TABLE>
See portfolio footnotes and notes to financial statements
MFS VIRGINIA MUNICIPAL BOND FUND
Municipal Bonds - 97.3%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
-----------------------------------------------------------------------------
<S> <C> <C> <C>
General Obligation - 11.8%
Chesapeake, VA, Public Improvement,
5.375s, 2012 $ 3,500 $ 3,395,770
Chesapeake, VA, Public Improvement,
5.375s, 2013 3,500 3,410,400
Chesapeake, VA, Water & Sewer Rev., 5s,
2025 9,100 8,093,267
Lebanon, VA, 7.6s, 2005 375 379,522
Lebanon, VA, 7.75s, 2010 310 313,841
Norfolk, VA, 5.25s, 2013 1,000 965,070
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
General Obligation - continued
Norfolk, VA, 5.25s, 2014 $ 1,750 $ 1,686,860
Norfolk, VA, 5.25s, 2015 3,000 2,888,460
Norfolk, VA, 5.25s, 2016 3,000 2,885,370
Portsmouth, VA, 6.375s, 2012 1,555 1,623,793
Richmond, VA, 0s, 2006 1,000 601,950
Richmond, VA, 0s, 2006 2,500 1,504,875
Richmond, VA, 0s, 2007 5,280 2,991,437
Richmond, VA, 0s, 2008 2,000 1,060,580
Richmond, VA, 0s, 2008 5,270 2,794,628
Richmond, VA, 0s, 2009 5,175 2,563,540
Roanoke, VA, 5s, 2014 3,000 2,800,590
State of Virginia, 5.375s, 2015 3,160 3,113,359
State of Virginia (Higher Educational
Institute), 0s, 1998 1,295 1,208,106
State of Virginia (Higher Educational
Institute), 0s, 1999 1,300 1,157,364
Suffolk, VA, 6.5s, 2006 1,250 1,300,550
Virginia Public School Authority, 6.5s,
2013 1,875 2,018,400
Virginia Public School Authority, "A",
5.375s, 2017 2,295 2,226,035
---------------
$50,983,767
-----------------------------------------------------------------------------
State and Local Appropriation - 8.6%
Brunswick County, VA, Industrial
Development Authority, 5.5s, 2017 $10,150 $ 9,963,849
Chesterfield County, VA, Industrial
Development Authority, Public
Facilities, 7.5s, 2008 1,720 1,748,294
Henrico County, VA, Industrial
Development Authority, Lease Rev.,
6.5s, 2010 5,000 5,420,600
New Kent County, VA, Industrial
Development Authority, Public
Facilities, 7.5s, 2011 700 746,557
Virginia Biotechnology Research Park
(Biotech Two), 5.25s, 2018 6,700 6,364,598
Virginia Public Building Authority,
MBIA, 0s, 2007 13,305 7,330,656
Virginia Public Building Authority,
MBIA, 0s, 2008 10,650 5,490,288
---------------
$37,064,842
-----------------------------------------------------------------------------
Refunded and Special Obligations - 13.9%
Arlington County, VA, Industrial
Development Authority (Arlington
Hospital), 7.125s, 2001 $ 4,450 $ 5,009,854
Carroll County, VA, Solid Waste
Authority Rev., 7.5s, 2001 2,265 2,581,534
Chesapeake, VA, Industrial Development
Authority (Sentara Life Care Corp.),
10s, 1997 1,105 1,185,499
Chesapeake, VA, Public Improvement,
6.75s, 1999### 2,500 2,697,850
Hampton, VA, Public Improvement,
6.625s, 2000 1,500 1,618,680
Henrico County, VA, Industrial
Development Authority (St. Mary's
Hospital), 7.5s, 2007 790 858,619
Hopewell County, VA, Hospital Authority
(John Randolph Hospital), 8.85s, 1997 4,645 4,786,580
Newport News, VA, 6.5s, 2000 875 954,091
Newport News, VA, 6.5s, 2000 2,205 2,404,310
Newport News, VA, 6.5s, 2000 2,325 2,535,157
Norfolk, VA, Industrial Development
Authority (Sentara Life Care Corp.),
10s, 1997 4,130 4,430,870
17
<PAGE>
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
Refunded and Special Obligations - continued
Norfolk, VA, Industrial Development
Authority (Sentara Life Care Corp.),
"B", 7.875s, 1998 $ 1,000 $ 1,090,680
Norfolk, VA, Industrial Development
Authority (Sentara Life Care Corp.),
"B", 7.9s, 1998 2,000 2,182,360
Portsmouth, VA, 6.9s, 2000 1,500 1,647,675
Puerto Rico Aqueduct & Sewer Authority
Rev., 9s, 2005 4,150 5,241,035
Puerto Rico Aqueduct & Sewer Authority
Rev., 10.25s, 2009 400 552,012
Roanoke, VA, Industrial Development
Authority, Hospital Rev. (Memorial),
7.25s, 2000 1,750 1,943,585
Roanoke, VA, Industrial Development
Authority, Hospital Rev. (Roanoke
Memorial), 7.5s, 2008 1,245 1,393,342
State of Virginia, Public School
Authority, 8.5s, 1997 500 515,690
Virginia Beach, VA, Certificates of
Participation (Judicial Center
Project), 7.25s, 2000 4,955 5,521,654
Virginia Beach, VA, Hospital Facilities
Rev. (Virginia Beach General
Hospital), 8.75s, 1997 2,875 3,088,210
Virginia Beach, VA, Water & Sewer Rev.,
6.625s, 2002 2,400 2,646,792
Virginia College Building Authority
(Hampton University), 7.75s, 1999 750 822,195
Virginia Resources Authority, Water &
Sewer System Rev., 7.875s, 1998 800 870,408
Virginia Resources Authority, Water &
Sewer System Rev., 7.5s, 1999 1,180 1,289,256
Virginia Transportation Board, Contract
Rev. (Route 28), 7.7s, 1998 2,175 2,323,792
---------------
$60,191,730
-----------------------------------------------------------------------------
Airport and Port Revenue - 6.6%
Metropolitan Washington, DC, Airport
Rev., 7.6s, 2014 $ 5,030 $ 5,506,039
Metropolitan Washington, DC, Airport
Rev., BIGI, 8.2s, 2018 3,500 3,807,020
Metropolitan Washington, DC, Airport
Rev., MBIA, 5.75s, 2020 12,000 11,740,320
Peninsula Airport Commission, VA, 7.3s,
2021 2,400 2,627,088
Virginia Port Authority, 8.2s, 2008 4,500 4,844,880
---------------
$28,525,347
-----------------------------------------------------------------------------
Electric and Gas Utility Revenue - 3.1%
Halifax County, VA, Industrial
Authority Rev. (Old Dominion
Electric), 6s, 2022 $ 5,000 $ 4,947,850
Pittsylvania County, VA, Industrial
Development Authority Rev., 7.5s,
2014 8,000 8,291,440
---------------
$13,239,290
-----------------------------------------------------------------------------
Health Care Revenue - 4.2%
Chesapeake, VA, Industrial Development
Authority (Sentara Life Care Corp.),
7.875s, 2008### $ 1,000 $ 1,080,870
Chesapeake, VA, Industrial Development
Authority (Sentara Life Care Corp.),
8s, 2018 4,000 4,305,160
Fairfax, Fauquier & Loudoun Counties,
VA, Health Center Commission, Nursing
Home Rev., 9s, 2020 1,890 1,986,957
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
Health Care Revenue - continued
Lynchburg, VA, Industrial Development
Authority (Central Health, Inc.),
8.125s, 2016 $ 1,400 $ 1,487,304
Martinsville, VA, Industrial
Development Authority, 6.75s, 2004 1,230 1,223,051
Norfolk, VA, Industrial Development
Authority (Sentara Life Care Corp.),
"A", 7.875s, 2008 1,000 1,073,030
Norfolk, VA, Industrial Development
Authority (Sentara Life Care Corp.),
"A", 7.9s, 2018 2,000 2,117,680
Peninsula Ports Authority, VA, Hospital
Facilities Rev. (Mary Immaculate),
7.375s, 2017 3,000 3,079,020
Suffolk, VA, Industrial Development
Authority (Louise Obici Memorial
Hospital), 7.875s, 2005 1,910 2,016,100
---------------
$18,369,172
-----------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 5.9%
Halifax, VA, Industrial Development
Authority (Tandy Corp.), 8.25s, 2008 $ 3,500 $ 3,767,470
Isle Wight County, VA, Industrial
Development Authority (Union Camp),
6.55s, 2024 8,000 8,306,640
Lynchburg, VA, Industrial Development
Authority (Kroger Co.), 7.9s, 2011 1,000 1,072,050
Puerto Rico Ports Authority Rev.
(American Airlines), 6.3s, 2023 2,000 2,020,040
Puerto Rico Ports Authority Rev.
(American Airlines), 6.25s, 2026 6,000 6,053,700
Virginia Beach, VA, Development
Authority (Beverly Enterprises), 10s,
2010 1,360 1,503,222
West Point, VA, Industrial Development
Authority, Solid Waste Disposal Rev.
(Chesapeake Corp. Project), 6.375s,
2019 2,600 2,636,504
---------------
$25,359,626
-----------------------------------------------------------------------------
Insured Health Care Revenue - 11.2%
Albemarle County, VA, Industrial
Development Authority, First Mortgage
Rev., FHA, 8.9s, 2026### $ 2,150 $ 2,399,873
Augusta County, VA, Industrial
Development Authority, AMBAC, 5.125s,
2021 3,000 2,771,820
Front Royal-Warren County, VA,
Industrial Development Authority,
FHA, 9.45s, 2024 1,000 1,091,560
Hanover County, VA, Industrial
Development Authority, MBIA, 6s, 2009 1,550 1,624,570
Hanover County, VA, Industrial
Development Authority, MBIA, 5.5s,
2025 7,000 6,745,550
Hanover County, VA, Industrial
Development Authority, MBIA, 5.5s,
2025 8,700 8,383,755
Henrico County, VA, Industrial
Development Authority Rev. (Bon
Secours), FSA, 7.984s, 2027++++ 8,700 8,762,205
Peninsula Ports Authority, VA, Hospital
Facilities Rev. (Wittaker Memorial),
FHA, 8.7s, 2023 2,100 2,198,427
Roanoke, VA, Industrial Development
Authority, MBIA, 5s, 2024 3,000 2,682,030
18
<PAGE>
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
Insured Health Care Revenue - continued
Roanoke, VA, Industrial Development
Authority, Hospital Rev. (Roanoke
Memorial), MBIA, 6.125s, 2017 $ 6,000 $ 6,367,860
Winchester, VA, Industrial Development
Authority, AMBAC, 9.205s, 2014++++ 4,900 5,489,127
---------------
$ 48,516,777
-----------------------------------------------------------------------------
Multi-Family Housing Revenue - 2.9%
Alexandria, VA, Redevelopment & Housing
Authority (Jefferson Village), 9s,
2018 $ 4,000 $ 4,103,320
Fairfax County, VA, Redevelopment &
Housing Authority (Little River
Glen), 8.95s, 2020 3,825 3,923,456
Norfolk, VA, Redevelopment & Housing
Authority (Dockside Apartments),
7.375s, 2028 2,000 2,102,880
Virginia Housing Development Authority,
6.5s, 2013 2,300 2,348,369
---------------
$ 12,478,025
-----------------------------------------------------------------------------
Sales and Excise Tax Revenue - 0.8%
Virginia Transportation Board,
Transportation Contract Rev., 6.5s,
2018 $ 3,500 $ 3,662,260
-----------------------------------------------------------------------------
Single Family Housing Revenue - 6.9%
Puerto Rico Housing Finance Corp.,
7.8s, 2021 $ 5 $ 5,202
Virginia Housing Development Authority,
7.54s, 2019++++ 7,500 7,064,775
Virginia Housing Development Authority,
6.6s, 2022 4,635 4,741,095
Virginia Housing Development Authority,
7.1s, 2022 2,000 2,028,580
Virginia Housing Development Authority,
6.3s, 2025 8,500 8,563,580
Virginia Housing Development Authority,
6.375s, 2026 7,000 7,094,430
Virginia Housing Development Authority,
0s, 2029 3,615 256,557
Virginia Housing Development Authority,
7.8s, 2038 100 103,638
---------------
$ 29,857,857
-----------------------------------------------------------------------------
Solid Waste Revenue - 0.7%
State of Virginia Research Authority,
Waste Disposal System Rev., 5.5s,
2015 $ 3,230 $ 3,131,130
-----------------------------------------------------------------------------
Turnpike Revenue - 0.7%
Chesapeake Bay, VA, Bridge & Tunnel
Authority, 0s, 2005 $ 4,535 $ 2,832,969
-----------------------------------------------------------------------------
Universities - 5.5%
Albemarle County, VA, Industrial
Development Authority, Health
Services Rev., 6.5s, 2022 $ 1,000 $ 1,023,140
Hampton Roads, VA, Medical College
General Rev., 6.875s, 2016 2,000 2,127,860
Hampton Roads, VA, Medical College
General Rev., 6.875s, 2016 1,500 1,595,895
Loudoun County, VA, Industrial
Development Authority, University
Facilities, 6.25s, 2012 2,710 2,785,636
Rockingham County, VA, Industrial
Development Authority Rev.
(Bridgewater), 6s, 2023 6,610 6,446,601
University of Virginia, University
Rev., 5.375s, 2014 5,690 5,514,236
University of Virginia, University
Rev., 5.375s, 2020 1,520 1,446,629
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------
Universities - continued
Virginia College Building Authority,
Educational Facilities Rev.
(Marymount), 7s, 2022 $ 2,500 $ 2,640,125
---------------
$ 23,580,122
-----------------------------------------------------------------------------
Water and Sewer Utility Revenue - 12.2%
Chesterfield County, VA, Water & Sewer
Rev., 0s, 2004 $ 5,025 $ 3,328,711
Chesterfield County, VA, Water & Sewer
Rev., 0s, 2005 4,815 3,004,704
Chesterfield County, VA, Water & Sewer
Rev., 0s, 2006 4,000 2,346,840
Chesterfield County, VA, Water & Sewer
Rev., 0s, 2007 6,000 3,285,420
Chesterfield County, VA, Water & Sewer
Rev., 0s, 2008 6,135 3,144,556
Chesterfield County, VA, Water & Sewer
Rev., 0s, 2009 6,135 2,937,806
Chesterfield County, VA, Water & Sewer
Rev., 0s, 2010 9,005 4,020,642
Fairfax County, VA, Water Authority
Rev., 6s, 2022 19,250 19,581,678
Hanover County, VA, Water & Sewer
Systems, 5.25s, 2026 7,000 6,544,300
Loudoun County, VA, Sanitation, Water &
Sewer Authority, 5.25s, 2026 1,500 1,396,410
Norfolk, VA, Water Rev., 5.9s, 2025 3,000 3,032,580
---------------
$ 52,623,647
-----------------------------------------------------------------------------
Other - 2.5%
Danville, VA, Industrial Development
Authority, Industrial Development
Rev., 8s, 2013 $ 3,115 $ 3,072,511
Loudoun, VA, Industrial Development
Authority, Industrial Development
Rev., 7.125s, 2015 4,000 3,934,520
Pamunkey, VA, Regional Jail Authority,
5.75s, 2018 2,500 2,493,525
Virginia Peninsula Regional Jail
Authority, Jail Facilities Rev.,
5.5s, 2018 1,500 1,440,780
---------------
$ 10,941,336
-----------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $400,276,216) $421,357,897
- ------------------------------------------------------------- ---------------
Rights - 0.2%
Georgia Municipal Electric Authority,
due 2016 $ 20 $ 383,800
State of New Jersey, "D", due 2003 5 582,250
-----------------------------------------------------------------------------
Total Rights (Identified Cost, $576,800) $ 966,050
- ------------------------------------------------------------- ---------------
Floating Rate Demand Notes - 1.3%
Peninsula Ports Authority, VA (Shell
Oil Co.), due 12/01/05 $ 4,700 $ 4,700,000
Peninsula Ports Authority, VA (Shell
Oil Co.), due 7/01/16 700 700,000
-----------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 5,400,000
- ------------------------------------------------------------- ---------------
Total Investments (Identified Cost, $406,253,016) $427,723,947
Other Assets, Less Liabilities - 1.2% 5,273,357
- -----------------------------------------------------------------------------
Net Assets - 100.0% $432,997,304
- ------------------------------------------------------------- ---------------
</TABLE>
See portfolio footnotes and notes to financial statements
19
<PAGE>
Portfolio of Investments (Unaudited) - September 30, 1996
MFS WEST VIRGINIA MUNICIPAL BOND FUND
Municipal Bonds - 97.3
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
---------------------------------------------------------------------------
<S> <C> <C> <C>
General Obligation - 10.0%
Cabell, WV, Board of Education, MBIA,
6s, 2006 $ 500 $ 531,315
Charleston, WV, Public Improvement,
7.2s, 2008 1,240 1,423,768
Charleston, WV, Public Improvement,
7.2s, 2009 1,140 1,306,223
Jefferson County, WV, Board of
Education, 6.85s, 2009 1,680 1,884,725
Monongalia County, WV, Board of
Education, MBIA, 7s, 2005 500 562,475
Ohio County, WV, Board of Education,
MBIA, 5.25s, 2018 1,180 1,137,013
State of West Virginia, FGIC, 5.25s,
2026 5,000 4,699,500
State of West Virginia, Water
Development Authority Rev., FSA,
6.2s, 2024 3,000 3,119,190
-------------
$14,664,209
---------------------------------------------------------------------------
State and Local Appropriation - 6.0%
West Virginia Building Commission,
Lease Rev. (West Virginia Regional
Jail), MBIA, 0s, 2007 $3,150 $ 1,738,044
West Virginia Building Commission,
Lease Rev. (West Virginia Regional
Jail), MBIA, 0s, 2008 3,050 1,574,258
West Virginia Building Commission,
Lease Rev. (West Virginia Regional
Jail), MBIA, 0s, 2009 2,500 1,189,875
West Virginia Building Commission,
Lease Rev. (West Virginia Regional
Jail), MBIA, 7s, 2015 1,000 1,086,910
West Virginia School Building
Authority, 6.75s, 2015 3,000 3,189,390
-------------
$ 8,778,477
---------------------------------------------------------------------------
Refunded and Special Obligations - 12.0%
Kanawha County, WV, Building Commission
(St. Francis Hospital), ETM, 7.5s,
2007 $ 265 $ 301,512
Puerto Rico Aqueduct & Sewer Authority
Rev., 9s, 2005 1,500 1,894,350
Puerto Rico Electric Power Authority
Rev., 8s, 1998 1,000 1,084,430
Puerto Rico Highway & Transportation
Authority Rev., 6.625s, 2002 1,600 1,780,256
Puerto Rico Highway & Transportation
Authority, Highway Rev., 6.625s, 2002 400 445,064
South Charleston, WV, Hospital Rev.
(Herbert J. Thomas Memorial
Hospital), BIGI, 8s, 1998 500 544,685
West Virginia Hospital Finance
Authority (Monongalia General
Hospital), 8.6s, 1997 1,000 1,035,180
West Virginia Parkways, Economic
Development & Tourism Authority,
FGIC, 0s, 2005 2,250 1,439,550
West Virginia Parkways, Economic
Development & Tourism Authority,
FGIC, 0s, 2006 2,500 1,505,650
West Virginia Parkways, Economic
Development & Tourism Authority,
FGIC, 0s, 2007 2,000 1,125,720
West Virginia Parkways, Economic
Development & Tourism Authority,
FGIC, 0s, 2008### 610 327,356
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
---------------------------------------------------------------------------
Refunded and Special Obligations - continued
West Virginia Water Development
Authority, 8.125s, 1998 $1,750 $ 1,915,463
West Virginia Water Development
Authority, 8.125s, 1998 2,015 2,205,518
West Virginia Water Development
Authority, 8.625s, 1998 750 828,292
West Virginia Water Development
Authority, 7.4s, 2001 750 852,338
West Virginia Water Development
Authority, 7.1s, 2009 250 285,870
-------------
$17,571,234
---------------------------------------------------------------------------
Electric and Gas Utility Revenue - 11.4%
Marshall County, WV, Pollution Control
Rev. (Ohio Power Co.), 6.85s, 2022 $2,000 $ 2,119,760
Marshall County, WV, Pollution Control
Rev. (Ohio Power Co.), MBIA, 6.85s,
2022 3,150 3,386,974
Mason County, WV, Pollution Control
Rev. (Appalachian Power), MBIA, 6.6s,
2022 7,000 7,400,400
McDowell County, WV, Industrial
Development Rev. (War Telephone Co.),
13.5s, 2001 365 365,493
Putnam County, WV, Pollution Control
Rev. (Appalachian Power Co.), MBIA,
6.6s, 2019 3,200 3,392,416
-------------
$16,665,043
---------------------------------------------------------------------------
Health Care Revenue - 9.5%
Berkeley County, WV, Building
Commission, Hospital Rev. (City
Hospital Project), 6.5s, 2022 $2,500 $ 2,506,025
Hampshire County, WV, First Mortgage
Rev. (Romney Health Care), 9.5s, 2022 1,280 1,311,847
Monongalia County, WV, Health
Facilities Rev. (Beverly Enterprises,
Inc.), 10s, 2007 865 944,718
West Virginia Hospital Finance
Authority (Charleston Area Medical
Center), 6.5s, 2023 2,000 2,078,840
West Virginia Hospital Finance
Authority (Fairmont General
Hospital), 6.625s, 2019 2,000 1,928,120
West Virginia Hospital Finance
Authority (Logan General Hospital),
7.25s, 2020 5,000 5,061,150
-------------
$13,830,700
---------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 17.6%
Braxton County, WV, Solid Waste
Disposal (Weyerhaeuser), 6.5s, 2025 $2,000 $ 2,048,520
Jackson County, WV, Pollution Control
Rev. (Kaiser Aluminum & Chemical
Corp.), 6.5s, 2008 1,345 1,303,426
Kanawha County, WV, Commercial
Development Rev. (Kroger Co.), 8s,
2011 1,000 1,075,570
Kanawha County, WV, Commercial
Development Rev. (May Dept. Stores
Co.), 6.5s, 2003 3,000 3,251,580
Kanawha County, WV, Pollution Control
Rev. (Union Carbide Corp.), 8s, 2020 2,000 2,171,640
Monongalia County, WV, Commercial
Development Rev. (Kroger Co.), 7.7s,
2012 2,000 2,131,940
Ohio County, WV, Industrial Development
Rev. (Kroger Co.), 8.125s, 2011 2,000 2,163,300
20
<PAGE>
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
---------------------------------------------------------------------------
Industrial Revenue
(Corporate Guarantee) - continued
Pleasants County, WV, Pollution Control
Rev. (West Penn Power), AMBAC, 6.15s,
2015 $5,250 $ 5,441,520
Putnam County, WV, Industrial
Development Rev. (Rite Aid Corp.),
10.375s, 2002 590 598,490
South Charleston, WV, Pollution Control
Rev. (Union Carbide Corp.), 7.625s,
2005 2,500 2,849,775
Wierton, WV, Pollution Control Rev.
(Weirton Steel), 8.625s, 2014 2,550 2,655,825
-------------
$ 25,691,586
---------------------------------------------------------------------------
Insured Health Care Revenue - 7.3%
Monongalia County, WV, Building
Commission, Hospital Rev. (Monongalia
General Hospital), MBIA, 6.625s, 2011 $1,000 $ 1,068,630
West Virginia Hospital Finance
Authority (Cabell Huntington
Hospital), AMBAC, 6.25s, 2019 5,000 5,243,650
West Virginia Hospital Finance
Authority (West Virginia University
Hospital, Inc.), MBIA, 5s, 2016 2,000 1,793,800
West Virginia Hospital Finance
Authority (West Virginia University
Medical Corp.), MBIA, 7.875s, 2007 1,500 1,582,425
West Virginia Hospital Finance
Authority (West Virginia University
Medical Corp.), MBIA, 7.875s, 2018 1,000 1,060,600
-------------
$ 10,749,105
---------------------------------------------------------------------------
Multi-Family Housing Revenue - 1.0%
Huntington, WV, Housing Corp.,
Multi-Family Rev., FNMA, 7.5s, 2024 $ 800 $ 839,752
Webster County, WV, Housing Development
Rev. (Circlebrook), 6.35s, 2008 555 563,486
-------------
$ 1,403,238
---------------------------------------------------------------------------
Single Family Housing Revenue - 8.1%
Berkeley, Brooke & Fayette Counties,
WV, FGIC, 9.1s, 2011 $ 70 $ 71,899
Berkeley County, WV, Residential
Mortgage Rev., 7.875s, 2012 305 312,536
Charles Town, WV, Residential Mortgage
Rev., 6.2s, 2011 845 853,306
Mason County, WV, Rev., 0s, 2014 1,700 440,215
West Virginia Housing Development Fund,
7.85s, 2014 840 864,074
West Virginia Housing Development Fund,
0s, 2015 790 111,983
West Virginia Housing Development Fund,
7.95s, 2017 1,810 1,885,622
West Virginia Housing Development Fund,
7.2s, 2018 5,000 5,245,750
West Virginia Housing Development Fund,
7.2s, 2020 2,000 2,098,300
-------------
$ 11,883,685
---------------------------------------------------------------------------
Turnpike Revenue - 2.0%
West Virginia Parkways, Economic
Development & Tourism Authority,
FGIC, 0s, 2006 $1,885 $ 1,112,131
West Virginia Parkways, Economic
Development & Tourism Authority,
FGIC, 7.452s, 2019++++ 1,800 1,740,258
-------------
$ 2,852,389
---------------------------------------------------------------------------
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
Principal Amount
Issuer (000 Omitted) Value
---------------------------------------------------------------------------
Universities - 0.7%
West Virginia University Rev. (West
Virginia University Dormitory
Project), MBIA, 6.75s, 2017 $1,000 $ 1,065,930
---------------------------------------------------------------------------
Water and Sewer Utility Revenue - 10.2%
Beckley, WV, Industrial Development
Rev. (Beckley Water Co.), 7s, 2017 $2,000 $ 2,135,040
Berkeley County, WV, Public Service
Sewer, MBIA, 5.625s, 2019 500 493,965
Charleston, WV, Sewer Rev., MBIA, 6.5s,
2017 2,260 2,417,138
Greenbrier, WV, Public Service, MBIA,
5.625s, 2019 500 492,080
Parkersburg, WV, Waterworks & Sewer,
FSA, 5.8s, 2019 2,500 2,507,375
West Virginia Water Development
Authority, 7.625s, 2009 500 563,935
West Virginia Water Development
Authority, 5.25s, 2035 2,000 1,825,180
West Virginia Water Development
Authority, CGIC, 7.5s, 2009 1,100 1,182,643
West Virginia Water Development
Authority, FSA, 5s, 2018 1,270 1,136,929
West Virginia Water Development
Authority, FSA, 5.625s, 2033 2,300 2,232,518
-------------
$ 14,986,803
---------------------------------------------------------------------------
Other - 1.5%
West Virginia Hospital Finance
Authority (General Division Medical
Building), 7.25s, 2014 $2,000 $ 2,193,380
---------------------------------------------------------------------------
Total Municipal Bonds
(Identified Cost, $133,910,742) $142,335,779
- ------------------------------------------------------------- -------------
Floating Rate Demand Notes - 0.5%
Lincoln County, WY, Pollution Control
(Exxon), due 11/01/14 $ 600 $ 600,000
Uinta County, WY, Pollution Control
Rev. (Chevron), due 8/15/20 200 200,000
---------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 800,000
- ------------------------------------------------------------- -------------
Total Investments (Identified Cost, $134,710,742) $143,135,779
Other Assets, Less Liabilities - 2.2% 3,185,290
- ----------------------------------------------------------------------------
Net Assets - 100.0% $146,321,069
- ------------------------------------------------------------- -------------
</TABLE>
See portfolio footnotes and notes to financial statements
Portfolio Footnotes:
** Non-income producing security - in default.
(S) Indexed security.
++ Security valued by or at the direction of the Trustees.
++++ Inverse floating rate security.
### Security segregated as collateral for an open futures contract.
21
<PAGE>
Financial Statements
Statements of Assets and Liabilities (Unaudited)
<TABLE>
<CAPTION>
Mississippi New York North Carolina Pennsylvania
September 30, 1996 Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investments -
Identified cost $80,496,311 $146,343,563 $412,495,007 $41,629,930
Unrealized appreciation 3,226,434 8,474,967 24,676,050 509,880
--------------------------------------------------------------
Total, at value $83,722,745 $154,818,530 $437,171,057 $42,139,810
Cash 47,265 85,423 -- 29,469
Receivable for Fund
shares sold 288,824 161,650 328,110 60,335
Receivable for
investments sold -- 1,277,909 100,000 506,314
Receivable for daily
variation margin on
open futures contracts 36,562 56,250 112,500 26,719
Interest receivable 1,557,604 2,341,493 7,640,576 673,781
Deferred organization
expenses 2,992 -- -- 2,355
Other assets 965 1,846 5,017 455
--------------------------------------------------------------
Total assets $85,656,957 $158,743,101 $445,357,260 $43,439,238
==============================================================
Liabilities:
Distributions payable $ 195,681 $ 277,777 $ 761,353 $ 78,138
Payable for Fund shares
reacquired 226,426 156,828 535,562 29,430
Payable for investments
purchased 976,141 2,285,395 2,474,054 450,320
Payable to affiliates -
Management fee 3,794 7,017 16,340 158
Shareholder servicing
agent fee 1,101 2,070 5,651 --
Distribution fee 3,164 4,860 15,139 3,021
Accrued expenses and
other liabilities 44,585 79,759 1,904,819 3,237
--------------------------------------------------------------
Total liabilities $ 1,450,892 $ 2,813,706 $ 5,712,918 $ 564,304
--------------------------------------------------------------
Net assets $84,206,065 $155,929,395 $439,644,342 $42,874,934
==============================================================
Net assets consist of:
Paid-in capital $85,178,196 $151,669,134 $426,591,157 $43,825,531
Unrealized appreciation
on investments 3,034,531 8,181,328 24,088,783 331,126
Accumulated net realized
loss on investments (3,950,319) (3,536,229) (10,064,928) (1,287,241)
Accumulated
undistributed
(distributions in
excess of) net
investment income (56,343) (384,838) (970,670) 5,518
--------------------------------------------------------------
Total $84,206,065 $155,929,395 $439,644,342 $42,874,934
==============================================================
Shares of beneficial
interest outstanding:
Class A 7,688,173 12,027,155 33,746,652 1,884,701
Class B 1,235,178 2,548,049 3,047,292 2,668,203
Class C -- -- 866,319 --
--------------------------------------------------------------
Total shares of
beneficial interest
outstanding 8,923,351 14,575,204 37,660,263 4,552,904
==============================================================
Net assets:
Class A $72,540,752 $128,674,963 $393,977,275 $17,726,293
Class B 11,665,313 27,254,432 35,559,430 25,148,641
Class C -- -- 10,107,637 --
--------------------------------------------------------------
Total net assets $84,206,065 $155,929,395 $439,644,342 $42,874,934
==============================================================
Class A shares:
Net asset value per
share (net assets /
shares of beneficial
interest outstanding) $9.44 $10.70 $11.67 $9.41
--------------------------------------------------------------
Offering price per share
(100/95.25 of net
asset value per share) $9.91 $11.23 $12.25 $9.88
==============================================================
Class B shares:
Net asset value and
offering price per
share (net assets /
shares of beneficial
interest outstanding) $9.44 $10.70 $11.67 $9.43
==============================================================
Class C shares:
Net asset value and
offering price per
share (net assets /
shares of beneficial
interest outstanding) -- -- $11.67 --
==============================================================
</TABLE>
On sales of $100,000 or more, the offering price of Class A shares is
reduced. A contingent deferred sales charge may be imposed on redemptions of
Class A, Class B and Class C shares.
See notes to financial statements
22
<PAGE>
Financial Statements - continued
Statements of Assets and Liabilities (Unaudited) - continued
<TABLE>
<CAPTION>
South Carolina Tennessee Virginia West Virginia
September 30, 1996 Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investments -
Identified cost $167,330,875 $116,641,093 $406,253,016 $134,710,742
Unrealized appreciation 9,505,791 5,551,442 21,470,931 8,425,037
---------------- --------------- --------------- ---------------
Total, at value $176,836,666 $122,192,535 $427,723,947 $143,135,779
Cash 9,975 46,351 8,519 79,935
Receivable for Fund
shares sold 79,040 363,615 285,132 131,983
Receivable for
investments sold 39,191 45,425 2,007,573 796,374
Receivable for daily
variation margin on
open futures contracts 36,562 22,500 182,813 14,062
Interest receivable 2,876,048 1,755,701 7,208,012 2,954,852
Other assets 2,063 1,370 5,076 1,584
---------------- --------------- --------------- ---------------
Total assets $179,879,545 $124,427,497 $437,421,072 $147,114,569
================ =============== =============== ===============
Liabilities:
Distributions payable $ 344,626 $ 266,396 $ 968,200 $ 295,908
Payable for Fund shares
reacquired 222,037 64 359,897 387,206
Payable for investments
purchased -- -- 2,939,123 --
Payable to affiliates -
Management fee 6,619 4,573 16,048 6,616
Shareholder servicing
agent fee 2,322 1,603 3,773 1,882
Distribution fee 6,225 4,292 19,081 4,924
Accrued expenses and
other liabilities 105,451 72,999 117,646 96,964
---------------- --------------- --------------- ---------------
Total liabilities $ 687,280 $ 349,927 $ 4,423,768 $ 793,500
---------------- --------------- --------------- ---------------
Net assets $179,192,265 $124,077,570 $432,997,304 $146,321,069
================ =============== =============== ===============
Net assets consist of:
Paid-in capital $173,071,223 $119,899,684 $425,507,393 $142,294,041
Unrealized appreciation
on investments 9,261,180 5,400,912 21,019,753 8,385,426
Accumulated net realized
loss on investments (2,838,392) (1,085,995) (12,210,096) (3,913,133)
Accumulated
distributions in excess
of net investment
income (301,746) (137,031) (1,319,746) (445,265)
---------------- --------------- --------------- ---------------
Total $179,192,265 $124,077,570 $432,997,304 $146,321,069
================ =============== =============== ===============
Shares of beneficial
interest outstanding:
Class A 13,249,913 10,624,917 35,645,361 11,705,329
Class B 1,684,352 1,345,988 2,712,901 1,177,702
Class C -- -- 309,915 --
---------------- --------------- --------------- ---------------
Total shares of
beneficial interest
outstanding 14,934,265 11,970,905 38,668,177 12,883,031
---------------- --------------- --------------- ---------------
Net assets:
Class A $158,984,764 $110,133,381 $399,157,794 $132,948,892
Class B 20,207,501 13,944,189 30,369,641 13,372,177
Class C -- -- 3,469,869 --
---------------- --------------- --------------- ---------------
Total net assets $179,192,265 $124,077,570 $432,997,304 $146,321,069
================ =============== =============== ===============
Class A shares:
Net asset value per
share (net assets /
shares of beneficial
interest outstanding) $12.00 $10.37 $11.20 $11.36
---------------- --------------- --------------- ---------------
Offering price per share
(100/95.25 of net
asset value per share) $12.60 $10.89 $11.76 $11.93
================ =============== =============== ===============
Class B shares:
Net asset value and
offering price per
share (net assets /
shares of beneficial
interest outstanding) $12.00 $10.36 $11.19 $11.35
================ =============== =============== ===============
Class C shares:
Net asset value and
offering price per
share (net assets /
shares of beneficial
interest outstanding) -- -- $11.20 --
================ =============== =============== ===============
</TABLE>
On sales of $100,000 or more, the offering price of Class A shares is
reduced. A contingent deferred sales charge may be imposed on redemptions of
Class A, Class B and Class C shares.
See notes to financial statements
23
<PAGE>
Financial Statements - continued
Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Mississippi New York North Carolina Pennsylvania
September 30, 1996 Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income:
Interest income $2,558,053 $ 4,997,576 $13,788,399 $1,254,632
------------- --------------- ---------------- --------------
Expenses -
Management fee $ 233,216 $ 435,537 $ 1,218,813 $ 118,832
Trustees' compensation 8,573 9,485 9,664 8,734
Shareholder servicing
agent fee (Class A) 55,770 97,947 299,966 13,825
Shareholder servicing
agent fee (Class B) 12,971 30,560 38,293 27,253
Shareholder servicing
agent fee (Class C) -- -- 7,319 --
Distribution and
service fee (Class A) -- 163,244 699,921 --
Distribution and
service fee (Class B) 47,711 138,909 174,060 98,254
Distribution and
service fee (Class C) -- -- 48,792 --
Custodian fee 17,809 30,140 67,113 9,842
Printing 5,895 9,407 29,283 4,897
Postage 3,391 2,815 11,674 2,632
Auditing fees 19,026 22,263 25,838 13,770
Legal fees 1,055 870 6,939 2,141
Amortization of
organization expenses 1,784 -- -- 881
Miscellaneous 28,260 38,243 109,295 14,811
------------- --------------- ---------------- --------------
Total expenses $ 435,461 $ 979,420 $ 2,746,970 $ 315,872
Fees paid indirectly (3,002) (6,168) (24,685) (3,205)
Preliminary reduction
of expenses by
investment adviser
and distributor (9,454) -- (71,549) (191,922)
------------- --------------- ---------------- --------------
Net expenses $ 423,005 $ 973,252 $ 2,650,736 $ 120,745
------------- --------------- ---------------- --------------
Net investment
income $2,135,048 $ 4,024,324 $11,137,663 $1,133,887
------------- --------------- ---------------- --------------
Realized and unrealized
gain (loss) on
investments:
Realized gain (loss)
(identified cost
basis) -
Investment transactions $ (121,640) $(1,364,422) $ (552,376) $ 75,617
Futures contracts 325,568 576,804 1,122,892 40,320
------------- --------------- ---------------- --------------
Net realized gain
(loss) on investments $ 203,928 $ (787,618) $ 570,516 $ 115,937
------------- --------------- ---------------- --------------
Change in unrealized
appreciation
(depreciation) -
Investments $ 738,411 $ 1,420,010 $ 3,803,243 $ 298,411
Futures contracts (164,390) (238,614) (446,647) (210,777)
------------- --------------- ---------------- --------------
Net unrealized gain
on investments $ 574,021 $ 1,181,396 $ 3,356,596 $ 87,634
------------- --------------- ---------------- --------------
Net realized and
unrealized gain on
investments $ 777,949 $ 393,778 $ 3,927,112 $ 203,571
------------- --------------- ---------------- --------------
Increase in net
assets from
operations $2,912,997 $ 4,418,102 $15,064,775 $1,337,458
============= =============== ================ ==============
</TABLE>
See notes to financial statements
24
<PAGE>
Financial Statements - continued
Statements of Operations (Unaudited) - continued
<TABLE>
<CAPTION>
Six Months Ended South Carolina Tennessee Virginia West Virginia
September 30, 1996 Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income:
Interest income $5,719,711 $3,919,125 $14,008,841 $ 4,692,691
---------------- ------------- --------------- ---------------
Expenses -
Management fee $ 498,381 $ 338,967 $ 1,203,288 $ 399,534
Trustees' compensation 9,664 9,349 6,965 9,965
Shareholder servicing
agent fee (Class A) 121,955 82,891 304,905 99,228
Shareholder servicing
agent fee (Class B) 21,074 14,419 31,764 14,278
Shareholder servicing
agent fee (Class C) -- -- 2,581 --
Distribution and service
fee (Class A) 284,561 193,413 711,444 231,533
Distribution and service
fee (Class B) 95,791 65,542 144,382 64,902
Distribution and service
fee (Class C) -- -- 17,209 --
Custodian fee 42,880 24,634 90,341 35,492
Printing 10,691 8,410 5,228 9,091
Postage 7,643 3,781 11,144 9,228
Auditing fees 15,417 15,951 15,887 14,888
Legal fees 5,672 1,247 3,368 5,672
Miscellaneous 42,719 15,792 83,376 32,932
---------------- ------------- --------------- ---------------
Total expenses $1,156,448 $ 774,396 $ 2,631,882 $ 926,743
Fees paid indirectly (9,023) (9,404) (71,414) (6,302)
Preliminary reduction of
expenses by investment
adviser and distributor (29,078) (20,070) (34,542) --
---------------- ------------- --------------- ---------------
Net expenses $1,118,347 $ 744,922 $ 2,525,926 $ 920,441
---------------- ------------- --------------- ---------------
Net investment income $4,601,364 $3,174,203 $11,482,915 $ 3,772,250
---------------- ------------- --------------- ---------------
Realized and unrealized
gain (loss) on
investments:
Realized gain (loss)
(identified cost basis) -
Investment transactions $ (100,063) $ (21,798) $(2,576,303) $(1,042,744)
Futures contracts 28,551 (47,923) 779,890 (9,554)
---------------- ------------- --------------- ---------------
Net realized loss on
investments $ (71,512) $ (69,721) $(1,796,413) $(1,052,298)
---------------- ------------- --------------- ---------------
Change in unrealized
appreciation
(depreciation) -
Investments $ 721,832 $ (229,625) $ 1,433,280 $ 1,378,948
Futures contracts (244,611) (150,530) (385,150) (15,734)
---------------- ------------- --------------- ---------------
Net unrealized gain
(loss) on
investments $ 477,221 $ (380,155) $ 1,048,130 $ 1,363,214
---------------- ------------- --------------- ---------------
Net realized and
unrealized gain (loss)
on investments $ 405,709 $ (449,876) $ (748,283) $ 310,916
---------------- ------------- --------------- ---------------
Increase in net
assets from
operations $5,007,073 $2,724,327 $10,734,632 $ 4,083,166
================ ============= =============== ===============
</TABLE>
See notes to financial statements
25
<PAGE>
Financial Statements - continued
Statements of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Mississippi New York North Carolina Pennsylvania
September 30, 1996 Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net
assets:
From operations -
Net investment income $ 2,135,048 $ 4,024,324 $ 11,137,663 $ 1,133,887
Net realized gain (loss)
on investments 203,928 (787,618) 570,516 115,937
Net unrealized gain on
investments 574,021 1,181,396 3,356,596 87,634
--------------- --------------- ---------------- ---------------
Increase in net assets
from operations $ 2,912,997 $ 4,418,102 $ 15,064,775 $ 1,337,458
--------------- --------------- ---------------- ---------------
Distributions declared to
shareholders -
From net investment income
(Class A) $(1,886,176) $ (3,374,636) $ (10,104,695) $ (535,590)
From net investment income
(Class B) (248,872) (603,920) (754,028) (620,797)
From net investment income
(Class C) -- -- (214,579) --
In excess of net
investment income (Class
A) (20,342) -- -- --
In excess of net
investment income (Class
B) (2,997) -- -- --
--------------- --------------- ---------------- ---------------
Total distributions
declared to shareholders $(2,158,387) $ (3,978,556) $ (11,073,302) $(1,156,387)
--------------- --------------- ---------------- ---------------
Fund share (principal)
transactions -
Net proceeds from sale of
shares $ 3,634,991 $ 10,065,342 $ 80,287,626 $ 4,508,605
Net asset value of shares
issued to shareholders in
reinvestment of
distributions 947,728 2,307,842 6,417,332 698,130
Cost of shares reacquired (7,041,629) (19,399,807) (103,597,641) (4,712,808)
--------------- --------------- ---------------- ---------------
Increase (decrease) in
net assets from Fund
share transactions $(2,458,910) $ (7,026,623) $ (16,892,683) $ 493,927
--------------- --------------- ---------------- ---------------
Total increase
(decrease) in net
assets $(1,704,300) $ (6,587,077) $ (12,901,210) $ 674,998
Net assets:
At beginning of period 85,910,365 162,516,472 452,545,552 42,199,936
--------------- --------------- ---------------- ---------------
At end of period $84,206,065 $155,929,395 $ 439,644,342 $42,874,934
--------------- --------------- ---------------- ---------------
Accumulated undistributed
(distributions in excess
of) net investment income
included in net assets at
end of period $ (56,343) $ (384,838) $ (970,670) $ 5,518
=============== =============== ================ ===============
</TABLE>
Statements of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended South Carolina Tennessee Virginia West Virginia
September 30, 1996 Fund Fund Fund Fund
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net
assets:
From operations -
Net investment income $ 4,601,364 $ 3,174,203 $ 11,482,915 $ 3,772,250
Net realized loss on
investments (71,512) (69,721) (1,796,413) (1,052,298)
Net unrealized gain (loss)
on investments 477,221 (380,155) 1,048,130 1,363,214
---------------- --------------- ---------------- -----------------
Increase in net assets
from operations $ 5,007,073 $ 2,724,327 $ 10,734,632 $ 4,083,166
---------------- --------------- ---------------- -----------------
Distributions declared to
shareholders -
From net investment income
(Class A) $ (4,153,467) $ (2,844,933) $ (10,606,618) $ (3,477,788)
From net investment income
(Class B) (420,101) (290,263) (649,467) (294,270)
From net investment income
(Class C) -- -- (78,666) --
---------------- --------------- ---------------- -----------------
Total distributions
declared to shareholders $ (4,573,568) $ (3,135,196) $ (11,334,751) $ (3,772,058)
---------------- --------------- ---------------- -----------------
Fund share (principal)
transactions -
Net proceeds from sale of
shares $ 6,580,481 $ 6,742,619 $ 86,230,042 $ 5,127,024
Net asset value of shares
issued to shareholders in
reinvestment of
distributions 2,497,121 1,531,887 5,543,265 2,004,714
Cost of shares reacquired (15,539,492) (6,531,842) (108,370,158) (8,282,258)
---------------- --------------- ---------------- -----------------
Increase (decrease) in
net assets from Fund
share transactions $ (6,461,890) $ 1,742,664 $ (16,596,851) $ (1,150,520)
---------------- --------------- ---------------- -----------------
Total increase
(decrease) in net
assets $ (6,028,385) $ 1,331,795 $ (17,196,970) $ (839,412)
Net assets:
At beginning of period 185,220,650 122,745,775 450,194,274 147,160,481
---------------- --------------- ---------------- -----------------
At end of period $179,192,265 $124,077,570 $ 432,997,304 $146,321,069
---------------- --------------- ---------------- -----------------
Accumulated distributions
in excess of net
investment income
included in net assets at
end of period $ (301,746) $ (137,031) $ (1,319,746) $ (445,265)
================ =============== ================ =================
</TABLE>
See notes to financial statements
26
<PAGE>
Financial Statements - continued
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended Mississippi New York North Carolina Pennsylvania
March 31, 1996 Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net
assets:
From operations -
Net investment income $ 4,874,834 $ 8,386,733 $ 22,978,702 $ 2,103,242
Net realized gain (loss)
on investments (468,604) 4,046,405 4,503,226 (391,379)
Net unrealized gain (loss)
on investments 2,480,286 (907,958) 1,749,598 786,766
--------------- --------------- ---------------- ---------------
Increase in net assets
from operations $ 6,886,516 $ 11,525,180 $ 29,231,526 $ 2,498,629
--------------- --------------- ---------------- ---------------
Distributions declared to
shareholders -
From net investment income
(Class A) $ (4,360,203) $ (7,263,571) $ (21,314,451) $ (990,676)
From net investment income
(Class B) (514,631) (1,123,162) (1,292,311) (1,117,148)
From net investment income
(Class C) -- -- (371,940) --
In excess of net
investment income (Class
A) (11,291) (76,432) (76,544) --
In excess of net
investment income (Class
B) (1,333) (11,819) (4,641) --
In excess of net
investment income (Class
C) -- -- (1,336) --
--------------- --------------- ---------------- ---------------
Total distributions
declared to shareholders $ (4,887,458) $ (8,474,984) $ (23,061,223) $(2,107,824)
--------------- --------------- ---------------- ---------------
Fund share (principal)
transactions -
Net proceeds from sale of
shares $ 10,936,455 $ 34,552,591 $ 97,550,746 $ 6,446,099
Issued in connection with
the acquisition of the
Advantage Fund -- 14,684,566 -- 14,818,825
Net asset value of shares
issued to shareholders in
reinvestment of
distributions 2,349,051 5,133,804 13,374,416 1,301,093
Cost of shares reacquired (17,836,086) (53,386,143) (128,090,675) (4,865,944)
--------------- --------------- ---------------- ---------------
Increase (decrease) in
net assets from Fund
share transactions $ (4,550,580) $ 984,818 $ (17,165,513) $17,700,073
--------------- --------------- ---------------- ---------------
Total increase
(decrease) in net assets $ (2,551,522) $ 4,035,014 $ (10,995,210) $18,090,878
Net assets:
At beginning of period 88,461,887 158,481,458 463,540,762 24,109,058
--------------- --------------- ---------------- ---------------
At end of period $ 85,910,365 $162,516,472 $ 452,545,552 $42,199,936
--------------- --------------- ---------------- ---------------
Accumulated undistributed
(distributions in excess
of) net investment income
included in net assets at
end of period $ (33,004) $ (430,606) $ (1,035,031) $ 28,022
=============== =============== ================ ===============
</TABLE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended South Carolina Tennessee Virginia West Virginia
March 31, 1996 Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net
assets:
From operations -
Net investment income $ 9,387,094 $ 6,446,216 $ 23,707,705 $ 7,530,240
Net realized gain (loss)
on investments (27,045) 870,217 3,901,116 207,892
Net unrealized gain on
investments 1,723,191 888,249 1,645,937 1,172,683
---------------- --------------- ---------------- ---------------
Increase in net assets
from operations $ 11,083,240 $ 8,204,682 $ 29,254,758 $ 8,910,815
---------------- --------------- ---------------- ---------------
Distributions declared to
shareholders -
From net investment income
(Class A) $ (8,720,747) $ (5,935,131) $ (22,461,025) $ (6,996,162)
From net investment income
(Class B) (666,347) (511,085) (1,128,382) (534,078)
From net investment income
(Class C) -- -- (118,298) --
In excess of net
investment income (Class
A) (7,833) (26,378) (205,431) (26,236)
In excess of net
investment income (Class
B) (598) (2,271) (10,320) (2,003)
In excess of net
investment income (Class
C) -- -- (1,082) --
---------------- --------------- ---------------- ---------------
Total distributions
declared to shareholders $ (9,395,525) $ (6,474,865) $ (23,924,538) $ (7,558,479)
---------------- --------------- ---------------- ---------------
Fund share (principal)
transactions -
Net proceeds from sale of
shares $ 19,862,472 $ 9,264,655 $ 92,397,697 $ 17,491,754
Net asset value of shares
issued to shareholders
in reinvestment of
distributions 5,148,735 3,118,511 12,033,414 4,098,096
Cost of shares reacquired (25,486,913) (18,945,783) (114,561,422) (13,443,792)
---------------- --------------- ---------------- ---------------
Increase (decrease) in
net assets from Fund
share transactions $ (475,706) $ (6,562,617) $ (10,130,311) $ 8,146,058
---------------- --------------- ---------------- ---------------
Total increase
(decrease) in net assets $ 1,212,009 $ (4,832,800) $ (4,800,091) $ 9,498,394
Net assets:
At beginning of period 184,008,641 127,578,575 454,994,365 137,662,087
---------------- --------------- ---------------- ---------------
At end of period $185,220,650 $122,745,775 $ 450,194,274 $147,160,481
---------------- --------------- ---------------- ---------------
Accumulated undistributed
(distributions in excess
of) net investment income
included in net assets at
end of period $ (329,568) $ (176,038) $ (1,467,910) $ (445,457)
================ =============== ================ ===============
</TABLE>
See notes to financial statements
27
<PAGE>
Financial Statements - continued
Financial Highlights
<TABLE>
<CAPTION>
Mississippi Fund
----------------------------------------------------------------------------------------------------
Six Months Two Months
Ended Year Ended Ended Year Ended
September 30, March 31, March 31, January 31,
----------------------------------------------------------------------------------------------------
1996 1996 1995 1994 1994 1993*
----------------------------------------------------------------------------------------------------
(Unaudited)
----------------------------------------------------------------------------------------------------
Class A
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share
outstanding throughout each
period):
Net asset value - beginning
of period $9.35 $9.15 $9.19 $10.00 $9.38 $9.53
-------- -------- -------- -------- -------- --------
Income from investment
operations# -
Net investment income(S) $0.24 $0.52 $0.54 $0.09 $0.55 $0.24
Net realized and
unrealized gain (loss) on
investments 0.09 0.20 (0.01) (0.81) 0.62 (0.15)
-------- -------- -------- -------- -------- --------
Total from investment
operations $0.33 $0.72 $0.53 $(0.72) $1.17 $0.09
-------- -------- -------- -------- -------- --------
Less distributions declared
to shareholders -
From net investment
income++++ $(0.24) $(0.52) $(0.54) $(0.09) $(0.55) $(0.24)
From net realized gain on
investments++++++ -- -- 0.00 -- -- --
In excess of net realized
gain on investments -- -- (0.03) -- -- --
-------- -------- -------- -------- -------- --------
Total distributions
declared to shareholders $(0.24) $(0.52) $(0.57) $(0.09) $(0.55) $(0.24)
-------- -------- -------- -------- -------- --------
Net asset value - end of
period $9.44 $9.35 $9.15 $9.19 $10.00 $9.38
======== ======== ======== ======== ======== ========
Total return++ 3.63%+++ 7.99% 6.08% (7.20)%+++ 12.80% 5.00%+++
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 0.88%+ 0.45% 0.22% 0.10%+ 0.03% 0.00%+
Net investment income 5.16%+ 5.51% 5.99% 5.69%+ 5.68% 5.59%+
Portfolio turnover 10% 31% 47% 2% 28% 14%
Net assets at end of period
(000 omitted) $72,541 $74,435 $79,033 $79,541 $84,177 $41,212
</TABLE>
*For the period from the commencement of investment operations, August 6,
1992 to January 31, 1993.
+Annualized.
+++Not annualized.
#Per share data for the periods subsequent to January 31, 1994 is based on
average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
++Total returns for Class A shares do not include the applicable sales
charge. If the charge had been included, the results would have been
lower.
++++For the six months ended September 30, 1996, the per share distribution
in excess of net investment income was $0.0026 for Class A shares. For
the year ended March 31, 1996, the per share distribution in excess of
net investment income was $0.0013 for Class A shares. For the year ended
March 31, 1995, the per share distribution in excess of net investment
income was $0.0035 for Class A shares.
++++++For the year ended March 31, 1995, the per share distribution from net
realized gain on investments was $0.0016 for Class A shares.
(S)The Adviser voluntarily agreed to maintain the expenses of the Fund at not
more than 1.30% of average daily net assets for Class A shares. To the
extent actual expenses were over/under these limitations, the net
investment income per share and the ratios would have been:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Net investment income $0.24 $0.48 $0.48 $0.08 $0.45 $0.19
Ratios (to average
net assets):
Expenses 0.90%+ 0.88% 0.93% 0.88%+ 1.01% 1.17%+
Net investment income 5.14%+ 5.08% 5.28% 4.91%+ 4.69% 4.42%+
</TABLE>
See notes to financial statements
28
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
Mississippi Fund
- ----------------------------------------------------------------------------------------------
Six Months Two Months
Ended Year Ended Ended Year Ended
September 30, March 31, March 31, January 31,
- ----------------------------------------------------------------------------------------------
1996 1996 1995 1994 1994**
- ----------------------------------------------------------------------------------------------
(Unaudited)
- ----------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share
outstanding throughout
each period):
Net asset value - beginning
of period $9.36 $9.16 $9.19 $9.99 $9.94
-------- -------- -------- -------- --------
Income from investment
operations# -
Net investment income(S) $0.20 $0.44 $0.45 $0.07 $0.18
Net realized and
unrealized gain (loss) on
investments 0.08 0.20 -- (0.79) 0.05
-------- -------- -------- -------- --------
Total from investment
operations $0.28 $0.64 $0.45 $(0.72) $0.23
-------- -------- -------- -------- --------
Less distributions declared
to shareholders -
From net investment
income++++ $(0.20) $(0.44) $(0.45) $(0.08) $(0.18)
From net realized gain on
investments++++++ -- -- 0.00 -- --
In excess of net realized
gain on investments -- -- (0.03) -- --
-------- -------- -------- -------- --------
Total distributions
declared to shareholders $(0.20) $(0.44) $(0.48) $(0.08) $(0.18)
-------- -------- -------- -------- --------
Net asset value - end of
period $9.44 $9.36 $9.16 $9.19 $9.99
======== ======== ======== ======== ========
Total return 3.06%+++ 7.11% 5.14% (7.27)%+++ 2.33%+++
Ratios (to average net assets)
/Supplemental data(S):
Expenses## 1.78%+ 1.28% 1.23% 1.10%+ 1.06%+
Net investment income 4.30%+ 4.67% 4.97% 4.67%+ 4.29%+
Portfolio turnover 10% 31% 47% 2% 28%
Net assets at end of period
(000 omitted) $11,665 $11,475 $9,429 $6,526 $6,268
</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.
++++For the six months ended September 30, 1996, the per share distribution
in excess of net investment income was $0.0024 for Class B shares. For
the year ended March 31, 1996, the per share distribution in excess of
net investment income was $0.0011 for Class B shares. For the year
ended March 31, 1995, the per share distribution in excess of net
investment income was $0.0029 for Class B shares. For the two months
ended March 31, 1994, the per share distribution in excess of net
investment income was $0.002 for Class B shares.
++++++For the year ended March 31, 1995, the per share distribution from net
realized gain on investments was $0.0016 for Class B shares.
(S)The Adviser voluntarily agreed to maintain the expenses of the Fund at
not more than 1.95% of average daily net assets for Class B shares. To
the extent actual expenses were over/under these limitations, the net
investment income per share and the ratios would have been:
<TABLE>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.20 $ 0.40 $ 0.38 $ 0.06 $ 0.14
Ratios (to average
net assets):
Expenses 1.79%+ 1.71% 2.01% 1.95%+ 2.12%+
Net investment
income 4.29%+ 4.24% 4.19% 3.82%+ 3.23%+
</TABLE>
See notes to financial statements
29
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
New York Fund
- ----------------------------------------------------------------------------------------------------------
Six Months Two Months
Ended Year Ended Ended Year Ended
September 30, March 31, March 31, January 31,
- ----------------------------------------------------------------------------------------------------------
1996 1996 1995 1994 1994 1993
- ----------------------------------------------------------------------------------------------------------
(Unaudited)
- ----------------------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share
outstanding throughout
each period):
Net asset value - beginning
of period $ 10.66 $10.49 $10.50 $11.34 $10.78 $10.25
-------- -------- -------- -------- -------- --------
Income from investment
operations# -
Net investment income(S) $ 0.28 $0.55 $0.56 $0.09 $0.59 $0.63
Net realized and
unrealized gain (loss) on
investments 0.03 0.17 0.05 (0.84) 0.74 0.58
-------- -------- -------- -------- -------- --------
Total from investment
operations $ 0.31 $0.72 $0.61 $(0.75) $1.33 $1.21
-------- -------- -------- -------- -------- --------
Less distributions declared
to shareholders -
From net investment income $ (0.27) $(0.55) $(0.56) $(0.06) $(0.57) $(0.65)
From net realized gain on
investments -- -- -- -- (0.17) (0.03)
In excess of net
investment income++++ -- 0.00 (0.01) (0.03) (0.03) --
In excess of net realized
gain on investments -- -- (0.05) -- -- --
-------- -------- -------- -------- -------- --------
Total distributions
declared to shareholders $ (0.27) $(0.55) $(0.62) $(0.09) $(0.77) $(0.68)
-------- -------- -------- -------- -------- --------
Net asset value - end of
period $ 10.70 $10.66 $10.49 $10.50 $11.34 $10.78
======== ======== ======== ======== ======== ========
Total return++ 3.00%+++ 6.98% 6.03% (6.58)%+++ 12.69% 12.23%
Ratios (to average net
assets)/Supplemental
data(S):
Expenses## 1.10%+ 1.10% 1.07% 1.03%+ 0.93% 0.53%
Net investment income 5.22%+ 5.09% 5.43% 5.09%+ 5.21% 6.16%
Portfolio turnover 45% 102% 147% 15% 51% 61%
Net assets at end of period
(000 omitted) $128,675 $134,449 $146,597 $162,621 $184,523 $135,749
</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.
++Total returns for Class A shares do not include the applicable sales
charge. If the charge had been included, the results would have been
lower.
++++For the year ended March 31, 1996, the per share distribution in excess
of net investment income for Class A shares was $0.0058.
(S)The investment adviser and/or the distributor voluntarily waived a
portion of their management and/or distribution fee, respectively, for
certain of the periods indicated. If these fees had been incurred by the
Fund, the net investment income per share and the ratios would have
been:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Net investment income -- $0.54 $0.55 $0.07 $0.56 $0.57
Ratios (to average
net assets):
Expenses## -- 1.20% 1.18% 1.23%+ 1.23% 1.13%
Net investment
income -- 4.99% 5.31% 4.88%+ 4.90% 5.56%
</TABLE>
See notes to financial statements
30
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
New York Fund
- ---------------------------------------------------------------------------
Year Ended
January 31,
- ---------------------------------------------------------------------------
1992 1991 1990 1989*
- ---------------------------------------------------------------------------
Class A
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share
outstanding throughout
each period):
Net asset value - beginning
of period $ 9.90 $ 9.74 $ 9.79 $ 9.53
-------------- --------- --------- ----------
Income from investment
operations -
Net investment income(S) $ 0.65 $ 0.65 $ 0.68 $ 0.29
Net realized and
unrealized gain on
investments 0.44 0.16 0.01 0.21
-------------- --------- --------- ----------
Total from investment
operations $ 1.09 $ 0.81 $ 0.69 $ 0.50
-------------- --------- --------- ----------
Less distributions declared
to shareholders -
From net investment income $ (0.69) $ (0.65) $ (0.67) $(0.24)
From net realized gain on
investments (0.05) -- (0.06) --
From paid-in capital -- -- (0.01) --
-------------- --------- --------- ----------
Total distributions
declared to shareholders $ (0.74) $ (0.65) $ (0.74) $(0.24)
-------------- --------- --------- ----------
Net asset value - end of
period $ 10.25 $ 9.90 $ 9.74 $ 9.79
============== ========= ========= ==========
Total return++ 11.42% 8.74% 7.33% 8.16%+
Ratios (to average net
assets)/Supplemental
data(S):
Expenses 0.65% 0.54% 0.40% 0.40%+
Net investment income 6.44% 6.73% 6.88% 5.93%+
Portfolio turnover 80% 188% 236% 32%
Net assets at end of period
(000 omitted) $79,524 $37,385 $20,156 $6,412
</TABLE>
*For the period from the commencement of investment operations,
June 6, 1988 to January 31, 1989.
+Annualized.
++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.
(S)The investment adviser and/or the distributor voluntarily waived a
portion of their management and/or distribution fee, respectively,
for the periods indicated. If these fees had been incurred by the
Fund, the net investment income per share and the ratios would have
been:
Net investment income $ 0.60 $ 0.61 $ 0.59 $ 0.26
Ratios (to average
net assets):
Expenses 1.16% 0.95% 1.32% 1.09%+
Net investment
income 5.93% 6.33% 5.96% 5.24%+
See notes to financial statements
31
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
New York Fund
------------------------------------------------------------------------------------------------
Six Months Two Months
Ended Year Ended Ended Year Ended
September 30, March 31, March 31, January 31,
------------------------------------------------------------------------------------------------
1996 1996 1995 1994 1994**
------------------------------------------------------------------------------------------------
(Unaudited)
------------------------------------------------------------------------------------------------
Class B
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a
share outstanding
throughout each period):
Net asset value - beginning
of period $ 10.66 $ 10.49 $ 10.50 $11.34 $11.46
-------- -------- -------- -------- --------
Income from investment
operations# -
Net investment income(S) $ 0.23 $ 0.47 $ 0.47 $ 0.07 $ 0.18
Net realized and
unrealized gain (loss) on
investments 0.04 0.17 0.05 (0.83) 0.04
-------- -------- -------- -------- --------
Total from investment
operations $ 0.27 $ 0.64 $ 0.52 $(0.76) $ 0.22
-------- -------- -------- -------- --------
Less distributions declared
to shareholders -
From net investment income $ (0.23) $ (0.47) $ (0.47) $(0.07) $(0.18)
From net realized gain on
investments -- -- -- -- (0.15)
In excess of net
investment income++++ -- 0.00 (0.01) (0.01) (0.01)
In excess of net realized
gain on investments -- -- (0.05) -- --
-------- -------- -------- -------- --------
Total distributions
declared to shareholders $ (0.23) $ (0.47) $ (0.53) $(0.08) $(0.34)
-------- -------- -------- -------- --------
Net asset value - end of
period $ 10.70 $ 10.66 $ 10.49 $10.50 $11.34
======== ======== ======== ======== ========
Total return 2.58%+++ 6.10% 5.17% (6.71)%+++ 5.20%+
Ratios (to average net
assets)/Supplemental
data(S):
Expenses## 1.92%+ 1.92% 1.89% 1.87%+ 1.79%+
Net investment income 4.40%+ 4.27% 4.58% 4.21%+ 3.90%+
Portfolio turnover 45% 102% 147% 15% 51%
Net assets at end of period
(000 omitted) $27,254 $28,068 $11,885 $6,265 $4,828
</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.
++++For the year ended March 31, 1996, the per share distribution in excess
of net investment income for Class B shares was $0.0048.
(S)The investment adviser and/or the distributor voluntarily waived a
portion of their management and/or distribution fees, respectively, for
certain of the periods indicated. If these fees had been incurred by
the Fund, the net investment income per share and the ratios would have
been:
<TABLE>
<S> <C> <C> <C> <C> <C>
Net investment income -- -- $ 0.47 $ 0.07 $ 0.17
Ratios (to average
net assets):
Expenses## -- -- 1.91% 1.97%+ 2.00%+
Net investment
income -- -- 4.57% 4.11%+ 3.69%+
</TABLE>
See notes to financial statements
32
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
North Carolina Fund
- --------------------------------------------------------------------------------------------------------------
Six Months Two Months
Ended Year Ended Ended Year Ended
September 30, March 31, March 31, January 31,
- --------------------------------------------------------------------------------------------------------------
1996 1996 1995 1994 1994 1993
- --------------------------------------------------------------------------------------------------------------
(Unaudited)
- --------------------------------------------------------------------------------------------------------------
Class A
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share
outstanding throughout
each period):
Net asset value - beginning
of period $ 11.57 $ 11.42 $ 11.48 $ 12.37 $ 11.80 $ 11.45
-------- -------- -------- -------- -------- --------
Income from investment
operations# -
Net investment income(S) $ 0.29 $ 0.59 $ 0.61 $ 0.10 $ 0.64 $ 0.65
Net realized and
unrealized gain (loss) on
investments 0.10 0.15 0.03 (0.89) 0.58 0.37
-------- -------- -------- -------- -------- --------
Total from investment
operations $ 0.39 $ 0.74 $ 0.64 $ (0.79) $ 1.22 $ 1.02
======== ======== ======== ======== ======== ========
Less distributions declared
to shareholders -
From net investment income $ (0.29) $ (0.59) $ (0.60) $ (0.07) $ (0.61) $ (0.67)
From net realized gain on
investments -- -- (0.06) -- (0.01) --
In excess of net
investment income++++ -- 0.00 -- (0.03) (0.03) --
In excess of net realized
gain on investments -- -- (0.04) -- -- --
-------- -------- -------- -------- -------- --------
Total distributions
declared to shareholders $ (0.29) $ (0.59) $ (0.70) $ (0.10) $ (0.65) $ (0.67)
-------- -------- -------- -------- -------- --------
Net asset value - end of
period $ 11.67 $ 11.57 $ 11.42 $ 11.48 $ 12.37 $ 11.80
======== ======== ======== ======== ======== ========
Total return++ 3.44%+++ 6.56% 5.86% (6.39)%+++ 10.59% 9.23%
Ratios (to average net
assets)/Supplemental
data(S):
Expenses## 1.13%+ 1.17% 1.16% 1.16%+ 1.19% 1.07%
Net investment income 5.08%+ 5.04% 5.38% 4.96%+ 5.21% 5.80%
Portfolio turnover 17% 30% 58% 2% 12% 2%
Net assets at end of period
(000 omitted) $393,977 $409,347 $429,131 $460,321 $495,158 $398,352
</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.
++Total returns for Class A shares do not include the applicable sales
charge. If the charge had been included, the results would have been
lower.
++++For the year ended March 31, 1996, the per share distribution in excess
of net investment income for Class A shares was $0.002.
(S)The investment adviser and/or distributor voluntarily waived a portion
of their management and/or distribution fees, respectively, for certain
of the periods indicated. If these fees had been incurred by the Fund,
the net investment income per share and the ratios would have been:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 0.29 -- -- -- -- --
Ratios (to average
net assets):
Expenses## 1.16%+ -- -- -- -- --
Net investment
income 5.05%+ -- -- -- -- --
</TABLE>
See notes to financial statements
33
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
North Carolina Fund
----------------------------------------------------------------------------------------------------
Year Ended
January 31,
----------------------------------------------------------------------------------------------------
1992 1991 1990 1989 1988 1987
----------------------------------------------------------------------------------------------------
Class A
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share
outstanding throughout
each period):
Net asset value - beginning
of period $ 11.30 $ 11.18 $ 11.15 $ 11.13 $ 11.82 $ 11.09
-------- -------- -------- -------- -------- --------
Income from investment
operations -
Net investment income $ 0.70 $ 0.72 $ 0.73 $ 0.74 $ 0.73 $ 0.75
Net realized and
unrealized gain (loss) on
investments 0.26 0.17 0.03 0.02 (0.69) 0.90
-------- -------- -------- -------- -------- --------
Total from investment
operations $ 0.96 $ 0.89 $ 0.76 $ 0.76 $ 0.04 $ 1.65
-------- -------- -------- -------- -------- --------
Less distributions declared
to shareholders -
From net investment income $ (0.76) $ (0.72) $ (0.73) $ (0.74) $ (0.73) $ (0.76)
From net realized gain on
investments (0.01) (0.05) -- -- -- (0.16)
From paid-in capital++++ (0.04) 0.00 -- -- -- --
-------- -------- -------- -------- -------- --------
Total distributions
declared to shareholders $ (0.81) $ (0.77) $ (0.73) $ (0.74) $ (0.73) $ (0.92)
-------- -------- -------- -------- -------- --------
Net asset value - end of
period $ 11.45 $ 11.30 $ 11.18 $ 11.15 $ 11.13 $ 11.82
======== ======== ======== ======== ======== ========
Total return++ 8.82% 8.34% 6.97% 7.12% 0.65% 15.76%
Ratios (to average net
assets)/Supplemental
data:
Expenses 1.09% 1.09% 1.12% 1.11% 1.08% 1.07%
Net investment income 6.17% 6.47% 6.48% 6.70% 6.71% 6.63%
Portfolio turnover 39% 44% 61% 25% 10% 10%
Net assets at end of period
(000 omitted) $312,466 $226,806 $175,101 $129,287 $110,462 $105,668
</TABLE>
++Total returns for Class A shares do not include the applicable sales
charge. If the charge had been included, the results would have been
lower.
++++For the year ended January 31, 1991, the per share distribution from
paid-in capital was $0.0005.
See notes to financial statements
34
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
North Carolina Fund
------------------------------------------------------------------------------------------------
Six Months Two Months
Ended Year Ended Ended Year Ended
September 30, March 31, March 31, January 31,
------------------------------------------------------------------------------------------------
1996 1996 1995 1994 1994**
------------------------------------------------------------------------------------------------
(Unaudited)
------------------------------------------------------------------------------------------------
Class B
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share
outstanding throughout
each period):
Net asset value - beginning
of period $ 11.56 $ 11.42 $ 11.47 $ 12.36 $ 12.36
-------- -------- -------- -------- --------
Income from investment
operations# -
Net investment income(S) $ 0.25 $ 0.50 $ 0.52 $ 0.08 $ 0.22
Net realized and
unrealized gain (loss) on
investments 0.11 0.14 0.05 (0.89) 0.01
-------- -------- -------- -------- --------
Total from investment
operations $ 0.36 $ 0.64 $ 0.57 $ (0.81) $ 0.23
-------- -------- -------- -------- --------
Less distributions declared
to shareholders -
From net investment income $ (0.25) $ (0.50) $ (0.52) $ (0.08) $ (0.21)
From net realized gain on
investments -- -- (0.06) -- (0.01)
In excess of net
investment income++++ -- 0.00 -- 0.00 (0.01)
In excess of net realized
gain on investments -- -- (0.04) -- --
-------- -------- -------- -------- --------
Total distributions
declared to shareholders $ (0.25) $ (0.50) $ (0.62) $ (0.08) $ (0.23)
-------- -------- -------- -------- --------
Net asset value - end of
period $ 11.67 $ 11.56 $ 11.42 $ 11.47 $ 12.36
======== ======== ======== ======== ========
Total return 3.16%+++ 5.70% 5.20% (6.51)%+++ 4.58%+
Ratios (to average net
assets)/Supplemental
data(S):
Expenses## 1.85%+ 1.90% 1.88% 1.88%+ 1.84%+
Net investment income 4.36%+ 4.30% 4.64% 4.18%+ 4.03%+
Portfolio turnover 17% 30% 58% 2% 12%
Net assets at end of period
(000 omitted) $35,559 $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.
++++For the year ended March 31, 1996 and the two months ended March 31,
1994, the per share distributions in excess of net investment income
for Class B shares were $0.002 and $0.004, respectively.
(S)The investment adviser and/or the distributor voluntarily waived a
portion of their management and/or distribution fees, respectively, for
certain of the periods indicated. If these fees had been incurred by
the Fund, the net investment income per share and the ratios would have
been:
<TABLE>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.25 -- -- -- --
Ratios (to average
net assets):
Expenses## 1.88%+ -- -- -- --
Net investment
income 4.33%+ -- -- -- --
</TABLE>
See notes to financial statements
35
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
North Carolina Fund
------------------------------------------------------------------------------------------------
Six Months Two Months
Ended Year Ended Ended Year Ended
September 30, March 31, March 31, January 31,
------------------------------------------------------------------------------------------------
1996 1996 1995 1994 1994***
------------------------------------------------------------------------------------------------
(Unaudited)
------------------------------------------------------------------------------------------------
Class C
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share
outstanding throughout
each period):
Net asset value - beginning
of period $ 11.56 $11.41 $11.47 $12.36 $12.24
-------- -------- -------- -------- --------
Income from investment
operations# -
Net investment income(S) $ 0.26 $ 0.51 $ 0.53 $ 0.10 $ 0.02
Net realized and
unrealized gain (loss) on
investments 0.10 0.15 0.04 (0.90) 0.12
-------- -------- -------- -------- --------
Total from investment
operations $ 0.36 $ 0.66 $ 0.57 $(0.80) $ 0.14
-------- -------- -------- -------- --------
Less distributions declared
to shareholders -
From net investment
income++++ $ (0.25) $(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 $ (0.25) $(0.51) $(0.63) $(0.09) $(0.02)
-------- -------- -------- -------- --------
Net asset value - end of
period $ 11.67 $11.56 $11.41 $11.47 $12.36
======== ======== ======== ======== ========
Total return 3.20%+++ 5.87% 5.18% (6.50)%+++ 16.50%+
Ratios (to average net
assets)/Supplemental
data(S):
Expenses## 1.78%+ 1.83% 1.81% 1.82%+ 1.44%+
Net investment income 4.43%+ 4.38% 4.71% 4.25%+ 2.33%+
Portfolio turnover 17% 30% 58% 2% 12%
Net assets at end of period
(000 omitted) $10,108 $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.
++++For the year ended March 31, 1996, the two months ended March 31, 1994
and the year ended January 31, 1994, the per share distributions in
excess of net investment income were $0.002, $0.002 and $0.003,
respectively.
(S)The investment adviser and/or the distributor voluntarily waived a
portion of their management and/or distribution fees, respectively, for
certain of the periods indicated. If these fees had been incurred by
the Fund, the net investment income per share and the ratios would have
been:
<TABLE>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.26 -- -- -- --
Ratios (to average
net assets):
Expenses## 1.81%+ -- -- -- --
Net investment
income 4.40%+ -- -- -- --
</TABLE>
See notes to financial statements
36
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
Pennsylvania Fund
------------------------------------------------------------------------------------------------
Six Months Two Months
Ended Year Ended Ended Year Ended
September 30, March 31, March 31, January 31,
------------------------------------------------------------------------------------------------
1996 1996 1995 1994 1994*
------------------------------------------------------------------------------------------------
(Unaudited)
------------------------------------------------------------------------------------------------
Class A
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share
outstanding throughout
each period):
Net asset value - beginning
of period $ 9.37 $ 9.29 $ 9.15 $ 10.14 $ 9.53
-------- -------- -------- -------- --------
Income from investment
operations# -
Net investment income(S) $ 0.27 $ 0.54 $ 0.54 $ 0.09 $ 0.50
Net realized and
unrealized gain (loss) on
investments 0.04 0.09 0.18 (0.99) 0.62
-------- -------- -------- -------- --------
Total from investment
operations $ 0.31 $ 0.63 $ 0.72 $ (0.90) $ 1.12
-------- -------- -------- -------- --------
Less distributions declared
to shareholders -
From net investment income $ (0.27) $ (0.55) $ (0.54) $ (0.09) $ (0.50)
From net realized gain on
investments -- -- (0.01) -- (0.01)
In excess of net realized
gain on investments -- -- (0.03) -- --
-------- -------- -------- -------- --------
Total distributions
declared to shareholders $ (0.27) $ (0.55) $ (0.58) $ (0.09) $ (0.51)
-------- -------- -------- -------- --------
Net asset value - end of
period $ 9.41 $ 9.37 $ 9.29 $ 9.15 $ 10.14
======== ======== ======== ======== ========
Total return++ 3.38%+++ 6.85% 8.14% (8.91)%+++ 12.12%
Ratios (to average net
assets)/Supplemental
data(S):
Expenses## 0.10%+ 0.10% 0.01% 0.00%+ 0.00%
Net investment income 5.70%+ 5.76% 5.97% 5.43%+ 5.30%
Portfolio turnover 18% 40% 49% 1% 10%
Net assets at end of period
(000 omitted) $17,726 $18,030 $16,411 $13,961 $13,987
</TABLE>
*For the period from the commencement of investment operations,
February 1, 1993 to January 31, 1994.
+Annualized.
+++Not annualized.
#Per share data for the periods subsequent to January 31, 1994 is based
on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses
are calculated without reduction for fees paid indirectly.
++Total returns for Class A shares do not include the applicable sales
charge. If the charge had been included, the results would have been
lower.
(S)The Adviser voluntarily agreed to maintain expenses of the Fund at not
more than 1.30% of average daily net assets for Class A shares. To the
extent actual expenses were over/under these limitations, the net
investment income per share and the ratios would have been:
<TABLE>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.22 $ 0.45 $ 0.43 $ 0.06 $ 0.32
Ratios (to average
net assets):
Expenses 0.97%+ 1.00% 1.18% 1.84%+ 1.94%+
Net investment
income 4.83%+ 4.86% 4.80% 3.60%+ 3.36%+
</TABLE>
See notes to financial statements
37
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
Pennsylvania Fund
------------------------------------------------------------------------------------------------
Six Months Two Months
Ended Year Ended Ended Year Ended
September 30, March 31, March 31, January 31,
------------------------------------------------------------------------------------------------
1996 1996 1995 1994 1994**
------------------------------------------------------------------------------------------------
(Unaudited)
------------------------------------------------------------------------------------------------
Class B
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share
outstanding throughout
each period):
Net asset value - beginning
of period $ 9.23 $ 9.29 $ 9.15 $10.15 $10.06
-------- -------- -------- -------- --------
Income from investment
operations# -
Net investment income(S) $ 0.23 $ 0.50 $ 0.45 $ 0.06 $ 0.17
Net realized and
unrealized gain (loss) on
investments 0.20 0.07 0.18 (0.99) 0.10
-------- -------- -------- -------- --------
Total from investment
operations $ 0.43 $ 0.57 $ 0.63 $(0.93) $ 0.27
-------- -------- -------- -------- --------
Less distributions declared
to shareholders -
From net investment
income++++ $ (0.23) $ (0.47) $(0.45) $(0.07) $(0.17)
From net realized gain on
investments -- -- (0.01) -- (0.01)
In excess of net realized
gain on investments -- -- (0.03) -- --
-------- -------- -------- -------- --------
Total distributions
declared to shareholders $ (0.23) $ (0.47) $(0.49) $(0.07) $(0.18)
-------- -------- -------- -------- --------
Net asset value - end of
period $ 9.43 $ 9.39 $ 9.29 $ 9.15 $10.15
======== ======== ======== ======== ========
Total return 2.97%+++ 6.23% 7.07% (9.16)%+++ 6.76%+
Ratios (to average net
assets)/Supplemental
data(S):
Expenses## 0.90%+ 0.88% 1.01% 1.00%+ 1.00%+
Net investment income 4.91%+ 4.98% 4.96% 4.37%+ 4.22%+
Portfolio turnover 18% 40% 49% 1% 10%
Net assets at end of period
(000 omitted) $25,149 $24,170 $7,699 $4,304 $3,401
</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.
++++For the two months ended March 31, 1994, Class B net investment income
includes distributions in excess of net investment income of less than
$0.001 per share.
(S)The Adviser voluntarily agreed to maintain expenses of the Fund at not
more than 1.95% of average daily net assets for Class B shares. To the
extent actual expenses were over/under these limitations, the net
investment income per share and the ratios would have been:
<TABLE>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.19 $ 0.41 $ 0.34 $ 0.04 $ 0.05
Ratios (to average
net assets):
Expenses 1.83%+ 1.85% 2.26% 2.91%+ 2.50%+
Net investment
income 3.98%+ 4.01% 3.72% 2.47%+ 1.29%+
</TABLE>
See notes to financial statements
38
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
South Carolina Fund
---------------------------------------------------------------------------------------------------------------
Six Months Two Months
Ended Year Ended Ended Year Ended
September 30, March 31, March 31, January 31,
---------------------------------------------------------------------------------------------------------------
1996 1996 1995 1994 1994 1993
---------------------------------------------------------------------------------------------------------------
(Unaudited)
---------------------------------------------------------------------------------------------------------------
Class A
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share
outstanding throughout
each period):
Net asset value - beginning
of period $11.97 $11.86 $11.79 $12.74 $12.02 $11.74
-------- -------- -------- -------- -------- --------
Income from investment
operations# -
Net investment income(S) $0.31 $0.62 $0.63 $0.08 $0.63 $0.67
Net realized and
unrealized gain (loss) on
investments 0.02 0.11 0.15 (0.92) 0.74 0.34
-------- -------- -------- -------- -------- --------
Total from investment
operations $0.33 $0.73 $0.78 $(0.84) $1.37 $1.01
-------- -------- -------- -------- -------- --------
Less distributions declared
to shareholders -
From net investment income $(0.30) $(0.62) $(0.62) $(0.08) $(0.61) $(0.69)
From net realized gain on
investments -- -- (0.06) -- (0.01) (0.04)
In excess of net
investment income++++ -- 0.00 -- (0.03) (0.03) --
In excess of net realized
gain on investments -- -- (0.03) -- -- --
-------- -------- -------- -------- -------- --------
Total distributions
declared to shareholders $(0.30) $(0.62) $(0.71) $(0.11) $(0.65) $(0.73)
-------- -------- -------- -------- -------- --------
Net asset value - end of
period $12.00 $11.97 $11.86 $11.79 $12.74 $12.02
======== ======== ======== ======== ======== ========
Total return++ 2.84%+++ 6.20% 6.93% (6.65)%++ 11.69% 8.89%
Ratios (to average net
assets)/Supplemental
data(S):
Expenses## 1.16%+ 1.20% 1.19% 1.23%+ 1.22% 1.12%
Net investment income 5.13%+ 5.10% 5.37% 5.09%+ 5.06% 5.74%
Portfolio turnover 8% 18% 30% 4% 10% 11%
Net assets at end of period
(000 omitted) $158,985 $166,801 $171,045 $173,316 $187,307 $144,539
</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.
++Total returns for Class A shares do not include the applicable sales
charge. If the charge had been included, the results would have been
lower.
++++For the year ended March 31, 1996, the per share distribution in
excess of net investment income was $0.0006 for Class A shares.
(S)The investment adviser and/or the distributor voluntarily waived a portion
of their management and/or distribution fees, respectively, for certain
of the periods indicated. If these fees had been incurred by the Fund,
the net investment income per share and the ratios would have been:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Net investment income $0.31 -- -- -- -- --
Ratios (to average
net assets):
Expenses## 1.20%+ -- -- -- -- --
Net investment
income 5.09%+ -- -- -- -- --
</TABLE>
See notes to financial statements
39
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
South Carolina Fund
------------------------------------------------------------------------------------------------
Year Ended
January 31,
------------------------------------------------------------------------------------------------
1992 1991 1990 1989 1988 1987
------------------------------------------------------------------------------------------------
Class A
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share
outstanding throughout
each period):
Net asset value - beginning
of period $ 11.45 $ 11.30 $ 11.24 $ 11.14 $ 11.54 $ 10.89
-------- -------- -------- -------- -------- --------
Income from investment
operations -
Net investment income $ 0.70 $ 0.71 $ 0.72 $ 0.76 $ 0.77 $ 0.77
Net realized and
unrealized gain (loss) on
investments 0.40 0.21 0.06 0.11 (0.36) 0.69
-------- -------- -------- -------- -------- --------
Total from investment
operations $ 1.10 $ 0.92 $ 0.78 $ 0.87 $ 0.41 $ 1.46
-------- -------- -------- -------- -------- --------
Less distributions declared
to shareholders -
From net investment income $ (0.76) $ (0.71) $ (0.72) $ (0.77) $ (0.77) $ (0.78)
From net realized gain on
investments (0.05) (0.06) -- -- -- (0.03)
From paid-in capital -- -- -- -- (0.04) --
-------- -------- -------- -------- -------- --------
Total distributions
declared to shareholders $ (0.81) $ (0.77) $ (0.72) $ (0.77) $ (0.81) $ (0.81)
-------- -------- -------- -------- -------- --------
Net asset value - end of
period $ 11.74 $ 11.45 $ 11.30 $ 11.24 $ 11.14 $ 11.54
======== ======== ======== ======== ======== ========
Total return++ 9.95% 8.46% 7.13% 8.18% 3.92% 14.05%
Ratios (to average net
assets)/Supplemental
data:
Expenses 1.15% 1.18% 1.21% 0.97% 0.81% 0.99%
Net investment income 6.07% 6.30% 6.35% 6.90% 7.07% 7.00%
Portfolio turnover 22% 47% 54% 27% 12% 13%
Net assets at end of period
(000 omitted) $101,434 $75,922 $57,675 $45,391 $34,025 $27,978
</TABLE>
++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.
See notes to financial statements
40
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
South Carolina Fund
------------------------------------------------------------------------------------------------
Six Months Two Months
Ended Year Ended Ended Year Ended
September 30, March 31, March 31, January 31,
------------------------------------------------------------------------------------------------
1996 1996 1995 1994 1994**
------------------------------------------------------------------------------------------------
(Unaudited)
------------------------------------------------------------------------------------------------
Class B
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning
of period $ 11.97 $ 11.86 $ 11.78 $ 12.73 $12.67
-------- -------- -------- -------- --------
Income from investment
operations# -
Net investment income(S) $ 0.26 $ 0.52 $ 0.54 $ 0.08 $ 0.21
Net realized and
unrealized gain (loss) on
investments 0.03 0.12 0.17 (0.94) 0.06
-------- -------- -------- -------- --------
Total from investment
operations $ 0.29 $ 0.64 $ 0.71 $ (0.86) $ 0.27
-------- -------- -------- -------- --------
Less distributions declared
to shareholders -
From net investment income $ (0.26) $ (0.53) $ (0.54) $ (0.08) $(0.20)
From net realized gain on
investments -- -- (0.06) -- --
In excess of net
investment income++++ -- 0.00 0.00 (0.01) (0.01)
In excess of net realized
gain on investments -- -- (0.03) -- --
-------- -------- -------- -------- --------
Total distributions
declared to shareholders $ (0.26) $ (0.53) $ (0.63) $ (0.09) $(0.21)
-------- -------- -------- -------- --------
Net asset value - end of
period $ 12.00 $ 11.97 $ 11.86 $ 11.78 $12.73
======== ======== ======== ======== ========
Total return 2.47%+++ 5.43% 6.26% (6.77)%+++ 5.47%+
Ratios (to average net
assets)/Supplemental
data(S):
Expenses## 1.88%+ 1.92% 1.90% 1.96%+ 1.90%+
Net investment income 4.41%+ 4.35% 4.63% 4.29%+ 3.86%+
Portfolio turnover 8% 18% 30% 4% 10%
Net assets at end of period
(000 omitted) $20,208 $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.
++++For the years ended March 31, 1996 and 1995, the per share
distributions in excess of net investment income were $0.0005 and
$0.00436, respectively, for Class B shares.
(S)The investment adviser and/or the distributor voluntarily waived a
portion of their management and/or distribution fees, respectively, for
certain of the periods indicated. If these fees had been incurred by
the Fund, the net investment income per share and the ratios would have
been:
<TABLE>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.26 -- -- -- --
Ratios (to average
net assets):
Expenses## 1.92%+ -- -- -- --
Net investment
income 4.37%+ -- -- -- --
</TABLE>
See notes to financial statements
41
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
Tennessee Fund
- ------------------------------------------------------------------------------------------------------------
Six Months Two Months
Ended Year Ended Ended Year Ended
September 30, March 31, March 31, January 31,
- ------------------------------------------------------------------------------------------------------------
1996 1996 1995 1994 1994 1993
- ------------------------------------------------------------------------------------------------------------
(Unaudited)
- ------------------------------------------------------------------------------------------------------------
Class A
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share
outstanding throughout
each period):
Net asset value - beginning
of period $ 10.40 $ 10.27 $ 10.26 $ 10.94 $ 10.37 $ 10.10
-------- -------- -------- -------- -------- --------
Income from investment
operations# -
Net investment income(S) $ 0.27 $ 0.54 $ 0.56 $ 0.09 $ 0.57 $ 0.57
Net realized and
unrealized gain (loss) on
investments (0.03) 0.13 0.02 (0.68) 0.57 0.31
-------- -------- -------- -------- -------- --------
Total from investment
operations $ 0.24 $ 0.67 $ 0.58 $ (0.59) $ 1.14 $ 0.88
-------- -------- -------- -------- -------- --------
Less distributions declared
to shareholders -
From net investment income $ (0.27) $ (0.54) $ (0.56) $ (0.07) $ (0.54) $ (0.57)
From net realized gain on
investments++++ -- -- 0.00 -- -- (0.01)
In excess of net
investment income++++++ -- 0.00 -- (0.02) (0.03) (0.03)
In excess of net realized
gain on investments -- -- (0.01) -- -- --
-------- -------- -------- -------- -------- --------
Total distributions
declared to shareholders $ (0.27) $ (0.54) $ (0.57) $ (0.09) $ (0.57) $ (0.61)
-------- -------- -------- -------- -------- --------
Net asset value - end of
period $ 10.37 $ 10.40 $ 10.27 $ 10.26 $ 10.94 $ 10.37
======== ======== ======== ======== ======== ========
Total return++ 2.31%+++ 6.66% 5.86% (5.39)%+++ 11.20% 9.03%
Ratios (to average net
assets)/Supplemental
data(S):
Expenses## 1.14%+ 1.21% 1.22% 1.21%+ 1.29% 1.14%
Net investment income 5.20%+ 5.18% 5.52% 5.31%+ 5.25% 5.89%
Portfolio turnover 9% 20% 27% 4% 12% 9%
Net assets at end of period
(000 omitted) $110,133 $109,811 $117,572 $117,117 $123,050 $99,443
</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.
++Total returns for Class A shares do not include the applicable
sales charge. If the charge had been included, the results would
have been lower.
++++For the year ended March 31, 1995, the per share distribution from
net realized gain on investments for Class A shares was $0.0014.
++++++For the year ended March 31, 1996, the per share distribution in excess
of net investment income for Class A shares was $0.0024.
(S)The investment adviser and/or the distributor voluntarily waived a
portion of their management and/or distribution fees, respectively,
for certain of the periods indicated. If these fees had been
incurred by the Fund, the net investment income per share and the
ratios would have been:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 0.27 -- -- -- -- $ 0.61
Ratios (to average
net assets):
Expenses## 1.17%+ -- -- -- -- 1.17%
Net investment
income 5.17%+ -- -- -- -- 6.23%
</TABLE>
See notes to financial statements
42
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
Tennessee Fund
- ---------------------------------------------------------------------------
Year Ended
January 31,
- ---------------------------------------------------------------------------
1992 1991 1990 1989*
- ---------------------------------------------------------------------------
Class A
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share
outstanding throughout
each period):
Net asset value - beginning
of period $ 9.90 $ 9.80 $ 9.68 $ 9.53
-------------- --------- --------- ----------
Income from investment
operations -
Net investment income(S) $ 0.61 $ 0.62 $ 0.67 $ 0.22
Net realized and
unrealized gain on
investments 0.30 0.13 0.11 0.10
-------------- --------- --------- ----------
Total from investment
operations $ 0.91 $ 0.75 $ 0.78 $ 0.32
-------------- --------- --------- ----------
Less distributions declared
to shareholders -
From net investment income $ (0.66) $ (0.63) $ (0.66) $ (0.17)
From net realized gain on
investments (0.05) (0.02) -- --
From paid-in capital++++ -- 0.00 -- --
-------------- --------- --------- ----------
Total distributions
declared to shareholders $ (0.71) $ (0.65) $ (0.66) $ (0.17)
-------------- --------- --------- ----------
Net asset value - end of
period $ 10.10 $ 9.90 $ 9.80 $ 9.68
============== ========= ========= ==========
Total return++ 9.50% 7.96% 8.30% 3.43%+++
Ratios (to average net
assets)/Supplemental
data(S):
Expenses 1.15% 1.03% 0.53% 0.40%+
Net investment income 6.11% 6.37% 6.70% 5.98%+
Portfolio turnover 42% 58% 78% 5%
Net assets at end of period
(000 omitted) $87,898 $72,108 $56,048 $15,832
</TABLE>
*For the period from the commencement of investment
operations, August 12, 1988 to January 31, 1989.
+Annualized.
+++Not annualized.
++Total returns for Class A shares do not include
the applicable sales charge. If the charge had
been included, the results would have been lower.
++++For the year ended January 31, 1991, the per share
distribution from paid-in capital for Class A
shares was $0.0013.
(S)The investment adviser and/or the distributor
voluntarily waived a portion of their management
and/or distribution fees, respectively, for
certain of the periods indicated. If these fees
had been incurred by the Fund, the net investment
income per share and the ratios would have been:
<TABLE>
<S> <C> <C> <C> <C>
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
43
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
Tennessee Fund
------------------------------------------------------------------------------------------------
Six Months Two Months
Ended Year Ended Ended Year Ended
September 30, March 31, March 31, January 31,
------------------------------------------------------------------------------------------------
1996 1996 1995 1994 1994**
------------------------------------------------------------------------------------------------
(Unaudited)
------------------------------------------------------------------------------------------------
Class B
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share
outstanding throughout
each period):
Net asset value - beginning
of period $ 10.39 $ 10.26 $ 10.26 $10.95 $10.87
-------- -------- -------- -------- --------
Income from investment
operations# -
Net investment income(S) $ 0.23 $ 0.46 $ 0.48 $ 0.08 $ 0.19
Net realized and
unrealized gain (loss) on
investments (0.03) 0.14 0.01 (0.69) 0.08
-------- -------- -------- -------- --------
Total from investment
operations $ 0.20 $ 0.60 $ 0.49 $(0.61) $ 0.27
-------- -------- -------- -------- --------
Less distributions declared
to shareholders -
From net investment income $ (0.23) $ (0.47) $ (0.48) $(0.08) $(0.19)
From net realized gain on
investments++++++ -- -- 0.00 -- --
In excess of net
investment income++++ -- 0.00 (0.01) -- --
-------- -------- -------- -------- --------
Total distributions
declared to shareholders $ (0.23) $ (0.47) $ (0.49) $(0.08) $(0.19)
-------- -------- -------- -------- --------
Net asset value - end of
period $ 10.36 $ 10.39 $ 10.26 $10.26 $10.95
======== ======== ======== ======== ========
Total return 1.95%+++ 5.89% 5.00% (5.59)%+++ 2.48%+++
Ratios (to average net
assets)/Supplemental
data(S):
Expenses## 1.86%+ 1.93% 1.94% 1.93%+ 1.93%+
Net investment income 4.48%+ 4.43% 4.80% 4.49%+ 4.20%+
Portfolio turnover 9% 20% 27% 4% 12%
Net assets at end of period
(000 omitted) $13,944 $12,935 $10,006 $5,294 $3,818
</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.
++++For the year ended March 31, 1996, the per share distribution in excess
of net investment income for Class B shares was $0.0021.
++++++For the year ended March 31, 1995, the per share distribution from net
realized gain on investments for Class B shares was $0.0014.
(S)The investment adviser and/or the distributor voluntarily waived a
portion of their management and/or distribution fees, respectively, for
certain of the periods indicated. If these fees had been incurred by
the Fund, the net investment income per share and the ratios would have
been:
<TABLE>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.23 -- -- -- --
Ratios (to average
net assets):
Expenses## 1.89%+ -- -- -- --
Net investment
income 4.45%+ -- -- -- --
</TABLE>
See notes to financial statements
44
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
Virginia Fund
- -----------------------------------------------------------------------------------------------------------
Six Months Two Months
Ended Year Ended Ended Year Ended
September 30, March 31, January 31, January 31,
- -----------------------------------------------------------------------------------------------------------
1996 1996 1995 1994 1994 1993
- -----------------------------------------------------------------------------------------------------------
(Unaudited)
- -----------------------------------------------------------------------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share
outstanding throughout
each period):
Net asset value - beginning
of period $ 11.21 $ 11.09 $ 11.15 $ 12.07 $ 11.72 $ 11.44
-------- -------- -------- -------- -------- --------
Income from investment
operations# -
Net investment income(S) $ 0.29 $ 0.59 $ 0.56 $ 0.10 $ 0.65 $ 0.68
Net realized and
unrealized gain (loss) on
investments (0.01) 0.13 0.04 (0.92) 0.56 0.30
-------- -------- -------- -------- -------- --------
Total from investment
operations $ 0.28 $ 0.72 $ 0.60 $ (0.82) $ 1.21 $ 0.98
-------- -------- -------- -------- -------- --------
Less distributions declared
to shareholders -
From net investment income $ (0.29) $ (0.60) $ (0.61) $ (0.06) $ (0.62) $ (0.70)
From net realized gain on
investments++++++ -- -- (0.04) -- (0.20) 0.00
In excess of net
investment income++++ -- 0.00 0.00 (0.04) (0.04) --
In excess of net realized
gain on investments -- -- (0.01) -- -- --
-------- -------- -------- -------- -------- --------
Total distributions
declared to shareholders $ (0.29) $ (0.60) $ (0.66) $ (0.10) $ (0.86) $ (0.70)
-------- -------- -------- -------- -------- --------
Net asset value - end of
period $ 11.20 $ 11.21 $ 11.09 $ 11.15 $ 12.07 $ 11.72
======== ======== ======== ======== ======== ========
Total return++ 2.55%+++ 6.52% 5.67% (6.80)%+++ 10.67% 8.88%
Ratios (to average net
assets)/Supplemental
data(S):
Expenses## 1.10%+ 1.18% 1.16% 1.17%+ 1.18% 1.08%
Net investment income 5.28%+ 5.20% 4.91% 5.33%+ 5.37% 6.02%
Portfolio turnover 21% 42% 27% 5% 22% 20%
Net assets at end of period
(000 omitted) $399,158 $418,408 $430,688 $443,580 $479,333 $399,696
</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.
++Total returns for Class A shares do not include the applicable
sales charge. If the charge had been included, the results would
have been lower.
++++For the years ended March 31, 1996 and March 31, 1995, the per
share distributions in excess of net investment income for Class A
shares were $0.005 and $0.003, respectively.
++++++For the year ended January 31, 1993, the per share distribution
from paid-in capital for Class A shares was $0.00348.
(S)The investment adviser and/or distributor voluntarily waived a
portion of their management and/or distrbution fee, respectively,
for certain of the periods indicated. If these fees had been
incurred by the Fund, the net investment income per share and the
ratios would have been:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 0.29 -- -- -- -- --
Ratios (to average
net assets):
Expenses## 1.14%+ -- -- -- -- --
Net investment
income 5.24%+ -- -- -- -- --
</TABLE>
See notes to financial statements
45
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
Virginia Fund
--------------------------------------------------------------------------------------------------
Year Ended
January 31,
--------------------------------------------------------------------------------------------------
1992 1991 1990 1989 1988 1987
--------------------------------------------------------------------------------------------------
Class A
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share
outstanding throughout
each period):
Net asset value - beginning
of period $ 11.16 $ 10.97 $ 10.91 $ 10.75 $ 11.38 $ 10.78
----------- ----------- ----------- ---------------------- -----------
Income from investment
operations -
Net investment income $ 0.71 $ 0.73 $ 0.73 $ 0.74 $ 0.72 $ 0.74
----------- ----------- ----------- ---------------------- -----------
Net realized and
unrealized gain (loss) on
investments 0.34 0.19 0.06 0.16 (0.57) 0.61
----------- ----------- ----------- ---------------------- -----------
Total from investment
operations $ 1.05 $ 0.92 $ 0.79 $ 0.90 $ 0.15 $ 1.35
----------- ----------- ----------- ---------------------- -----------
Less distributions declared
to shareholders -
From net investment income $ (0.77) $ (0.73) $ (0.73) $ (0.74) $ (0.71) $ (0.75)
From net realized gain on
investments -- -- -- -- (0.05) --
From paid-in capital++++ -- -- -- -- (0.02) 0.00
----------- ----------- ----------- ---------------------- -----------
Total distributions
declared to shareholders $ (0.77) $ (0.73) $ (0.73) $ (0.74) $ (0.78) $ (0.75)
----------- ----------- ----------- ---------------------- -----------
Net asset value - end of
period $ 11.44 $ 11.16 $ 10.97 $ 10.91 $ 10.75 $ 11.38
=========== =========== =========== ====================== ===========
Total return++ 9.76% 8.74% 7.46% 8.76% 1.61% 13.12%
Ratios (to average net
assets)/Supplemental
data:
Expenses 1.08% 1.11% 1.12% 1.09% 1.04% 1.02%
Net investment income 6.32% 6.64% 6.67% 6.91% 6.75% 6.73%
Portfolio turnover 13% 38% 41% 38% 11% 20%
Net assets at end of period
(000 omitted) $328,664 $275,202 $240,553 $207,680 $192,104 $181,937
</TABLE>
++Total returns for Class A shares do not include the
applicable sales charge. If the charge had been included,
the results would have been lower.
++++For the year ended January 31, 1987, the per share
distribution from paid-in capital for Class A shares was
$0.0005.
See notes to financial statements
46
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
Virginia Fund
- ----------------------------------------------------------------------------------------------
Six Months Two Months
Ended Year Ended Ended Year Ended
September 30, March 31, March 31, January 31,
- ----------------------------------------------------------------------------------------------
1996 1996 1995 1994 1994**
- ----------------------------------------------------------------------------------------------
(Unaudited)
- ----------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning
of period $ 11.21 $ 11.08 $ 11.14 $ 12.06 $ 12.14
-------- -------- -------- -------- --------
Income from investment
operations# -
Net investment income(S) $ 0.25 $ 0.51 $ 0.53 $ 0.09 $ 0.22
Net realized and
unrealized gain (loss) on
investments (0.02) 0.13 (0.01) (0.92) 0.01
-------- -------- -------- -------- --------
Total from investment
operations $ 0.23 $ 0.64 $ 0.52 $ (0.83) $ 0.23
-------- -------- -------- -------- --------
Less distributions declared
to shareholders -
From net investment income $ (0.25) $ (0.51) $ (0.53) $ (0.09) $ (0.21)
From net realized gain on
investments -- -- (0.04) -- (0.09)
In excess of net
investment income++++ -- 0.00 0.00 0.00 (0.01)
In excess of net realized
gain on investments -- -- (0.01) -- --
-------- -------- -------- -------- --------
Total distributions
declared to shareholders $ (0.25) $ (0.51) $ (0.58) $ (0.09) $ (0.31)
-------- -------- -------- -------- --------
Net asset value - end of
period $ 11.19 $ 11.21 $ 11.08 $ 11.14 $ 12.06
======== ======== ======== ======== ========
Total return 2.09%+++ 5.85% 4.91% (6.92)%+++ 4.93%+
Ratios (to average net
assets)/Supplemental
data(S):
Expenses## 1.83%+ 1.90% 1.88% 1.88%+ 1.82%+
Net investment income 4.56%+ 4.46% 4.84% 4.52%+ 4.25%+
Portfolio turnover 21% 42% 27% 5% 22%
Net assets at end of period
(000 omitted) $30,370 $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.
++++For the year ended March 31, 1996, the year ended
March 31, 1995 and the two months ended March 31, 1994,
the per share distributions in excess of net investment
income for Class B shares were $0.002, $0.005 and
$0.002, respectively.
(S)The investment adviser and/or the distributor
voluntarily waived a portion of their management and/or
distribution fees, respectively, for certain of the
periods indicated. If these fees had been incurred by
the Fund, the net investment income per share and the
ratios would have been:
<TABLE>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.25 -- -- -- --
Ratios (to average
net assets):
Expenses## 1.87%+ -- -- -- --
Net investment
income 4.52%+ -- -- -- --
</TABLE>
See notes to financial statements
47
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
Virginia Fund
- ----------------------------------------------------------------------------------------------
Six Months Two Months
Ended Year Ended Ended Year Ended
September 30, March 31, March 31, January 31,
- ----------------------------------------------------------------------------------------------
1996 1996 1995 1994 1994***
- ----------------------------------------------------------------------------------------------
(Unaudited)
- ----------------------------------------------------------------------------------------------
Class C
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning
of period $11.21 $11.07 $11.14 $12.06 $11.94
-------- -------- -------- -------- --------
Income from investment
operations# -
Net investment income(S) $ 0.26 $ 0.51 $ 0.56 $ 0.08 $ 0.02
Net realized and
unrealized gain (loss) on
investments (0.02) 0.15 (0.04) (0.91) 0.12
-------- -------- -------- -------- --------
Total from investment
operations $ 0.24 $ 0.66 $ 0.52 $(0.83) $ 0.14
-------- -------- -------- -------- --------
Less distributions declared
to shareholders -
From net investment
income++++ $(0.25) $(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 $(0.25) $(0.52) $(0.59) $(0.09) $(0.02)
-------- -------- -------- -------- --------
Net asset value - end of
period $11.20 $11.21 $11.07 $11.14 $12.06
======== ======== ======== ======== ========
Total return 2.22%+++ 6.02% 4.85% (6.91)%+++ 17.05%+
Ratios (to average net
assets)/Supplemental
data(S):
Expenses## 1.76%+ 1.83% 1.80% 1.82%+ 1.18%+
Net investment income 4.64%+ 4.53% 4.90% 4.48%+ 1.79%+
Portfolio turnover 21% 42% 27% 5% 22%
Net assets at end of period
(000 omitted) $3,470 $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.
++++For the years ended March 31, 1996, March 31, 1995 and January 31, 1994,
the per share distributions in excess of net investment income for Class
C shares were $0.005, $0.002 and $0.002, respectively.
(S)The investment adviser and/or the distributor voluntarily waived a
portion of their management and/or distribution fees, respectively, for
certain of the periods indicated. If these fees had been incurred by
the Fund, the net investment income per share and the ratios would have
been:
<TABLE>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.26 -- -- -- --
Ratios (to average
net assets):
Expenses## 1.80%+ -- -- -- --
Net investment
income 4.61%+ -- -- -- --
</TABLE>
See notes to financial statements
48
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
West Virginia Fund
- ---------------------------------------------------------------------------------------------------------
Six Months Two Months
Ended Year Ended Ended Year Ended
September 30, March 31, March 31, January 31,
- ---------------------------------------------------------------------------------------------------------
1996 1996 1995 1994 1994 1993
- ---------------------------------------------------------------------------------------------------------
(Unaudited)
- ---------------------------------------------------------------------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share
outstanding throughout
each period):
Net asset value - beginning
of period $ 11.33 $ 11.21 $ 11.19 $ 12.06 $ 11.50 $ 11.20
-------- -------- -------- -------- -------- --------
Income from investment
operations# -
Net investment income $ 0.30 $ 0.61 $ 0.62 $ 0.01 $ 0.64 $ 0.66
Net realized and
unrealized gain (loss) on
investments 0.03 0.12 0.03 (0.78) 0.69 0.34
-------- -------- -------- -------- -------- --------
Total from investment
operations $ 0.33 $ 0.73 $ 0.65 $ (0.77) $ 1.33 $ 1.00
-------- -------- -------- -------- -------- --------
Less distributions declared
to shareholders -
From net investment income $ (0.30) $ (0.61) $ (0.62) $ (0.06) $ (0.61) $ (0.69)
From net realized gain on
investments -- -- -- -- (0.12) (0.01)
In excess of net
investment income++++ -- 0.00 -- (0.04) (0.04) --
In excess of net realized
gain on investments -- -- (0.01) -- -- --
-------- -------- -------- -------- -------- --------
Total distributions
declared to shareholders $ (0.30) $ (0.61) $ (0.63) $ (0.10) $ (0.77) $ (0.70)
-------- -------- -------- -------- -------- --------
Net asset value - end of
period $ 11.36 $ 11.33 $ 11.21 $ 11.19 $ 12.06 $ 11.50
======== ======== ======== ======== ======== ========
Total return++ 2.93%+++ 6.58% 6.07% (6.37)%+++ 11.80% 9.12%
Ratios (to average net
assets)/Supplemental
data:
Expenses## 1.20%+ 1.22% 1.19% 1.30%+ 1.24% 1.15%
Net investment income 5.26%+ 5.30% 5.62% 5.36%+ 5.30% 5.97%
Portfolio turnover 17% 11% 23% 2% 26% 19%
Net assets at end of period
(000 omitted) $132,949 $134,514 $127,616 $130,726 $141,190 $115,289
</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.
++Total returns for Class A shares do not include the applicable
sales charge. If the charge had been included, the results
would have been lower.
++++For the year ended March 31, 1996, the per share distribution
in excess of net investment income for Class A shares was
$0.002.
See notes to financial statements
49
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
West Virginia Fund
- --------------------------------------------------------------------------------------------
Year Ended
January 31,
- --------------------------------------------------------------------------------------------
1992 1991 1990 1989 1988 1987
- --------------------------------------------------------------------------------------------
Class A
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share
outstanding throughout
each period):
Net asset value - beginning
of period $ 10.93 $ 10.72 $ 10.68 $ 10.51 $ 11.30 $ 10.77
--------- --------- --------- --------- --------- ----------
Income from investment
operations -
Net investment income $ 0.70 $ 0.71 $ 0.71 $ 0.77 $ 0.77 $ 0.81
Net realized and
unrealized gain (loss) on
investments 0.34 0.21 0.04 0.18 (0.72) 0.56
--------- --------- --------- --------- --------- ----------
Total from investment
operations $ 1.04 $ 0.92 $ 0.75 $ 0.95 $ 0.05 $ 1.37
--------- --------- --------- --------- --------- ----------
Less distributions declared
to shareholders -
From net investment income $ (0.76) $ (0.71) $ (0.71) $ (0.78) $ (0.76) $ (0.81)
From net realized gain on
investments (0.01) -- -- -- (0.02) (0.03)
From paid-in capital++++ -- -- -- -- (0.06) 0.00
--------- --------- --------- --------- --------- ----------
Total distributions
declared to shareholders $ (0.77) $ (0.71) $ (0.71) $ (0.78) $ (0.84) $ (0.84)
--------- --------- --------- --------- --------- ----------
Net asset value - end of
period $ 11.20 $ 10.93 $ 10.72 $ 10.68 $ 10.51 $ 11.30
========= ========= ========= ========= ========= ==========
Total return++ 9.84% 8.91% 7.26% 9.43% 0.76% 13.42%
Ratios (to average net
assets)/Supplemental
data:
Expenses 1.17% 1.21% 1.22% 0.86% 0.79% 0.87%
Net investment income 6.33% 6.59% 6.63% 7.01% 7.32% 7.42%
Portfolio turnover 14% 37% 34% 9% 11% 9%
Net assets at end of period
(000 omitted) $80,440 $61,984 $52,398 $43,026 $36,276 $34,436
</TABLE>
++Total returns for Class A shares do not include the applicable sales
charge. If the charge had been included, the results would have been
lower.
++++For the year ended January 31, 1987, the per share distribution from
paid-in capital for Class A shares was $0.0018.
See notes to financial statements
50
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
West Virginia Fund
- ----------------------------------------------------------------------------------------------
Six Months Two Months
Ended Year Ended Ended Year Ended
September 30, March 31, March 31, January 31,
- ----------------------------------------------------------------------------------------------
1996 1996 1995 1995 1994**
- ----------------------------------------------------------------------------------------------
(Unaudited)
- ----------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share
outstanding throughout
each period):
Net asset value - beginning
of period $ 11.33 $ 11.21 $ 11.19 $12.06 $12.13
-------- -------- -------- -------- --------
Income from investment
operations# -
Net investment income $ 0.26 $ 0.52 $ 0.53 $ 0.01 $ 0.22
Net realized and
unrealized gain (loss) on
investments 0.02 0.12 0.04 (0.87) 0.05
-------- -------- -------- -------- --------
Total from investment
operations $ 0.28 $ 0.64 $ 0.57 $(0.86) $ 0.27
-------- -------- -------- -------- --------
Less distributions declared
to shareholders -
From net investment income $ (0.26) $ (0.52) $ (0.54) $(0.01) $(0.21)
From net realized gain on
investments -- -- -- -- (0.12)
In excess of net
investment income++++ -- 0.00 0.00 -- (0.01)
In excess of net realized
gain on investments -- -- (0.01) -- --
-------- -------- -------- -------- --------
Total distributions
declared to shareholders $ (0.26) $ (0.52) $ (0.55) $(0.01) $(0.34)
-------- -------- -------- -------- --------
Net asset value - end of
period $ 11.35 $ 11.33 $ 11.21 $11.19 $12.06
======== ======== ======== ======== ========
Total return 2.57%+++ 5.81% 5.30% (6.48)%+++ 5.59%+
Ratios (to average net
assets)/Supplemental
data:
Expenses## 1.92%+ 1.94% 1.91% 2.02%+ 1.89%+
Net investment income 4.53%+ 4.56% 4.87% 4.56%+ 4.14%+
Portfolio turnover 17% 11% 23% 2% 26%
Net assets at end of period
(000 omitted) $13,372 $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.
++++For the years ended March 31, 1996 and March 31, 1995,
the per share distributions in excess of net investment
income for Class B shares were $0.002 and $0.005,
respectively.
See notes to financial statements
51
<PAGE>
Notes to Financial Statements (Unaudited)
(1) Business and Organization
MFS Municipal Series Trust (the Trust) is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. The Trust presently
consists of 16 Funds, as follows: MFS Municipal Income Fund, MFS Alabama
Municipal Bond Fund, MFS Arkansas Municipal Bond Fund, MFS California
Municipal Bond Fund, MFS Florida Municipal Bond Fund, MFS Georgia Municipal
Bond Fund, MFS Maryland Municipal Bond Fund, MFS Massachusetts Municipal Bond
Fund, MFS Mississippi Municipal Bond Fund* (Mississippi Fund), MFS New York
Municipal Bond Fund* (New York Fund), MFS North Carolina Municipal Bond Fund*
(North Carolina Fund), MFS Pennsylvania Municipal Bond Fund* (Pennsylvania
Fund), MFS South Carolina Municipal Bond Fund* (South Carolina Fund), MFS
Tennessee Municipal Bond Fund* (Tennessee Fund), MFS Virginia Municipal Bond
Fund* (Virginia 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 affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. Because each Fund invests primarily in the securities of a single
state and its political subdivisions, each Fund is vulnerable to the effects
of changes in the legal, political and economic environment of the particular
state.
Investment Valuations - Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues, are valued on the
basis of valuations furnished by dealers or by a pricing service with
consideration to factors such as institutional-size trading in similar groups
of securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data, without exclusive reliance upon
exchange or over-the-counter prices. Short-term obligations, which mature in
60 days or less, are valued at amortized cost, which approximates market
value. Futures contracts, options and options on futures contracts listed on
commodities exchanges are valued at closing settlement prices.
Over-the-counter options are valued by brokers through the use of a pricing
model which takes into account closing bond valuations, implied volatility
and short-term repurchase rates. Securities for which there are no such
quotations or valuations are valued at fair value as determined in good faith
by or at the direction of the Trustees.
Deferred Organization Expenses - Costs incurred by a Fund in connection with
its organization have been deferred and are being amortized on a
straight-line basis over a five-year period beginning on the date of
commencement of Fund operations.
Futures Contracts - Each Fund may enter into futures contracts for the
delayed delivery of securities or contracts based on financial indices at a
fixed price on a future date. In entering such contracts, each Fund is
required to deposit either in cash or securities an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received
by the Fund each day, depending on the daily fluctuations in the value of the
underlying security, and are recorded for financial statement purposes as
unrealized gains or losses by the Fund. Each Fund's investment in futures
contracts is designed to hedge against anticipated future changes in interest
rates or securities prices. Investments in interest rate futures for purposes
other than hedging may be made to modify the duration of the portfolio
without incurring the additional transaction costs involved in buying and
selling the underlying securities. Investments in index contracts, or
contracts on related options, for purposes other than hedging may be made
when a Fund has cash on hand and wishes to participate in anticipated market
appreciation while the cash is being invested. Should interest rates or
securities prices move unexpectedly, the Fund may not achieve the anticipated
benefits of the futures contracts and may realize a loss.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and original issue discount are amortized or accreted for financial statement
and tax reporting purposes as required by federal income tax regulations.
Fees Paid Indirectly - The Trust's custodian bank calculates its fee based on
each Fund's average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure the value of cash deposited with the custodian by each
Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Trust's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net income,
including any net realized gain on investments. Accordingly, no provision for
federal income or excise tax is provided. Each Fund files a tax return
annually using tax accounting methods required under provisions of the Code
which may differ from generally accepted accounting principles, the basis on
which these financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial
statements may differ from that reported on each Fund's tax return and,
consequently, the character of distributions to shareholders reported in the
financial highlights may differ from that reported to shareholders on Form
1099-DIV.
Distributions paid by each Fund from net interest received on tax-exempt
municipal bonds are not includable by shareholders as gross income for
federal income tax purposes because each Fund intends to meet certain
requirements of the Code applicable to regulated investment companies, which
will enable each Fund to pay exempt-interest dividends. The portion of such
interest, if any, earned on private activity bonds
52
<PAGE>
Notes to Financial Statements (Unaudited) - continued
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.
At March 31, 1996, the following Funds, for federal income tax purposes, had
capital loss carryforwards which may be applied against any net taxable
realized gains of each succeeding year until the earlier of their utilization
or expiration.
<TABLE>
<CAPTION>
Mississippi New York North Carolina Pennsylvania
Expiration Date Fund Fund Fund Fund
=============================================================================
<S> <C> <C> <C> <C>
March 31, 2003 $ 940,501 $2,754,263 $9,803,419 $ 111,447
March 31, 2004 3,172,754 -- -- 1,259,709
-------------- -------------- -------------- --------------
Total $4,113,255 $ 2,754,263 $9,803,419 $1,371,156
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
South Carolina Tennessee Virginia West Virginia
Expiration Date Fund Fund Fund Fund
=============================================================================
<S> <C> <C> <C> <C>
March 31, 2003 $ -- $ 381,262 $ 6,639,093 $ 295,369
March 31, 2004 2,709,187 635,014 3,840,742 2,589,345
-------------- -------------- -------------- --------------
Total $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 also 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 settled shares
outstanding, without distinction between share classes. Dividends are
declared separately for each class. No class has preferential dividend
rights; differences in per share dividend rates are generally due to
differences in separate class expenses.
(3) Transactions with Affiliates
Investment Adviser - The Trust has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an effective annual rate
of 0.55% of each Fund's average daily net assets. The investment adviser did
not impose a portion of its fee with respect to the North Carolina,
Pennsylvania, South Carolina, Tennessee and Virginia Funds, which is
reflected as a preliminary reduction of expenses in the Statement of
Operations.
Under a temporary expense reimbursement agreement with MFS, MFS has
voluntarily agreed to pay all of the Mississippi and Pennsylvania Funds'
operating expenses, exclusive of management, distribution and service fees.
The Mississippi and Pennsylvania Funds in turn will pay MFS an expense
reimbursement fee not greater than 0.40% of its average daily net assets. To
the extent that the expense reimbursement fee exceeds the Pennsylvania Fund's
actual expenses, the excess will be applied to amounts paid by MFS in prior
years. At September 30, 1996, the aggregate unreimbursed expenses owed to MFS
by the Mississippi Fund amounted to $0. At September 30, 1996, the aggregate
unreimbursed expenses owed to MFS by the Pennsylvania Fund amounted to
$254,551, including $37,671 incurred in the current period.
The Trust pays no compensation directly to its Trustees who are officers of
the investment adviser, or to officers of the Trust, all of whom receive
remuneration for their services to the Trust from MFS. Certain officers and
Trustees of the Trust are officers or directors of MFS, MFS Fund
Distributors, Inc. (MFD) and MFS Service Center, Inc. (MFSC). The Trust has
an unfunded defined benefit plan for all its independent Trustees and Mr.
Bailey. Included in Trustees' compensation for the period ended September 30,
1996 is a net periodic pension expense for each Fund, as follows:
<TABLE>
<CAPTION>
North
Mississippi New York Carolina Pennsylvania
Fund Fund Fund Fund
=============================================================================
<S> <C> <C> <C> <C>
$1,527 $2,397 $2,576 $1,646
South West
Carolina Tennessee Virginia Virginia
Fund Fund Fund Fund
=============================================================================
$2,575 $2,260 $ 2,877 $2,877
</TABLE>
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$11,440, $10,108, $28,902, $6,781, $22,468, $15,777, $36,430 and $25,729 as
its portion of the sales charge on sales of Class A shares of the
Mississippi, New York, North Carolina, Pennsylvania, South Carolina,
Tennessee, Virginia and West Virginia Funds, respectively, for the period
ended September 30, 1996.
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:
Each Class A distribution plan provides that the Fund will pay MFD up to
0.35% per annum of its average daily net assets attributable to Class A
shares in order that MFD may pay expenses on behalf of the Fund related to
the distribution and servicing of its shares. These expenses include a
service fee 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 $17,675, $24,077, $14,749, $12,440,
$31,874 and $8,904 for the New York, North Carolina, South Carolina,
Tennessee, Virginia and West Virginia Funds for the period ended September
30, 1996. Fees incurred under the distribution plan during the period ended
September 30, 1996 were 0.00%, 0.25%, 0.35%, 0.00%, 0.35%, 0.35%, 0.35% and
0.35% of each Fund's average daily net assets attributable to Class A shares
on an annualized basis for the Mississippi, New York, North
53
<PAGE>
Notes to Financial Statements (Unaudited) - continued
Carolina, Pennsylvania, South Carolina, Tennessee, Virginia and West Virginia
Funds. MFD is currently not imposing the 0.10% distribution fee for the New
York Fund. Payments of the 0.35% per annum distribution/service fee by the
Mississippi Fund will commence on such date to be determined by the Trustees.
In the case of the Pennsylvania Fund, payments of up to 0.10% per annum of
the distribution fee will commence on such date to be determined by the
Trustees and payments of up to 0.25% per annum of the service fee will
commence when the value of the net assets of the Fund attributable to Class A
shares first equals or exceeds $50 million.
The Class B and Class C distribution plans provide that each relevant Fund
will pay MFD a distribution fee of 0.75% per annum, and a service fee of up
to 0.25% per annum, of the Fund's average daily net assets attributable to
Class B and Class C shares. The service fee is currently suspended for the
Mississippi and Pennsylvania Funds' Class B shares held over one year. MFD
will pay to securities dealers that enter into a sales agreement with MFD all
or a portion of the service fee attributable to Class B and Class C shares,
and will pay to such securities dealers all of the distribution fee
attributable to Class C shares. The service fee is intended to be additional
consideration for services rendered by the dealer with respect to Class B and
Class C shares. MFD retains the service fee for accounts not attributable to
a securities dealer, which amounted to $3,850, $2,929, $2,812, $3,155, $7,311
and $733 for the New York, North Carolina, South Carolina, Tennessee,
Virginia and West Virginia Funds, respectively, for Class B shares. MFS
retains the service fee for accounts not attributable to a securities dealer,
which amounted to $1,860 and $985 for the North Carolina and Virginia Funds
for Class C shares. Fees incurred under the distribution plans during the
period ended September 30, 1996 were 0.82%, 1.00%, 1.00%, 0.79%, 1.00%,
1.00%, 1.00% and 1.00%, of each of the Fund's average daily net assets
attributable to Class B shares for the Mississippi, New York, North Carolina,
Pennsylvania, South Carolina, Tennessee, Virginia and West Virginia Funds,
respectively, on an annualized basis. Fees incurred under the distribution
plans during the period ended September 30, 1996 were 1.00% of each of the
Fund's average daily net assets attributable to Class C shares for the North
Carolina and Virginia Funds, respectively, on an annualized basis.
Purchases over $1 million of Class A shares are subject to a contingent
deferred sales charge in the event of a shareholder redemption within 12
months following such 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. A contingent deferred sales charge
is imposed on shareholder redemptions of Class C shares in the event of a
shareholder redemption within 12 months of purchases made on or after April
1, 1996. MFD receives all contingent deferred sales charges. Contingent
deferred sales charges imposed during the period ended September 30, 1996 on
Class A, Class B and Class C shares were as follows:
<TABLE>
<CAPTION>
North
Mississippi New York Carolina Pennsylvania
CDSC Imposed Fund Fund Fund Fund
=============================================================================
<S> <C> <C> <C> <C>
Class A $ -- $ 51 $ $11,206
Class B $26,108 $57,297 $70,572 $18,704
Class C $ -- $ -- $ 130 $ --
</TABLE>
<TABLE>
<CAPTION>
South West
Carolina Tennessee Virginia Virginia
CDSC Imposed Fund Fund Fund Fund
=============================================================================
<S> <C> <C> <C> <C>
Class A $ 104 $ -- $ -- $ --
Class B $20,653 $22,457 $ 31,697 $ 24,283
Class C $ -- $ -- $ -- $ --
</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
Mississippi New York Carolina Pennsylvania
Fund Fund Fund Fund
=============================================================================
<S> <C> <C> <C> <C>
Purchases $ 8,460 $69,496 $75,544 $8,319
Sales 10,003 76,653 86,244 7,702
</TABLE>
<TABLE>
<CAPTION>
South West
Carolina Tennessee Virginia Virginia
Fund Fund Fund Fund
=============================================================================
<S> <C> <C> <C> <C>
Purchases $ 13,972 $13,321 $87,498 $23,974
Sales 18,987 11,308 93,811 25,311
</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
Mississippi New York Carolina Pennsylvania
Fund Fund Fund Fund
=============================================================================
<S> <C> <C> <C> <C>
Aggregate cost $80,496 $146,344 $ 412,495 $41,630
------- -------- --------- -------
Gross unrealized
appreciation $ 3,327 $ 9,428 $ 25,327 $ 885
Gross unrealized
depreciation (101) (953) (651) (375)
------- -------- --------- -------
Net unrealized
appreciation $ 3,226 $ 8,475 $ 24,676 $ 510
------- -------- --------- -------
</TABLE>
<TABLE>
<CAPTION>
South West
Carolina Tennessee Virginia Virginia
Fund Fund Fund Fund
=============================================================================
<S> <C> <C> <C> <C>
Aggregate cost $167,331 $116,641 $ 406,253 $134,711
------- -------- --------- -------
Gross unrealized
appreciation $ 9,933 $ 6,295 $ 22,464 $ 8,755
Gross unrealized
depreciation (427) (744) (993) (330)
------- -------- --------- -------
Net unrealized
appreciation $ 9,506 $ 5,551 $ 21,471 $ 8,425
------- -------- --------- -------
</TABLE>
54
<PAGE>
Notes to Financial Statements (Unaudited) - continued
(5) Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares Mississippi Fund New York Fund North Carolina Fund
--------------------- ---------------------- ------------------------
Period Ended September
30, 1996 (000 Omitted) Shares Amount Shares Amount Shares Amount
==============================================================================================
<S> <C> <C> <C> <C> <C> <C>
Shares sold 295 $ 2,758 756 $ 8,005 6,488 $ 74,887
Shares issued to
shareholders in
reinvestment of
distributions 91 845 185 1,961 503 5,816
Shares reacquired (660) (6,143) (1,522) (16,110) (8,629) (99,642)
--------- ----------- --------- ------------ ----------- ------------
Net decrease (274) $ (2,540) (581) $ (6,144) (1,638) $ (18,939)
========= =========== ========= ============ =========== ============
Year Ended March 31,
1996 (000 Omitted) Shares Amount Shares Amount Shares Amount
==============================================================================================
Shares sold 877 $ 8,180 2,667 $ 28,693 7,027 $ 82,500
Shares issued to
shareholders in
reinvestment of
distributions 228 2,141 415 4,457 1,060 12,349
Shares reacquired (1,776) (16,709) (4,446) (47,873) (10,276) (120,480)
--------- ----------- --------- ------------ ----------- ------------
Net decrease (671) $ (6,388) (1,364) $(14,723) (2,189) $ (25,631)
========= =========== ========= ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
Pennsylvania Fund South Carolina Fund Tennessee Fund
--------------------- ---------------------- ------------------------
Period Ended September
30, 1996 (000 Omitted) Shares Amount Shares Amount Shares Amount
==============================================================================================
<S> <C> <C> <C> <C> <C> <C>
Shares sold 278 $ 2,575 344 $ 4,085 467 $ 4,829
Shares issued to
shareholders in
reinvestment of
distributions 37 349 190 2,259 133 1,367
Shares reacquired (355) (3,298) (1,220) (14,532) (534) (5,508)
--------- ----------- --------- ------------ ----------- ------------
Net increase
(decrease) (40) $ (374) (686) $ (8,188) 66 $ 688
========= =========== ========= ============ =========== ============
Year Ended March 31,
1996 (000 Omitted) Shares Amount Shares Amount Shares Amount
==============================================================================================
Shares sold 302 $ 2,857 1,071 $ 12,906 527 $ 5,493
Shares issued to
shareholders in
reinvestment of
distributions 70 659 395 4,764 271 2,835
Shares reacquired (213) (2,014) (1,950) (23,552) (1,692) (17,696)
--------- ----------- --------- ------------ ----------- ------------
Net increase
(decrease) 159 $ 1,502 (484) $ (5,882) (894) $ (9,368)
========= =========== ========= ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
Virginia Fund West Virginia Fund
---------------------- ------------------------
Period Ended September
30, 1996 (000 Omitted) Shares Amount Shares Amount
==============================================================================================
<S> <C> <C> <C> <C>
Shares sold 7,422 $ 82,432 338 $ 3,824
Shares issued to
shareholders in
reinvestment of
distributions 469 5,218 161 1,812
Shares reacquired (9,564) (106,326) (665) (7,481)
--------- ------------ ----------- ------------
Net decrease (1,673) $ (18,676) (166) $ (1,845)
========= ============ =========== ============
Year Ended March 31,
1996 (000 Omitted) Shares Amount Shares Amount
==============================================================================================
Shares sold 7,192 $ 82,090 1,206 $ 13,870
Shares issued to
shareholders in
reinvestment of
distributions 1,009 11,447 328 3,752
Shares reacquired (9,726) (111,003) (1,047) (11,988)
--------- ------------ ----------- ------------
Net increase
(decrease) (1,525) $ (17,466) 487 $ 5,634
========= ============ =========== ============
</TABLE>
55
<PAGE>
Notes to Financial Statements (Unaudited) - continued
<TABLE>
<CAPTION>
Class B Shares Mississippi Fund New York Fund North Carolina Fund
--------------------- ---------------------- ------------------------
Period Ended September
30, 1996 (000 Omitted) Shares Amount Shares Amount Shares Amount
==============================================================================================
<S> <C> <C> <C> <C> <C> <C>
Shares sold 94 $ 877 194 $ 2,060 342 $ 3,940
Shares issued to
shareholders in
reinvestment of
distributions 11 103 33 347 40 468
Shares reacquired (96) (899) (311) (3,290) (262) (3,028)
--------- ----------- --------- ------------ ----------- ------------
Net increase
(decrease) 9 $ 81 (84) $ (883) 120 $ 1,380
========= =========== ========= ============ =========== ============
Year Ended March 31,
1996 (000 Omitted) Shares Amount Shares Amount Shares Amount
==============================================================================================
Shares sold 295 $ 2,757 544 $ 5,859 952 $11,119
Shares issued in
connection with the
acquisition of the
Advantage Fund -- -- 1,405 14,685 -- --
Shares issued to
shareholders in
reinvestment of
distributions 22 208 63 676 70 821
Shares reacquired (120) (1,127) (513) (5,513) (395) (4,599)
--------- ----------- --------- ------------ ----------- ------------
Net increase 197 $ 1,838 1,499 $15,707 627 $ 7,341
========= =========== ========= ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
Pennsylvania Fund South Carolina Fund Tennessee Fund
--------------------- ---------------------- ------------------------
Period Ended September
30, 1996 (000 Omitted) Shares Amount Shares Amount Shares Amount
==============================================================================================
<S> <C> <C> <C> <C> <C> <C>
Shares sold 207 $ 1,934 210 $ 2,495 186 $ 1,914
Shares issued to
shareholders in
reinvestment of
distributions 37 349 20 238 16 165
Shares reacquired (151) (1,415) (85) (1,007) (100) (1,024)
--------- ----------- --------- ------------ ----------- ------------
Net increase 93 $ 868 145 $ 1,726 102 $ 1,055
--------- ----------- --------- ------------ ----------- ------------
Year Ended March 31,
1996 (000 Omitted) Shares Amount Shares Amount Shares Amount
==============================================================================================
Shares sold 376 $ 3,589 575 $ 6,957 362 $ 3,771
Issues in connection
with the acquisition
of the Advantage Fund 1,604 14,819 -- -- -- --
Shares issued to
shareholders in
reinvestment of
distributions 68 642 32 384 27 284
Shares reacquired (300) (2,852) (161) (1,935) (120) (1,249)
--------- ----------- --------- ------------ ----------- ------------
Net increase 1,748 $16,198 446 $ 5,406 269 $ 2,806
========= =========== ========= ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
Virginia Fund West Virginia Fund
---------------------- ------------------------
Period Ended September
30, 1996 (000 Omitted) Shares Amount Shares Amount
==============================================================================================
<S> <C> <C> <C> <C>
Shares sold 291 $ 3,241 115 $ 1,303
Shares issued to
shareholders in
reinvestment of
distributions 25 275 17 192
Shares reacquired (145) (1,616) (71) (801)
--------- ------------ ----------- ------------
Net increase 171 $ 1,900 61 $ 694
========= ============ =========== ============
Year Ended March 31,
1996 (000 Omitted) Shares Amount Shares Amount
==============================================================================================
Shares sold 706 $ 8,043 317 $ 3,621
Shares issued to
shareholders in
reinvestment of
distributions 43 494 30 346
Shares reacquired (199) (2,269) (127) (1,455)
--------- ------------ ----------- ------------
Net increase 550 $ 6,268 220 $ 2,512
========= ============ =========== ============
</TABLE>
56
<PAGE>
Notes to Financial Statements (Unaudited) - continued
<TABLE>
<CAPTION>
Class C Shares North Carolina Fund Virginia Fund
---------------------- ------------------------
Period Ended September
30, 1996 (000 Omitted) Shares Amount Shares Amount
==============================================================================================
<S> <C> <C> <C> <C>
Shares sold 126 $ 1,461 44 $ 484
Shares issued to
shareholders in
reinvestment of
distributions 12 133 5 51
Shares reacquired (81) (928) (39) (428)
--------- ------------ ----------- ------------
Net increase 57 $ 666 10 $ 107
========= ============ =========== ============
Year Ended March 31,
1996 (000 Omitted) Shares Amount Shares Amount
==============================================================================================
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
========= ============ =========== ============
</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 period ended September 30, 1996 ranged from $224
to $2,165.
(7) Financial Instruments
The Trust trades financial instruments with off-balance sheet risk in the
normal course of its investing activities in order to manage exposure to
market risks such as interest rates. These financial instruments include
futures contracts. The notional or contractual amounts of these instruments
represent the investment a Fund has in particular classes of financial
instruments and does not necessarily represent the amounts potentially
subject to risk. The measurement of the risks associated with these
instruments is meaningful only when all related and offsetting transactions
are considered.
Futures Contracts
<TABLE>
<CAPTION>
Unrealized
Fund Description Expiration Contracts Position Depreciation
====================================================================================================
<S> <C> <C> <C> <C> <C>
Mississippi Fund U.S. Treasury Notes December 1996 130 Short $191,903
New York Fund U.S. Treasury Notes December 1996 400 Short $293,639
North Carolina Fund U.S. Treasury Notes December 1996 200 Short $587,267
Pennsylvania Fund U.S. Treasury Notes December 1996 95 Short $178,754
South Carolina Fund U.S. Treasury Notes December 1996 130 Short $244,611
Tennessee Fund U.S. Treasury Notes December 1996 80 Short $150,530
Virginia Fund U.S. Treasury Notes December 1996 650 Short $451,178
West Virginia Fund U.S. Treasury Notes December 1996 50 Short $ 39,611
</TABLE>
At September 30, 1996, each Fund had sufficient cash and/or securities to
cover margin requirements on open futures contracts.
The Trust also invests in indexed securities whose value may be linked to
interest rates, commodities, indices or other financial indicators. Indexed
securities are fixed-income securities whose proceeds at maturity
(principal-indexed securities) or interest rates (coupon-indexed securities)
rise and fall according to the change in one or more specified underlying
instruments. Indexed securities may be more volatile than the underlying
instrument itself. The following is a summary of such securities held at
September 30, 1996:
<TABLE>
<CAPTION>
Principal
Amount
(000 Unrealized
Fund Description Index Omitted) Value Depreciation
===================================================================================================
<S> <C> <C> <C> <C> <C>
South Carolina Puerto Rico Telephone
Fund Authority
Rev., 5.05s, 2004 J.J. Kenny $1,000 $ 930,210 $ 69,790
Tennessee Fund Puerto Rico Public
Buildings PSA Municipal
Authority, 5.91s, 2016 Swap $2,000 $1,845,240 $154,760
Puerto Rico Telephone
Authority
Rev., 5.05s, 2004 J.J. Kenny $2,000 $1,860,420 $154,760
</TABLE>
57
<PAGE>
Notes to Financial Statements (Unaudited) - continued
(8) Litigation
MFS has been named as a defendant in a lawsuit brought by the City of Troy,
NY (the City) alleging, among other things, that certain municipal securities
issued by Troy and purchased by MFS Municipal Series Trust-New York (the
Fund) were invalid at the time of issuance. The Fund is the actual owner of
certain of the securities. The lawsuit seeks to void the issuance of the
securities and seeks the return of all principal and interest payments
previously made by the City together with interest on such amounts. If the
matter cannot be resolved through settlement with the City and other parties,
MFS and the Fund, if named as defendant, intend vigorously to contest the
case. This lawsuit is in a preliminary state and involves significant
complexities that prevent the Fund from being able to predict whether any
liability might result. Management does not believe that any potential
liability would be material to the financial position of the Fund.
Accordingly, no amount has been accrued in the financial statements with
respect to this matter. The Fund has filed a separate lawsuit against the
City and certain other parties, in which the Fund is seeking a determination
that the securities are valid and that the Fund is entitled to payment and/or
damages. If such securities are deemed invalid, then interest payments
received from the City are taxable. Given this uncertainty, the Fund is
currently treating such interest payments as taxable.
---------------------------------------------------
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.
58
<PAGE>
The MFS Family of Funds(R)
America's Oldest Mutual Fund Group
The members of the MFS Family of Funds are grouped below according to the
types of securities in their portfolios. For free prospectuses containing more
complete information, including the exchange privilege and all charges and
expenses, please contact your financial adviser or call MFS at 1-800-637-2929
any business day from 9 a.m. to 5 p.m. Eastern time (or leave a message
anytime). This material should be read carefully before investing or sending
money.
Stock
Massachusetts Investors Trust
Massachusetts Investors Growth Stock Fund
MFS(R) Capital Growth Fund
MFS(R) Emerging Growth Fund
MFS(R) Gold & Natural Resources Fund
MFS(R) Growth Opportunities Fund
MFS(R) Managed Sectors Fund
MFS(R) OTC Fund
MFS(R) Research Fund
MFS(R) Value Fund
Stock and Bond
MFS(R) Total Return Fund
MFS(R) Utilities Fund
Bond
MFS(R) Bond Fund
MFS(R) Government Mortgage Fund
MFS(R) Government Securities Fund
MFS(R) High Income Fund
MFS(R) Intermediate Income Fund
MFS(R) Strategic Income Fund
Limited Maturity Bond
MFS(R) Government Limited Maturity Fund
MFS(R) Limited Maturity Fund
MFS(R) Municipal Limited Maturity Fund
World
MFS(R)/Foreign & Colonial Emerging Markets
Equity Fund
MFS(R)/Foreign & Colonial International
Growth Fund
MFS(R)/Foreign & Colonial International
Growth and Income Fund
MFS(R) World Asset Allocation Fund(sm)
MFS(R) World Equity Fund
MFS(R) World Governments Fund
MFS(R) World Growth Fund
MFS(R) World Total Return Fund
National Tax-Free Bond
MFS(R) Municipal Bond Fund
MFS(R) Municipal High Income Fund
MFS(R) Municipal Income Fund
State Tax-Free Bond
Alabama, Arkansas, California, Florida, Georgia, Maryland, Massachusetts,
Mississippi, New York, North Carolina, Pennsylvania, South Carolina, Tennessee,
Virginia, West Virginia
Money Market
MFS(R) Cash Reserve Fund
MFS(R) Government Money Market Fund
MFS(R) Money Market Fund
59
<PAGE>
Ads Illustrate MFS' Unparalleled Experience
[Picture of the Earth viewed from the Moon.]
Mercury Gemini Apollo Mfs
MFS' new advertisements look back at some of the most important events of the
twentieth century to demonstrate a simple point - no other fund company can
match MFS' experience. MFS has been managing money for investors since 1924 when
we "invented" the na tion's first fund, Massachusetts Investors Trust.
Print and broadcast ads will offer dramatic portraits of what that 72 years'
worth of experience means. By the time the Apollo rockets began taking off for
the moon, for example, MFS had already been exploring the universe of stocks for
more than four decades. The company was also on the scene, as other ads will
illustrate, when Louis Armstrong was redefining jazz and when the great
racehorse Whirlaway was galloping to a Triple Crown victory.
As MFS Chairman Keith Brodkin emphasizes, in today's increasingly competitive
mutual fund industry, it's important to have a recognizable brand name. The goal
of the MFS ad campaign is to increase public awareness of the company and its
unique role in the industry as the inventor of the mutual fund.
The across-the-board strength of the MFS Family of Funds Registration Mark
will be highlighted in the print ads, which cite the performance results and
Morningstar ratings of various MFS funds.
The broadcast ads appear on a number of cable and network television news and
sports programs. The print ads appear in newspapers such as The Wall Street
Journal and USA Today; in financial magazines such as Kiplinger's Personal
Finance and Money, and in leisure magazines such as Golf Digest and Tennis.
(The cost of the campaign is being underwritten by MFS. It is neither a fund
shareholder nor an annuity contractholder expense.)
60
<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 advisers)
Walter E. Robb, III - President and Treasurer, Benchmark Advisors, Inc.
(corporate financial consultants); President, Benchmark Consulting Group,
Inc. (office services); 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
Web Site
http://www.mfs.com
Fund Managers*
David R. King
Geoffrey H. Schechter
David B. Smith
Treasurer
W. Thomas London*
*Affiliated with the Investment Adviser
Assistant Treasurer
James O. Yost*
Secretary
Stephen E. Cavan*
Assistant Secretary
James R. Bordewick, Jr.*
Custodian
State Street Bank and Trust Company
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.
[Add DALBAR LOGO]
For the third year in a row, MFS earned a #1 ranking in the DALBAR, Inc.
Broker/Dealer Survey, Main Office Operations Service Quality Category. The firm
achieved a 3.48 overall score on a scale of 1 to 4 in the 1996 survey. A total
of 110 firms responded, offering input on the quality of service they received
from 29 mutual fund companies nationwide. The survey contained questions about
service quality in 15 categories, including "knowledge of phone service
contacts," "accuracy of transaction processing," and "overall ease of doing
business with the firm."
<PAGE>
[BACK COVER]
MFS(R) Municipal [DALBAR SEAL]
Series Trust DALBAR
MFS #1 MFS
500 Boylston Street TOP-RATED SERVICE
Boston, MA 02116
MFS(R) Mississippi Municipal Bond Fund
MFS(R) New York Municipal Bond Fund
MFS(R) North Carolina Municipal Bond Fund
MFS(R) Pennsylvania 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
[MFS logo](SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
(C) 1996 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116
Bulk Rate
U.S. Postage
P A I D
Permit #55638
Boston, MA
58/258
52/252
41/241/341
30/230
42/242
53/253
43/243/343
MST-3B-11/96-52M 44/244
