[front cover]
[running graphic of the word BOND behind cover type]
[logo](silhouette of man and woman at desk)
MFS(SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
MFS(R) Municipal
Series Trust
Annual Report (bullet) March 31, 1998
For the States of: Mississippi,
New York, North Carolina,
Pennsylvania, South Carolina,
Tennessee, Virginia, and West Virginia
Now two MFS(R) IRA choices (see page 68)
<PAGE>
In Memoriam
A. Keith Brodkin
1935 - 1998
Chairman and Chief Executive Officer
MFS Investment Management(SM)
[photo of A. Keith Brodkin]
On February 2, 1998, Keith Brodkin, a friend and leader to everyone at MFS, died
unexpectedly at age 62. His thoughtful letters to shareholders on the markets
and economy have been an integral part of MFS shareholder reports like this one
for many years.
Keith joined MFS in 1970 as the firm's first fixed-income manager, managing the
bond portion of MFS(R) Total Return Fund. He went on to manage our first
pure bond fund, MFS(R) Bond Fund, when it was introduced in 1974, and he was
considered a pioneer in the art of active bond management.
Keith was named President and Chief Investment Officer of MFS in 1987 and four
years later became Chairman and Chief Executive Officer. During his
stewardship, MFS has achieved significant growth in total assets under
management, rising from some $25 billion in 1991 to the over $80 billion today
entrusted to us by three million individual and institutional investors
worldwide. Under Keith's leadership, MFS has carefully but steadily built its
domestic and international investment capabilities through the introduction of
a range of new products and a still-growing staff that now numbers over 100
equity and fixed-income professionals.
Throughout his career, Keith was very active in a wide range of charitable
endeavors. He is survived by his wife and three children. His leadership,
friendship, and wise counsel will be sorely missed.
<PAGE>
Table of Contents
<TABLE>
<S> <C>
Letter from the Chairman .............. 2
Portfolio Managers' Overview .......... 3
Portfolio Managers' Profiles .......... 3
Performance Summary ................... 4
Fund Facts ............................ 5
Federal Tax Information ............... 5
Portfolio of Investments .............. 14
Financial Statements .................. 29
Notes to Financial Statements ......... 61
Independent Auditors' Report .......... 67
The MFS(R) Roth IRA ................... 68
Trustees and Officers ................. 69
</TABLE>
- --------------------------------------------------------------------------------
HIGHLIGHTS
[bullet] The 12-month period ended March 31, 1998, was a positive one for
domestic fixed-income investors, as inflationary expectations declined
and economic growth did not add meaningful inflationary pressures.
[bullet] The municipal bond market was positively impacted by this environment,
as yields on long-term, high-grade municipal bonds fell approximately
61 basis points (0.61%) and continued economic growth translated into
improved credit strength.
[bullet] While equity markets were captivating the interest of most investors,
the supply of new municipal issues increased by 19% over the previous
year as issuers rushed to take advantage of the lower interest-rate
environment. This helped create a supply/demand imbalance that caused
municipals to underperform the general market.
[bullet] Our strategy of reducing the Funds' volatility and increasing holdings
of lower-rated investment-grade securities worked well in this
environment. We continue to focus on coupons, call protection,
effective maturities, and credit quality to optimize the relationship
between yield and total return.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other
MFS product is available from your financial adviser, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE>
Letter from the Chairman
[photo of Jeffrey L. Shames]
Dear Shareholders:
As investment managers we take a long-term view of the world's economies, as
well as of the stock and bond markets, and try to avoid getting caught up in
short-term fluctuations. However, it is hard to ignore unexpected events such as
the Asian economic turmoil or closely watched companies that miss their
quarterly earnings estimates. Given the potential for these events and their
possible impact on major market indices, we think it's important to offer some
perspective about recent market behavior and to let you know what MFS is doing
in an effort to provide you with favorable long-term investment performance.
The most notable recent event affecting investment markets has been the Asian
turmoil, which began in the summer of 1997 as a result of slowing growth rates
in the region and excess speculation in real estate markets. Since then, most
countries in the region have begun to implement the economic and regulatory
restructuring needed to put themselves on a stronger financial foundation.
While it may be a few years before some of these countries return to solid
economic footing, and while there will probably be a relatively short-term
impact on the U.S. economy, we believe the long-term outlook for the region is
quite positive.
The Asian situation has brought home the lesson that major events can quickly
impact investment markets around the world, including those of the United
States. Although U.S. equities have enjoyed a bull market lasting more than 15
years and have continued to set records in the first few months of 1998, there
have been brief bouts of volatility associated with the Asian turmoil, as well
as with perceived downturns for certain industries such as technology.
While we believe the long-term outlook for the equity markets is favorable, we
also believe we are overdue for a market correction in which prices will remain
flat or decline, possibly for an extended period of time. Since no one can
predict market cycles, that makes it that much more important to find companies
that can keep growing in the face of the occasional downturn and even gain
market share. For us, this means using original, bottom-up research to examine
each company's earnings potential and position as well as the overall prospects
for its industry. To that end, MFS continues to increase the research support
available to portfolio managers of MFS funds.
On the fixed-income side, MFS uses active portfolio management based on
extensive research and credit analysis to reduce the potential for price
declines and enhance the opportunity for price appreciation. For both equity
and fixed-income managers, this means visiting and meeting with thousands of
companies and issuers of credit every year, as well as attending many
presentations and closely following sources of industry research.
We believe this approach, based on thorough research, teamwork, innovative
thinking, and the free exchange of ideas, is the best way to get the most
performance for shareholders in MFS funds -- in any market environment.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ Jeffrey Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management
April 14, 1998
Jeffrey L. Shames, a graduate of Wesleyan University and the Massachusetts
Institute of Technology Sloan School of Management, joined MFS in 1983.
After four years as an industry analyst and portfolio manager, he was named
Chief Equity Officer in 1987 and President and a member of the Board of
Directors in 1993. Mr. Shames was appointed Chairman and Chief Executive
Officer in February 1998.
2
<PAGE>
Portfolio Managers' Overview
Dear Shareholders:
The 12-month period ended March 31, 1998, was a positive one for domestic
fixed-income investors, as inflationary expectations declined and economic
growth did not add meaningful inflationary pressures. In fact, 1997's 1.7%
inflation rate, as measured by the Consumer Price Index, was near a 25-year
low.
The U.S. fixed-income markets also benefited from the "flight to quality" of
global investors out of damaged Asian markets to more stable U.S.
dollar-denominated assets. The Asian slowdown may further relieve inflation in
the United States as industrial commodity prices remain weak and the strength
of the U.S. dollar moderates demand for exports. These factors have helped to
lower yields on 30-year U.S. Treasury bonds by approximately 114 basis points
(1.14%) over the period, from 7.09% to 5.95%.
The municipal bond market was positively impacted by these domestic and global
forces. Yields on long-term, high-grade municipal bonds over the period, as
measured by general obligation bonds rated "Aaa" by Moody's Investors Service,
fell approximately 61 basis points (0.61%), from 5.66% to 5.05%. In addition,
continued economic growth translated into improved credit strength. According to
Moody's, 258 issuers were upgraded, versus 101 downgrades during the last
calendar year. As a result of strengthening credits, the yield spread between
the highest- and lowest-rated investment-grade securities compressed by 25 basis
points (0.25%) over the period. This helped the performance of lower-quality
investment-grade bonds.
Municipal bond mutual funds had generally negative cash flows over the period
as the equity market captivated the interest of most fund investors. The supply
of new municipal issues increased by 19% over the previous year as many issuers
rushed to take advantage of the lower interest-rate environment. These factors
helped create an imbalance between supply and demand that caused municipals to
underperform the general market. The ratio of municipal to U.S. Treasury yields
thus increased from 81% at the beginning of the period to 87% by the end of the
period.
We continue to focus on coupons, call protection, effective maturities, and
credit quality to optimize the relationship between yield and total return.
While we remain constructive on the fixed-income markets with inflation benign,
we are cognizant that the Federal Reserve Board might feel the need for a
preemptive tightening if growth in the economy continues unabated.
Respectfully,
/s/ John P. Kihn /s/ David B. Smith
John P. Kihn David B. Smith
Portfolio Manager Portfolio Manager
The opinions expressed in this report are those of the portfolio managers and
are only through the end of the period of the report as stated on the cover.
The managers' views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' PROFILES
Note to Shareholders: Effective December 15, 1997, John P. Kihn joined
David B. Smith as Portfolio Manager of the Funds, succeeding Geoffrey L.
Schechter.
John P. Kihn is a Vice President of MFS Investment Management and Portfolio
Manager of MFS(R) Municipal Income Fund, MFS(R) Municipal Limited
Maturity Fund, and MFS Florida, New York, and Tennessee Municipal Bond
funds. Mr. Kihn joined MFS as a quantitative analyst in October 1997 after
working as a Senior Quantitative Analyst with a major investment firm. Mr.
Kihn earned a bachelor's degree in Economics from the University of
California, Berkeley, a master's degree in Business Economics from the
University of California, Santa Barbara, and a doctorate degree in
Accounting and Finance from the London School of Economics.
David B. Smith is a Vice President -- Investments in the Municipal
Fixed-Income Department of MFS Investment Management. He is Portfolio
Manager of MFS Alabama, Arkansas, California, Georgia, Maryland,
Massachusetts, Mississippi, North Carolina, Pennsylvania, South Carolina,
Virginia, and West Virginia Municipal Bond funds. He joined MFS in 1988 as a
Senior Treasury Analyst in the Corporate Treasury Department. He was named a
Research Analyst in the Fixed-Income Department in 1989, an Investment
Officer in 1990, an Assistant Vice President in 1991, and a Vice President
in 1993. Mr. Smith is a graduate of Union College and holds a Masters in
Business Administration degree from Babson College.
3
<PAGE>
Performance Summary
The performances of the individual state Funds listed below and on the
following pages include the reinvestment of dividends and capital gains but
exclude the effects of any sales charges. Each Fund's results have been
compared to the Lehman Brothers Municipal Bond Index (the Lehman Index), an
unmanaged index of municipal bond investments rated "Baa" or higher. However,
while this index is considered the benchmark for performance of municipal
bonds, it is comprised of municipal bonds issued nationwide, while each of the
Funds in the Trust is limited to investing in the bonds of a particular state.
Because individual indices do not exist for all of the states, we have provided
a discussion of each Fund's performance relative to the Lehman Index.
The portfolio of each Fund will tend to be structured with respect to maturity
and coupon and sector distribution based on our views on interest rates, credit
quality, and financing trends. However, each Fund's performance will differ
because of supply/demand and credit quality conditions, which vary from state
to state.
Mississippi
The Fund's total returns for the fiscal year ended March 31, 1998, were 11.02%
for Class A shares and 10.15% for Class B shares. These returns compare to a
9.84% return for the average other-state fund as tracked by Lipper Analytical
Services, Inc., an independent firm that reports mutual fund performance, and
to a 10.70% return for the Lehman Index over the same period.
New York
The Fund's total returns for the fiscal year ended March 31, 1998, were 11.59%
for Class A shares and 10.78% for Class B shares. These returns compare to a
10.49% return for the average New York fund as tracked by Lipper and to a
10.70% return for the Lehman Index over the same period.
North Carolina
The Fund's total returns for the fiscal year ended March 31, 1998, were 10.36%
for Class A shares and 9.75% for Class B and Class C shares. These returns
compare to a 10.42% return for the average North Carolina fund as tracked by
Lipper and to a 10.70% return for the Lehman Index over the same period. The
Fund's overweighting in zero coupon bonds added to performance over the period;
however, its high coupon, short-call bonds detracted from performance. We will
endeavor to lower the Fund's overweighting in zero coupon bonds and extend its
call protection when appropriate.
Pennsylvania
The Fund's total returns for the fiscal year ended March 31, 1998, were 11.65%
for Class A shares and 10.76% for Class B shares. These returns compare to a
10.24% return for the average Pennsylvania fund as tracked by Lipper and to a
10.70% return for the Lehman Index over the same period.
South Carolina
The Fund's total returns for the fiscal year ended March 31, 1998, were 10.62%
for Class A shares and 9.91% for Class B shares. These returns compare to a
10.30% return for the average South Carolina fund as tracked by Lipper and to a
10.70% return for the Lehman Index over the same period. We decreased the
Fund's exposure to insured bonds over the period, enhancing its performance.
Tennessee
The Fund's total returns for the fiscal year ended March 31, 1998, were 11.11%
for Class A shares and 10.51% for the Class B shares. These returns compare to
a 9.82% return for the average Tennessee fund as tracked by Lipper and to a
10.70% return for the Lehman Index over the same period.
Virginia
The Fund's total returns for the fiscal year ended March 31, 1998, were 10.32%
for Class A shares and 9.61% for Class B and Class C shares. These returns
compare to a 10.69% return for the average Virginia fund as tracked by Lipper
and to a 10.70% return for the Lehman Index over the same period. We improved
the Fund's relative performance over the period by reducing its average
maturity, increasing its holdings of intermediate-term noncallable bonds, and
increasing its exposure to lower-investment-grade holdings.
West Virginia
The Fund's total returns for the fiscal year ended March 31, 1998, were 9.42%
for Class A shares and 8.72% for Class B shares. These returns compare to a
9.84% return for the average other-state fund as tracked by Lipper and to a
10.70% return for the Lehman Index over the same period. We reduced the Fund's
premium coupon/short-call holdings and increased its holdings of
lower-investment-grade bonds over the period.
4
<PAGE>
Performance Summary - continued
- --------------------------------------------------------------------------------
FUND FACTS
Objective: Each Fund seeks current income exempt from federal income taxes
and from the personal income taxes, if any, of the state to which its name
refers.
<TABLE>
<S> <C>
Commencement of investment operations:
Mississippi August 6, 1992
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
Net assets as of March 31, 1998:
Mississippi $ 76.8 million
New York $146.0 million
North Carolina $433.0 million
Pennsylvania $ 39.5 million
South Carolina $176.9 million
Tennessee $127.1 million
Virginia $409.0 million
West Virginia $145.5 million
</TABLE>
<TABLE>
<S> <C> <C>
Class inception:
Mississippi Class A August 6, 1992
Class B September 7, 1993
New York Class A June 6, 1988
Class B September 7, 1993
North Carolina Class A October 31, 1984
Class B September 7, 1993
Class C January 3, 1994
Pennsylvania Class A February 1, 1993
Class B September 7, 1993
South Carolina Class A October 31, 1984
Class B September 7, 1993
Tennessee Class A August 12, 1988
Class B September 7, 1993
Virginia Class A October 31, 1984
Class B September 7, 1993
Class C January 3, 1994
West Virginia Class A October 31, 1984
Class B September 7, 1993
</TABLE>
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
In January 1999, shareholders will be mailed a Form 1099 reporting the
federal tax status of all distributions paid during the calendar year 1998.
For federal income tax purposes, approximately 99% of the total dividends
paid by each fund from net investment income during the year ended March 31,
1998, is designated as an exempt-interest dividend.
5
<PAGE>
Performance Summary - continued
The information below and on the following pages illustrates the historical
performance for each Fund's Class A shares in comparison to various market
indicators. Class A share performance results reflect the deduction of the
4.75% maximum sales charge; benchmark comparisons are unmanaged and do not
reflect any fees or expenses. The performance of other share classes will be
greater than or less than the line shown, based on the differences in charges
and fees paid by shareholders investing in the different classes. It is not
possible to invest directly in an index.
MFS(R) MISSISSIPPI MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the period from September 1, 1992, through March 31, 1998)
[line chart]
<TABLE>
<CAPTION>
MFS Mississippi
Period Municipal Bond Consumer Price Lehman Brothers
End Fund - Class A Index - US Municipal Bond Index
<S> <C> <C> <C>
8/92 9525 10000 10000
3/93 9852 10221 10526
3/94 10085 10477 10770
3/95 10699 10776 11570
3/96 11553 11069 12540
3/97 12156 11388 13224
3/98 13799 11512 14784
</TABLE>
Average Annual Total Returns as of March 31, 1998
<TABLE>
<CAPTION>
Class A Investment Results
----------------------------------------------------
1 Year 3 Years 5 Years Life of Fund*
----------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +11.02% +8.05% +6.50% +6.36%
- ----------------------------------------------------------------------------------------------------------
SEC Results + 5.74% +6.31% +5.47% +5.45%
- ----------------------------------------------------------------------------------------------------------
Comparative Indices
----------------------------------------------------
1 Year 3 Years 5 Years Life of Fund*
----------------------------------------------------
Average other state tax-exempt municipal bond fund+ + 9.84% +7.21% +6.14% +6.37%
- ----------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index# +10.70% +8.16% +6.82% +6.98%
- ----------------------------------------------------------------------------------------------------------
Consumer Price Index#** + 1.38% +2.32% +2.47% +2.57%
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
---------------------------------------------------
1 Year 3 Years 5 Years Life of Fund*
---------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +10.15% +7.17% +5.67% +5.55%
- ----------------------------------------------------------------------------------------------------------
SEC Results + 6.15% +6.29% +5.32% +5.40%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Fund's investment operations,
August 6, 1992, through March 31, 1998.
+Source: Lipper Analytical Services, Inc.
#Source: CDA/Wiesenberger.
**The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%.
B results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of B. Because operating expenses
of A are lower than those of B, B performance generally would have been lower
than A performance. The A performance included within the B SEC performance has
been adjusted to reflect the CDSC generally applicable to B rather than the
initial sales charge generally applicable to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to capital gains tax.
6
<PAGE>
Performance Summary - continued
MFS(R) NEW YORK MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the period from July 1, 1988, through March 31, 1998)
[line chart]
<TABLE>
<CAPTION>
MFS New York
Period Municipal Bond Consumer Price Lehman Brothers
End Fund - Class A Index - US Municipal Bond Index
<S> <C> <C> <C>
6/88 9525 10000 10000
3/89 9914 10409 10671
3/90 10825 10953 11798
3/91 11852 11489 12886
3/92 13136 11855 14173
3/93 15085 12221 15948
3/94 15418 12528 16318
3/95 16347 12885 17530
3/96 17487 13236 19000
3/97 18305 13617 20037
3/98 20448 13746 22861
</TABLE>
Average Annual Total Returns as of March 31, 1998
<TABLE>
<CAPTION>
Class A Investment Results
----------------------------------------------------
1 Year 3 Years 5 Years Life of Fund*
----------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +11.59% +7.71% +6.25% +8.08%
- -------------------------------------------------------------------------------------------------------
SEC Results + 6.29% +5.98% +5.22% +7.55%
- -------------------------------------------------------------------------------------------------------
Comparative Indices
----------------------------------------------------
1 Year 3 Years 5 Years Life of Fund*
----------------------------------------------------
Average New York tax-exempt municipal bond fund+ +10.49% +7.41% +5.90% +7.85%
- -------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index# +10.70% +8.16% +6.82% +8.45%
- -------------------------------------------------------------------------------------------------------
Consumer Price Index#** + 1.38% +2.32% +2.47% +3.34%
- -------------------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
---------------------------------------------------
1 Year 3 Years 5 Years Life of Fund*
---------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +10.78% +6.84% +5.46% +7.63%
- -------------------------------------------------------------------------------------------------------
SEC Results + 6.78% +5.96% +5.12% +7.63%
- -------------------------------------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Fund's investment operations,
June 6, 1988, through March 31, 1998.
+Source: Lipper Analytical Services, Inc.
#Source: CDA/Wiesenberger.
**The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%.
B results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of B. Because operating expenses
of A are lower than those of B, B performance generally would have been lower
than A performance. The A performance included within the B SEC performance has
been adjusted to reflect the CDSC generally applicable to B rather than the
initial sales charge generally applicable to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to capital gains tax.
7
<PAGE>
Performance Summary - continued
MFS(R) NORTH CAROLINA MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the 5-year period ended March 31, 1998)
[line chart]
<TABLE>
<CAPTION>
MFS North Carolina
Period Municipal Bond Consumer Price Lehman Brothers
End Fund - Class A Index - US Municipal Bond Index
<S> <C> <C> <C>
3/93 9522 10000 10000
3/94 9646 10251 10232
3/95 10212 10543 10992
3/96 10881 10830 11914
3/97 11435 11142 12564
3/98 12620 11295 13908
</TABLE>
Growth of a Hypothetical $10,000 Investment
(For the 10-year period ended March 31, 1998)
[line chart]
<TABLE>
<CAPTION>
MFS North Carolina
Period Municipal Bond Consumer Price Lehman Brothers
End Fund - Class A Index - US Municipal Bond Index
<S> <C> <C> <C>
3/88 9527 10000 10000
3/89 10281 10498 10721
3/90 11165 11047 11853
3/91 12069 11588 12946
3/92 13045 11957 14239
3/93 14541 12326 16023
3/94 14731 12635 16394
3/95 15595 12996 17613
3/96 16618 13350 19089
3/97 17463 13734 20131
3/98 19272 13923 22285
</TABLE>
Average Annual Total Returns as of March 31, 1998
<TABLE>
<CAPTION>
Class A Investment Results
-------------------------------------------
1 Year 3 Years 5 Years 10 Years
-------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +10.36% +7.31% +5.80% +7.30%
- ----------------------------------------------------------------------------------------------------
SEC Results + 5.12% +5.59% +4.77% +6.78%
- ----------------------------------------------------------------------------------------------------
Class C Investment Results
-------------------------------------------
1 Year 3 Years 5 Years 10 Years
-------------------------------------------
Average Annual Total Return +9.75% +6.65% +5.19% +6.99%
- ----------------------------------------------------------------------------------------------------
SEC Results +8.75% +6.65% +5.19% +6.99%
- ----------------------------------------------------------------------------------------------------
Comparative Indices
-------------------------------------------
1 Year 3 Years 5 Years 10 Years
-------------------------------------------
Average North Carolina tax-exempt municipal bond fund+ +10.42% +7.25% +6.01% +7.55%
- ----------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index# +10.70% +8.16% +6.82% +8.34%
- ----------------------------------------------------------------------------------------------------
Consumer Price Index#* + 1.38% +2.32% +2.47% +3.37%
- ----------------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
-------------------------------------------
1 Year 3 Years 5 Years 10 Years
-------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +9.75% +6.58% +5.12% +6.95%
- ----------------------------------------------------------------------------------------------------
SEC Results +5.75% +5.69% +4.77% +6.95%
- ----------------------------------------------------------------------------------------------------
</TABLE>
+Source: Lipper Analytical Services, Inc.
#Source: CDA/Wiesenberger.
*The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%. Class C shares ("C") have
no initial sales charge but, like B, have higher annual fees and expenses than
A. C SEC results reflect the 1% CDSC applicable to shares redeemed within 12
months.
B and C results include the performance and the operating expenses (e.g., Rule
12b-1 fees) of A for periods prior to the inception of B and C. Because
operating expenses of B and C are higher than those of A, B and C performance
generally would have been lower than A performance. The A performance included
in the B and C SEC performance has been adjusted to reflect the CDSC generally
applicable to B and C rather than the initial sales charge generally applicable
to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to capital gains tax.
8
<PAGE>
Performance Summary - continued
MFS(R) PENNSYLVANIA MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the period from February 1, 1993, through March 31, 1998)
[line chart]
<TABLE>
<CAPTION>
MFS Pennsylvania
Period Municipal Bond Consumer Price Lehman Brothers
End Fund - Class A Index - US Municipal Bond Index
<S> <C> <C> <C>
2/93 9525 10000 10000
3/94 9728 10323 10490
3/95 10520 10617 11269
3/96 11240 10906 12214
3/97 11765 11220 12881
3/98 13136 11375 14259
</TABLE>
Average Annual Total Returns as of March 31, 1998
<TABLE>
<CAPTION>
Class A Investment Results
-----------------------------------------------
1 Year 3 Years 5 Years Life of Fund*
-----------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +11.65% +7.68% +6.69% +6.42%
- ------------------------------------------------------------------------------------------------------
SEC Results + 6.35% +5.95% +5.66% +5.42%
- ------------------------------------------------------------------------------------------------------
Comparative Indices
-----------------------------------------------
1 Year 3 Years 5 Years Life of Fund*
-----------------------------------------------
Average Pennsylvania tax-exempt municipal bond fund+ +10.24% +7.61% +6.27% +5.91%
- ------------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index# +10.70% +8.16% +6.82% +7.12%
- ------------------------------------------------------------------------------------------------------
Consumer Price Index#** + 1.38% +2.32% +2.47% +2.53%
- ------------------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
---------------------------------------------
1 Year 3 Years 5 Years Life of Fund*
---------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +10.76% +6.90% +5.89% +5.52%
- -----------------------------------------------------------------------------------------------------
SEC Results + 6.76% +6.02% +5.54% +5.35%
- -----------------------------------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Fund's investment operations,
February 1, 1993, through March 31, 1998.
+Source: Lipper Analytical Services, Inc.
#Source: CDA/Wiesenberger.
**The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%.
B results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of B. Because operating expenses
of A are lower than those of B, B performance generally would have been lower
than A performance. The A performance included within the B SEC performance has
been adjusted to reflect the CDSC generally applicable to B rather than the
initial sales charge generally applicable to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to capital gains tax.
9
<PAGE>
Performance Summary - continued
MFS(R) SOUTH CAROLINA MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the 5-year period ended March 31, 1998)
[line chart]
<TABLE>
<CAPTION>
MFS South Carolina
Period Municipal Bond Consumer Price Lehman Brothers
End Fund - Class A Index - US Municipal Bond Index
<S> <C> <C> <C>
3/93 9525 10000 10000
3/94 9674 10251 10232
3/95 10345 10543 10992
3/96 10986 10830 11914
3/97 11475 11142 12564
3/98 12694 11295 13908
</TABLE>
Growth of a Hypothetical $10,000 Investment
(For the 10-year period ended March 31, 1998)
[line chart]
<TABLE>
<CAPTION>
MFS South Carolina
Period Municipal Bond Consumer Price Lehman Brothers
End Fund - Class A Index - US Municipal Bond Index
<S> <C> <C> <C>
3/88 9521 10000 10000
3/89 10320 10498 10721
3/90 11250 11047 11853
3/91 12151 11588 12946
3/92 13262 11957 14239
3/93 14817 12326 16023
3/94 15049 12635 16394
3/95 16092 12996 17613
3/96 17089 13350 19089
3/97 17851 13734 20131
3/98 19746 13923 22285
</TABLE>
Average Annual Total Returns as of March 31, 1998
<TABLE>
<CAPTION>
Class A Investment Results
-------------------------------------------
1 Year 3 Years 5 Years 10 Years
-------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +10.62% +7.06% +5.91% +7.57%
- ----------------------------------------------------------------------------------------------------
SEC Results + 5.36% +5.34% +4.89% +7.05%
- ----------------------------------------------------------------------------------------------------
Comparative Indices
-------------------------------------------
1 Year 3 Years 5 Years 10 Years
-------------------------------------------
Average South Carolina tax-exempt municipal bond fund+ +10.30% +7.52% +5.94% +7.77%
- ----------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index# +10.70% +8.16% +6.82% +8.34%
- ----------------------------------------------------------------------------------------------------
Consumer Price Index#* + 1.38% +2.32% +2.47% +3.37%
- ----------------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
------------------------------------------
1 Year 3 Years 5 Years 10 Years
------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +9.91% +6.32% +5.23% +7.22%
- ----------------------------------------------------------------------------------------------------
SEC Results +5.91% +5.43% +4.89% +7.22%
- ----------------------------------------------------------------------------------------------------
</TABLE>
+Source: Lipper Analytical Services, Inc.
#Source: CDA/Wiesenberger.
*The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%.
B results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of B. Because operating expenses
of A are lower than those of B, B performance generally would have been lower
than A performance. The A performance included within the B SEC performance has
been adjusted to reflect the CDSC generally applicable to B rather than the
initial sales charge generally applicable to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to capital gains tax.
10
<PAGE>
Performance Summary - continued
MFS(R) TENNESSEE MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the period from September 1, 1988, through March 31, 1998)
[line chart]
<TABLE>
<CAPTION>
MFS Tennessee
Period Municipal Bond Consumer Price Lehman Brothers
End Fund - Class A Index - US Municipal Bond Index
<S> <C> <C> <C>
8/88 9525 10000 10000
3/89 9772 10321 10449
3/90 10810 10861 11552
3/91 11602 11392 12618
3/92 12702 11755 13878
3/93 14118 12118 15616
3/94 14469 12422 15979
3/95 15316 12776 17166
3/96 16336 13124 18605
3/97 17068 13502 19620
3/98 19002 13630 21701
</TABLE>
Average Annual Total Returns as of March 31, 1998
<TABLE>
<CAPTION>
Class A Investment Results
-----------------------------------------------
1 Year 3 Years 5 Years Life of Fund*
-----------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +11.11% +7.38% +6.08% +7.43%
- ---------------------------------------------------------------------------------------------------
SEC Results + 5.83% +5.65% +5.05% +6.89%
- ---------------------------------------------------------------------------------------------------
Comparative Indices
-----------------------------------------------
1 Year 3 Years 5 Years Life of Fund*
-----------------------------------------------
Average Tennessee tax-exempt municipal bond fund+ + 9.82% +7.35% +5.75% +7.68%
- ---------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index# +10.70% +8.16% +6.82% +8.38%
- ---------------------------------------------------------------------------------------------------
Consumer Price Index#** + 1.38% +2.32% +2.47% +3.31%
- ---------------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
----------------------------------------------
1 Year 3 Years 5 Years Life of Fund*
----------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +10.51% +6.68% +5.40% +7.04%
- ---------------------------------------------------------------------------------------------------
SEC Results + 6.51% +5.80% +5.05% +7.04%
- ---------------------------------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Fund's investment operations,
August 12, 1988, through March 31, 1998.
+Source: Lipper Analytical Services, Inc.
#Source: CDA/Wiesenberger.
**The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%.
B results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of B. Because operating expenses
of A are lower than those of B, B performance generally would have been lower
than A performance. The A performance included within the B SEC performance has
been adjusted to reflect the CDSC generally applicable to B rather than the
initial sales charge generally applicable to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to capital gains tax.
11
<PAGE>
Performance Summary - continued
MFS(R) VIRGINIA MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the 5-year period ended March 31, 1998)
[line chart]
<TABLE>
<CAPTION>
MFS Virginia
Period Municipal Bond Consumer Price Lehman Brothers
End Fund - Class A Index - US Municipal Bond Index
<S> <C> <C> <C>
3/93 9526 10000 10000
3/94 9620 10251 10232
3/95 10165 10543 10992
3/96 10828 10830 11914
3/97 11258 11142 12564
3/98 12419 11295 13908
</TABLE>
Growth of a Hypothetical $10,000 Investment
(For the 10-year period ended March 31, 1998)
[line chart]
<TABLE>
<CAPTION>
MFS Virginia
Period Municipal Bond Consumer Price Lehman Brothers
End Fund - Class A Index - US Municipal Bond Index
<S> <C> <C> <C>
3/88 9529 10000 10000
3/89 10436 10498 10721
3/90 11384 11047 11853
3/91 12341 11588 12946
3/92 13435 11957 14239
3/93 14959 12326 16023
3/94 15106 12635 16394
3/95 15962 12996 17613
3/96 17003 13350 19089
3/97 17678 13734 20131
3/98 19502 13923 22285
</TABLE>
Average Annual Total Returns as of March 31, 1998
<TABLE>
<CAPTION>
Class A Investment Results
-------------------------------------------
1 Year 3 Years 5 Years 10 Years
-------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +10.32% +6.90% +5.45% +7.42%
- ----------------------------------------------------------------------------------------------
SEC Results + 5.08% +5.18% +4.43% +6.90%
- ----------------------------------------------------------------------------------------------
Class C Investment Results
-------------------------------------------
1 Year 3 Years 5 Years 10 Years
-------------------------------------------
Average Annual Total Return +9.61% +6.28% +4.84% +7.11%
- ----------------------------------------------------------------------------------------------
SEC Results +8.61% +6.28% +4.84% +7.11%
- ----------------------------------------------------------------------------------------------
Comparative Indices
-------------------------------------------
1 Year 3 Years 5 Years 10 Years
-------------------------------------------
Average Virginia tax-exempt municipal bond fund+ +10.69% +7.70% +6.09% +7.58%
- ----------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index# +10.70% +8.16% +6.82% +8.34%
- ----------------------------------------------------------------------------------------------
Consumer Price Index#* + 1.38% +2.32% +2.47% +3.37%
- ----------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
------------------------------------------
1 Year 3 Years 5 Years 10 Years
------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +9.61% +6.20% +4.77% +7.08%
- ----------------------------------------------------------------------------------------------
SEC Results +5.61% +5.31% +4.42% +7.08%
- ----------------------------------------------------------------------------------------------
</TABLE>
+Source: Lipper Analytical Services, Inc.
#Source: CDA/Wiesenberger.
*The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%. Class C shares ("C") have
no initial sales charge but, like B, have higher annual fees and expenses than
A. C SEC results reflect the 1% CDSC applicable to shares redeemed within 12
months.
B and C results include the performance and the operating expenses (e.g., Rule
12b-1 fees) of A for periods prior to the inception of B and C. Because
operating expenses of B and C are higher than those of A, B and C performance
generally would have been lower than A performance. The A performance included
in the B and C SEC performance has been adjusted to reflect the CDSC generally
applicable to B and C rather than the initial sales charge generally applicable
to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to capital gains tax.
12
<PAGE>
Performance Summary - continued
MFS(R) WEST VIRGINIA MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the 5-year period ended March 31, 1998)
[line chart]
<TABLE>
<CAPTION>
MFS West Virginia
Period Municipal Bond Consumer Price Lehman Brothers
End Fund - Class A Index - US Municipal Bond Index
<S> <C> <C> <C>
3/93 9527 10000 10000
3/94 9737 10251 10232
3/95 10327 10543 10992
3/96 11007 10830 11914
3/97 11580 11142 12564
3/98 12671 11295 13908
</TABLE>
Growth of a Hypothetical $10,000 Investment
(For the 10-year period ended March 31, 1998)
[line chart]
<TABLE>
<CAPTION>
MFS West Virginia
Period Municipal Bond Consumer Price Lehman Brothers
End Fund - Class A Index - US Municipal Bond Index
<S> <C> <C> <C>
3/88 9524 10000 10000
3/89 10364 10498 10721
3/90 11272 11047 11853
3/91 12217 11588 12946
3/92 13379 11957 14239
3/93 14918 12326 16023
3/94 15247 12635 16394
3/95 16173 12996 17613
3/96 17237 13350 19089
3/97 18134 13734 20131
3/98 19842 13923 22285
</TABLE>
Average Annual Total Returns as of March 31, 1998
<TABLE>
<CAPTION>
Class A Investment Results
------------------------------------------
1 Year 3 Years 5 Years 10 Years
------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +9.42% +7.05% +5.87% +7.62%
- ------------------------------------------------------------------------------------------------
SEC Results +4.22% +5.33% +4.84% +7.09%
- ------------------------------------------------------------------------------------------------
Comparative Indices
------------------------------------------
1 Year 3 Years 5 Years 10 Years
------------------------------------------
Average other-state tax-exempt municipal bond fund+ + 9.84% +7.21% +6.14% +7.52%
- ------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index# +10.70% +8.16% +6.82% +8.34%
- ------------------------------------------------------------------------------------------------
Consumer Price Index#* + 1.38% +2.32% +2.47% +3.37%
- ------------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
-----------------------------------------
1 Year 3 Years 5 Years 10 Years
-----------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +8.72% +6.32% +5.19% +7.27%
- ------------------------------------------------------------------------------------------------
SEC Results +4.72% +5.43% +4.84% +7.27%
- ------------------------------------------------------------------------------------------------
</TABLE>
+Source: Lipper Analytical Services, Inc.
#Source: CDA/Wiesenberger.
*The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%.
B results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of B. Because operating expenses
of A are lower than those of B, B performance generally would have been lower
than A performance. The A performance included within the B SEC performance has
been adjusted to reflect the CDSC generally applicable to B rather than the
initial sales charge generally applicable to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to capital gains tax.
13
<PAGE>
Portfolio of Investments - March 31, 1998
MFS MISSISSIPPI MUNICIPAL BOND FUND
Municipal Bonds - 98.2%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ------------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 7.3%
Commonwealth of Puerto Rico, MBIA, 7.584s,
2008[dbldag][dbldag] $2,000 $ 2,241,740
Hinds County, MS, MBIA, 6.25s, 2010 1,660 1,906,875
Hinds County, MS, MBIA, 6.25s, 2011 1,285 1,477,172
-----------
$ 5,625,787
- ------------------------------------------------------------------------------------------
State and Local Appropriation - 10.4%
Hinds Community College, MS, Conference and
Training Center, 6.5s, 2014 $1,320 $ 1,393,141
Medical Center Educational Building Corp., MS
(University of Mississippi Medical Center),
MBIA, 5.65s, 2009 2,000 2,168,300
Medical Center Educational Bulding Corp., MS
(University of Mississippi Medical Center),
MBIA, 5.9s, 2023 2,250 2,362,118
State of Mississippi, Certificates of Participation
(Rehabilitation Services), 6.1s, 2014 2,000 2,079,780
-----------
$ 8,003,339
- ------------------------------------------------------------------------------------------
Refunded and Special Obligations - 9.6%
Mississippi Home Corp., 0s, 2013 $6,920 $ 3,160,641
Puerto Rico Highway & Transportation Authority
Rev., 6.625s, 2018 1,900 2,112,914
State of Mississippi, 6.75s, 2014 1,800 2,052,936
-----------
$ 7,326,491
- ------------------------------------------------------------------------------------------
Airport and Port Revenue - 2.8%
Puerto Rico Ports Authority (American Airlines),
6.25s, 2026 $2,000 $ 2,170,220
- ------------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 6.1%
Claiborne County, MS, Pollution Control Rev.
(System Energy Resources, Inc.), 7.3s, 2025 $1,000 $ 1,059,790
Puerto Rico Electric Power Authority Power Rev.,
FSA, 8.208s, 2023[dbldag][dbldag] 1,000 1,155,990
Warren County, MS, Pollution Control Rev.
(Mississippi Power & Light), 7s, 2022 1,000 1,106,230
Washington County, MS, Pollution Control Rev.
(Mississippi Power & Light), 7s, 2022 1,230 1,360,663
-----------
$ 4,682,673
- ------------------------------------------------------------------------------------------
Health Care Revenue - 5.4%
Jones County, MS, Hospital Rev. (South Central
Regional Medical Center), 5.5s, 2017 $1,000 $ 995,090
Mississippi Hospital Equipment & Facilities
Authority Rev., 6s, 2016 1,500 1,548,360
Mississippi Hospital Equipment & Facilities
Authority Rev. (Magnolia Regional Health
Center), 7.375s, 2021 1,500 1,598,325
-----------
$ 4,141,775
- ------------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 10.7%
Jones County, MS, Solid Waste Disposal Rev.
(International Paper Co.), 5.8s, 2021 $1,000 $ 1,038,750
Lowndes County, MS, Solid Waste Disposal &
Pollution Control Rev. (Weyerhaeuser), 6.8s, 2022 3,250 3,949,042
Mississippi Business Finance Corp. (Jackson
Municipal Airport/Airborne Freight), 7.15s, 2007 985 1,095,340
Mississippi Business Finance Corp., Solid Waste
Disposal Rev. (Mississippi Chemical Corp.),
5.8s, 2022[sec][sec] 1,000 998,290
Warren County, MS, Pollution Control Rev.
(International Paper), 6.6s, 2019 1,000 1,110,400
-----------
$ 8,191,822
- ------------------------------------------------------------------------------------------
Insured Health Care Revenue - 18.6%
Alcorn County, Corinth (Magnolia Regional Health
Center), AMBAC, 5.75s, 2013 $2,000 $ 2,128,440
Gulfport, MS, Hospital Facilities (Memorial
Hospital), MBIA, 6.125s, 2015 2,250 2,442,195
Gulfport, MS, Hospital Facilities (Memorial
Hospital), MBIA, 6.2s, 2018 1,000 1,086,600
Hinds County, MS, Rev. (Methodist Hospital &
Rehabilitation Center), AMBAC, 5.6s, 2012 3,055 3,276,365
Mississippi Development Bank, Special Obligation
(Adams County Hospital), FSA, 5.75s, 2016 1,000 1,050,630
Mississippi Hospital Equipment & Facilities
Authority Rev. (Baptist), MBIA, 6.5s, 2010 1,190 1,337,120
Mississippi Hospital Equipment & Facilities
Authority Rev. (Baptist), MBIA, 6s, 2013 750 813,217
Mississippi Hospital Equipment & Facilities
Authority Rev. (Rush Medical Foundation),
Connie Lee, 6.7s, 2018 2,000 2,178,680
-----------
$14,313,247
- ------------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 5.2%
Gulfport, MS, Community Development
(Oakview Apartments), FNMA, 7.4s, 2025 $1,755 $ 1,909,370
Jackson, MS, Elderly Housing Corp., Mortgage
Rev. (Delhaven Manor), "C", FHA, 7.375s, 2024 1,960 2,089,615
-----------
$ 3,998,985
- ------------------------------------------------------------------------------------------
Single Family Housing Revenue - 7.4%
Mississippi Home Corp., GNMA, 6.5s, 2024 $2,650 $ 2,810,378
Mississippi Home Corp., GNMA, 6.625s, 2027 1,350 1,453,923
Mississippi Home Corp., GNMA, 7.55s, 2027 1,225 1,388,635
-----------
$ 5,652,936
- ------------------------------------------------------------------------------------------
Universities - 1.4%
University of Mississippi, Educational Building
Corp. (Athletic Facilities), 6.2s, 2016 $1,000 $ 1,076,000
- ------------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 10.2%
Columbus, MS, Water & Sewer Rev., MBIA,
6.5s, 2013 $1,000 $ 1,116,440
Gautier, MS, Utility District, Utility Systems Rev.,
FGIC, 6.375s, 2019 1,300 1,408,784
Harrison County, MS, Wastewater Management
District, Wastewater Treatment, FGIC, 6.5s, 2006 1,375 1,475,581
Harrison County, MS, Wastewater Management
District, Wastewater Treatment, FGIC, 5.875s, 2025 1,000 1,054,660
Meridian, MS, Water & Sewer Rev., AMBAC,
6s, 2010 1,500 1,626,615
Meridian, MS, Water & Sewer Rev., AMBAC,
6.2s, 2012 650 711,828
Meridian, MS, Water & Sewer Rev., AMBAC,
6.2s, 2013 400 438,048
-----------
$ 7,831,956
- ------------------------------------------------------------------------------------------
Other - 3.1%
Mississippi Development Bank (Diamond Lakes
Utilities), 6.25s, 2017 $1,250 $ 1,267,438
Vicksburg Warren, MS, School District Capital
Improvements, 4.7s, 2016 1,160 1,090,307
-----------
$ 2,357,745
- ------------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $69,550,677) $75,372,976
- ------------------------------------------------------------------------------------------
</TABLE>
14 - MMI
<PAGE>
Portfolio of Investments - continued
Floating Rate Demand Note - 1.4%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ------------------------------------------------------------------------
<S> <C> <C>
Jackson County, MS, Pollution Control
Rev. (Chevron USA, Inc.), due 06/01/23,
at Identified Cost $1,100 $ 1,100,000
- ------------------------------------------------------------------------
Total Investments (Identified Cost, $70,650,677) $76,472,976
Other Assets, Less Liabilities - 0.4% 305,840
- ------------------------------------------------------------------------
Net assets - 100.0% $76,778,816
- ------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
Portfolio of Investments - March 31, 1998
MFS NEW YORK MUNICIPAL BOND FUND
Municipal Bonds - 98.2%
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 11.5%
Nassau County, NY, "A", FGIC, 6s, 2012 $1,000 $ 1,118,150
New York City, NY, 7.2s, 2008 1,000 1,167,570
New York City, NY, 7.3s, 2010 880 1,035,012
New York City, NY, 7.3s, 2011 5,000 5,865,450
New York City, NY, 7.375s, 2013[sec][sec] 1,600 1,888,464
New York City, NY, 8.25s, 2016 160 181,909
Oswego County, NY, 6.7s, 2009 1,000 1,178,940
Port Byron, NY, Central School District, AMBAC,
7.4s, 2012 500 632,650
Port Byron, NY, Central School District, AMBAC,
7.4s, 2013 500 634,690
Port Byron, NY, Central School District, AMBAC,
7.4s, 2014 500 637,320
Port Byron, NY, Central School District, AMBAC,
7.4s, 2015 500 640,745
Territory of Virgin Islands, 7.75s, 2006 365 402,464
Washingtonville, NY, Central School District, FGIC,
7.35s, 2008 550 677,363
Washingtonville, NY, Central School District, FGIC,
7.35s, 2009 550 681,582
-----------
$16,742,309
- -------------------------------------------------------------------------------------
State and Local Appropriation - 22.1%
Metropolitan Transportation Authority, NY,
Service Contract, 7.375s, 2008 $2,000 $ 2,408,400
Metropolitan Transportation Authority, NY,
Service Contract, 0s, 2012 1,655 807,872
Metropolitan Transportation Authority, NY,
Service Contract, AMBAC, 5.75s, 2013 1,825 2,006,405
Metropolitan Transportation Authority, NY,
Service Contract, 0s, 2014 3,520 1,546,406
Metropolitan Transportation Authority, NY,
Service Contract, 0s, 2014 3,500 1,537,620
Metropolitan Transportation Authority, NY,
Service Contract, 5.5s, 2017[sec][sec] 750 762,375
New York Dormitory Authority Rev.
(City University), FSA, 5.75s, 2013 4,250 4,629,057
New York Dormitory Authority Rev.
(City University), 5.625s, 2016 1,450 1,528,895
New York Dormitory Authority Rev.
(City University), AMBAC, 5.75s, 2018 1,000 1,096,160
New York Dormitory Authority Rev.
(City University), AMBAC, 5.75s, 2018 800 876,928
New York Dormitory Authority Rev.
(City University), 5.375s, 2024 1,500 1,502,520
New York Dormitory Authority Rev.
(State University), AMBAC, 6s, 2011 $ 590 $ 655,555
New York Dormitory Authority Rev.
(State University), 5.875s, 2017 1,130 1,255,260
New York Dormitory Authority Rev.
(State University), FSA, 5.875s, 2017 1,435 1,579,045
New York Dormitory Authority Rev. (University),
MBIA, 0s, 2007 2,500 1,661,650
New York Medical Care Facilities Finance
Agency, MBIA, 6s, 2025 1,300 1,386,632
New York Medical Care Facilities Finance
Agency, Mental Health Services, 6.375s, 2014 1,000 1,095,510
New York Urban Development Corp.
(Correctional Facilities), AMBAC, 0s, 2009 5,000 3,032,150
New York Urban Development Corp.
(State Facilities), AMBAC, 5.6s, 2015 2,750 2,963,538
-----------
$32,331,978
- -------------------------------------------------------------------------------------
Refunded and Special Obligations - 12.5%
New York City, NY, 8s, 2001 $ 490 $ 555,258
New York City, NY, 8.25s, 2001 1,840 2,117,951
New York City, NY, Municipal Water & Sewer
Finance Authority, 7s, 2001 530 579,428
New York City, NY, Municipal Water & Sewer
Finance Authority, 7s, 2001 225 245,983
New York City, NY, Municipal Water & Sewer
Finance Authority, Systems Rev., 7.375s, 2001 2,000 2,220,720
New York Local Government Assistance Corp.,
7.25s, 2001 2,500 2,764,050
New York Medical Care Facilities Finance Agency
(Montefiore Medical), FHA, 7.25s, 2009 3,165 3,321,066
New York Medical Care Facilities Finance Agency
(St. Luke's Hospital), FHA, 7.45s, 2000 2,600 2,810,366
New York Medical Care Facilities Finance
Agency, Mental Health Services, 7.875s, 2000 340 375,635
New York Medical Care Facilities Finance
Agency, Mental Health Services, 7.3s, 2001 750 837,788
New York Urban Development Corp., State
Facilities Rev., 7.5s, 2001 1,000 1,112,600
Puerto Rico Aqueduct & Sewer Authority Rev.,
9s, 2005 250 317,307
Triborough Bridge & Tunnel Authority, NY,
7.375s, 2000 1,000 1,071,110
-----------
$18,329,262
- -------------------------------------------------------------------------------------
Airport and Port Revenue - 1.6%
New York City, NY, Industrial Development
Agency, Special Facilities Rev. (American
Airlines), 6.9s, 2024 $1,000 $ 1,115,850
Port Authority NY & NJ, Special Obligation
(JFK International), MBIA, 6.25s, 2015 1,000 1,155,710
-----------
$ 2,271,560
- -------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 9.0%
New York City, NY, Industrial Development Agency
(Brooklyn Navy Yard Cogen Partners), 5.65s, 2028 $1,000 $ 1,011,270
New York Energy Research and Development
Authority, Electrical Facilities Rev. (Long Island
Lighting), 7.15s, 2022 2,700 2,950,263
New York Power Authority, FGIC, 6.5s, 2008 2,500 2,901,425
Port Authority NY & NJ, Special Obligation,
6.75s, 2019 1,750 1,948,380
</TABLE>
15 - MNY
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Electric and Gas Utility Revenue - continued
Puerto Rico Electric Power Authority, 8.473s, 2023[dbldag][dbldag] $1,500 $ 1,733,985
Virgin Islands Water & Power Authority, Electric
Systems Rev., 7.4s, 2011 2,355 2,537,183
------------
$ 13,082,506
- ------------------------------------------------------------------------------------------------------
Health Care Revenue - 3.0%
Albany, NY, Industrial Development Authority,
Civic Facilities Rev., 8.25s, 2004 $1,785 $ 1,918,286
Dutchess, NY, Industrial Development Agency,
Civic Facilities Rev., 8.625s, 2016 1,085 1,164,682
New York Medical Care Facilities Finance
Agency, Mental Health Services
(Huntington Mortgage), 6.5s, 2014 1,250 1,357,938
------------
$ 4,440,906
- ------------------------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 4.2%
Allegany County, NY, Industrial Development
Authority, Solid Waste Rev. (Atlantic Richfield),
6.625s, 2016 $1,000 $ 1,092,130
Essex County, NY, Industrial Development Agency
(International Paper), 5.55s, 2014 750 783,562
Essex County, NY, Industrial Development Agency
(Solid Waste International Paper), 6.15s, 2021 1,000 1,079,280
Fulton County, NY, Industrial Development Agency
(Crossroads Incubator), 8.75s, 2009 1,025 1,087,587
Monroe County, NY, Industrial Development
Agency (Weyerhauser), 9s, 2006 1,000 1,017,170
Onondaga County, NY, Industrial Development
Agency (Bristol-Meyers Squibb), 5.75s, 2024 1,000 1,096,160
------------
$ 6,155,889
- ------------------------------------------------------------------------------------------------------
Insured Health Care Revenue - 6.4%
New York City, NY, Health & Hospital Corp.,
AMBAC, 7.36s, 2023[dbldag][dbldag] $3,200 $ 3,336,832
New York Dormitory Authority Rev.
(Champlain Valley), Connie Lee, 6s, 2010 250 281,653
New York Dormitory Authority Rev.
(St. Vincent's Hospital), FHA, 7.375s, 2011 2,500 2,766,825
New York Medical Care Facilities Finance Agency
(Montefiore Medical), AMBAC, 6.5s, 2029 2,550 2,918,398
------------
$ 9,303,708
- ------------------------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 0.4%
New York City, NY, Housing Development Corp.
(South Bronx Cooperatives), 8.1s, 2023 $ 570 $ 598,073
- ------------------------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 0.7%
Municipal Assistance Corp., City of Troy, MBIA,
0s, 2019 $1,835 $ 613,055
Municipal Assistance Corp., City of Troy, MBIA,
0s, 2020 1,120 364,661
------------
$ 977,716
- ------------------------------------------------------------------------------------------------------
Single Family Housing Revenue - 3.6%
New York Mortgage Agency Rev., 7.375s, 2011 $1,295 $ 1,404,713
New York Mortgage Agency Rev., 8.05s, 2011 80 84,198
New York Mortgage Agency Rev., 6.45s, 2017 2,355 2,533,580
New York Mortgage Agency Rev., 8.05s, 2022 150 160,081
New York Mortgage Agency Rev., 7.75s, 2023 995 1,076,680
------------
$ 5,259,252
- ------------------------------------------------------------------------------------------------------
Turnpike Revenue - 6.4%
Triborough Bridge & Tunnel Authority, NY,
5.5s, 2017 $8,000 $ 8,442,240
Virgin Islands Public Finance Authority, Highway
Rev., 7.7s, 2004 800 855,800
------------
$ 9,298,040
- ------------------------------------------------------------------------------------------------------
Universities - 4.5%
Hempstead Town, NY, Civic Facilities Rev.
(Hofstra University), MBIA, 5.8s, 2015 $1,500 $ 1,595,760
Islip, NY, Community Development Agency Rev.
(New York Institute of Technology), 7.5s, 2026 2,000 2,198,660
New York Dormitory Authority Rev.
(Colgate University), MBIA, 6s, 2016 1,000 1,126,430
New York Dormitory Authority Rev.
(Cornell University), 7.375s, 2020 1,500 1,631,220
------------
$ 6,552,070
- ------------------------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 12.3%
New York City, NY, Municipal Water & Sewer
Finance Authority, 6s, 2010 $ 620 $ 692,137
New York City, NY, Municipal Water & Sewer
Finance Authority, 7.1s, 2012 2,000 2,189,300
New York City, NY, Municipal Water & Sewer
Finance Authority, 7s, 2015 745 812,139
New York City, NY, Municipal Water & Sewer
Finance Authority, 7.6s, 2020 470 497,053
New York Environmental Facilities Corp., Pollution
Control Rev., 5.75s, 2010 3,235 3,533,914
New York Environmental Facilities Corp., Pollution
Control Rev., 6.875s, 2010 1,780 1,957,840
New York Environmental Facilities Corp., Pollution
Control Rev., 6.875s, 2010 220 241,144
New York Environmental Facilities Corp., Pollution
Control Rev., 5.75s, 2012 1,100 1,193,390
New York Environmental Facilities Corp., Water
Facilities Rev., 8.85s, 2015 2,500 2,844,375
Suffolk County, NY, Water Authority, MBIA,
5.1s, 2012 1,895 1,958,331
Suffolk County, NY, Water Authority, MBIA,
5.1s, 2013 2,000 2,059,280
------------
$ 17,978,903
- ------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $128,730,414) $143,322,172
- ------------------------------------------------------------------------------------------------------
Floating Rate Demand Note - 0.4%
- ------------------------------------------------------------------------------------------------------
New York City, NY, Municipal Water Finance
Authority, due 06/15/23, at Identified Cost $ 600 $ 600,000
- ------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $129,330,414) $143,922,172
Other Assets, Less Liabilities - 1.4% 2,071,947
- ------------------------------------------------------------------------------------------------------
Net assets - 100.0% $145,994,119
- ------------------------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
16 - MNY
<PAGE>
Portfolio of Investments - March 31, 1998
MFS NORTH CAROLINA MUNICIPAL BOND FUND
Municipal Bonds - 98.8%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 5.9%
Charlotte, NC, Water and Sewer, 5.8s, 2013 $1,780 $ 1,906,434
Charlotte, NC, Water and Sewer, 5.8s, 2014 5,050 5,395,319
Charlotte, NC, Water and Sewer, 5.9s, 2019 2,820 3,016,582
Charlotte, NC, Water and Sewer, 5.6s, 2021 4,500 4,741,425
Durham, NC, 5.9s, 2013 2,400 2,605,656
Durham, NC, 5.9s, 2014 2,400 2,598,312
Hertford County, NC, 9.5s, 2000 100 101,359
Hertford County, NC, 9.5s, 2001 100 101,849
Hertford County, NC, 9.5s, 2002 100 102,349
North Carolina Capital Improvement, 5.1s, 2015 5,000 5,085,250
-----------
$25,654,535
- --------------------------------------------------------------------------------------------
State and Local Appropriation - 7.8%
Charlotte, NC, Certificates of Participation
(Convention Facilites Project), AMBAC, 0s, 2004 $3,435 $ 2,576,284
Charlotte, NC, Certificates of Participation
(Convention Facilites Project), AMBAC, 0s, 2005 4,810 3,429,819
Charlotte, NC, Certificates of Participation
(Convention Facilites Project), AMBAC, 0s, 2006 1,075 730,441
Charlotte, NC, Certificates of Participation
(Convention Facilites Project), AMBAC, 0s, 2008 3,000 1,845,510
Cumberland County, NC, Certificates of
Participation (Civic Center), AMBAC, 6.375s, 2010 1,100 1,232,462
Cumberland County, NC, Certificates of
Participation (Civic Center), AMBAC, 0s, 2011 425 218,255
Cumberland County, NC, Certificates of
Participation (Civic Center), AMBAC, 0s, 2013 1,000 464,420
Dare County, NC, MBIA, 6.6s, 2006 2,100 2,271,423
Durham, NC, Certificates of Participation
(Hospital and Office Facilities), 5.875s, 2009 1,460 1,578,786
Durham, NC, Certificates of Participation
(New Durham Corp.), 6.875s, 2009 1,750 1,906,152
Franklin County, NC, Certificates of Participation
(Jail and School), FGIC, 6.625s, 2014 2,000 2,231,260
Greensboro, NC, Certificates of Participation
(Coliseum Arena Project), 6.25s, 2011 2,180 2,316,904
Harnett County, NC, Certificates of Participation,
AMBAC, 6.2s, 2006 1,000 1,116,590
Harnett County, NC, Certificates of Participation,
AMBAC, 6.2s, 2009 1,500 1,658,340
Puerto Rico Housing, Bank and Finance Agency,
7.5s, 2006 7,000 8,215,970
Scotland County, NC, Certificates of Participation
(Jail and Courthouse Project), FSA, 6.75s, 2011 1,000 1,082,550
Union County, NC, Certificates of Participation,
AMBAC, 6.375s, 2012 1,000 1,094,960
-----------
$33,970,126
- --------------------------------------------------------------------------------------------
Refunded and Special Obligations - 9.8%
Chapel Hill, NC, Parking Facilities Rev.
(Rosemary Street Project), 8.125s, 2000 $1,585 $ 1,772,601
Chapel Hill, NC, Parking Facilities Rev.
(Rosemary Street Project), 8.25s, 2000 3,305 3,706,491
Charlotte, NC, Certificates of Participation
(Convention Facilities Project), AMBAC,
6.75s, 2021 4,250 4,702,200
Craven, NC, Regional Medical Authority, MBIA,
7.2s, 2000 1,500 1,638,165
North Carolina Eastern Municipal Power Agency,
7.5s, 2010 2,595 3,257,659
North Carolina Eastern Municipal Power Agency,
5s, 2017 11,870 11,998,671
North Carolina Medical Care Commission,
Hospital Rev. (Gaston Health Care), 0s, 1999 $ 500 $ 280,760
North Carolina Medical Care Commission,
Hospital Rev. (Mercy Hospital), 6.5s, 2015 1,000 1,095,300
North Carolina Medical Care Commission,
Hospital Rev. (Presbyterian Health), 7.3s, 2000 1,000 1,094,460
North Carolina Medical Care Commission,
Hospital Rev. (Presbyterian Health), 7.375s, 2000 4,000 4,384,920
Pender County, NC, Certificates of Participation
(Pender County Prison), 7.6s, 2001 1,900 2,125,530
Pender County, NC, Certificates of Participation
(Pender County Prison), 7.7s, 2001 1,000 1,121,640
Wake County, NC, Hospital Rev., MBIA, 0s, 2010 1,950 1,079,579
Winston-Salem, NC, Water and Sewer Systems
Rev., 6.25s, 2012 4,000 4,377,080
-----------
$42,635,056
- --------------------------------------------------------------------------------------------
Airport and Port Revenue - 1.3%
Puerto Rico Ports Authority (American Airlines),
6.25s, 2026 $5,075 $ 5,506,933
- --------------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 19.1%
New Hanover County, NC, Industrial Facilities Rev.
(Carolina Power and Light Co.), 6.9s, 2009 $1,000 $ 1,067,160
North Carolina Eastern Municipal Power Agency,
AMBAC, 6s, 2018 14,245 15,885,454
North Carolina Eastern Municipal Power Agency,
MBIA, 7s, 2007 5,000 5,849,200
North Carolina Eastern Municipal Power Agency,
MBIA, 7.25s, 2007 5,000 5,938,350
North Carolina Eastern Municipal Power Agency,
MBIA, 7.5s, 2010 3,005 3,725,930
North Carolina Municipal Power Agency, No. 1,
Catawba Electric Rev., MBIA, 0s, 2008 10,150 6,491,128
North Carolina Municipal Power Agency, No. 1,
Catawba Electric Rev., MBIA, 0s, 2009 16,000 9,641,920
North Carolina Municipal Power Agency, No. 1,
Catawba Electric Rev., MBIA, 6s, 2011 8,000 8,824,080
North Carolina Municipal Power Agency, No. 1,
Catawba Electric Rev., MBIA, 6.72s, 2012[dbldag][dbldag] 9,000 9,561,600
North Carolina Municipal Power Agency, No. 1,
Catawba Electric Rev., MBIA, 5.5s, 2014[sec][sec] 3,500 3,700,165
North Carolina Municipal Power Agency, No. 1,
Catawba Electric Rev., FSA, 6.2s, 2018 4,300 4,642,323
Puerto Rico Electric Power Authority Rev., FSA,
6s, 2016 5,000 5,402,200
Wake County, NC, Industrial Facilities Rev.
(Carolina Power and Light), 6.9s, 2009 2,000 2,134,320
-----------
$82,863,830
- --------------------------------------------------------------------------------------------
Health Care Revenue - 18.8%
Charlotte-Mecklenberg Hospital Authority, "A",
5.75s, 2021 $1,500 $ 1,568,820
North Carolina Medical Care Commission,
Hospital Rev. (Carolina Medicorp), 6s, 2021 19,000 19,765,510
North Carolina Medical Care Commission,
Hospital Rev. (Duke University), 5.25s, 2021 5,975 5,974,940
North Carolina Medical Care Commission,
Hospital Rev. (Firsthealth Of The Carolinas),
5s, 2028 2,465 2,379,588
North Carolina Medical Care Commission,
Hospital Rev. (Gaston Health Care), 5.5s, 2015 8,040 8,257,482
North Carolina Medical Care Commission,
Hospital Rev. (Gaston Health Care), 5.5s, 2019 7,500 7,644,600
</TABLE>
17 - MNC
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Health Care Revenue - continued
North Carolina Medical Care Commission,
Hospital Rev. (Halifax Memorial), 6.75s, 2014 $1,355 $ 1,477,086
North Carolina Medical Care Commission,
Hospital Rev. (Halifax Memorial), 6.75s, 2024 4,500 4,905,450
North Carolina Medical Care Commission,
Hospital Rev. (Moore Memorial Hospital),
9.1s, 1999 800 828,864
North Carolina Medical Care Commission,
Hospital Rev. (Rex Hospital Project), 6.25s, 2017 2,500 2,690,250
North Carolina Medical Care Commission,
Hospital Rev. (Valdese General), 8.75s, 2016 5,365 6,070,819
North Carolina Medical Care Commission,
Hospital Rev. (Well Spring Retirement),
6.25s, 2017 2,500 2,576,075
North Carolina Medical Care Commission,
Hospital Rev. (Well Spring Retirement),
6.25s, 2021 2,000 2,055,900
Northern Hospital District, Surry County, NC,
Heath Care Facilities Rev., 7.875s, 2021 4,530 4,957,904
Pitt County, NC, Hospital Rev. (Memorial Hospital),
5.25s, 2021 10,135 10,129,121
-----------
$81,282,409
- ---------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 11.3%
Chatham County, NC, Industrial Facilities &
Pollution Control (Weyerhaeuser), 9s, 2006 $1,260 $ 1,281,634
Columbus County, NC, Industrial Facilities &
Pollution Control (International Paper), 5.8s, 2016 4,000 4,191,840
Columbus County, NC, Industrial Facilities &
Pollution Control (International Paper),
6.15s, 2021 5,000 5,396,400
Halifax County, NC, Industrial Facilities & Pollution
Control Finance Authority (Champion
International Corp.), 8.15s, 2019 1,500 1,613,235
Haywood County, NC, Industrial Facilities &
Pollution Control Finance Authority (Champion
International Corp.), 8.1s, 2009 2,500 2,686,850
Haywood County, NC, Industrial Facilities &
Pollution Control Finance Authority (Champion
International Corp.), 5.75s, 2025 11,500 11,880,765
Martin County, NC, Industrial Facilities & Pollution
Control Finance Authority (Weyerhaeuser Co.),
7.25s, 2014 7,000 7,756,490
Martin County, NC, Industrial Facilities & Pollution
Control Finance Authority (Weyerhaeuser Co.),
6.8s, 2024 7,500 8,355,825
Mecklenburg County, NC, Industrial Facilities
and Pollution Control Finance Authority
(Precision Steel), 7.75s, 2014 2,600 2,793,596
Surry County, NC, Industrial Facilities & Pollution
Control Finance Authority (Weyerhaeuser),
9.25s, 2002 1,500 1,686,525
Wake County, NC, Industrial Facilities & Pollution
Control Finance Authority (Mallinkcodt),
6.75s, 2012 1,100 1,165,274
-----------
$48,808,434
- ---------------------------------------------------------------------------------------
Insured Health Care Revenue - 4.0%
Cumberland County, NC, Hospital Facilities Rev.
(Cumberland County Hospital), MBIA, 0s, 2009 $1,800 $ 1,044,756
Cumberland County, NC, Hospital Facilities Rev.
(Cumberland Hospital), MBIA, 6s, 2021 4,000 4,148,800
New Hanover County, NC, Hospital Rev. (New
Hanover Regional Medical Center), AMBAC,
5.75s, 2026 $3,625 $ 3,834,271
North Carolina Medical Care Commission,
5s, 2017[sec][sec] 3,500 3,415,230
North Carolina Medical Care Commission
(Wake County Hospital), AMBAC, 5.375s, 2026 1,610 1,633,522
North Carolina Medical Care Commission
(Wilson Memorial Hospital), AMBAC, 0s, 2013 1,000 463,490
North Carolina Medical Care Commission
(Wilson Memorial Hospital), AMBAC, 0s, 2015 1,140 466,545
North Carolina Medical Care Commission
(Wilson Memorial Hospital), AMBAC, 5.25s, 2020 2,250 2,262,240
-----------
$17,268,854
- ---------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 4.2%
Asheville, NC, Housing Authority (Asheville
Terrace Apartments), 7.1s, 2011 $5,000 $ 5,357,450
North Carolina Housing Finance Agency, FHA,
6.9s, 2024 4,880 5,256,150
North Carolina Housing Finance Agency, FHA,
6.05s, 2028 5,000 5,265,650
Salisbury, NC, Housing Corp. (Yadkin Senior
Citizens), FNMA, 6.75s, 2022 2,060 2,133,851
-----------
$18,013,101
- ---------------------------------------------------------------------------------------
Single Family Housing Revenue - 3.8%
North Carolina Housing Finance Agency,
6.15s, 2017 $2,000 $ 2,141,240
North Carolina Housing Finance Agency,
6.7s, 2018 1,785 1,908,843
North Carolina Housing Finance Agency,
8.125s, 2019 1,070 1,097,424
North Carolina Housing Finance Agency,
7.7s, 2021 1,940 2,001,226
North Carolina Housing Finance Agency,
7.8s, 2021 1,785 1,798,388
North Carolina Housing Finance Agency,
7.85s, 2028 4,945 5,159,316
North Carolina Housing Finance Agency,
7.6s, 2032 2,430 2,536,143
-----------
$16,642,580
- ---------------------------------------------------------------------------------------
Solid Waste Revenue - 0.3%
Iredell, NC, Solid Waste Systems Rev., 6.25s, 2012 $1,250 $ 1,332,088
- ---------------------------------------------------------------------------------------
Turnpike Revenue - 0.7%
Puerto Rico Highway and Transportation Authority
Rev., 6.421s, 2007[dbldag][dbldag] $2,750 $ 3,031,105
- ---------------------------------------------------------------------------------------
Universities - 8.4%
Appalachian State University, NC, MBIA,
6.1s, 2014 $1,140 $ 1,242,840
Appalachian State University, NC, MBIA,
6.125s, 2019 4,370 4,757,750
North Carolina Education Facilities Finance
Agency (Duke University), 6.75s, 2021 11,500 12,548,340
University of North Carolina, University Rev.,
0s, 2012 8,265 4,143,410
University of North Carolina, University Rev.,
0s, 2013 6,415 3,005,620
University of North Carolina, University Rev.,
0s, 2015 4,415 1,842,379
University of North Carolina, University Rev.,
0s, 2016 3,500 1,381,275
</TABLE>
18 - MNC
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
Universities - continued
University of North Carolina, University Rev.,
0s, 2017 $3,910 $ 1,461,245
University of North Carolina (Chapel Hill), 0s, 2012 9,105 4,026,959
University of North Carolina (Chapel Hill), 0s, 2013 4,285 1,766,620
------------
$ 36,176,438
- --------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 3.4%
Asheville, NC, Water System Rev., FGIC, 5.7s, 2025 $2,000 $ 2,105,900
Charlotte, NC, Water and Sewer Systems Rev.,
5.25s, 2021 4,000 4,046,840
Gastonia, NC, Utilities Systems Rev., MBIA,
4.75s, 2015 1,000 965,760
Kannapolis, NC, Certificates of Participation,
MBIA, 7.375s, 2010 5,000 5,354,950
Raleigh, NC, Water and Sewer Systems Rev.,
5.125s, 2022 2,000 2,019,900
------------
$ 14,493,350
- --------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $390,802,732) $427,678,839
- --------------------------------------------------------------------------------------
Floating Rate Demand Notes - 0.9%
- --------------------------------------------------------------------------------------
Bartow County, GA, Development Authority,
Pollution Control Rev. (Georgia Power Co.),
due 03/01/24 $ 900 $ 900,000
Burke County, GA, Development Authority
Pollution, Pollution Control Rev. (Georgia Power
Co.), due 09/01/25 100 100,000
Harris County, TX, Hospital Rev. (Methodist
Hospital), due 12/01/25 1,000 1,000,000
Lincoln County, WY, Pollution Control Rev.,
due 11/01/17 900 900,000
Lincoln County, WY, Pollution Control Rev. (Exxon),
due 07/01/14 700 700,000
Lubbock, TX, Health Facilities Development Corp.
Rev. (St. Joseph Health System), due 07/01/13 200 200,000
- --------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 3,800,000
- --------------------------------------------------------------------------------------
Total Investments (Identified Cost, $394,602,732) $431,478,839
Other Assets, Less Liabilities - 0.3% 1,496,706
- --------------------------------------------------------------------------------------
Net assets - 100.0% $432,975,545
- --------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
Portfolio of Investments - March 31, 1998
MFS PENNSYLVANIA MUNICIPAL BOND FUND
Municipal Bonds - 97.1%
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 10.7%
Butler, PA, School District, FGIC, 5.375s, 2018 $ 500 $ 507,190
Chester County, PA, 5.65s, 2011 500 524,375
Dauphin County, PA, General Authority Rev.,
MBIA, 0s, 2020 240 74,671
Greene County, PA, 6s, 2010 100 103,173
Lycoming County, PA, MBIA, 5.55s, 2012 1,000 1,052,770
Northeastern York County, PA, School District,
FGIC, 0s, 2012 415 209,679
Oley Valley, PA, School District, AMBAC, 0s, 2011 810 428,798
Southeastern Area, PA, Special Schools Authority
Rev., 0s, 2007 $ 360 $ 230,508
State of Pennsylvania, 6.25s, 2010 300 344,937
Wilson, PA, School District, AMBAC, 0s, 2009 1,275 750,899
----------
$4,227,000
- ---------------------------------------------------------------------------------------
State and Local Appropriation - 0.8%
Philadelphia, PA, Municipal Authority Rev.
(Justice Lease), 8.625s, 2016 $ 285 $ 317,014
- ---------------------------------------------------------------------------------------
Refunded and Special Obligations - 18.5%
Allegheny County, PA, Sanitation Authority, FGIC,
0s, 2014 $2,835 $1,235,493
Beaver County, PA, "A", MBIA, 5.75s, 2006 250 273,705
Commonwealth of Puerto Rico, 6.35s, 2004 1,350 1,527,457
Northumberland County, PA, Lease,
Commonwealth Correctional Facility, MBIA,
0s, 2012 1,000 494,980
Philadelphia, PA, Gas Works Rev., 6s, 2013 1,645 1,821,986
Philadelphia, PA, Hospital & Higher Educational
Facilities Authority, FHA, 7.25s, 2001 500 556,070
Puerto Rico Highways & Transportation Authority
Rev., 6.5s, 2002 250 276,807
Schuylkill County, PA, Redevelopment Authority
Rev., FGIC, 7s, 2007 300 328,830
Westmoreland County, PA, MBIA, ETM,
5.25s, 2009 400 420,060
Westmoreland County, PA, FGIC, ETM, 0s, 2018 1,000 354,460
----------
$7,289,848
- ---------------------------------------------------------------------------------------
Airport and Port Revenue - 2.7%
Allegheny County, PA, Airport Rev. (Pittsburgh
International Airport), MBIA, 5.75s, 2014 $1,000 $1,069,550
- ---------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 4.2%
Luzerne County, PA, Industrial Development
Authority, AMBAC, 7.2s, 2017 $ 500 $ 561,285
Luzerne County, PA, Industrial Development
Authority, 6.05s, 2019 300 312,768
Philadelphia, PA, Gas Works Rev., 6.375s, 2014 750 796,035
----------
$1,670,088
- ---------------------------------------------------------------------------------------
Health Care Revenue - 10.2%
Butler County, PA, Industrial Development
Authority (Sherwood Oaks), 5.75s, 2011 $ 400 $ 411,516
Chester County, PA, Health & Education
(Main Line), 5.5s, 2015 335 342,705
Cumberland County, PA, Municipal Refunding
(Carlisle Hospital), 6.8s, 2023 500 550,730
Montgomery County, PA, Industrial Development
Authority, Health Facilities Rev. (AHF/Ambler),
8.5s, 2023 210 236,149
Pennsylvania Higher Education Rev., 5.7s, 2011 550 582,945
Philadelphia, PA, Health & Educational Facilities
(Jeanes Health), 6.6s, 2010 500 552,415
Philadelphia, PA, Health & Educational Facilities
Authority (Temple University), 6.625s, 2023 250 275,210
Philadelphia, PA, Hospital & Higher Educational
Facilities Authority (The Phil. Protestant Home
Project A), 6.5s, 2027 500 509,475
Scranton Lackawanna, PA, Health & Welfare
(Allied Health), 7.125s, 2005 500 549,240
----------
$4,010,385
- ---------------------------------------------------------------------------------------
</TABLE>
19 - MPA
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Revenue (Corporate Guarantee) - 6.3%
Erie County, PA, Industrial Development Authority
(International Paper Co.), 5.3s, 2012 $ 500 $ 515,870
Erie County, PA, Industrial Development Authority,
Environmental Improvement (International Paper
Co.), 7.625s, 2018 250 291,840
New Morgan, PA, Industrial Development
Authority (Browning Ferris Co.), 6.5s, 2019 500 543,885
Northampton County, PA, Industrial Development
Authority (Bethlehem Steel), 7.55s, 2017 750 842,407
Pennsylvania Economic Development Authority
(MacMillan Bloedel), 7.6s, 2020 250 272,763
-----------
$ 2,466,765
- ----------------------------------------------------------------------------------------
Insured Health Care Revenue - 6.8%
Allegheny County, PA, Hospital Authority (South
Hills Health System), MBIA, 5.8s, 2016 $ 500 $ 529,090
Blair County, PA, Hospital Authority (Altoona),
AMBAC, 5.5s, 2008 470 500,851
Dauphin County, PA, General Authority Hospital
Rev. (Hapsco Project), MBIA, 5.8s, 2002 355 374,987
Lehigh County, PA, Hospital Rev. (Lehigh Valley),
MBIA, 7s, 2016 250 305,635
Lycoming County, PA, Authority Hospital Rev.
(Williamsport Hospital Obligation Group), Connie
Lee, 5.375s, 2010 750 784,867
Sayre, PA, Health Care Facilities (VHA, PA),
AMBAC, 6.375s, 2022 160 171,208
-----------
$ 2,666,638
- ----------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 0.7%
Montgomery County, PA, Redevelopment Authority
(KBF Associates), 6.5s, 2025 $ 250 $ 259,128
- ----------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 4.0%
Puerto Rico Highway & Transportation Authority,
5.5s, 2008 $ 500 $ 522,405
Puerto Rico Highway & Transportation Authority,
5.5s, 2013 500 532,950
Puerto Rico Highway & Transportation Authority,
MBIA, 5.5s, 2015 500 532,780
-----------
$ 1,588,135
- ----------------------------------------------------------------------------------------
Single Family Housing Revenue - 8.8%
Pennsylvania Housing Finance Agency, FHA-VA,
5.75s, 2013 $1,000 $ 1,040,720
Pennsylvania Housing Finance Agency,
6.75s, 2014 500 541,810
Pennsylvania Housing Finance Agency, 6.4s, 2016 500 534,785
Pennsylvania Housing Finance Agency, 6.65s, 2021 250 269,755
Pennsylvania Housing Finance Agency, 6.125s, 2024 465 487,952
Philadelphia, PA, Redevelopment Authority,
6.1s, 2010 200 208,840
Pittsburgh, PA, Urban Development Corp.,
5.5s, 2010 400 407,860
-----------
$ 3,491,722
- ----------------------------------------------------------------------------------------
Solid Waste Revenue - 3.9%
Harrisburg, PA, 5.875s, 2021 $1,000 $ 1,029,230
York County, PA, Solid Waste Systems Rev., FGIC,
5.5s, 2011 485 517,587
-----------
$ 1,546,817
- ----------------------------------------------------------------------------------------
Universities - 5.9%
Cumberland County, PA, Municipal Authority
(Messiah College), AMBAC, 5.125s, 2015 $ 300 $ 300,135
Pennsylvania Higher Education Facilities Authority
Rev. (Thomas Jefferson University), 6s, 2019 625 644,838
Pennsylvania Higher Education Facilities Authority
Rev. (University of Pennsylvania), 7s, 2008 400 460,628
Philadelphia, PA, Authority for Industrial
Development (Girard Estate Facilities Leasing
Project), 5.5s, 2014 880 911,530
-----------
$ 2,317,131
- ----------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 7.1%
Lancaster, PA, Sewer Authority, FGIC, 6.85s, 2011 $ 250 $ 251,053
Philadelphia, PA, Water Rev., MBIA, 6.25s, 2012 1,050 1,206,208
Philadelphia, PA, Water Rev., FSA, 5.75s, 2013 300 316,029
Philadelphia, PA, Water Rev., MBIA, 5.5s, 2014 1,000 1,040,120
-----------
$ 2,813,410
- ----------------------------------------------------------------------------------------
Other - 6.5%
Pennsylvania Convention Center Rev., 6.75s, 2019 $ 250 $ 275,440
Pennsylvania Finance Authority Rev., 6.6s, 2009 900 984,510
Pennsylvania Industrial Development Authority,
AMBAC, 7s, 2007 300 351,660
Pennsylvania Industrial Development Authority,
AMBAC, 5.8s, 2009 400 437,668
Philadelphia, PA, Industrial Development
Authority, MBIA, 5.35s, 2012 500 517,270
-----------
$ 2,566,548
- ----------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $35,932,031) $38,300,179
- ----------------------------------------------------------------------------------------
Floating Rate Demand Note - 1.5%
- ----------------------------------------------------------------------------------------
Allegheny County, PA, Hospital Development
Authority Rev. (Aces Presbyterian Hospital), due
3/01/20, at Identified Cost $ 600 $ 600,000
- ----------------------------------------------------------------------------------------
Total Investments (Identified Cost, $36,532,031) $38,900,179
Other Assets, Less Liabilities - 1.4% 568,211
- ----------------------------------------------------------------------------------------
Net assets - 100.0% $39,468,390
- ----------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
20 - MPA
<PAGE>
Portfolio of Investments - March 31, 1998
MFS SOUTH CAROLINA MUNICIPAL BOND FUND
Municipal Bonds - 97.4%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 5.9%
Charleston County, SC, 5.5s, 2014 $1,250 $ 1,304,275
Commonwealth of Puerto Rico, 6.5s, 2013 3,300 3,881,394
Commonwealth of Puerto Rico, 6.5s, 2023 2,000 2,279,260
Richland County, SC, School District No. 1,
5s, 2016 1,975 1,977,034
State of South Carolina, Highway Rev.,
4.5s, 2021[sec][sec] 1,090 1,000,675
-----------
$10,442,638
- --------------------------------------------------------------------------------------
State and Local Appropriation - 4.5%
Berkeley County, SC, School District, AMBAC,
6.3s, 2016 $1,800 $ 1,964,592
Greenville County, SC, Certificates of Participation
(Greenville Technical College), AMBAC, 5.9s, 2019 850 896,240
Hilton Head Island, SC, Public Finance Corp.,
Certificates of Participation, AMBAC, 5.75s, 2014 1,750 1,863,190
Lexington County, SC, School District No. 1,
Certificates of Participation (Gilbert Middle
School), MBIA, 6.65s, 2012 1,000 1,071,870
Puerto Rico Public Buildings Authority, 5.7s, 2009 1,000 1,094,400
Puerto Rico Public Buildings Authority, 5.5s, 2021 1,000 1,058,400
-----------
$ 7,948,692
- --------------------------------------------------------------------------------------
Refunded and Special Obligations - 16.8%
Calhoun, SC, Solid Waste Disposal Rev.
(Eastman Kodak), 6.75s, 2017 $1,000 $ 1,190,240
Charleston County, SC, Certificates of
Participation (Charlestown Public Facilities
Corp.), MBIA, 7.1s, 2001 2,000 2,211,220
Charleston County, SC (Alumax Project), 6.5s, 2001 1,315 1,428,669
Columbia, SC, Waterworks & Sewer Rev., 0s, 2004 1,500 1,169,595
Columbia, SC, Waterworks & Sewer Rev., 0s, 2006 2,045 1,451,766
Commonwealth of Puerto Rico, Public
Improvement Rev., 6.8s, 2002 425 475,499
Myrtle Beach, SC, Water & Sewer Rev., MBIA,
6s, 2000 1,750 1,815,327
Myrtle Beach, SC, Public Finance Corp.,
Certificates of Participation (Convention Center),
6.875s, 2002 2,500 2,799,200
Puerto Rico Aqueduct & Sewer Authority Rev.,
9s, 2005 750 951,923
Puerto Rico Highway & Transportation Authority,
Highway Rev., 6.625s, 2002 300 333,618
Richland County, SC, Certificates of Participation,
FGIC, 0s, 2005 1,160 856,880
Richland County, SC, Certificates of Participation,
FGIC, 0s, 2006 1,160 819,842
Richland County, SC, Certificates of Participation,
FGIC, 0s, 2007 1,160 781,016
South Carolina Jobs Economic Development
Authority (Carolina Hospital System Project),
7.55s, 2002 2,000 2,300,420
South Carolina Public Service Authority (Santee
Cooper), 6.625s, 2002 4,000 4,448,520
South Carolina Public Service Authority, "C"
(Santee Cooper), 7.1s, 2001 1,220 1,351,406
Spartanburg, SC, Waterworks Rev., FGIC, 6.05s, 2006 2,750 3,068,064
Williamsburg County, SC, School District Public
Facilities Corp., Certificates of Participation,
7.5s, 2003 175 203,549
Williamsburg County, SC, School District Public
Facilities Corp., Certificates of Participation,
7.5s, 2003 190 220,996
Williamsburg County, SC, School District Public
Facilities Corp., Certificates of Participation,
7.5s, 2003 $ 205 $ 238,444
Williamsburg County, SC, School District Public
Facilities Corp., Certificates of Participation,
7.5s, 2003 220 255,891
Williamsburg County, SC, School District Public
Facilities Corp., Certificates of Participation,
7.5s, 2003 270 314,048
Williamsburg County, SC, School District Public
Facilities Corp., Certificates of Participation,
7.5s, 2003 315 366,389
Williamsburg County, SC, School District Public
Facilities Corp., Certificates of Participation,
7.5s, 2003 635 738,594
-----------
$29,791,116
- --------------------------------------------------------------------------------------
Airport and Port Revenue - 1.9%
Horry County, SC, Airport Rev., "A", FSA,
5.7s, 2027 $2,250 $ 2,345,738
Richland Lexington, SC, Airport Rev.
(Columbia Airport), "A", AMBAC, 5.7s, 2026 1,000 1,034,850
-----------
$ 3,380,588
- --------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 16.2%
Camden, SC, Public Utility Rev., Refunding &
Improvement, MBIA, 5.5s, 2017 $1,500 $ 1,561,815
Colleton & Dorchester Counties, SC, Pollution
Control Rev., 6.6s, 2014 3,000 3,270,150
Fairfield County, SC, Pollution Control Rev. (South
Carolina Electric Co.), 6.5s, 2014 1,250 1,364,462
Oconee County, SC, Pollution Control Rev. (Duke
Power Co.), 7.5s, 2017 1,000 1,057,080
Piedmont, SC, Municipal Power Agency, FGIC,
6.25s, 2021 4,600 5,280,708
Piedmont, SC, Municipal Power Agency, MBIA,
4s, 2023 7,000 5,744,340
Puerto Rico Electric Power Authority Rev., MBIA,
6.125s, 2008 1,025 1,160,044
South Carolina Public Service Authority, MBIA,
8.262s, 2013[dbldag][dbldag] 3,000 3,218,340
South Carolina Public Service Authority, FGIC,
5.875s, 2023 2,000 2,127,820
South Carolina Public Service Authority, "B",
AMBAC, 5.5s, 2023 1,000 1,026,760
South Carolina Public Service Authority (South
Carolina Electric & Gas), AMBAC, 5s, 2019 3,000 2,924,100
-----------
$28,735,619
- --------------------------------------------------------------------------------------
Health Care Revenue - 9.6%
Greenville County, SC, First Mortgage Rev.
(Chestnut Hill), 10.125s, 2016 $1,860 $ 1,873,950
Greenville Hospital System, SC, Hospital Facilities
Rev., 6s, 2020 5,400 5,971,374
Greenville Hospital System, SC, Hospital Facilities
Rev., 5.25s, 2023 1,500 1,502,715
Greenville Hospital System, SC, Hospital Facilities
Rev., "A", 5.25s, 2017 2,785 2,807,419
Horry County, SC, Hospital Facilities Rev. (Conway
Hospital), 6.75s, 2012 4,500 4,861,080
-----------
$17,016,538
- --------------------------------------------------------------------------------------
</TABLE>
21 - MSC
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Revenue (Corporate Guarantee) - 10.8%
Chester County, SC, Industrial Development Rev.
(Springs Industries, Inc), 7.35s, 2014 $1,000 $ 1,092,640
Chester County, SC, Industrial Development Rev.
(Springs Industries, Inc.), 7.8s, 2014 1,025 1,114,400
Darlington County, SC, Industrial Development
Rev. (Nucor Corp.), 5.75s, 2023 2,000 2,073,520
Darlington County, SC, Industrial Development
Rev. (Sonoco Products Co.), 6.125s, 2025 1,500 1,593,600
Fairfield County, SC, Industrial Development Rev.
(Rite Aid, Inc.), 7.9s, 2016 2,890 2,949,245
Florence County, SC, Industrial Development Rev.
(Stone Container Corp.), 7.375s, 2007 865 939,944
Greenville County, SC, Industrial Development
Rev. (Kroger Co.), 7.85s, 2015 500 573,205
Lexington County, SC, Industrial Rev. (J. B. White
& Co.), 8s, 2005 545 594,121
Richland County, SC, Pollution Control Rev.
(Union Camp Corp.), 6.55s, 2020 1,800 1,953,162
Richland County, SC, Pollution Control Rev.
(Union Camp Corp.), 6.75s, 2022 2,000 2,174,020
York City, SC, Industrial Development Rev.
(Hoechst Celanese), 5.7s, 2024 4,000 4,102,840
------------
$ 19,160,697
- --------------------------------------------------------------------------------------
Insured Health Care Revenue - 6.5%
Charleston County, SC, Hospital Facilities Rev.
(Medical Society Health Project), MBIA, 5s, 2022 $2,450 $ 2,359,766
Lexington County, SC, Hospital Rev., FSA,
5.5s, 2006 2,180 2,330,900
Lexington County, SC, Hospital Rev., FSA,
5.125s, 2021 1,500 1,482,870
South Carolina Jobs Economic Development
Authority, Hospital Facilities Rev. (Anderson Area
Medical Center), MBIA, 5.25s, 2015 1,750 1,771,823
Spartanburg County, SC, Health Service Rev.,
AMBAC, 5.3s, 2025 1,000 1,000,860
Spartanburg County, SC, Hospital Facilities Rev.,
Health Services District, Inc., AMBAC, 5.3s, 2020 2,500 2,511,075
------------
$ 11,457,294
- --------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 2.5%
South Carolina Housing Finance & Development
Authority (Fairway Apartments), FHA,
7.625s, 2033 $1,935 $ 2,046,417
South Carolina Housing, Finance & Development
Authority (Hunting Ridge Apartments), 6.75s, 2025 1,000 1,070,050
South Carolina Housing, Finance & Development
Authority (Runaway Bay Apartments), 6.125s, 2015 1,300 1,352,936
------------
$ 4,469,403
- --------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 1.8%
Puerto Rico Highway & Transportation Authority
Rev., 5.5s, 2013 $1,000 $ 1,065,900
Puerto Rico Highway & Transportation Authority
Rev., 5.5s, 2036 2,000 2,084,320
------------
$ 3,150,220
- --------------------------------------------------------------------------------------
Single Family Housing Revenue - 0.1%
South Carolina Housing, Finance & Development
Authority Rev., 8.6s, 2019 $ 80 $ 81,849
- --------------------------------------------------------------------------------------
Solid Waste Revenue - 1.2%
Orangeburg County, SC, Solid Waste Disposal
Facilities Rev., AMBAC, 5.7s, 2024 $2,000 $ 2,052,080
- --------------------------------------------------------------------------------------
Universities - 1.0%
Coastal Carolina University, SC, MBIA,
6.875s, 2026 $1,000 $ 1,140,430
University of South Carolina, University Rev.,
MBIA, 5.75s, 2026 515 541,265
------------
$ 1,681,695
- --------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 18.6%
Charleston County, SC, Waterworks & Sewer
Rev., 6s, 2012 $2,000 $ 2,133,140
Charleston, SC, Waterworks & Sewer Rev.,
6s, 2018 1,500 1,599,330
Charleston, SC, Waterworks & Sewer Rev., MBIA,
5s, 2022 3,150 3,077,266
Columbia, SC, Waterworks & Sewer Rev., 0s, 2005 2,245 1,682,964
Columbia, SC, Waterworks & Sewer Rev., 0s, 2006 9,330 6,680,747
Columbia, SC, Waterworks & Sewer Rev.,
5.375s, 2012 3,500 3,693,410
Edgefield County, SC, Waterworks & Sewer Rev.,
FGIC, 5s, 2028 1,000 967,090
Greenville, SC, Waterworks Rev., 5.5s, 2022 1,000 1,032,480
Laurens County, SC, Water & Sewer Commission,
Sewer System Rev., 5.5s, 2014 1,080 1,094,699
Myrtle Beach, SC, Water & Sewer Rev., MBIA,
5.5s, 2013 1,000 1,038,270
South Carolina Water Resources Authority Rev.
(Local Government Program), 7.25s, 2020 3,000 3,203,610
Spartanburg, SC, Waterworks Rev., FGIC, 5s, 2013 1,000 1,003,780
Spartanburg, SC, Waterworks Rev., FGIC, 5s, 2014 1,000 999,530
Western Carolina Regional Sewer Authority Rev.,
AMBAC, 0s, 2007 4,000 2,676,160
York County, SC, Water & Sewer Rev., 6.5s, 2025 2,000 2,077,880
------------
$ 32,960,356
- --------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $157,550,405)
- --------------------------------------------------------------------------------------
$172,328,785
- --------------------------------------------------------------------------------------
Floating Rate Demand Notes - 1.3%
- --------------------------------------------------------------------------------------
Burke County, GA, Development Authority
Pollution, Pollution Control Rev.
(Georgia Power Co.), due 9/01/25 $ 100 $ 100,000
Harris County, TX, Hospital Rev.
(Methodist Hospital), due 12/01/25 600 600,000
Harris County, TX, Industrial Development Rev.
(Shell Oil), due 4/01/27 1,500 1,500,000
Lincoln County, WY, Pollution Control Rev. (Exxon),
due 11/01/14 100 100,000
- --------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost
- --------------------------------------------------------------------------------------
$ 2,300,000
------------
Total Investments (Identified Cost, $159,850,405) $174,628,785
Other Assets, Less Liabilities - 1.3%
- --------------------------------------------------------------------------------------
2,277,669
------------
Net assets - 100.0%
- --------------------------------------------------------------------------------------
$176,906,454
------------
See portfolio footnotes and notes to financial statements
</TABLE>
22 - MSC
<PAGE>
Portfolio of Investments - March 31, 1998
MFS TENNESSEE MUNICIPAL BOND FUND
Municipal Bonds - 98.5%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 14.2%
Commonwealth of Puerto Rico, 5.375s, 2025 $1,640 $ 1,654,465
Commonwealth of Puerto Rico, 5.4s, 2025 3,000 3,045,540
Johnson City, TN, FGIC, 0s, 2012 1,690 858,672
Knoxville, TN, Public Improvement, 5.25s, 2015 1,000 1,018,960
Metropolitan Government of Nashville & Davidson
County, TN, 6.125s, 2014 1,000 1,090,860
Metropolitan Government of Nashville & Davidson
County, TN, 6.125s, 2019 1,255 1,369,029
Metropolitan Government of Nashville & Davidson
County, TN, 5.125s, 2025 2,000 1,978,560
Rutherford County, TN, 0s, 2015 1,500 597,390
Shelby County, TN, 0s, 2009 1,000 579,750
Shelby County, TN, 0s, 2012 3,000 1,491,360
Shelby County, TN, Capital Appreciation
Refunding, "B", 0s, 2013 3,960 1,830,668
Shelby County, TN, Public Improvement, "B",
5.75s, 2021 1,000 1,095,550
State of Tennessee, "A", 5s, 2016 1,000 997,520
Territory of Virgin Islands, 7.75s, 2006 365 402,464
-----------
$18,010,788
- --------------------------------------------------------------------------------------
State and Local Appropriation - 1.7%
Gatlinburg, TN, Public Building Authority
(Gatlinburg Convention Center), AMBAC,
6.9s, 2012 $1,000 $ 1,104,960
Puerto Rico Public Buildings Authority, 5.5s, 2021 1,000 1,058,400
-----------
$ 2,163,360
- --------------------------------------------------------------------------------------
Refunded and Special Obligations - 12.7%
Bristol, TN, Health & Educational Facilities Board
(Bristol Memorial), FGIC, 7s, 2001 $ 500 $ 548,270
Gladeville, TN, Utility District, Waterworks Rev.,
FGIC, 7.4s, 2000 500 539,360
Knox County, TN, Health, Education & Housing
Facilities Board (Baptist East), 8.5s, 2004 1,045 1,112,507
Knox County, TN, Industrial Development Board,
0s, 2016 5,825 2,269,187
Memphis, TN, Electric Systems Rev., 6.75s, 2000 1,500 1,596,705
Metropolitan Government of Nashville & Davidson
County, TN, Health & Education Facility Board
Rev., 0s, 2021 5,995 1,749,401
Mt. Juliet, TN, Public Building Authority
(Madison), MBIA, 7.7s, 2004 1,100 1,383,426
Mt. Juliet, TN, Public Building Authority
(Madison), MBIA, 7.8s, 2004 3,500 4,419,730
New Tazewell, TN, Health, Educational & Housing
Facilities Board (Lincoln), 7.25s, 2005 2,000 2,053,500
Wilson County, TN, Water & Wastewater
Authority, 8s, 1999 500 528,730
-----------
$16,200,816
- --------------------------------------------------------------------------------------
Airport and Port Revenue - 0.8%
Memphis-Shelby County, TN, Airport Authority
(North West Link & Parent Co.), 6.125s, 2016 $1,000 $ 1,015,750
- --------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 6.3%
Bolivar, TN, Electric Systems Rev., MBIA,
5.25s, 2016 $ 730 $ 741,322
Jackson, TN, Electric Systems Rev., MBIA,
5s, 2018 1,000 994,880
Lawrenceburg, TN, Electric Rev., MBIA, 5.5s, 2026 1,255 1,291,533
Metropolitan Government of Nashville & Davidson
County, TN, MBIA, 0s, 2009 3,250 1,930,792
Metropolitan Government of Nashville & Davidson
County, TN, MBIA, 0s, 2010 $2,480 $ 1,389,470
Metropolitan Government of Nashville & Davidson
County, TN, MBIA, 0s, 2012 3,305 1,653,128
-----------
$ 8,001,125
- --------------------------------------------------------------------------------------
Health Care Revenue - 2.5%
Cookeville, TN, Industrial Development Board,
Hospital Rev. (Cookeville General), 5.75s, 2010 $2,000 $ 2,091,840
Knox County, TN, Health, Education & Housing
Facilities Board (East Tennessee Children's),
6.5s, 2012 1,000 1,082,480
-----------
$ 3,174,320
- --------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 12.0%
Bristol, TN, Industrial Development Authority
(Kmart Corp.), 7.5s, 2008 $1,105 $ 1,213,743
Hardeman County, TN (Correctional Facilities
Corp.), 7.75s, 2017 1,000 1,114,960
Hardeman County, TN (Corrections Corp. of
America), 7.375s, 2017 500 542,510
Humphreys County, TN, Certificates of
Participation (DuPont), 6.7s, 2024 1,750 1,934,713
Knox County, TN, Industrial Development Board
(Kroger Co.), 8.1s, 2003 2,000 2,268,820
Lawrenceburg, TN, Industrial Development Board
(Tridon, Inc.), 9.625s, 2006 1,000 1,060,580
McMinn County, TN, Industrial Development
Board, Pollution Control Rev. (Bowater),
7.625s, 2016 1,000 1,090,400
Memphis-Shelby County, TN, Airport Authority
(Federal Express Corp.), 7.875s, 2009 2,755 3,089,677
Memphis-Shelby County, TN, Airport Authority
(Federal Express Corp.), 6.2s, 2014 1,000 1,061,470
Metropolitan Government of Nashville & Davidson
County, TN (Wilson Sporting), 7.75s, 2014 1,000 1,077,110
Puerto Rico Industrial, Medical & Environmental
Pollution Control Facilities, Finance Authority
Rev. (Baxter Travenol Laboratories), 8s, 2012 750 784,658
-----------
$15,238,641
- --------------------------------------------------------------------------------------
Insured Health Care Revenue - 9.1%
Bristol, TN, Health & Educational Facilities Board
(Bristol Memorial), FGIC, 8.87s, 2021 $2,825 $ 2,935,429
Johnson City, TN, Health & Education Financing
Authority (Johnson City Medical Center
Hospital), MBIA, 5.25s, 2016 1,375 1,383,223
Knox County, TN, Health, Education & Housing
Facilities Board (Fort Sanders), MBIA, 5.75s, 2014 3,250 3,553,842
Metropolitan Government of Nashville & Davidson
County, TN, Health & Education (Meharry
Medical College), AMBAC, 5s, 2024 3,750 3,669,300
-----------
$11,541,794
- --------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 5.7%
Franklin, TN, Industrial Development (Landings
Apartments), FSA, 6s, 2026 $1,000 $ 1,045,900
Franklin, TN, Industrial Development Rev. (Sussex
Downs), FHA, 6.75s, 2027 1,000 1,084,550
Jackson, TN, Health, Education & Housing
Facilities Board (Posthouse Apartments), FHA,
7.1s, 2028 1,610 1,726,468
</TABLE>
23 - MTN
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Multi-Family Housing Revenue - continued
Metropolitan Government of Nashville & Davidson
County, TN, Health & Education Facility Board
Rev. (Herman Street), FHA, 7.25s, 2032 $ 495 $ 531,036
Metropolitan Government of Nashville & Davidson
County, TN, Industrial Development Board, FHA,
6.95s, 2026 1,000 1,073,460
Metropolitan Government of Nashville & Davidson
County, TN, Industrial Development Board, FHA,
7.5s, 2029 695 729,722
Metropolitan Government of Nashville & Davidson
County, TN, Industrial Development Board, FHA,
7.7s, 2029 1,000 1,046,630
------------
$ 7,237,766
- --------------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 1.7%
Puerto Rico Highway & Transportation Authority,
MBIA, 5.5s, 2015 $1,000 $ 1,065,560
Tennessee Local Development Authority Rev.,
Community Provider Loan, 7s, 2021 1,000 1,102,900
------------
$ 2,168,460
- --------------------------------------------------------------------------------------------
Single Family Housing Revenue - 5.9%
Shelby County, TN, Single Family Mortgage Rev.,
FHA, 0s, 2015 $6,480 $ 1,147,738
Tennessee Housing Development Agency, 0s, 2006 3,955 2,722,582
Tennessee Housing Development Agency, 0s, 2016 5,000 1,821,350
Tennessee Housing Development Agency,
7.375s, 2023 1,000 1,054,240
Tennessee Housing Development Agency,
7.125s, 2026 670 729,074
------------
$ 7,474,984
- --------------------------------------------------------------------------------------------
Universities - 4.8%
Jackson, TN, Health, Educational & Housing
Facilities Board (Lambuth University), Asset
Guaranty, 5.9s, 2015 $1,000 $ 1,051,790
Metropolitan Government of Nashville & Davidson
County, TN, Health, Educational & Housing
Facilities Board (Vanderbilt University),
5.25s, 2012 1,000 1,034,780
Metropolitan Government of Nashville & Davidson
County, TN, Health, Educational & Housing
Facilities Board (Vanderbilt University), 5.3s, 2013 1,875 1,943,325
Metropolitan Government of Nashville & Davidson
County, TN, Health, Educational & Housing
Facilities Board (Vanderbilt University),
5.375s, 2014 1,000 1,041,110
Metropolitian Government of Nashville &
Davidson County, TN, Health, Educational &
Housing Facilities Board (Vanderbilt University),
7.625s, 2016 1,000 1,022,970
------------
$ 6,093,975
- --------------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 21.1%
Clarksville, TN, Water, Sewer & Gas, MBIA,
5.25s, 2018 $1,000 $ 1,008,550
Madison, TN, Utility Waterworks Refunding,
MBIA, 5s, 2019 2,750 2,728,770
Metropolitan Government of Nashville & Davidson
County, TN, Water & Sewer Rev., FGIC, 5.2s, 2013 2,000 2,094,140
Metropolitan Government of Nashville & Davidson
County, TN, Water & Sewer Rev., FGIC, 5.1s, 2016 2,565 2,549,713
Metropolitan Government of Nashville & Davidson
County, TN, Water & Sewer Rev., AMBAC,
6.075s, 2022 2,000 2,162,680
Metropolitan Government of Nashville & Davidson
County, TN, Water & Sewer Rev., AMBAC,
8.418s, 2022[dbldag][dbldag] 1,000 1,161,000
Mt. Juliet, TN, Public Building Authority
(Cumberland), 7.55s, 2024 1,190 1,241,289
Mt. Juliet, TN, Public Building Authority
(Hermitage), MBIA, 7.5s, 2009 300 314,043
Mt. Juliet, TN, Public Building Authority (Milcroft),
7.55s, 2024 2,005 2,091,415
Mt. Juliet, TN, Public Building Authority (New
Market), 8.375s, 2024 555 582,595
Mt. Juliet, TN, Public Building Authority (Tipton),
7.5s, 2004 305 318,100
Poplar Grove, TN, Utility District, Waterworks
Rev., 6.375s, 2011 500 531,885
Puerto Rico Aqueduct & Sewer Rev., 6.25s, 2012 1,000 1,135,910
West Knox Utility District, TN, Water & Sewer
Rev., MBIA, 0s, 2002 1,315 1,078,458
West Knox Utility District, TN, Water & Sewer
Rev., MBIA, 0s, 2003 1,045 819,050
West Knox Utility District, TN, Water & Sewer
Rev., MBIA, 0s, 2004 1,920 1,436,774
West Knox Utility District, TN, Water & Sewer
Rev., MBIA, 0s, 2005 1,920 1,370,438
West Knox Utility District, TN, Water & Sewer
Rev., MBIA, 0s, 2006 1,920 1,305,888
West Knox Utility District, TN, Water & Sewer
Rev., MBIA, 0s, 2007 1,920 1,243,162
White House Utility District, TN, Robertson &
Sumner Counties Waterworks, FGIC, 0s, 2014 3,590 1,637,650
------------
$ 26,811,510
- --------------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $114,647,643) $125,133,289
- --------------------------------------------------------------------------------------------
Floating Rate Demand Note - 0.2%
- --------------------------------------------------------------------------------------------
Harris County, TX, Hospital Rev. (Methodist
Hospital), due 12/01/25, at Identified Cost $ 300 $ 300,000
- --------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $114,947,643) $125,433,289
Other Assets, Less Liabilities - 1.3% 1,635,750
- --------------------------------------------------------------------------------------------
Net assets - 100.0% $127,069,039
- --------------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
24 - MTN
<PAGE>
Portfolio of Investments - March 31, 1998
MFS VIRGINIA MUNICIPAL BOND FUND
Municipal Bonds - 98.3%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 9.9%
Bristol, VA, MBIA, 5.3s, 2018 $1,250 $ 1,258,362
Chesapeake, VA, Public Improvement, 5.375s, 2013 3,500 3,623,620
Commonwealth of Puerto Rico, 5.5s, 2013 2,000 2,140,740
Lebanon, VA, 6.375s, 2011 1,625 1,737,710
Loudoun County, VA, 5s, 2016 1,000 989,210
Richmond, VA, 0s, 2006 1,000 704,380
Richmond, VA, 0s, 2006 2,500 1,760,950
Richmond, VA, 6.5s, 2006 2,000 2,145,800
Richmond, VA, 0s, 2007 5,280 3,534,590
Richmond, VA, 0s, 2008 2,000 1,275,540
Richmond, VA, 0s, 2008 5,270 3,361,048
Richmond, VA, 0s, 2009 5,175 3,135,947
Richmond, VA, 5.5s, 2009 5,000 5,368,150
Spotsylvania County, VA, FGIC, 6s, 2009 4,270 4,809,173
State of Virginia (Higher Educational Institute),
0s, 1998 1,295 1,287,321
State of Virginia (Higher Educational Institute),
0s, 1999 1,300 1,246,674
Virginia Public School Authority, 6.5s, 2013 1,875 2,094,281
-----------
$40,473,496
- --------------------------------------------------------------------------------------
State and Local Appropriation - 12.6%
Blue Ridge, VA, Regional Jail Authority, MBIA,
5.2s, 2021 $4,830 $ 4,827,778
Chesapeake, VA, Industrial Development Authority
(Chesapeake Court House), MBIA, 6.25s, 2011 3,985 4,503,249
Chesapeake, VA, Industrial Development Authority
(Chesapeake Court House), 5.25s, 2017 2,000 2,027,740
Chesterfield County, VA, Industrial Development
Authority, Public Facilities, 7.5s, 2008 1,720 1,906,637
Henrico County, VA, Industrial Development
Authority, Lease Rev., 6.5s, 2010 5,000 5,646,950
Puerto Rico Public Buildings Authority, 5.25s, 2021 3,075 3,074,754
Puerto Rico Public Buildings Authority, 5s, 2027 5,500 5,328,235
Virginia Biotechnology Research Park (Biotech
Two), 5.25s, 2018 8,800 8,958,224
Virginia Public Building Authority, MBIA, 0s, 2007 13,305 8,736,329
Virginia Public Building Authority, MBIA, 0s, 2008 10,650 6,651,671
-----------
$51,661,567
- --------------------------------------------------------------------------------------
Refunded and Special Obligations - 9.2%
Arlington County, VA, Industrial Development
Authority (Arlington Hospital), 7.125s, 2001 $4,450 $ 4,951,693
Carroll County, VA, Solid Waste Authority Rev.,
7.5s, 2001 2,265 2,543,278
Fairfax County, VA, Redevelopment & Housing
Authority (Little River Glen), 8.95s, 1999 3,755 4,041,920
Henrico County, VA, Industrial Development
Authority (St. Mary's Hospital), 7.5s, 2000 750 820,530
New Kent County, VA, Industrial Development
Authority, Public Facilities, 7.5s, 2011 700 783,454
Newport News, VA, 6.5s, 2000 875 942,716
Newport News, VA, 6.5s, 2000 2,205 2,375,645
Portsmouth, VA, 6.9s, 2000 1,500 1,621,260
Portsmouth, VA, 6.375s, 2001 1,555 1,688,512
Puerto Rico Aqueduct & Sewer Authority Rev.,
9s, 2005 4,150 5,267,304
Puerto Rico Aqueduct & Sewer Authority Rev.,
10.25s, 2009 400 553,164
Roanoke, VA, Industrial Development Authority,
Hospital Rev. (Roanoke Memorial), 7.25s, 2000 1,750 1,902,793
Roanoke, VA, Industrial Development Authority,
Hospital Rev. (Roanoke Memorial), 7.5s, 2000 1,245 1,358,905
Suffolk, VA, Industrial Development Authority
(Louise Obici Memorial Hospital), 7.875s, 2005 $1,560 $ 1,637,610
Virginia Beach, VA, Certificates of Participation
(Judical Center Project), FGIC, 7.25s, 2000 4,955 5,411,455
Virginia Beach, VA, Water & Sewer Rev.,
6.625s, 2002 1,400 1,542,660
-----------
$37,442,899
- --------------------------------------------------------------------------------------
Airport and Port Revenue - 7.8%
Metropolitan Washington, DC, Airport Rev.,
7.6s, 2014 $5,030 $ 5,482,800
Metropolitan Washington, DC, Airport Rev.,
5.5s, 2016 2,465 2,521,005
Metropolitan Washington, DC, Airport Rev.,
5.75s, 2020 11,000 11,485,320
Metropolitan Washington, DC, Airport Rev., "A",
6.625s, 2019 1,000 1,093,860
Peninsula Airport Commission, VA, 7.3s, 2021 2,400 2,647,320
Puerto Rico Ports Authority (American Airlines),
6.3s, 2023 2,000 2,136,820
Puerto Rico Ports Authority (American Airlines),
6.25s, 2026 6,000 6,510,660
-----------
$31,877,785
- --------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 3.1%
Halifax County, VA, Industrial Authority Rev.
(Old Dominion Electric), 6s, 2022 $5,000 $ 5,161,200
Pittsylvania County, VA, Industrial Development
Authority Rev., 7.5s, 2014 4,000 4,411,880
Puerto Rico Electric Power Authority, 6s, 2015 3,000 3,235,530
-----------
$12,808,610
- --------------------------------------------------------------------------------------
Health Care Revenue - 1.5%
Albemarle County, VA, Industrial Development
Authority Health Services Rev., 6.5s, 2022 $1,000 $ 1,077,840
Fairfax, Fauquier & Loudoun Counties, VA, Health
Center Commission, Nursing Home Rev., 9s, 2020 1,865 2,018,862
Martinsville, VA, Industrial Development Authority,
6.75s, 2004 1,230 1,255,892
Peninsula Ports, VA, Health Care Rev. (Riverside
Health System), 6.625s, 2010 1,500 1,644,735
-----------
$ 5,997,329
- --------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 6.4%
Bedford County, VA, Industrial Development
Authority Rev. (Georgia Pacific Corp.), 5.6s, 2025 $4,500 $ 4,524,930
Halifax, VA, Industrial Development Authority
(Tandy Corp.), 8.25s, 2008 3,500 3,672,725
Isle Wight County, VA, Industrial Development
(Union Camp), 6.55s, 2024 8,000 8,805,760
Isle Wight County, VA, Industrial Development
(Union Camp), 6.1s, 2027 3,500 3,673,845
Lynchburg, VA, Industrial Development Authority
(Kroger Co.), 7.9s, 2011 1,000 1,130,330
Virginia Beach, VA, Development Authority
(Beverly Enterprises), 10s, 2010 1,265 1,395,535
West Point, VA, Industrial Development Authority,
Solid Waste Disposal Rev. (Chesapeake Corp.
Project), 6.375s, 2019 2,600 2,809,482
-----------
$26,012,607
- --------------------------------------------------------------------------------------
</TABLE>
25 - MVA
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Insured Health Care Revenue - 9.6%
Albemarle County, VA, Industrial Development
Authority, First Mortgage Rev., FHA, 8.9s, 2026 $2,150 $ 2,375,492
Fredericksburg, VA, Industrial Development
(Medicorp Health Systems), AMBAC, 5.25s, 2023 12,900 12,811,377
Front Royal-Warren County, VA, Industrial
Development Authority, FHA, 9.45s, 2024 1,000 1,084,710
Hanover County, VA, Industrial Development
Authority, MBIA, 6s, 2009 1,550 1,732,544
Hanover County, VA, Industrial Development
Authority (Memorial Regional Medical Center),
MBIA, 6.5s, 2008 1,000 1,158,420
Hanover County, VA, Industrial Development
Authority (Memorial Regional Medical Center),
MBIA, 6.5s, 2009 1,510 1,753,925
Henrico County, VA, Industrial Development
Authority Rev. (Bon Secours Health), MBIA,
6.25s, 2020 1,500 1,739,835
Peninsula Ports Authority, VA, Hospital Facilities
Rev. (Whittaker Memorial), FHA, 8.7s, 2023 2,100 2,147,460
Prince William County, VA, Industrial Development
Authority, Hospital Rev. (Potomac Hospital
Corp.), FSA, 5s, 2025 1,500 1,452,345
Roanoke, VA, Industrial Development Authority,
Hospital Rev. (Roanoke Memorial), MBIA, 6.125s, 2017 6,000 6,795,960
Winchester, VA, Industrial Development Authority,
RIBS, AMBAC, 9.246s, 2014[dbldag][dbldag] 4,900 6,066,249
------------
$ 39,118,317
- -----------------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 3.3%
Alexandria, VA, Redevelopment & Housing
Finance Authority (Jefferson Village
Apartments), 9s, 2018 $4,000 $ 4,155,280
Norfolk, VA, Redevelopment & Housing Authority
(Dockside Apartments), FHA, 7.375s, 2028 2,000 2,121,100
Virginia Housing Development Authority, 6.5s, 2013 2,300 2,479,400
Virginia Housing Development Authority, 6.6s, 2022 4,635 4,922,926
------------
$ 13,678,706
- -----------------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 4.9%
Commonwealth of Puerto Rico, "A", AMBAC,
5s, 2021 $3,000 $ 2,947,410
Puerto Rico Highway & Transportation Authority
Rev., 5.5s, 2015 2,000 2,131,120
Puerto Rico Highway & Transportation Authority
Rev., 5.5s, 2018 1,450 1,481,103
Virginia Port Authority, 8.2s, 2008 4,500 4,636,800
Virginia Transportation Board, Transportation
Contract Rev., 6.5s, 2018 3,500 3,779,825
Virginia Transportation Board, US Route 58,
5.125s, 2021 5,000 4,923,500
------------
$ 19,899,758
- -----------------------------------------------------------------------------------------------
Single Family Housing Revenue - 7.9%
Puerto Rico Housing Finance Corp., GNMA,
7.8s, 2021 $ 5 $ 5,143
Virginia Housing Development Authority,
7.6s, 2019[dbldag][dbldag] 7,500 7,905,975
Virginia Housing Development Authority, 6.2s, 2021 15,000 15,591,900
Virginia Housing Development Authority, 6.3s, 2025 8,500 9,009,745
------------
$ 32,512,763
- -----------------------------------------------------------------------------------------------
Turnpike Revenue - 2.7%
Chesapeake Bay, VA, Bridge & Tunnel Authority,
FGIC, 0s, 2005 $4,535 $ 3,293,544
Chesapeake Bay, VA, Bridge & Tunnel Authority,
FGIC, 6s, 2007 5,700 6,336,063
North Virginia Transportation District Commuter
Rail (Virginia Railway Express Project), MBIA, 6s, 2010 1,240 1,395,756
------------
$ 11,025,363
- -----------------------------------------------------------------------------------------------
Universities - 4.6%
Hampton Roads, VA, Medical College General
Rev., 6.875s, 2016 $2,000 $ 2,174,020
Hampton Roads, VA, Medical College General
Rev., 6.875s, 2016 1,500 1,630,515
Loudoun County, VA, Industrial Development
Authority, University Facilities, 6.25s, 2012 2,710 2,894,117
Roanoke County, VA, Industrial Development
Authority (Hollins College), 5.25s, 2023 1,000 980,440
Rockingham County, VA, Industrial Development
Authority Rev. (Bridgewater), 6s, 2023 3,000 3,092,910
University of Virginia, University Rev., 5.375s, 2014 5,190 5,305,322
Virginia College Building Authority, Educational
Facilities Rev. (Marymount), 7s, 2022 2,500 2,733,275
------------
$ 18,810,599
- -----------------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 10.6%
Chesterfield County, VA, Water & Sewer Rev., 0s, 2004 $5,025 $ 3,806,789
Chesterfield County, VA, Water & Sewer Rev., 0s, 2005 4,815 3,484,616
Chesterfield County, VA, Water & Sewer Rev., 0s, 2006 4,000 2,762,640
Chesterfield County, VA, Water & Sewer Rev., 0s, 2007 6,000 3,950,880
Chesterfield County, VA, Water & Sewer Rev., 0s, 2008 6,135 3,827,872
Chesterfield County, VA, Water & Sewer Rev., 0s, 2009 6,135 3,599,527
Chesterfield County, VA, Water & Sewer Rev., 0s, 2010 9,005 4,984,267
Fairfax County, VA, Water Authority Rev., 5s, 2021 2,000 2,011,120
Fairfax County, VA, Water Authority Rev., 5s, 2029 4,000 3,878,440
Hanover County, VA, Water & Sewer Systems,
5.25s, 2026 2,000 2,006,480
Upper Occoquan, VA, Sewer Rev., MBIA, 5.15s, 2020 7,000 7,102,340
Virginia Resources Authority, 5s, 2018 2,220 2,156,797
------------
$ 43,571,768
- -----------------------------------------------------------------------------------------------
Other - 4.2%
Danville, VA, Industrial Development Authority,
Industrial Development Rev., 8s, 2013 $2,965 $ 3,128,787
Fairfax County, VA, Redevelopment & Housing
Authority, 5.5s, 2017 2,225 2,285,587
Loudoun, VA, Industrial Development Authority,
Industrial Development Rev., 7.125s, 2015 2,000 2,183,860
New River Valley, VA, Regional Jail Authority, 5.125s, 2019 6,905 6,873,996
Pamunkey, VA, Regional Jail Authority, MBIA, 5.75s, 2018 2,500 2,649,650
------------
$ 17,121,880
- -----------------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $371,695,241) $402,013,447
- -----------------------------------------------------------------------------------------------
Floating Rate Demand Note - 0.5%
- -----------------------------------------------------------------------------------------------
Lynchburg, VA, Industrial Development Authority,
"G", due 12/01/25, at Identified Cost $2,100 $ 2,100,000
- -----------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $373,795,241) $404,113,447
Other Assets, Less Liabilities - 1.2% 4,895,163
- -----------------------------------------------------------------------------------------------
Net assets - 100.0% $409,008,610
- -----------------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
26 - MVA
<PAGE>
Portfolio of Investments - March 31, 1998
MFS WEST VIRGINIA MUNICIPAL BOND FUND
Municipal Bonds - 98.4%
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 16.0%
Charleston, WV, Public Improvement, 7.2s, 2008 $1,240 $ 1,510,233
Charleston, WV, Public Improvement, 7.2s, 2009 1,140 1,395,155
Jefferson County, WV, Board of Education, FGIC,
6.85s, 2009 1,680 2,023,140
Monongalia County, WV, Board of Education,
MBIA, 7s, 2005 500 578,540
State of West Virginia, FGIC, 5.5s, 2017 2,565 2,608,323
State of West Virginia, FGIC, 5s, 2021 4,000 3,892,120
State of West Virginia, FGIC, 5.25s, 2026 8,000 8,008,960
State of West Virginia, Water Development
Authority Rev., FSA, 6.2s, 2024 3,000 3,304,980
-----------
$23,321,451
- ----------------------------------------------------------------------------------------
State and Local Appropriation - 6.6%
Puerto Rico Public Buildings Authority, 5.25s, 2021 $3,115 $ 3,114,751
West Virginia Building Commission, Lease Rev.
(West Virginia Regional Jail), MBIA, 0s, 2007 3,150 2,061,108
West Virginia Building Commission, Lease Rev.
(West Virginia Regional Jail), MBIA, 0s, 2008 3,050 1,896,886
West Virginia Building Commission, Lease Rev.
(West Virginia Regional Jail), MBIA, 0s, 2009 2,500 1,463,450
West Virginia Building Commission, Lease Rev.
(West Virginia Regional Jail), MBIA, 7s, 2015 1,000 1,077,950
-----------
$ 9,614,145
- ----------------------------------------------------------------------------------------
Refunded and Special Obligations - 11.0%
Cabell, WV, Board of Education, MBIA, 6s, 2006 $ 500 $ 553,870
Kanawha County, WV, Building Commission
(St. Francis Hospital), 7.5s, 2007 235 269,731
Kanawha, Merc, & Nicholas Counties, WV, Single
Family Mortage Rev., 0s, 2014 2,230 890,394
Ohio County, WV, Board of Education, ETM, 5.25s,
2018 1,180 1,217,158
Puerto Rico Aqueduct & Sewer Authority Rev., 9s, 2005 1,500 1,903,845
West Virginia Parkways, Economic Development
& Tourism Authority, FGIC, 0s, 2005 2,250 1,625,962
West Virginia Parkways, Economic Development
Authority, FGIC, 0s, 2006 2,500 1,727,675
West Virginia Parkways, Economic Development
& Tourism Authority, FGIC, 0s, 2007 2,000 1,309,840
West Virginia Parkways, Economic Development
Authority, FGIC, 0s, 2008 610 377,858
West Virginia University Rev. (West Virginia
University Dormitory Project), MBIA, 6.75s, 2017 1,000 1,094,610
West Virginia School Building Authority, 6.75s, 2015 3,000 3,281,940
West Virginia Water Development Authority,
7.4s, 2001 750 843,180
West Virginia Water Development Authority,
7.1s, 2009 250 292,988
West Virginia Water Development Authority,
7.625s, 2009 500 551,030
-----------
$15,940,081
- ----------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 12.8%
Marshall County, WV, Pollution Control Rev.
(Ohio Power Co.), 6.85s, 2022 $2,000 $ 2,184,740
Marshall County, WV, Pollution Control Rev.
(Ohio Power Co.), MBIA, 6.85s, 2022 3,150 3,485,097
Mason County, WV, Pollution Control Rev.
(Appalachian Power), MBIA, 6.6s, 2022 7,000 7,749,350
McDowell County, WV, Industrial Development
Rev. (War Telephone Co.), 13.5s, 2001 310 311,932
Puerto Rico Electric Power Authority, MBIA,
0s, 2017 $3,705 $ 1,398,378
Putnam County, WV, Pollution Control Rev.
(Applachian Power Co.), MBIA, 6.6s, 2019 3,200 3,529,280
-----------
$18,658,777
- ----------------------------------------------------------------------------------------
Health Care Revenue - 6.9%
Berkeley County, WV, Building Commission,
Hospital Rev. (City Hospital Project), 6.5s, 2022 $2,500 $ 2,659,775
Monongalia County, WV, Health Facilities Rev.
(Beverly Enterprises, Inc.), 10s, 2007 820 885,961
West Virginia Hospital Finance Authority
(Charleston Area Medical Center), 6.5s, 2023 2,000 2,156,900
West Virginia Hospital Finance Authority
(Fairmont General Hospital), 6.625s, 2019 2,000 2,124,320
West Virginia Hospital Finance Authority
(General Division Medical Building), 7.25s, 2014 2,000 2,240,220
-----------
$10,067,176
- ----------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 15.7%
Braxton County, WV, Solid Waste Disposal
(Weyerhaeuser), 6.5s, 2025 $2,000 $ 2,175,020
Jackson County, WV, Pollution Control Rev.
(Kaiser Aluminum & Chemical Corp.), 6.5s, 2008 3,285 3,297,089
Kanawha County, WV, Commercial Development
Rev. (Kroger Co.), 8s, 2011 1,000 1,131,210
Kanawha County, WV, Commercial Development
Rev. (May Department Stores Co.), 6.5s, 2003 3,000 3,320,550
Kanawha County, WV, Pollution Control Rev.
(Union Carbide Corp.), 8s, 2020 2,000 2,170,820
Monongalia County, WV, Commercial
Development Rev. (Kroger Co.), 7.7s, 2012 2,000 2,273,520
Ohio County, WV, Industrial Development Rev.
(Kroger Co.), 8.125s, 2011 2,000 2,275,400
Putnam County, WV, Industrial Development Rev.
(Rite Aid Corp.), 10.375s, 2002 590 592,997
South Charleston, WV, Pollution Control Rev.
(Union Carbide Corp.), 7.625s, 2005 2,500 2,937,050
Wierton, WV, Pollution Control Rev. (Weirton
Steel), 8.625s, 2014 2,550 2,693,616
-----------
$22,867,272
- ----------------------------------------------------------------------------------------
Insured Health Care Revenue - 7.8%
Harrison County, WV, Building Commission Rev.
(United Hospital Center), AMBAC, 5.25s, 2021 $2,625 $ 2,604,367
Monongalia County, WV, Building Commission,
Health Rev. (Monongalia General Hospital),
MBIA, 6.625s, 2011 1,000 1,081,940
West Virginia Hospital Finance Authority (Cabell
Huntington Hospital), AMBAC, 6.25s, 2019 5,000 5,440,200
West Virginia Hospital Finance Authority
(West Virginia University Hospital Corp.), MBIA,
5s, 2016 2,225 2,185,551
-----------
$11,312,058
- ----------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 1.0%
Huntington, WV, Housing Corp., Multi-Family Rev.,
FNMA, 7.5s, 2024 $ 800 $ 854,672
Webster County, WV, Housing Development Rev.
(Circlebrook), FHA, 6.35s, 2008 525 556,747
-----------
$ 1,411,419
- ----------------------------------------------------------------------------------------
</TABLE>
27 - MWV
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Sales and Excise Tax Revenue - 2.2%
Puerto Rico Highway & Transportation Authority
Rev., 5.5s, 2013 $2,000 $ 2,131,800
Puerto Rico Highway & Transportation Authority
Rev., 5.5s, 2036 1,000 1,042,160
------------
$ 3,173,960
- -----------------------------------------------------------------------------------------------------
Single Family Housing Revenue - 4.9%
Berkeley County, WV, Residential Mortgage Rev.,
7.875s, 2012 $ 215 $ 225,060
Charles Town, WV, Residential Mortgage Rev.,
6.2s, 2011 670 702,401
Mason County, WV, 0s, 2014 1,700 507,756
West Virginia Housing Development Fund,
7.85s, 2014 840 868,476
West Virginia Housing Development Fund,
7.95s, 2017 430 445,502
West Virginia Housing Development Fund,
7.2s, 2018 2,105 2,252,097
West Virginia Housing Development Fund,
7.2s, 2020 1,980 2,118,362
------------
$ 7,119,654
- -----------------------------------------------------------------------------------------------------
Turnpike Revenue - 3.4%
West Virginia Parkways, Economic Development
& Tourism Authority, FGIC, 0s, 2006 $1,885 $ 1,303,892
West Virginia Parkways, Economic Development
& Tourism Authority, FGIC, RIBS, 7.452s, 2019[dbldag][dbldag] 3,300 3,641,913
------------
$ 4,945,805
- -----------------------------------------------------------------------------------------------------
Universities - 2.7%
West Virgina University Rev. (West Virginia
Dormitory Project), AMBAC, 5s, 2022 $2,000 $ 1,948,200
West Virginia University Rev. (West Virginia
University Student Union), AMBAC, 5s, 2027 2,000 1,914,640
------------
$ 3,862,840
- -----------------------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 6.2%
Beckley, WV, Industrial Development Rev.
(Beckley Water Co.), 7s, 2017 $2,000 $ 2,188,760
Charleston, WV, Sewer Rev., MBIA, 6.5s, 2017 2,260 2,489,842
West Virginia Water Development Authority, CGIC,
7.5s, 2009 1,100 1,177,506
West Virginia Water Development Authority, FSA,
5s, 2018 1,270 1,244,359
West Virginia Water Development Authority, FSA,
5.25s, 2035 2,000 2,003,380
------------
$ 9,103,847
- -----------------------------------------------------------------------------------------------------
Other - 1.2%
West Virginia Building Commission, Lottery Rev.,
MBIA, 5.25s, 2010 $1,750 $ 1,818,583
- -----------------------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $130,341,456) $143,217,068
- -----------------------------------------------------------------------------------------------------
Floating Rate Demand Note - 0.1%
- -----------------------------------------------------------------------------------------------------
Harris County, TX Industrial Development Corp.
(Shell Oil), due 4/01/27, at Identified Cost $ 100 $ 100,000
- -----------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $130,441,456) $143,317,068
Other Assets, Less Liabilities - 1.5% 2,156,809
- -----------------------------------------------------------------------------------------------------
Net assets - 100.0% $145,473,877
- -----------------------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
Portfolio Footnotes:
[dbldag][dbldag]Inverse floating rate security.
[sec][sec]When-issued security. At March 31, 1998, the Fund had sufficient cash
and/or securities at least equal to the value of the when-issued
security.
28 - MWV
<PAGE>
Financial Statements
Statements of Assets and Liabilities
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Mississippi New York
March 31, 1998 Fund Fund
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments -
Identified cost $ 70,650,677 $129,330,414
Unrealized appreciation 5,822,299 14,591,758
------------ ------------
Total, at value $ 76,472,976 $143,922,172
Cash 72,151 51,695
Receivable for Fund shares sold 216,065 566,469
Receivable for investments sold -- 1,047,446
Interest receivable 1,272,823 2,168,004
Other assets 10,159 1,357
------------ ------------
Total assets $ 78,044,174 $147,757,143
------------ ------------
Liabilities:
Distributions payable $ 172,182 $ 242,948
Payable for Fund shares reacquired 20,000 136,765
Payable for investments purchased -- 547,446
Payable for when-issued investments purchased 1,004,833 725,723
Payable to affiliates -
Management fee 2,814 5,346
Shareholder servicing agent fee 704 1,336
Distribution and service fee 1,510 4,602
Administrative fee 94 178
Accrued expenses and other liabilities 63,221 98,680
------------ ------------
Total liabilities $ 1,265,358 $ 1,763,024
------------ ------------
Net assets $ 76,778,816 $145,994,119
------------ ------------
Net assets consist of:
Paid-in capital $ 74,142,820 $134,184,952
Unrealized appreciation on investments 5,822,299 14,591,758
Accumulated net realized loss on investments (3,294,817) (2,792,138)
Accumulated undistributed (distributions in excess of)
net investment income 108,514 9,547
------------ ------------
Total $ 76,778,816 $145,994,119
------------ ------------
Shares of beneficial interest outstanding:
Class A 6,685,063 10,602,605
Class B 1,083,446 2,364,869
Class C -- --
------------ ------------
Total shares of beneficial interest outstanding 7,768,509 12,967,474
------------ ------------
Net assets:
Class A $ 66,061,483 $119,376,158
Class B 10,717,333 26,617,961
Class C -- --
------------ ------------
Total net assets $ 76,778,816 $145,994,119
------------ ------------
Class A shares:
Net asset value per share
(net assets [divided by] shares of beneficial interest outstanding) $ 9.88 $ 11.26
------------ ------------
Offering price per share (100 [divided by] 95.25 of net asset value per share) $ 10.37 $ 11.82
------------ ------------
Class B shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) $ 9.89 $ 11.26
------------ ------------
Class C shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) -- --
------------ ------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
North Carolina Pennsylvania
March 31, 1998 Fund Fund
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments -
Identified cost $394,602,732 $ 36,532,031
Unrealized appreciation 36,876,107 2,368,148
------------ ------------
Total, at value $431,478,839 $ 38,900,179
Cash 59,458 38,411
Receivable for Fund shares sold 1,826,363 51,162
Receivable for investments sold 1,049,470 15,000
Interest receivable 6,777,541 587,919
Other assets 3,878 596
------------ ------------
Total assets $441,195,549 $ 39,593,267
------------ ------------
Liabilities:
Distributions payable $ 699,951 $ 64,726
Payable for Fund shares reacquired 224,124 55,170
Payable for investments purchased -- --
Payable for when-issued investments purchased 7,122,687 --
Payable to affiliates -
Management fee 15,843 1,450
Shareholder servicing agent fee 3,961 --
Distribution and service fee 15,101 3,531
Administrative fee 528 --
Accrued expenses and other liabilities 137,809 --
------------ ------------
Total liabilities $ 8,220,004 $ 124,877
------------ ------------
Net assets $432,975,545 $ 39,468,390
------------ ------------
Net assets consist of:
Paid-in capital $402,613,729 $ 38,723,045
Unrealized appreciation on investments 36,876,107 2,368,148
Accumulated net realized loss on investments (5,941,233) (1,659,249)
Accumulated undistributed (distributions in excess of)
net investment income (573,058) 36,446
------------ ------------
Total $432,975,545 $ 39,468,390
------------ ------------
Shares of beneficial interest outstanding:
Class A 31,316,107 1,926,901
Class B 3,641,772 2,088,544
Class C 670,448 --
------------ ------------
Total shares of beneficial interest outstanding 35,628,327 4,015,445
------------ ------------
Net assets:
Class A $380,594,535 $ 18,917,804
Class B 44,237,675 20,550,586
Class C 8,143,335 --
------------ ------------
Total net assets $432,975,545 $ 39,468,390
------------ ------------
Class A shares:
Net asset value per share
(net assets [divided by] shares of beneficial interest outstanding) $ 12.15 $ 9.82
------------ ------------
Offering price per share (100 [divided by] 95.25 of net asset value per share) $ 12.76 $ 10.31
------------ ------------
Class B shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) $ 12.15 $ 9.84
------------ ------------
Class C shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) $ 12.15 --
------------ ------------
</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
29
<PAGE>
Financial Statements - continued
Statements of Assets and Liabilities - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
South Carolina
March 31, 1998 Fund
- ------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments -
Identified cost $159,850,405
Unrealized appreciation 14,778,380
------------
Total, at value $174,628,785
Cash 94,412
Receivable for Fund shares sold 219,078
Receivable for investments sold 1,034,467
Interest receivable 2,480,902
Other assets 1,558
------------
Total assets $178,459,202
------------
Liabilities:
Distributions payable $ 319,015
Payable for Fund shares reacquired 122,309
Payable for when-issued investments purchased 1,002,080
Payable to affiliates -
Management fee 6,502
Shareholder servicing agent fee 1,626
Distribution and service fee 6,547
Administrative fee 217
Accrued expenses and other liabilities 94,452
------------
Total liabilities $ 1,552,748
------------
Net assets $176,906,454
------------
Net assets consist of:
Paid-in capital $163,365,761
Unrealized appreciation on investments 14,778,380
Accumulated undistributed net realized
gain (loss) on investments (1,093,523)
Accumulated undistributed (distributions in excess of)
net investment income (144,164)
------------
Total $176,906,454
------------
Shares of beneficial interest outstanding:
Class A 11,886,734
Class B 2,243,721
Class C --
------------
Total shares of beneficial interest outstanding 14,130,455
------------
Net assets:
Class A $148,820,317
Class B 28,086,137
Class C --
------------
Total net assets $176,906,454
------------
Class A shares:
Net asset value per share
(net assets [divided by] shares of beneficial interest outstanding) $ 12.52
------------
Offering price per share (100 [divided by] 95.25 of net asset value per share) $ 13.14
------------
Class B shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) $ 12.52
------------
Class C shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) --
------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Tennessee Virginia
March 31, 1998 Fund Fund
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments -
Identified cost $ 114,947,643 $373,795,241
Unrealized appreciation 10,485,646 30,318,206
------------- ------------
Total, at value $ 125,433,289 $404,113,447
Cash 84,940 73,891
Receivable for Fund shares sold 238,667 204,568
Receivable for investments sold 135,000 50,000
Interest receivable 1,633,115 5,959,753
Other assets 1,102 3,778
------------- ------------
Total assets $ 127,526,113 $410,405,437
------------- ------------
Liabilities:
Distributions payable $ 260,983 $ 803,999
Payable for Fund shares reacquired 105,997 436,472
Payable for when-issued investments purchased -- --
Payable to affiliates -
Management fee 4,666 15,043
Shareholder servicing agent fee 1,166 3,761
Distribution and service fee 4,594 13,607
Administrative fee 156 501
Accrued expenses and other liabilities 79,512 123,444
------------- ------------
Total liabilities $ 457,074 $ 1,396,827
------------- ------------
Net assets $ 127,069,039 $409,008,610
------------- ------------
Net assets consist of:
Paid-in capital $ 116,400,051 $386,569,024
Unrealized appreciation on investments 10,485,646 30,318,206
Accumulated undistributed net realized
gain (loss) on investments 175,706 (6,693,553)
Accumulated undistributed (distributions in excess of)
net investment income 7,636 (1,185,067)
------------- ------------
Total $ 127,069,039 $409,008,610
------------- ------------
Shares of beneficial interest outstanding:
Class A 9,974,593 32,127,096
Class B 1,668,278 2,834,673
Class C -- 265,551
------------- ------------
Total shares of beneficial interest outstanding 11,642,871 35,227,320
------------- ------------
Net assets:
Class A $ 108,871,423 $373,024,462
Class B 18,197,616 32,901,658
Class C -- 3,082,490
------------- ------------
Total net assets $ 127,069,039 $409,008,610
------------- ------------
Class A shares:
Net asset value per share
(net assets [divided by] shares of beneficial interest outstanding) $ 10.91 $ 11.61
------------- ------------
Offering price per share (100 [divided by] 95.25 of net asset value per share) $ 11.45 $ 12.19
------------- ------------
Class B shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) $ 10.91 $ 11.61
------------- ------------
Class C shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) -- $ 11.61
------------- ------------
<CAPTION>
- ------------------------------------------------------------------------------------------------
West Virginia
March 31, 1998 Fund
- ------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments -
Identified cost $130,441,456
Unrealized appreciation 12,875,612
------------
Total, at value $143,317,068
Cash 53,961
Receivable for Fund shares sold 49,346
Receivable for investments sold 20,000
Interest receivable 2,529,146
Other assets 1,289
------------
Total assets $145,970,810
------------
Liabilities:
Distributions payable $ 260,837
Payable for Fund shares reacquired 136,790
Payable for when-issued investments purchased --
Payable to affiliates -
Management fee 5,349
Shareholder servicing agent fee 1,337
Distribution and service fee 4,982
Administrative fee 178
Accrued expenses and other liabilities 87,460
------------
Total liabilities $ 496,933
------------
Net assets $145,473,877
------------
Net assets consist of:
Paid-in capital $136,357,971
Unrealized appreciation on investments 12,875,612
Accumulated undistributed net realized
gain (loss) on investments (3,254,262)
Accumulated undistributed (distributions in excess of)
net investment income (505,444)
------------
Total $145,473,877
------------
Shares of beneficial interest outstanding:
Class A 11,045,275
Class B 1,315,043
Class C --
------------
Total shares of beneficial interest outstanding 12,360,318
------------
Net assets:
Class A $130,001,503
Class B 15,472,374
Class C --
------------
Total net assets $145,473,877
------------
Class A shares:
Net asset value per share
(net assets [divided by] shares of beneficial interest outstanding) $ 11.77
------------
Offering price per share (100 [divided by] 95.25 of net asset value per share) $ 12.36
------------
Class B shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) $ 11.77
------------
Class C shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) --
------------
</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
30
<PAGE>
Financial Statements - continued
Statements of Operations
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Mississippi New York North Carolina Pennsylvania
Year Ended March 31, 1998 Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income:
Interest income $4,481,362 $ 9,083,284 $25,514,906 $2,201,078
---------- ----------- ----------- ----------
Expenses -
Management fee $ 421,798 $ 807,334 $ 2,357,113 $ 219,296
Trustees' compensation 16,733 17,942 18,117 17,257
Shareholder servicing agent fee 96,505 184,686 538,011 50,095
Distribution and service fee (Class A) -- 301,149 1,326,584 --
Distribution and service fee (Class B) 84,274 265,454 422,774 174,490
Distribution and service fee (Class C) -- -- 70,592 --
Administrative fee 10,839 20,744 60,449 5,618
Custodian fee 28,774 57,862 161,393 19,507
Auditing fees 29,027 31,027 30,677 29,764
Printing 7,669 15,080 38,706 6,425
Postage 4,385 10,047 27,234 4,604
Legal fees 3,023 9,075 4,478 2,735
Amortization of organization expenses 1,218 -- -- 1,478
Miscellaneous 38,426 97,508 114,802 36,847
---------- ----------- ----------- ----------
Total expenses $ 742,671 $ 1,817,908 $ 5,170,930 $ 568,116
Fees paid indirectly (8,228) (20,195) (48,503) (11,565)
Reduction of expenses by investment adviser (50,559) (96,880) (429,491) (232,987)
---------- ----------- ----------- ----------
Net expenses $ 683,884 $ 1,700,833 $ 4,692,936 $ 323,564
---------- ----------- ----------- ----------
Net investment income $3,797,478 $ 7,382,451 $20,821,970 $1,877,514
---------- ----------- ----------- ----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $1,067,231 $ 581,689 $ 4,147,317 $ 376,424
Futures contracts (9,103) (24,276) (45,517) (6,069)
---------- ----------- ----------- ----------
Net realized gain on investments $1,058,128 $ 557,413 $ 4,101,800 $ 370,355
---------- ----------- ----------- ----------
Change in unrealized appreciation on
investments $3,159,311 $ 8,128,220 $17,339,006 $1,973,736
---------- ----------- ----------- ----------
Net realized and unrealized gain on investments $4,217,439 $ 8,685,633 $21,440,806 $2,344,091
---------- ----------- ----------- ----------
Increase in net assets from operations $8,014,917 $16,068,084 $42,262,776 $4,221,605
---------- ----------- ----------- ----------
</TABLE>
See notes to financial statements
31
<PAGE>
Financial Statements - continued
Statements of Operations - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
South Carolina Tennessee Virginia West Virginia
Year Ended March 31, 1998 Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income:
Interest income $10,350,714 $ 7,587,609 $24,651,103 $ 8,731,857
----------- ----------- ----------- -----------
Expenses -
Management fee $ 962,150 $ 691,203 $ 2,261,655 $ 788,060
Trustees' compensation 18,377 18,367 18,229 18,230
Shareholder servicing agent fee 219,563 157,738 516,345 180,179
Distribution and service fee (Class A) 523,940 382,368 1,317,039 450,793
Distribution and service fee (Class B) 251,617 163,701 314,433 147,016
Distribution and service fee (Class C) -- -- 32,548 --
Administrative fee 24,661 17,714 58,011 20,233
Custodian fee 69,649 50,776 154,819 57,318
Auditing fees 32,025 34,027 40,327 31,327
Printing 14,917 9,991 36,829 13,473
Postage 10,730 6,772 24,716 8,186
Legal fees 3,951 3,082 5,048 3,999
Miscellaneous 59,894 43,450 106,326 52,441
----------- ----------- ----------- -----------
Total expenses $ 2,191,474 $ 1,579,189 $ 4,886,325 $ 1,771,255
Fees paid indirectly (16,160) (19,194) (89,755) (16,670)
Reduction of expenses by investment adviser (175,283) (125,923) (412,175) (95,657)
----------- ----------- ----------- -----------
Net expenses $ 2,000,031 $ 1,434,072 $ 4,384,395 $ 1,658,928
----------- ----------- ----------- -----------
Net investment income $ 8,350,683 $ 6,153,537 $20,266,708 $ 7,072,929
----------- ----------- ----------- -----------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) -
Investment transactions $ 2,296,421 $ 1,327,353 $ 6,279,954 $ 345,141
Futures contracts 9,142 -- -- --
----------- ----------- ----------- -----------
Net realized gain on investments $ 2,305,563 $ 1,327,353 $ 6,279,954 $ 345,141
----------- ----------- ----------- -----------
Change in unrealized appreciation -
Investments $ 6,781,555 $ 5,784,067 $13,748,696 $ 5,401,673
Futures contracts 40,726 -- -- --
----------- ----------- ----------- -----------
Net unrealized gain on investments $ 6,822,281 $ 5,784,067 $13,748,696 $ 5,401,673
----------- ----------- ----------- -----------
Net realized and unrealized gain on investments $ 9,127,844 $ 7,111,420 $20,028,650 $ 5,746,814
----------- ----------- ----------- -----------
Increase in net assets from operations $17,478,527 $13,264,957 $40,295,358 $12,819,743
----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements
32
<PAGE>
Financial Statements - continued
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Mississippi New York North Carolina Pennsylvania
Year Ended March 31, 1998 Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 3,797,478 $ 7,382,451 $ 20,821,970 $ 1,877,514
Net realized gain on investments 1,058,128 557,413 4,101,800 370,355
Net unrealized gain on investments 3,159,311 8,128,220 17,339,006 1,973,736
------------- ------------- ------------- -------------
Increase in net assets from operations $ 8,014,917 $ 16,068,084 $ 42,262,776 $ 4,221,605
------------- ------------- ------------- -------------
Distributions declared to shareholders -
From net investment income (Class A) $ (3,282,482) $ (5,984,379) $ (18,623,468) $ (912,228)
From net investment income (Class B) (453,554) (1,119,683) (1,800,152) (971,524)
From net investment income (Class C) -- -- (300,815) --
------------- ------------- ------------- -------------
Total distributions declared to shareholders $ (3,736,036) $ (7,104,062) $ (20,724,435) $ (1,883,752)
------------- ------------- ------------- -------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 4,313,446 $ 30,612,726 $ 53,922,184 $ 7,256,261
Net asset value of shares issued to shareholders
in reinvestment of distributions 1,609,390 4,100,520 12,040,260 1,024,716
Cost of shares reacquired (11,066,227) (45,994,931) (78,460,580) (12,981,830)
------------- ------------- ------------- -------------
Decrease in net assets from Fund
share transactions $ (5,143,391) $ (11,281,685) $ (12,498,136) $ (4,700,853)
------------- ------------- ------------- -------------
Total increase (decrease) in net assets $ (864,510) $ (2,317,663) $ 9,040,205 $ (2,363,000)
Net assets:
At beginning of period 77,643,326 148,311,782 423,935,340 41,831,390
------------- ------------- ------------- -------------
At end of period $ 76,778,816 $ 145,994,119 $ 432,975,545 $ 39,468,390
------------- ------------- ------------- -------------
Accumulated undistributed (distributions in excess of)
net investment income included in net
assets at end of period $ 108,514 $ 9,547 $ (573,058) $ 36,466
------------- ------------- ------------- -------------
</TABLE>
See notes to financial statements
33
<PAGE>
Financial Statements - continued
Statements of Changes in Net Assets - continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
South Carolina Tennessee Virginia West Virginia
Year Ended March 31, 1998 Fund Fund Fund Fund
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 8,350,683 $ 6,153,537 $ 20,266,708 $ 7,072,929
Net realized gain on investments 2,305,563 1,327,353 6,279,954 345,141
Net unrealized gain on investments 6,822,281 5,784,067 13,748,696 5,401,673
------------- ------------- ------------- -------------
Increase in net assets from operations $ 17,478,527 $ 13,264,957 $ 40,295,358 $ 12,819,743
------------- ------------- ------------- -------------
Distributions declared to shareholders -
From net investment income (Class A) $ (7,292,328) $ (5,444,688) $ (18,762,689) $ (6,433,739)
From net investment income (Class B) (1,058,355) (708,849) (1,362,739) (639,190)
From net investment income (Class C) -- -- (141,280) --
In excess of net investment income (Class A) (10,662) (29,444) (62,418) (68,917)
In excess of net investment income (Class B) (1,547) (3,833) (4,534) (6,847)
In excess of net investment income (Class C) -- -- (470) --
------------- ------------- ------------- -------------
Total distributions declared to shareholders $ (8,362,892) $ (6,186,814) $ (20,334,130) $ (7,148,693)
------------- ------------- ------------- -------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 17,049,823 $ 11,515,607 $ 43,445,071 $ 9,813,340
Net asset value of shares issued to shareholders
in reinvestment of distributions 4,449,578 3,023,395 9,957,896 3,862,325
Cost of shares reacquired (24,487,967) (16,983,923) (77,289,917) (13,566,545)
------------- ------------- ------------- -------------
Increase (decrease) in net assets from Fund
share transactions $ (2,988,566) $ (2,444,921) $ (23,886,950) $ 109,120
------------- ------------- ------------- -------------
Total increase (decrease) in net assets $ 6,127,069 $ 4,633,222 $ (3,925,722) $ 5,780,170
Net assets:
At beginning of period 170,779,385 122,435,817 412,934,332 139,693,707
------------- ------------- ------------- -------------
At end of period $ 176,906,454 $ 127,069,039 $ 409,008,610 $ 145,473,877
------------- ------------- ------------- -------------
Accumulated undistributed (distributions in excess of)
net investment income included in net
assets at end of period $ (144,164) $ 7,636 $ (1,185,067) $ (505,444)
------------- ------------- ------------- -------------
</TABLE>
See notes to financial statements
34
<PAGE>
Financial Statements - continued
Statements of Changes in Net Assets - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Mississippi New York North Carolina Pennsylvania
Year Ended March 31, 1997 Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 4,156,402 $ 7,847,568 $ 21,946,294 $ 2,229,024
Net realized gain (loss) on investments (149,786) (484,632) 1,019,630 (571,590)
Net unrealized gain (loss) on investments 202,478 (536,394) (1,195,086) 150,921
------------- ------------- -------------- ------------
Increase in net assets from operations $ 4,209,094 $ 6,826,542 $ 21,770,838 $ 1,808,355
------------- ------------- -------------- ------------
Distributions declared to shareholders -
From net investment income (Class A) $ (3,636,582) $ (6,608,917) $ (19,960,583) $ (1,021,497)
From net investment income (Class B) (488,656) (1,193,195) (1,572,775) (1,235,549)
From net investment income (Class C) -- -- (412,936) --
In excess of net investment income (Class A) -- -- (57,101) (5,499)
In excess of net investment income (Class B) -- -- (4,500) (6,652)
In excess of net investment income (Class C) -- -- (1,180) --
------------- ------------- -------------- ------------
Total distributions declared to shareholders $ (4,125,238) $ (7,802,112) $ (22,009,075) $ (2,269,197)
------------- ------------- -------------- ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 5,147,902 $ 18,795,107 $ 150,297,565 $ 6,941,408
Net asset value of shares issued to shareholders
in reinvestment of distributions 1,796,462 4,479,249 12,769,917 1,339,280
Cost of shares reacquired (15,295,259) (36,503,476) (191,439,457) (8,188,392)
------------- ------------- -------------- ------------
Net increase (decrease) in net assets from
Fund share transactions $ (8,350,895) $ (13,229,120) $ (28,371,975) $ 92,296
------------- ------------- -------------- ------------
Total decrease in net assets $ (8,267,039) $ (14,204,690) $ (28,610,212) $ (368,546)
Net assets:
At beginning of period 85,910,365 162,516,472 452,545,552 42,199,936
------------- ------------- -------------- ------------
At end of period $ 77,643,326 $ 148,311,782 $ 423,935,340 $ 41,831,390
------------- ------------- -------------- ------------
Accumulated undistributed (distributions in excess of)
net investment income included in net
assets at end of period $ 36,215 $ (338,090) $ (714,721) $ 16,202
------------- ------------- -------------- ------------
</TABLE>
See notes to financial statements
35
<PAGE>
Financial Statements - continued
Statements of Changes in Net Assets - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
South Carolina Tennessee Virginia West Virginia
Year Ended March 31, 1997 Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 9,088,770 $ 6,429,943 $ 22,582,005 $ 7,584,842
Net realized loss on investments (504,527) (23,124) (2,270,255) (738,568)
Net unrealized gain (loss) on investments (827,860) (1,079,488) (3,402,113) 451,727
------------- ------------- -------------- -------------
Increase in net assets from operations $ 7,756,383 $ 5,327,331 $ 16,909,637 $ 7,298,001
------------- ------------- -------------- -------------
Distributions declared to shareholders -
From net investment income (Class A) $ (8,123,664) $ (5,716,145) $ (21,012,643) $ (6,960,660)
From net investment income (Class B) (895,171) (609,095) (1,346,865) (608,405)
From net investment income (Class C) -- -- (161,724) --
------------- ------------- -------------- -------------
Total distributions declared to shareholders $ (9,018,835) $ (6,325,240) $ (22,521,232) $ (7,569,065)
------------- ------------- -------------- -------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 14,266,849 $ 12,503,086 $ 158,319,115 $ 8,573,897
Net asset value of shares issued to shareholders
in reinvestment of distributions 4,940,927 3,089,989 10,962,194 4,100,851
Cost of shares reacquired (32,386,589) (14,905,124) (200,929,656) (19,870,458)
------------- ------------- -------------- -------------
Net increase (decrease) in net assets from
Fund share transactions $ (13,178,813) $ 687,951 $ (31,648,347) $ (7,195,710)
------------- ------------- -------------- -------------
Total decrease in net assets $ (14,441,265) $ (309,958) $ (37,259,942) $ (7,466,774)
Net assets:
At beginning of period 185,220,650 122,745,775 450,194,274 147,160,481
------------- ------------- -------------- -------------
At end of period $ 170,779,385 $ 122,435,817 $ 412,934,332 $ 139,693,707
------------- ------------- -------------- -------------
Accumulated distributions in excess of
net investment income included in net
assets at end of period $ (211,229) $ (16,248) $ (1,257,215) $ (429,680)
------------- ------------- -------------- -------------
</TABLE>
See notes to financial statements
36
<PAGE>
Financial Statements - continued
Financial Highlights
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Mississippi Fund
- -----------------------------------------------------------------------------------------------------------------
Year Ended March 31,
-------------------------------------------------------
1998 1997 1996 1995
-------------------------------------------------------
Class A
-------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period): $ 9.35 $ 9.35 $ 9.15 $ 9.19
Net asset value - beginning of period ------ ------- ------ ------
Income from investment operations# - $ 0.49 $ 0.48 $ 0.52 $ 0.54
Net investment income[sec]
Net realized and unrealized gain 0.52 0.00 0.20 (0.01)
(loss) on investments ------ ------- ------ -------
$ 1.01 $ 0.48 $ 0.72 $ 0.53
Total from investment operations ------ ------- ------ -------
Less distributions declared to shareholders - $(0.48) $(0.48) $ (0.52) $(0.54)
From net investment income[dbldag][dbldag]
From net realized gain on -- -- -- (0.00)
investments[dbldag][dbldag][dbldag] -- -- -- (0.03)
In excess of net realized gain on investments ------- ------- ------- -------
$(0.48) $(0.48) $ (0.52) $(0.57)
Total distributions declared to shareholders ------- ------- ------- -------
$ 9.88 $ 9.35 $ 9.35 $ 9.15
Net asset value - end of period ------- ------- ------- -------
11.02% 5.22% 7.99% 6.08%
Total return[dbldag]
Ratios (to average net assets)/Supplemental
data[sec]: 0.78% 0.87% 0.45% 0.22%
Expenses## 5.04% 5.14% 5.51% 5.99%
Net investment income 18% 17% 31% 47%
Portfolio turnover $66,061 $66,630 $74,435 $79,033
Net assets at end of period (000 omitted)
<FN>
*For the period from the commencement of the Fund's investment operations, August 6, 1992, through
January 31, 1993.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are based on average shares
outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without
reduction for fees paid indirectly.
[dbldag]Total returns for Class A shares do not include the applicable sales charge. If the charge had
been included, the results would have been lower.
[dbldag][dbldag]For the years ended March 31, 1996, and 1995, the per share distributions in excess of
net investment income were $0.0013 and $0.0035, respectively.
[dbldag][dbldag][dbldag]For the year ended March 31, 1995, the per share distribution from net realized
gain on investments was $0.0016.
[sec]Effective August 1, 1997, the investment adviser voluntarily waived a portion of its management
fee. Prior to March 31, 1997, the investment adviser voluntarily
agreed to maintain expenses of the Fund, exclusive of management, distribution, and services fees, at
no more than 0.40% of average daily net assets. To the extent
actual expenses were over/under this limitation, and if the investment adviser was not waiving its
fee, the net investment income per share and the ratios would
have been:
Net investment income $ 0.48
Ratios (to average net assets):
Expenses## 0.85%
Net investment income 4.97%
</FN>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Mississippi Fund
- ----------------------------------------------------------------------------------------------------------------------------
Two Months
Ended Year Ended Period Ended
March 31, January 31, January 31,
1994 1994 1993*
------------------------------------------------
Class A
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.00 $ 9.38 $ 9.53
--------- ------- ---------
Income from investment operations# -
Net investment income[sec] $ 0.09 $ 0.55 $ 0.24
Net realized and unrealized gain (loss) on investments (0.81) 0.62 (0.15)
--------- ------- ---------
Total from investment operations $ (0.72) $ 1.17 $ 0.09
--------- ------- ---------
Less distributions declared to shareholders -
From net investment income[dbldag][dbldag] $ (0.09) $ (0.55) $ (0.24)
From net realized gain on investments[dbldag][dbldag][dbldag] -- -- --
In excess of net realized gain on investments -- -- --
--------- -------- ---------
Total distributions declared to shareholders $ (0.09) $ (0.55) $ (0.24)
--------- -------- ---------
Net asset value - end of period $ 9.19 $ 10.00 $ 9.38
--------- -------- ---------
Total return[dbldag] (7.20)%++ 12.80% 5.00%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 0.10%+ 0.03% 0.00%+
Net investment income 5.69%+ 5.68% 5.59%+
Portfolio turnover 2% 28% 14%
Net assets at end of period (000 omitted) $ 79,541 $84,177 $ 41,212
Net investment income $ 0.08 $ 0.45 $ 0.19
Ratios (to average net assets):
Expenses## 0.88%+ 1.01% 1.17%+
Net investment income 4.91%+ 4.69% 4.42%+
</TABLE>
See notes to financial statements
37
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Mississippi Fund
- --------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
--------------------------------------------------
1998 1997 1996 1995
--------------------------------------------------
Class B
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.36 $ 9.36 $ 9.16 $ 9.19
------- ------- ------ -------
Income from investment operations# -
Net investment income[sec] $ 0.41 $ 0.40 $ 0.44 $ 0.45
Net realized and unrealized gain (loss) on investments 0.53 -- 0.20 --
------- ------- ------ -------
Total from investment operations $ 0.94 $ 0.40 $ 0.64 $ 0.45
------- ------- ------ -------
Less distributions declared to shareholders -
From net investment income[dbldag][dbldag] $ (0.41) $ (0.40) $(0.44) $ (0.45)
From net realized gain on investments[dbldag][dbldag][dbldag] -- -- -- (0.00)
In excess of net realized gain on investments -- -- -- (0.03)
-------- -------- ------- --------
Total distributions declared to shareholders $ (0.41) $ (0.40) $(0.44) $ (0.48)
-------- -------- ------- --------
Net asset value - end of period $ 9.89 $ 9.36 $ 9.36 $ 9.16
-------- -------- ------- --------
Total return 10.15% 4.33% 7.11% 5.14%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.56% 1.72% 1.28% 1.23%
Net investment income 4.26% 4.29% 4.67% 4.97%
Portfolio turnover 18% 17% 31% 47%
Net assets at end of period (000 omitted) $10,717 $11,014 $11,475 $ 9,429
<FN>
**For the period from the inception of Class B, September 7, 1993, through January 31, 1994.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees
paid indirectly.
[dbldag][dbldag]For the years ended March 31, 1996, and 1995, and the two months ended March 31, 1994, the per share
distributions in excess of net investment income were
$0.0011 and $0.0029, and $0.002, respectively.
[dbldag][dbldag][dbldag]For the year ended March 31, 1995, the per share distribution from net realized gain on
investments was $0.0016.
[sec]Effective August 1, 1997, the investment adviser voluntarily waived a portion of its management fee. Prior to
March 31, 1997, the investment adviser voluntarily
agreed to maintain expenses of the Fund, exclusive of management, distribution, and service fees, at no more than
0.40% of average daily net assets. To the extent
actual expenses were over/under this limitation, and if the investment adviser was not waiving its fee, the net
investment income per share and the ratios would
have been:
Net investment income $ 0.40 -- $ 0.40 $ 0.38
Ratios (to average net assets):
Expenses## 1.63% -- 1.71% 2.01%
Net investment income 4.19% -- 4.24% 4.19%
</FN>
<CAPTION>
Two Months
Ended Period Ended
March 31, January 31,
1994 1994**
-------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.99 $ 9.94
------- ------
Income from investment operations# -
Net investment income[sec] $ 0.07 $ 0.18
Net realized and unrealized gain (loss) on investments (0.79) 0.05
------- ------
Total from investment operations $ (0.72) $ 0.23
------- ------
Less distributions declared to shareholders -
From net investment income[dbldag][dbldag] $ (0.08) $(0.18)
From net realized gain on investments[dbldag][dbldag][dbldag] -- --
In excess of net realized gain on investments -- --
------- ------
Total distributions declared to shareholders $ (0.08) $(0.18)
------- ------
Net asset value - end of period $ 9.19 $ 9.99
------- ------
Total return (7.27)%++ 2.33%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.10%+ 1.06%+
Net investment income 4.67%+ 4.29%+
Portfolio turnover 2% 28%
Net assets at end of period (000 omitted) $ 6,526 $6,268
Net investment income $ 0.06 $ 0.14
Ratios (to average net assets):
Expenses## 1.95%+ 2.12%+
Net investment income 3.82%+ 3.23%+
</TABLE>
See notes to financial statements
38
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
New York Fund
- --------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
--------------------------------------------------
1998 1997 1996 1995
--------------------------------------------------
Class A
--------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.60 $ 10.66 $ 10.49 $ 10.50
------- -------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.57 $ 0.55 $ 0.55 $ 0.56
Net realized and unrealized gain (loss) on investments 0.64 (0.06) 0.17 0.05
------- ------- ------- -------
Total from investment operations $ 1.21 $ 0.49 $ 0.72 $ 0.61
------- -------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.55) $ (0.55) $ (0.55) $ (0.56)
In excess of net investment income[dbldag][dbldag] -- -- (0.00) (0.01)
In excess of net realized gain on investments -- -- -- (0.05)
-------- ------- ------- -------
Total distributions declared to shareholders $ (0.55) $ (0.55) $ (0.55) $ (0.62)
-------- ------- ------- -------
Net asset value - end of period $ 11.26 $ 10.60 $ 10.66 $ 10.49
-------- ------- ------- -------
Total return[dbldag] 11.59% 4.68% 6.98% 6.03%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.03% 1.11% 1.10% 1.07%
Net investment income 5.14% 5.18% 5.09% 5.43%
Portfolio turnover 41% 64% 102% 147%
Net assets at end of period (000 omitted) $119,376 $121,588 $134,449 $146,597
<FN>
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
[dbldag]Total returns for Class A shares do not include the applicable sales charge. If the charge had been
included, the results would have been lower.
[dbldag][dbldag]For the year ended March 31, 1996, the per share distribution in excess of net investment income was
$0.0058.
[sec]The investment adviser and/or the distributor voluntarily waived a portion of their management fee and/or
distribution fee, respectively, for certain of the periods indicated. If these fees had been incurred by the Fund,
the net investment income per share and the ratios would have been:
Net investment income $ 0.56 -- $ 0.54 $ 0.55
Ratios (to average net assets):
Expenses## 1.10% -- 1.20% 1.18%
Net investment income 5.07% -- 4.99% 5.31%
</FN>
<CAPTION>
Two Months
Ended
March 31,
1994
----------
<S> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.34
-------
Income from investment operations# -
Net investment income[sec] $ 0.09
Net realized and unrealized gain (loss) on investments (0.84)
-------
Total from investment operations $ (0.75)
-------
Less distributions declared to shareholders -
From net investment income $ (0.06)
In excess of net investment income[dbldag][dbldag] (0.03)
In excess of net realized gain on investments --
-------
Total distributions declared to shareholders $ (0.09)
-------
Net asset value - end of period $ 10.50
-------
Total return[dbldag] (6.58)%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.03%+
Net investment income 5.09%+
Portfolio turnover 15%
Net assets at end of period (000 omitted) $162,621
Net investment income $ 0.07
Ratios (to average net assets):
Expenses## 1.23%+
Net investment income 4.88%+
</TABLE>
See notes to financial statements
39
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
New York Fund
- -------------------------------------------------------------------------------------------------------------------------------
Year Ended January 31, 1994 1993 1992 1991 1990
-----------------------------------------------------------
Class A
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.78 $ 10.25 $ 9.90 $ 9.74 $ 9.79
-------- -------- -------- ------- --------
Income from investment operations -
Net investment income[sec] $ 0.59 $ 0.63 $ 0.65 $ 0.65 $ 0.68
Net realized and unrealized gain on investments 0.74 0.58 0.44 0.16 0.01
-------- -------- -------- ------- --------
Total from investment operations $ 1.33 $ 1.21 $ 1.09 $ 0.81 $ 0.69
-------- -------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.57) $ (0.65) $ (0.69) $ (0.65) $ (0.67)
From net realized gain on investments (0.17) (0.03) (0.05) -- (0.06)
In excess of net investment income (0.03) -- -- -- --
From paid-in capital -- -- -- -- (0.01)
-------- -------- -------- ------- --------
Total distributions declared to shareholders $ (0.77) $ (0.68) $ (0.74) $ (0.65) $ (0.74)
-------- -------- -------- ------- --------
Net asset value - end of period $ 11.34 $ 10.78 $ 10.25 $ 9.90 $ 9.74
-------- -------- -------- ------- --------
Total return[dbldag] 12.69% 12.23% 11.42% 8.74% 7.33%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses 0.93% 0.53% 0.65% 0.54% 0.40%
Net investment income 5.21% 6.16% 6.44% 6.73% 6.88%
Portfolio turnover 51% 61% 80% 188% 236%
Net assets at end of period (000 omitted) $184,523 $135,749 $79,524 $37,385 $20,156
<FN>
*For the period from the commencement of the Fund's investment operations, June
6, 1988, through January 31, 1989.
+Annualized.
[dbldag]Total returns for Class A shares do not include the applicable sales
charge. If the charge had been included, the results would have been lower.
[sec]The investment adviser and/or the distributor voluntarily waived a portion of their management fee and/or
distribution fee, respectively, for the periods indicated. If these fees had been incurred by the Fund,
the net investment income per share and the ratios would have been:
Net investment income $ 0.56 $ 0.57 $ 0.60 $ 0.61 $ 0.59
Ratios (to average net assets):
Expenses 1.23% 1.13% 1.16% 0.95% 1.32%
Net investment income 4.91% 5.56% 5.93% 6.33% 5.96%
</FN>
<CAPTION>
Period ended
January 31,
Year Ended January 31, 1989*
- ---------------------------------------------------------------------------------
<S> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.53
--------
Income from investment operations -
Net investment income[sec] $ 0.29
Net realized and unrealized gain on investments 0.21
--------
Total from investment operations $ 0.50
--------
Less distributions declared to shareholders -
From net investment income $ (0.24)
From net realized gain on investments --
In excess of net investment income --
From paid-in capital --
--------
Total distributions declared to shareholders $ (0.24)
--------
Net asset value - end of period $ 9.79
--------
Total return[dbldag] 8.16%+
Ratios (to average net assets)/Supplemental data[sec]:
Expenses 0.40%+
Net investment income 5.93%+
Portfolio turnover 32%
Net assets at end of period (000 omitted) $ 6,412
Net investment income $ 0.26
Ratios (to average net assets):
Expenses 1.09%+
Net investment income 5.24%+
</TABLE>
See notes to financial statements
40
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
New York Fund
- ---------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------
1998 1997 1996 1995
---------------------------------------------
Class B
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.59 $ 10.66 $ 10.49 $ 10.50
------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.49 $ 0.47 $ 0.47 $ 0.47
Net realized and unrealized gain (loss) on investments 0.64 (0.07) 0.17 0.05
------- ------- ------- -------
Total from investment operations $ 1.13 $ 0.40 $ 0.64 $ 0.52
------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.46) $ (0.47) $ (0.47) $ (0.47)
From net realized gain on investments -- -- -- --
In excess of net investment income[dbldag][dbldag] -- -- (0.00) (0.01)
In excess of net realized gain on investments -- -- -- (0.05)
-------- -------- -------- --------
Total distributions declared to shareholders $ (0.46) $ (0.47) $ (0.47) $ (0.53)
-------- -------- -------- --------
Net asset value - end of period $ 11.26 $ 10.59 $ 10.66 $ 10.49
-------- -------- -------- --------
Total return 10.78% 3.77% 6.10% 5.17%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.78% 1.92% 1.92% 1.89%
Net investment income 4.39% 4.37% 4.27% 4.58%
Portfolio turnover 41% 64% 102% 147%
Net assets at end of period (000 omitted) $26,618 $26,724 $28,068 $11,885
<FN>
**For the period from the inception of Class B, September 7, 1993, through January 31, 1994.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees
paid indirectly.
[dbldag][dbldag]For the year ended March 31, 1996, the per share distribution in excess of net investment income
was $0.0048.
[sec]The investment adviser and/or the distributor voluntarily waived a portion of their management fee and/or
distribution fee, respectively, for certain of the periods indicated. If these fees had been incurred by
the Fund, the net investment income per share and the ratios would have been:
Net investment income $ 0.48 -- -- $ 0.47
Ratios (to average net assets):
Expenses## 1.85% -- -- 1.91%
Net investment income 4.32% -- -- 4.57%
</FN>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
New York Fund
- ---------------------------------------------------------------------------------------------------------------
Two Months
Ended Period Ended
March 31, January 31,
1994 1994**
-------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.34 $ 11.46
------- --------
Income from investment operations# -
Net investment income[sec] $ 0.07 $ 0.18
Net realized and unrealized gain (loss) on investments (0.83) 0.04
------- --------
Total from investment operations $ (0.76) $ 0.22
------- --------
Less distributions declared to shareholders -
From net investment income $ (0.07) $ (0.18)
From net realized gain on investments -- (0.15)
In excess of net investment income[dbldag][dbldag] (0.01) (0.01)
In excess of net realized gain on investments -- --
------- --------
Total distributions declared to shareholders $ (0.08) $ (0.34)
------- --------
Net asset value - end of period $ 10.50 $ 11.34
------- --------
Total return (6.71)%++ 5.20%+
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.87%+ 1.79%+
Net investment income 4.21%+ 3.90%+
Portfolio turnover 15% 51%
Net assets at end of period (000 omitted) $ 6,265 $ 4,828
Net investment income $ 0.07 $ 0.17
Ratios (to average net assets):
Expenses## 1.97%+ 2.00%+
Net investment income 4.11%+ 3.69%+
</TABLE>
See notes to financial statements
41
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
North Carolina Fund
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------------------
1998 1997 1996 1995
---------------------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.56 $ 11.57 $ 11.42 $ 11.48
------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.59 $ 0.59 $ 0.59 $ 0.61
Net realized and unrealized gain (loss) on investments 0.59 (0.01) 0.15 0.03
------- ------- ------- -------
Total from investment operations $ 1.18 $ 0.58 $ 0.74 $ 0.64
------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.59) $ (0.59) $ (0.59) $ (0.60)
From net realized gain on investments -- -- -- (0.06)
In excess of net investment income[dbldag][dbldag] -- (0.00) (0.00) --
In excess of net realized gain on investments -- -- -- (0.04)
------- ------- ------- -------
Total distributions declared to shareholders $ (0.59) $ (0.59) $ (0.59) $ (0.70)
------- ------- ------- -------
Net asset value - end of period $ 12.15 $ 11.56 $ 11.57 $ 11.42
------- ------- ------- -------
Total return[dbldag] 10.36% 5.09% 6.56% 5.86%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.03% 1.08% 1.17% 1.16%
Net investment income 4.92% 5.05% 5.04% 5.38%
Portfolio turnover 24% 33% 30% 58%
Net assets at end of period (000 omitted) $380,595 $377,112 $409,347 $429,131
<FN>
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
[dbldag]Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
[dbldag][dbldag]For the years ended March 31, 1997, and 1996, the per share distributions in excess of net investment
income were $0.002 and $0.002, respectively.
[sec]The investment adviser voluntarily waived a portion of its management fee for certain of the periods
indicated. If these fees had been incurred by the Fund, the net investment income per share and the
ratios would have been:
Net investment income $ 0.58 $ 0.58 -- --
Ratios (to average net assets):
Expenses## 1.13% 1.15% -- --
Net investment income 4.82% 4.98% -- --
</FN>
<CAPTION>
Two Months
Ended Year Ended
March 31, January 31,
1994 1994
------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 12.37 $ 11.80
-------- --------
Income from investment operations# -
Net investment income[sec] $ 0.10 $ 0.64
Net realized and unrealized gain (loss) on investments (0.89) 0.58
-------- --------
Total from investment operations $ (0.79) $ 1.22
-------- --------
Less distributions declared to shareholders -
From net investment income $ (0.07) $ (0.61)
From net realized gain on investments -- (0.01)
In excess of net investment income[dbldag][dbldag] (0.03) (0.03)
In excess of net realized gain on investments -- --
-------- --------
Total distributions declared to shareholders $ (0.10) $ (0.65)
-------- --------
Net asset value - end of period $ 11.48 $ 12.37
-------- --------
Total return[dbldag] (6.39)%++ 10.59%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.16%+ 1.19%
Net investment income 4.96%+ 5.21%
Portfolio turnover 2% 12%
Net assets at end of period (000 omitted) $460,321 $495,158
Net investment income -- --
Ratios (to average net assets):
Expenses## -- --
Net investment income -- --
</TABLE>
See notes to financial statements
42
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
North Carolina Fund
- -----------------------------------------------------------------------------------------------------------------------------
Year Ended January 31, 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.45 $ 11.30 $ 11.18 $ 11.15 $ 11.13
-------- -------- -------- -------- --------
Income from investment operations -
Net investment income $ 0.65 $ 0.70 $ 0.72 $ 0.73 $ 0.74
Net realized and unrealized gain on investments 0.37 0.26 0.17 0.03 0.02
-------- -------- -------- -------- --------
Total from investment operations $ 1.02 $ 0.96 $ 0.89 $ 0.76 $ 0.76
-------- -------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.67) $ (0.76) $ (0.72) $ (0.73) $ (0.74)
From net realized gain on investments -- (0.01) (0.05) -- --
From paid-in capital[dbldag][dbldag] -- (0.04) (0.00) -- --
-------- -------- -------- -------- --------
Total distributions declared to shareholders $ (0.67) $ (0.81) $ (0.77) $ (0.73) $ (0.74)
-------- -------- -------- -------- --------
Net asset value - end of period $ 11.80 $ 11.45 $ 11.30 $ 11.18 $ 11.15
-------- -------- -------- -------- --------
Total return[dbldag] 9.23% 8.82% 8.34% 6.97% 7.12%
Ratios (to average net assets)/Supplemental data:
Expenses 1.07% 1.09% 1.09% 1.12% 1.11%
Net investment income 5.80% 6.17% 6.47% 6.48% 6.70%
Portfolio turnover 2% 39% 44% 61% 25%
Net assets at end of period (000 omitted) $398,352 $312,466 $226,806 $175,101 $129,287
<FN>
[dbldag]Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
[dbldag][dbldag]For the year ended January 31, 1991, the per share distribution from paid-in capital was $0.0005.
</FN>
</TABLE>
See notes to financial statements
43
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
North Carolina Fund
- -------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------------
1998 1997 1996 1995
---------------------------------------------------
Class B
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.55 $ 11.56 $ 11.42 $ 11.47
------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.51 $ 0.50 $ 0.50 $ 0.52
Net realized and unrealized gain (loss) on investments 0.60 -- 0.14 0.05
------- ------- ------- -------
Total from investment operations $ 1.11 $ 0.50 $ 0.64 $ 0.57
------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.51) $ (0.51) $ (0.50) $ (0.52)
From net realized gain on investments -- -- -- (0.06)
In excess of net investment income[dbldag][dbldag] -- (0.00) (0.00) --
In excess of net realized gain on investments -- -- -- (0.04)
------- ------- ------- -------
Total distributions declared to shareholders $ (0.51) $ (0.51) $ (0.50) $ (0.62)
------- ------- ------- -------
Net asset value - end of period $ 12.15 $ 11.55 $ 11.56 $ 11.42
------- ------- ------- -------
Total return 9.75% 4.36% 5.70% 5.20%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.68% 1.78% 1.90% 1.88%
Net investment income 4.27% 4.36% 4.30% 4.64%
Portfolio turnover 24% 33% 30% 58%
Net assets at end of period (000 omitted) $44,238 $39,035 $33,847 $26,260
<FN>
**For the period from the inception of Class B, September 7, 1993, through January 31, 1994.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
[dbldag][dbldag]For the years ended March 31, 1997, and 1996, and the two months ended March 31, 1994, the per share
distributions in excess of net investment income were
$0.001, $0.002, and $0.004, respectively.
[sec]The investment adviser voluntarily waived a portion of its management fee for certain of the periods indicated.
If these fees had been incurred by the Fund, the net investment income per share and the ratios would have been
Net investment income $ 0.50 $ 0.49 -- --
Ratios (to average net assets):
Expenses## 1.78% 1.85% -- --
Net investment income 4.17% 4.29% -- --
</FN>
<CAPTION>
Two Months
Ended Period Ended
March 31, January 31,
1994 1994**
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 12.36 $ 12.36
-------- -------
Income from investment operations# -
Net investment income[sec] $ 0.08 $ 0.22
Net realized and unrealized gain (loss) on investments (0.89) 0.01
-------- -------
Total from investment operations $ (0.81) $ 0.23
-------- -------
Less distributions declared to shareholders -
From net investment income $ (0.08) $ (0.21)
From net realized gain on investments -- (0.01)
In excess of net investment income[dbldag][dbldag] (0.00) (0.01)
In excess of net realized gain on investments -- --
-------- -------
Total distributions declared to shareholders $ (0.08) $ (0.23)
-------- -------
Net asset value - end of period $ 11.47 $ 12.36
-------- -------
Total return (6.51)%++ 4.58%+
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.88%+ 1.84%+
Net investment income 4.18%+ 4.03%+
Portfolio turnover 2% 12%
Net assets at end of period (000 omitted) $ 15,866 $13,379
Net investment income -- --
Ratios (to average net assets):
Expenses## -- --
Net investment income -- --
</TABLE>
See notes to financial statements
44
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
North Carolina Fund
- ----------------------------------------------------------------------------------------------------------------
Year Ended March 31,
--------------------------------------------------
1998 1997 1996 1995
--------------------------------------------------
Class C
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.55 $ 11.56 $ 11.41 $ 11.47
------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.51 $ 0.52 $ 0.51 $ 0.53
Net realized and unrealized gain (loss) on investments 0.60 (0.02) 0.15 0.04
------- ------- ------- -------
Total from investment operations $ 1.11 $ 0.50 $ 0.66 $ 0.57
------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income[dbldag][dbldag] $ (0.51) $ (0.51) $ (0.51) $ (0.53)
From net realized gain on investments -- -- -- (0.06)
In excess of net realized gain on investments -- -- -- (0.04)
------- ------- ------- -------
Total distributions declared to shareholders $ (0.51) $ (0.51) $ (0.51) $ (0.63)
------- ------- ------- -------
Net asset value - end of period $ 12.15 $11.55 $11.56 $ 11.41
------- ------- ------- -------
Total return 9.75% 4.41% 5.87% 5.18%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.68% 1.73% 1.83% 1.81%
Net investment income 4.27% 4.40% 4.38% 4.71%
Portfolio turnover 24% 33% 30% 58%
Net assets at end of period (000 omitted) $ 8,143 $ 7,789 $ 9,352 $ 8,149
<FN>
***For the period from the inception of Class C, January 3, 1994, through January 31, 1994.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
[dbldag][dbldag]For the years ended March 31, 1997, and 1996, the two months ended March 31, 1994, and the period
ended January 31, 1994, the per share distributions in exces of net investment income were $0.002,
$0.002, $0.002, and $0.003, respectively.
[sec]The investment adviser voluntarily waived a portion of its management fee 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:
</FN>
Net investment income $ 0.50 $ 0.51 -- --
Ratios (to average net assets):
Expenses## 1.78% 1.80% -- --
Net investment income 4.17% 4.33% -- --
<CAPTION>
Two Months
Ended Period Ended
March 31, January 31,
1994 1994***
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 12.36 $ 12.24
------- -------
Income from investment operations# -
Net investment income[sec] $ 0.10 $ 0.02
Net realized and unrealized gain (loss) on investments (0.90) 0.12
------- -------
Total from investment operations $ (0.80) $ 0.14
------- -------
Less distributions declared to shareholders -
From net investment income[dbldag][dbldag] $ (0.09) $ (0.02)
From net realized gain on investments -- --
In excess of net realized gain on investments -- --
------- -------
Total distributions declared to shareholders $ (0.09) $ (0.02)
------- -------
Net asset value - end of period $ 11.47 $ 12.36
------- -------
Total return (6.50)%++ 16.50%+
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.82%+ 1.44%+
Net investment income 4.25%+ 2.33%+
Portfolio turnover 2% 12%
Net assets at end of period (000 omitted) $ 6,661 $ 4,584
Net investment income -- --
Ratios (to average net assets):
Expenses## -- --
Net investment income -- --
</TABLE>
See notes to financial statements
45
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Pennsylvania Fund
- -----------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------------
1998 1997 1996 1995
---------------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.26 $ 9.37 $ 9.29 $ 9.15
-------- ------ ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.50 $ 0.53 $ 0.54 $ 0.54
Net realized and unrealized gain (loss) on investments 0.56 (0.10) 0.09 0.18
-------- ------- ------- -------
Total from investment operations $ 1.06 $ 0.43 $ 0.63 $ 0.72
-------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income[dbldag][dbldag] $ (0.50) $ (0.54) $ (0.55) $ (0.54)
From net realized gain on investments -- -- -- (0.01)
In excess of net realized gain on investments -- -- -- (0.03)
-------- ------- ------- -------
Total distributions declared to shareholders $ (0.50) $ (0.54) $ (0.55) $ (0.58)
-------- ------- ------- -------
Net asset value - end of period $ 9.82 $ 9.26 $ 9.37 $ 9.29
-------- ------- ------- -------
Total return[dbldag] 11.65% 4.67% 6.85% 8.14%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses 0.40% 0.10% 0.10% 0.01%
Net investment income 5.15% 5.66% 5.76% 5.97%
Portfolio turnover 31% 42% 40% 49%
Net assets at end of period (000 omitted) $ 18,918 $16,933 $18,030 $16,411
<FN>
*For the period from the commencement of the Fund's investment operations, February 1, 1993, through January 31,
1994.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees
paid indirectly.
[dbldag]Total returns for Class A shares do not include the applicable sales charge. If the charge had been
included, the results would have been lower.
[dbldag][dbldag]For the year ended March 31, 1997, per share distribution in excess of net investment income was
$0.003.
[sec]Subject to reimbursement by the Fund, the investment adviser voluntarily agreed to maintain expenses of the
Fund, exclusive of management, distribution, and service fees, at not more than 0.00% of average daily net
assets. Effective October 31, 1997, the investment adviser voluntarily waived a portion of its management
fee. If this fee had been incurred by the Fund and to the extent actual expenses were over/under this
limitation, the net investment income per share and the ratios would have been:
</FN>
Net investment income $ 0.44 $ 0.45 $ 0.45 $ 0.43
Ratios (to average net assets):
Expenses## 0.99% 0.95% 1.00% 1.18%
Net investment income 4.56% 4.81% 4.86% 4.80%
<CAPTION>
Two Months
Ended Period Ended
March 31, January 31,
1994 1994*
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.14 $ 9.53
-------- --------
Income from investment operations# -
Net investment income[sec] $ 0.09 $ 0.50
Net realized and unrealized gain (loss) on investments (0.99) 0.62
-------- --------
Total from investment operations $ (0.90) $ 1.12
-------- --------
Less distributions declared to shareholders -
From net investment income[dbldag][dbldag] $ (0.09) $ (0.50)
From net realized gain on investments -- (0.01)
In excess of net realized gain on investments -- --
-------- --------
Total distributions declared to shareholders $ (0.09) $ (0.51)
-------- --------
Net asset value - end of period $ 9.15 $ 10.14
-------- --------
Total return[dbldag] (8.91)%++ 12.12%+
Ratios (to average net assets)/Supplemental data[sec]:
Expenses 0.00%+ 0.00%+
Net investment income 5.43%+ 5.30%+
Portfolio turnover 1% 10%
Net assets at end of period (000 omitted) $ 13,961 $ 13,987
Net investment income $ 0.06 $ 0.32
Ratios (to average net assets):
Expenses## 1.84%+ 1.94%+
Net investment income 3.60%+ 3.36%+
</TABLE>
See notes to financial statements
46
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Pennsylvania Fund
- -----------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------------
1998 1997 1996 1995
---------------------------------------------------
Class B
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.28 $ 9.39 $ 9.29 $ 9.15
------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.42 $ 0.46 $ 0.50 $ 0.45
Net realized and unrealized gain (loss) on investments 0.56 (0.11) 0.07 0.18
------- ------- ------- -------
Total from investment operations $ 0.98 $ 0.35 $ 0.57 $ 0.63
------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income[dbldag][dbldag] $ (0.42) $ (0.46) $ (0.47) $ (0.45)
From net realized gain on investments -- -- -- (0.01)
In excess of net realized gain on investments -- -- -- (0.03)
------- ------- ------- -------
Total distributions declared to shareholders $ (0.42) $ (0.46) $ (0.47) $ (0.49)
------- ------- ------- -------
Net asset value - end of period $ 9.84 $ 9.28 $ 9.39 $ 9.29
------- ------- ------- -------
Total return 10.76% 3.83% 6.23% 7.07%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses 1.19% 0.90% 0.88% 1.01%
Net investment income 4.36% 4.86% 4.98% 4.96%
Portfolio turnover 31% 42% 40% 49%
Net assets at end of period (000 omitted) $20,551 $24,898 $24,170 $ 7,699
<FN>
**For the period from the inception of Class B, September 7, 1993, through January 31, 1994.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees
paid indirectly.
[dbldag][dbldag]For the year ended March 31, 1997, and the two months ended March 31, 1994, the per share
distributions in excess of net investment income were $0.002 and $0.001, respectively.
[sec]Subject to reimbursement by the Fund, the investment adviser voluntarily agreed to maintain expenses of the
Fund, exclusive of management, distribution, and service fees, at not more than 0.00% of average daily net
assets. Effective October 31, 1997, the investment adviser voluntarily waived a portion of its management
fee. If this fee had been incurred by the Fund and to the extent actual expenses were over/under this
limitation, the net investment income per share and the ratios would have been:
</FN>
Net investment income $ 0.36 $ 0.38 $ 0.41 $ 0.34
Ratios (to average net assets):
Expenses## 1.78% 1.75% 1.85% 2.26%
Net investment income 3.77% 4.01% 4.01% 3.72%
<CAPTION>
Two Months
Ended Period Ended
March 31, January 31,
1994 1994**
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.15 $ 10.06
-------- -------
Income from investment operations# -
Net investment income[sec] $ 0.06 $ 0.17
Net realized and unrealized gain (loss) on investments (0.99) 0.10
-------- -------
Total from investment operations $ (0.93) $ 0.27
-------- -------
Less distributions declared to shareholders -
From net investment income[dbldag][dbldag] $ (0.07) $ (0.17)
From net realized gain on investments -- (0.01)
In excess of net realized gain on investments -- --
-------- -------
Total distributions declared to shareholders $ (0.07) $ (0.18)
-------- -------
Net asset value - end of period $ 9.15 $ 10.15
-------- -------
Total return (9.16)%++ 6.76%+
Ratios (to average net assets)/Supplemental data[sec]:
Expenses 1.00%+ 1.00%+
Net investment income 4.37%+ 4.22%+
Portfolio turnover 1% 10%
Net assets at end of period (000 omitted) $ 4,304 $ 3,401
Net investment income $ 0.04 $ 0.05
Ratios (to average net assets):
Expenses## 2.91%+ 2.50%+
Net investment income 2.47%+ 1.29%+
</TABLE>
See notes to financial statements
47
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
South Carolina Fund
- -----------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------------
1998 1997 1996 1995
---------------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.88 $ 11.97 $ 11.86 $ 11.79
-------- -------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.60 $ 0.62 $ 0.62 $ 0.63
Net realized and unrealized gain (loss) on investments 0.64 (0.10) 0.11 0.15
-------- -------- -------- --------
Total from investment operations $ 1.24 $ 0.52 $ 0.73 $ 0.78
-------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.60) $ (0.61) $ (0.62) $ (0.62)
From net realized gain on investments -- -- -- (0.06)
In excess of net investment income[dbldag][dbldag] (0.00) -- (0.00) --
In excess of net realized gain on investments -- -- -- (0.03)
-------- -------- -------- --------
Total distributions declared to shareholders $ (0.60) $ (0.61) $ (0.62) $ (0.71)
-------- -------- -------- --------
Net asset value - end of period $ 12.52 $ 11.88 $ 11.97 $ 11.86
-------- -------- -------- --------
Total return[dbldag] 10.62% 4.46% 6.20% 6.93%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.06% 1.10% 1.20% 1.19%
Net investment income 4.86% 5.17% 5.10% 5.37%
Portfolio turnover 29% 13% 18% 30%
Net assets at end of period (000 omitted) $148,820 $148,908 $166,801 $171,045
<FN>
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees
paid indirectly.
[dbldag]Total returns for Class A shares do not include the applicable sales charge. If the charge had been
included, the results would have been lower.
[dbldag][dbldag]For the years ended March 31, 1998 and 1996, the per share distributions in excess of net investment
income were $0.0009 and $0.0006, respectively.
[sec]The investment adviser voluntarily waived a portion of its management fee for certain of the periods
indicated. If this fee had been incurred by the Fund, the net investment income per share and the ratios would
have been:
</FN>
Net investment income $ 0.59 $ 0.16 -- --
Ratios (to average net assets):
Expenses ## 1.16% 1.16% -- --
Net investment income 4.76% 5.11% -- --
<CAPTION>
Two Months
Ended Year Ended
March 31, January 31,
1994 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 12.74 $ 12.02
-------- --------
Income from investment operations# -
Net investment income[sec] $ 0.08 $ 0.63
Net realized and unrealized gain (loss) on investments (0.92) 0.74
-------- --------
Total from investment operations $ (0.84) $ 1.37
-------- --------
Less distributions declared to shareholders -
From net investment income $ (0.08) $ (0.61)
From net realized gain on investments -- (0.01)
In excess of net investment income[dbldag][dbldag] (0.03) (0.03)
In excess of net realized gain on investments -- --
-------- --------
Total distributions declared to shareholders $ (0.11) $ (0.65)
-------- --------
Net asset value - end of period $ 11.79 $ 12.74
-------- --------
Total return[dbldag] (6.65)%++ 11.69%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.23%+ 1.22%
Net investment income 5.09%+ 5.06%
Portfolio turnover 4% 10%
Net assets at end of period (000 omitted) $173,316 $187,307
Net investment income -- --
Ratios (to average net assets):
Expenses ## -- --
Net investment income -- --
</TABLE>
See notes to financial statements
48
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
South Carolina Fund
- --------------------------------------------------------------------------------------------------------------------------
Year Ended January 31, 1993 1992 1991 1990 1989
- --------------------------------------------------------------------------------------------------------------------------
Class A
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.74 $ 11.45 $ 11.30 $ 11.24 $ 11.14
-------- -------- ------- ------- -------
Income from investment operations -
Net investment income $ 0.67 $ 0.70 $ 0.71 $ 0.72 $ 0.76
Net realized and unrealized gain on investments 0.34 0.40 0.21 0.06 0.11
-------- -------- ------- ------- -------
Total from investment operations $ 1.01 $ 1.10 $ 0.92 $ 0.78 $ 0.87
-------- -------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.69) $ (0.76) $ (0.71) $ (0.72) $ (0.77)
From net realized gain on investments (0.04) (0.05) (0.06) -- --
-------- -------- ------- ------- -------
Total distributions declared to shareholders $ (0.73) $ (0.81) $ (0.77) $ (0.72) $ (0.77)
-------- -------- ------- ------- -------
Net asset value - end of period $ 12.02 $ 11.74 $ 11.45 $11.30 $11.24
-------- -------- ------- ------- -------
Total return[dbldag] 8.89% 9.95% 8.46% 7.13% 8.18%
Ratios (to average net assets)/Supplemental data:
Expenses 1.12% 1.15% 1.18% 1.21% 0.97%
Net investment income 5.74% 6.07% 6.30% 6.35% 6.90%
Portfolio turnover 11% 22% 47% 54% 27%
Net assets at end of period (000 omitted) $144,539 $101,434 $75,922 $57,675 $45,391
<FN>
[dbldag]Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
</FN>
</TABLE>
See notes to financial statements
49
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
South Carolina Fund
- -----------------------------------------------------------------------------------------------------------------
Year Ended March 31,
-------------------------------------------------
1998 1997 1996 1995
-------------------------------------------------
Class B
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.88 $ 11.97 $ 11.86 $ 11.78
------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.52 $ 0.54 $ 0.52 $ 0.54
Net realized and unrealized gain (loss) on investments 0.64 (0.10) 0.12 0.17
------- ------- ------- -------
Total from investment operations $ 1.16 $ 0.44 $ 0.64 $ 0.71
------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.52) $ (0.53) $ (0.53) $ (0.54)
From net realized gain on investments -- -- -- (0.06)
In excess of net investment income[dbldag][dbldag] (0.00) -- (0.00) (0.00)
In excess of net realized gain on investments -- -- -- (0.03)
------- ------- ------- -------
Total distributions declared to shareholders $ (0.52) $ (0.53) $ (0.53) $ (0.63)
------- ------- ------- -------
Net asset value - end of period $ 12.52 $11.88 $ 11.97 $ 11.86
------- ------- ------- -------
Total return 9.91% 3.73% 5.43% 6.26%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.71% 1.79% 1.92% 1.90%
Net investment income 4.21% 4.48% 4.35% 4.63%
Portfolio turnover 29% 13% 18% 30%
Net assets at end of period (000 omitted) $28,086 $21,871 $18,420 $12,964
<FN>
**For the period from the inception of Class B, September 7, 1993, through January 31, 1994.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
[dbldag][dbldag]For the years ended March 31, 1998, 1996, and 1995, the per share distributions in excess of net
investment income were $0.0008, $0.0005 and $0.00436, respectively.
[sec]The investment adviser voluntarily waived a portion of its management fee for certain of the periods indicated.
If this fee had been incurred by the Fund, the net investment income per share and the ratios would have been:
</FN>
Net investment income $ 0.51 $ 0.53 -- --
Ratios (to average net assets):
Expenses ## 1.81% 1.85% -- --
Net investment income 4.11% 4.42% -- --
<CAPTION>
Two Months
Ended Period Ended
March 31, January 31,
1994 1994**
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 12.73 $ 12.67
-------- -------
Income from investment operations# -
Net investment income[sec] $ 0.08 $ 0.21
Net realized and unrealized gain (loss) on investments (0.94) 0.06
-------- -------
Total from investment operations $ (0.86) $ 0.27
-------- -------
Less distributions declared to shareholders -
From net investment income $ (0.08) $ (0.20)
From net realized gain on investments -- --
In excess of net investment income[dbldag][dbldag] (0.01) (0.01)
In excess of net realized gain on investments -- --
-------- -------
Total distributions declared to shareholders $ (0.09) $ (0.21)
-------- -------
Net asset value - end of period $ 11.78 $ 12.73
-------- -------
Total return (6.77)%++ 5.47%+
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.96%+ 1.90%+
Net investment income 4.29%+ 3.86%+
Portfolio turnover 4% 10%
Net assets at end of period (000 omitted) $ 10,085 $ 8,217
Net investment income -- --
Ratios (to average net assets):
Expenses ## -- --
Net investment income -- --
</TABLE>
See notes to financial statements
50
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Tennessee Fund
- ------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
--------------------------------------------------------
1998 1997 1996 1995
--------------------------------------------------------
Class B
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.32 $ 10.40 $ 10.27 $ 10.26
-------- -------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.53 $ 0.55 $ 0.54 $ 0.56
Net realized and unrealized gain (loss) on investments 0.60 (0.09) 0.13 0.02
-------- --------- -------- --------
Total from investment operations $ 1.13 $ 0.46 $ 0.67 $ 0.58
-------- --------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.53) $ (0.54) $ (0.54) $ (0.56)
From net realized gain on investments[dbldag][dbldag] -- -- -- (0.00)
In excess of net investment income[dbldag][dbldag][dbldag] (0.01) -- (0.00) --
In excess of net realized gain on investments -- -- -- (0.01)
-------- -------- -------- --------
Total distributions declared to shareholders $ (0.54) $ (0.54) $ (0.54) $ (0.57)
-------- -------- -------- --------
Net asset value - end of period $ 10.91 $ 10.32 $ 10.40 $ 10.27
-------- -------- -------- --------
Total return[dbldag] 11.11% 4.48% 6.66% 5.86%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.07% 1.10% 1.21% 1.22%
Net investment income 4.97% 5.26% 5.18% 5.52%
Portfolio turnover 26% 20% 20% 27%
Net assets at end of period (000 omitted) $108,871 $108,000 $109,811 $117,572
<FN>
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
[dbldag]Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
[dbldag][dbldag]For the year ended March 31, 1995, the per share distribution from net realized gain on investments was
$0.0014.
[dbldag][dbldag][dbldag]For the year ended March 31, 1996, the per share distribution in excess of net investment income was
$0.0024.
[sec]The investment adviser voluntarily waived a portion of its management fee for certain of the periods indicated. If
this fee had been incurred by the Fund, the net investment income per share and the ratios would have been:
</FN>
Net investment income $ 0.52 $ 0.54 -- --
Ratios (to average net assets):
Expenses## 1.17% 1.16% -- --
Net investment income 4.87% 5.20% -- --
<CAPTION>
Two Months
Ended Year Ended
March 31, January 31,
1994 1994
---------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.94 $ 10.37
-------- -------
Income from investment operations# -
Net investment income[sec] $ 0.09 $ 0.57
Net realized and unrealized gain (loss) on investments (0.68) 0.57
-------- -------
Total from investment operations $ (0.59) $ 1.14
-------- -------
Less distributions declared to shareholders -
From net investment income $ (0.07) $ (0.54)
From net realized gain on investments[dbldag][dbldag] -- --
In excess of net investment income[dbldag][dbldag][dbldag] (0.02) (0.03)
In excess of net realized gain on investments -- --
-------- -------
Total distributions declared to shareholders $ (0.09) $ (0.57)
-------- -------
Net asset value - end of period $ 10.26 $ 10.94
-------- -------
Total return[dbldag] (5.39)%++ 11.20%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.21%+ 1.29%
Net investment income 5.31%+ 5.25%
Portfolio turnover 4% 12%
Net assets at end of period (000 omitted) $117,117 $123,050
Net investment income -- --
Ratios (to average net assets):
Expenses## -- --
Net investment income -- --
</TABLE>
See notes to financial statements
51
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Tennessee Fund
- --------------------------------------------------------------------------------------------------------------------------
Year Ended January 31, Period Ended
-------------------------------------------- January 31,
1993 1992 1991 1990 1989*
----------------------------------------------------------
Class A
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.10 $ 9.90 $ 9.80 $ 9.68 $ 9.53
------- ------- ------- ------- ------
Income from investment operations -
Net investment income[sec] $ 0.57 $ 0.61 $ 0.62 $ 0.67 $ 0.22
Net realized and unrealized gain on investments 0.31 0.30 0.13 0.11 0.10
------- ------- ------- ------- ------
Total from investment operations $ 0.88 $ 0.91 $ 0.75 $ 0.78 $ 0.32
------- ------- ------- ------- ------
Less distributions declared to shareholders -
From net investment income $ (0.57) $ (0.66) $ (0.63) $ (0.66) $ (0.17)
From net realized gain on investments (0.01) (0.05) (0.02) -- --
In excess of net investment income (0.03) -- -- -- --
From paid-in capital[dbldag][dbldag] -- -- (0.00) -- --
------- ------- ------- ------- -------
Total distributions declared to shareholders $ (0.61) $ (0.71) $ (0.65) $ (0.66) $ (0.17)
------- ------- ------- ------- -------
Net asset value - end of period $ 10.37 $ 10.10 $ 9.90 $ 9.80 $ 9.68
------- ------- ------- ------- -------
Total return[dbldag] 9.03% 9.50% 7.96% 8.30% 3.43%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses 1.14% 1.15% 1.03% 0.53% 0.40%+
Net investment income 5.89% 6.11% 6.37% 6.70% 5.98%+
Portfolio turnover 9% 42% 58% 78% 5%
Net assets at end of period (000 omitted) $99,443 $87,898 $72,108 $56,048 $15,832
<FN>
*For the period from the commencement of the Fund's investment operations, August 12, 1988, through January 31, 1989.
+Annualized.
++Not annualized.
[dbldag]Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
[dbldag][dbldag]For the year ended January 31, 1991, the per share distribution from paid-in capital was $0.0013.
[sec]The investment adviser and/or the distributor voluntarily waived a portion of their management fee and/or distribution
fee, respectively, for certain of the periods indicated. If these fees had been incurred by the Fund, the net investment
income per share and the ratios would have been:
</FN>
Net investment income $ 0.61 -- $ 0.60 $ 0.20
Ratios (to average net assets):
Expenses 1.17% -- -- 1.24% 0.95%+
Net investment income 6.23% -- -- 5.99% 5.43%+
</TABLE>
See notes to financial statements
52
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Tennessee Fund
- -------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------------------
1998 1997 1996 1995
---------------------------------------------------------
Class B
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.31 $ 10.39 $ 10.26 $ 10.26
-------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.46 $ 0.47 $ 0.46 $ 0.48
Net realized and unrealized gain (loss) on investments 0.61 (0.09) 0.14 0.01
-------- ------- ------- -------
Total from investment operations $ 1.07 $ 0.38 $ 0.60 $ 0.49
-------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.46) $ (0.46) $ (0.47) $ (0.48)
From net realized gain on investments[dbldag][dbldag] -- -- -- (0.00)
In excess of net investment income[dbldag][dbldag][dbldag] (0.01) -- (0.00) --
In excess of net realized gain on investments -- -- -- (0.01)
-------- ------- ------- -------
Total distributions declared to shareholders $ (0.47) $ (0.46) $ (0.47) $ (0.49)
-------- ------- ------- -------
Net asset value - end of period $ 10.91 $ 10.31 $ 10.39 $ 10.26
-------- ------- ------- -------
Total return 10.51% 3.76% 5.89% 5.00%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.72% 1.79% 1.93% 1.94%
Net investment income 4.32% 4.57% 4.43% 4.80%
Portfolio turnover 26% 20% 20% 27%
Net assets at end of period (000 omitted) $ 18,198 $14,436 $12,935 $10,006
<FN>
**For the period from the inception of Class B, September 7, 1993, through January 31, 1994.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
[dbldag][dbldag]For the year ended March 31, 1995, the per share distribution from net realized gain on investments was
$0.0014.
[dbldag][dbldag][dbldag]For the year ended March 31, 1996, the per share distribution in excess of net investment income
was $0.0021.
[sec]The investment adviser voluntarily waived a portion of its management fee for certain of the periods indicated. If
this fee had been incurred by the Fund, the net investment income per share and the ratios would have been:
</FN>
Net investment income $ 0.45 $ 0.46 -- --
Ratios (to average daily net assets):
Expenses## 1.82% 1.85% -- --
Net investment income 4.22% 4.51% -- --
<CAPTION>
Two Months
Ended Period Ended
March 31, January 31,
1994 1994**
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.95 $ 10.87
------- -------
Income from investment operations# -
Net investment income[sec] $ 0.08 $ 0.19
Net realized and unrealized gain (loss) on investments (0.69) 0.08
------- -------
Total from investment operations $ (0.61) $ 0.27
------- -------
Less distributions declared to shareholders -
From net investment income $ (0.08) $ (0.19)
From net realized gain on investments[dbldag][dbldag] -- --
In excess of net investment income[dbldag][dbldag][dbldag] -- --
In excess of net realized gain on investments -- --
------- -------
Total distributions declared to shareholders $ (0.08) $ (0.19)
------- -------
Net asset value - end of period $ 10.26 $ 10.95
------- -------
Total return (5.59)%++ 2.48%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.93%+ 1.93%+
Net investment income 4.49%+ 4.20%+
Portfolio turnover 4% 12%
Net assets at end of period (000 omitted) $ 5,294 $ 3,818
Net investment income -- --
Ratios (to average daily net assets):
Expenses## -- --
Net investment income -- --
</TABLE>
See notes to financial statements
53
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Virginia Fund
- -------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------------------
1998 1997 1996 1995
---------------------------------------------------------
Class A
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.06 $ 11.21 $ 11.09 $ 11.15
-------- -------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.57 $ 0.59 $ 0.59 $ 0.56
Net realized and unrealized gain (loss) on investments 0.55 (0.15) 0.13 0.04
-------- -------- -------- --------
Total from investment operations $ 1.12 $ 0.44 $ 0.72 $ 0.60
-------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.57) $ (0.59) $ (0.60) $ (0.61)
From net realized gain on investments -- -- -- (0.04)
In excess of net investment income[dbldag][dbldag] (0.00) -- (0.00) (0.00)
In excess of net realized gain on investments -- -- -- (0.01)
-------- -------- -------- --------
Total distributions declared to shareholders $ (0.57) $ (0.59) $ (0.60) $ (0.66)
-------- -------- -------- --------
Net asset value - end of period $ 11.61 $ 11.06 $ 11.21 $ 11.09
-------- -------- -------- --------
Total return[dbldag] 10.32% 3.97% 6.52% 5.67%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.03% 1.08% 1.18% 1.16%
Net investment income 4.97% 5.27% 5.20% 4.91%
Portfolio turnover 39% 42% 42% 27%
Net assets at end of period (000 omitted) $373,024 $379,185 $418,408 $430,688
<FN>
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
[dbldag]Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
[dbldag][dbldag]For the years ended March 31, 1998, 1996, and 1995, the per share distributions in excess of net investment
income were $0.002, $0.005 and $0.003, respectively.
[sec]The investment adviser voluntarily waived a portion of its management fee for certain of the periods indicated. If
this fee had been incurred by the Fund, the net investment income per share and the ratios would have been:
</FN>
Net investment income $ 0.56 $ 0.58 -- --
Ratios (to average net assets):
Expenses## 1.13% 1.14% -- --
Net investment income 4.87% 5.21% -- --
<CAPTION>
Two Months
Ended Year Ended
March 31, January 31,
1994 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 12.07 $ 11.72
-------- --------
Income from investment operations# -
Net investment income[sec] $ 0.10 $ 0.65
Net realized and unrealized gain (loss) on investments (0.92) 0.56
-------- --------
Total from investment operations $ (0.82) $ 1.21
-------- --------
Less distributions declared to shareholders -
From net investment income $ (0.06) $ (0.62)
From net realized gain on investments -- (0.20)
In excess of net investment income[dbldag][dbldag] (0.04) (0.04)
In excess of net realized gain on investments -- --
-------- --------
Total distributions declared to shareholders $ (0.10) $ (0.86)
-------- --------
Net asset value - end of period $ 11.15 $ 12.07
-------- --------
Total return[dbldag] (6.80)%++ 10.67%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.17%+ 1.18%
Net investment income 5.33%+ 5.37%
Portfolio turnover 5% 22%
Net assets at end of period (000 omitted) $443,580 $479,333
Net investment income -- --
Ratios (to average net assets):
Expenses## -- --
Net investment income -- --
</TABLE>
See notes to financial statements
54
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Virginia Fund
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended January 31, 1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.44 $ 11.16 $ 10.97 $ 10.91 $ 10.75
-------- ------- -------- -------- --------
Income from investment operations -
Net investment income $ 0.68 $ 0.71 $ 0.73 $ 0.73 $ 0.74
Net realized and unrealized gain on investments 0.30 0.34 0.19 0.06 0.16
-------- ------- -------- -------- --------
Total from investment operations $ 0.98 $ 1.05 $ 0.92 $ 0.79 $ 0.90
-------- ------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.70) $ (0.77) $ (0.73) $ (0.73) $ (0.74)
From net realized gain on investments[dbldag][dbldag] (0.00) -- -- -- --
-------- -------- -------- -------- --------
Total distributions declared to shareholders $ (0.70) $ (0.77) $ (0.73) $ (0.73) $ (0.74)
-------- -------- -------- -------- --------
Net asset value - end of period $ 11.72 $ 11.44 $ 11.16 $ 10.97 $ 10.91
-------- -------- -------- -------- --------
Total return[dbldag] 8.88% 9.76% 8.74% 7.46% 8.76%
Ratios (to average net assets)/Supplemental data:
Expenses 1.08% 1.08% 1.11% 1.12% 1.09%
Net investment income 6.02% 6.32% 6.64% 6.67% 6.91%
Portfolio turnover 20% 13% 38% 41% 38%
Net assets at end of period (000 omitted) $399,696 $328,664 $275,202 $240,553 $207,680
<FN>
[dbldag]Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
[dbldag][dbldag]For the year ended January 31, 1993, the per share distribution from net realized gain on investments was
$0.00348.
</FN>
</TABLE>
See notes to financial statements
55
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Virginia Fund
- -----------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
-------------------------------------------------------
1998 1997 1996 1995
-------------------------------------------------------
Class B
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.06 $ 11.21 $ 11.08 $ 11.14
------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.49 $ 0.51 $ 0.51 $ 0.53
Net realized and unrealized gain (loss) on investments 0.56 (0.15) 0.13 (0.01)
------- ------- ------- -------
Total from investment operations $ 1.05 $ 0.36 $ 0.64 $ 0.52
------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.49) $ (0.51) $ (0.51) $ (0.53)
From net realized gain on investments -- -- -- (0.04)
In excess of net investment income[dbldag][dbldag] (0.01) -- (0.00) (0.00)
In excess of net realized gain on investments -- -- -- (0.01)
------- ------- ------- -------
Total distributions declared to shareholders $ (0.50) $ (0.51) $ (0.51) $ (0.58)
------- ------- ------- -------
Net asset value - end of period $ 11.61 $ 11.06 $ 11.21 $11.08
------- ------- ------- -------
Total return 9.61% 3.24% 5.85% 4.91%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.68% 1.78% 1.90% 1.88%
Net investment income 4.32% 4.57% 4.46% 4.84%
Portfolio turnover 39% 42% 42% 27%
Net assets at end of period (000 omitted) $32,902 $30,567 $28,420 $22,007
<FN>
**For the period from the inception of Class B, September 7, 1993, through January 31, 1994.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
[dbldag][dbldag]For the years ended March 31, 1996, and 1995, and the two months ended March 31, 1994, the per share
distributions in excess of net investment income were $0.002, $0.005, and $0.002, respectively.
[sec]The investment adviser voluntarily waived a portion of its management fee for certain of the periods indicated. If
this fee had been incurred by the Fund, the net investment income and the ratios would have been:
</FN>
Net investment income $ 0.48 $ 0.50 -- --
Ratios (to average net assets):
Expenses## 1.78% 1.84% -- --
Net investment income 4.22% 4.51% -- --
<CAPTION>
Two Months
Ended Period Ended
March 31, January 31,
1994 1994**
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 12.06 $ 12.14
-------- -------
Income from investment operations# -
Net investment income[sec] $ 0.09 $ 0.22
Net realized and unrealized gain (loss) on investments (0.92) 0.01
-------- -------
Total from investment operations $ (0.83) $ 0.23
-------- -------
Less distributions declared to shareholders -
From net investment income $ (0.09) $ (0.21)
From net realized gain on investments -- (0.09)
In excess of net investment income[dbldag][dbldag] (0.00) (0.01)
In excess of net realized gain on investments -- --
-------- -------
Total distributions declared to shareholders $ (0.09) $ (0.31)
-------- -------
Net asset value - end of period $ 11.14 $ 12.06
-------- -------
Total return (6.92)%++ 4.93%+
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.88%+ 1.82%+
Net investment income 4.52%+ 4.25%+
Portfolio turnover 5% 22%
Net assets at end of period (000 omitted) $ 13,337 $10,877
Net investment income -- --
Ratios (to average net assets):
Expenses## -- --
Net investment income -- --
</TABLE>
See notes to financial statements
56
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Virginia Fund
- ------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
--------------------------------------------------
1998 1997 1996 1995
--------------------------------------------------
Class C
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.06 $ 11.21 $ 11.07 $ 11.14
------- ------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.49 $ 0.52 $ 0.51 $ 0.56
Net realized and unrealized gain (loss) on investments 0.56 (0.16) 0.15 (0.04)
------- ------- -------- --------
Total from investment operations $ 1.05 $ 0.36 $ 0.66 $ 0.52
------- ------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.49) $ (0.51) $ (0.52) $ (0.54)
From net realized gain on investment income -- -- -- (0.04)
In excess of net investment income[dbldag][dbldag] (0.01) -- (0.00) (0.00)
In excess of net realized gain on investments -- -- -- (0.01)
------- ------- -------- --------
Total distributions declared to shareholders $ (0.50) $ (0.51) $ (0.52) $ (0.59)
------- ------- -------- --------
Net asset value - end of period $ 11.61 $ 11.06 $ 11.21 $ 11.07
------- ------- -------- --------
Total return 9.61% 3.30% 6.02% 4.85%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.68% 1.72% 1.83% 1.80%
Net investment income 4.32% 4.63% 4.53% 4.90%
Portfolio turnover 39% 42% 42% 27%
Net assets at end of period (000 omitted) $ 3,082 $ 3,182 $ 3,366 $ 2,300
<FN>
***For the period from the inception of Class C, January 3, 1994, through January 31, 1994.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
[dbldag][dbldag]For the years ended March 31, 1996, 1995, and January 31, 1994, the per share distributions in excess
of net investment income were $0.005, $0.002, and $0.002, respectively.
[sec]The investment adviser voluntarily waived a portion of its management fee for certain of the periods indicated.
If this fee had been incurred by the Fund, the net investment income and the ratios would have been:
</FN>
Net investment income $ 0.48 $ 0.51 -- --
Ratios (to average net assets):
Expenses## 1.78% 1.78% -- --
Net investment income 4.22% 4.57% -- --
<CAPTION>
Two Months
Ended Period Ended
March 31, January 31,
1994 1994***
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 12.06 $ 11.94
-------- -------
Income from investment operations# -
Net investment income[sec] $ 0.08 $ 0.02
Net realized and unrealized gain (loss) on investments (0.91) 0.12
-------- -------
Total from investment operations $ (0.83) $ 0.14
-------- -------
Less distributions declared to shareholders -
From net investment income $ (0.09) $ (0.02)
From net realized gain on investment income -- --
In excess of net investment income[dbldag][dbldag] -- (0.00)
In excess of net realized gain on investments -- --
-------- -------
Total distributions declared to shareholders $ (0.09) $ (0.02)
-------- -------
Net asset value - end of period $ 11.14 $ 12.06
-------- -------
Total return (6.91)%++ 17.05%+
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.82%+ 1.18%+
Net investment income 4.48%+ 1.79%+
Portfolio turnover 5% 22%
Net assets at end of period (000 omitted) $ 1,760 $ 833
Net investment income -- --
Ratios (to average net assets):
Expenses## -- --
Net investment income -- --
</TABLE>
See notes to financial statements
57
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
West Virginia Fund
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
-----------------------------------------------------------
1998 1997 1996 1995
-----------------------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.31 $ 11.33 $ 11.21 $ 11.19
-------- -------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.58 $ 0.60 $ 0.61 $ 0.62
Net realized and unrealized gain (loss) on investments 0.47 (0.02) 0.12 0.03
-------- -------- -------- --------
Total from investment operations $ 1.05 $ 0.58 $ 0.73 $ 0.65
-------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.58) $ (0.60) $ (0.61) $ (0.62)
From net realized gain on investments -- -- -- --
In excess of net investment income[dbldag][dbldag] (0.01) -- (0.00) --
In excess of net realized gain on investments -- -- -- (0.01)
-------- -------- -------- --------
Total distributions declared to shareholders $ (0.59) $ (0.60) $ (0.61) $ (0.63)
-------- -------- -------- --------
Net asset value - end of period $ 11.77 $ 11.31 $ 11.33 $ 11.21
-------- -------- -------- --------
Total return[dbldag] 9.42% 5.20% 6.58% 6.07%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.10% 1.17% 1.22% 1.19%
Net investment income 4.98% 5.28% 5.30% 5.62%
Portfolio turnover 17% 21% 11% 23%
Net assets at end of period (000 omitted) $130,002 $126,107 $134,514 $127,616
<FN>
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
[dbldag]Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
[dbldag][dbldag]For the year ended March 31, 1996, the per share distribution in excess of net investment income was $0.002.
[sec]The investment adviser voluntarily waived a portion of its management fee for certain of the periods indicated. If this
fee had been incurred by the Fund, the net investment income and the ratios would have been:
</FN>
Net investment income $ 0.57 -- -- --
Ratios (to average net assets):
Expenses## 1.17% -- -- --
Net investment income 4.91% -- -- --
<CAPTION>
Two Months
Ended Year Ended
March 31, January 31,
1994 1994
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 12.06 $ 11.50
-------- --------
Income from investment operations# -
Net investment income[sec] $ 0.01 $ 0.64
Net realized and unrealized gain (loss) on investments (0.78) 0.69
-------- --------
Total from investment operations $ (0.77) $ 1.33
-------- --------
Less distributions declared to shareholders -
From net investment income $ (0.06) $ (0.61)
From net realized gain on investments -- (0.12)
In excess of net investment income[dbldag][dbldag] (0.04) (0.04)
In excess of net realized gain on investments -- --
-------- --------
Total distributions declared to shareholders $ (0.10) $ (0.77)
-------- --------
Net asset value - end of period $ 11.19 $ 12.06
-------- --------
Total return[dbldag] (6.37)%++ 11.80%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.30%+ 1.24%
Net investment income 5.36%+ 5.30%
Portfolio turnover 2% 26%
Net assets at end of period (000 omitted) $130,726 $141,190
Net investment income -- --
Ratios (to average net assets):
Expenses## -- --
Net investment income -- --
</TABLE>
See notes to financial statements
58
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
West Virginia Fund
- ------------------------------------------------------------------------------------------------------------------------
Year Ended January 31, 1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------------
Class A
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.20 $ 10.93 $ 10.72 $ 10.68 $ 10.51
-------- ------- ------- ------- -------
Income from investment operations -
Net investment income $ 0.66 $ 0.70 $ 0.71 $ 0.71 $ 0.77
Net realized and unrealized gain on investments 0.34 0.34 0.21 0.04 0.18
-------- ------- ------- ------- -------
Total from investment operations $ 1.00 $ 1.04 $ 0.92 $ 0.75 $ 0.95
-------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.69) $ (0.76) $ (0.71) $ (0.71) $ (0.78)
From net realized gain on investments (0.01) (0.01) -- -- --
-------- ------- ------- ------- -------
Total distributions declared to shareholders $ (0.70) $ (0.77) $ (0.71) $ (0.71) $ (0.78)
-------- ------- ------- ------- -------
Net asset value - end of period $ 11.50 $ 11.20 $ 10.93 $ 10.72 $ 10.68
-------- ------- ------- ------- -------
Total return[dbldag] 9.12% 9.84% 8.91% 7.26% 9.43%
Ratios (to average net assets)/Supplemental data:
Expenses 1.15% 1.17% 1.21% 1.22% 0.86%
Net investment income 5.97% 6.33% 6.59% 6.63% 7.01%
Portfolio turnover 19% 14% 37% 34% 9%
Net assets at end of period (000 omitted) $115,289 $80,440 $61,984 $52,398 $43,026
<FN>
[dbldag]Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
</FN>
</TABLE>
See notes to financial statements
59
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
West Virginia Fund
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
-----------------------------------------------------------
1998 1997 1996 1995
-----------------------------------------------------------
Class B
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.31 $ 11.33 $ 11.21 $ 11.19
------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.51 $ 0.52 $ 0.52 $ 0.53
Net realized and unrealized gain (loss) on investments 0.46 (0.02) 0.12 0.04
------- ------- ------- -------
Total from investment operations $ 0.97 $ 0.50 $ 0.64 $ 0.57
------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.51) $ (0.52) $ (0.52) $ (0.54)
From net realized gain on investments -- -- -- --
In excess of net investment income[dbldag][dbldag] (0.00) -- (0.00) (0.00)
In excess of net realized gain on investments -- -- -- (0.01)
------- ------- ------- -------
Total distributions declared to shareholders $ (0.51) $ (0.52) $ (0.52) $ (0.55)
------- ------- ------- -------
Net asset value - end of period $ 11.77 $ 11.31 $ 11.33 $ 11.21
------- ------- ------- -------
Total return 8.72% 4.47% 5.81% 5.30%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.75% 1.87% 1.94% 1.91%
Net investment income 4.33% 4.57% 4.56% 4.87%
Portfolio turnover 17% 21% 11% 23%
Net assets at end of period (000 omitted) $15,472 $13,587 $12,647 $10,046
<FN>
**For the period from the inception of Class B, September 7, 1993, through January 31, 1994.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to January 31, 1994, are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
[dbldag][dbldag]For the years ended March 31, 1998, 1996, and 1995, the per share distributions in excess of net investment
income were $0.005, $0.002 and $0.005, respectively.
[sec]The investment adviser voluntarily waived a portion of its management fee for certain of the periods indicated. If
this fee had been incurred by the Fund, the net investment income and the ratios would have been:
</FN>
Net investment income $ 0.50 -- -- --
Ratios (to average net assets):
Expenses## 1.82% -- -- --
Net investment income 4.26% -- -- --
<CAPTION>
Two Months
Ended Period Ended
March 31, January 31,
1994 1994**
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 12.06 $ 12.13
------- -------
Income from investment operations# -
Net investment income[sec] $ 0.01 $ 0.22
Net realized and unrealized gain (loss) on investments (0.87) 0.05
------- -------
Total from investment operations $ (0.86) $ 0.27
------- -------
Less distributions declared to shareholders -
From net investment income $ (0.01) $ (0.21)
From net realized gain on investments -- (0.12)
In excess of net investment income[dbldag][dbldag] -- (0.01)
In excess of net realized gain on investments -- --
------- -------
Total distributions declared to shareholders $ (0.01) $ (0.34)
------- -------
Net asset value - end of period $ 11.19 $ 12.06
------- -------
Total return (6.48)%++ 5.59%+
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 2.02%+ 1.89%+
Net investment income 4.56%+ 4.14%+
Portfolio turnover 2% 26%
Net assets at end of period (000 omitted) $ 5,456 $ 4,530
Net investment income -- --
Ratios (to average net assets):
Expenses## -- --
Net investment income -- --
</TABLE>
See notes to financial statements
60
<PAGE>
Notes to Financial Statements
(1) Business and Organization
MFS Municipal Series Trust (the Trust) is organized as a Massachusetts business
trust and is registered under the Investment Company Act of 1940, as amended,
as an open-end management investment company. The Trust presently consists of
16 Funds, as follows: MFS Municipal Income Fund, MFS Alabama Municipal Bond
Fund, 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.
*These Funds are included within these financial statements.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Because
each Fund invests primarily in the securities of a single state and its
political subdivisions, each Fund is vulnerable to the effects of changes in
the legal and economic environment of the particular state.
Investment Valuations - Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues, are valued on the
basis of valuations furnished by dealers or by a pricing service with
consideration to factors such as institutional-size trading in similar groups
of securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics, and other market data, without exclusive reliance upon
exchange or over-the-counter prices. Short-term obligations, which mature in 60
days or less, are valued at amortized cost, which approximates market value.
Futures contracts listed on commodities exchanges are reported at market value
using closing settlement prices. Securities for which there are no such
quotations or valuations are valued at fair value as determined in good faith
by or at the direction of the Trustees.
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
with the broker either in cash or securities an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received by
the Fund each day, depending on the daily fluctuations in the value of the
contract, and are recorded for financial statement purposes as unrealized gains
or losses by the Fund. Each Fund's investment in futures contracts is designed
to hedge against anticipated future changes in interest rates or securities
prices. Investments in interest rate futures for purposes other than hedging
may be made to modify the duration of the portfolio without incurring the
additional transaction costs involved in buying and selling the underlying
securities. Should interest rates or securities prices move unexpectedly, the
Fund may not achieve the anticipated benefits of the futures contracts and may
realize a loss.
Indexed Securities - Each Fund may invest in indexed securities whose value may
be linked to interest rates, indices, or other financial indicators. Indexed
securities are fixed-income securities whose proceeds at maturity
(principal-indexed securities) or interest rates (coupon-indexed securities)
rise and fall according to the change in one or more specified underlying
instruments. Indexed securities may be more volatile than the underlying
instrument itself.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and original issue discount is amortized or accreted for financial statement
and tax reporting purposes as required by federal income tax regulations.
Capital infusions, which are generally non-recurring incurred to protect or
enhance the value of high-yield securities, are reported as additions to the
cost basis of the security. Costs that are incurred to negotiate the terms or
conditions of capital infusions or that are expected to result in a plan of
reorganization are reported as realized losses. Ongoing costs incurred to
protect or enhance an investment, or costs incurred to pursue other claims or
legal actions, are expensed.
Fees Paid Indirectly - The Trust's custody fee is calculated as a percentage of
each Fund's month end net assets. The fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
each Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
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.
61
<PAGE>
Notes to Financial Statements - continued
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 to shareholders are recorded on the ex-dividend date. Each Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a tax return of capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.
During the year ended March 31, 1998, the following amounts were reclassified
from accumulated undistributed net realized gain (loss) on investments to
accumulated undistributed (distributions in excess of) net investment income
due to differences between book and tax accounting for accrued market discount
on disposal of securities:
<TABLE>
<CAPTION>
Mississippi New York North Carolina Pennsylvania South Carolina Tennessee Virginia
Fund Fund Fund Fund Fund Fund Fund
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$10,857 $69,248 $44,128 $26,482 $79,274 $57,161 $139,570
</TABLE>
These changes had no effect on the net assets or the net asset value per share
of the funds.
At March 31, 1998, the following Funds, for federal income tax purposes, had
capital loss carryforwards which may be applied against any net taxable
realized gains of each succeeding year until the earlier of their utilization
or expiration.
<TABLE>
<CAPTION>
Mississippi New York North Carolina Pennsylvania South Carolina Virginia West Virginia
Expiration Date Fund Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
March 31, 2003 $ -- $2,266,098 $5,720,615 $ -- $ -- $ 502,446 $ --
March 31, 2004 3,057,195 -- -- 1,125,777 452,212 3,840,742 2,539,573
March 31, 2005 228,833 502,292 -- 533,472 593,657 2,350,366 714,690
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total $3,286,028 $2,768,390 $5,720,615 $1,659,249 $1,045,869 $6,693,554 $3,254,263
========== ========== ========== ========== ========== ========== ==========
</TABLE>
Multiple Classes of Shares of Beneficial Interest - Each Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on the value
of settled shares outstanding of each class, without distinction between share
classes. Dividends are declared separately for each class. No class has
preferential dividend rights; differences in per share dividend rates are
generally due to differences in separate class expenses. Class B shares will
convert to Class A shares approximately eight years after purchase.
(3) Transactions with Affiliates
Investment Adviser - The Trust has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.55% of
each Fund's average daily net assets. The investment adviser has voluntarily
agreed to waive a portion of its fee with respect to each Fund, which is
reflected as a reduction of expenses in the Statement of Operations.
The Pennsylvania Fund has a temporary expense reimbursement agreement whereby
MFS has voluntarily agreed to pay all of the Pennsylvania Fund's operating
expenses, exclusive of management, distribution, and service fees. The
Pennsylvania Fund 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 March 31, 1998, the
aggregate unreimbursed expenses owed to MFS by the Pennsylvania Fund amounted
to $232,567. During the year ended March 31, 1998, MFS did not impose the
reimbursement fee of $159,264.
Administrator - The Funds have an administrative services agreement with MFS to
provide the Funds with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee
at the following annual percentages of each Fund's average daily net assets:
<TABLE>
<S> <C>
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
</TABLE>
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
62
<PAGE>
Notes to Financial Statements - continued
independent Trustees and Mr. Bailey. Included in Trustees' compensation for the
year ended March 31, 1998, is a net periodic pension expense for each Fund, as
follows:
<TABLE>
<CAPTION>
North South West
Mississippi New York Carolina Pennsylvania Carolina Tennessee Virginia Virginia
Fund Fund Fund Fund Fund Fund Fund Fund
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$4,066 $5,695 $5,821 $4,321 $5,711 $5,701 $5,982 $5,982
</TABLE>
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$17,405, $13,837, $102,313, $19,765, $39,848, $35,227, $81,631, and $48,338 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 year ended March 31, 1998. The
Trustees have adopted a distribution plan for Class A, Class B, and Class C
shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
Each Fund's distribution plan provides that the Fund will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service fee
paid to each securities dealer that enters into a sales agreement with MFD of
up to 0.25% per annum of the Fund's average daily net assets attributable to
Class A shares which are attributable to that securities dealer, and a
distribution fee to MFD of up to 0.10% per annum of the Fund's average daily
net assets attributable to Class A shares. MFD retains the service fee for
accounts not attributable to a securities dealer, which amounted to $43,862,
$70,634, $40,888, $39,298, $97,475, and $26,949 for the New York, North
Carolina, South Carolina, Tennessee, Virginia, and West Virginia Funds,
respectively, for the year ended March 31, 1998. Fees incurred under the
distribution plan during the year ended March 31, 1998 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 Carolina, Pennsylvania, South Carolina, Tennessee,
Virginia, and West Virginia Funds, respectively. Payments of the Mississippi
Fund's 0.35% per annum distribution and service fee will commence on such date
as the Trustees of Trust may determine. In the case of the New York and
Pennsylvania Funds, payments of the 0.10% per annum distribution fee will
commence on such date as the Trustees of Trust may determine. For the
Pennsylvania Fund, 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.
Each Fund's distribution plan provides that the Fund will pay MFD a
distribution fee of 0.75% per annum, and a service fee of up to 0.25% per
annum, of the Fund's average daily net assets attributable to Class B and Class
C shares. MFD will pay to securities dealers that enter into a sales agreement
with MFD all or a portion of the service fee attributable to Class B and Class
C shares and will pay to such securities dealers all of the distribution fee
attributable to Class C shares. The service fee is intended to be consideration
for services rendered by the dealer with respect to Class B and Class C shares.
MFD retains the service fee for accounts not attributable to a securities
dealer, which amounted to $11,071, $7,886, $5,954, $5,214, $21,533, and $2,837
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 $6,236
and $723 for the North Carolina and Virginia Funds, respectively, for Class C
shares. Fees incurred under the distribution plan during the year ended March
31, 1998, were 0.78%, 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 plan during the year ended March
31, 1998, were 1.00% and 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. Except in the case of the 0.25% per annum
Class B service fee paid by the Mississippi Fund upon sale of Class B shares in
the first year, payment of the 0.25% per annum service fee by the Mississippi
Fund will commence on such date as the Trustees of Trust may determine. Except
in the case of the 0.25% per annum Class B service fee paid by the Pennsylvania
Fund upon sale of Class B shares in the first year payment of the 0.25% per
annum service fee will commence on such date as the Class A service fee first
becomes payable.
Certain Class A shares and Class C shares are subject to a contingent deferred
sales charge in the event of a shareholder redemption within 12 months
following purchase. A contingent deferred sales charge is imposed on
shareholder redemptions of Class B shares in the event of a shareholder
redemption within six years of purchase. MFD receives all contingent deferred
sales charges. Contingent deferred sales charges imposed during the year ended
March 31, 1998, on Class A, Class B, and Class C shares were as follows:
<TABLE>
<CAPTION>
North South West
Mississippi New York Carolina Pennsylvania Carolina Tennessee Virginia Virginia
CDSC imposed Fund Fund Fund Fund Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $ -- $ 4,763 $ -- $ -- $ 82 $ -- $ -- $ 9
Class B $48,915 $64,504 $104,578 $26,291 $48,837 $34,989 $81,775 $34,856
Class C $ -- $ -- $ 4,497 $ -- $ -- $ -- $ 3,974 $ --
</TABLE>
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of each Fund's average daily net assets at an effective annual rate
of 0.1125%. Prior to January 1, 1998, the fee was calculated as a percentage of
each Fund's average daily net assets at an effective annual rate of 0.13%.
63
<PAGE>
Notes to Financial Statements - continued
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities, and
short-term obligations were as follows (000 omitted):
<TABLE>
<CAPTION>
North South West
Mississippi New York Carolina Pennsylvania Carolina Tennessee Virginia Virginia
Fund Fund Fund Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Purchases $13,656 $59,571 $101,383 $11,864 $49,165 $31,733 $153,703 $25,169
Sales 17,245 69,903 112,259 15,264 53,150 32,999 164,049 23,017
</TABLE>
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Funds, as computed on a federal income tax basis, are
as follows (000 omitted):
<TABLE>
<CAPTION>
North South West
Mississippi New York Carolina Pennsylvania Carolina Tennessee Virginia Virginia
Fund Fund Fund Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aggregate cost $70,659 $129,354 $394,823 $36,532 $159,900 $114,948 $373,795 $130,441
------- -------- -------- ------- -------- -------- -------- --------
Gross unrealized appreciation $ 5,818 $ 14,568 $ 36,714 $ 2,374 $ 14,800 $ 10,534 $ 30,458 $ 12,913
Gross unrealized depreciation (4) -- (58) (6) (72) (48) (140) (37)
------- -------- -------- ------- -------- -------- -------- --------
Net unrealized appreciation $ 5,814 $ 14,568 $ 36,656 $ 2,368 $ 14,728 $ 10,486 $ 30,318 $ 12,876
======= ======== ======== ======= ======== ======== ======== ========
</TABLE>
(5) Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Mississippi Fund New York Fund North Carolina Fund
Class A Shares --------------------- -------------------- ---------------------
Year Ended March 31, 1998 (000 Omitted) Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 340 $ 3,311 2,457 $ 27,162 3,557 $ 43,014
Shares issued to shareholders in reinvestment
of distributions 150 1,455 315 3,486 894 10,719
Shares reacquired (930) (9,013) (3,645) (40,239) (5,766) (69,369)
---- --------- ------ --------- ------ ---------
Net decrease (440) $ (4,247) (873) $ (9,591) (1,315) $ (15,636)
==== ========= ====== ========= ====== =========
Year Ended March 31, 1997 (000 Omitted) Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
Shares sold 420 $ 3,942 1,336 $ 14,245 11,938 $ 138,759
Shares issued to shareholders in reinvestment
of distributions 170 1,601 355 3,792 989 11,523
Shares reacquired (1,427) (13,419) (2,824) (30,108) (15,681) (182,342)
------ --------- ------ --------- ------- ---------
Net decrease (837) $ (7,876) (1,133) $ (12,071) (2,754) $ (32,060)
====== ========= ====== ========= ======= =========
</TABLE>
<TABLE>
<CAPTION>
Pennsylvania Fund South Carolina Fund Tennessee Fund
--------------------- ------------------- --------------------
Year Ended March 31, 1998 (000 Omitted) Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 394 $ 3,820 722 $ 8,866 613 $ 6,529
Shares issued to shareholders in reinvestment
of distributions 58 562 313 3,853 248 2,663
Shares reacquired (353) (3,408) (1,682) (20,677) (1,356) (14,510)
---- -------- ------ --------- ------ ---------
Net increase (decrease) 99 $ 974 (647) $ (7,958) (495) $ (5,318)
==== ======== ====== ========= ====== =========
Year Ended March 31, 1997 (000 Omitted) Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
Shares sold 379 $ 3,531 747 $ 8,956 819 $ 8,497
Shares issued to shareholders in reinvestment
of distributions 70 653 368 4,404 266 2,759
Shares reacquired (546) (5,091) (2,517) (30,161) (1,175) (12,195)
----- -------- ------ --------- ------ ---------
Net decrease (97) $ (907) (1,402) $ (16,801) (90) $ (939)
===== ======== ====== ========= ====== =========
</TABLE>
64
<PAGE>
Notes to Financial Statements - continued
<TABLE>
<CAPTION>
Virginia Fund West Virginia Fund
Class A Shares ------------------------ -----------------------
Year Ended March 31, 1998 (000 Omitted) Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,292 $ 37,717 628 $ 7,306
Shares issued to shareholders in reinvestment
of distributions 808 9,265 296 3,454
Shares reacquired (6,251) (71,443) (1,029) (11,967)
------ --------- ------ ---------
Net decrease (2,151) $ (24,461) (105) $ (1,207)
====== ========= ====== =========
Year Ended March 31, 1997 (000 Omitted) Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------
Shares sold 13,538 $ 151,104 537 $ 6,100
Shares issued to shareholders in reinvestment
of distributions 921 10,293 326 3,704
Shares reacquired (17,500) (195,457) (1,584) (17,969)
------- --------- ------ ---------
Net decrease (3,041) $ (34,060) (721) $ (8,165)
======= ========= ====== =========
</TABLE>
<TABLE>
<CAPTION>
Mississippi Fund New York Fund North Carolina Fund
Class B Shares -------------------- --------------------- --------------------
Year Ended March 31, 1998 (000 Omitted) Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 104 $ 1,002 312 $ 3,451 686 $ 8,214
Shares issued to shareholders in reinvestment
of distributions 16 154 55 614 93 1,113
Shares reacquired (213) (2,053) (525) (5,756) (516) (6,196)
---- -------- ---- -------- ---- --------
Net increase (decrease) (93) $ (897) (158) $ (1,691) 263 $ 3,131
==== ======== ==== ======== ==== ========
Year Ended March 31, 1997 (000 Omitted) Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------
Shares sold 129 $ 1,206 427 $ 4,550 800 $ 9,310
Shares issued to shareholders in reinvestment
of distributions 21 195 64 687 84 973
Shares reacquired (199) (1,876) (600) (6,395) (432) (5,013)
----- -------- ----- -------- ------ --------
Net increase (decrease) (49) $ (475) (109) $ (1,158) 452 $ 5,270
===== ======== ===== ======== ====== ========
</TABLE>
<TABLE>
<CAPTION>
Pennsylvania Fund South Carolina Fund Tennessee Fund
---------------------- --------------------- --------------------
Year Ended March 31, 1998 (000 Omitted) Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 357 $ 3,436 663 $ 8,183 465 $ 4,987
Shares issued to shareholders in reinvestment
of distributions 47 463 48 597 34 360
Shares reacquired (998) (9,574) (308) (3,811) (231) (2,474)
---- -------- ---- -------- ---- --------
Net increase (decrease) (594) $ (5,675) 403 $ 4,969 268 $ 2,873
==== ======== ==== ======== ==== ========
Year Ended March 31, 1997 (000 Omitted) Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------
Shares sold 364 $ 3,410 443 $ 5,311 385 $ 4,006
Shares issued to shareholders in reinvestment
of distributions 73 686 45 537 32 331
Shares reacquired (330) (3,097) (186) (2,226) (261) (2,710)
----- -------- ----- -------- ----- --------
Net increase 107 $ 999 302 $ 3,622 156 $ 1,627
===== ======== ===== ======== ===== ========
</TABLE>
<TABLE>
<CAPTION>
Virginia Fund West Virginia Fund
------------------------ -----------------------
Year Ended March 31, 1998 (000 Omitted) Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 410 $ 4,700 216 $ 2,508
Shares issued to shareholders in reinvestment
of distributions 51 588 35 409
Shares reacquired (390) (4,456) (138) (1,601)
---- -------- ---- --------
Net increase 71 $ 832 113 $ 1,316
==== ======== ==== ========
Year Ended March 31, 1997 (000 Omitted) Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------
Shares sold 552 $ 6,182 218 $ 2,474
Shares issued to shareholders in reinvestment
of distributions 51 567 35 397
Shares reacquired (375) (4,195) (167) (1,902)
------ -------- ----- --------
Net increase 228 $ 2,554 86 $ 969
====== ======== ===== ========
</TABLE>
65
<PAGE>
Notes to Financial Statements - continued
<TABLE>
<CAPTION>
North Carolina Fund Virginia Fund
Class C Shares ------------------------ -----------------------
Year Ended March 31, 1998 (000 Omitted) Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 224 $ 2,694 91 $ 1,028
Shares issued to shareholders in reinvestment
of distributions 17 208 9 105
Shares reacquired (245) (2,896) (122) (1,391)
---- -------- ---- --------
Net increase (decrease) (4) $ 6 (22) $ (258)
==== ======== ==== ========
Year Ended March 31, 1997 (000 Omitted) Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------
Shares sold 191 $ 2,228 93 $ 1,033
Shares issued to shareholders in reinvestment
of distributions 24 274 9 102
Shares reacquired (350) (4,084) (114) (1,277)
----- -------- ------ --------
Net decrease (135) $ (1,582) (12) $ (142)
===== ======== ====== ========
</TABLE>
(6) Line of Credit
The Trust and other affiliated funds participate in a $805 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of Fund
shares. Interest is charged to each fund, based on its borrowings, at a rate
equal to the bank's base rate. In addition, a commitment fee, based on the
average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated to
the each of the Funds for the year ended March 31, 1998, ranged from $227 to
$2,491.
(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. At March 31, 1998,
there were no open futures contracts.
66
<PAGE>
Independent Auditors' Report
To the Trustees of MFS Municipal Series Trust and Shareholders of the
Portfolios of MFS Municipal Series Trust:
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of MFS Mississippi Municipal Bond
Fund, MFS New York Municipal Bond Fund, MFS North Carolina Municipal Bond Fund,
MFS Pennsylvania Municipal Bond Fund, MFS South Carolina Municipal Bond Fund,
MFS Tennessee Municipal Bond Fund, MFS Virginia Municipal Bond Fund, and MFS
West Virginia Municipal Bond Fund (portfolios of MFS Municipal Series Trust) as
of March 31, 1998, the related statements of operations for the year then
ended, the statements of changes in net assets for the years ended March 31,
1998 and 1997, and the financial highlights for each of the years in the
four-year period ended March 31, 1998, the two months ended March 31, 1994, and
each of the years in the six-year period ended January 31, 1994. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
March 31, 1998 by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of each of the
aforementioned portfolios of MFS Municipal Series Trust at March 31, 1998, the
results of their operations, the changes in their net assets, and their
financial highlights for the respective stated periods in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
May 8, 1998
67
<PAGE>
Good News!
[Graphic]
ROTH
ANOTHER MFS IRA CHOICE
TRADITIONAL
[End Graphic]
Now two MFS IRA choices.
Here's good news for millions of Americans. Recent tax legislation has brought
about the introduction of the new Roth Individual Retirement Account (IRA) and,
along with it, some attractive new advantages for investors -- like added
flexibility and earnings that are never taxed.*
But along with Roth IRAs have come many questions as well . . . about how the
account works, about how it compares to traditional IRAs, and about whether it
fits in with your specific situation.
If you'd like answers to questions like these, may we suggest two convenient
ways to get all the details on this new financial planning opportunity.
[bullet] Call your financial adviser, who can help you determine whether an
IRA is right for you and which IRA would be more suitable.
[bullet] Or ask us to send you the MFS IRA Choices kit, which compares the
traditional IRA to the Roth IRA. Call 1-800-637-1255 any business day
from 8 a.m. to 6 p.m. Eastern time or visit our Web site at
www.mfs.com.
*Certain withdrawals taken prior to age 59-1/2 are subject to a 10% federal
penalty tax.
This material is not intended to replace the advice of a qualified attorney,
tax adviser, financial adviser, or insurance agent. Before making any financial
commitment regarding the issues discussed here, consult with the appropriate
professional adviser.
68
<PAGE>
MFS(R) Municipal Series Trust
Trustees
Richard B. Bailey* - Private Investor;
Former Chairman and Director (until 1991),
MFS Investment Management
Marshall N. Cohan - Private Investor
Lawrence H. Cohn, M.D. - Chief of Cardiac Surgery,
Brigham and Women's Hospital; Professor of Surgery,
Harvard Medical School
The Hon. Sir J. David Gibbons, KBE - Chief Executive Officer,
Edmund Gibbons Ltd.
Abby M. O'Neill - Private Investor
Walter E. Robb, III - President and Treasurer, Benchmark
Advisors, Inc. (corporate financial consultants); President,
Benchmark Consulting Group, Inc. (office services)
Arnold D. Scott* - Senior Executive Vice President,
Director, and Secretary, MFS Investment Management
Jeffrey L. Shames* - Chairman, Chief Executive Officer,
and Director, MFS Investment Management
J. Dale Sherratt - President, Insight Resources, Inc.
(acquisition planning specialists)
Ward Smith - Former Chairman (until 1994), NACCO
Industries (holding company)
Investment Adviser
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
Distributor
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
Portfolio Managers
John P. Kihn*
David B. Smith*
Treasurer
W. Thomas London*
Assistant Treasurers
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
*Affiliated with the Investment Adviser
Secretary
Stephen E. Cavan*
Assistant Secretary
James R. Bordewick, Jr.*
Custodian
State Street Bank and Trust Company
Auditors
Deloitte & Touche LLP
Investor Information
For MFS stock and bond market outlooks, call toll free:
1-800-637-4458 anytime from a touch-tone telephone.
For information on MFS mutual funds, call your
financial adviser or, for an information kit, call
toll free: 1-800-637-2929 any business day from 9 a.m.
to 5 p.m. Eastern time (or leave a message anytime).
Investor Service
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
For general information, call toll free: 1-800-225-2606
any business day from 8 a.m. to 8 p.m. Eastern time.
For service to speech- or hearing-impaired, call toll free:
1-800-637-6576 any business day from 9 a.m. to 5 p.m.
Eastern time. (To use this service, your phone must be
equipped with a Telecommunications Device for the Deaf.)
For share prices, account balances, and exchanges, call toll
free: 1-800-MFS-TALK (1-800-637-8255) anytime from a
touch-tone telephone.
World Wide Web
www.mfs.com
[Graphic] For the fourth year in a
DALBAR row, MFS earned a
MFS NUMBER 1 MFS #1 ranking in the
TOP-RATED SERVICE DALBAR, Inc.
[End Graphic] Broker/Dealer Survey,
Main Office Operations
Service Quality Category.
The firm achieved a 3.42
overall score on a scale of 1 to 4 in the 1997 survey. A total of 111 firms
responded, offering input on the quality of service they received from 29
mutual fund companies nationwide. The survey contained questions about service
quality in 11 categories, including "knowledge of phone service contact,"
"keeping you informed," and "ease of doing business" with the firm.
69
<PAGE>
[back cover]
MFS(R) Municipal Bulk Rate
Series Trust U.S. Postage
Paid
MFS(R) Mississippi Municipal Bond Fund MFS
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)
[End MFS Logo]
500 Boylston Street
Boston, MA 02116-3741
[Dalbar Logo]
DALBAR
MFS NUMBER 1 MFS
TOP-RATED SERVICE
[End Dalbar Logo]
58/258
52/252
41/241/341
30/230
42/242
53/253
43/243/343
44/244
(C)1998 MFS Fund Distributors, Inc., 500 Boylston Street, MST-2B-5/98/53M
Boston, MA 02116-3741
