[MFS LOGO]
MFS
INVESTMENT MANAGEMENT
We invented the mutual fund[RegTM]
MFS[RegTM] Municipal
Series Trust
Semiannual Report [bullet] September 30, 1998
For the States of: Mississippi,
New York, North Carolina,
Pennsylvania, South Carolina
Tennessee, Virginia, and West Virginia
<PAGE>
Table of Contents
<TABLE>
<S> <C>
Letter from the Chairman .............. 1
Management Review and Outlook ......... 3
Performance Summary ................... 4
Portfolio of Investments .............. 7
Financial Statements .................. 23
Notes to Financial Statements ......... 55
Trustees and Officers ................. 65
</TABLE>
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HIGHLIGHTS
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[bullet] We are in the process of upgrading the overall credit qualities of the
portfolios based on our diminished expectations for domestic economic
growth. We are focusing on "A"-, "AA"-, and "AAA"-rated securities when
doing so will not severely impact the sustainability of the Funds'
income streams.
[bullet] A prime sector in which we are finding value is bonds backed by revenue
streams that finance essential services, such as water and sewer
projects.
[bullet] Our use of a systematic, quantitative research process helps us
identify opportunities and risks in the municipal bond marketplace and
enables bottom-up, fundamental credit-risk analysis of all current and
prospective holdings.
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
Letter from the Chairman
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
In the coming year, MFS will celebrate its 75th anniversary. In 1924, our
Massachusetts Investors Trust, the nation's first mutual fund, opened to the
public and helped launch a revolution in investing that continues today. In the
75 years since, MFS has grown with its investors not only through bear markets,
economic and political turmoil, wars, and oil shortages, but also through long
periods of growth and prosperity. We are very proud of our record of investment
management and service to shareholders throughout our history.
One of the best ways for us to serve our shareholders is to help them
understand some of the reasons behind developments in the investment markets
and, when necessary, to take a more cautious outlook. This is particularly
important during periods of market volatility such as we are experiencing this
year, when equity prices do not follow a straight course. In light of this
volatility, it is clear that equity valuations have risen to a point at which
stock prices have become vulnerable to changes in the investment environment
such as a slowing economy, earnings disappointments, and global economic and
political turmoil. While we continue to hold a favorable long-term outlook for
the equity markets, we also believe that the recent market correction was
overdue and was a healthy near-term event that should rid the financial system
of some excesses that have developed.
Currently, equity investors seem to be focused on the slowdown in corporate
earnings and, more recently, on the continuing uncertainty overseas,
particularly in Russia and some of the emerging markets. In the second quarter,
for example, average earnings growth for companies in the Standard & Poor's 500
Composite Index (the S&P 500), a popular, unmanaged index of common stock total
return performance, was about 3%, well below what people were expecting a year
ago. As a result of this and continuing concerns about Asia and emerging
markets, the stock markets pulled back from the record-high levels set in
mid-July. Although the U.S. stock market has responded positively to reductions
in interest rates by the Federal Reserve Board, the market's retreat helped
correct some -- but not all -- of the overvaluations that had been building for
some time. Prior to July, equity prices had been rising without a corresponding
increase in corporate earnings. As a result, price-to-earnings (P/E) ratios, or
the amount investors paid for stocks in relation to companies' earnings per
share, also went up. If this year's downturn helps create more reasonable
valuations, we believe it could provide a sounder long-term foundation for the
equity markets. On another positive note, interest rates have begun to decline
as inflation has remained low. In an environment of low interest rates, stocks
become more attractive than most fixed-income investments, while low inflation
helps control companies' costs.
Internationally, the economic turmoil in Asia continues to be a concern to us,
while Russia is facing political and economic uncertainty and Latin American
economies are feeling substantial pressure. We believe the United States has
yet to see the full impact of this crisis. There have been brief periods of
improvement in a few places and countries such as Japan and Brazil have taken
positive steps toward economic reform but, for the most part, these economies
are still very weak. At the same time, the Asian turmoil has had the beneficial
effect of moderating U.S. growth and keeping inflation in check, which has
helped establish a favorable interest-rate environment.
Countering the situation in Asia has been the growing strength of European
economies, although European equity markets have also seen some volatility this
year. But as these countries move toward economic union, they are benefiting
from a convergence of interest rates to lower levels, a rapid expansion of
manufacturing and service businesses, and an increasingly strong consumer
sector. This has helped American exporters offset some of their Asian losses
while providing investment opportunities in developed and emerging European
markets.
Given the uncertainty arising from these conflicting developments, we believe
that it is prudent to remind investors of the need to take a long-term view and
to diversify their investments across a range of asset classes. This includes
portfolios that focus on bond and international investments as well as on the
U.S. stock market. At MFS, we also believe our decades-long commitment to
original, company-by-company research gives us an advantage by helping us find
companies that we think can keep growing or gain market share during periods of
turmoil. To help fulfill this commitment and to provide the broadest possible
coverage of industry sectors and individual companies, MFS continues to
increase its number of full-time research analysts, who thoroughly investigate
each company's earnings potential and position in its industry as well as the
overall prospects for that industry.
We also use active portfolio management on the fixed-income side, using our
extensive research and credit analysis to help reduce the potential for price
declines and enhance the opportunity for appreciation. Every year, both
fixed-income and equity managers meet with thousands of credit issuers and
companies. They also attend many presentations, closely follow sources of
industry research, and keep track of competitors.
As we have for 75 years, we will continue to apply this discipline of thorough,
bottom-up research to both the equity and fixed-income markets because we
believe it offers the best potential for
1
<PAGE>
Letter from the Chairman - continued
providing favorable long-term performance for our shareholders -- regardless of
changes in the overall market environment.
We appreciate your confidence and welcome any questions or comments you may
have.
Respectfully,
/s/ Jeffrey L. Shames
- ---------------------
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management[RegTM]
October 14, 1998
2
<PAGE>
Management Review and Outlook
Dear Shareholders,
In much the same way volatility has affected the equity markets, it has had an
impact on the climate for fixed-income investing during the past six months.
However, it has been a positive time for fixed-income investors in several
high-quality bond asset classes. The impact of low inflation and a flight to
high-quality U.S. Treasury securities spurred by the Asian economic crisis have
increased the demand for Treasuries, driving 30-year Treasury bond interest
rates to 31-year lows and causing an uptick in bond prices. One effect of low
Treasury yields has been a widening of yield spreads between these securities
and other types of taxable fixed-income investments.
However, in the municipal bond market yield spreads have not widened appreciably
in the past year, so the difference in yields between bonds of varying credit
qualities is much narrower than on the taxable side of the fixed-income market.
We don't expect these spreads to stay as narrow in the future, and we are
preparing for the day when spreads do widen by upgrading the credit quality of
the individual portfolios. While this may cost us a small amount of additional
yield, we don't consider it prudent to reach for yield today when to do so may
adversely impact the credit quality and subsequent performance of the portfolios
tomorrow. We believe that this approach will better position the portfolios in
the event that a national economic slowdown begins to impact consumer confidence
and spending and, by extension, municipal economies. If these recessionary signs
develop, they could result in reduced tax revenues and a boost in the need for
- -- and cost of -- social services, which may affect municipal economies and
pressure bond credit ratings.
We are focusing much of our investment activity on higher-quality bonds rated
"A," "AA," and "AAA" when we can do so without significantly impacting the
sustainability of the portfolios' income streams. Among the sectors in which we
are finding value are bonds backed by steady revenue streams that finance
essential services yet to face deregulation, such as water and sewer projects.
We feel that MFS[RegTM] Original Research(SM) will continue to differentiate our
approach to municipal investing. Our focus on research consists of both a
systematic, quantitative process through which we identify opportunities and
risks in the municipal bond marketplace and an intensive, bottom-up,
fundamental credit-risk analysis of all current and prospective holdings.
Respectfully,
/s/ John P. Kihn /s/ Geoffrey L. Schechter
- ---------------- -------------------------
John P. Kihn Geoffrey L. Schechter
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 May 29, 1998, Geoffrey L. Schechter joined
John P. Kihn as portfolio manager of the Funds, succeeding David B. Smith.
John P. Kihn is a Vice President of MFS Investment Management[RegTM] and
portfolio manager of MFS[RegTM] Municipal Income Fund, MFS[RegTM] Municipal
Limited Maturity Fund and MFS[RegTM] Alabama, Arkansas, California, Florida,
Georgia, Maryland, Massachusetts, Mississippi, New York, North Carolina,
Pennsylvania, South Carolina, Tennessee and Virginia Municipal Bond funds.
Mr. Kihn joined MFS as a quantitative analyst in October 1997 and was named
portfolio manager later that year. He previously had worked as a senior
quantitative analyst with a major investment management firm. Mr. Kihn
earned a bachelor's degree in economics from the University of California,
Berkeley, a master's degree in business economics from the University of
California, Santa Barbara, and a doctorate degree in accounting and finance
from the London School of Economics.
Geoffrey L. Schechter is a Vice President of MFS Investment
Management[RegTM] and portfolio manager of MFS Municipal Bond Fund and MFS
Alabama, Arkansas, California, Georgia, Maryland, Massachusetts,
Mississippi, North Carolina, Pennsylvania, South Carolina, Virginia and West
Virginia Municipal Bond funds. Mr. Schechter joined MFS as an Investment
Officer in 1993 after working as a municipal credit analyst with a major
insurance company. He was named an Assistant Vice President in 1994 and a
Vice President in 1995. He became manager of MFS Municipal Bond Fund in
1998. Mr. Schechter is a graduate of the University of Texas and has an
M.B.A. from Boston University. He is a Chartered Financial Analyst and a
Certified Public Accountant.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other
MFS product is available from your financial adviser, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
3
<PAGE>
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FUND FACTS
- --------------------------------------------------------------------------------
Objective: Each Fund seeks current income exempt from federal income taxes
and from the personal income taxes, if any, of the state to which its name
refers.
<TABLE>
<CAPTION>
Commencement of investment operations:
<S> <C>
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
<CAPTION>
Net assets as of September 30, 1998:
<S> <C>
Mississippi $ 77.0 million
New York $146.7 million
North Carolina $435.8 million
Pennsylvania $ 41.8 million
South Carolina $180.3 million
Tennessee $128.9 million
Virginia $412.0 million
West Virginia $150.6 million
</TABLE>
<TABLE>
<CAPTION>
Class inception:
<S> <C> <C>
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>
Performance Summary
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for the
applicable time periods. Investment results reflect the percentage change in
net asset value, including reinvestment of dividends.
Average Annual and Cumulative Total Rates of Return through September 30, 1998
MFS[RegTM] Mississippi Municipal Bond Fund
<TABLE>
<CAPTION>
Class A Investment Results
-----------------------------------------------------------------
6 Months 1 Year 3 Years 5 Years 10 Years/Life*
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +4.60% +8.74% +26.18% +33.38% +48.18%
- -----------------------------------------------------------------------------------------------
Average Annual Total Return -- +8.74% +8.06% +5.93% +6.60%
- -----------------------------------------------------------------------------------------------
SEC Results -- +3.58% +6.32% +4.90% +5.76%
- -----------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
---------------------------------------------------------------
6 Months 1 Year 3 Years 5 Years 10 Years/Life*
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +4.19% +7.89% +23.09% +27.99% +41.97%
- ----------------------------------------------------------------------------------------------
Average Annual Total Return -- +7.89% +7.17% +5.06% +5.86%
- ----------------------------------------------------------------------------------------------
SEC Results -- +3.89% +6.29% +4.72% +5.86%
- ----------------------------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Fund's investment operations,
August 6, 1992, through September 30, 1998.
MFS[RegTM] New York Municipal Bond Fund
<TABLE>
<CAPTION>
Class A Investment Results
----------------------------------------------------------------
6 Months 1 Year 3 Years 5 Years 10 Years/Life
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +4.07% +8.08% +24.89% +32.00% +119.72%
- ----------------------------------------------------------------------------------------------
Average Annual Total Return -- +8.08% +7.69% +5.71% +8.19%
- ----------------------------------------------------------------------------------------------
SEC Results -- +2.95% +5.96% +4.68% +7.67%
- ----------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
---------------------------------------------------------------
6 Months 1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +3.78% +7.38% +22.06% +26.96% +111.14%
- ---------------------------------------------------------------------------------------------
Average Annual Total Return -- +7.38% +6.87% +4.89% +7.76%
- ---------------------------------------------------------------------------------------------
SEC Results -- +3.38% +5.98% +4.55% +7.76%
- ---------------------------------------------------------------------------------------------
</TABLE>
MFS[RegTM] North Carolina Municipal Bond Fund
<TABLE>
<CAPTION>
Class A Investment Results
------------------------------------------------------------
6 Months 1 Year 3 Years 5 Years 10 Years/Life
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +4.01% +7.76% +23.85% +30.02% +100.42%
- ------------------------------------------------------------------------------------------
Average Annual Total Return -- +7.76% +7.39% +5.39% +7.20%
- ------------------------------------------------------------------------------------------
SEC Results -- +2.64% +5.67% +4.37% +6.68%
- ------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
---------------------------------------------------------------
6 Months 1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +3.59% +6.99% +21.27% +25.46% +93.25%
- ---------------------------------------------------------------------------------------------
Average Annual Total Return -- +6.99% +6.64% +4.64% +6.81%
- ---------------------------------------------------------------------------------------------
SEC Results -- +2.99% +5.76% +4.30% +6.81%
- ---------------------------------------------------------------------------------------------
<CAPTION>
Class C Investment Results
------------------------------------------------------------
6 Months 1 Year 3 Years 5 Years 10 Years/Life
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +3.58% +6.98% +21.51% +25.82% +93.97%
- ------------------------------------------------------------------------------------------
Average Annual Total Return -- +6.98% +6.71% +4.70% +6.85%
- ------------------------------------------------------------------------------------------
SEC Results -- +5.98% +6.71% +4.70% +6.85%
- ------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
Performance Summary - continued
MFS[RegTM] Pennsylvania Municipal Bond Fund
<TABLE>
<CAPTION>
Class A Investment Results
-----------------------------------------------------------------
6 Months 1 Year 3 Years 5 Years 10 Years/Life*
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +4.89% +9.34% +26.11% +32.56% +44.61%
- -----------------------------------------------------------------------------------------------
Average Annual Total Return -- +9.34% +8.04% +5.80% +6.73%
- -----------------------------------------------------------------------------------------------
SEC Results -- +4.15% +6.30% +4.78% +5.81%
- -----------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
----------------------------------------------------------------
6 Months 1 Year 3 Years 5 Years 10 Years/Life*
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +4.47% +8.36% +23.12% +27.26% +38.72%
- ----------------------------------------------------------------------------------------------
Average Annual Total Return -- +8.36% +7.18% +4.94% +5.95%
- ----------------------------------------------------------------------------------------------
SEC Results -- +4.36% +6.30% +4.60% +5.81%
- ----------------------------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Fund's investment operations,
February 1, 1993, through September 30, 1998.
MFS[RegTM] South Carolina Municipal Bond Fund
<TABLE>
<CAPTION>
Class A Investment Results
---------------------------------------------------------------
6 Months 1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +3.97% +7.98% +23.05% +30.08% +104.96%
- ---------------------------------------------------------------------------------------------
Average Annual Total Return -- +7.98% +7.16% +5.40% +7.44%
- ---------------------------------------------------------------------------------------------
SEC Results -- +2.85% +5.44% +4.38% +6.92%
- ---------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
---------------------------------------------------------------
6 Months 1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +3.55% +7.29% +20.59% +25.52% +97.64%
- ---------------------------------------------------------------------------------------------
Average Annual Total Return -- +7.29% +6.44% +4.65% +7.05%
- ---------------------------------------------------------------------------------------------
SEC Results -- +3.29% +5.55% +4.32% +7.05%
- ---------------------------------------------------------------------------------------------
</TABLE>
MFS[RegTM] Tennessee Municipal Bond Fund
<TABLE>
<CAPTION>
Class A Investment Results
----------------------------------------------------------------
6 Months 1 Year 3 Years 5 Years 10 Years/Life
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +3.91% +7.96% +23.71% +32.06% +105.91%
- ----------------------------------------------------------------------------------------------
Average Annual Total Return -- +7.96% +7.35% +5.72% +7.49%
- ----------------------------------------------------------------------------------------------
SEC Results -- +2.83% +5.62% +4.69% +6.97%
- ----------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
---------------------------------------------------------------
6 Months 1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +3.49% +7.27% +21.14% +27.51% +98.56%
- ---------------------------------------------------------------------------------------------
Average Annual Total Return -- +7.27% +6.60% +4.98% +7.10%
- ---------------------------------------------------------------------------------------------
SEC Results -- +3.27% +5.71% +4.65% +7.10%
- ---------------------------------------------------------------------------------------------
</TABLE>
MFS[RegTM] Virginia Municipal Bond Fund
<TABLE>
<CAPTION>
Class A Investment Results
------------------------------------------------------------
6 Months 1 Year 3 Years 5 Years 10 Years/Life
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +3.99% +7.56% +22.02% +27.75% +100.61%
- ------------------------------------------------------------------------------------------
Average Annual Total Return -- +7.56% +6.86% +5.02% +7.21%
- ------------------------------------------------------------------------------------------
SEC Results -- +2.45% +5.14% +4.00% +6.69%
- ------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
---------------------------------------------------------------
6 Months 1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +3.57% +6.78% +19.47% +23.37% +93.61%
- ---------------------------------------------------------------------------------------------
Average Annual Total Return -- +6.78% +6.11% +4.29% +6.83%
- ---------------------------------------------------------------------------------------------
SEC Results -- +2.78% +5.22% +3.96% +6.83%
- ---------------------------------------------------------------------------------------------
<CAPTION>
Class C Investment Results
--------------------------------------------------------------
6 Months 1 Year 3 Years 5 Years 10 Years/Life
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +3.66% +6.87% +19.78% +23.67% +94.34%
- --------------------------------------------------------------------------------------------
Average Annual Total Return -- +6.87% +6.20% +4.34% +6.87%
- --------------------------------------------------------------------------------------------
SEC Results -- +5.87% +6.20% +4.34% +6.87%
- --------------------------------------------------------------------------------------------
</TABLE>
MFS[RegTM] West Virginia Municipal Bond Fund
<TABLE>
<CAPTION>
Class A Investment Results
----------------------------------------------------------------
6 Months 1 Year 3 Years 5 Years 10 Years/Life
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +3.83% +7.14% +22.26% +29.52% +105.72%
- ----------------------------------------------------------------------------------------------
Average Annual Total Return -- +7.14% +6.93% +5.31% +7.48%
- ----------------------------------------------------------------------------------------------
SEC Results -- +2.06% +5.21% +4.29% +6.95%
- ----------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
---------------------------------------------------------------
6 Months 1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +3.41% +6.46% +19.71% +24.98% +98.38%
- ---------------------------------------------------------------------------------------------
Average Annual Total Return -- +6.46% +6.18% +4.56% +7.09%
- ---------------------------------------------------------------------------------------------
SEC Results -- +2.46% +5.28% +4.23% +7.09%
- ---------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
Notes to Performance Summary
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%. Class C shares ("C") have
no initial sales charge but, like B, have higher annual fees and expenses than
A. C SEC results reflect the 1% CDSC applicable to shares redeemed within 12
months.
B and C results include the performance and the operating expenses (e.g., Rule
12b-1 fees) of A for periods prior to the inception of B and C. Because
operating expenses of B and C are higher than those of A, B and C performance
generally would have been lower than A performance. The A performance included
in the B and C SEC performance has been adjusted to reflect the CDSC generally
applicable to B and C rather than the initial sales charge generally applicable
to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Past performance
is no guarantee of future results.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to capital gains tax.
6
<PAGE>
Portfolio of Investments (Unaudited) - September 30, 1998
MFS MISSISSIPPI MUNICIPAL BOND FUND
Municipal Bonds - 97.4%
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 7.5%
Commonwealth of Puerto Rico, MBIA,
7.846s, 2008++++ $2,000 $ 2,303,660
Hinds County, MS, MBIA, 6.25s, 2010 1,660 1,953,820
Hinds County, MS, MBIA, 6.25s, 2011 1,285 1,516,852
-----------
$ 5,774,332
- ---------------------------------------------------------------------------------------------
State and Local Appropriation - 7.5%
Hinds Community College, MS, Conference and
Training Center, 6.5s, 2014 $1,320 $ 1,415,660
Medical Center Educational Building Corp., MS
(University of Mississippi Medical Center),
MBIA, 5.65s, 2009 2,000 2,240,300
State of Mississippi, Certificates of Participation
(Rehabilitation Services), 6.1s, 2014 2,000 2,112,540
-----------
$ 5,768,500
- ---------------------------------------------------------------------------------------------
Refunded and Special Obligations - 16.8%
Harrison County, MS, Wastewater Management
District, Wastewater Treatment, FGIC,
5.875s, 2005 $1,000 $ 1,125,320
Medical Center Educational Building Corp., MS
(University of Mississippi Medical Center),
MBIA, 5.9s, 2004 2,250 2,536,110
Mississippi Home Corp., 0s, 2013 6,920 3,412,321
Mississippi Hospital Equipment & Facilities
Authority Rev. (Magnolia Regional Health
Center), 7.375s, 2001 1,500 1,679,235
Puerto Rico Highway & Transportation Authority,
Highway Rev., 6.625s, 2002 1,900 2,120,647
State of Mississippi, 6.75s, 2004 1,800 2,078,208
-----------
$12,951,841
- ---------------------------------------------------------------------------------------------
Airport and Port Revenue - 2.8%
Puerto Rico Ports Authority (American Airlines),
6.25s, 2026 $2,000 $ 2,199,640
- ---------------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 6.1%
Claiborne County, MS, Pollution Control Rev.
(System Energy Resources, Inc.), 7.3s, 2025 $1,000 $ 1,055,470
Puerto Rico Electric Power Authority,
7.898s, 2023++++ 1,000 1,176,430
Warren County, MS, Pollution Control Rev.
(Mississippi Power & Light), 7s, 2022 1,000 1,116,130
Washington County, MS, Pollution Control Rev.
(Mississippi Power & Light), 7s, 2022 1,230 1,372,840
-----------
$ 4,720,870
- ---------------------------------------------------------------------------------------------
Health Care Revenue - 2.7%
Jones County, MS, Hospital Rev. (South Central
Regional Medical Center), 5.5s, 2017 $1,000 $ 1,016,660
Mississippi Hospital Equipment & Facilities
Authority Rev., 6s, 2016 1,000 1,054,230
-----------
$ 2,070,890
- ---------------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 9.6%
Jones County, MS, Solid Waste Disposal Rev.
(International Paper Co.), 5.8s, 2021 $1,000 $ 1,050,200
Lowndes County, MS, Solid Waste Disposal &
Pollution Control Rev. (Weyerhaeuser), 6.8s, 2022 3,250 4,064,872
Mississippi Business Finance Corp. (Jackson
Municipal Airport/Airborne Freight), 7.15s, 2007 985 1,123,028
</TABLE>
Municipal Bonds - continued
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Revenue (Corporate Guarantee) - continued
Warren County, MS, Pollution Control Rev.
(International Paper), 6.6s, 2019 $1,000 $ 1,123,520
-----------
$ 7,361,620
- ---------------------------------------------------------------------------------------------
Insured Health Care Revenue - 19.8%
Alcorn County, Corinth (Magnolia Regional Health
Center), AMBAC, 5.75s, 2013 $2,000 $ 2,177,820
Corinth & Alcorn County, MS, 5.5s, 2021 670 675,407
Gulfport, MS, Hospital Facilities (Memorial
Hospital), MBIA, 6.125s, 2015 2,250 2,479,432
Gulfport, MS, Hospital Facilities (Memorial
Hospital), MBIA, 6.2s, 2018 1,000 1,100,370
Hinds County, MS, Rev. (Methodist Hospital &
Rehabilitation Center), AMBAC, 5.6s, 2012 3,055 3,392,914
Mississippi Development Bank, Special Obligation
(Adams County Hospital), FSA, 5.75s, 2016### 1,000 1,075,140
Mississippi Hospital Equipment & Facilities
Authority Rev. (Baptist), MBIA, 6.5s, 2010 1,190 1,354,232
Mississippi Hospital Equipment & Facilities
Authority Rev. (Baptist), MBIA, 6s, 2013 750 828,150
Mississippi Hospital Equipment & Facilities
Authority Rev. (Rush Medical Foundation),
Connie Lee, 6.7s, 2018 2,000 2,183,460
-----------
$15,266,925
- ---------------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 5.2%
Gulfport, MS, Community Development (Oakview
Apartments), FNMA, 7.4s, 2025 $1,755 $ 1,915,776
Jackson, MS, Elderly Housing Corp., Mortgage
Rev. (Delhaven Manor), "C", FHA, 7.375s, 2024 1,950 2,076,204
-----------
$ 3,991,980
- ---------------------------------------------------------------------------------------------
Single Family Housing Revenue - 7.4%
Mississippi Home Corp., GNMA, 6.5s, 2024 $2,650 $ 2,827,417
Mississippi Home Corp., GNMA, 6.625s, 2027 1,350 1,462,982
Mississippi Home Corp., GNMA, 7.55s, 2027 1,215 1,383,703
-----------
$ 5,674,102
- ---------------------------------------------------------------------------------------------
Universities - 1.4%
University of Mississippi, Educational Building
Corp. (Athletic Facilities), 6.2s, 2016 $1,000 $ 1,085,930
- ---------------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 8.9%
Columbus, MS, Water & Sewer Rev., MBIA,
6.5s, 2013 $1,000 $ 1,130,460
Gautier, MS, Utility District, Utility Systems Rev.,
FGIC, 6.375s, 2019 1,300 1,413,958
Harrison County, MS, Wastewater Management
District, Wastewater Treatment, FGIC, 6.5s, 2006 1,375 1,474,220
Meridian, MS, Water & Sewer Rev., AMBAC,
6s, 2010 1,500 1,653,210
Meridian, MS, Water & Sewer Rev., AMBAC,
6.2s, 2012 650 722,241
Meridian, MS, Water & Sewer Rev., AMBAC,
6.2s, 2013 400 444,456
-----------
$ 6,838,545
- ---------------------------------------------------------------------------------------------
Other - 1.7%
Mississippi Development Bank (Diamond Lakes
Utilities), 6.25s, 2007 1,250 $ 1,280,088
- ---------------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $67,641,652) $74,985,263
- ---------------------------------------------------------------------------------------------
</TABLE>
7 - MMS
<PAGE>
Portfolio of Investments (Unaudited) - continued
Floating Note Demand Note - 1.3%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Jackson County, MS, Pollution Control Rev.
(Chevron USA, Inc.), due 6/01/23, at Identified
Cost $1,000 $ 1,000,000
- ---------------------------------------------------------------------------------------
Total Investments (Identified Cost, $68,641,652) $75,985,263
Other Assets, Less Liabilities - 1.3% 1,000,173
- ---------------------------------------------------------------------------------------
Net assets - 100.0% $76,985,436
- ---------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
MFS NEW YORK MUNICIPAL BOND FUND
Municipal Bonds - 97.9%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 3.6%
Oswego County, NY, 6.7s, 2009 $1,000 $ 1,214,210
Port Byron, NY, Central School District, AMBAC,
7.4s, 2012 500 654,830
Port Byron, NY, Central School District, AMBAC,
7.4s, 2013 500 655,265
Port Byron, NY, Central School District, AMBAC,
7.4s, 2014 500 657,935
Port Byron, NY, Central School District, AMBAC,
7.4s, 2015 500 660,535
Washingtonville, NY, Central School District, FGIC,
7.35s, 2008 550 690,574
Washingtonville, NY, Central School District, FGIC,
7.35s, 2009 550 697,840
-----------
$ 5,231,189
- -----------------------------------------------------------------------------------
State and Local Appropriation - 21.4%
Metropolitan Transportation Authority, NY, Service
Contract, 7.375s, 2008 $2,000 $ 2,382,160
Metropolitan Transportation Authority, NY, Service
Contract, 0s, 2012 1,655 869,785
Metropolitan Transportation Authority, NY, Service
Contract, AMBAC, 5.75s, 2013 1,825 2,064,312
Metropolitan Transportation Authority, NY, Service
Contract, 0s, 2014 7,020 3,283,114
Metropolitan Transportation Authority, NY, Service
Contract, 5.5s, 2017 750 791,790
New York Dormitory Authority Rev. (City
University), FSA, 5.75s, 2013 4,250 4,827,022
New York Dormitory Authority Rev. (City
University), 5.625s, 2016 1,450 1,597,175
New York Dormitory Authority Rev. (City
University), AMBAC, 5.75s, 2018 1,800 2,054,088
New York Dormitory Authority Rev. (State
University), 5.875s, 2017 1,130 1,269,442
New York Dormitory Authority Rev. (State
University), FSA, 5.875s, 2017 1,435 1,660,252
New York Dormitory Authority Rev. (University),
MBIA, 0s, 2007 2,500 1,752,075
New York Medical Care Facilities Finance
Agency, MBIA, 6s, 2025 1,300 1,417,143
New York Medical Care Facilities Finance
Agency, Mental Health Services, 6.375s, 2014 1,000 1,115,240
New York Urban Development Corp. (Correctional
Facilities), AMBAC, 0s, 2009 5,000 3,211,950
New York Urban Development Corp. (State
Facilities), AMBAC, 5.6s, 2015 2,750 3,078,928
-----------
$31,374,476
- -----------------------------------------------------------------------------------
Refunded and Special Obligations - 26.2%
New York City, NY, 8s, 2001### $ 490 $ 552,563
New York City, NY, 8.25s, 2001 2,000 2,291,760
New York City, NY, 7.2s, 2004 1,000 1,179,320
New York City, NY, 7.3s, 2004 880 1,044,921
New York City, NY, 7.3s, 2004 5,000 5,922,600
New York City, NY, 7.375s, 2004 1,600 1,906,096
New York City, NY, Municipal Water & Sewer
Finance Authority, 7s, 2001 755 825,124
New York City, NY, Municipal Water & Sewer
Finance Authority, Systems Rev., 7.375s, 2001 2,000 2,216,600
New York Environmental Facilities Corp., Pollution
Control Rev., 6.875s, 2001 1,780 1,958,214
New York Local Government Assistance Corp.,
7.25s, 2001 2,500 2,757,950
</TABLE>
8 - MNY
<PAGE>
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Refunded and Special Obligations - continued
New York Medical Care Facilities Finance Agency
(Montefiore Medical), AMBAC, 6.5s, 2005 $2,550 $ 2,960,065
New York Medical Care Facilities Finance Agency
(Montefiore Medical), FHA, 7.25s, 2009 1,660 1,716,324
New York Medical Care Facilities Finance Agency
(St. Luke's Hospital), FHA, 7.45s, 2000 2,600 2,782,988
New York Medical Care Facilities Finance
Agency, Mental Health Services, 7.875s, 2000 340 372,280
New York Medical Care Facilities Finance
Agency, Mental Health Services, 7.3s, 2001 750 836,123
New York Power Authority, FGIC, 6.5s, 2008 2,500 2,894,575
New York Urban Development Corp., State
Facilities Rev., 7.5s, 2001 1,000 1,109,080
Puerto Rico Aqueduct & Sewer Authority Rev.,
9s, 2005 250 316,095
Territory of Virgin Islands, 7.75s, 2001 335 367,827
Triborough Bridge & Tunnel Authority, NY,
7.375s, 2000 1,000 1,060,240
Virgin Islands Public Finance Authority, Highway
Rev., 7.7s, 1999 800 851,080
Virgin Islands Water & Power Authority, Electric
Systems Rev., 7.4s, 2001 2,250 2,490,502
-----------
$38,412,327
- -----------------------------------------------------------------------------------------
Airport and Port Revenue - 1.6%
New York City, NY, Industrial Development
Agency, Special Facilities Rev. (American
Airlines), 6.9s, 2024 $1,000 $ 1,119,400
Port Authority NY & NJ, Special Obligation (JFK
International), MBIA, 6.25s, 2015 1,000 1,192,980
-----------
$ 2,312,380
- -----------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 7.0%
Long Island, NY, Power Authority Rev., FSA,
5s, 2018 $1,500 $ 1,511,235
Long Island, NY, Power Authority Rev., FSA,
5.125s, 2022 1,000 1,013,160
New York City, NY, Industrial Development Rev.
(Brooklyn Navy Yard Cogeneration Partners),
5.65s, 2028 1,000 1,026,820
New York Energy Research and Development
Authority, Electrical Facilities Rev. (Long Island
Lighting), 7.15s, 2022 2,700 2,964,087
Port Authority NY & NJ, Special Obligation,
6.75s, 2019 1,750 1,969,835
Puerto Rico Electric Power Authority, FSA,
5.929s, 2023++++ 1,500 1,764,645
-----------
$10,249,782
- -----------------------------------------------------------------------------------------
Health Care Revenue - 2.9%
Albany, NY, Industrial Development Authority,
Civic Facilities Rev., 8.25s, 2004 $1,590 $ 1,715,944
Dutchess, NY, Industrial Development Agency,
Civic Facilities Rev., 8.625s, 2016 1,085 1,190,549
New York Medical Care Facilities Finance
Agency, Mental Health Services (Huntington
Mortgage), 6.5s, 2014 1,250 1,372,350
-----------
$ 4,278,843
- -----------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 4.2%
Allegany County, NY, Industrial Development
Authority, Solid Waste Rev. (Atlantic Richfield),
6.625s, 2016 $1,000 $ 1,096,240
</TABLE>
Municipal Bonds - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Revenue (Corporate Guarantee) - continued
Essex County, NY, Industrial Development Agency
(International Paper), 5.55s, 2014 $ 750 $ 805,935
Essex County, NY, Industrial Development Agency
(Solid Waste International Paper), 6.15s, 2021 1,000 1,090,660
Fulton County, NY, Industrial Development Agency
(Crossroads Incubator), 8.75s, 2009 1,025 1,079,745
Monroe County, NY, Industrial Development
Agency (Weyerhaeuser), 9s, 2006 1,000 1,009,900
Onondaga County, NY, Industrial Development
Agency (Bristol-Meyers Squibb), 5.75s, 2024 1,000 1,130,930
-----------
$ 6,213,410
- -----------------------------------------------------------------------------------------
Insured Health Care Revenue - 4.5%
New York City, NY, Health & Hospital Corp.,
AMBAC, 6.075s, 2023++++ $3,200 $ 3,482,176
New York Dormitory Authority Rev. (Champlain
Valley), Connie Lee, 6s, 2010 250 287,275
New York Dormitory Authority Rev. (St. Vincent's
Hospital), FHA, 7.375s, 2011 2,500 2,753,425
-----------
$ 6,522,876
- -----------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 0.4%
New York City, NY, Housing Development Corp.
(South Bronx Cooperatives), 8.1s, 2023 $ 570 $ 596,972
- -----------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 0.7%
Municipal Assistance Corp., City of Troy, MBIA,
0s, 2019 $1,835 $ 656,691
Municipal Assistance Corp., City of Troy, MBIA,
0s, 2020 1,120 391,026
-----------
$ 1,047,717
- -----------------------------------------------------------------------------------------
Single Family Housing Revenue - 3.4%
New York Mortgage Agency Rev., 7.375s, 2011 $1,295 $ 1,399,869
New York Mortgage Agency Rev., 8.05s, 2011 50 52,383
New York Mortgage Agency Rev., 6.45s, 2017 2,355 2,556,918
New York Mortgage Agency Rev., 7.75s, 2023 960 1,033,354
-----------
$ 5,042,524
- -----------------------------------------------------------------------------------------
Turnpike Revenue - 6.0%
Triborough Bridge & Tunnel Authority, NY,
5.5s, 2017 $8,000 $ 8,861,200
- -----------------------------------------------------------------------------------------
Universities - 4.9%
Hempstead Town, NY, Civic Facilities Rev. (Hofstra
University), MBIA, 5.8s, 2015 $1,500 $ 1,640,340
Islip, NY, Community Development Agency Rev.
(New York Institute of Technology), 7.5s, 2026 2,000 2,206,800
New York Dormitory Authority Rev. (Colgate
University), MBIA, 6s, 2016 1,000 1,168,520
New York Dormitory Authority Rev. (Cornell
University), 7.375s, 2020 1,500 1,620,570
Utica, NY, Industrial Development Agency (Utica
College), 5.3s, 2008 500 508,535
-----------
$ 7,144,765
- -----------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 11.1%
New York City, NY, Municipal Water & Sewer
Finance Authority, 6s, 2010 $ 620 $ 710,334
New York City, NY, Municipal Water & Sewer
Finance Authority, 7.1s, 2012 2,000 2,183,820
New York City, NY, Municipal Water & Sewer
Finance Authority, 7s, 2015 745 811,186
New York City, NY, Municipal Water & Sewer
Finance Authority, 7.6s, 2020 470 489,721
</TABLE>
9 - MNY
<PAGE>
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Water and Sewer Utility Revenue - continued
New York Environmental Facilities Corp., Pollution
Control Rev., 5.75s, 2010 $3,235 $ 3,658,300
New York Environmental Facilities Corp., Pollution
Control Rev., 6.875s, 2010 220 241,131
New York Environmental Facilities Corp., Pollution
Control Rev., 5.75s, 2012 1,100 1,244,012
New York Environmental Facilities Corp., Water
Facilities Rev., 8.85s, 2015 2,500 2,819,250
Suffolk County, NY, Water Authority, MBIA,
5.1s, 2012 1,895 2,015,560
Suffolk County, NY, Water Authority, MBIA,
5.1s, 2013 2,000 2,118,500
------------
$ 16,291,814
- -----------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $126,718,129) $143,580,275
- -----------------------------------------------------------------------------------------
Floating Rate Demand Notes - 0.6%
- -----------------------------------------------------------------------------------------
Long Island, NY, Power Authority Rev., due 5/01/33 $ 100 $ 100,000
New York City, NY, Municipal Water Finance
Authority, due 6/15/24 800 800,000
- -----------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 900,000
- -----------------------------------------------------------------------------------------
Total Investments (Identified Cost, $127,618,129) $144,480,275
Other Assets, Less Liabilities - 1.5% 2,250,489
- -----------------------------------------------------------------------------------------
Net assets - 100.0% $146,730,764
- -----------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
MFS NORTH CAROLINA MUNICIPAL BOND FUND
Municipal Bonds - 97.5%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 1.3%
Durham, NC, 5.9s, 2013 $2,400 $ 2,652,576
Durham, NC, 5.9s, 2014 2,400 2,645,520
Hertford County, NC, 9.5s, 2000### 100 101,237
Hertford County, NC, 9.5s, 2001### 100 101,883
Hertford County, NC, 9.5s, 2002 100 102,383
-----------
$ 5,603,599
- ----------------------------------------------------------------------------------------
State and Local Appropriation - 9.0%
Charlotte, NC, Certificates of Participation
(Convention Facilities Project), AMBAC, 0s, 2004 $3,435 $ 2,702,212
Charlotte, NC, Certificates of Participation
(Convention Facilities Project), AMBAC, 0s, 2005 4,810 3,614,426
Charlotte, NC, Certificates of Participation
(Convention Facilities Project), AMBAC, 0s, 2006 1,075 773,205
Charlotte, NC, Certificates of Participation
(Convention Facilities Project), AMBAC, 0s, 2008 3,000 1,967,130
Cumberland County, NC, Certificates of
Participation (Civic Center), AMBAC, 0s, 2011 425 236,134
Cumberland County, NC, Certificates of
Participation (Civic Center), AMBAC, 0s, 2013 1,000 492,590
Dare County, NC, MBIA, 6.6s, 2006 2,100 2,288,979
Durham, NC, Certificates of Participation (Hospital
and Office Facilities), 5.875s, 2009 1,460 1,601,664
Durham, NC, Certificates of Participation (New
Durham Corp.), 6.875s, 2009 1,750 1,903,702
Franklin County, NC, Certificates of Participation
(Jail and School), FGIC, 6.625s, 2014 2,000 2,261,140
Greensboro, NC, Certificates of Participation
(Coliseum Arena Project), 6.25s, 2011 2,180 2,333,472
Harnett County, NC, Certificates of Participation,
AMBAC, 6.2s, 2006 1,000 1,118,770
Harnett County, NC, Certificates of Participation,
AMBAC, 6.2s, 2009 1,500 1,666,050
Puerto Rico Housing, Bank and Finance Agency,
7.5s, 2006 7,000 8,359,960
Puerto Rico Public Finance Corp., AMBAC,
5.375s, 2016 3,000 3,282,690
Puerto Rico Public Finance Corp., 5s, 2026 2,500 2,500,800
Scotland County, NC, Certificates of Participation
(Jail and Courthouse Project), FSA, 6.75s, 2011 1,000 1,080,370
Union County, NC, Certificates of Participation,
AMBAC, 6.375s, 2012 1,000 1,105,650
-----------
$39,288,944
- ----------------------------------------------------------------------------------------
Refunded and Special Obligations - 23.8%
Appalachian State University, NC, MBIA,
6.1s, 2004 $1,140 $ 1,286,684
Appalachian State University, NC, MBIA,
6.125s, 2004 4,370 4,937,750
Chapel Hill, NC, Parking Facilities Rev. (Rosemary
Street Project), 8.125s, 2000 1,585 1,759,952
Chapel Hill, NC, Parking Facilities Rev. (Rosemary
Street Project), 8.25s, 2000 3,305 3,678,300
Charlotte, NC, Certificates of Participation
(Convention Facilities Project), AMBAC,
6.75s, 2001 4,250 4,708,150
Charlotte, NC, Water and Sewer, 5.8s, 2004 6,830 7,576,519
Charlotte, NC, Water and Sewer, 5.9s, 2004 2,820 3,141,677
Charlotte, NC, Water and Sewer, 5.6s, 2006 4,500 5,032,935
Craven, NC, Regional Medical Authority, MBIA,
7.2s, 2000 1,500 1,630,695
Cumberland County, NC, Certificates of
Participation (Civic Center), AMBAC, 6.375s, 2004 1,100 1,268,267
</TABLE>
10 - MNC
<PAGE>
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Refunded and Special Obligations - continued
North Carolina Eastern Municipal Power Agency,
7.5s, 2010 $2,595 $ 3,325,467
North Carolina Eastern Municipal Power Agency,
5s, 2017 11,870 12,302,068
North Carolina Medical Care Commission,
Hospital Rev. (Carolina Medicorp), 6s, 2001 19,000 20,062,290
North Carolina Medical Care Commission,
Hospital Rev. (Gaston Health Care), 0s, 1999 500 286,675
North Carolina Medical Care Commission,
Hospital Rev. (Presbyterian Health), 7.3s, 2000 1,000 1,089,030
North Carolina Medical Care Commission,
Hospital Rev. (Presbyterian Health), 7.375s, 2000 4,000 4,361,840
North Carolina Medical Care Commission,
Hospital Rev. (Rex Hospital Project), 6.25s, 2003 2,500 2,795,225
Pender County, NC, Certificates of Participation
(Pender County Prison), 7.6s, 2001 1,685 1,880,207
Pender County, NC, Certificates of Participation
(Pender County Prison), 7.7s, 2001 1,000 1,118,360
Pitt County, NC, Hospital Rev. (Memorial Hospital),
5.25s, 2005 10,135 11,101,980
University of North Carolina (Chapel Hill), 0s, 2002 9,105 4,177,738
University of North Carolina (Chapel Hill), 0s, 2002 4,285 1,832,738
Winston-Salem, NC, Water and Sewer Systems
Rev., 6.25s, 2002 4,000 4,401,000
------------
$103,755,547
- ----------------------------------------------------------------------------------------
Airport and Port Revenue - 1.3%
Puerto Rico Ports Authority (American Airlines),
6.25s, 2026 $5,075 $ 5,581,587
- ----------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 19.5%
New Hanover County, NC, Industrial Facilities Rev.
(Carolina Power and Light Co.), 6.9s, 2009 $1,000 $ 1,060,510
North Carolina Eastern Municipal Power Agency,
MBIA, 7s, 2007 5,000 5,959,850
North Carolina Eastern Municipal Power Agency,
MBIA, 7.25s, 2007 5,000 6,046,150
North Carolina Eastern Municipal Power Agency,
MBIA, 7.5s, 2010 3,005 3,841,592
North Carolina Eastern Municipal Power Agency,
AMBAC, 6s, 2018 14,245 16,554,115
North Carolina Municipal Power Agency, No. 1,
Catawba Electric Rev., MBIA, 0s, 2008 10,150 6,894,489
North Carolina Municipal Power Agency, No. 1,
Catawba Electric Rev., MBIA, 0s, 2009 12,610 8,035,722
North Carolina Municipal Power Agency, No. 1,
Catawba Electric Rev., MBIA, 6s, 2011 8,000 9,207,120
North Carolina Municipal Power Agency, No. 1,
Catawba Electric Rev., MBIA, 6.97s, 2012++++ 9,000 9,970,740
North Carolina Municipal Power Agency, No. 1,
Catawba Electric Rev., MBIA, 5.5s, 2014 3,500 3,857,980
North Carolina Municipal Power Agency, No. 1,
Catawba Electric Rev., FSA, 6.2s, 2018 4,300 4,691,902
Puerto Rico Electric Power Authority Rev., FSA,
6s, 2016 5,000 5,494,550
Virgin Islands Water & Power Authority, 5.3s, 2021 1,000 1,017,050
Wake County, NC, Industrial Facilities Rev.
(Carolina Power and Light), 6.9s, 2009 2,000 2,121,020
------------
$ 84,752,790
- ----------------------------------------------------------------------------------------
Health Care Revenue - 10.7%
Charlotte-Mecklenberg Hospital Authority, "A",
5.75s, 2021 $1,500 $ 1,597,905
</TABLE>
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. (Duke University), 5.25s, 2021 $5,975 $ 6,072,572
North Carolina Medical Care Commission,
Hospital Rev. (Gaston Health Care), 5.5s, 2015 8,040 8,375,911
North Carolina Medical Care Commission,
Hospital Rev. (Gaston Health Care), 5.5s, 2019 7,500 7,750,725
North Carolina Medical Care Commission,
Hospital Rev. (Halifax Memorial), 6.75s, 2014 1,355 1,480,635
North Carolina Medical Care Commission,
Hospital Rev. (Halifax Memorial), 6.75s, 2024 4,500 4,915,575
North Carolina Medical Care Commission,
Hospital Rev. (Moore Memorial Hospital),
9.1s, 1999 800 807,000
North Carolina Medical Care Commission,
Hospital Rev. (Valdese General), 8.75s, 2016 5,245 5,901,779
North Carolina Medical Care Commission,
Hospital Rev. (Well Spring Retirement),
6.25s, 2017 2,500 2,583,575
North Carolina Medical Care Commission,
Hospital Rev. (Well Spring Retirement),
6.25s, 2021 2,000 2,062,260
Northern Hospital District, Surry County, NC,
Heath Care Facilities Rev., 7.875s, 2021 4,530 4,929,954
------------
$ 46,477,891
- ----------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 10.6%
Chatham County, NC, Industrial Facilities &
Pollution Control (Weyerhaeuser), 9s, 2006 $1,260 $ 1,264,700
Columbus County, NC, Industrial Facilities &
Pollution Control (International Paper), 5.8s, 2016 4,000 4,265,800
Columbus County, NC, Industrial Facilities &
Pollution Control (International Paper),
6.15s, 2021 5,000 5,395,050
Halifax County, NC, Industrial Facilities & Pollution
Control Finance Authority (Champion
International Corp.), 8.15s, 2019 1,500 1,592,400
Haywood County, NC, Industrial Facilities &
Pollution Control Finance Authority (Champion
International Corp.), 8.1s, 2009 90 96,249
Haywood County, NC, Industrial Facilities &
Pollution Control Finance Authority (Champion
International Corp.), 8.1s, 2009 2,410 2,557,468
Haywood County, NC, Industrial Facilities &
Pollution Control Finance Authority (Champion
International Corp.), 5.75s, 2025 8,900 9,373,747
Martin County, NC, Industrial Facilities & Pollution
Control Finance Authority (Weyerhaeuser Co.),
7.25s, 2014### 7,000 7,747,670
Martin County, NC, Industrial Facilities & Pollution
Control Finance Authority (Weyerhaeuser Co.),
6.8s, 2024 7,500 8,429,400
Mecklenburg County, NC, Industrial Facilities and
Pollution Control Finance Authority (Precision
Steel), 7.75s, 2014 2,600 2,761,564
Surry County, NC, Industrial Facilities & Pollution
Control Finance Authority (Weyerhaeuser),
9.25s, 2002 1,500 1,687,830
Wake County, NC, Industrial Facilities & Pollution
Control Finance Authority (Mallinkcodt),
6.75s, 2012 1,100 1,162,161
------------
$ 46,334,039
- ----------------------------------------------------------------------------------------
</TABLE>
11 - MNC
<PAGE>
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Insured Health Care Revenue - 3.9%
Cumberland County, NC, Hospital Facilities Rev.
(Cumberland County Hospital), MBIA, 0s, 2009 $ 1,800 $ 1,119,510
Cumberland County, NC, Hospital Facilities Rev.
(Cumberland County Hospital), MBIA, 6s, 2021 4,000 4,169,440
New Hanover County, NC, Hospital Rev. (New
Hanover Regional Medical Center), AMBAC,
5.75s, 2026 3,625 3,931,675
North Carolina Medical Care Commission
(Catholic Health East), AMBAC, 5s, 2018 2,000 2,013,680
North Carolina Medical Care Commission
(Catholic Health East), AMBAC, 5s, 2028 3,000 2,998,800
North Carolina Medical Care Commission (Wake
County Hospital), MBIA, 5.375s, 2026 1,610 1,675,140
North Carolina Medical Care Commission (Wilson
Memorial Hospital), AMBAC, 0s, 2013 1,000 490,870
North Carolina Medical Care Commission (Wilson
Memorial Hospital), AMBAC, 0s, 2015 1,140 500,768
------------
$ 16,899,883
- ----------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 4.2%
Asheville, NC, Housing Authority (Asheville
Terrace Apartments), 7.1s, 2011 $ 5,000 $ 5,375,150
North Carolina Housing Finance Agency, FHA,
6.9s, 2024 4,880 5,266,349
North Carolina Housing Finance Agency, FHA,
6.05s, 2028 5,000 5,356,400
Salisbury, NC, Housing Corp. (Yadkin Senior
Citizens), FNMA, 6.75s, 2022 2,035 2,115,688
------------
$ 18,113,587
- ----------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 0.6%
Virgin Islands Public Finance Authority, 5.5s, 2018 $ 1,000 $ 1,024,360
Virgin Islands Public Finance Authority, 5.5s, 2022 1,600 1,634,672
------------
$ 2,659,032
- ----------------------------------------------------------------------------------------
Single Family Housing Revenue - 3.6%
North Carolina Housing Finance Agency,
5.125s, 2013 $ 1,100 $ 1,116,720
North Carolina Housing Finance Agency,
6.15s, 2017 2,000 2,168,920
North Carolina Housing Finance Agency,
6.7s, 2018 1,785 1,913,538
North Carolina Housing Finance Agency,
7.7s, 2021 1,795 1,841,598
North Carolina Housing Finance Agency,
7.8s, 2021 1,620 1,634,175
North Carolina Housing Finance Agency,
7.85s, 2028 4,490 4,670,902
North Carolina Housing Finance Agency,
7.6s, 2032 2,210 2,299,616
------------
$ 15,645,469
- ----------------------------------------------------------------------------------------
Solid Waste Revenue - 0.3%
Iredell, NC, Solid Waste Systems Rev., 6.25s, 2012 $ 1,250 $ 1,342,375
- ----------------------------------------------------------------------------------------
Turnpike Revenue - 0.7%
Puerto Rico Highway and Transportation Authority
Rev., 6.65s, 2007++++ $ 2,750 $ 3,133,625
- ----------------------------------------------------------------------------------------
Universities - 4.9%
North Carolina Education Facilities Finance
Agency (Duke University), 6.75s, 2021 $11,500 $ 12,525,570
University of North Carolina, University Rev.,
0s, 2012 4,265 2,250,939
</TABLE>
Municipal Bonds - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Universities - continued
University of North Carolina, University Rev.,
0s, 2013 $ 6,415 $ 3,200,187
University of North Carolina, University Rev.,
0s, 2015 4,415 1,972,622
University of North Carolina, University Rev.,
0s, 2016 3,500 1,477,770
------------
$ 21,427,088
- ----------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 3.1%
Asheville, NC, Water System Rev., FGIC, 5.7s, 2025 $ 2,000 $ 2,159,800
Charlotte, NC, Water and Sewer Systems Rev.,
5.25s, 2021 4,000 4,147,880
Kannapolis, NC, Certificates of Participation,
MBIA, 7.375s, 2010 5,000 5,309,050
Raleigh, NC, Water and Sewer Systems Rev.,
5.125s, 2022 2,000 2,048,520
------------
$ 13,665,250
- ----------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $381,508,743) $424,680,706
- ----------------------------------------------------------------------------------------
Floating Rate Demand Notes - 0.9%
- ----------------------------------------------------------------------------------------
Bartow County, GA, Development Authority,
Pollution Control Rev. (Georgia Power Co.), due
3/01/24 $ 1,500 $ 1,500,000
Harris County, TX, Industrial Development Corp.,
Pollution Control Rev. (Exxon Corp.), due 3/01/24 1,300 1,300,000
New Castle, PA, Area Hospital Authority
(Jameson Memorial Hospital), due 7/01/26 1,200 1,200,000
- ----------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 4,000,000
- ----------------------------------------------------------------------------------------
Total Investments (Identified Cost, $385,508,743) $428,680,706
Other Assets, Less Liabilities - 1.6% 7,092,062
- ----------------------------------------------------------------------------------------
Net assets - 100.0% $435,772,768
- ----------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
12 - MNC
<PAGE>
Portfolio of Investments (Unaudited) - September 30, 1998
MFS PENNSYLVANIA MUNICIPAL BOND FUND
Municipal Bonds - 96.6%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 6.0%
Butler, PA, School District, FGIC, 5.375s, 2018 $ 500 $ 521,170
Chester County, PA, 5.65s, 2011 500 534,305
Dauphin County, PA, General Authority Rev.,
MBIA, 0s, 2020 240 81,245
Greene County, PA, 6s, 2010 100 104,694
Northeastern York County, PA, School District,
FGIC, 0s, 2012 415 224,751
Oley Valley, PA, School District, AMBAC, 0s, 2011 810 460,542
Southeastern Area, PA, Special Schools Authority
Rev., 0s, 2007 360 244,926
State of Pennsylvania, 6.25s, 2010 300 355,218
-----------
$ 2,526,851
- ----------------------------------------------------------------------------------------
State and Local Appropriation - 2.2%
Delaware Valley, PA, Regional Finance Authority,
AMBAC, 7.031s, 2018 $ 500 $ 606,425
Philadelphia, PA, Municipal Authority Rev.
(Justice Lease), 8.625s, 2016 285 314,765
-----------
$ 921,190
- ----------------------------------------------------------------------------------------
Refunded and Special Obligations - 25.4%
Allegheny County, PA, Sanitation Authority, FGIC,
0s, 2014 $2,835 $ 1,332,790
Beaver County, PA, "A", MBIA, 5.75s, 2006 250 278,760
Commonwealth of Puerto Rico, 6.35s, 2004 1,350 1,545,993
Harrisburg, PA, 5.875s, 2003 1,000 1,103,910
Lycoming County, PA, MBIA, 5.55s, 2007 1,000 1,109,270
Northumberland County, PA, Lease (Commonwealth
Correctional Facility), MBIA, 0s, 2012 1,000 527,110
Philadelphia, PA, Gas Works Rev., 6.375s, 2003 750 832,132
Philadelphia, PA, Gas Works Rev., 6s, 2013 1,645 1,880,219
Philadelphia, PA, Hospital & Higher Educational
Facilities Authority, FHA, 7.25s, 2001 500 555,295
Puerto Rico Highways & Transportation Authority
Rev., 6.5s, 2002 250 277,950
Schuylkill County, PA, Redevelopment Authority
Rev., FGIC, 7s, 2001 300 327,999
Westmoreland County, PA, MBIA, ETM,
5.25s, 2009 400 431,364
Westmoreland County, PA, FGIC, ETM, 0s, 2018 1,000 387,060
-----------
$10,589,852
- ----------------------------------------------------------------------------------------
Airport and Port Revenue - 3.9%
Allegheny County, PA, Airport Rev. (Pittsburgh
International Airport), MBIA, 5.75s, 2014 $1,000 $ 1,110,850
Philadelphia, PA, Industrial Development Authority
(Philadelphia Airport Systems), FGIC, 5s, 2016 500 503,315
-----------
$ 1,614,165
- ----------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 3.3%
Luzerne County, PA, Industrial Development
Authority, AMBAC, 7.2s, 2017 $ 500 $ 563,425
Luzerne County, PA, Industrial Development
Authority, 6.05s, 2019 300 317,973
Virgin Islands Water & Power Authority, 5.3s, 2018 500 509,415
-----------
$ 1,390,813
- ----------------------------------------------------------------------------------------
</TABLE>
Municipal Bonds - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Health Care Revenue - 9.1%
Butler County, PA, Industrial Development
Authority (Sherwood Oaks), 5.75s, 2011 $ 400 $ 416,508
Chester County, PA, Health & Education (Main
Line), 5.5s, 2015### 335 347,636
Cumberland County, PA, Municipal Refunding
(Carlisle Hospital), 6.8s, 2023 500 551,605
Pennsylvania Higher Education Rev., 5.7s, 2011 550 595,419
Philadelphia, PA, Health & Educational Facilities
(Jeanes Health), 6.6s, 2010 500 556,825
Philadelphia, PA, Health & Educational Facilities
(Temple University), 6.625s, 2023 250 271,208
Philadelphia, PA, Hospital & Educational Facilities
(The Phil. Protestant Home Project A), 6.5s, 2027 500 517,220
Scranton Lackawanna, PA, Health & Welfare
(Allied Health), 7.125s, 2005 500 549,610
-----------
$ 3,806,031
- ----------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 5.3%
Erie County, PA, Industrial Development Authority
(International Paper Co.), 5.3s, 2012 $ 500 $ 530,120
Erie County, PA, Industrial Development Authority
(International Paper Co.), 7.625s, 2018 250 294,015
New Morgan, PA, Industrial Development
Authority (Browning Ferris Co.), 6.5s, 2019 500 547,160
Northampton County, PA, Industrial Development
Authority (Bethlehem Steel), 7.55s, 2017 750 841,920
-----------
$ 2,213,215
- ----------------------------------------------------------------------------------------
Insured Health Care Revenue - 6.5%
Allegheny County, PA, Hospital Authority (South
Hills Health System), MBIA, 5.8s, 2016 $ 500 $ 542,095
Blair County, PA, Hospital Authority (Altoona),
AMBAC, 5.5s, 2008 470 514,265
Dauphin County, PA, General Authority Hospital
Rev. (Hapsco Project), MBIA, 5.8s, 2002 355 379,250
Lehigh County, PA, Hospital Rev. (Lehigh Valley),
MBIA, 7s, 2016 250 316,587
Lycoming County, PA, Authority Hospital Rev.
(Williamsport Hospital Obligation Group), Connie
Lee, 5.375s, 2010 750 804,015
Sayre, PA, Health Care Facilities (VHA, PA),
AMBAC, 6.375s, 2022 160 173,434
-----------
$ 2,729,646
- ----------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 0.6%
Montgomery County, PA, Redevelopment Authority
(KBF Associates), 6.5s, 2025 $ 250 $ 264,273
- ----------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 3.9%
Puerto Rico Highway & Transportation Authority,
5.5s, 2008 $ 500 $ 530,320
Puerto Rico Highway & Transportation Authority,
5.5s, 2013 500 543,755
Puerto Rico Highway & Transportation Authority,
MBIA, 5.5s, 2015 500 557,070
-----------
$ 1,631,145
- ----------------------------------------------------------------------------------------
Single Family Housing Revenue - 8.4%
Pennsylvania Housing Finance Agency, FHA-VA,
5.75s, 2013 $1,000 $ 1,059,130
Pennsylvania Housing Finance Agency,
6.75s, 2014 500 545,275
Pennsylvania Housing Finance Agency, 6.4s, 2016 500 538,110
</TABLE>
13 - MPA
<PAGE>
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
Single Family Housing Revenue - continued
Pennsylvania Housing Finance Agency,
6.65s, 2021 $ 250 $ 271,405
Pennsylvania Housing Finance Agency,
6.125s, 2024 435 461,657
Philadelphia, PA, Redevelopment Authority,
6.1s, 2010 200 212,164
Pittsburgh, PA, Urban Development Corp.,
5.5s, 2010 400 414,016
-----------
$ 3,501,757
- ----------------------------------------------------------------------------------
Solid Waste Revenue - 1.3%
York County, PA, Solid Waste Systems Rev., FGIC,
5.5s, 2011 $ 485 $ 536,706
- ----------------------------------------------------------------------------------
Universities - 6.9%
Cumberland County, PA, Municipal Authority
(Messiah College), AMBAC, 5.125s, 2015 $ 300 $ 307,632
Pennsylvania Higher Education Facilities Authority
Rev. (Temple University), MBIA, 5.25s, 2014 500 523,840
Pennsylvania Higher Education Facilities Authority
Rev. (Thomas Jefferson University), 6s, 2019 625 643,181
Pennsylvania Higher Education Facilities Authority
Rev. (University of Pennsylvania), 7s, 2008 400 462,180
Philadelphia, PA, Authority for Industrial
Development (Girard Estate Facilities Leasing),
5.5s, 2014 880 935,414
-----------
$ 2,872,247
- ----------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 6.9%
Lancaster, PA, Sewer Authority, FGIC, 6.85s, 2011 $ 250 $ 251,180
Philadelphia, PA, Water Rev., MBIA, 6.25s, 2012 1,050 1,242,171
Philadelphia, PA, Water Rev., FSA, 5.75s, 2013 300 320,181
Philadelphia, PA, Water Rev., MBIA, 5.5s, 2014 1,000 1,061,850
-----------
$ 2,875,382
- ----------------------------------------------------------------------------------
Other - 6.9%
Lehigh County, PA, General Purpose Authority
(Kidspeace Obligation Group), 6s, 2018 $ 250 $ 249,467
Pennsylvania Convention Center Rev., 6.75s, 2019 250 275,770
Pennsylvania Finance Authority Rev., 6.6s, 2009 900 996,759
Pennsylvania Industrial Development Authority,
AMBAC, 7s, 2007 300 359,211
Pennsylvania Industrial Development Authority,
AMBAC, 5.8s, 2009 400 450,512
Philadelphia, PA, Industrial Development
Authority, MBIA, 5.35s, 2012 500 530,825
-----------
$ 2,862,544
- ----------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $37,056,938) $40,335,817
- ----------------------------------------------------------------------------------
Floating Rate Demand Notes - 1.2%
- ----------------------------------------------------------------------------------
Allegheny County, PA, Hospital Development Rev.
(Aces Presbyterian Hospital), due 3/01/18 $ 100 $ 100,000
New Castle, PA, Area Hospital Authority
(Jameson Memorial Hospital), due 7/01/26 400 400,000
- ----------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 500,000
- ----------------------------------------------------------------------------------
Total Investments (Identified Cost, $37,556,938) $40,835,817
Other Assets, Less Liabilities - 2.2% 915,777
- ----------------------------------------------------------------------------------
Net assets - 100.0% $41,751,594
- ----------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
MFS SOUTH CAROLINA MUNICIPAL BOND FUND
Municipal Bonds - 97.0%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 4.6%
Charleston County, SC, 5.5s, 2014 $1,250 $1,342,612
Commonwealth of Puerto Rico, 6.5s, 2013 3,300 3,918,222
Richland County, SC, School District No. 1,
5s, 2016 1,975 2,029,174
State of South Carolina, Highway Rev., 4.5s, 2021 1,090 1,043,948
----------
$8,333,956
- -----------------------------------------------------------------------------------
State and Local Appropriation - 3.6%
Berkeley County, SC, School District (Berkeley
School Facilities Group Inc.), AMBAC, 5s, 2016 $1,500 $1,513,695
Greenville County, SC, Certificates of Participation
(Greenville Technical College), AMBAC,
5.9s, 2019 850 915,008
Hilton Head Island, SC, Public Finance Corp.,
Certificates of Participation, AMBAC, 5.75s, 2014 1,750 1,902,792
Puerto Rico Public Buildings Authority, 5.7s, 2009 1,000 1,108,080
Puerto Rico Public Buildings Authority, 5.5s, 2021 1,000 1,097,840
----------
$6,537,415
- -----------------------------------------------------------------------------------
Refunded and Special Obligations - 19.7%
Berkeley County, SC, School District, AMBAC,
6.3s, 2004 $1,800 $2,035,008
Calhoun, SC, Solid Waste Disposal Rev. (Eastman
Kodak), 6.75s, 2017 1,000 1,233,790
Charleston County, SC (Alumax), 6.5s, 2001 1,315 1,431,088
Charleston County, SC, Certificates of
Participation (Charlestown Public Facilities
Corp.), MBIA, 7.1s, 2001 2,000 2,209,340
Columbia, SC, Waterworks & Sewer Rev., 0s, 2004 1,500 1,216,440
Columbia, SC, Waterworks & Sewer Rev., 0s, 2006 2,045 1,524,016
Commonwealth of Puerto Rico, 6.5s, 2004 2,000 2,305,720
Commonwealth of Puerto Rico, Public
Improvement Rev., 6.8s, 2002 425 476,931
Lexington County, SC, School District No. 1,
Certificates of Participation (Gilbert Middle
School), MBIA, 6.65s, 2001 1,000 1,077,610
Myrtle Beach, SC, Public Finance Corp.,
Certificates of Participation (Convention Center),
6.875s, 2002 2,500 2,808,825
Myrtle Beach, SC, Water & Sewer Rev., MBIA,
6s, 2000 1,750 1,808,205
Puerto Rico Aqueduct & Sewer Authority Rev.,
9s, 2005 750 948,285
Puerto Rico Highway & Transportation Authority,
Highway Rev., 6.625s, 2002 300 334,839
Richland County, SC, Certificates of Participation,
FGIC, 0s, 2005 1,160 897,689
Richland County, SC, Certificates of Participation,
FGIC, 0s, 2006 1,160 860,952
Richland County, SC, Certificates of Participation,
FGIC, 0s, 2007 1,160 823,357
South Carolina Jobs Economic Development
Authority (Carolina Hospital System Project),
7.55s, 2002 2,000 2,304,260
South Carolina Public Service Authority, "C"
(Santee Cooper), 7.1s, 2001 1,220 1,349,076
South Carolina Public Service Authority (Santee
Cooper), 6.625s, 2002 4,000 4,467,040
Spartanburg, SC, Waterworks Rev., FGIC,
6.05s, 2006 2,750 3,118,445
</TABLE>
14 - MSC
<PAGE>
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
Refunded and Special Obligations - continued
Williamsburg County, SC, School District Public
Facilities Corp., Certificates of Participation,
7.5s, 2003 $2,010 $ 2,348,584
-----------
$35,579,500
- ------------------------------------------------------------------------------------
Airport and Port Revenue - 1.9%
Horry County, SC, Airport Rev., "A", FSA,
5.7s, 2027 $2,250 $ 2,411,483
Richland Lexington, SC, Airport Rev. (Columbia
Airport), "A", AMBAC, 5.7s, 2026 1,000 1,057,920
-----------
$ 3,469,403
- ------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 17.6%
Camden, SC, Public Utility Rev., Refunding &
Improvement, MBIA, 5.5s, 2017 $1,500 $ 1,609,980
Colleton & Dorchester Counties, SC, Pollution
Control Rev., 6.6s, 2014 3,000 3,286,320
Fairfield County, SC, Pollution Control Rev. (South
Carolina Electric Co.), 6.5s, 2014 1,250 1,371,025
Oconee County, SC, Pollution Control Rev. (Duke
Power Co.), 7.5s, 2017 1,000 1,041,620
Piedmont, SC, Municipal Power Agency, MBIA,
4s, 2023 7,000 6,084,820
Piedmont, SC, Municipal Power Agency, Electric
Rev., FGIC, 6.25s, 2021 4,600 5,506,568
Puerto Rico Electric Power Authority Rev., MBIA,
6.125s, 2008 1,025 1,192,505
South Carolina Public Service Authority, MBIA,
5.25s, 2013 1,965 2,062,936
South Carolina Public Service Authority, MBIA,
8.262s, 2013++++ 3,000 3,340,710
South Carolina Public Service Authority, FGIC,
5.875s, 2023 2,000 2,173,860
South Carolina Public Service Authority, "B",
AMBAC, 5.5s, 2023 1,000 1,052,700
South Carolina Public Service Authority (South
Carolina Electric & Gas), MBIA, 5s, 2019 3,000 3,034,650
-----------
$31,757,694
- ------------------------------------------------------------------------------------
Health Care Revenue - 9.7%
Greenville County, SC, First Mortgage Rev.
(Chestnut Hill), 10.125s, 2016 $1,860 $ 1,599,600
Greenville Hospital System, SC, Hospital Facilities
Rev., 6s, 2020 5,400 6,178,626
Greenville Hospital System, SC, Hospital Facilities
Rev., 5.25s, 2023 2,040 2,086,716
Greenville Hospital System, SC, Hospital Facilities
Rev., "A", 5.25s, 2017 2,785 2,865,904
Horry County, SC, Hospital Facilities Rev. (Conway
Hospital), 6.75s, 2012 4,320 4,691,088
-----------
$17,421,934
- ------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 9.1%
Chester County, SC, Industrial Development Rev.
(Springs Industries, Inc), 7.35s, 2014 $1,000 $ 1,094,440
Chester County, SC, Industrial Development Rev.
(Springs Industries, Inc.), 7.8s, 2014 1,025 1,110,546
Darlington County, SC, Industrial Development
Rev. (Nucor Corp.), 5.75s, 2023 2,000 2,106,780
Darlington County, SC, Industrial Development
Rev. (Sonoco Products Co.), 6.125s, 2025 1,500 1,621,245
Florence County, SC, Industrial Development Rev.
(Stone Container Corp.), 7.375s, 2007 865 937,842
</TABLE>
Municipal Bonds - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Revenue (Corporate Guarantee) - continued
Greenville County, SC, Industrial Development
Rev. (Kroger Co.), 7.85s, 2015 $ 500 $ 569,085
Lexington County, SC, Industrial Rev. (J. B. White
& Co.), 8s, 2005 515 557,730
Richland County, SC, Pollution Control Rev. (Union
Camp Corp.), 6.55s, 2020 1,800 1,974,222
Richland County, SC, Pollution Control Rev. (Union
Camp Corp.), 6.75s, 2022 2,000 2,183,080
York City, SC, Industrial Development Rev.
(Hoechst Celanese), 5.7s, 2024 4,000 4,162,960
-----------
$16,317,930
- ------------------------------------------------------------------------------------
Insured Health Care Revenue - 6.5%
Charleston County, SC, Hospital Facilities Rev.
(Medical Society Health Project), MBIA, 5s, 2022 $2,450 $ 2,452,621
Lexington County, SC, Hospital Rev., FSA,
5.5s, 2006 2,180 2,377,334
Lexington County, SC, Hospital Rev., FSA,
5.125s, 2021 1,500 1,523,070
South Carolina Jobs Economic Development
Authority, Hospital Facilities Rev. (Anderson Area
Medical Center), MBIA, 5.25s, 2015 1,750 1,810,305
Spartanburg County, SC, Health Service Rev.,
AMBAC, 5.3s, 2025 1,000 1,027,750
Spartanburg County, SC, Hospital Facilities Rev.
(Health Services District, Inc.), AMBAC, 5.3s,
2020 2,500 2,578,175
-----------
$11,769,255
- ------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 2.5%
South Carolina Housing Finance & Development
Authority (Fairway Apartments), FHA, 7.625s, 2033 $1,925 $ 2,033,666
South Carolina Housing, Finance & Development
Authority (Hunting Ridge Apartments), 6.75s, 2025 1,000 1,083,150
South Carolina Housing, Finance & Development
Authority (Runaway Bay Apartments),
6.125s, 2015 1,300 1,377,519
-----------
$ 4,494,335
- ------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 1.2%
Puerto Rico Highway & Transportation Authority
Rev., 5.5s, 2013 $1,000 $ 1,087,510
Virgin Islands Public Finance Authority, 5.5s, 2018 1,000 1,024,360
-----------
$ 2,111,870
- ------------------------------------------------------------------------------------
Single Family Housing Revenue - 0.0%
South Carolina Housing, Finance & Development
Authority Rev., 8.6s, 2019### $ 80 $ 81,697
- ------------------------------------------------------------------------------------
Solid Waste Revenue - 1.2%
Orangeburg County, SC, Solid Waste Disposal
Facilities Rev., AMBAC, 5.7s, 2024 $2,000 $ 2,080,340
- ------------------------------------------------------------------------------------
Universities - 1.0%
Coastal Carolina University, SC, MBIA,
6.875s, 2026 $1,000 $ 1,151,190
University of South Carolina, University Rev.,
MBIA, 5.75s, 2026 515 553,393
-----------
$ 1,704,583
- ------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 18.4%
Cayce, SC, Waterworks & Sewage Rev., FSA,
5s, 2017 $1,500 $ 1,516,470
Charleston County, SC, Waterworks & Sewer
Rev., 6s, 2012 2,000 2,135,840
</TABLE>
15 - MSC
<PAGE>
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
Water and Sewer Utility Revenue - continued
Charleston, SC, Waterworks & Sewer Rev.,
6s, 2018 $1,500 $ 1,595,775
Charleston, SC, Waterworks & Sewer Rev., MBIA,
5s, 2022 3,150 3,161,907
Columbia, SC, Waterworks & Sewer Rev., 0s, 2005 2,245 1,744,904
Columbia, SC, Waterworks & Sewer Rev., 0s, 2006 9,330 6,944,599
Columbia, SC, Waterworks & Sewer Rev.,
5.375s, 2012 3,500 3,814,475
Greenville, SC, Waterworks Rev., 5.5s, 2022 1,000 1,050,970
Myrtle Beach, SC, Water & Sewer Rev., MBIA,
5.5s, 2013 1,000 1,058,420
South Carolina Water Resources Authority Rev.
(Local Government Program), 7.25s, 2020 3,000 3,188,130
Spartenburg, SC, Waterworks Rev., FGIC, 5s, 2013 1,000 1,036,360
Spartanburg, SC, Waterworks Rev., FGIC, 5s, 2014 1,000 1,032,090
Western Carolina Regional Sewer Authority Rev.,
AMBAC, 0s, 2007 4,000 2,836,480
York County, SC, Water & Sewer Rev., 6.5s, 2025 2,000 2,105,860
------------
$ 33,222,280
- ----------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $157,304,808) $174,882,192
- ----------------------------------------------------------------------------------
Floating Rate Demand Notes - 1.7%
- ----------------------------------------------------------------------------------
Allegheny County, PA, Hospital Development Rev.,
due 3/01/20 $1,100 $ 1,100,000
Appling County, GA, Development Authority,
Pollution (Georgia Power Co.), due 9/01/29 500 500,000
Burke County, GA, Development Authority,
Pollution Control Rev. (Georgia Power Co.),
due 4/01/25 100 100,000
Burke County, GA, Development Authority,
Pollution Control Rev. (Georgia Power Co.),
due 9/01/25 100 100,000
Harris County, TX, Hospital Rev. (Methodist
Hospital), due 12/01/26 100 100,000
Harris County, TX, Industrial Development Rev.
(Shell Oil Co.), due 4/01/27 700 700,000
New York City, NY, due 8/01/22 100 100,000
Uinta County, Pollution Control Rev. (Chevron),
due 8/15/20 400 400,000
- ----------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 3,100,000
- ----------------------------------------------------------------------------------
Total Investments (Identified Cost, $160,404,808) $177,982,192
Other Assets, Less Liabilities - 1.3% 2,308,280
- ----------------------------------------------------------------------------------
Net assets - 100.0% $180,290,472
- ----------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
MFS TENNESSEE MUNICIPAL BOND FUND
Municipal Bonds - 97.0%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 10.1%
Commonwealth of Puerto Rico, 5.375s, 2025 $1,640 $ 1,698,565
Commonwealth of Puerto Rico, 5.4s, 2025 3,000 3,122,880
Johnson City, TN, FGIC, 0s, 2012 1,690 908,307
Knoxville, TN, Public Improvement, 5.25s, 2015 1,000 1,041,480
Metropolitan Government of Nashville & Davidson
County, TN, 5.125s, 2025 2,000 2,027,660
Rutherford County, TN, 0s, 2015 1,500 635,025
Shelby County, TN, 0s, 2012 3,000 1,620,210
Shelby County, TN, Capital Appreciation
Refunding, "B", 0s, 2013 3,960 1,997,543
-----------
$13,051,670
- ----------------------------------------------------------------------------------
State and Local Appropriation - 1.7%
Gatlinburg, TN, Public Building Authority
(Gatlinburg Convention Center), AMBAC,
6.9s, 2012 $1,000 $ 1,096,800
Puerto Rico Public Buildings Authority, AMBAC,
5.5s, 2021 1,000 1,097,840
-----------
$ 2,194,640
- ----------------------------------------------------------------------------------
Refunded and Special Obligations - 21.8%
Bristol, TN, Health & Educational Facilities Board
(Bristol Memorial), FGIC, 7s, 2001 $ 500 $ 547,385
Gladeville, TN, Utility District, Waterworks Rev.,
FGIC, 7.4s, 2000 500 536,150
Knox County, TN, Health, Education & Housing
Facilities Board (Baptist East), 8.5s, 1999 1,045 1,090,896
Knox County, TN, Industrial Development Board,
0s, 2016 5,825 2,390,638
Memphis, TN, Electric Systems Rev., 6.75s, 2000 1,500 1,585,350
Metropolitan Government of Nashville & Davidson
County, TN, 6.125s, 2002 2,255 2,473,645
Metropolitan Government of Nashville & Davidson
County, TN, Health & Education Facility Board
Rev., 0s, 2021 5,995 1,769,484
Metropolitan Government of Nashville & Davidson
County, TN, Water & Sewer Rev., AMBAC,
6.075s, 2002 2,000 2,171,360
Mt. Juliet, TN, Public Building Authority
(Madison), MBIA, 7.7s, 2004 1,100 1,394,899
Mt. Juliet, TN, Public Building Authority
(Madison), MBIA, 7.8s, 2004 3,500 4,455,045
Shelby County, TN, 0s, 2005 1,000 608,400
Shelby County, TN, Public Improvement, "B",
5.75s, 2006 1,000 1,116,030
Territory of Virgin Islands, 7.75s, 2001 335 367,827
West Knox Utility District, TN, Water & Sewer
Rev., MBIA, 0s, 2002 1,315 1,119,999
West Knox Utility District, TN, Water & Sewer
Rev., MBIA, 0s, 2003 1,045 854,152
West Knox Utility District, TN, Water & Sewer
Rev., MBIA, 0s, 2004 1,920 1,504,608
West Knox Utility District, TN, Water & Sewer
Rev., MBIA, 0s, 2005 1,920 1,441,113
West Knox Utility District, TN, Water & Sewer
Rev., MBIA, 0s, 2006 1,920 1,373,453
West Knox Utility District, TN, Water & Sewer
Rev., MBIA, 0s, 2007 1,920 1,312,281
-----------
$28,112,715
- ----------------------------------------------------------------------------------
Airport and Port Revenue - 0.8%
Memphis-Shelby County, TN, Airport Authority
(North West Link & Parent Co.), 6.125s, 2016 $1,000 $ 1,025,070
- ----------------------------------------------------------------------------------
</TABLE>
16 - MTN
<PAGE>
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
Electric and Gas Utility Revenue - 6.7%
Harpeth Valley, TN, Utilities Improvement, MBIA,
4.75s, 2013 $1,000 $ 996,590
Jackson, TN, Electric Systems Rev., MBIA,
5s, 2018 1,000 1,010,780
Lawrenceburg, TN, Electric Rev., MBIA, 5.5s, 2026 1,255 1,325,292
Metropolitan Government of Nashville & Davidson
County, TN, MBIA, 0s, 2009 3,250 2,060,955
Metropolitan Government of Nashville & Davidson
County, TN, MBIA, 0s, 2010 2,480 1,493,059
Metropolitan Government of Nashville & Davidson
County, TN, MBIA, 0s, 2012 3,305 1,768,440
-----------
$ 8,655,116
- ----------------------------------------------------------------------------------
Health Care Revenue - 3.5%
Cookeville, TN, Industrial Development Board,
Hospital Rev. (Cookeville General), 5.75s, 2010 $2,000 $ 2,117,480
Knox County, TN, Health, Education & Housing
Facilities Board (East Tennessee Children's),
6.5s, 2012 1,000 1,086,350
Springfield, TN, Health & Higher Educational
Facilities (Northcrest Medical Center),
5.25s, 2013 1,290 1,303,029
-----------
$ 4,506,859
- ----------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 11.8%
Bristol, TN, Industrial Development Authority
(Kmart Corp.), 7.5s, 2008 $1,105 $ 1,215,412
Hardeman County, TN (Correctional Facilities
Corp.), 7.75s, 2017 1,000 1,120,430
Hardeman County, TN (Corrections Corp. of
America), 7.375s, 2017 500 545,775
Humphreys County, TN, Certificates of
Participation (DuPont), 6.7s, 2024### 1,750 1,952,825
Knox County, TN, Industrial Development Board
(Kroger Co.), 8.1s, 2003 2,000 2,245,640
Lawrenceburg, TN, Industrial Development Board
(Tridon, Inc.), 9.625s, 2006 1,000 1,054,150
McMinn County, TN, Industrial Development
Board, Pollution Control Rev. (Bowater),
7.625s, 2016 1,000 1,086,730
Memphis-Shelby County, TN, Airport Authority
(Federal Express Corp.), 7.875s, 2009 2,755 3,081,275
Memphis-Shelby County, TN, Airport Authority
(Federal Express Corp.), 6.2s, 2014 1,000 1,075,110
Metropolitan Government of Nashville & Davidson
County, TN (Wilson Sporting), 7.75s, 2014 1,000 1,064,850
Puerto Rico Industrial, Medical & Environmental
Pollution Control Facilities, Finance Authority
Rev. (Baxter Travenol Laboratories), 8s, 2012 750 774,742
-----------
$15,216,939
- ----------------------------------------------------------------------------------
Insured Health Care Revenue - 9.9%
Bristol, TN, Health & Educational Facilities Board
(Bristol Memorial), FGIC, 8.87s, 2021 $2,825 $ 2,952,747
Jackson, TN, Hospital Rev. (Jackson-Madison
County General Hospital), AMBAC, 5s, 2018 1,000 1,000,000
Johnson City, TN, Health & Education Financing
Authority (Johnson City Medical Center
Hospital), MBIA, 5.25s, 2016 1,375 1,411,891
Knox County, TN, Health, Education & Housing
Facilities Board (Fort Sanders), MBIA,
5.75s, 2014 3,250 3,629,112
</TABLE>
Municipal Bonds - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
Insured Health Care Revenue - continued
Metropolitan Government of Nashville & Davidson
County, TN, Health & Education (Meharry
Medical College), AMBAC, 5s, 2024 $3,750 $ 3,782,100
-----------
$12,775,850
- ----------------------------------------------------------------------------------
Multi-Family Housing Revenue - 5.7%
Franklin, TN, Industrial Development (Landings
Apartments), FSA, 6s, 2026 $1,000 $ 1,065,640
Franklin, TN, Industrial Development (Sussex
Downs), FHA, 6.75s, 2027 1,000 1,094,440
Jackson, TN, Health, Education & Housing
Facilities Board (Posthouse Apartments), FHA,
7.1s, 2028 1,610 1,732,006
Metropolitan Government of Nashville & Davidson
County, TN, Health & Education Facility Board
Rev. (Herman Street), FHA, 7.25s, 2032 495 533,575
Metropolitan Government of Nashville & Davidson
County, TN, Industrial Development Board, FHA,
6.95s, 2026 1,000 1,078,800
Metropolitan Government of Nashville & Davidson
County, TN, Industrial Development Board, FHA,
7.5s, 2029 695 727,304
Metropolitan Government of Nashville & Davidson
County, TN, Industrial Development Board, FHA,
7.7s, 2029 1,000 1,042,140
-----------
$ 7,273,905
- ----------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 2.3%
Puerto Rico Highway & Transportation Authority,
MBIA, 5.5s, 2015 $1,000 $ 1,114,140
Tennessee Local Development Authority Rev.,
Community Provider Loan, 7s, 2021 1,000 1,106,320
Virgin Islands Public Finance Authority,
5.875s, 2018 730 762,018
-----------
$ 2,982,478
- ----------------------------------------------------------------------------------
Single Family Housing Revenue - 4.9%
Shelby County, TN, Single Family Mortgage Rev.,
FHA, 0s, 2015 $5,535 $ 1,061,945
Tennessee Housing Development Agency, 0s, 2006 3,955 2,795,710
Tennessee Housing Development Agency, 0s, 2016 5,000 1,872,500
Tennessee Housing Development Agency,
7.125s, 2026 590 624,415
-----------
$ 6,354,570
- ----------------------------------------------------------------------------------
Universities - 4.0%
Jackson, TN, Health, Educational & Housing
Facilities Board (Lambuth University), Asset
Guaranty, 5.9s, 2015 $1,000 $ 1,082,040
Metropolitan Government of Nashville & Davidson
County, TN, Health, Educational & Housing
Facilities Board (Vanderbilt University),
5.25s, 2012 1,000 1,049,530
Metropolitan Government of Nashville & Davidson
County, TN, Health, Educational & Housing
Facilities Board (Vanderbilt University), 5.3s, 2013 1,875 1,967,625
Metropolitan Government of Nashville & Davidson
County, TN, Health, Educational & Housing
Facilities Board (Vanderbilt University),
5.375s, 2014 1,000 1,051,050
-----------
$ 5,150,245
- ----------------------------------------------------------------------------------
</TABLE>
17 - MTN
<PAGE>
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Water and Sewer Utility Revenue - 13.8%
Clarksville, TN, Water, Sewer & Gas, MBIA,
5.25s, 2018 $1,000 $ 1,032,500
Madison, TN, Utility Waterworks Refunding,
MBIA, 5s, 2019 2,750 2,777,005
Metropolitan Government of Nashville & Davidson
County, TN, Water & Sewer Rev., FGIC,
5.2s, 2013 2,000 2,141,200
Metropolitan Government of Nashville & Davidson
County, TN, Water & Sewer Rev., FGIC,
5.1s, 2016 2,565 2,593,753
Metropolitan Government of Nashville & Davidson
County, TN, Water & Sewer Rev., AMBAC,
9.23s, 2022++++ 1,000 1,174,960
Mt. Juliet, TN, Public Building Authority
(Cumberland), 7.55s, 2024 1,190 1,225,783
Mt. Juliet, TN, Public Building Authority
(Hermitage), MBIA, 7.5s, 2009 300 309,453
Mt. Juliet, TN, Public Building Authority (Milcroft),
7.55s, 2024 2,005 2,065,290
Mt. Juliet, TN, Public Building Authority (New
Market), 8.375s, 2024 555 573,132
Mt. Juliet, TN, Public Building Authority (Tipton),
7.5s, 2004 305 314,114
Poplar Grove, TN, Utility District, Waterworks
Rev., 6.375s, 2011 500 535,160
Puerto Rico Aqueduct & Sewer Rev., 6.25s, 2012 1,000 1,174,290
White House Utility District, TN, Robertson &
Sumner Counties Waterworks, FGIC, 0s, 2014 3,590 1,780,030
------------
$ 17,696,670
- -------------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $113,015,585) $124,996,727
- -------------------------------------------------------------------------------------------
Floating Rate Demand Notes - 2.1%
- -------------------------------------------------------------------------------------------
Burke County, GA, Development Authority,
Pollution Control Rev. (Georgia Power Co.), due
4/01/25 $ 300 $ 300,000
Coweta County, GA, Development Authority
(Georgia Power Co.), due 3/01/24 100 100,000
Geisinger Authority, PA, Health Systems Rev., due
8/15/28 1,300 1,300,000
Georgia Hospital Financing Authority Rev.
(Hospital Loan Program), due 3/01/01 100 100,000
Lincoln County, WY, Pollution Control Rev. (Exxon),
due 7/01/17 400 400,000
New Castle, PA, Area Hospital Authority
(Jameson Memorial Hospital), due 7/01/26 500 500,000
- -------------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 2,700,000
- -------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $115,715,585) $127,696,727
Other Assets, Less Liabilities - 0.9% 1,189,944
- -------------------------------------------------------------------------------------------
Net assets - 100.0% $128,886,671
- -------------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
MFS VIRGINIA MUNICIPAL BOND FUND
Municipal Bonds - 96.2%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 11.9%
Bristol, VA, MBIA, 5.3s, 2018 $ 1,250 $ 1,295,300
Chesapeake, VA, Public Improvement, 5.375s, 2013 3,500 3,771,110
Commonwealth of Puerto Rico, 5.5s, 2013 2,000 2,163,900
Fairfax County, VA, Public Improvement Series,
5.5s, 2013 2,470 2,639,812
Fairfax County, VA, Redevelopment & Housing
Authority, 5.5s, 2017 2,225 2,331,489
Hampton, VA, Refunding Public Improvement,
5s, 2014 1,000 1,034,440
Lebanon, VA, 6.375s, 2011 1,625 1,792,716
Loudoun County, VA, 5.25s, 2014 1,585 1,718,362
Loudoun County, VA, 5.25s, 2015 480 518,491
Loudoun County, VA, 5s, 2016 1,000 1,017,950
Puerto Rico Commonwealth Highway &
Transportation Authority Rev., FSA, 5.5s, 2015 2,000 2,228,280
Richmond, VA, 0s, 2006 3,500 2,598,645
Richmond, VA, 6.5s, 2006 2,000 2,145,120
Richmond, VA, 0s, 2007 5,280 3,748,430
Richmond, VA, 0s, 2008 7,270 4,907,759
Richmond, VA, 0s, 2009 5,175 3,305,428
Richmond, VA, 5.5s, 2009 5,000 5,509,500
Spotsylvania County, VA, FGIC, 6s, 2009 4,270 4,867,331
State of Virginia (Higher Educational Institute),
0s, 1999 1,300 1,272,648
-----------
$48,866,711
- -------------------------------------------------------------------------------------------
State and Local Appropriation - 11.9%
Blue Ridge, VA, Regional Jail Authority, MBIA,
5.2s, 2021 $ 4,830 $ 4,963,791
Chesapeake, VA, Industrial Development Authority
(Chesapeake Court House), MBIA, 6.25s, 2011 3,985 4,604,150
Chesapeake, VA, Industrial Development Authority
(Chesapeake Court House), MBIA, 5.25s, 2017 2,000 2,080,240
Chesterfield County, VA, Industrial Development
Authority, Public Facilities, 7.5s, 2008 1,720 1,897,951
Henrico County, VA, Industrial Development
Authority, Lease Rev., 6.5s, 2010 5,000 5,725,450
Puerto Rico Public Buildings Authority, 5.25s, 2021 3,075 3,139,329
Puerto Rico Public Finance Corp., AMBAC,
5.375s, 2016 1,000 1,094,230
Virginia Biotechnology Research Park (Biotech
Two), 5.25s, 2018 8,800 9,111,960
State and Local Appropriation - continued
Virginia Public Building Authority, MBIA, 0s, 2007 13,305 9,275,980
Virginia Public Building Authority, MBIA, 0s, 2008 10,650 7,080,546
-----------
$48,973,627
- -------------------------------------------------------------------------------------------
Refunded and Special Obligations - 9.9%
Arlington County, VA, Industrial Development
Authority (Arlington Hospital), 7.125s, 2001 $ 4,450 $ 4,945,997
Carroll County, VA, Solid Waste Authority Rev.,
7.5s, 2001 2,265 2,537,321
Fairfax County, VA, Redevelopment & Housing
Authority (Little River Glen), 8.95s, 1999 3,730 3,938,283
Hampton Roads, VA, Medical College General
Rev., 6.875s, 2001 1,500 1,663,095
Henrico County, VA, Industrial Development
Authority (St. Mary's Hospital), 7.5s, 2000### 695 754,721
New Kent County, VA, Industrial Development
Authority, Public Facilities, 7.5s, 2001 700 781,207
Newport News, VA, 6.5s, 2000 3,080 3,313,926
Portsmouth, VA, 6.9s, 2000 1,500 1,613,175
Portsmouth, VA, 6.375s, 2001 1,555 1,693,442
</TABLE>
18 - MVA
<PAGE>
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Refunded and Special Obligations - continued
Puerto Rico Aqueduct & Sewer Authority Rev.,
9s, 2005 $4,150 $ 5,247,177
Puerto Rico Aqueduct & Sewer Authority Rev.,
10.25s, 2009 400 553,252
Roanoke, VA, Industrial Development Authority,
Hospital Rev. (Roanoke Memorial), 7.25s, 2000 1,750 1,889,492
Roanoke, VA, Industrial Development Authority,
Hospital Rev. (Roanoke Memorial), 7.5s, 2000 1,245 1,349,431
Suffolk, VA, Industrial Development Authority
(Louise Obici Memorial Hospital), 7.875s, 1999 1,560 1,607,814
Virginia Beach, VA, Certificates of Participation
(Judical Center Project), FGIC, 7.25s, 2000 4,955 5,377,563
Virginia Beach, VA, Water & Sewer Rev.,
6.625s, 2002 1,400 1,546,958
Virginia Public School Authority, 6.5s, 2004 1,875 2,156,550
-----------
$40,969,404
- -------------------------------------------------------------------------------------------
Airport and Port Revenue - 8.3%
Metropolitan Washington, DC, Airport Rev.,
7.6s, 2014 $5,030 $ 5,446,685
Metropolitan Washington, DC, Airport Rev.,
5.5s, 2016 2,465 2,582,507
Metropolitan Washington, DC, Airport Rev., MBIA,
5s, 2018 2,000 2,001,060
Metropolitan Washington, DC, Airport Rev.,
5.75s, 2020 11,000 11,705,870
Metropolitan Washington, DC, Airport Rev., "A",
MBIA, 6.625s, 2019 1,000 1,098,940
Peninsula Airport Commission, VA, 7.3s, 2021 2,400 2,639,712
Puerto Rico Ports Authority (American Airlines),
6.3s, 2023 2,000 2,159,360
Puerto Rico Ports Authority (American Airlines),
6.25s, 2026 6,000 6,598,920
-----------
$34,233,054
- -------------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 3.1%
Halifax County, VA, Industrial Authority Rev. (Old
Dominion Electric), 6s, 2022 $5,000 $ 5,205,550
Pittsylvania County, VA, Industrial Development
Authority Rev., 7.5s, 2014 4,000 4,419,400
Puerto Rico Electric Power Authority, 6s, 2015 3,000 3,248,370
-----------
$12,873,320
- -------------------------------------------------------------------------------------------
Health Care Revenue - 2.0%
Albemarle County, VA, Industrial Development
Authority, Health Services Rev., 6.5s, 2022 $1,000 $ 1,081,770
Fairfax, Fauquier & Loudoun Counties, VA, Health
Center Commission, Nursing Home Rev., 9s, 2020 1,840 1,990,236
Lynchburg, VA, Industrial Development Authority,
5.2s, 2018 1,000 1,014,850
Martinsville, VA, Industrial Development Authority,
6.75s, 2004 1,230 1,256,876
Peninsula Ports, VA, Health Care Rev. (Riverside
Health System), 6.625s, 2010 1,500 1,644,735
Virginia Beach, VA, Development Authority
(Beverly Enterprises), 10s, 2010 1,265 1,375,156
-----------
$ 8,363,623
- -------------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 6.1%
Bedford County, VA, Industrial Development
Authority Rev. (Georgia Pacific Corp.), 5.6s, 2025 $6,000 $ 6,159,240
Isle Wight County, VA, Industrial Development
(Union Camp), 6.55s, 2024 8,000 8,876,160
Isle Wight County, VA, Industrial Development
(Union Camp), 6.1s, 2027 3,500 3,760,960
</TABLE>
Municipal Bonds - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Revenue (Corporate Guarantee) - continued
Loudoun, VA, Industrial Development Authority
Rev., 7.125s, 2015 $2,000 $ 2,191,460
Lynchburg, VA, Industrial Development Authority
(Kroger Co.), 7.9s, 2011 1,000 1,119,770
West Point, VA, Industrial Development Authority,
Solid Waste Disposal Rev. (Chesapeake Corp.
Project), 6.375s, 2019 2,600 2,832,388
-----------
$24,939,978
- -------------------------------------------------------------------------------------------
Insured Health Care Revenue - 9.6%
Albemarle County, VA, Industrial Development
Authority, First Mortgage Rev., FHA, 8.9s, 2026 $2,150 $ 2,356,314
Danville, VA, Industrial Development Authority
Hospital Rev. (Danville Regional Medical Center),
AMBAC, 5.2s, 2018 2,500 2,651,050
Fredericksburg, VA, Industrial Development
(Medicorp Health Systems), AMBAC, 5.25s, 2023 11,000 11,302,940
Front Royal-Warren County, VA, Industrial
Development Authority, FHA, 9.45s, 2024 1,000 1,075,310
Hanover County, VA, Industrial Development
Authority, MBIA, 6s, 2009 1,550 1,781,988
Hanover County, VA, Industrial Development
Authority (Memorial Regional Medical Center),
MBIA, 6.5s, 2008 1,000 1,176,630
Hanover County, VA, Industrial Development
Authority (Memorial Regional Medical Center),
MBIA, 6.5s, 2009 1,510 1,801,128
Henrico County, VA, Industrial Development
Authority Rev. (Bon Secours Health), MBIA,
6.25s, 2020 1,500 1,790,490
Peninsula Ports Authority, VA, Hospital Facilities
Rev. (Whittaker Memorial), FHA, 8.7s, 2023 2,100 2,136,456
Roanoke, VA, Industrial Development Authority,
Hospital Rev. (Roanoke Memorial), MBIA,
6.125s, 2017 6,000 7,032,840
Winchester, VA, Industrial Development Authority,
AMBAC, 9.296s, 2014++++ 4,900 6,352,115
-----------
$39,457,261
- -------------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 3.7%
Alexandria, VA, Redevelopment & Housing
Finance Authority (Jefferson Village
Apartments), 9s, 2018 $4,000 $ 4,145,640
Norfolk, VA, Redevelopment & Housing Authority
(Dockside Apartments), FHA, 7.375s, 2028 2,000 2,122,220
Virginia Housing Development Authority, 6.5s, 2013 2,300 2,502,101
Virginia Housing Development Authority,
5.95s, 2016 1,905 2,039,950
Virginia Housing Development Authority, 6.6s, 2022 4,260 4,551,810
-----------
$15,361,721
- -------------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 2.6%
Commonwealth of Puerto Rico, "A", AMBAC,
5s, 2021 $3,000 $ 3,029,490
Puerto Rico Highway & Transportation Authority,
Highway Rev., 5.5s, 2018 1,450 1,522,833
Virgin Islands Public Finance Authority,
5.625s, 2025 1,000 1,030,000
Virginia Transportation Board, US Route 58,
5.125s, 2021 5,000 5,090,400
-----------
$10,672,723
- -------------------------------------------------------------------------------------------
</TABLE>
19 - MVA
<PAGE>
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Single Family Housing Revenue - 8.0%
Puerto Rico Housing Finance Corp., GNMA,
7.8s, 2021 $ 5 $ 5,102
Virginia Housing Development Authority,
7.22s, 2019++++ 7,500 8,118,150
Virginia Housing Development Authority, 6.2s, 2021 15,000 15,720,750
Virginia Housing Development Authority, 6.3s, 2025 8,500 9,066,270
------------
$ 32,910,272
- -------------------------------------------------------------------------------------------
Turnpike Revenue - 4.7%
Chesapeake Bay, VA, Bridge & Tunnel Authority,
FGIC, 0s, 2005 $4,535 $ 3,464,740
Chesapeake Bay, VA, Bridge & Tunnel Authority,
FGIC, 6s, 2007 5,700 6,429,258
Chesapeake Bay, VA, Bridge & Tunnel Authority,
5.5s, 2025 1,000 1,103,480
North Virginia Transportation District Commuter
Rail (Virginia Railway Express Project), MBIA,
6s, 2010 1,240 1,433,552
Pocahontas Parkway Assn., VA, Toll Road Rev.,
0s, 2012 1,500 714,255
Pocahontas Parkway Assn., VA, Toll Road Rev.,
0s, 2013 1,500 671,550
Pocahontas Parkway Assn., VA, Toll Road Rev.,
0s, 2014 1,500 630,765
Pocahontas Parkway Assn., VA, Toll Road Rev.,
0s, 2015 1,500 587,040
Pocahontas Parkway Assn., VA, Toll Road Rev.,
0s, 2016 1,500 550,035
Virginia Transportation Board, Transportation
Contract Rev., 6.5s, 2018 3,500 3,793,090
------------
$ 19,377,765
- -------------------------------------------------------------------------------------------
Universities - 2.6%
Hampton Roads, VA, Medical College General
Rev., 6.875s, 2016 $2,000 $ 2,166,300
Loudoun County, VA, Industrial Development
Authority, University Facilities, 6.25s, 2012 2,710 2,914,334
Roanoke County, VA, Industrial Development
Authority (Hollins College), 5.25s, 2023 1,000 1,015,940
Virginia College Building Authority, Educational
Facilities Rev. (Hampden Sydney College),
5s, 2016 1,730 1,758,856
Virginia College Building Authority, Educational
Facilities Rev. (Marymount), 7s, 2022 2,500 2,725,125
------------
$ 10,580,555
- -------------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 8.7%
Chesterfield County, VA, Water & Sewer Rev.,
0s, 2004 $5,025 $ 3,972,915
Chesterfield County, VA, Water & Sewer Rev.,
0s, 2005 4,815 3,625,165
Chesterfield County, VA, Water & Sewer Rev.,
0s, 2006 4,000 2,882,120
Chesterfield County, VA, Water & Sewer Rev.,
0s, 2007 6,000 4,133,340
Chesterfield County, VA, Water & Sewer Rev.,
0s, 2008 6,135 4,028,732
Chesterfield County, VA, Water & Sewer Rev.,
0s, 2009 6,135 3,831,001
Chesterfield County, VA, Water & Sewer Rev.,
0s, 2010 9,005 5,332,401
Fairfax County, VA, Water Authority Rev., 5s, 2021 2,000 2,060,520
Fairfax County, VA, Water Authority Rev., 5s, 2029 4,000 4,027,480
</TABLE>
Municipal Bonds - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Water and Sewer Utility Revenue - continued
Hanover County, VA, Water & Sewer Systems,
MBIA, 5.25s, 2026 $2,000 $ 2,058,300
------------
$ 35,951,974
- -------------------------------------------------------------------------------------------
Other - 3.1%
Danville, VA, Industrial Development Authority,
Industrial Development Rev., 8s, 2013 $2,965 $ 3,162,202
New River Valley, VA, Regional Jail Authority,
MBIA, 5.125s, 2019 6,905 7,062,503
Pamunkey, VA, Regional Jail Authority, MBIA,
5.75s, 2018 2,500 2,713,851
------------
$ 12,938,556
- -------------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $360,853,718) $396,470,544
- -------------------------------------------------------------------------------------------
Floating Rate Demand Notes - 2.2%
- -------------------------------------------------------------------------------------------
Burke County, GA, Development Authority,
Pollution Rev. (Georgia Power Co.), due 4/01/25 $ 100 $ 100,000
Geisinger Authority, PA, Health Systems Rev., due
8/15/28 500 500,000
Georgia Hospital Financing Authority Rev.
(Hospital Loan Program), due 3/01/01 100 100,000
Harris County, TX, Hospital Rev. (Methodist
Hospital), due 12/01/25 3,000 3,000,000
Harris County, TX, Industrial Development Corp.,
Pollution Control Rev. (Exxon Corp.), due 3/01/24 100 100,000
Lynchburg, VA, Industrial Development Authority,
due 12/01/25 2,400 2,400,000
Lynchburg, VA, Industrial Development Authority,
"G", due 12/01/25 2,100 2,100,000
New Castle, PA, Area Hospital Authority
(Jameson Memorial Hospital), due 7/01/26 100 100,000
Pinellas County, FL, Health Facility Authority,
due 12/01/15 500 500,000
- -------------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 8,900,000
- -------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $369,753,718) $405,370,544
Other Assets, Less Liabilities - 1.6% 6,603,561
- -------------------------------------------------------------------------------------------
Net assets - 100.0% $411,974,105
- -------------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
20 - MVA
<PAGE>
Portfolio of Investments (Unaudited) - September 30, 1998
MFS WEST VIRGINIA MUNICIPAL BOND FUND
Municipal Bonds - 98.1%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 16.9%
Charleston, WV, Public Improvement, 7.2s, 2008 $1,240 $ 1,538,245
Charleston, WV, Public Improvement, 7.2s, 2009 1,140 1,432,535
Jefferson County, WV, Board of Education, FGIC,
6.85s, 2009 1,680 2,067,593
Monongalia County, WV, Board of Education,
MBIA, 7s, 2005 500 584,355
State of West Virginia, FGIC, 5s, 2015 1,500 1,525,920
State of West Virginia, FGIC, 5.5s, 2017 2,565 2,695,918
State of West Virginia, FGIC, 5s, 2021 4,000 4,026,360
State of West Virginia, FGIC, 5.25s, 2026 8,000 8,178,240
State of West Virginia, Water Development
Authority Rev., FSA, 6.2s, 2024 3,000 3,347,670
-----------
$25,396,836
- -------------------------------------------------------------------------------------------
State and Local Appropriation - 5.3%
Puerto Rico Public Buildings Authority, 5.25s, 2021 $3,115 $ 3,180,166
West Virginia Building Commission, Lease Rev.
(West Virginia Regional Jail), AMBAC,
5.375s, 2018 3,000 3,214,470
West Virginia School Building Authority,
Refunding Capital Improvement, "B", FSA,
5.25s, 2021 1,550 1,600,685
-----------
$ 7,995,321
- -------------------------------------------------------------------------------------------
Refunded and Special Obligations - 15.4%
Cabell, WV, Board of Education, MBIA, 6s, 2006 $ 500 $ 563,020
Kanawha County, WV, Building Commission (St.
Francis Hospital), 7.5s, 2007 235 272,172
Kanawha, Merc, & Nicholas Counties, WV, Single
Family Mortage Rev., 0s, 2014 2,230 937,291
Ohio County, WV, Board of Education, MBIA,
5.25s, 2018 1,180 1,269,019
Puerto Rico Aqueduct & Sewer Authority Rev.,
9s, 2005 1,500 1,896,570
West Virginia Building Commission, Lease Rev.
(West Virginia Regional Jail), MBIA, 7s, 2000 1,000 1,074,650
West Virginia Building Commission, Lease Rev.
(West Virginia Regional Jail), MBIA, 0s, 2007 3,150 2,181,249
West Virginia Building Commission, Lease Rev.
(West Virginia Regional Jail), MBIA, 0s, 2008 3,050 2,015,379
West Virginia Building Commission, Lease Rev.
(West Virginia Regional Jail), MBIA, 0s, 2009 2,500 1,574,850
West Virginia Parkways, Economic Development
& Tourism Authority, FGIC, 0s, 2005 2,250 1,706,535
West Virginia Parkways, Economic Development
& Tourism Authority, FGIC, 0s, 2007 2,000 1,389,540
West Virginia Parkways, Economic Development
Authority, FGIC, 0s, 2006 2,500 1,824,400
West Virginia Parkways, Economic Development
Authority, FGIC, 0s, 2008 610 401,545
West Virginia School Building Authority,
6.75s, 2001 3,000 3,282,030
West Virginia University Rev. (West Virginia
University Dormitory), MBIA, 6.75s, 2002 1,000 1,097,640
West Virginia Water Development Authority,
7.625s, 2000 500 548,050
West Virginia Water Development Authority,
7.4s, 2001 750 842,092
West Virginia Water Development Authority,
7.1s, 2009 235 278,694
-----------
$23,154,726
- -------------------------------------------------------------------------------------------
</TABLE>
Municipal Bonds - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Electric and Gas Utility Revenue - 12.5%
Marshall County, WV, Pollution Control Rev. (Ohio
Power Co.), 6.85s, 2022 $2,000 $ 2,189,920
Marshall County, WV, Pollution Control Rev. (Ohio
Power Co.), MBIA, 6.85s, 2022 3,150 3,491,995
Mason County, WV, Pollution Control Rev.
(Appalachian Power), MBIA, 6.6s, 2022 7,000 7,776,160
McDowell County, WV, Industrial Development
Rev. (War Telephone Co.), 13.5s, 2001 245 246,600
Puerto Rico Electric Power Authority, MBIA,
0s, 2017 3,705 1,541,095
Putnam County, WV, Pollution Control Rev.
(Applachian Power Co.), MBIA, 6.6s, 2019 3,200 3,538,848
-----------
$18,784,618
- -------------------------------------------------------------------------------------------
Health Care Revenue - 7.2%
Berkeley County, WV, Building Commission,
Hospital Rev. (City Hospital), 6.5s, 2022 $2,500 $ 2,675,225
Monongalia County, WV, Health Facilities Rev.
(Beverly Enterprises, Inc.), 10s, 2007 820 871,291
Ohio County, WV, County Commission Health
System (Ohio Valley Medical Center), 5.75s, 2013 750 751,380
West Virginia Hospital Finance Authority
(Charleston Area Medical Center), 6.5s, 2023 2,000 2,167,880
West Virginia Hospital Finance Authority (Fairmont
General Hospital), 6.625s, 2019 2,000 2,173,340
West Virginia Hospital Finance Authority (General
Division Medical Building), 7.25s, 2014 2,000 2,242,740
-----------
$10,881,856
- -------------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 15.2%
Braxton County, WV, Solid Waste Disposal
(Weyerhaeuser), 6.5s, 2025 $2,000 $ 2,203,920
Jackson County, WV, Pollution Control Rev.
(Kaiser Aluminum & Chemical Corp.), 6.5s, 2008 3,285 3,296,925
Kanawha County, WV, Commercial Development
Rev. (Kroger Co.), 8s, 2011 1,000 1,120,050
Kanawha County, WV, Commercial Development
Rev. (May Department Stores Co.), 6.5s, 2003 3,000 3,336,000
Kanawha County, WV, Pollution Control Rev.
(Union Carbide Corp.), 8s, 2020 2,000 2,155,280
Monongalia County, WV, Commercial
Development Rev. (Kroger Co.), 7.7s, 2012 2,000 2,258,300
Ohio County, WV, Industrial Development Rev.
(Kroger Co.), 8.125s, 2011 2,000 2,252,360
Putnam County, WV, Industrial Development Rev.
(Rite Aid Corp.), 10.375s, 2002 590 592,891
South Charleston, WV, Pollution Control Rev.
(Union Carbide Corp.), 7.625s, 2005 2,500 2,964,125
Weirton, WV, Pollution Control Rev. (Weirton
Steel), 8.625s, 2014 2,550 2,677,959
-----------
$22,857,810
- -------------------------------------------------------------------------------------------
Insured Health Care Revenue - 6.2%
Harrison County, WV, Building Commission Rev.
(United Hospital Center), AMBAC, 5.25s, 2021 $2,625 $ 2,697,030
Monongalia County, WV, Building Commission,
Health Rev. (Monongalia General Hospital),
MBIA, 6.625s, 2011 1,000 1,085,540
West Virginia Hospital Finance Authority (Cabell
Huntington Hospital), AMBAC, 6.25s, 2019 5,000 5,499,100
-----------
$ 9,281,670
- -------------------------------------------------------------------------------------------
</TABLE>
21 - MWV
<PAGE>
Portfolio of Investments (Unaudited) - continued
Municipal Bonds - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Multi-Family Housing Revenue - 0.9%
Huntington, WV, Housing Corp., Multi-Family Rev.,
FNMA, 7.5s, 2024 $ 800 $ 856,720
Webster County, WV, Housing Development Rev.
(Circlebrook), FHA, 6.35s, 2008 505 540,476
------------
$ 1,397,196
- -------------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 1.8%
Puerto Rico Highway & Transportation Authority
Rev., 5.5s, 2013 $2,000 $ 2,175,020
Virgin Islands Public Finance Authority,
5.625s, 2025 500 515,000
------------
$ 2,690,020
- -------------------------------------------------------------------------------------------
Single Family Housing Revenue - 4.7%
Berkeley County, WV, Residential Mortgage Rev.,
7.875s, 2012### $ 185 $ 194,328
Charles Town, WV, Residential Mortgage Rev.,
6.2s, 2011 640 677,126
Mason County, WV, 0s, 2014 1,700 526,898
West Virginia Housing Development Fund,
7.85s, 2014 410 421,755
West Virginia Housing Development Fund,
7.2s, 2018 2,105 2,254,897
West Virginia Housing Development Fund,
7.2s, 2020 1,930 2,066,798
West Virginia Housing Development Fund,
5.3s, 2023 1,000 1,007,810
------------
$ 7,149,612
- -------------------------------------------------------------------------------------------
Turnpike Revenue - 3.4%
West Virginia Parkways, Economic Development
& Tourism Authority, FGIC, 0s, 2006 $1,885 $ 1,372,450
West Virginia Parkways, Economic Development
& Tourism Authority, FGIC, 7.452s, 2019++++ 3,300 3,752,364
------------
$ 5,124,814
- -------------------------------------------------------------------------------------------
</TABLE>
Municipal Bonds - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Universities - 1.3%
West Virgina University Rev. (West Virginia
Dormitory), AMBAC, 5s, 2022 $2,000 $ 2,022,900
- --------------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 6.1%
Beckley, WV, Industrial Development Rev.
(Beckley Water Co.), 7s, 2017 $2,000 $ 2,196,460
Charleston, WV, Sewer Rev., MBIA, 6.5s, 2017 2,260 2,507,877
West Virginia Water Development Authority, CAP
GTY, 7.5s, 2009 1,100 1,164,537
West Virginia Water Development Authority, FSA,
5s, 2018 1,270 1,278,547
West Virginia Water Development Authority, FSA,
5.25s, 2035 2,000 2,058,540
------------
$ 9,205,961
- --------------------------------------------------------------------------------------------
Other - 1.2%
West Virginia Building Commission, Lottery Rev.,
MBIA, 5.25s, 2010 $1,750 $ 1,872,360
- --------------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $132,983,989) $147,815,700
- --------------------------------------------------------------------------------------------
Floating Rate Demand Note - 0.1%
- --------------------------------------------------------------------------------------------
New Castle, PA, Area Hospital Authority
(Jameson Memorial Hospital), due 7/01/26, at
Identified Cost $ 100 $ 100,000
- --------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $133,083,989) $147,915,700
Other Assets, Less Liabilities - 1.8% 2,732,239
- --------------------------------------------------------------------------------------------
Net assets - 100.0% $150,647,939
- --------------------------------------------------------------------------------------------
</TABLE>
See portfolio footnotes and notes to financial statements
Portfolio Footnotes:
++++Inverse floating rate security.
###Security segregated as collateral for an open futures contract.
22 - MWV
<PAGE>
Financial Statements
Statements of Assets and Liabilities (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Mississippi New York
September 30, 1998 Fund Fund
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments -
Identified cost $68,641,652 $127,618,129
Unrealized appreciation 7,343,611 16,862,146
----------- ------------
Total, at value $75,985,263 $144,480,275
Cash 39,139 63,884
Receivable for Fund shares sold 34,369 359,194
Receivable for investments sold -- 75,000
Interest receivable 1,245,452 2,110,475
Other assets 9,958 969
----------- ------------
Total assets $77,314,181 $147,089,797
----------- ------------
Liabilities:
Distributions payable $ 169,363 $ 240,987
Payable for Fund shares reacquired 112,507 15,578
Payable for daily variation margin on open future contracts 2,031 23,156
Payable to affiliates -
Management fee 940 1,781
Shareholder servicing agent fee 235 445
Distribution fee and service fee 1,337 1,583
Administrative fee 31 59
Accrued expenses and other liabilities 42,301 75,444
----------- ------------
Total liabilities $ 328,745 $ 359,033
----------- ------------
Net assets $76,985,436 $146,730,764
----------- ------------
Net assets consist of:
Paid-in capital $72,834,701 $132,701,651
Unrealized appreciation on investments 7,339,748 16,727,284
Accumulated net realized loss on investments (3,279,462) (2,728,021)
Accumulated undistributed (distributions in excess of)
net investment income 90,449 29,850
----------- ------------
Total $76,985,436 $146,730,764
----------- ------------
Shares of beneficial interest outstanding:
Class A 6,558,046 10,273,662
Class B 1,078,565 2,561,424
Class C -- --
----------- ------------
Total shares of beneficial interest outstanding 7,636,611 12,835,086
----------- ------------
Net assets:
Class A $66,103,249 $117,455,864
Class B 10,882,187 29,274,900
Class C -- --
----------- ------------
Total net assets $76,985,436 $146,730,764
----------- ------------
Class A shares:
Net asset value per share
(net assets [divided by] shares of beneficial interest outstanding) $ 10.08 $ 11.43
----------- ------------
Offering price per share (100 [divided by] 95.25 of net asset value per share) $ 10.58 $ 12.00
----------- ------------
Class B shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) $ 10.09 $ 11.43
----------- ------------
Class C shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) -- --
----------- ------------
<CAPTION>
North Carolina Pennsylvania
September 30, 1998 Fund Fund
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments -
Identified cost $385,508,743 $37,556,938
Unrealized appreciation 43,171,963 3,278,879
------------ -----------
Total, at value $428,680,706 $40,835,817
Cash 84,579 354,978
Receivable for Fund shares sold 1,217,207 8,611
Receivable for investments sold 120,000 35,713
Interest receivable 6,826,244 614,368
Other assets 2,823 1,743
------------ -----------
Total assets $436,931,559 $41,851,230
------------ -----------
Liabilities:
Distributions payable $ 693,234 $ 66,218
Payable for Fund shares reacquired 267,869 28,000
Payable for daily variation margin on open future contracts 75,331 1,219
Payable to affiliates -
Management fee 5,293 509
Shareholder servicing agent fee 1,323 --
Distribution fee and service fee 5,171 2,432
Administrative fee 176 --
Accrued expenses and other liabilities 110,394 1,258
------------ -----------
Total liabilities $ 1,158,791 $ 99,636
------------ -----------
Net assets $435,772,768 $41,751,594
------------ -----------
Net assets consist of:
Paid-in capital $398,850,025 $40,046,644
Unrealized appreciation on investments 42,726,151 3,276,598
Accumulated net realized loss on investments (5,260,256) (1,606,584)
Accumulated undistributed (distributions in excess of)
net investment income (543,152) 34,936
------------ -----------
Total $435,772,768 $41,751,594
------------ -----------
Shares of beneficial interest outstanding:
Class A 30,457,006 1,975,514
Class B 3,999,707 2,173,502
Class C 862,748 --
------------ -----------
Total shares of beneficial interest outstanding 35,319,461 4,149,016
------------ -----------
Net assets:
Class A $375,807,198 $19,856,026
Class B 49,326,249 21,895,568
Class C 10,639,321 --
------------ -----------
Total net assets $435,772,768 $41,751,594
------------ -----------
Class A shares:
Net asset value per share
(net assets [divided by] shares of beneficial interest outstanding) $ 12.34 $ 10.05
------------ -----------
Offering price per share (100 [divided by] 95.25 of net asset value per share) $ 12.96 $ 10.55
------------ -----------
Class B shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) $ 12.33 $ 10.07
------------ -----------
Class C shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) $ 12.33 --
------------ -----------
</TABLE>
On sales of $100,000 or more, the offering price of Class A shares is reduced.
A contingent deferred sales charge may be imposed on redemptions of Class A,
Class B, and Class C shares.
See notes to financial statements
23
<PAGE>
Financial Statements - continued
Statements of Assets and Liabilities (Unaudited) - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
South Carolina Tennessee Virginia
September 30, 1998 Fund Fund Fund
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Investments -
Identified cost $160,404,808 $115,715,585 $369,753,718
Unrealized appreciation 17,577,384 11,981,142 35,616,826
------------ ------------ ------------
Total, at value $177,982,192 $127,696,727 $405,370,544
Cash 29,186 15,237 5,700
Receivable for Fund shares sold 277,735 103,096 312,080
Receivable for investments sold 10,000 1,928,800 3,805,000
Interest receivable 2,441,289 1,545,235 5,747,390
Other assets 1,168 837 2,694
------------ ------------ ------------
Total assets $180,741,570 $131,289,932 $415,243,408
------------ ------------ ------------
Liabilities:
Distributions payable $ 308,220 $ 249,686 $ 782,740
Payable for Fund shares reacquired 53,866 80,371 226,308
Payable for investments purchased -- 1,998,242 2,135,136
Payable for daily variation margin on open future contracts 6,094 4,063 13,406
Payable to affiliates -
Management fee 2,200 1,573 5,029
Shareholder servicing agent fee 549 393 1,258
Distribution and service fee 2,286 1,580 4,603
Administrative fee 73 52 167
Accrued expenses and other liabilities 77,810 67,301 100,656
------------ ------------ ------------
Total liabilities $ 451,098 $ 2,403,261 $ 3,269,303
------------ ------------ ------------
Net assets $180,290,472 $128,886,671 $411,974,105
------------ ------------ ------------
Net assets consist of:
Paid-in capital $163,942,335 $116,469,156 $383,436,287
Unrealized appreciation on investments 17,565,856 11,973,446 35,591,458
Accumulated undistributed net realized
gain (loss) on investments (1,043,802) 416,204 (5,865,070)
Accumulated undistributed (distributions in excess of)
net investment income (173,917) 27,865 (1,188,570)
------------ ------------ ------------
Total $180,290,472 $128,886,671 $411,974,105
------------ ------------ ------------
Shares of beneficial interest outstanding:
Class A 11,603,801 9,821,898 31,609,933
Class B 2,571,962 1,826,733 2,959,250
Class C -- -- 387,382
------------ ------------ ------------
Total shares of beneficial interest outstanding 14,175,763 11,648,631 34,956,565
------------ ------------ ------------
Net assets:
Class A $147,593,160 $108,685,781 $372,543,588
Class B 32,697,312 20,200,890 34,864,164
Class C -- -- 4,566,353
------------ ------------ ------------
Total net assets $180,290,472 $128,886,671 $411,974,105
------------ ------------ ------------
Class A shares:
Net asset value per share
(net assets [divided by] shares of beneficial interest outstanding) $ 12.72 $ 11.07 $ 11.79
------------ ------------ ------------
Offering price per share (100 [divided by] 95.25 of net asset value per share) $ 13.35 $ 11.62 $ 12.38
------------ ------------ ------------
Class B shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) $ 12.71 $ 11.06 $ 11.78
------------ ------------ ------------
Class C shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) -- -- $ 11.79
------------ ------------ ------------
<CAPTION>
West Virginia
September 30, 1998 Fund
- ------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments -
Identified cost $133,083,989
Unrealized appreciation 14,831,711
------------
Total, at value $147,915,700
Cash 46,109
Receivable for Fund shares sold 505,813
Receivable for investments sold 35,000
Interest receivable 2,675,046
Other assets 961
------------
Total assets $151,178,629
------------
Liabilities:
Distributions payable $ 259,305
Payable for Fund shares reacquired 191,714
Payable for investments purchased --
Payable for daily variation margin on open future contracts 4,875
Payable to affiliates -
Management fee 1,837
Shareholder servicing agent fee 460
Distribution and service fee 1,730
Administrative fee 61
Accrued expenses and other liabilities 70,708
------------
Total liabilities $ 530,690
------------
Net assets $150,647,939
------------
Net assets consist of:
Paid-in capital $139,537,748
Unrealized appreciation on investments 14,822,463
Accumulated undistributed net realized
gain (loss) on investments (3,183,889)
Accumulated undistributed (distributions in excess of)
net investment income (528,383)
------------
Total $150,647,939
------------
Shares of beneficial interest outstanding:
Class A 11,197,069
Class B 1,432,238
Class C --
------------
Total shares of beneficial interest outstanding 12,629,307
------------
Net assets:
Class A $133,569,245
Class B 17,078,694
Class C --
------------
Total net assets $150,647,939
------------
Class A shares:
Net asset value per share
(net assets [divided by] shares of beneficial interest outstanding) $ 11.93
------------
Offering price per share (100 [divided by] 95.25 of net asset value per share) $ 12.52
------------
Class B shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) $ 11.92
------------
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
24
<PAGE>
Financial Statements - continued
Statements of Operations (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Mississippi New York North Carolina Pennsylvania
Six Months Ended September 30, 1998 Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income:
Interest income $2,175,838 $4,302,984 $12,431,256 $1,077,823
---------- ---------- ----------- ----------
Expenses -
Management fee $ 210,157 $ 395,736 $ 1,181,535 $ 110,404
Trustees' compensation 8,862 10,170 10,884 9,147
Shareholder servicing agent fee 42,901 80,785 241,198 22,775
Distribution and service fee (Class A) -- 145,282 653,320 --
Distribution and service fee (Class B) 41,810 136,953 231,317 81,169
Distribution and service fee (Class C) -- -- 46,038 --
Administrative fee 5,720 10,712 32,160 3,037
Custodian fee 12,184 22,341 59,682 6,565
Printing 4,272 7,564 21,290 2,456
Postage 1,604 4,068 11,085 1,307
Auditing fees 17,808 17,308 17,308 15,308
Legal fees 3,866 -- 2,311 2,052
Miscellaneous 20,646 33,008 74,903 15,840
---------- ---------- ----------- ----------
Total expenses $ 369,830 $ 863,927 $ 2,583,031 $ 270,060
Fees paid indirectly (6,796) (13,370) (39,270) (5,689)
Preliminary reduction of expenses by investment adviser (38,551) (72,600) (216,743) (93,043)
---------- ---------- ----------- ----------
Net expenses $ 324,483 $ 777,957 $ 2,327,018 $ 171,328
---------- ---------- ----------- ----------
Net investment income $1,851,355 $3,525,027 $10,104,238 $ 906,495
---------- ---------- ----------- ----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 15,355 $ 155,071 $ 984,631 $ 52,665
Futures contracts -- (90,954) (303,654) --
---------- ---------- ----------- ----------
Net realized gain on investments $ 15,355 $ 64,117 $ 680,977 $ 52,665
---------- ---------- ----------- ----------
Change in unrealized appreciation (depreciation) -
Investments $1,521,312 $2,270,388 $ 6,295,856 $ 910,731
Futures contracts (3,863) (134,862) (445,812) (2,281)
---------- ---------- ----------- ----------
Net unrealized gain on investments $1,517,449 $2,135,526 $ 5,850,044 $ 908,450
---------- ---------- ----------- ----------
Net realized and unrealized gain on investments $1,532,804 $2,199,643 $ 6,531,021 $ 961,115
---------- ---------- ----------- ----------
Increase in net assets from operations $3,384,159 $5,724,670 $16,635,259 $1,867,610
---------- ---------- ----------- ----------
</TABLE>
See notes to financial statements
25
<PAGE>
Financial Statements - continued
Statements of Operations (Unaudited) - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
South Carolina Tennessee Virginia West Virginia
Six Months Ended September 30, 1998 Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income:
Interest income $4,988,280 $3,706,723 $11,707,021 $4,284,902
---------- ---------- ----------- ----------
Expenses -
Management fee $ 487,522 $ 347,401 $ 1,117,022 $ 402,615
Trustees' compensation 10,205 10,074 10,937 10,458
Shareholder servicing agent fee 99,523 70,919 228,026 82,194
Distribution and service fee (Class A) 257,649 187,778 644,766 227,757
Distribution and service fee (Class B) 148,525 93,880 165,976 79,875
Distribution and service fee (Class C) -- -- 18,738 --
Administrative fee 13,270 9,455 30,404 10,959
Custodian fee 24,813 19,593 60,987 22,155
Printing 8,829 5,606 20,139 7,334
Postage 4,382 2,314 9,394 2,653
Auditing fees 16,308 16,308 8,008 17,008
Legal fees 1,803 1,784 1,220 2,382
Miscellaneous 42,341 38,906 80,351 34,993
---------- ---------- ----------- ----------
Total expenses $1,115,170 $ 804,018 $ 2,395,968 $ 900,383
Fees paid indirectly (12,395) (16,747) (55,885) (11,234)
Preliminary reduction of expenses by investment adviser (89,423) (63,726) (204,916) (73,841)
---------- ---------- ----------- ----------
Net expenses $1,013,352 $ 723,545 $ 2,135,167 $ 815,308
---------- ---------- ----------- ----------
Net investment income $3,974,928 $2,983,178 $ 9,571,854 $3,469,594
---------- ---------- ----------- ----------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) on investment transactions $ 49,721 $ 240,498 $ 828,483 $ 70,373
---------- ---------- ----------- ----------
Change in unrealized appreciation (depreciation) -
Investments $2,799,004 $1,495,496 $ 5,298,620 $1,956,099
Futures contracts (11,528) (7,696) (25,368) (9,248)
---------- ---------- ----------- ----------
Net unrealized gain on investments $2,787,476 $1,487,800 $ 5,273,252 $1,946,851
---------- ---------- ----------- ----------
Net realized and unrealized gain on investments $2,837,197 $1,728,298 $ 6,101,735 $2,017,224
---------- ---------- ----------- ----------
Increase in net assets from operations $6,812,125 $4,711,476 $15,673,589 $5,486,818
---------- ---------- ----------- ----------
</TABLE>
See notes to financial statements
26
<PAGE>
Financial Statements - continued
Statements of Changes in Net Assets (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Mississippi New York North Carolina Pennsylvania
Six Months Ended September 30, 1998 Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 1,851,355 $ 3,525,027 $ 10,104,238 $ 906,495
Net realized gain on investments 15,355 64,117 680,977 52,665
Net unrealized gain on investments 1,517,449 2,135,526 5,850,044 908,450
----------- ----------- ------------ -----------
Increase in net assets from operations $ 3,384,159 $ 5,724,670 $ 16,635,259 $ 1,867,610
----------- ----------- ------------ -----------
Distributions declared to shareholders -
From net investment income (Class A) $(1,644,116) $ (2,919,708) $ (8,929,738) $ (477,350)
From net investment income (Class B) (225,304) (585,016) (955,151) (430,655)
From net investment income (Class C) -- -- (189,443) --
----------- ------------ ------------- -----------
Total distributions declared to shareholders $(1,869,420) $ (3,504,724) $(10,074,332) $ (908,005)
----------- ------------ ------------ -----------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 3,111,428 $ 15,443,129 $ 51,700,338 $ 3,608,799
Net asset value of shares issued to shareholders
in reinvestment of distributions 816,346 2,022,597 5,821,411 507,450
Cost of shares reacquired (5,235,893) (18,949,027) (61,285,453) (2,792,650)
----------- ------------ ------------ -----------
Increase (decrease) in net assets from Fund
share transactions $(1,308,119) $ (1,483,301) $ (3,763,704) $ 1,323,599
----------- ------------ ------------ -----------
Total increase in net assets $ 206,620 $ 736,645 $ 2,797,223 $ 2,283,204
Net assets:
At beginning of period 76,778,816 145,994,119 432,975,545 39,468,390
----------- ------------ ------------ -----------
At end of period $76,985,436 $146,730,764 $435,772,768 $41,751,594
----------- ------------ ------------ -----------
Accumulated undistributed (distributions in excess of)
net investment income included in net assets at end of period $ 90,449 $ 29,850 $ (543,152) $ 34,936
----------- ------------ ------------ -----------
</TABLE>
See notes to financial statements
27
<PAGE>
Financial Statements - continued
Statements of Changes in Net Assets (Unaudited) - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
South Carolina Tennessee Virginia West Virginia
Six Months Ended September 30, 1998 Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 3,974,928 $ 2,983,178 $ 9,571,854 $ 3,469,594
Net realized gain on investments 49,721 240,498 828,483 70,373
Net unrealized gain on investments 2,787,476 1,487,800 5,273,252 1,946,851
------------ ------------ ------------ ------------
Increase in net assets from operations $ 6,812,125 $ 4,711,476 $ 15,673,589 $ 5,486,818
------------ ------------ ------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $ (3,389,166) $ (2,573,778) $ (8,809,273) $ (3,136,352)
From net investment income (Class B) (585,762) (389,171) (685,693) (333,242)
From net investment income (Class C) -- -- (76,888) --
In excess of net investment income (Class A) (25,368) -- (3,224) (20,736)
In excess of net investment income (Class B) (4,385) -- (251) (2,203)
In excess of net investment income (Class C) -- -- (28) --
------------ ------------ ------------ ------------
Total distributions declared to shareholders $ (4,004,681) $ (2,962,949) $ (9,575,357) $ (3,492,533)
------------ ------------ ------------ ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 9,369,268 $ 7,035,248 $ 29,143,454 $ 8,743,606
Net asset value of shares issued to shareholders
in reinvestment of distributions 2,081,525 1,418,012 4,786,539 1,917,293
Cost of shares reacquired (10,874,219) (8,384,155) (37,062,730) (7,481,122)
------------ ------------ ------------ ------------
Increase (decrease) in net assets from Fund
share transactions $ 576,574 $ 69,105 $ (3,132,737) $ 3,179,777
------------ ------------ ------------ ------------
Total increase in net assets $ 3,384,018 $ 1,817,632 $ 2,965,495 $ 5,174,062
Net assets:
At beginning of period 176,906,454 127,069,039 409,008,610 145,473,877
------------ ------------ ------------ ------------
At end of period $180,290,472 $128,886,671 $411,974,105 $150,647,939
------------ ------------ ------------ ------------
Accumulated undistributed (distributions in excess of)
net investment income included in net assets at end of period $ (173,917) $ 27,865 $ (1,188,570) $ (528,383)
------------ ------------ ------------ ------------
</TABLE>
See notes to financial statements
28
<PAGE>
Financial Statements - continued
Statements of Changes in Net Assets - continued
- --------------------------------------------------------------------------------
<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) $ 36,446
------------ ------------ ------------ ------------
</TABLE>
See notes to financial statements
29
<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:
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
30
<PAGE>
Financial Statements - continued
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Mississippi Fund
- --------------------------------------------------------------------------------
Six Months
Ended
September 30,
1998
--------------
(Unaudited)
- --------------------------------------------------------------------------------
Class A
- --------------------------------------------------------------------------------
<S> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.88
-------
Income from investment operations# -
Net investment income[sec] $ 0.25
Net realized and unrealized
gain (loss) on investments 0.20
-------
Total from investment operations $ 0.45
-------
Less distributions declared to shareholders -
From net investment income++++ $ (0.25)
From net realized gain on investments++++++ --
In excess of net realized gain on investments --
-------
Total distributions declared to
shareholders $ (0.25)
-------
Net asset value - end of period $ 10.08
-------
Total return++ 4.60%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 0.75%+
Net investment income 4.94%+
Portfolio turnover 2%
Net assets at end of period (000 omitted) $66,103
*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.
++Total returns for Class A shares do not include the applicable sales charge. If the charge had been
included, the results would have been lower.
++++For the years ended March 31, 1996, and 1995, the per share distributions in excess of net investment
income were $0.0013 and $0.0035, respectively.
++++++For the year ended March 31, 1995, the per share distribution from net realized gain on investments was $0.0016.
[sec]The investment adviser voluntarily waived a portion of its management fee for certain of the periods indicated. 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 0.40% of average daily net assets for certain of the
periods indicated. To the extent actual expenses were over/under this limitation, and if the investment advisor was not
waiving a portion of its fee, the net investment income per share and the ratios would have been:
Net investment income $ 0.25
Ratios (to average net assets):
Expenses## 0.85%+
Net investment income 4.84%+
<CAPTION>
Year Ended March 31,
----------------------------------
1998 1997 1996
----------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.35 $ 9.35 $ 9.15
------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.49 $ 0.48 $ 0.52
Net realized and unrealized
gain (loss) on investments 0.52 -- 0.20
------- ------- -------
Total from investment operations $ 1.01 $ 0.48 $ 0.72
------- ------- -------
Less distributions declared to shareholders -
From net investment income++++ $ (0.48) $ (0.48) $ (0.52)
From net realized gain on investments++++++ -- -- --
In excess of net realized gain on investments -- -- --
------- ------- -------
Total distributions declared to
shareholders $ (0.48) $ (0.48) $ (0.52)
------- ------- -------
Net asset value - end of period $ 9.88 $ 9.35 $ 9.35
------- ------- -------
Total return++ 11.02% 5.22% 7.99%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 0.78% 0.87% 0.45%
Net investment income 5.04% 5.14% 5.51%
Portfolio turnover 18% 17% 31%
Net assets at end of period (000 omitted) $66,061 $66,630 $74,435
*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.
++Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
++++For the years ended March 31, 1996, and 1995, the per share distributions in excess of net investment income were $0.0013
and $0.0035, respectively.
++++++For the year ended March 31, 1995, the per share distribution from net realized gain on investments was $0.0016.
[sec]The investment adviser voluntarily waived a portion of its management fee for certain of the periods indicated. 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 0.40% of average daily net assets for certain of the periods
indicated. To the extent actual expenses were over/under this limitation, and if the investment advisor was not waiving a
portion of its fee, the net investment income per share and the ratios would have been:
Net investment income $ 0.48 -- $ 0.48
Ratios (to average net assets):
Expenses## 0.85% -- 0.88%
Net investment income 4.97% -- 5.08%
<CAPTION>
Two Months
Ended
March 31,
1995 1994
------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.19 $ 10.00
------- -------
Income from investment operations# -
Net investment income[sec] $ 0.54 $ 0.09
Net realized and unrealized
gain (loss) on investments (0.01) (0.81)
------- -------
Total from investment operations $ 0.53 $ (0.72)
------- -------
Less distributions declared to shareholders -
From net investment income++++ $ (0.54) $ (0.09)
From net realized gain on investments++++++ (0.00) --
In excess of net realized gain on investments (0.03) --
------- -------
Total distributions declared to
shareholders $ (0.57) $ (0.09)
------- -------
Net asset value - end of period $ 9.15 $ 9.19
------- -------
Total return++ 6.08% (7.20)%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 0.22% 0.10%+
Net investment income 5.99% 5.69%+
Portfolio turnover 47% 2%
Net assets at end of period (000 omitted) $79,033 $79,541
*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.
++Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
++++For the years ended March 31, 1996, and 1995, the per share distributions in excess of net investment income were
$0.0013 and $0.0035, respectively.
++++++For the year ended March 31, 1995, the per share distribution from net realized gain on investments was $0.0016.
[sec]The investment adviser voluntarily waived a portion of its management fee for certain of the periods indicated. 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 0.40% of average daily net assets for certain of the periods
indicated. To the extent actual expenses were over/under this limitation, and if the investment advisor was not waiving a
portion of its fee, the net investment income per share and the ratios would have been:
Net investment income $ 0.48 $ 0.08
Ratios (to average net assets):
Expenses## 0.93% 0.88%+
Net investment income 5.28% 4.91%+
<CAPTION>
Year Ended Period Ended
January 31, January 31,
1994 1993*
-------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.38 $ 9.53
------- --------
Income from investment operations# -
Net investment income[sec] $ 0.55 $ 0.24
Net realized and unrealized
gain (loss) on investments 0.62 (0.15)
------- -------
Total from investment operations $ 1.17 $ 0.09
------- -------
Less distributions declared to shareholders -
From net investment income++++ $ (0.55) $ (0.24)
From net realized gain on investments++++++ -- --
In excess of net realized gain on investments -- --
------- -------
Total distributions declared to
shareholders $ (0.55) $ (0.24)
------- -------
Net asset value - end of period $ 10.00 $ 9.38
------- -------
Total return++ 12.80% 5.00%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 0.03% 0.00%+
Net investment income 5.68% 5.59%+
Portfolio turnover 28% 14%
Net assets at end of period (000 omitted) $84,177 $41,212
*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.
++Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
++++For the years ended March 31, 1996, and 1995, the per share distributions in excess of net investment income were
$0.0013 and $0.0035, respectively.
++++++For the year ended March 31, 1995, the per share distribution from net realized gain on investments was $0.0016.
[sec]The investment adviser voluntarily waived a portion of its management fee for certain of the periods indicated. 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 0.40% of average daily net assets for certain of the periods
indicated. To the extent actual expenses were over/under this limitation, and if the investment advisor was not waiving a
portion of its fee, the net investment income per share and the ratios would have been:
Net investment income $ 0.45 $ 0.19
Ratios (to average net assets):
Expenses## 1.01% 1.17%+
Net investment income 4.69% 4.42%+
</TABLE>
See notes to financial statements
31
<PAGE>
Financial Statements - continued
Financial Highlights - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Mississippi Fund
- ------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended March 31,
September 30, --------------------------------------------
1998 1998 1997 1996 1995
------------------------------------------------------------
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------
Class B
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.89 $ 9.36 $ 9.36 $ 9.16 $ 9.19
------- ------- ------- ------- ------
Income from investment operations# -
Net investment income[sec] $ 0.21 $ 0.41 $ 0.40 $ 0.44 $ 0.45
Net realized and unrealized gain (loss) on investments 0.20 0.53 -- 0.20 --
------- ------- ------- ------- ------
Total from investment operations $ 0.41 $ 0.94 $ 0.40 $ 0.64 $ 0.45
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income++++ $ (0.21) $ (0.41) $ (0.40) $ (0.44) $(0.45)
From net realized gain on investments++++++ -- -- -- -- (0.00)
In excess of net realized gain on investments -- -- -- -- (0.03)
------- ------- ------- ------- ------
Total distributions declared to shareholders $ (0.21) $ (0.41) $ (0.40) $ (0.44) $(0.48)
------- ------- ------- ------- ------
Net asset value - end of period $ 10.09 $ 9.89 $ 9.36 $ 9.36 $ 9.16
------- ------- ------- ------- ------
Total return 4.19%++ 10.15% 4.33% 7.11% 5.14%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.53%+ 1.56% 1.72% 1.28% 1.23%
Net investment income 4.16%+ 4.26% 4.29% 4.67% 4.97%
Portfolio turnover 2% 18% 17% 31% 47%
Net assets at end of period (000 omitted) $10,882 $10,717 $11,014 $11,475 $9,429
**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.
++++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.
++++++For the year ended March 31, 1995, the per share distribution from net realized gain on investments was $0.0016.
[sec]The investment adviser voluntarily waived a portion of its management fee for certain of the periods indicated. 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 0.40% of average daily net assets for certain of the periods
indicated. To the extent actual expenses were over/under this limitation, and if the investment advisor was not waiving a
portion of its fee, the net investment income per share and the ratios would have been:
Net investment income $ 0.21 $ 0.40 -- $ 0.40 $ 0.38
Ratios (to average net assets):
Expenses## 1.63%+ 1.63% -- 1.71% 2.01%
Net investment income 4.06%+ 4.19% -- 4.24% 4.19%
<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++++ $ (0.08) $ (0.18)
From net realized gain on investments++++++ -- --
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
**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.
++++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.
++++++For the year ended March 31, 1995, the per share distribution from net realized gain on investments was $0.0016.
[sec]The investment adviser voluntarily waived a portion of its management fee for certain of the periods indicated. 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 0.40% of average daily net assets for certain of the periods
indicated. To the extent actual expenses were over/under this limitation, and if the investment advisor was not waiving a
portion of its fee, the net investment income per share and the ratios would have been:
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
32
<PAGE>
Financial Statements - continued
Financial Highlights - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
New York Fund
- ---------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended March 31,
September 30, ---------------------
1998 1998
-----------------------------------
(Unaudited)
- ---------------------------------------------------------------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.26 $ 10.60
-------- --------
Income from investment operations# -
Net investment income[sec] $ 0.28 $ 0.57
Net realized and unrealized gain (loss) on investments 0.17 0.64
-------- --------
Total from investment operations $ 0.45 $ 1.21
-------- --------
Less distributions declared to shareholders -
From net investment income $ (0.28) $ (0.55)
In excess of net investment income++++ -- --
In excess of net realized gain on investments -- --
-------- --------
Total distributions declared to shareholders $ (0.28) $ (0.55)
-------- --------
Net asset value - end of period $ 11.43 $ 11.26
-------- --------
Total return++ 4.07%++ 11.59%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 0.95%+ 1.03%
Net investment income 5.02%+ 5.14%
Portfolio turnover 3% 41%
Net assets at end of period (000 omitted) $117,456 $119,376
+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.
++Total returns for Class A do not include the applicable sales charge. If the charge had been included, the results would
have been lower.
++++For the year ended March 31, 1996, the per share distribution in excess of net investment income was $0.0058.
[sec]The investment adviser and/or distributor voluntarily waived a portion of their management fee and/or distribution fee,
respectively, for certain of the periods indicated. If these fees had been incurred by the Fund, the net investment income per
share and the ratios would have been:
Net investment income $ 0.27 $ 0.56
Ratios (to average net assets):
Expenses## 1.05%+ 1.10%
Net investment income 4.92%+ 5.07%
<CAPTION>
Two Months
Ended
March 31,
1997 1996 1995 1994
-----------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.66 $ 10.49 $ 10.50 $ 11.34
-------- -------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.55 $ 0.55 $ 0.56 $ 0.09
Net realized and unrealized gain (loss) on investments (0.06) 0.17 0.05 (0.84)
-------- -------- -------- --------
Total from investment operations $ 0.49 $ 0.72 $ 0.61 $ (0.75)
-------- -------- -------- ---------
Less distributions declared to shareholders -
From net investment income $ (0.55) $ (0.55) $ (0.56) $ (0.06)
In excess of net investment income++++ -- (0.00) (0.01) (0.03)
In excess of net realized gain on investments -- -- (0.05) --
-------- -------- -------- --------
Total distributions declared to shareholders $ (0.55) $ (0.55) $ (0.62) $ (0.09)
-------- -------- -------- --------
Net asset value - end of period $ 10.60 $ 10.66 $ 10.49 $ 10.50
-------- -------- -------- --------
Total return++ 4.68% 6.98% 6.03% (6.58)%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.11% 1.10% 1.07% 1.03%+
Net investment income 5.18% 5.09% 5.43% 5.09%+
Portfolio turnover 64% 102% 147% 15%
Net assets at end of period (000 omitted) $121,588 $134,449 $146,597 $162,621
+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.
++Total returns for Class A do not include the applicable sales charge. If the charge had been included, the results would
have been lower.
++++For the year ended March 31, 1996, the per share distribution in excess of net investment income was $0.0058.
[sec]The investment adviser and/or distributor voluntarily waived a portion of their management fee and/or distribution fee,
respectively, for certain of the periods indicated. If these fees had been incurred by the Fund, the net investment income per
share and the ratios would have been:
Net investment income -- $ 0.54 $ 0.55 $ 0.07
Ratios (to average net assets):
Expenses## -- 1.20% 1.18% 1.23%+
Net investment income -- 4.99% 5.31% 4.88%+
</TABLE>
See notes to financial statements
33
<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++ 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
*For the period from the commencement of the Fund's investment operations, June 6, 1988, through January 31, 1989.
+Annualized.
++Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
[sec]The investment adviser and/or 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%
<CAPTION>
Period Ended
January 31,
1989*
-------------
<S> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.53
-------
Income from investment operations -
Net investment income[sec] $ 0.29
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++ 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
*For the period from the commencement of the Fund's investment operations, June 6, 1988, through January 31, 1989.
+Annualized.
++Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
[sec]The investment adviser and/or 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 $ 0.26
Ratios (to average net assets):
Expenses 1.09%+
Net investment income 5.24%+
</TABLE>
See notes to financial statements
34
<PAGE>
Financial Statements - continued
Financial Highlights - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
New York Fund
- --------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended March 31,
September 30, -----------------------------------------------
1998 1998 1997 1996 1995
--------------------------------------------------------------
(Unaudited)
- --------------------------------------------------------------------------------------------------------------------------------
Class B
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.26 $ 10.59 $ 10.66 $ 10.49 $ 10.50
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.24 $ 0.49 $ 0.47 $ 0.47 $ 0.47
Net realized and unrealized gain (loss) on investments 0.17 0.64 (0.07) 0.17 0.05
------- ------- ------- ------- -------
Total from investment operations $ 0.41 $ 1.13 $ 0.40 $ 0.64 $ 0.52
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.24) $ (0.46) $ (0.47) $ (0.47) $ (0.47)
From net realized gain on investments -- -- -- -- --
In excess of net investment income++++ -- -- -- (0.00) (0.01)
In excess of net realized gain on investments -- -- -- -- (0.05)
------- ------- ------- ------- -------
Total distributions declared to shareholders $ (0.24) $ (0.46) $ (0.47) $ (0.47) $ (0.53)
------- ------- ------- ------- -------
Net asset value - end of period $ 11.43 $ 11.26 $ 10.59 $ 10.66 $ 10.49
------- ------- ------- ------- -------
Total return 3.78%++ 10.78% 3.77% 6.10% 5.17%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.70%+ 1.78% 1.92% 1.92% 1.89%
Net investment income 4.27%+ 4.39% 4.37% 4.27% 4.58%
Portfolio turnover 3% 41% 64% 102% 147%
Net assets at end of period (000 omitted) $29,275 $26,618 $26,724 $28,068 $11,885
**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.
++++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 $ 0.23 $ 0.48 -- -- $ 0.47
Ratios (to average net assets):
Expenses## 1.80%+ 1.85% -- -- 1.91%
Net investment income 4.17%+ 4.32% -- -- 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 $ 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++++ (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
**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.
++++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 $ 0.07 $ 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
35
<PAGE>
Financial Statements - continued
Financial Highlights - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
North Carolina Fund
- ----------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended March 31,
September 30, --------------------
1998 1998
----------------------------------
(Unaudited)
- ----------------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 12.15 $ 11.56
-------- --------
Income from investment operations# -
Net investment income[sec] $ 0.29 $ 0.59
Net realized and unrealized gain (loss) on investments 0.19 0.59
-------- --------
Total from investment operations $ 0.48 $ 1.18
-------- --------
Less distributions declared to shareholders -
From net investment income $ (0.29) $ (0.59)
From net realized gain on investments -- --
In excess of net investment income++++ -- --
In excess of net realized gain on investments -- --
-------- --------
Total distributions declared to shareholders $ (0.29) $ (0.59)
-------- --------
Net asset value - end of period $ 12.34 $ 12.15
-------- --------
Total return++ 4.01%++ 10.36%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.01%+ 1.03%
Net investment income 4.77%+ 4.92%
Portfolio turnover 6% 24%
Net assets at end of period (000 omitted) $375,807 $380,595
+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.
++Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
++++For the years ended March 31, 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 $ 0.28 $ 0.58
Ratios (to average net assets):
Expenses## 1.11%+ 1.13%
Net investment income 4.67%+ 4.82%
<CAPTION>
Two Months
Ended Year Ended
March 31, January 31,
1997 1996 1995 1994 1994
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.57 $ 11.42 $ 11.48 $ 12.37 $ 11.80
-------- -------- -------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.59 $ 0.59 $ 0.61 $ 0.10 $ 0.64
Net realized and unrealized gain (loss) on investments (0.01) 0.15 0.03 (0.89) 0.58
-------- -------- -------- -------- --------
Total from investment operations $ 0.58 $ 0.74 $ 0.64 $ (0.79) $ 1.22
-------- -------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.59) $ (0.59) $ (0.60) $ (0.07) $ (0.61)
From net realized gain on investments -- -- (0.06) -- (0.01)
In excess of net investment income++++ (0.00) (0.00) -- (0.03) (0.03)
In excess of net realized gain on investments -- -- (0.04) -- --
-------- -------- -------- -------- --------
Total distributions declared to shareholders $ (0.59) $ (0.59) $ (0.70) $ (0.10) $ (0.65)
-------- -------- -------- -------- --------
Net asset value - end of period $ 11.56 $ 11.57 $ 11.42 $ 11.48 $ 12.37
-------- -------- -------- -------- --------
Total return++ 5.09% 6.56% 5.86% (6.39)%++ 10.59%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.08% 1.17% 1.16% 1.16%+ 1.19%
Net investment income 5.05% 5.04% 5.38% 4.96%+ 5.21%
Portfolio turnover 33% 30% 58% 2% 12%
Net assets at end of period (000 omitted) $377,112 $409,347 $429,131 $460,321 $495,158
+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.
++Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
++++For the years ended March 31, 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 -- -- -- --
Ratios (to average net assets):
Expenses## 1.15% -- -- -- --
Net investment income 4.98% -- -- -- --
</TABLE>
See notes to financial statements
36
<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++++ -- (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++ 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
++Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
++++For the year ended January 31, 1991, the per share distribution from paid-in capital was $0.0005.
</TABLE>
See notes to financial statements
37
<PAGE>
Financial Statements - continued
Financial Highlights - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
North Carolina Fund
- -------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended March 31,
September 30, ----------------------
1998 1998 1997
--------------------------------------
(Unaudited)
- -------------------------------------------------------------------------------------------------------
Class B
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 12.15 $ 11.55 $ 11.56
------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.25 $ 0.51 $ 0.50
Net realized and unrealized gain (loss) on investments 0.18 0.60 --
------- ------- -------
Total from investment operations $ 0.43 $ 1.11 $ 0.50
------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.25) $ (0.51) $ (0.51)
From net realized gain on investments -- -- --
In excess of net investment income++++ -- -- (0.00)
In excess of net realized gain on investments -- -- --
------- ------- -------
Total distributions declared to shareholders $ (0.25) $ (0.51) $ (0.51)
------- ------- -------
Net asset value - end of period $ 12.33 $ 12.15 $ 11.55
------- ------- -------
Total return 3.59%++ 9.75% 4.36%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.66%+ 1.68% 1.78%
Net investment income 4.12%+ 4.27% 4.36%
Portfolio turnover 6% 24% 33%
Net assets at end of period (000 omitted) $49,326 $44,238 $39,035
**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.
++++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 $ 0.24 $ 0.50 $ 0.49
Ratios (to average net assets):
Expenses## 1.76%+ 1.78% 1.85%
Net investment income 4.02%+ 4.17% 4.29%
<CAPTION>
Two Months
Ended Period Ended
March 31, January 31,
1996 1995 1994 1994**
------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.42 $ 11.47 $ 12.36 $ 12.36
------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.50 $ 0.52 $ 0.08 $ 0.22
Net realized and unrealized gain (loss) on investments 0.14 0.05 (0.89) 0.01
------- ------- ------- -------
Total from investment operations $ 0.64 $ 0.57 $ (0.81) $ 0.23
------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.50) $ (0.52) $ (0.08) $ (0.21)
From net realized gain on investments -- (0.06) -- (0.01)
In excess of net investment income++++ (0.00) -- (0.00) (0.01)
In excess of net realized gain on investments -- (0.04) -- --
------- ------- ------- -------
Total distributions declared to shareholders $ (0.50) $ (0.62) $ (0.08) $ (0.23)
------- ------- ------- -------
Net asset value - end of period $ 11.56 $ 11.42 $ 11.47 $ 12.36
------- ------- ------- -------
Total return 5.70% 5.20% (6.51)%++ 4.58%+
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.90% 1.88% 1.88%+ 1.84%+
Net investment income 4.30% 4.64% 4.18%+ 4.03%+
Portfolio turnover 30% 58% 2% 12%
Net assets at end of period (000 omitted) $33,847 $26,260 $15,866 $13,379
**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.
++++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 -- -- -- --
Ratios (to average net assets):
Expenses## -- -- -- --
Net investment income -- -- -- --
</TABLE>
See notes to financial statements
38
<PAGE>
Financial Statements - continued
Financial Highlights - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
North Carolina Fund
- -----------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended March 31,
September 30, --------------------
1998 1998
------------------------------------
(Unaudited)
- -----------------------------------------------------------------------------------------------------
Class C
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 12.15 $ 11.55
------- -------
Income from investment operations# -
Net investment income[sec] $ 0.25 $ 0.51
Net realized and unrealized gain (loss) on investments 0.18 0.60
------- -------
Total from investment operations $ 0.43 $ 1.11
------- -------
Less distributions declared to shareholders -
From net investment income++++ $ (0.25) $ (0.51)
From net realized gain on investments -- --
In excess of net realized gain on investments -- --
------- -------
Total distributions declared to shareholders $ (0.25) $ (0.51)
------- -------
Net asset value - end of period $ 12.33 $ 12.15
------- -------
Total return 3.58%++ 9.75%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.66%+ 1.68%
Net investment income 4.12%+ 4.27%
Portfolio turnover 6% 24%
Net assets at end of period (000 omitted) $10,639 $ 8,143
***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.
++++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 excess 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:
Net investment income $ 0.24 $ 0.50
Ratios (to average net assets):
Expenses## 1.76%+ 1.78%
Net investment income 4.02%+ 4.17%
<CAPTION>
Two Months
Ended Period Ended
March 31, January 31,
1997 1996 1995 1994 1994***
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.56 $ 11.41 $11.47 $ 12.36 $ 12.24
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.52 $ 0.51 $ 0.53 $ 0.10 $ 0.02
Net realized and unrealized gain (loss) on investments (0.02) 0.15 0.04 (0.90) 0.12
------- ------- ------- ------- -------
Total from investment operations $ 0.50 $ 0.66 $ 0.57 $ (0.80) $ 0.14
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income++++ $ (0.51) $ (0.51) $ (0.53) $ (0.09) $ (0.02)
From net realized gain on investments -- -- (0.06) -- --
In excess of net realized gain on investments -- -- (0.04) -- --
------- ------- ------- ------- -------
Total distributions declared to shareholders $ (0.51) $ (0.51) $ (0.63) $ (0.09) $ (0.02)
------- ------- ------- ------- -------
Net asset value - end of period $ 11.55 $ 11.56 $ 11.41 $ 11.47 $ 12.36
------- ------- ------- ------- -------
Total return 4.41% 5.87% 5.18% (6.50)%++ 16.50%+
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.73% 1.83% 1.81% 1.82%+ 1.44%+
Net investment income 4.40% 4.38% 4.71% 4.25%+ 2.33%+
Portfolio turnover 33% 30% 58% 2% 12%
Net assets at end of period (000 omitted) $ 7,789 $ 9,352 $ 8,149 $ 6,661 $ 4,584
***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.
++++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 excess 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:
Net investment income $ 0.51 -- -- -- --
Ratios (to average net assets):
Expenses## 1.80% -- -- -- --
Net investment income 4.33% -- -- -- --
</TABLE>
See notes to financial statements
39
<PAGE>
Financial Statements - continued
Financial Highlights - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Pennsylvania Fund
- ----------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended March 31,
September 30, -------------------
1998 1998
-----------------------------------
(Unaudited)
- ----------------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.82 $ 9.26
------- -------
Income from investment operations# -
Net investment income[sec] $ 0.24 $ 0.50
Net realized and unrealized gain (loss) on investments 0.23 0.56
------- -------
Total from investment operations $ 0.47 $ 1.06
------- -------
Less distributions declared to shareholders -
From net investment income++++ $ (0.24) $ (0.50)
From net realized gain on investments -- --
In excess of net realized gain on investments -- --
------- -------
Total distributions declared to shareholders $ (0.24) $ (0.50)
------- -------
Net asset value - end of period $ 10.05 $ 9.82
------- -------
Total return++ 4.89%++ 11.65%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses 0.48%+## 0.40%
Net investment income 4.90%+ 5.15%
Portfolio turnover 3% 31%
Net assets at end of period (000 omitted) $19,856 $18,918
*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.
++Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
++++For the year ended March 31, 1997, per share distribution in excess of net investment income was $0.003.
[sec]The investment adviser voluntarily waived a portion of its management fee for certain of the periods indicated. 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 for certain of the periods
indicated. To the extent actual expenses were over/under this limitation, and if the investment advisor was not waiving a
portion of its fee, the net investment income per share and the ratios would have been:
Net investment income $ 0.22 $ 0.44
Ratios (to average net assets):
Expenses## 0.94%+ 0.99%
Net investment income 4.44%+ 4.56%
<CAPTION>
Two Months
Ended Period Ended
March 31, January 31,
1997 1996 1995 1994 1994*
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.37 $ 9.29 $ 9.15 $ 10.14 $ 9.53
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.53 $ 0.54 $ 0.54 $ 0.09 $ 0.50
Net realized and unrealized gain (loss) on investments (0.10) 0.09 0.18 (0.99) 0.62
------- ------- ------- ------- -------
Total from investment operations $ 0.43 $ 0.63 $ 0.72 $ (0.90) $ 1.12
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income++++ $ (0.54) $ (0.55) $ (0.54) $ (0.09) $ (0.50)
From net realized gain on investments -- -- (0.01) -- (0.01)
In excess of net realized gain on investments -- -- (0.03) -- --
------- ------- ------- ------- -------
Total distributions declared to shareholders $ (0.54) $ (0.55) $ (0.58) $ (0.09) $ (0.51)
------- ------- ------- ------- -------
Net asset value - end of period $ 9.26 $ 9.37 $ 9.29 $ 9.15 $ 10.14
------- ------- ------- ------- -------
Total return++ 4.67% 6.85% 8.14% (8.91)%++ 12.12%+
Ratios (to average net assets)/Supplemental data[sec]:
Expenses 0.10% 0.10% 0.01% 0.00%+ 0.00%+
Net investment income 5.66% 5.76% 5.97% 5.43%+ 5.30%+
Portfolio turnover 42% 40% 49% 1% 10%
Net assets at end of period (000 omitted) $16,933 $18,030 $16,411 $13,961 $13,987
*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.
++Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
++++For the year ended March 31, 1997, per share distribution in excess of net investment income was $0.003.
[sec]The investment adviser voluntarily waived a portion of its management fee for certain of the periods indicated. 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 for certain of the periods
indicated. To the extent actual expenses were over/under this limitation, and if the investment advisor was not waiving a
portion of its fee, the net investment income per share and the ratios would have been:
Net investment income $ 0.45 $ 0.45 $ 0.43 $ 0.06 $ 0.32
Ratios (to average net assets):
Expenses## 0.95% 1.00% 1.18% 1.84%+ 1.94%+
Net investment income 4.81% 4.86% 4.80% 3.60%+ 3.36%+
</TABLE>
See notes to financial statements
40
<PAGE>
Financial Statements - continued
Financial Highlights - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Pennsylvania Fund
- -------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended March 31,
September 30, -------------------------------------------
1998 1998 1997 1996 1995
---------------------------------------------------------------
(Unaudited)
- -------------------------------------------------------------------------------------------------------------------------------
Class B
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.84 $ 9.28 $ 9.39 $ 9.29 $ 9.15
------- ------- ------- ------- ------
Income from investment operations# -
Net investment income[sec] $ 0.20 $ 0.42 $ 0.46 $ 0.50 $ 0.45
Net realized and unrealized gain (loss) on investments 0.23 0.56 (0.11) 0.07 0.18
------- ------- ------- ------- ------
Total from investment operations $ 0.43 $ 0.98 $ 0.35 $ 0.57 $ 0.63
------- ------- ------- ------- ------
Less distributions declared to shareholders -
From net investment income++++ $ (0.20) $ (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 $ (0.20) $ (0.42) $ (0.46) $ (0.47) $(0.49)
------- ------- ------- ------- ------
Net asset value - end of period $ 10.07 $ 9.84 $ 9.28 $ 9.39 $ 9.29
------- ------- ------- ------- ------
Total return 4.47%++ 10.76% 3.83% 6.23% 7.07%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses 1.26%+## 1.19% 0.90% 0.88% 1.01%
Net investment income 4.12%+ 4.36% 4.86% 4.98% 4.96%
Portfolio turnover 3% 31% 42% 40% 49%
Net assets at end of period (000 omitted) $21,896 $20,551 $24,898 $24,170 $7,699
**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.
++++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]The investment adviser voluntarily waived a portion of its management fee for certain of the periods indicated. 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 for certain of the periods
indicated. To the extent actual expenses were over/under this limitation, and if the investment advisor was not waiving a
portion of its fee, the net investment income per share and the ratios would have been:
Net investment income $ 0.18 $ 0.36 $ 0.38 $ 0.41 $ 0.34
Ratios (to average net assets):
Expenses## 1.72%+ 1.78% 1.75% 1.85% 2.26%
Net investment income 3.66%+ 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++++ $(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
**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.
++++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]The investment adviser voluntarily waived a portion of its management fee for certain of the periods indicated. 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 for certain of the periods
indicated. To the extent actual expenses were over/under this limitation, and if the investment advisor was not waiving a
portion of its fee, the net investment income per share and the ratios would have been:
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
41
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
South Carolina Fund
- -----------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended March 31,
September 30, --------------------
1998 1998
-------------------------------------
(Unaudited)
- -----------------------------------------------------------------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 12.52 $ 11.88
-------- --------
Income from investment operations# -
Net investment income[sec] $ 0.29 $ 0.60
Net realized and unrealized gain (loss) on investments 0.20 0.64
-------- --------
Total from investment operations $ 0.49 $ 1.24
-------- --------
Less distributions declared to shareholders -
From net investment income $ (0.29) $ (0.60)
From net realized gain on investments -- --
In excess of net investment income++++ (0.00) (0.00)
In excess of net realized gain on investments -- --
-------- --------
Total distributions declared to shareholders $ (0.29) $ (0.60)
-------- --------
Net asset value - end of period $ 12.72 $ 12.52
-------- --------
Total return++ 3.97%++ 10.62%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.04%+ 1.06%
Net investment income 4.58%+ 4.86%
Portfolio turnover 4% 29%
Net assets at end of period (000 omitted) $147,593 $148,820
+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.
++Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
++++For the six months ended September 30, 1998 and the years ended March 31, 1998 and 1996, the per share distributions in excess
of net investment income were $0.0021, $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:
Net investment income $ 0.28 $ 0.59
Ratios (to average net assets):
Expenses ## 1.14%+ 1.16%
Net investment income 4.48%+ 4.76%
<CAPTION>
Two Months
Ended Year Ended
March 31, January 31,
1997 1996 1995 1994 1994
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.97 $ 11.86 $ 11.79 $ 12.74 $ 12.02
-------- -------- -------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.62 $ 0.62 $ 0.63 $ 0.08 $ 0.63
Net realized and unrealized gain (loss) on investments (0.10) 0.11 0.15 (0.92) 0.74
-------- -------- -------- -------- --------
Total from investment operations $ 0.52 $ 0.73 $ 0.78 $ (0.84) $ 1.37
-------- -------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.61) $ (0.62) $ (0.62) $ (0.08) $ (0.61)
From net realized gain on investments -- -- (0.06) -- (0.01)
In excess of net investment income++++ -- (0.00) -- (0.03) (0.03)
In excess of net realized gain on investments -- -- (0.03) -- --
-------- -------- -------- -------- --------
Total distributions declared to shareholders $ (0.61) $ (0.62) $ (0.71) $ (0.11) $ (0.65)
-------- -------- -------- -------- --------
Net asset value - end of period $ 11.88 $ 11.97 $ 11.86 $ 11.79 $ 12.74
-------- -------- -------- -------- --------
Total return++ 4.46% 6.20% 6.93% (6.65)%++ 11.69%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.10% 1.20% 1.19% 1.23%+ 1.22%
Net investment income 5.17% 5.10% 5.37% 5.09%+ 5.06%
Portfolio turnover 13% 18% 30% 4% 10%
Net assets at end of period (000 omitted) $148,908 $166,801 $171,045 $173,316 $187,307
+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.
++Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
++++For the six months ended September 30, 1998 and the years ended March 31, 1998 and 1996, the per share distributions in excess
of net investment income were $0.0021, $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:
Net investment income $ 0.16 -- -- -- --
Ratios (to average net assets):
Expenses ## 1.16% -- -- -- --
Net investment income 5.11% -- -- -- --
</TABLE>
See notes to financial statements
42
<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++ 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
++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.
</TABLE>
See notes to financial statements
43
<PAGE>
Financial Statements - continued
Financial Highlights - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
South Carolina Fund
- ----------------------------------------------------------------------------------
Six Months
Ended
September 30,
1998
---------------
(Unaudited)
- ----------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------
<S> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 12.52
-------
Income from investment operations# -
Net investment income[sec] $ 0.25
Net realized and unrealized gain (loss) on investments 0.19
-------
Total from investment operations $ 0.44
-------
Less distributions declared to shareholders -
From net investment income $ (0.25)
From net realized gain on investments --
In excess of net investment income++++ (0.00)
In excess of net realized gain on investments --
-------
Total distributions declared to shareholders $ (0.25)
-------
Net asset value - end of period $ 12.71
-------
Total return 3.55%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.69%+
Net investment income 3.93%+
Portfolio turnover 4%
Net assets at end of period (000 omitted) $32,697
**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.
++++For the six months ended September 30, 1998, and the years ended March 31, 1998, 1996, and 1995, the per share distributions
in excess of net investment income were $0.0018, $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:
Net investment income $ 0.24
Ratios (to average net assets):
Expenses ## 1.79%+
Net investment income 3.83%+
<CAPTION>
Year Ended March 31,
-----------------------------------------------
1998 1997 1996 1995
-----------------------------------------------
<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++++ (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
**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.
++++For the six months ended September 30, 1998, and the years ended March 31, 1998, 1996, and 1995, the per share distributions
in excess of net investment income were $0.0018, $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:
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++++ (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
**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.
++++For the six months ended September 30, 1998, and the years ended March 31, 1998, 1996, and 1995, the per share distributions
in excess of net investment income were $0.0018, $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:
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>
Tennessee Fund
- ----------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended March 31,
September 30, --------------------
1998 1998
-----------------------------------
(Unaudited)
- ----------------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.91 $ 10.32
-------- --------
Income from investment operations# -
Net investment income[sec] $ 0.26 $ 0.53
Net realized and unrealized gain (loss) on investments 0.16 0.60
-------- --------
Total from investment operations $ 0.42 $ 1.13
-------- --------
Less distributions declared to shareholders -
From net investment income $ (0.26) $ (0.53)
From net realized gain on investments++++ -- --
In excess of net investment income++++++ -- (0.01)
In excess of net realized gain on investments -- --
-------- --------
Total distributions declared to shareholders $ (0.26) $ (0.54)
-------- --------
Net asset value - end of period $ 11.07 $ 10.91
-------- --------
Total return++ 3.91%++ 11.11%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.07%+ 1.07%
Net investment income 4.80%+ 4.97%
Portfolio turnover 3% 26%
Net assets at end of period (000 omitted) $108,686 $108,871
+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.
++Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
++++For the year ended March 31, 1995, the per share distribution from net realized gain on investments was $0.0014.
++++++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:
Net investment income $ 0.25 $ 0.52
Ratios (to average net assets):
Expenses## 1.17%+ 1.17%
Net investment income 4.70%+ 4.87%
<CAPTION>
Two Months
Ended Year Ended
March 31, January 31,
1997 1996 1995 1994 1994
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.40 $ 10.27 $ 10.26 $ 10.94 $ 10.37
-------- -------- -------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.55 $ 0.54 $ 0.56 $ 0.09 $ 0.57
Net realized and unrealized gain (loss) on investments (0.09) 0.13 0.02 (0.68) 0.57
-------- -------- -------- -------- --------
Total from investment operations $ 0.46 $ 0.67 $ 0.58 $ (0.59) $ 1.14
-------- -------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.54) $ (0.54) $ (0.56) $ (0.07) $ (0.54)
From net realized gain on investments++++ -- -- (0.00) -- --
In excess of net investment income++++++ -- (0.00) -- (0.02) (0.03)
In excess of net realized gain on investments -- -- (0.01) -- --
-------- -------- -------- -------- --------
Total distributions declared to shareholders $ (0.54) $ (0.54) $ (0.57) $ (0.09) $ (0.57)
-------- -------- -------- -------- --------
Net asset value - end of period $ 10.32 $ 10.40 $ 10.27 $ 10.26 $ 10.94
-------- -------- -------- -------- --------
Total return++ 4.48% 6.66% 5.86% (5.39)%++ 11.20%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.10% 1.21% 1.22% 1.21%+ 1.29%
Net investment income 5.26% 5.18% 5.52% 5.31%+ 5.25%
Portfolio turnover 20% 20% 27% 4% 12%
Net assets at end of period (000 omitted) $108,000 $109,811 $117,572 $117,117 $123,050
+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.
++Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
++++For the year ended March 31, 1995, the per share distribution from net realized gain on investments was $0.0014.
++++++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:
Net investment income $ 0.54 -- -- -- --
Ratios (to average net assets):
Expenses## 1.16% -- -- -- --
Net investment income 5.20% -- -- -- --
</TABLE>
See notes to financial statements
45
<PAGE>
Financial Statements - continued
Financial Highlights - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Tennessee Fund
- ----------------------------------------------------------------------------------------------------------------------
Year Ended January 31,
----------------------------------------------------
1993 1992 1991 1990
----------------------------------------------------
Class A
----------------------------------------------------
<S> <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
------- ------- ------- -------
Income from investment operations -
Net investment income[sec] $ 0.57 $ 0.61 $ 0.62 $ 0.67
Net realized and unrealized gain on investments 0.31 0.30 0.13 0.11
------- ------- ------- -------
Total from investment operations $ 0.88 $ 0.91 $ 0.75 $ 0.78
------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.57) $ (0.66) $ (0.63) $ (0.66)
From net realized gain on investments (0.01) (0.05) (0.02) --
In excess of net investment income (0.03) -- -- --
From paid-in capital++++ -- -- (0.00) --
------- ------- ------- -------
Total distributions declared to shareholders $ (0.61) $ (0.71) $ (0.65) $ (0.66)
------- ------- ------- -------
Net asset value - end of period $ 10.37 $ 10.10 $ 9.90 $ 9.80
------- ------- ------- -------
Total return++ 9.03% 9.50% 7.96% 8.30%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses 1.14% 1.15% 1.03% 0.53%
Net investment income 5.89% 6.11% 6.37% 6.70%
Portfolio turnover 9% 42% 58% 78%
Net assets at end of period (000 omitted) $99,443 $87,898 $72,108 $56,048
*For the period from the commencement of the Fund's investment operations, August 12, 1988, through January 31, 1989.
+Annualized.
++Not annualized.
++Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
++++For the year ended January 31, 1991, the per share distribution from paid-in capital 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:
Net investment income $ 0.61 -- -- $ 0.60
Ratios (to average net assets):
Expenses 1.17% -- -- 1.24%
Net investment income 6.23% -- -- 5.99%
<CAPTION>
Period Ended
January 31,
1989*
------------
<S> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.53
-------
Income from investment operations -
Net investment income[sec] $ 0.22
Net realized and unrealized gain on investments 0.10
-------
Total from investment operations $ 0.32
-------
Less distributions declared to shareholders -
From net investment income $ (0.17)
From net realized gain on investments --
In excess of net investment income --
From paid-in capital++++ --
-------
Total distributions declared to shareholders $ (0.17)
-------
Net asset value - end of period $ 9.68
-------
Total return++ 3.43%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses 0.40%+
Net investment income 5.98%+
Portfolio turnover 5%
Net assets at end of period (000 omitted) $15,832
*For the period from the commencement of the Fund's investment operations, August 12, 1988, through January 31, 1989.
+Annualized.
++Not annualized.
++Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
++++For the year ended January 31, 1991, the per share distribution from paid-in capital 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:
Net investment income $ 0.20
Ratios (to average net assets):
Expenses 0.95%+
Net investment income 5.43%+
</TABLE>
See notes to financial statements
46
<PAGE>
Financial Statements - continued
Financial Highlights - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Tennessee Fund
- -----------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended March 31,
September 30, --------------------
1998 1998
----------------------------
(Unaudited)
- -----------------------------------------------------------------------------------------------------
Class B
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.91 $ 10.31
------- -------
Income from investment operations# -
Net investment income[sec] $ 0.23 $ 0.46
Net realized and unrealized gain (loss) on investments 0.15 0.61
------- -------
Total from investment operations $ 0.38 $ 1.07
------- -------
Less distributions declared to shareholders -
From net investment income $ (0.23) $ (0.46)
From net realized gain on investments++++ -- --
In excess of net investment income++++++ -- (0.01)
In excess of net realized gain on investments -- --
------- -------
Total distributions declared to shareholders $ (0.23) $ (0.47)
------- -------
Net asset value - end of period $ 11.06 $ 10.91
------- -------
Total return 3.49%++ 10.51%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.72%+ 1.72%
Net investment income 4.15%+ 4.32%
Portfolio turnover 3% 26%
Net assets at end of period (000 omitted) $20,201 $18,198
**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.
++++For the year ended March 31, 1995, the per share distribution from net realized gain on investments was $0.0014.
++++++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:
Net investment income $ 0.22 $ 0.45
Ratios (to average daily net assets):
Expenses## 1.82%+ 1.82%
Net investment income 4.05%+ 4.22%
<CAPTION>
Two Months
Ended Period Ended
March 31, January 31,
1997 1996 1995 1994 1994**
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.39 $ 10.26 $ 10.26 $ 10.95 $ 10.87
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.47 $ 0.46 $ 0.48 $ 0.08 0.19
Net realized and unrealized gain (loss) on investments (0.09) 0.14 0.01 (0.69) 0.08
------- ------- ------- ------- -------
Total from investment operations $ 0.38 $ 0.60 $ 0.49 $ (0.61) $ 0.27
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.46) $ (0.47) $ (0.48) $ (0.08) $ (0.19)
From net realized gain on investments++++ -- -- (0.00) -- --
In excess of net investment income++++++ -- (0.00) -- -- --
In excess of net realized gain on investments -- -- (0.01) -- --
------- ------- ------- ------- -------
Total distributions declared to shareholders $ (0.46) $ (0.47) $ (0.49) $ (0.08) $ (0.19)
------- ------- ------- ------- -------
Net asset value - end of period $ 10.31 $ 10.39 $ 10.26 $ 10.26 $ 10.95
------- ------- ------- ------- -------
Total return 3.76% 5.89% 5.00% (5.59)%++ 2.48%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.79% 1.93% 1.94% 1.93%+ 1.93%+
Net investment income 4.57% 4.43% 4.80% 4.49%+ 4.20%+
Portfolio turnover 20% 20% 27% 4% 12%
Net assets at end of period (000 omitted) $14,436 $12,935 $10,006 $ 5,294 $ 3,818
**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.
++++For the year ended March 31, 1995, the per share distribution from net realized gain on investments was $0.0014.
++++++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:
Net investment income $ 0.46 -- -- -- --
Ratios (to average daily net assets):
Expenses## 1.85% -- -- -- --
Net investment income 4.51% -- -- -- --
</TABLE>
See notes to financial statements
47
<PAGE>
Financial Statements - continued
Financial Highlights - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Virginia Fund
- ----------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended March 31,
September 30, --------------------
1998 1998
----------------------------------
(Unaudited)
- ----------------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.61 $ 11.06
-------- --------
Income from investment operations# -
Net investment income[sec] $ 0.28 $ 0.57
Net realized and unrealized gain (loss) on investments 0.18 0.55
-------- --------
Total from investment operations $ 0.46 $ 1.12
-------- --------
Less distributions declared to shareholders -
From net investment income $ (0.28) $ (0.57)
From net realized gain on investments -- --
In excess of net investment income++++ (0.00) (0.00)
In excess of net realized gain on investments -- --
-------- --------
Total distributions declared to shareholders $ (0.28) $ (0.57)
-------- --------
Net asset value - end of period $ 11.79 $ 11.61
-------- --------
Total return++ 3.99%++ 10.32%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.01%+ 1.03%
Net investment income 4.76%+ 4.97%
Portfolio turnover 7% 39%
Net assets at end of period (000 omitted) $372,544 $373,024
+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.
++Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
++++For the six months ended September 30, 1998, and the years ended March 31, 1998, 1996, and 1995, the per share distributions
in excess of net investment income were $0.0001, $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:
Net investment income $ 0.27 $ 0.56
Ratios (to average net assets):
Expenses## 1.11%+ 1.13%
Net investment income 4.66%+ 4.87%
<CAPTION>
Two Months
Ended Year Ended
March 31, January 31,
1997 1996 1995 1994 1994
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.21 $ 11.09 $ 11.15 $ 12.07 $ 11.72
-------- -------- -------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.59 $ 0.59 $ 0.56 $ 0.10 $ 0.65
Net realized and unrealized gain (loss) on investments (0.15) 0.13 0.04 (0.92) 0.56
-------- -------- -------- -------- --------
Total from investment operations $ 0.44 $ 0.72 $ 0.60 $ (0.82) $ 1.21
-------- -------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.59) $ (0.60) $ (0.61) $ (0.06) $ (0.62)
From net realized gain on investments -- -- (0.04) -- (0.20)
In excess of net investment income++++ -- (0.00) (0.00) (0.04) (0.04)
In excess of net realized gain on investments -- -- (0.01) -- --
-------- -------- -------- -------- --------
Total distributions declared to shareholders $ (0.59) $ (0.60) $ (0.66) $ (0.10) $ (0.86)
-------- -------- -------- -------- --------
Net asset value - end of period $ 11.06 $ 11.21 $ 11.09 $ 11.15 $ 12.07
-------- -------- -------- -------- --------
Total return++ 3.97% 6.52% 5.67% (6.80)%++ 10.67%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.08% 1.18% 1.16% 1.17%+ 1.18%
Net investment income 5.27% 5.20% 4.91% 5.33%+ 5.37%
Portfolio turnover 42% 42% 27% 5% 22%
Net assets at end of period (000 omitted) $379,185 $418,408 $430,688 $ 443,580 $479,333
+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.
++Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
++++For the six months ended September 30, 1998, and the years ended March 31, 1998, 1996, and 1995, the per share distributions
in excess of net investment income were $0.0001, $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:
Net investment income $ 0.58 -- -- -- --
Ratios (to average net assets):
Expenses## 1.14% -- -- -- --
Net investment income 5.21% -- -- -- --
</TABLE>
See notes to financial statements
48
<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++++ (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++ 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
++Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
++++For the year ended January 31, 1993, the per share distribution from net realized gain on investments was $0.00348.
</TABLE>
See notes to financial statements
49
<PAGE>
Financial Statements - continued
Financial Highlights - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Virginia Fund
- ----------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended March 31,
September 30, --------------------
1998 1998
----------------------------------
(Unaudited)
- ----------------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.61 $ 11.06
------- -------
Income from investment operations# -
Net investment income[sec] $ 0.24 $ 0.49
Net realized and unrealized gain (loss) on investments 0.17 0.56
------- -------
Total from investment operations $ 0.41 $ 1.05
------- -------
Less distributions declared to shareholders -
From net investment income $ (0.24) $ (0.49)
From net realized gain on investments -- --
In excess of net investment income++++ (0.00) (0.01)
In excess of net realized gain on investments -- --
------- -------
Total distributions declared to shareholders $ (0.24) $ (0.50)_
------- -------
Net asset value - end of period $ 11.78 $ 11.61
------- -------
Total return 3.57%++ 9.61%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.66%+ 1.68%
Net investment income 4.11%+ 4.32%
Portfolio turnover 7% 39%
Net assets at end of period (000 omitted) $34,864 $32,902
**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.
++++For the six months ended September 30, 1998 and 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 $0.0001, $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:
Net investment income $ 0.23 $ 0.48
Ratios (to average net assets):
Expenses## 1.76%+ 1.78%
Net investment income 4.01%+ 4.22%
<CAPTION>
Two Months
Ended Period Ended
March 31, January 31,
1997 1996 1995 1994 1994**
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.21 $ 11.08 $ 11.14 $ 12.06 $ 12.14
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.51 $ 0.51 $ 0.53 $ 0.09 $ 0.22
Net realized and unrealized gain (loss) on investments (0.15) 0.13 (0.01) (0.92) 0.01
------- ------- ------- ------- -------
Total from investment operations $ 0.36 $ 0.64 $ 0.52 $ (0.83) $ 0.23
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.51) $ (0.51) $ (0.53) $ (0.09) $ (0.21)
From net realized gain on investments -- -- (0.04) -- (0.09)
In excess of net investment income++++ -- (0.00) (0.00) (0.00) (0.01)
In excess of net realized gain on investments -- -- (0.01) -- --
------- ------- ------- ------- -------
Total distributions declared to shareholders $ (0.51) $ (0.51) $ (0.58) $ (0.09) $ (0.31)
------- ------- ------- ------- -------
Net asset value - end of period $ 11.06 $ 11.21 $ 11.08 $ 11.14 $ 12.06
------- ------- ------- ------- -------
Total return 3.24% 5.85% 4.91% (6.92)%++ 4.93%+
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.78% 1.90% 1.88% 1.88%+ 1.82%+
Net investment income 4.57% 4.46% 4.84% 4.52%+ 4.25%+
Portfolio turnover 42% 42% 27% 5% 22%
Net assets at end of period (000 omitted) $30,567 $28,420 $22,007 $13,337 $10,877
**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.
++++For the six months ended September 30, 1998 and 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 $0.0001, $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:
Net investment income $ 0.50 -- -- -- --
Ratios (to average net assets):
Expenses## 1.84% -- -- -- --
Net investment income 4.51% -- -- -- --
</TABLE>
See notes to financial statements
50
<PAGE>
Financial Statements - continued
Financial Highlights - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Virginia Fund
- ----------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended March 31,
September 30, --------------------
1998 1998
----------------------------------
(Unaudited)
- ----------------------------------------------------------------------------------------------------
Class C
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $11.61 $11.06
------ ------
Income from investment operations# -
Net investment income[sec] $ 0.24 0.49
Net realized and unrealized gain (loss) on investments 0.18 0.56
------ ------
Total from investment operations $ 0.42 $ 1.05
------ ------
Less distributions declared to shareholders -
From net investment income $(0.24) $(0.49)
From net realized gain on investment income -- --
In excess of net investment income++++ (0.00) (0.01)
In excess of net realized gain on investments -- --
------ ------
Total distributions declared to shareholders $(0.24) $(0.50)
------ ------
Net asset value - end of period $11.79 $11.61
------ ------
Total return 3.66%++ 9.61%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.66%+ 1.68%
Net investment income 4.11%+ 4.32%
Portfolio turnover 7% 39%
Net assets at end of period (000 omitted) $4,566 $3,082
***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.
++++For the six months ended September 30, 1998 and the years ended March 31, 1996, 1995, and January 31, 1994, the per share
distributions in excess of net investment income were $0.0001, $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:
Net investment income $ 0.23 $ 0.48
Ratios (to average net assets):
Expenses## 1.76%+ 1.78%
Net investment income 4.01%+ 4.22%
<CAPTION>
Two Months
Ended Period Ended
March 31, January 31,
1997 1996 1995 1994 1994***
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $11.21 $11.07 $11.14 $12.06 $ 11.94
------ ------ ------ ------ -------
Income from investment operations# -
Net investment income[sec] $ 0.52 $ 0.51 $ 0.56 $ 0.08 $ 0.02
Net realized and unrealized gain (loss) on investments (0.16) 0.15 (0.04) (0.91) 0.12
------ ------ ------ ------ -------
Total from investment operations $ 0.36 $ 0.66 $ 0.52 $(0.83) $ 0.14
------ ------ ------ ------ -------
Less distributions declared to shareholders -
From net investment income $(0.51) $(0.52) $(0.54) $(0.09) $ (0.02)
From net realized gain on investment income -- -- (0.04) -- --
In excess of net investment income++++ -- (0.00) (0.00) -- (0.00)
In excess of net realized gain on investments -- -- (0.01) -- --
------ ------ ------ ------ -------
Total distributions declared to shareholders $(0.51) $(0.52) $(0.59) $(0.09) $ (0.02)
------ ------ ------ ------ -------
Net asset value - end of period $11.06 $11.21 $11.07 $11.14 $ 12.06
------ ------ ------ ------ -------
Total return 3.30% 6.02% 4.85% (6.91)%++ 17.05%+
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.72% 1.83% 1.80% 1.82%+ 1.18%+
Net investment income 4.63% 4.53% 4.90% 4.48%+ 1.79%+
Portfolio turnover 42% 42% 27% 5% 22%
Net assets at end of period (000 omitted) $3,182 $3,366 $2,300 $1,760 $ 833
***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.
++++For the six months ended September 30, 1998 and the years ended March 31, 1996, 1995, and January 31, 1994, the per share
distributions in excess of net investment income were $0.0001, $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:
Net investment income $ 0.51 -- -- -- --
Ratios (to average net assets):
Expenses## 1.78% -- -- -- --
Net investment income 4.57% -- -- -- --
</TABLE>
See notes to financial statements
51
<PAGE>
Financial Statements - continued
Financial Highlights - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
West Virginia Fund
- ----------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended March 31,
September 30, --------------------
1998 1998
----------------------------------
(Unaudited)
- ----------------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.77 $ 11.31
-------- --------
Income from investment operations# -
Net investment income[sec] $ 0.28 $ 0.58
Net realized and unrealized gain (loss) on investments 0.17 0.47
-------- --------
Total from investment operations $ 0.45 $ 1.05
-------- --------
Less distributions declared to shareholders -
From net investment income $ (0.28) $ (0.58)
From net realized gain on investments -- --
In excess of net investment income++++ (0.01) (0.01)
In excess of net realized gain on investments -- --
-------- --------
Total distributions declared to shareholders $ (0.29) $ (0.59)
-------- --------
Net asset value - end of period $ 11.93 $ 11.77
-------- --------
Total return++ 3.83%++ 9.42%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.05%+ 1.10%
Net investment income 4.79%+ 4.98%
Portfolio turnover 5% 17%
Net assets at end of period (000 omitted) $133,569 $130,002
+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.
++Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
++++For the year ended March 31, 1996, the per share distribution in excess of net investment income was $0.002.
[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:
Net investment income $ 0.27 $ 0.57
Ratios (to average net assets):
Expenses## 1.15%+ 1.17%
Net investment income 4.69%+ 4.91%
<CAPTION>
Two Months
Ended Year Ended
March 31, January 31,
1997 1996 1995 1994 1994
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.33 $ 11.21 $ 11.19 $ 12.06 $ 11.50
-------- -------- -------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.60 $ 0.61 $ 0.62 $ 0.01 $ 0.64
Net realized and unrealized gain (loss) on investments (0.02) 0.12 0.03 (0.78) 0.69
-------- -------- -------- -------- --------
Total from investment operations $ 0.58 $ 0.73 $ 0.65 $ (0.77) $ 1.33
-------- -------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.60) $ (0.61) $ (0.62) $ (0.06) $ (0.61)
From net realized gain on investments -- -- -- -- (0.12)
In excess of net investment income++++ -- (0.00) -- (0.04) (0.04)
In excess of net realized gain on investments -- -- (0.01) -- --
-------- -------- -------- -------- --------
Total distributions declared to shareholders $ (0.60) $ (0.61) $ (0.63) $ (0.10) $ (0.77)
-------- -------- -------- -------- --------
Net asset value - end of period $ 11.31 $ 11.33 $ 11.21 $ 11.19 $ 12.06
-------- -------- -------- -------- --------
Total return++ 5.20% 6.58% 6.07% (6.37)%++ 11.80%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.17% 1.22% 1.19% 1.30%+ 1.24%
Net investment income 5.28% 5.30% 5.62% 5.36%+ 5.30%
Portfolio turnover 21% 11% 23% 2% 26%
Net assets at end of period (000 omitted) $126,107 $134,514 $127,616 $130,726 $141,190
+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.
++Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
++++For the year ended March 31, 1996, the per share distribution in excess of net investment income was $0.002.
[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:
Net investment income -- -- -- -- --
Ratios (to average net assets):
Expenses## -- -- -- -- --
Net investment income -- -- -- -- --
</TABLE>
See notes to financial statements
52
<PAGE>
Financial Statements - continued
Financial Highlights - continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
West Virginia Fund
- -------------------------------------------------------------------------------------------------------------------------------
Year Ended January 31, 1993 1992 1991 1990 1989
- -------------------------------------------------------------------------------------------------------------------------------
Class A
- -------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
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++ 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
++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.
</TABLE>
See notes to financial statements
53
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
West Virginia Fund
- ----------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended March 31,
September 30, --------------------
1998 1998
----------------------------------
(Unaudited)
- ----------------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.77 $ 11.31
------- -------
Income from investment operations# -
Net investment income[sec] $ 0.24 $ 0.51
Net realized and unrealized gain (loss) on investments 0.16 0.46
------- -------
Total from investment operations $ 0.40 $ 0.97
------- -------
Less distributions declared to shareholders -
From net investment income $ (0.24) $ (0.51)
From net realized gain on investments -- --
In excess of net investment income++++ (0.01) (0.00)
In excess of net realized gain on investments -- --
------- -------
Total distributions declared to shareholders $ (0.25) $ (0.51)
------- -------
Net asset value - end of period $ 11.92 $ 11.77
------- -------
Total return 3.41%++ 8.72%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.70%+ 1.75%
Net investment income 4.14%+ 4.33%
Portfolio turnover 5% 17%
Net assets at end of period (000 omitted) $17,079 $15,472
**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.
++++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:
Net investment income $ 0.23 $ 0.50
Ratios (to average net assets):
Expenses## 1.80%+ 1.82%
Net investment income 4.04%+ 4.26%
<CAPTION>
Two Months
Ended Period Ended
March 31, January 31,
1997 1996 1995 1994 1994**
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.33 $ 11.21 $ 11.19 $12.06 $12.13
------- ------- ------- ------ ------
Income from investment operations# -
Net investment income[sec] $ 0.52 $ 0.52 $ 0.53 $ 0.01 $ 0.22
Net realized and unrealized gain (loss) on investments (0.02) 0.12 0.04 (0.87) 0.05
------- ------- ------- ------ ------
Total from investment operations $ 0.50 $ 0.64 $ 0.57 $(0.86) $ 0.27
------- ------- ------- ------ ------
Less distributions declared to shareholders -
From net investment income $ (0.52) $ (0.52) $ (0.54) $(0.01) $(0.21)
From net realized gain on investments -- -- -- -- (0.12)
In excess of net investment income++++ -- (0.00) (0.00) -- (0.01)
In excess of net realized gain on investments -- -- (0.01) -- --
------- ------- ------- ------ ------
Total distributions declared to shareholders $ (0.52) $ (0.52) $ (0.55) $(0.01) $(0.34)
------- ------- ------- ------ ------
Net asset value - end of period $ 11.31 $ 11.33 $ 11.21 $11.19 $12.06
------- ------- ------- ------ ------
Total return 4.47% 5.81% 5.30% (6.48)%++ 5.59%+
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.87% 1.94% 1.91% 2.02%+ 1.89%+
Net investment income 4.57% 4.56% 4.87% 4.56%+ 4.14%+
Portfolio turnover 21% 11% 23% 2% 26%
Net assets at end of period (000 omitted) $13,587 $12,647 $10,046 $5,456 $4,530
**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.
++++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:
Net investment income -- -- -- -- --
Ratios (to average net assets):
Expenses## -- -- -- -- --
Net investment income -- -- -- -- --
</TABLE>
See notes to financial statements
54
<PAGE>
Notes to Financial Statements (Unaudited)
(1) Business and Organization
MFS Municipal Series Trust (the Trust) is organized as a Massachusetts business
trust and is registered under the Investment Company Act of 1940, as amended,
as an open-end management investment company. The Trust presently consists of
16 Funds, as follows: MFS Municipal Income Fund, MFS Alabama Municipal Bond
Fund, MFS Arkansas Municipal Bond Fund, MFS California Municipal Bond Fund, MFS
Florida Municipal Bond Fund, MFS Georgia Municipal Bond Fund, MFS Maryland
Municipal Bond Fund, MFS Massachusetts Municipal Bond Fund, MFS Mississippi
Municipal Bond Fund* (Mississippi Fund), MFS New York Municipal Bond Fund* (New
York Fund), MFS North Carolina Municipal Bond Fund* (North Carolina Fund), MFS
Pennsylvania Municipal Bond Fund* (Pennsylvania Fund), MFS South Carolina
Municipal Bond Fund* (South Carolina Fund), MFS Tennessee Municipal Bond Fund*
(Tennessee Fund), MFS Virginia Municipal Bond Fund* (Virginia Fund), and MFS
West Virginia Municipal Bond Fund* (West Virginia Fund). Each Fund, except MFS
Municipal Income Fund, is non-diversified.
*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 the commodities exchanges are reported at market
value using closing settlement prices. Securities for which there are no such
quotations or valuations are valued at fair value as determined in good faith
by or at the direction of the Trustees.
Futures Contracts - Each Fund may enter into futures contracts for the delayed
delivery of securities or contracts based on financial indices at a fixed price
on a future date. In entering such contracts, each Fund is required to deposit
with the broker either in cash or securities an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received by
the Fund each day, depending on the daily fluctuations in the value of the
contract, and are recorded for financial statement purposes as unrealized gains
or losses by the Fund. Each Fund's investment in futures contracts is designed
to hedge against anticipated future changes in interest rates or securities
prices. Investments in interest rate futures for purposes other than hedging
may be made to modify the duration of the portfolio without incurring the
additional transaction costs involved in buying and selling the underlying
securities. Investments in index contracts or contracts on related options for
purposes other than hedging, may be made when a Fund has cash on hand and
wishes to participate in anticipated market appreciation while the cash is
being invested. Should interest rates or securities prices move unexpectedly,
the Fund may not achieve the anticipated benefits of the futures contracts and
may realize a loss.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and original issue discount is amortized or accreted for financial statement
and tax reporting purposes as required by federal income tax regulations.
Interest payments received in additional securities are recorded on the
ex-interest date in an amount equal to the value of the security on such date.
Some securities may be purchased on a "when-issued" or "forward delivery"
basis, which means that the securities will be delivered to the Fund at a
future date, usually beyond customary settlement time.
Legal fees and other related expenses incurred to preserve and protect the
value of a security owned are added to the cost of the security; other legal
fees are expensed. Capital infusions, which are generally non-recurring,
incurred to protect or enhance the value of high-yield debt securities, are
reported as an addition to the cost basis of the security. Costs that are
incurred to negotiate the terms or conditions of capital infusions or that are
expected to result in a plan of reorganization are reported as realized losses.
Ongoing costs incurred to protect or enhance an investment, or costs incurred
to pursue other claims or legal actions, are 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. Each Fund files a tax return annually
using tax accounting
55
<PAGE>
Notes to Financial Statements (Unaudited) - continued
methods required under provisions of the Code, which may differ from generally
accepted accounting principles, the basis on which these financial statements
are prepared. Accordingly, the amount of net investment income and net realized
gain reported on these financial statements may differ from that reported on
each Fund's tax return and, consequently, the character of distributions to
shareholders reported in the financial highlights may differ from that reported
to shareholders on Form 1099-DIV.
Distributions paid by each Fund from net interest received on tax-exempt
municipal bonds are not includable by shareholders as gross income for federal
income tax purposes because each Fund intends to meet certain requirements of
the Code applicable to regulated investment companies, which will enable each
Fund to pay exempt-interest dividends. The portion of such interest, if any,
earned on private activity bonds issued after August 7, 1986 may be considered
a tax-preference item to shareholders.
Distributions to shareholders are recorded on the ex-dividend date. Each Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a tax return of capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes are classified as
distributions in excess of net investment income or net realized gains.
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 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 preliminary 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 September 30, 1998,
the aggregate unreimbursed expenses owed to MFS by the Pennsylvania Fund
amounted to $224,386. During the six months ended September 30, 1998, MFS did
not impose the reimbursement fee of $80,979.
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 of its independent Trustees and Mr. Bailey.
Included in Trustees' compensation for the six months ended September 30, 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>
$2,225 $2,915 $2,915 $2,350 $3,184 $3,286 $2,914 $2,914
</TABLE>
Administrator - The Trust has an administrative services agreement with MFS to
provide the Trust with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, each Fund pays MFS an administrative fee
at the following annual percentages of each Fund's average daily net assets:
<TABLE>
<S> <C>
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
</TABLE>
56
<PAGE>
Notes to Financial Statements (Unaudited) - continued
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$13,459, $6,850, $43,862, $7,625, $22,799, $17,327, $45,871 and $25,529, 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 six months ended September 30, 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 $7,087,
$12,731, $4,397, $5,631, $14,195 and $3,635 for the New York, North Carolina,
South Carolina, Tennessee, Virginia and West Virginia Funds, respectively, for
the six months ended September 30, 1998. Fees incurred under the distribution
plan during the six months ended September 30, 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 Class A distribution and service fee will commence on such date as the
Trustees may determine. In the case of the New York and Pennsylvania Funds,
payments of the 0.10% per annum Class A distribution fee will be implemented on
such date as the Trustees of Trust may determine. For the Pennsylvania Fund,
payments of the 0.25% per annum Class A service fee will commence on the date
that net assets of the Fund attributable to Class A shares first equal or
exceed $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 $2,983, $2,970, $1,198, $1,048, $1,611, and $1,501
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 $24 and
$0 for the North Carolina and Virginia Funds, respectively, for Class C shares.
Fees incurred under the distribution plan during the six months ended September
30, 1998, were 0.78%, 1.00%, 1.00%, 0.78%, 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 six months ended
September 30, 1998, were 1.00% and 1.00% of each 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 Class B service fee will be suspended
until 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 the
sale of Class B shares in the first year, payment of the Class B service fee
will be suspended until such date as the Class A service fee first becomes
payable.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months following
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class B shares in the event of a shareholder redemption within
six years of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the six months ended September
30, 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 $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ 3
Class B $8,967 $18,417 $32,306 $11,558 $25,034 $26,119 $56,372 $15,599
Class C $ -- $ -- $ 1,365 $ -- $ -- $ -- $ -- $ --
</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%.
57
<PAGE>
Notes to Financial Statements (Unaudited) - 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 $1,377 $3,687 $23,091 $2,311 $6,514 $3,988 $27,588 $8,847
Sales 3,347 5,549 34,453 989 7,270 6,645 40,854 6,643
</TABLE>
The cost and unrealized appreciation or depreciation in value of the
investments owned by each Fund, as computed on a federal income tax basis, are
as follows (000 omitted):
<TABLE>
<CAPTION>
North
Mississippi New York Carolina Pennsylvania
Fund Fund Fund Fund
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate cost $68,642 $127,618 $385,509 $37,557
------- -------- -------- -------
Gross unrealized appreciation $ 7,344 $ 16,862 $ 43,210 $ 3,315
Gross unrealized depreciation -- -- (38) (36)
------- -------- -------- -------
Net unrealized appreciation $ 7,344 $ 16,862 $ 43,172 $ 3,279
------- -------- -------- -------
<CAPTION>
South West
Carolina Tennessee Virginia Virginia
Fund Fund Fund Fund
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate cost $160,405 $115,716 $369,754 $133,084
-------- -------- -------- --------
Gross unrealized appreciation $ 17,888 $ 11,989 $ 35,631 $ 14,838
Gross unrealized depreciation (310) (8) (14) (6)
-------- -------- -------- --------
Net unrealized appreciation $ 17,578 $ 11,981 $ 35,617 $ 14,832
-------- -------- -------- --------
</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
Class A Shares --------------------------
Six Months Ended September 30, 1998 (000 Omitted) Shares Amount
- ------------------------------------------------------------------------------
<S> <C> <C>
Shares sold 239 $ 2,371
Shares issued to shareholders in reinvestment
of distributions 74 732
Shares reacquired (440) (4,362)
---- -------
Net decrease (127) $ (1,259)
---- --------
Year Ended March 31, 1998 (000 Omitted) Shares Amount
- ------------------------------------------------------------------------------
Shares sold 340 $ 3,311
Shares issued to shareholders in reinvestment
of distributions 150 1,455
Shares reacquired (930) (9,013)
---- -------
Net decrease (440) $(4,247)
---- -------
Pennsylvania Fund
--------------------------
Six Months Ended September 30, 1998 (000 Omitted) Shares Amount
- ------------------------------------------------------------------------------
Shares sold 155 $ 1,516
Shares issued to shareholders in reinvestment
of distributions 30 300
Shares reacquired (136) (1,338)
---- -------
Net increase (decrease) 49 $ 478
---- -------
Year Ended March 31, 1998 (000 Omitted) Shares Amount
- ------------------------------------------------------------------------------
Shares sold 394 $ 3,820
Shares issued to shareholders in reinvestment
of distributions 58 562
Shares reacquired (353) (3,408)
---- -------
Net increase (decrease) 99 $ 974
---- -------
<CAPTION>
New York Fund North Carolina Fund
Class A Shares -------------------------- -------------------------
Six Months Ended September 30, 1998 (000 Omitted) Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,020 $ 11,498 3,501 $ 42,591
Shares issued to shareholders in reinvestment
of distributions 152 1,710 419 5,107
Shares reacquired (1,501) (16,908) (4,779) (58,153)
------ -------- ------ ---------
Net decrease (329) $ (3,700) (859) $ (10,455)
------ -------- ------ ---------
Year Ended March 31, 1998 (000 Omitted) Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------
Shares sold 2,457 $ 27,162 3,557 $ 43,014
Shares issued to shareholders in reinvestment
of distributions 315 3,486 894 10,719
Shares reacquired (3,645) (40,239) (5,766) (69,369)
------ -------- ------ ---------
Net decrease (873) $ (9,591) (1,315) $ (15,636)
------ -------- ------ ---------
South Carolina Fund Tennessee Fund
-------------------------- --------------------------
Six Months Ended September 30, 1998 (000 Omitted) Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------
Shares sold 325 $ 4,045 370 $ 4,041
Shares issued to shareholders in reinvestment
of distributions 140 1,767 111 1,215
Shares reacquired (748) (9,352) (634) (6,919)
------ -------- ------ ---------
Net increase (decrease) (283) $ (3,540) (153) $ (1,663)
------ -------- ------ ---------
Year Ended March 31, 1998 (000 Omitted) Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------
Shares sold 722 $ 8,866 613 $ 6,529
Shares issued to shareholders in reinvestment
of distributions 313 3,853 248 2,663
Shares reacquired (1,682) (20,677) (1,356) (14,510)
------ -------- ------ ---------
Net increase (decrease) (647) $ (7,958) (495) $ (5,318)
------ -------- ------ ---------
</TABLE>
58
<PAGE>
Notes to Financial Statements (Unaudited) - continued
<TABLE>
<CAPTION>
Virginia Fund West Virginia Fund
Class A Shares -------------------------- ------------------------
Six Months Ended September 30, 1998 (000 Omitted) Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 2,049 $ 23,866 585 $ 6,898
Shares issued to shareholders in reinvestment
of distributions 380 4,425 145 1,707
Shares reacquired (2,946) (34,284) (578) (6,804)
------ --------- ---- ---------
Net increase (decrease) (517) $ (5,993) 152 $ 1,801
------ --------- ---- ---------
Year Ended March 31, 1998 (000 Omitted) Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
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)
------ --------- ------ ---------
Class B Shares Mississippi Fund New York Fund North Carolina Fund
---------------------- ------------------------ ------------------------
Six Months Ended September 30, 1998 (000 Omitted) Shares Amount Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
Shares sold 76 $ 740 350 $ 3,945 537 $ 6,526
Shares issued to shareholders in reinvestment
of distributions 8 84 28 313 49 603
Shares reacquired (88) (873) (182) (2,041) (228) (2,775)
------- -------- --------- --------- --------- ---------
Net increase (decrease) (4) $ (49) 196 $ 2,217 358 $ 4,354
------- -------- --------- --------- --------- ---------
Year Ended March 31, 1998 (000 Omitted) Shares Amount Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
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
------- -------- --------- --------- --------- ---------
Pennsylvania Fund South Carolina Fund Tennessee Fund
---------------------- ------------------------ ------------------------
Six Months Ended September 30, 1998 (000 Omitted) Shares Amount Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
Shares sold 212 $ 2,093 425 $ 5,324 275 $ 2,994
Shares issued to shareholders in reinvestment
of distributions 21 207 25 315 19 203
Shares reacquired (148) (1,454) (122) (1,522) (135) (1,465)
------- -------- --------- --------- --------- ---------
Net increase 85 $ 846 328 $ 4,117 159 $ 1,732
------- -------- --------- --------- --------- ---------
Year Ended March 31, 1998 (000 Omitted) Shares Amount Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
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
------- -------- --------- --------- --------- ---------
Virginia Fund West Virginia Fund
------------------------- ----------------------
Six Months Ended September 30, 1998 (000 Omitted) Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
Shares sold 326 $ 3,774 157 $ 1,846
Shares issued to shareholders in reinvestment
of distributions 26 301 18 210
Shares reacquired (228) (2,628) (58) (677)
--------- --------- --------- ---------
Net increase 124 $ 1,447 117 $ 1,379
--------- --------- --------- ---------
Year Ended March 31, 1998 (000 Omitted) Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
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
--------- --------- --------- ---------
</TABLE>
59
<PAGE>
Notes to Financial Statements (Unaudited) - continued
<TABLE>
<CAPTION>
North Carolina Fund Virginia Fund
Class C Shares ------------------------------- --------------------------
Six Months Ended September 30, 1998 (000 Omitted) Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 213 $ 2,583 130 $ 1,503
Shares issued to shareholders in reinvestment
of distributions 9 111 5 61
Shares reacquired (29) (357) (14) (151)
--- -------- --- --------
Net increase 193 $ 2,337 121 $ 1,413
--- -------- --- --------
Year Ended March 31, 1998 (000 Omitted) Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------
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)
-------- -------- ------ --------
</TABLE>
(6) Line of Credit
The Trust and other affiliated funds participate in an $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 Funds for the six months ended September 30, 1998, ranged from $142 to
$1,675.
(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.
60
<PAGE>
Notes to Financial Statements (Unaudited) - continued
Futures Contracts
<TABLE>
<CAPTION>
Unrealized
Appreciation/
Fund Description Expiration Contracts Position (Depreciation)
- --------------------- ---------------------- --------------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Mississippi Fund U.S. Treasury Bonds December 1998 5 Short $ (12,088)
Municipal Bond Index December 1998 5 Long 8,225
----------
$ (3,863)
==========
New York Fund U.S. Treasury Bonds December 1998 57 Short $ (267,071)
Municipal Bond Index December 1998 57 Long 132,209
----------
$ (134,862)
==========
North Carolina Fund U.S. Treasury Notes December 1998 185 Short $ (877,445)
Municipal Bond Index December 1998 185 Long 431,807
Municipal Bond Index December 1998 84 Short (449)
Municipal Bond Index December 1998 1 Long 275
----------
$ (445,812)
==========
Pennsylvania Fund U.S. Treasury Bonds December 1998 3 Short $ (7,016)
Municipal Bond Index December 1998 3 Long 4,735
----------
$ (2,281)
==========
South Carolina Fund U.S. Treasury Bonds December 1998 15 Short $ (36,202)
Municipal Bond Index December 1998 15 Long 24,674
----------
$ (11,528)
==========
Tennessee Fund U.S. Treasury Bonds December 1998 10 Short $ (24,145)
Municipal Bond Index December 1998 10 Long 16,449
----------
$ (7,696)
==========
Virginia Fund U.S. Treasury Bonds December 1998 33 Short $ (79,450)
Municipal Bond Index December 1998 33 Long 54,082
----------
$ (25,368)
==========
West Virginia Fund U.S. Treasury Bonds December 1998 12 Short $ (29,187)
Municipal Bond Index December 1998 12 Long 19,939
----------
$ (9,248)
==========
</TABLE>
At September 30, 1998, the Mississippi, New York, North Carolina, Pennsylvania,
South Carolina, Tennessee, Virginia, and West Virginia Funds had sufficient
cash and/or securities to cover margin requirements on open futures contracts.
61
<PAGE>
MFS Family of Funds(R)
MFS offers a range of mutual funds to meet investors' varying financial needs
and goals. The funds are placed below in descending order of the level of risk
and reward each one offers in relation to the others in that asset class.(1) The
objective of the fund you choose should correspond to your financial needs and
goals.
HIGHER RISK/HIGHER REWARD POTENTIAL
BOND FUNDS
MFS(R) Global Governments Fund(2)
MFS(R) High Yield Opportunities Fund
MFS(R) High Income Fund
MFS(R) Municipal High Income Fund
MFS(R) Strategic Income Fund
MFS(R) Municipal State Funds
AL, AR, CA, FL, GA, MD, MA, MS,
NY, NC, PA, SC, TN, VA, WV
MFS(R) Municipal Income Fund
MFS(R) Bond Fund
MFS(R) Municipal Bond Fund
MFS(R) Government Securities Fund
MFS(R) Government Mortgage Fund
MFS(R) Intermediate Income Fund
MFS(R) Municipal Limited Maturity Fund
MFS(R) Limited Maturity Fund
MFS(R) Government Limited Maturity Fund
STOCK FUNDS
MFS(R)/Foreign & Colonial Emerging
Markets Equity Fund
MFS(R) Managed Sectors Fund
MFS(R) New Discovery Fund
MFS(R) Emerging Growth Fund
MFS(R) Mid Cap Growth Fund
MFS(R) International Growth Fund
MFS(R) Research International Fund
MFS(R) Global Growth Fund(2)
MFS(R) Strategic Growth Fund
MFS(R) Research Fund
MFS(R) International Growth
and Income Fund
MFS(R) Global Equity Fund(2)
MFS(R) Capital Opportunities Fund
Massachusetts Investors Growth
Stock Fund
MFS(R) Growth Opportunities Fund
MFS(R) Large Cap Growth Fund
MFS(R) Union Standard(R) Equity Fund
MFS(R) Research Growth
and Income Fund
Massachusetts Investors Trust
MFS(R) Equity Income Fund
MFS(R) Utilities Fund
MFS(R) Global Total Return Fund(2)
MFS(R) Total Return Fund
MFS(R) Global Asset
Allocation Fund(2)
LOWER RISK / LOWER REWARD POTENTIAL
(1) For information on the specific risks, charges, and expenses associated
with any MFS fund, refer to the prospectus. Read it carefully before
investing or sending money.
(2) MFS "global" funds were formerly "world" funds. As of August 24, 1998,
their names changed but their objectives remain the same.
62
<PAGE>
Diversifying Your Investment Portfolio
Most experts agree that it's wise to diversify your investments, no matter what
your age or financial situation. Diversification - spreading your assets among a
variety of investment types - can help spread your risk as well.
No one type of investment performs well all the time. In fact, each type of
investment tends to follow its own cycle, so that when the price of one is
rising, the price of another may be declining. By including a range of
investments in your portfolio, the overall volatility - or change in value - of
that portfolio should be less than if you put everything in one type of
investment.
MFS offers a wide variety of investments to suit a wide range of needs. For more
information, talk to your financial adviser or request our We're MFS kit. For
details about a specific MFS fund, ask for a prospectus including charges and
expenses. Read the prospectus carefully before you invest or send money.
For more information, call MFS at 1-800-225-2606 any business day from 8 a.m. to
8 p.m. Eastern time or visit our Web site at www.mfs.com.
63
<PAGE>
[MFS Logo]
Heritage Planning(SM)
Helping Yourself [bullet] Helping Your Parents
[bullet] Helping your Children(SM)
[Picture of Man at desk, showing a couple a letter]
You, Your Adviser, and MFS:
A Powerful Partnership
In today's complex world, financial needs go beyond putting aside money,
choosing investment products, and understanding the markets. What you really
need is an overall plan to address the complex lifestyle issues facing you, your
parents, and your children. And that's where your financial adviser and MFS can
help.
MFS(R) Heritage Planning(SM) is our program to help you and your adviser
develop strategies to meet your long-term financial needs. Your financial
adviser can offer you MFS Heritage Planning educational materials on topics such
as:
[bullet] retirement planning
[bullet] college funding
[bullet] estate planning
[bullet] eldercare
Talk with your financial adviser today or order the MFS Heritage Planning kit
from our Web site at www.mfs.com or by calling 1-800-225-2606 any business day
from 8 a.m. to 8 p.m. Eastern time.
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, consult with the appropriate financial adviser.
64
<PAGE>
MFS(R) Municipal Series Trust
Trustees
Richard B. Bailey* - Private Investor;
Former Chairman and Director (until 1991),
MFS Investment Management
Marshall N. Cohan - Private Investor
Lawrence H. Cohn, M.D. - Chief of Cardiac Surgery,
Brigham and Women's Hospital; Professor of Surgery,
Harvard Medical School
The Hon. Sir J. David Gibbons, KBE - Chief Executive Officer,
Edmund Gibbons Ltd.; Chairman, Colonial Insurance Company, Ltd.
Abby M. O'Neill - Private Investor
Walter E. Robb, III - President and Treasurer, Benchmark
Advisors, Inc. (corporate financial consultants); President,
Benchmark Consulting Group, Inc. (office services)
Arnold D. Scott* - Senior Executive Vice President,
Director, and Secretary, MFS Investment Management
Jeffrey L. Shames* - Chairman, Chief Executive Officer,
and Director, MFS Investment Management
J. Dale Sherratt - President, Insight Resources, Inc.
(acquisition planning specialists)
Ward Smith - Former Chairman (until 1994), NACCO
Industries (holding company)
Investment Adviser
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
Distributor
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
Portfolio Managers
John P. Kihn*
Geoffrey L. Schechter*
Treasurer
W. Thomas London*
Assistant Treasurers
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
Secretary
Stephen E. Cavan*
Assistant Secretary
James R. Bordewick, Jr.*
Custodian
State Street Bank and Trust Company
Investor Information
For MFS stock and bond market outlooks, call toll free:
1-800-637-4458 anytime from a touch-tone telephone.
For information on MFS mutual funds, call your
financial adviser or, for an information kit, call
toll free: 1-800-637-2929 any business day from 9 a.m.
to 5 p.m. Eastern time (or leave a message anytime).
Investor Service
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
For general information, call toll free: 1-800-225-2606
any business day from 8 a.m. to 8 p.m. Eastern time.
For service to speech- or hearing-impaired, call toll free:
1-800-637-6576 any business day from 9 a.m. to 5 p.m.
Eastern time. (To use this service, your phone must be
equipped with a Telecommunications Device for the Deaf.)
For share prices, account balances, and exchanges, call toll
free: 1-800-MFS-TALK (1-800-637-8255) anytime from a
touch-tone telephone.
World Wide Web
www.mfs.com
*Affiliated with the Investment Adviser
65
<PAGE>
MFS (R) Municipal
Series Trust
MFS(R) Mississippi Municipal Bond Fund
MFS(R) New York Municipal Bond Fund
MFS(R) North Carolina Municipal Bond Fund
MFS(R) Pennsylvania Municipal Bond Fund
MFS(R) South Carolina Municipal Bond Fund
MFS(R) Tennessee Municipal Bond Fund
MFS(R) Virginia Municipal Bond Fund
MFS(R) West Virginia Municipal Bond Fund
[MFS Logo]
500 Boylston Street
Boston, MA 02116-3741
- -------------
Bulk Rate
U.S. Postage
Paid
MFS
- -------------
(C) 1998 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
58/258
52/252
41/241/341
30/230
42/242
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43/243/343
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MST-3B-11/98/56M
