[MFS 75 YEARS LOGO]
MFS(R) Municipal
Series Trust
Annual Report o March 31, 1999
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 ............... 2
Performance Summary ......................... 4
Portfolio of Investments .................... 14
Financial Statements ........................ 30
Notes to Financial Statements ............... 56
Independent Auditors' Report ................ 62
MFS' Year 2000 Readiness Disclosure ......... 64
Trustees and Officers ....................... 65
</TABLE>
MFS Celebrates its Diamond Anniversary!
March 21, 1999, marked the 75th anniversary of MFS' invention of the mutual
fund. The mutual fund industry has brought the power of investing to every
American, offering them the opportunity for college degrees, home ownership, and
comfortable retirement. Imagine today's world without mutual funds. We couldn't.
And while the years ahead will bring a number of challenges, our 75 years of
experience will help guide a new generation of investors into the future.
[MFS 75 years EXPERIENCE THE FUTURE (SM) LOGO]
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE>
Letter from the Chairman
Dear Shareholders,
[photograph of Since we launched Massachusetts Investors Trust,
Jeffrey L. Shames] the nation's first mutual fund, 75 years ago,
MFS has weathered numerous market and economic
cycles, from the occasional recession to long
periods of growth and prosperity. Throughout
that time, we have tried to give investors a
realistic assessment of the investment markets
and, when necessary, to sound a note of caution
-- even when market conditions appear quite
favorable.
Although the equity markets have overcome last year's volatility, we still think
stocks are overdue for a correction that will rid them of the excesses that have
developed. Perhaps the most glaring measure of those excesses is the high level
of valuations, that is, the amount equity investors are paying for each dollar
of earnings. By mid-March, the price-to-earnings (P/E) ratio of the average
stock in the Standard & Poor's 500 Composite Index, a popular, unmanaged index
of common stock total return performance, was almost 28% higher than it was a
year ago. While P/E ratios keep going up, earnings have essentially been flat,
and we believe they are likely to stay that way, for a few months at least. This
leaves stock prices vulnerable to negative events such as a domestic or
international crisis, a sudden increase in interest rates, or a slowing economy,
any of which could lead to lower corporate earnings.
While risks in the overall market have increased, one industry calls for
particular attention. For several months, Internet-related stocks have
exhibited extreme price volatility. The Internet's potential impact on the way
individuals and companies communicate and conduct business is certainly great,
but we feel that most of the recent run-up in the share prices of these
companies is unjustified. Many of them have not yet reported any profits, and
there is no way of knowing which of today's "hot" Internet stocks will be
successful -- or even in existence -- a few years from now. Therefore, we think
the frenzy surrounding even the best-known Internet stocks is purely
speculative.
However, there are some established companies offering Internet-related products
and services that may generate revenue. These include companies that provide
networking equipment, that make servers to store information, and that help
customers make better use of Internet services. Because they already have
profitable businesses as well as the potential to use the Internet to increase
their opportunities to generate revenue, these companies have been the focus of
our research efforts.
Although we think valuations for the overall equity market, and especially for
Internet stocks, are excessive, we see this situation as an opportunity for our
portfolio managers to capitalize on MFS(R) Original Research(SM). This is a
fundamental, company-by-company process that helps us find investments that we
believe are most likely to achieve long-term earnings growth, through both
negative and positive market cycles.
We also rely heavily on our research process when investing in the fixed-income
markets. Last year, turmoil in emerging markets and volatility in the U.S. stock
market helped create a "flight to quality," meaning that investors moved toward
U.S. Treasury securities, which are seen as carrying less risk, and away from
almost everything else. As a result, yields on non-Treasury securities
increased, while yields on Treasuries fell. Some of these yield spreads, or
differentials, have narrowed, but they have not returned to the levels seen
before last year's market turmoil. We think this has created opportunities for
our portfolio managers to find attractive yields in these markets.
Individual investors, meanwhile, should realize that the tremendous increases in
the broad stock market averages of the past several years are a historical
aberration and should rein in their expectations for future market performance.
If they are not already diversified across a range of investments, including
growth stock funds, value-oriented funds, and fixed-income funds, investors may
want to talk to their financial advisers about developing well-diversified
portfolios with greater potential to weather unexpected changes in the markets.
Doing so may help investors more effectively meet their long-term financial
goals. We appreciate your confidence and welcome any questions or comments you
may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
April 16, 1999
1
<PAGE>
Management Review and Outlook
Dear Shareholders,
The past 12 months have been generally positive for investors in domestic
fixed-income securities. Bond prices, including prices of municipal bonds,
increased as interest rates, which move in the opposite direction, declined. The
yield on the 30-year U.S. Treasury bond benchmark fell 0.26% -- beginning the
period at 5.94% and ending at 5.68%. However, this modest decline belies the
level of volatility in the fixed-income markets during the period. Treasury
rates rose in April 1998, peaking at 6.08%, due to investor concerns that strong
growth in the domestic economy, combined with low unemployment, would lead to
higher inflation. In the following months, the crisis in the emerging markets of
Southeast Asia and Russia, along with signals of a moderation in the domestic
economy, spurred demand for Treasuries, which are viewed as safer than other
taxable securities. By October, these factors, as well as three interest-rate
reductions by the Federal Reserve Board and a correction in the equity markets,
pushed interest rates on 30-year Treasuries to 4.71%, their lowest level in 31
years. However, due to the aforementioned inflation fears, by March 31, 1999,
the Treasury yield had climbed to 5.68%. In addition, worldwide economic
fundamentals appeared to have strengthened.
In the municipal market, yields on long-term, high-grade "AAA"-rated municipal
bonds also fell during the period, but by a smaller amount, from 5.05% to 4.97%.
Although yields on municipal bonds generally followed the same path as Treasury
securities, municipal bonds underperformed Treasuries, mainly because of a large
increase in new, tax-exempt securities. Some $285 billion in new municipal bonds
was issued in 1998, the second-highest year on record. The supply of new issues,
however, exceeded the demand for them. By the fall, the ratio of municipal bond
and Treasury yields was close to 100%, the highest since 1986, making income
from municipal investments attractive to people in almost all tax brackets.
(Principal value and interest on Treasury securities are guaranteed by the U.S.
government if held to maturity.)
Given the backdrop of strong economic growth and conservative financial
management at state and local levels, the credit quality of most issuers
remained healthy. As a result, there was a narrow yield differential -- only
about 0.30% -- between high- and low-rated bonds. With such a narrow range in
yield between high- and low-rated bonds, we feel there are very few
opportunities where we're being compensated for purchasing lower-quality
credits.
Our plan for the coming year, therefore, is twofold. In addition to focusing on
higher-rated bonds, we will purchase bonds maturing in 15 to 20 years to avoid
the extra risk of bonds maturing in more than 20 years. Although yields on these
longer-maturity bonds may appear attractive, their prices will fall more if
interest rates rise. We carefully are maintaining our exposure to cyclical
industries, such as manufacturing, because companies with low credit ratings
could have problems if the economy were unable to sustain last year's
high-growth rate. In particular, we are taking a cautious approach to the health
care sector, which is experiencing problems associated with the tightening of
rules regarding Medicare reimbursement, and the electric utility sector, in
which impending deregulation has created uncertainty for many issuers. At the
same time, we have increased our positions in high-quality general-obligation
and revenue bonds being issued to pay for such essential services as water and
sewer systems.
Using our research-driven, bottom-up approach to fundamental credit analysis to
try to identify opportunities in the marketplace, we will continue our
systematic approach to municipal investing.
Respectfully,
/s/ Michael L. Dawson /s/ John P. Kihn
Michael L. Dawson John P. Kihn
Portfolio Manager Portfolio Manager
The opinions expressed in this report are those of the portfolio managers and
are current only through the end of the period of the report as stated on the
cover. The managers' views are subject to change at any time based on market and
other conditions, and no forecasts can be guaranteed.
Note to Shareholders: Effective May 1, 1999, Christopher J. Mier joins Michael
L. Dawson as portfolio manager of the following MFS(R) Municipal Series
Trust state funds: Mississippi, New York, Pennsylvania, and Tennessee. Also
effective May 1, 1999, Geoffrey L. Schechter joins Mr. Dawson as portfolio
manager of the Trust's North Carolina, South Carolina, Virginia, and West
Virginia funds.
2
<PAGE>
Management Review and Outlook - continued
PORTFOLIO MANAGERS' PROFILES
Michael L. Dawson is Assistant Vice President and a portfolio manager of all
state municipal bond funds at MFS Investment Management(R). He joined MFS
in 1998 and became portfolio manager in 1999. Prior to joining MFS, Mr. Dawson
worked in institutional sales -- fixed income for Fidelity Capital Markets and
Goldman Sachs. Prior to that, he was a research analyst in the municipal bond
group at Franklin Templeton. He is a graduate of Santa Clara University and is
a candidate for an M.B.A. degree from Babson College in May 1999.
John P. Kihn is Vice President of MFS Investment Management(R) and
portfolio manager of MFS(R) Municipal Income Fund and MFS(R) Municipal
Limited Maturity Fund. He is also a portfolio manager of all state municipal
bond funds. Mr. Kihn joined MFS as a quantitative analyst in 1997 and was
named portfolio manager later that year. He previously had worked as a senior
quantitative analyst with a major investment management firm. Mr. Kihn earned
a bachelor's degree in economics from the University of California, Berkeley,
a master's degree in business economics from the University of California,
Santa Barbara, and a doctorate degree in accounting and finance from the
London School of Economics.
All portfolio managers at MFS Investment Management are supported by an
investment staff of over 100 professionals utilizing MFS(R) Original
Research(SM), a company-oriented, bottom-up process of selecting securities.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other MFS
product is available from your financial adviser, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
3
<PAGE>
Performance Summary
The performances of the individual state Funds listed below include the
reinvestment of dividends and capital gains but exclude the effects of any sales
charges. Each Fund's results have been compared to the relevant state municipal
debt fund as tracked by Lipper Analytical Services, Inc., an independent firm
that reports mutual fund performance. For those states where Lipper does not
track state specific fund performance, we have provided the average "other
state" municipal debt fund returns. Each Fund's results have also been compared
to the Lehman Brothers Municipal Bond Index (the Lehman Index), an unmanaged
index of municipal bond investments rated "Baa" or higher. However, while this
index is considered the benchmark for performance of municipal bonds, it is
comprised of municipal bonds issued nationwide, while each of the Funds in the
Trust is limited to investing in the bonds of a particular state. It is not
possible to invest directly in an index.
The portfolio of each Fund will tend to be structured with respect to maturity,
coupon, and sector selection based on our views on interest rates, credit
quality, and financing trends. However, each Fund's performance will differ
because of supply/demand and credit quality conditions, which vary from state to
state.
Mississippi
The Fund's total returns for the fiscal year ended March 31, 1999, were 5.62%
for Class A shares and 4.80% for Class B shares. These returns compare to a
4.86% return for the average "other state" municipal debt fund as tracked by
Lipper and to a 6.27% return for the Lehman Index over the same period.
New York
The Fund's total returns for the fiscal year ended March 31, 1999, were 5.14%
for Class A shares and 4.46% for Class B shares. These returns compare to a
5.17% return for the average New York municipal debt fund as tracked by Lipper
and to a 6.27% return for the Lehman Index over the same period.
North Carolina
The Fund's total returns for the fiscal year ended March 31, 1999, were 4.76%
for Class A shares and 4.00% for Class B and Class C shares. These returns
compare to a 5.00% return for the average North Carolina municipal debt fund as
tracked by Lipper and to a 6.27% return for the Lehman Index over the same
period.
Pennsylvania
The Fund's total returns for the fiscal year ended March 31, 1999, were 5.85%
for Class A shares and 5.02% for Class B shares. These returns compare to a
4.66% return for the average Pennsylvania municipal debt fund as tracked by
Lipper and to a 6.27% return for the Lehman Index over the same period.
South Carolina
The Fund's total returns for the fiscal year ended March 31, 1999, were 4.33%
for Class A shares and 3.57% for Class B shares. These returns compare to a
4.71% return for the average South Carolina municipal debt fund as tracked by
Lipper and to a 6.27% return for the Lehman Index over the same period.
Tennessee
The Fund's total returns for the fiscal year ended March 31, 1999, were 4.80%
for Class A shares and 4.04% for Class B shares. These returns compare to a
5.07% return for the average Tennessee municipal debt fund as tracked by Lipper
and to a 6.27% return for the Lehman Index over the same period.
Virginia
The Fund's total returns for the fiscal year ended March 31, 1999, were 4.71%
for Class A shares and 4.04% for Class B and Class C shares. These returns
compare to a 4.95% return for the average Virginia municipal debt fund as
tracked by Lipper and to a 6.27% return for the Lehman Index over the same
period.
West Virginia
The Fund's total returns for the fiscal year ended March 31, 1999, were 4.73%
for Class A shares and 3.97% for Class B shares. These returns compare to a
4.86% return for the average "other state" municipal debt fund as tracked by
Lipper and to a 6.27% return for the Lehman Index over the same period.
4
<PAGE>
Performance Summary - continued
FUND FACTS
Objective: Each Fund seeks current income exempt from federal income taxes
and from the personal income taxes, if any, of the state to which its name
refers.
<TABLE>
<CAPTION>
Commencement of investment operations:
<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
Net assets as of March 31, 1999:
Mississippi $ 78.3 million
New York $147.2 million
North Carolina $430.7 million
Pennsylvania $ 45.7 million
South Carolina $182.0 million
Tennessee $140.1 million
Virginia $408.0 million
West Virginia $150.6 million
</TABLE>
<TABLE>
<C>
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>
5
<PAGE>
Performance Summary - continued
The following information illustrates the historical performance of the Fund's
original share class in comparison to various market indicators. Performance
results include the deduction of the maximum applicable sales charge and reflect
the percentage change in net asset value, including reinvestment of dividends.
Benchmark comparisons are unmanaged and do not reflect any fees or expenses. The
performance of other share classes will be greater than or less than the line
shown. (See Notes to Performance Summary for more information.)
It is not possible to invest directly in an index.
MFS(R) MISSISSIPPI MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the period from August 31, 1992, through March 31, 1999)
[Begin Plot Points]
<TABLE>
<CAPTION>
MFS
Mississippi Lehman
Municipal Brothers
Bond Fund -- Municipal
Class A Bond Index
<S> <C> <C>
8/92 9529 10000
3/93 10073 10629
10312 10876
3/95 10939 11684
11813 12663
3/97 12430 13354
13799 14784
3/99 14574 15710
</TABLE>
[End Plot Points]
Average Annual Total Returns as of March 31, 1999
<TABLE>
<CAPTION>
Class A Investment Results
-------------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
-------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +5.62% +7.25% +7.16% +6.25%
- -----------------------------------------------------------------------------------------------
SEC Results +0.60% +5.53% +6.13% +5.47%
- -----------------------------------------------------------------------------------------------
Comparative Indices
-------------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
-------------------------------------------------------
Average other state municipal debt fund+ +4.86% +6.50% +6.45% +6.30%
- -----------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index++ +6.27% +7.45% +7.63% +7.10%
- -----------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
-------------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
-------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +4.80% +6.40% +6.28% +5.50%
- -----------------------------------------------------------------------------------------------
SEC Results +0.80% +5.50% +5.97% +5.50%
- -----------------------------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Fund's investment operations,
August 6, 1992, through March 31, 1999. Index information is from August 31,
1992.
+Source: Lipper Analytical Services, Inc.
++Source: Wiesenberger(R).
Notes to Performance Summary:
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%.
B results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of B. Because operating expenses
of A are lower than those of B, B performance generally would have been lower
than A performance. The A performance included within the B SEC performance has
been adjusted to reflect the CDSC generally applicable to B rather than the
initial sales charge generally applicable to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
Investment return and principal value will fluctuate, and shares, when redeemed,
may be worth more or less than their original cost. Past performance is no
guarantee of future results.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to capital gains tax. See the
prospectus for details.
6
<PAGE>
Performance Summary - continued
MFS(R) NEW YORK MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the 5-year period ended March 31, 1999)
[Begin Plot Points]
<TABLE>
<CAPTION>
MFS
New York Lehman
Municipal Brothers
Bond Fund -- Municipal
Class A Bond Index
<S> <C> <C>
3/94 9528 10000
3/95 10102 10743
3/96 10807 11644
3/97 11313 12279
3/98 12624 13593
3/99 13273 14445
</TABLE>
[End Plot Points]
Growth of a Hypothetical $10,000 Investment
(For the 10-year period ended March 31, 1999)
[Begin Plot Points]
<TABLE>
<CAPTION>
MFS
New York Lehman
Municipal Brothers
Bond Fund -- Municipal
Class A Bond Index
<S> <C> <C>
3/89 9522 10000
3/91 11384 12076
3/93 14489 14946
3/95 15702 16428
3/97 17582 18777
3/99 20629 22089
</TABLE>
[End Plot Points]
Average Annual Total Returns as of March 31, 1999
<TABLE>
<CAPTION>
Class A Investment Results
---------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +5.14% +7.09% +6.86% +8.04%
- --------------------------------------------------------------------------------------------
SEC Results +0.15% +5.37% +5.82% +7.51%
- --------------------------------------------------------------------------------------------
Comparative Indices
---------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------
Average New York municipal debt fund+ +5.17% +6.80% +6.56% +7.58%
- --------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index++ +6.27% +7.45% +7.63% +8.25%
- --------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
---------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +4.46% +6.29% +6.02% +7.57%
- --------------------------------------------------------------------------------------------
SEC Results +0.46% +5.39% +5.71% +7.57%
- --------------------------------------------------------------------------------------------
</TABLE>
+Source: Lipper Analytical Services, Inc.
++Source: Wiesenberger(R).
Notes to Performance Summary:
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%.
B results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of B. Because operating expenses
of A are lower than those of B, B performance generally would have been lower
than A performance. The A performance included within the B SEC performance has
been adjusted to reflect the CDSC generally applicable to B rather than the
initial sales charge generally applicable to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
Investment return and principal value will fluctuate, and shares, when redeemed,
may be worth more or less than their original cost. Past performance is no
guarantee of future results.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to capital gains tax. See the
prospectus for details.
7
<PAGE>
Performance Summary - continued
MFS(R) NORTH CAROLINA MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the 5-year period ended March 31, 1999)
[Begin Plot Points]
<TABLE>
<CAPTION>
MFS
North Carolina Lehman
Municipal Brothers
Bond Fund -- Municipal
Class A Bond Index
<S> <C> <C>
3/94 9527 10000
3/95 10086 10743
3/96 10747 11644
3/97 11294 12279
3/98 12464 13593
3/99 13057 14445
</TABLE>
[End Plot Points]
Growth of a Hypothetical $10,000 Investment
(For the 10-year period ended March 31, 1999)
[Begin Plot Points]
<TABLE>
<CAPTION>
MFS
North Carolina Lehman
Municipal Brothers
Bond Fund -- Municipal
Class A Bond Index
<S> <C> <C>
3/89 9523 10000
3/91 11179 12076
3/93 13469 14946
3/95 14445 16428
3/97 16176 18777
3/99 18701 22089
</TABLE>
[End Plot Points]
Average Annual Total Returns as of March 31, 1999
<TABLE>
<CAPTION>
Class A Investment Results
---------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +4.76% +6.71% +6.51% +6.98%
- -------------------------------------------------------------------------------------------------
SEC Results -0.22% +4.99% +5.48% +6.46%
- -------------------------------------------------------------------------------------------------
Class C Investment Results
---------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------
Average Annual Total Return +4.00% +6.02% +5.82% +6.60%
- -------------------------------------------------------------------------------------------------
SEC Results +3.00% +6.02% +5.82% +6.60%
- -------------------------------------------------------------------------------------------------
Comparative Indices
---------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------
Average North Carolina municipal debt fund+ +5.00% +6.72% +6.65% +7.12%
- -------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index++ +6.27% +7.45% +7.63% +8.25%
- -------------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
---------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +4.00% +6.00% +5.78% +6.56%
- -------------------------------------------------------------------------------------------------
SEC Results +0.01% +5.11% +5.46% +6.56%
- -------------------------------------------------------------------------------------------------
</TABLE>
+Source: Lipper Analytical Services, Inc.
++Source: Wiesenberger(R).
Notes to Performance Summary:
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%. Class C shares ("C") have
no initial sales charge but, like B, have higher annual fees and expenses than
A. C SEC results reflect the 1% CDSC applicable to shares redeemed within 12
months.
B and C results include the performance and the operating expenses (e.g., Rule
12b-1 fees) of A for periods prior to the inception of B and C. Because
operating expenses of B and C are higher than those of A, B and C performance
generally would have been lower than A performance. The A performance included
in the B and C SEC performance has been adjusted to reflect the CDSC generally
applicable to B and C rather than the initial sales charge generally applicable
to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
Investment return and principal value will fluctuate, and shares, when redeemed,
may be worth more or less than their original cost. Past performance is no
guarantee of future results.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to capital gains tax. See the
prospectus for details.
8
<PAGE>
Performance Summary - continued
MFS(R) PENNSYLVANIA MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the period from February 28, 1993, through March 31, 1999)
[Begin Plot Points]
<TABLE>
<CAPTION>
MFS
Pennsylvania Lehman
Municipal Brothers
Bond Fund -- Municipal
Class A Bond Index
<S> <C> <C>
2/93 9529 10000
3/95 10301 10876
3/97 11520 12431
3/99 13614 14624
</TABLE>
[End Plot Points]
Average Annual Total Returns as of March 31, 1999
<TABLE>
<CAPTION>
Class A Investment Results
----------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
----------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +5.85% +7.35% +7.41% +6.32%
- ------------------------------------------------------------------------------------------------
SEC Results +0.82% +5.62% +6.37% +5.49%
- ------------------------------------------------------------------------------------------------
Comparative Indices
----------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
----------------------------------------------------
Average Pennsylvania municipal debt fund+ +4.66% +6.59% +6.70% +6.54%
- ------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index++ +6.27% +7.45% +7.63% +6.44%
- ------------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
----------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life*
----------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +5.02% +6.49% +6.55% +5.54%
- ------------------------------------------------------------------------------------------------
SEC Results +1.02% +5.60% +6.24% +5.54%
- ------------------------------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Fund's investment operations,
February 1, 1993, through March 31, 1999. Index information is from February
28, 1993.
+Source: Lipper Analytical Services, Inc.
++Source: Wiesenberger(R).
Notes to Performance Summary:
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%.
B results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of B. Because operating expenses
of A are lower than those of B, B performance generally would have been lower
than A performance. The A performance included within the B SEC performance has
been adjusted to reflect the CDSC generally applicable to B rather than the
initial sales charge generally applicable to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
Investment return and principal value will fluctuate, and shares, when redeemed,
may be worth more or less than their original cost. Past performance is no
guarantee of future results.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to capital gains tax. See the
prospectus for details.
9
<PAGE>
Performance Summary - continued
MFS(R) SOUTH CAROLINA MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the 5-year period ended March 31, 1999)
[Begin Plot Points]
<TABLE>
<CAPTION>
MFS
South Carolina Lehman
Municipal Brothers
Bond Fund -- Municipal
Class A Bond Index
<S> <C> <C>
3/94 9523 10000
3/95 10184 10743
3/96 10815 11644
3/97 11296 12279
3/98 12496 13593
3/99 13036 14445
</TABLE>
[End Plot Points]
Growth of a Hypothetical $10,000 Investment
(For the 10-year period ended March 31, 1999)
[Begin Plot Points]
<TABLE>
<CAPTION>
MFS
South Carolina Lehman
Municipal Brothers
Bond Fund -- Municipal
Class A Bond Index
<S> <C> <C>
3/89 9526 10000
3/91 11217 12076
3/93 13677 14946
3/95 14854 16428
3/97 16478 18777
3/99 19016 22089
</TABLE>
[End Plot Points]
Average Annual Total Returns as of March 31, 1999
<TABLE>
<CAPTION>
Class A Investment Results
---------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +4.33% +6.43% +6.48% +7.16%
- -------------------------------------------------------------------------------------------------
SEC Results -0.63% +4.71% +5.45% +6.64%
- -------------------------------------------------------------------------------------------------
Comparative Indices
---------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------
Average South Carolina municipal debt fund+ +4.71% +6.55% +6.79% +7.35%
- -------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index++ +6.27% +7.45% +7.63% +8.25%
- -------------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
---------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +3.57% +5.69% +5.75% +6.74%
- -------------------------------------------------------------------------------------------------
SEC Results -0.41% +4.79% +5.43% +6.74%
- -------------------------------------------------------------------------------------------------
</TABLE>
+Source: Lipper Analytical Services, Inc.
++Source: Wiesenberger(R).
Notes to Performance Summary:
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%.
B results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of B. Because operating expenses
of A are lower than those of B, B performance generally would have been lower
than A performance. The A performance included within the B SEC performance has
been adjusted to reflect the CDSC generally applicable to B rather than the
initial sales charge generally applicable to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
Investment return and principal value will fluctuate, and shares, when redeemed,
may be worth more or less than their original cost. Past performance is no
guarantee of future results.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to capital gains tax. See the
prospectus for details.
10
<PAGE>
Performance Summary - continued
MFS(R) TENNESSEE MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the 5-year period ended March 31, 1999)
[Begin Plot Points]
<TABLE>
<CAPTION>
MFS
Tennessee Lehman
Municipal Brothers
Bond Fund -- Municipal
Class A Bond Index
<S> <C> <C>
3/94 9526 10000
3/95 10084 10743
3/96 10755 11644
3/97 11238 12279
3/98 12486 13593
3/99 13086 14445
</TABLE>
[End Plot Points]
Growth of a Hypothetical $10,000 Investment
(For the 10-year period ended March 31, 1999)
[Begin Plot Points]
<TABLE>
<CAPTION>
MFS
Tennessee Lehman
Municipal Brothers
Bond Fund -- Municipal
Class A Bond Index
<S> <C> <C>
3/89 9529 10000
3/91 11313 12076
3/93 13766 14946
3/95 14935 16428
3/97 16643 18777
3/99 19380 22089
</TABLE>
[End Plot Points]
Average Annual Total Returns as of March 31, 1999
<TABLE>
<CAPTION>
Class A Investment Results
---------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +4.80% +6.76% +6.55% +7.37%
- --------------------------------------------------------------------------------------------
SEC Results -0.18% +5.04% +5.52% +6.85%
- --------------------------------------------------------------------------------------------
Comparative Indices
---------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life
--------------------------------------------------
Average Tennessee municipal debt fund+ +5.07% +6.73% +6.75% +7.39%
- --------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index++ +6.27% +7.45% +7.63% +8.25%
- --------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
---------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +4.04% +6.05% +5.81% +6.95%
- --------------------------------------------------------------------------------------------
SEC Results +0.05% +5.16% +5.49% +6.95%
- --------------------------------------------------------------------------------------------
</TABLE>
+Source: Lipper Analytical Services, Inc.
++Source: Wiesenberger(R).
Notes to Performance Summary:
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%.
B results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of B. Because operating expenses
of A are lower than those of B, B performance generally would have been lower
than A performance. The A performance included within the B SEC performance has
been adjusted to reflect the CDSC generally applicable to B rather than the
initial sales charge generally applicable to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
Investment return and principal value will fluctuate, and shares, when redeemed,
may be worth more or less than their original cost. Past performance is no
guarantee of future results.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to capital gains tax. See the
prospectus for details.
11
<PAGE>
Performance Summary - continued
MFS(R) VIRGINIA MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the 5-year period ended March 31, 1999)
[Begin Plot Points]
<TABLE>
<CAPTION>
MFS
Virginia Lehman
Municipal Brothers
Bond Fund -- Municipal
Class A Bond Index
<S> <C> <C>
3/94 9522 10000
3/95 10061 10743
3/96 10717 11644
3/97 11143 12279
3/98 12292 13593
3/99 12872 14445
</TABLE>
[End Plot Points]
Growth of a Hypothetical $10,000 Investment
(For the 10-year period ended March 31, 1999)
[Begin Plot Points]
<TABLE>
<CAPTION>
MFS
Virginia Lehman
Municipal Brothers
Bond Fund -- Municipal
Class A Bond Index
<S> <C> <C>
3/89 9521 10000
3/91 11259 12076
3/93 13647 14946
3/95 14563 16428
3/97 16128 18777
3/99 18631 22089
</TABLE>
[End Plot Points]
Average Annual Total Returns as of March 31, 1999
<TABLE>
<CAPTION>
Class A Investment Results
---------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +4.71% +6.30% +6.21% +6.94%
- --------------------------------------------------------------------------------------------
SEC Results -0.26% +4.59% +5.19% +6.42%
- --------------------------------------------------------------------------------------------
Class C Investment Results
---------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------
Average Annual Total Return +4.04% +5.61% +5.54% +6.56%
- --------------------------------------------------------------------------------------------
SEC Results +3.04% +5.61% +5.54% +6.56%
- --------------------------------------------------------------------------------------------
Comparative Indices
---------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------
Average Virginia municipal debt fund+ +4.95% +6.80% +6.71% +7.18%
- --------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index++ +6.27% +7.45% +7.63% +8.25%
- --------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
---------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +4.04% +5.60% +5.51% +6.53%
- --------------------------------------------------------------------------------------------
SEC Results +0.05% +4.69% +5.18% +6.53%
- --------------------------------------------------------------------------------------------
</TABLE>
+Source: Lipper Analytical Services, Inc.
++Source: Wiesenberger(R).
Notes to Performance Summary:
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%. Class C shares ("C") have
no initial sales charge but, like B, have higher annual fees and expenses than
A. C SEC results reflect the 1% CDSC applicable to shares redeemed within 12
months.
B and C results include the performance and the operating expenses (e.g., Rule
12b-1 fees) of A for periods prior to the inception of B and C. Because
operating expenses of B and C are higher than those of A, B and C performance
generally would have been lower than A performance. The A performance included
in the B and C SEC performance has been adjusted to reflect the CDSC generally
applicable to B and C rather than the initial sales charge generally applicable
to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
Investment return and principal value will fluctuate, and shares, when redeemed,
may be worth more or less than their original cost. Past performance is no
guarantee of future results.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to capital gains tax. See the
prospectus for details.
12
<PAGE>
Performance Summary - continued
MFS(R) WEST VIRGINIA MUNICIPAL BOND FUND
Growth of a Hypothetical $10,000 Investment
(For the 5-year period ended March 31, 1999)
[Begin Plot Points]
<TABLE>
<CAPTION>
MFS
West Virginia Lehman
Municipal Brothers
Bond Fund -- Municipal
Class A Bond Index
<S> <C> <C>
3/94 9523 10000
3/95 10101 10743
3/96 10766 11644
3/97 11326 12279
3/98 12393 13593
3/99 12979 14445
</TABLE>
[End Plot Points]
Growth of a Hypothetical $10,000 Investment
(For the 10-year period ended March 31, 1999)
[Begin Plot Points]
<TABLE>
<CAPTION>
MFS
West Virginia Lehman
Municipal Brothers
Bond Fund -- Municipal
Class A Bond Index
<S> <C> <C>
3/89 9529 10000
3/91 11233 12076
3/93 13717 14946
3/95 14870 16428
3/97 16673 18777
3/99 19106 22089
</TABLE>
[End Plot Points]
Average Annual Total Returns as of March 31, 1999
<TABLE>
<CAPTION>
Class A Investment Results
---------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +4.73% +6.43% +6.39% +7.20%
- ------------------------------------------------------------------------------------------------
SEC Results -0.25% +4.72% +5.36% +6.68%
- ------------------------------------------------------------------------------------------------
Comparative Indices
---------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------
Average "other state" municipal debt fund+ +4.86% +6.50% +6.45% +6.96%
- ------------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index++ +6.27% +7.45% +7.63% +8.25%
- ------------------------------------------------------------------------------------------------
<CAPTION>
Class B Investment Results
---------------------------------------------------
1 Year 3 Years 5 Years 10 Years/Life
---------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Total Return +3.97% +5.70% +5.64% +6.78%
- ------------------------------------------------------------------------------------------------
SEC Results -0.02% +4.80% +5.32% +6.78%
- ------------------------------------------------------------------------------------------------
</TABLE>
+Source: Lipper Analytical Services, Inc.
++Source: Wiesenberger(R).
Notes to Performance Summary:
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%.
B results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of B. Because operating expenses
of A are lower than those of B, B performance generally would have been lower
than A performance. The A performance included within the B SEC performance has
been adjusted to reflect the CDSC generally applicable to B rather than the
initial sales charge generally applicable to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
Investment return and principal value will fluctuate, and shares, when redeemed,
may be worth more or less than their original cost. Past performance is no
guarantee of future results.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to capital gains tax. See the
prospectus for details.
13
<PAGE>
Portfolio of Investments - March 31, 1999
MFS MISSISSIPPI MUNICIPAL BOND FUND
Municipal Bonds - 97.7%
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 8.9%
Commonwealth of Puerto Rico, MBIA, 8.194s,
2008++ $2,000 $ 2,274,080
Gulfport, MS, School District, AMBAC, 5s, 2016 1,330 1,331,436
Hinds County, MS, MBIA, 6.25s, 2010 1,660 1,905,995
Hinds County, MS, MBIA, 6.25s, 2011 1,285 1,478,547
-----------
$ 6,990,058
- -------------------------------------------------------------------------------------
State and Local Appropriation - 7.3%
Hinds Community College, MS, Conference and
Training Center, 6.5s, 2014+ $1,320 $ 1,395,016
Medical Center Educational Building Corp., MS
(University of Mississippi Medical Center),
MBIA, 5.65s, 2009+ 2,000 2,197,440
State of Mississippi, Certificates of Participation
(Rehabilitation Services), 6.1s, 2014+ 2,000 2,084,200
-----------
$ 5,676,656
- -------------------------------------------------------------------------------------
Refunded and Special Obligations - 17.9%
Columbus, MS, Water & Sewer Rev., MBIA,
6.5s, 2004 $1,000 $ 1,133,470
Harrison County, MS, Wastewater Management
District, Wastewater Treatment, FGIC, 5.875s,
2005 1,000 1,113,410
Medical Center Educational Building Corp., MS
(University of Mississippi Medical Center),
MBIA, 5.9s, 2004+ 2,250 2,514,803
Mississippi Home Corp., 0s, 2013 6,920 3,436,195
Mississippi Hospital Equipment & Facilities
Authority Rev. (Magnolia Regional Health
Center), 7.375s, 2001 1,500 1,660,950
Puerto Rico Highway & Transportation Authority
Rev., 6.625s, 2002 1,900 2,096,270
State of Mississippi, 6.75s, 2004 1,800 2,050,056
-----------
$14,005,154
- -------------------------------------------------------------------------------------
Airport and Port Revenue - 2.7%
Puerto Rico Ports Authority (American Airlines),
6.25s, 2026 $2,000 $ 2,145,720
- -------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 5.9% Claiborne County, MS, Pollution Control
Rev.
(System Energy Resources, Inc.), 7.3s, 2025 $1,000 $ 1,045,470
Puerto Rico Electric Power Authority, FSA,
8.328s, 2023++ 1,000 1,162,150
Warren County, MS, Pollution Control Rev.
(Mississippi Power & Light), 7s, 2022 1,000 1,098,420
Washington County, MS, Pollution Control Rev.
(Mississippi Power & Light), 7s, 2022 1,230 1,351,057
-----------
$ 4,657,097
- -------------------------------------------------------------------------------------
Health Care Revenue - 3.4%
Corinth Alcorn County, MS, Hospital Rev.
(Magnolia Regional Health Center), MBIA-IBC,
5.5s, 2021 $ 670 $ 658,965
Jones County, MS, Hospital Rev. (South Central
Regional Medical Center), 5.5s, 2017 1,000 1,000,720
Mississippi Hospital Equipment & Facilities
Authority Rev., 6s, 2016 1,000 1,035,190
-----------
$ 2,694,875
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Revenue (Corporate Guarantee) - 9.1%
Jones County, MS, Solid Waste Disposal Rev.
(International Paper Co.), 5.8s, 2021 $1,000 $ 1,028,830
Lowndes County, MS, Solid Waste Disposal &
Pollution Control Rev. (Weyerhauser), 6.8s, 2022 3,250 3,904,030
Mississippi Business Finance Corp. (Jackson
Municipal Airport/Airborne Freight), 7.15s, 2007 985 1,122,683
Warren County, MS, Pollution Control Rev.
(International Paper), 6.6s, 2019 1,000 1,092,390
-----------
$ 7,147,933
- -------------------------------------------------------------------------------------
Insured Health Care Revenue - 18.4% Alcorn County,
MS, Corinth Hospital Rev.
(Magnolia Regional Health Center), AMBAC,
5.75s, 2013 $2,000 $ 2,175,020
Gulfport, MS, Hospital Facilities (Memorial
Hospital), MBIA, 6.125s, 2015 2,250 2,459,273
Gulfport, MS, Hospital Facilities (Memorial
Hospital), MBIA, 6.2s, 2018 1,000 1,094,010
Hinds County, MS, Rev. (Methodist Hospital &
Rehabilitation Center), AMBAC, 5.6s, 2012 3,055 3,317,302
Mississippi Development Bank, Special Obligation
(Adams County Hospital), FSA, 5.75s, 2016 1,000 1,072,780
Mississippi Hospital Equipment & Facilities
Authority Rev. (Baptist), MBIA, 6.5s, 2010 1,190 1,327,100
Mississippi Hospital Equipment & Facilities
Authority Rev. (Baptist), MBIA, 6s, 2013 750 821,760
Mississippi Hospital Equipment & Facilities
Authority Rev. (Rush Medical Foundation),
Connie Lee, 6.7s, 2018 2,000 2,162,420
-----------
$14,429,665
- -------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 5.4%
Gulfport, MS, Community Development (Oakview
Apartments), FNMA, 7.4s, 2025 $1,755 $ 1,885,748
Jackson, MS, Elderly Housing Corp., Mortgage
Rev. (Delhaven Manor), "C", FHA, 7.375s, 2024 1,945 2,049,913
Ridgeland, MS, Urban Renewal Housing Rev.
(Northbrook I & III Apartments), 6.15s, 2019 300 297,555
-----------
$ 4,233,216
- -------------------------------------------------------------------------------------
Single Family Housing Revenue - 7.8%
Mississippi Home Corp., GNMA, 6.5s, 2024 $2,650 $ 2,784,593
Mississippi Home Corp., GNMA, 6.625s, 2027 1,350 1,431,162
Mississippi Home Corp., GNMA, 7.55s, 2027 1,215 1,364,688
Mississippi Home Corp., GNMA, 5.25s, 2031 500 543,350
-----------
$ 6,123,793
- -------------------------------------------------------------------------------------
Universities - 1.4%
University of Mississippi, Educational Building
Corp. (Athletic Facilities), 6.2s, 2016 $1,000 $ 1,063,270
- -------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 6.9%
Columbus, MS, Water & Sewer Rev., MBIA,
5s, 2013 $1,165 $ 1,183,803
Gautier, MS, Utility District, Utility Systems
Rev., FGIC, 6.375s, 2019 1,300 1,402,466
Meridian, MS, Water & Sewer Rev., AMBAC,
6s, 2010 1,500 1,624,230
Meridian, MS, Water & Sewer Rev., AMBAC,
6.2s, 2012 650 714,961
Meridian, MS, Water & Sewer Rev., AMBAC,
6.2s, 2013 400 442,560
-----------
$ 5,368,020
- -------------------------------------------------------------------------------------
</TABLE>
14 - MMS
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
Other - 2.6%
Mississippi Development Bank (Diamond Lakes
Utilities), 6.25s, 2017 $1,250 $ 1,268,138
Mississippi Development Bank (Tupelo
Fairgrounds), AMBAC, 5s, 2017 785 778,393
-----------
$ 2,046,531
- -------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $70,451,605) $76,581,988
- -------------------------------------------------------------------------------------
Floating Rate Demand Notes - 0.8%
- -------------------------------------------------------------------------------------
Jackson County, MS, Pollution Control
Rev. (Chevron USA, Inc.), due 12/01/16 $ 100 $ 100,000
Jackson County, MS, Pollution Control
Rev. (Chevron USA, Inc.), due 06/01/23 100 100,000
Perry County, MS, Pollution Control Rev.,
due 03/01/02 400 400,000
- -------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 600,000
- -------------------------------------------------------------------------------------
Total Investments (Identified Cost, $71,051,605) $77,181,988
Other Assets, Less Liabilities - 1.5% 1,152,284
- -------------------------------------------------------------------------------------
Net assets - 100.0% $78,334,272
- -------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
MFS NEW YORK MUNICIPAL BOND FUND
Municipal Bonds - 96.8%
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 5.6%
Buffalo, NY, FSA, 5.125s, 2014 $1,580 $ 1,625,267
Buffalo, NY, General Improvement, AMBAC,
5.125s, 2014 1,505 1,548,118
Oswego County, NY, 6.7s, 2009 1,000 1,185,030
Port Byron, NY, Central School District, AMBAC,
7.4s, 2012 500 638,935
Port Byron, NY, Central School District, AMBAC,
7.4s, 2013 500 641,625
Port Byron, NY, Central School District, AMBAC,
7.4s, 2014 500 646,655
Port Byron, NY, Central School District, AMBAC,
7.4s, 2015 500 648,500
Washingtonville, NY, Central School District, FGIC,
7.35s, 2008 550 675,054
Washingtonville, NY, Central School District, FGIC,
7.35s, 2009 550 680,856
-----------
$ 8,290,040
- -------------------------------------------------------------------------------------
State and Local Appropriation - 26.2%
Metropolitan Transportation Authority, NY, Service
Contract, 7.375s, 2008 $2,000 $ 2,306,760
Metropolitan Transportation Authority, NY, Service
Contract, AMBAC, 5.75s, 2013 1,825 2,042,065
Metropolitan Transportation Authority, NY, Service
Contract, 0s, 2014 3,520 1,637,117
Metropolitan Transportation Authority, NY, Service
Contract, 0s, 2014 3,500 1,627,815
Metropolitan Transportation Authority, NY, Service
Contract, 5.5s, 2017 750 780,938
New York Dormitory Authority Rev. (City
University), FSA, 5.75s, 2013 4,250 4,755,495
New York Dormitory Authority Rev. (City
University), 5.625s, 2016 1,450 1,551,935
New York Dormitory Authority Rev. (City
University), AMBAC, 5.75s, 2018 1,000 1,105,100
New York Dormitory Authority Rev. (City
University), AMBAC, 5.75s, 2018 800 884,080
New York Dormitory Authority Rev. (Mental Health
Services Facilities), MBIA, 5.125s, 2014 1,500 1,545,840
New York Dormitory Authority Rev. (Special
Action School Districts), FSA, 5.25s, 2012 2,680 2,832,921
New York Dormitory Authority Rev. (State
University), 5.875s, 2017 1,130 1,249,701
New York Dormitory Authority Rev. (State
University), FSA, 5.875s, 2017 1,435 1,610,902
New York Medical Care Facilities Financing
Agency Rev., 6.375s, 2014 15 16,340
New York Medical Care Facilities Financing
Agency Rev., MBIA, 6s, 2025 20 21,500
New York Urban Development Corp. Rev., FSA,
5.5s, 2008 4,000 4,341,240
New 1York Urban Development Corp. Rev.,
AMBAC, 5.125s, 2014 1,000 1,027,180
New York Urban Development Corp. Rev.
(Correctional Facilities), AMBAC, 0s, 2009+ 5,000 3,235,700
New York Urban Development Corp. Rev.
(Correctional Facilities), AMBAC, 5.25s, 2015 2,880 2,986,185
New York Urban Development Corp. Rev. (State
Facilities), AMBAC, 5.6s, 2015+ 2,750 3,016,035
-----------
$38,574,849
- -------------------------------------------------------------------------------------
</TABLE>
15-MNY
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
Refunded and Special Obligations - 13.8%
New York City, NY, 8s, 2001 $ 490 $ 544,875
New York City, NY, 8.25s, 2001 2,000 2,259,460
New York City, NY, 7.2s, 2004 1,000 1,162,040
New York City, NY, 7.3s, 2004 880 1,029,125
New York City, NY, 7.3s, 2004 5,000 5,834,100
New York City, NY, 7.375s, 2004 1,600 1,876,880
New York Medical Care Facilities Financing
Agency Rev. (Mental Health Services),
7.875s, 2000 340 366,741
New York Medical Care Facilities Financing
Agency Rev. (Mental Health Services),
6.375s, 2004 985 1,116,281
New York Medical Care Facilities Financing
Agency Rev. (Montefiore Medical), AMBAC,
6.5s, 2005 2,550 2,915,976
New York Power Authority, FGIC, 6.5s, 2008 2,500 2,859,225
Puerto Rico Aqueduct & Sewer Authority Rev.,
FSA, 9s, 2005 250 307,487
-----------
$20,272,190
- -------------------------------------------------------------------------------------
Airport and Port Revenue - 1.5%
New York City, NY, Industrial Development
Agency, Special Facilities Rev. (American
Airlines), 6.9s, 2024 $1,000 $ 1,106,780
Port Authority NY & NJ, Special Obligation
(JFK International), MBIA, 6.25s, 2015 1,000 1,161,130
-----------
$ 2,267,910
- -------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 6.9%
Long Island, NY, Power Authority Rev., FSA,
5.125s, 2016 $1,000 $ 1,014,400
Long Island, NY, Power Authority Rev., FSA,
5s, 2018 1,500 1,490,595
New York City, NY, Industrial Development Agency
Rev. (Brooklyn Navy Yard Cogeneration
Partners), 5.65s, 2028 1,000 1,022,510
New York Research and Development Authority,
Electrical Facilities Rev. (Long Island Lighting),
7.15s, 2022 2,700 2,975,859
Port Authority NY & NJ, Special Obligation,
6.75s, 2019 1,750 1,934,608
Puerto Rico Electric Power Authority, FSA,
8.328s, 2023++ 1,500 1,743,225
-----------
$10,181,197
- -------------------------------------------------------------------------------------
Health Care Revenue - 3.3%
Albany, NY, Industrial Development Agency, Civic
Facilities Rev., 8.25s, 2004 $1,590 $ 1,692,921
Chautauqua County, NY, Industrial Development
Agency, Civic Facilities Rev. (Womans Christian
Assn.), 6.35s, 2017 200 199,654
Chautauqua County, NY, Industrial Development
Agency, Civic Facilities Rev. (Womans Christian
Assn.), 6.4s, 2029 500 499,135
Dutchess, NY, Industrial Development Agency,
Civic Facilities Rev., 8.625s, 2016 1,060 1,148,012
New York Medical Care Facilities Finance
Agency, Mental Health Services (Huntington
Mortgage), 6.5s, 2014 1,250 1,355,000
-----------
$ 4,894,722
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Revenue (Corporate Guarantee) - 4.1%
Allegany County, NY, Industrial Development
Agency, Solid Waste Rev. (Atlantic Richfield),
6.625s, 2016 $1,000 $ 1,080,520
Essex County, NY, Industrial Development Agency
(International Paper), 5.55s, 2014 750 781,290
Essex County, NY, Industrial Development Agency
(International Paper), 6.15s, 2021 1,000 1,066,390
Fulton County, NY, Industrial Development Agency
(Crossroads Incubator), 8.75s, 2009 975 1,016,584
Monroe County, NY, Industrial Development
Agency (Weyerhauser), 9s, 2006 1,000 1,003,670
Onondaga County, NY, Industrial Development
Agency (Bristol-Meyers Squibb), 5.75s, 2024 1,000 1,092,770
-----------
$ 6,041,224
- -------------------------------------------------------------------------------------
Insured Health Care Revenue - 5.8%
New York City, NY, Health & Hospital Corp.,
AMBAC, 7.71s, 2023++ $3,200 $ 3,376,192
New York Dormitory Authority Rev. (Champlain
Valley), Connie Lee, 6s, 2010 250 281,985
New York Dormitory Authority Rev. (Municipal
Health Facilities), FSA, 5s, 2018 2,180 2,153,557
New York Dormitory Authority Rev. (St. Vincent's
Hospital), FHA, 7.375s, 2011 2,445 2,656,223
-----------
$ 8,467,957
- -------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 0.4%
New York City, NY, Housing Development Corp.
(South Bronx Cooperatives), 8.1s, 2023 $ 565 $ 587,052
- -------------------------------------------------------------------------------------
Single Family Housing Revenue - 3.3%
New York Mortgage Agency Rev., 7.375s, 2011 $1,295 $ 1,382,995
New York Mortgage Agency Rev., 8.05s, 2011 20 20,754
New York Mortgage Agency Rev., 6.45s, 2017 2,355 2,509,111
New York Mortgage Agency Rev., 7.75s, 2023 870 926,237
-----------
$ 4,839,097
- -------------------------------------------------------------------------------------
Turnpike Revenue - 7.5%
New York Thruway Authority Rev., Highway &
Bridges, FGIC, 5.125s, 2015 $2,400 $ 2,447,688
Triborough Bridge & Tunnel Authority, NY,
5.5s, 2017 8,000 8,563,520
-----------
$11,011,208
- -------------------------------------------------------------------------------------
Universities - 5.7%
Hempstead Town, NY, Civic Facilities Rev.
(Hofstra University), MBIA, 5.8s, 2015 $1,500 $ 1,639,050
Islip, NY, Community Development Agency Rev.
(New York Institute of Technology), 7.5s, 2026 2,000 2,184,200
New York Dormitory Authority Rev. (Colgate
University), MBIA, 6s, 2016 1,000 1,142,100
New York Dormitory Authority Rev. (State
University), MBIA, 5s, 2018 3,000 2,981,490
Utica, NY, Industrial Development Agency (Utica
College), 5.3s, 2008 500 501,890
-----------
$ 8,448,730
- -------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 12.7%
New York City, NY, Municipal Water & Sewer
Finance Authority Rev., 6s, 2010 $ 620 $ 699,081
New York City, NY, Municipal Water & Sewer
Finance Authority Rev., 7.1s, 2012 2,000 2,139,620
New York City, NY, Municipal Water & Sewer
Finance Authority Rev., 7s, 2015 745 794,982
</TABLE>
16 - MNY
<PAGE>
Portfolio of Investments - 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., Clean
Water & Drinking, 5s, 2016 $2,000 $ 2,002,460
New York Environmental Facilities Corp., Pollution
Control Rev., 5.75s, 2010 3,235 3,613,431
New York Environmental Facilities Corp., Pollution
Control Rev., 6.875s, 2010 220 237,404
New York Environmental Facilities Corp., Pollution
Control Rev., 5.75s, 2012 1,100 1,222,606
New York Environmental Facilities Corp., Water
Facilities Rev., 8.85s, 2015 2,500 2,777,475
Suffolk County, NY, Water Authority, MBIA,
5.1s, 2012 1,895 2,000,608
Suffolk County, NY, Water Authority, MBIA,
5.1s, 2013 2,000 2,094,180
Triborough Bridge & Tunnel Authority, NY,
5.25s, 2017 1,000 1,022,590
------------
$ 18,604,437
- -------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $130,075,394) $142,480,613
- -------------------------------------------------------------------------------------
Floating Rate Demand Notes - 1.7%
- -------------------------------------------------------------------------------------
Long Island, NY, Power Authority Rev., due 05/01/33 $ 600 $ 600,000
New York City, NY, Municipal Water Finance
Authority Rev., due 06/15/22 100 100,000
New York City, NY, Municipal Water Finance
Authority Rev., due 06/15/23 100 100,000
New York City, NY, Municipal Water Finance
Authority Rev., due 06/15/24 1,700 1,700,000
- -------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 2,500,000
- -------------------------------------------------------------------------------------
Total Investments (Identified Cost, $132,575,394) $144,980,613
Other Assets, Less Liabilities - 1.5% 2,193,823
- -------------------------------------------------------------------------------------
Net assets - 100.0% $147,174,436
- -------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
MFS NORTH CAROLINA MUNICIPAL BOND FUND
Municipal Bonds - 98.1%
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 4.2%
Durham, NC, 5.9s, 2013 $2,400 $ 2,615,856
Durham, NC, 5.9s, 2014 2,400 2,617,152
Durham, NC, 5s, 2018 2,800 2,834,300
Hertford County, NC, 9.5s, 2000 100 101,110
Hertford County, NC, 9.5s, 2001 100 101,510
Hertford County, NC, 9.5s, 2002 100 102,010
State of North Carolina, 5.679s, 2015++ 5,000 4,945,400
State of North Carolina, 5.679s, 2017++ 5,000 4,656,850
-----------
$17,974,188
- -------------------------------------------------------------------------------------
State and Local Appropriation - 8.3%
Charlotte, NC, Certificates of Participation
(Convention Facilities Project), AMBAC, 0s, 2004+ $ 3,435 $ 2,728,008
Charlotte, NC, Certificates of Participation
(Convention Facilities Project), AMBAC, 0s, 2005+ 4,810 3,634,869
Charlotte, NC, Certificates of Participation
(Convention Facilities Project), AMBAC, 0s, 2006+ 1,075 773,183
Charlotte, NC, Certificates of Participation
(Convention Facilities Project), AMBAC, 0s, 2008+ 3,000 1,961,580
Cumberland County, NC, Certificates of
Participation (Civic Center), AMBAC, 0s, 2011+ 425 234,995
Cumberland County, NC, Certificates of
Participation (Civic Center), AMBAC, 0s, 2013+ 1,000 492,130
Dare County, NC, MBIA, 6.6s, 2006+ 2,100 2,265,690
Durham, NC, Certificates of Participation
(New Durham Corp.), 6.875s, 2009+ 1,750 1,874,005
Franklin County, NC, Certificates of Paticipation
(Jail and School), FGIC, 6.625s, 2014+ 2,000 2,266,240
Greensboro, NC, Certificates of Participation
(Coliseum Arena), 6.25s, 2011+ 2,180 2,311,847
Harnett County, NC, Certificates of Participation,
AMBAC, 6.2s, 2006+ 1,000 1,107,260
Harnett County, NC, Certificates of Participation,
AMBAC, 6.2s, 2009+ 1,500 1,646,580
Puerto Rico Housing, Bank and Finance Agency,
7.5s, 2006 7,000 8,170,680
Puerto Rico Public Finance Corp., AMBAC,
5.375s, 2016 3,000 3,232,710
Sampson Area Development Corp., NC,
Installment Payment Rev., MBIA, 4.75s, 2019 1,000 958,580
Scotland County, NC, Certificates of Participation
(Jail and Courthouse), FSA, 6.75s, 2011+ 1,000 1,065,160
Union County, NC, Certificates of Participation,
AMBAC, 6.375s, 2012+ 1,000 1,096,010
-----------
$35,819,527
- -------------------------------------------------------------------------------------
Refunded and Special Obligations - 18.2%
Chapel Hill, NC, Parking Facilities Rev. (Rosemary
Street), 8.125s, 2000 $1,535 $ 1,679,535
Chapel Hill, NC, Parking Facilities Rev. (Rosemary
Street), 8.25s, 2000 3,305 3,622,776
Durham County, NC, Certificates of Participation
(Hospital and Office Facilities), 5.875s, 2006+ 1,460 1,614,775
Haywood County, NC, Industrial Facilities &
Pollution Control Finance Authority (Champion
International), 8.1s, 1999 90 94,286
North Carolina Eastern Municipal Power Agency,
7.5s, 2009 2,595 3,277,225
North Carolina Eastern Municipal Power Agency,
5s, 2017 11,870 12,078,675
North Carolina Medical Care Commission,
Hospital Rev. (Carolina Medicorp), 6s, 2001 16,000 16,775,040
</TABLE>
17-MNC
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
Refunded and Special Obligations - continued
North Carolina Medical Care Commission,
Hospital Rev. (Halifax Memorial Hospital),
6.75s, 2002 $5,855 $ 6,497,586
North Carolina Medical Care Commission,
Hospital Rev. (Rex Hospital), 6.25s, 2003 2,500 2,775,875
North Carolina Medical Care Commission,
Hospital Rev. (Valdese General Hospital),
8.75s, 2001 5,245 5,977,831
Pender County, NC, Certificates of Participation
(Pender County Prison), 7.6s, 2001+ 1,685 1,854,511
Pender County, NC, Certificates of Participation
(Pender County Prison), 7.7s, 2001+ 1,000 1,102,650
Pitt County, NC, Hospital Rev. (Memorial Hospital),
5.25s, 2021 10,135 10,355,031
University of North Carolina (Chapel Hill),
0s, 2002 9,105 4,260,685
University of North Carolina (Chapel Hill), 0s,
2002 4,285 1,869,117
Winston-Salem, NC, Water and Sewer Systems
Rev., 6.25s, 2002 4,000 4,371,960
-----------
$78,207,558
- -------------------------------------------------------------------------------------
Airport and Port Revenue - 1.3%
Puerto Rico Ports Authority (American Airlines),
6.25s, 2026 $5,075 $ 5,444,764
- -------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 17.0%
Dare City, NC, Utility System Rev., MBIA,
5.25s, 2014 $1,020 $ 1,059,729
New Hanover County, NC, Industrial Facilities
Rev. (Carolina Power and Light Co.), 6.9s, 2009 1,000 1,045,900
North Carolina Eastern Municipal Power Agency,
MBIA-IBC, 7s, 2007 5,000 5,845,050
North Carolina Eastern Municipal Power Agency,
MBIA, 7.25s, 2007 5,000 5,926,300
North Carolina Eastern Municipal Power Agency,
MBIA, 7.5s, 2010 3,005 3,756,040
North Carolina Eastern Municipal Power Agency,
AMBAC, 6s, 2018 14,245 16,113,801
North Carolina Municipal Power Agency, No. 1,
Catawba Electric Rev., MBIA, 0s, 2008 10,150 6,909,207
North Carolina Municipal Power Agency, No. 1,
Catawba Electric Rev., MBIA, 6s, 2011 8,000 9,058,560
North Carolina Municipal Power Agency, No. 1,
Catawba Electric Rev., MBIA, 7.22s, 2012++ 9,000 9,764,190
North Carolina Municipal Power Agency, No. 1,
Catawba Electric Rev., MBIA, 5.5s, 2014 3,500 3,790,640
North Carolina Municipal Power Agency, No. 1,
Catawba Electric Rev., FSA, 6.2s, 2018 4,300 4,664,683
Puerto Rico Electric Power Authority, FSA,
6s, 2016 5,000 5,473,100
-----------
$73,407,200
- -------------------------------------------------------------------------------------
Health Care Revenue - 11.1%
Charlotte-Mecklenberg Hospital Authority, "A",
5.75s, 2021 $1,500 $ 1,568,445
North Carolina Medical Care Commission,
Hospital Rev. (Duke University), 5.25s, 2021 5,975 5,970,638
North Carolina Medical Care Commission,
Hospital Rev. (Firsthealth of the Carolinas),
5s, 2018 2,890 2,829,946
North Carolina Medical Care Commission,
Hospital Rev. (Gaston Health Care), 5.5s, 2015 8,040 8,256,357
North Carolina Medical Care Commission,
Hospital Rev. (Gaston Health Care), 5.5s, 2019 7,500 7,616,250
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
Health Care Revenue - continued
North Carolina Medical Care Commission,
Hospital Rev. (Moore Memorial Hospital),
9.1s, 1999 $ 800 $ 807,080
North Carolina Medical Care Commission,
Hospital Rev. (Pitt County Memorial Hospital),
5.25s, 2012 1,445 1,490,185
North Carolina Medical Care Commission,
Hospital Rev. (Pitt County Memorial Hospital),
5s, 2018 5,000 4,895,350
North Carolina Medical Care Commission,
Hospital Rev. (Well Spring Retirement),
6.25s, 2017 2,500 2,564,450
North Carolina Medical Care Commission,
Hospital Rev. (Well Spring Retirement),
6.25s, 2021 2,000 2,047,380
Northern Hospital District, Surry County, NC,
Heath Care Facilities Rev., 7.875s, 2021 4,530 4,880,078
University of North Carolina, Chapel Hill,
University Hospital Rev., 5.25s, 2019 4,800 4,827,456
-----------
$47,753,615
- -------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 10.4%
Chatham County, NC, Industrial Facilities &
Pollution Control (Weyerhaeuser), 9s, 2006 $1,260 $ 1,264,914
Columbus County, NC, Industrial Facilities &
Pollution Control (International Paper), 5.8s, 2016 4,000 4,149,280
Columbus County, NC, Industrial Facilities &
Pollution Control (International Paper),
6.15s, 2021 5,000 5,276,300
Halifax County, NC, Industrial Facilities &
Pollution Control Finance Authority (Champion
International Corp.), 8.15s, 2019 1,500 1,561,440
Haywood County, NC, Industrial Facilities &
Pollution Control Finance Authority (Champion
International), 8.1s, 2009 2,410 2,509,292
Haywood County, NC, Industrial Facilities &
Pollution Control Finance Authority (Champion
International Corp.), 5.75s, 2025 8,900 8,960,520
Martin County, NC, Industrial Facilities & Pollution
Control Finance Authority (Weyerhaeuser Co.),
7.25s, 2014 7,000 7,623,770
Martin County, NC, Industrial Facilities & Pollution
Control Finance Authority (Weyerhaeuser Co.),
6.8s, 2024 7,500 8,294,025
Mecklenburg County, NC, Industrial Facilities and
Pollution Control Finance Authority (Precision
Steel), 7.75s, 2014 2,600 2,720,484
Surry County, NC, Industrial Facilities & Pollution
Control Finance Authority (Weyerhaeuser Co.),
9.25s, 2002 1,200 1,324,872
Wake County, NC, Industrial Facilities & Pollution
Control Finance Authority (Mallinkcodt),
6.75s, 2012 1,100 1,148,664
-----------
$44,833,561
- -------------------------------------------------------------------------------------
Insured Health Care Revenue - 8.3%
Catawba County, NC, Hospital Rev. (Catawba
Memorial Hospital), AMBAC, 5s, 2017 $1,200 $ 1,189,909
Cumberland County, NC, Hospital Facilities Rev.
(Cumberland County Hospital), MBIA, 0s, 2009 1,800 1,113,876
Cumberland County, NC, Hospital Facilities Rev.
(Cumberland County Hospital), MBIA, 6s, 2021 4,000 4,184,600
</TABLE>
18 - MNC
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
Insured Health Care Revenue - continued
New Hanover County, NC, Hospital Rev. (New
Hanover Regional Medical Center), MBIA,
5s, 2019 $6,225 $ 6,123,035
New Hanover County, NC, Hospital Rev. (New
Hanover Regional Medical Center), AMBAC,
5.75s, 2026 3,625 3,860,480
North Carolina Medical Care Commission, Health
Care Facility Rev. (Novant Health), MBIA, 5s,
2018 1,975 1,945,908
North Carolina Medical Care Commission,
Hospital Rev. (Alamance Regional Medical
Center, Inc.), FSA, 5s, 2016 3,180 3,172,177
North Carolina Medical Care Commission,
Hospital Rev. (Mission-St. Joseph Health
System), MBIA, 5.1s, 2018 3,000 2,992,560
North Carolina Medical Care Commission,
Hospital Rev. (Northeast Medical Center),
AMBAC, 4.75s, 2013 1,330 1,317,259
North Carolina Medical Care Commission,
Hospital Rev. (Rex Healthcare), AMBAC, 5s, 2017 5,000 4,958,050
North Carolina Medical Care Commission,
Hospital Rev. (Wake County Hospital), AMBAC,
5.375s, 2026 1,610 1,647,529
North Carolina Medical Care Commission,
Hospital Rev. (Wilson Memorial Hospital),
AMBAC, 0s, 2013 1,000 490,610
North Carolina Medical Care Commission,
Hospital Rev. (Wilson Memorial Hospital),
AMBAC, 0s, 2015 1,140 496,675
North Carolina Medical Care Commission
(Catholic Health East), AMBAC, 5s, 2018 2,000 1,970,340
------------
$ 35,463,008
- -------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 4.2%
Asheville, NC, Housing Authority (Asheville
Terrace Apartments), FGIC, 7.1s, 2011 $5,000 $ 5,336,000
North Carolina Housing Finance Agency, FHA,
6.9s, 2024 4,880 5,273,133
North Carolina Housing Finance Agency, FHA,
6.05s, 2028 5,000 5,307,650
Salisbury, NC, Housing Corp. (Yadkin Senior
Citizens), FNMA, 6.75s, 2022 2,010 2,074,661
-----------
$17,991,444
- -------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 0.6%
Virgin Islands Public Finance Authority, 5.5s, 2018 $1,000 $ 1,007,220
Virgin Islands Public Finance Authority, 5.5s, 2022 1,600 1,602,032
-----------
$ 2,609,252
- -------------------------------------------------------------------------------------
Single Family Housing Revenue - 2.6%
North Carolina Housing Finance Agency,
5.125s, 2013 $ 1,100 $ 1,109,834
North Carolina Housing Finance Agency,
6.15s, 2017 2,000 2,118,220
North Carolina Housing Finance Agency,
6.7s, 2018 1,785 1,887,637
North Carolina Housing Finance Agency,
7.85s, 2028 4,075 4,208,456
North Carolina Housing Finance Agency,
7.6s, 2032 2,025 2,091,643
-----------
$ 11,415,790
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
Solid Waste Revenue - 0.3%
Iredell, NC, Solid Waste Systems Rev., 6.25s, 2012 $1,250 $ 1,323,500
- -------------------------------------------------------------------------------------
Turnpike Revenue - 2.3%
Puerto Rico Highway & Transportation Authority
Rev., 6.9s, 2007++ $2,750 $ 3,076,645
Puerto Rico Highway & Transportation Authority
Rev., FSA, 8.49s, 2018++ 5,425 7,000,366
------------
$ 10,077,011
- -------------------------------------------------------------------------------------
Universities - 5.4%
North Carolina Education Facilities Finance
Agency (Duke University), 6.75s, 2021 $11,500 $ 12,398,495
University of North Carolina, University Rev.,
0s, 2012 4,265 2,256,228
University of North Carolina, University Rev.,
0s, 2013 6,415 3,208,334
University of North Carolina, University Rev.,
0s, 2015 4,415 1,966,529
University of North Carolina, University Rev.,
0s, 2016 3,500 1,471,120
University of North Carolina-Greensboro Rev.,
Student Facilities Systems, AMBAC, 5.125s, 2018 2,000 2,007,580
------------
$ 23,308,286
- -------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 3.9%
Asheville, NC, Water System Rev., FGIC, 5.7s, 2025 $2,000 $ 2,135,980
Charlotte, NC, Water & Sewer, 5s, 2020 3,350 3,354,188
Charlotte, NC, Water & Sewer, 5s, 2022 1,900 1,900,057
Charlotte, NC, Water & Sewer Systems Rev.,
5.25s, 2021 4,000 4,024,840
Raleigh, NC, Combined Enterprise Systems Rev.,
4.75s, 2016 3,520 3,419,750
Raleigh, NC, Combined Enterprise Systems Rev.,
5.125s, 2022 2,000 2,007,420
------------
Total Municipal Bonds (Identified Cost, $391,373,037) $ 16,842,235
- -------------------------------------------------------------------------------------
$422,470,939
- -------------------------------------------------------------------------------------
Floating Rate Demand Note - 0.4%
- -------------------------------------------------------------------------------------
District of Columbia, due 08/15/38, at Identified
Cost $1,700 $ 1,700,000
- -------------------------------------------------------------------------------------
Total Investments (Identified Cost, $393,073,037) $424,170,939
Other Assets, Less Liabilities - 1.5% 6,522,481
- -------------------------------------------------------------------------------------
Net assets - 100.0% $430,693,420
- -------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
19 - MNC
<PAGE>
Portfolio of Investments - March 31, 1999
MFS PENNSYLVANIA MUNICIPAL BOND FUND
Municipal Bonds - 96.2%
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 7.7%
Butler, PA, School District, FGIC, 5.375s, 2018 $ 500 $ 513,780
Chester County, PA, 5.65s, 2011 500 528,615
Dauphin County, PA, General Authority Rev.,
MBIA, 0s, 2020 240 80,021
Greene County, PA, 6s, 2010 100 104,836
Northeastern York County, PA, School District,
FGIC, 0s, 2012 415 223,104
Oley Valley, PA, School District, AMBAC, 0s, 2011 810 457,787
Philadelphia, PA, FGIC, 5.125s, 2014 500 511,830
Philadelphia, PA, Authority for Industrial
Development, Airport Rev. (Philadelphia Airport
System), FGIC, 5s, 2015 500 500,615
Southeastern Area, PA, Special Schools Authority
Rev., 0s, 2007 360 247,349
State of Pennsylvania, 6.25s, 2010 300 343,791
----------
$3,511,728
- -------------------------------------------------------------------------------------
State and Local Appropriation - 1.8%
Delaware Valley, PA, Regional Finance Authority,
AMBAC, 7.386s, 2018++ $ 500 $ 559,735
Philadelphia, PA, Municipal Authority Rev.
(Justice Lease), 8.625s, 2016+ 220 239,563
----------
$ 799,298
- -------------------------------------------------------------------------------------
Refunded and Special Obligations - 20.6%
Allegheny County, PA, Sanitation Authority, FGIC,
0s, 2014 $2,835 $1,329,360
Beaver County, PA, "A", MBIA, 5.75s, 2006 250 276,698
Commonwealth of Puerto Rico, 6.35s, 2004 1,350 1,529,968
Harrisburg, PA, 5.875s, 2003 1,000 1,100,300
Northumberland County, PA, Lease,
(Commonwealth Correctional Facility), MBIA,
0s, 2012 1,000 525,930
Philadelphia, PA, Gas Works Rev., 6.375s, 2003 750 822,742
Philadelphia, PA, Gas Works Rev., 6s, 2013 1,645 1,852,599
Philadelphia, PA, Hospital & Higher Educational
Facilities Authority, FHA, 7.25s, 2001 500 550,070
Puerto Rico Highway & Transportation Authority
Rev., 6.5s, 2002 250 274,880
Schuylkill County, PA, Redevelopment Authority
Rev., FGIC, 7s, 2001 300 323,100
Westmoreland County, PA, MBIA, ETM,
5.25s, 2009 400 423,684
Westmoreland County, PA, FGIC, ETM, 0s, 2018 1,000 373,850
----------
$9,383,181
- -------------------------------------------------------------------------------------
Airport and Port Revenue - 4.5%
Allegheny County, PA, Airport Rev. (Pittsburgh
International Airport), MBIA, 5.75s, 2014 $1,000 $1,089,340
Philadelphia, PA, Industrial Development Authority
(Philadelphia Airport Systems), FGIC, 5s, 2016 500 498,190
Virgin Islands Port Authority, Airport Rev. (Rohlsen
Terminal), 4.5s, 2005 495 487,060
----------
$2,074,590
- -------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 3.0%
Luzerne County, PA, Industrial Development
Authority, AMBAC, 7.2s, 2017 $ 500 $ 555,615
Luzerne County, PA, Industrial Development
Authority, 6.05s, 2019 300 313,239
Virgin Islands Water & Power Authority, 5.3s, 2018 500 496,945
----------
$1,365,799
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
Health Care Revenue - 8.2%
Butler County, PA, Industrial Development
Authority (Sherwood Oaks), 5.75s, 2011 $ 400 $ 413,268
Chester County, PA, Health & Education (Main
Line), 5.5s, 2015 335 342,467
Cumberland County, PA, Municipal Refunding
(Carlisle Hospital), 6.8s, 2023 500 539,615
Pennsylvania Higher Education Rev., 5.7s, 2011 550 581,466
Philadelphia, PA, Health & Educational Facilities
(Jeanes Health), 6.6s, 2010 500 551,415
Philadelphia, PA, Health & Educational Facilities
(Temple University), 6.625s, 2023 250 265,927
Philadelphia, PA, Hospital & Higher Educational
Facilities (The Philadelphia Protestant Home),
6.5s, 2027 500 516,720
Scranton Lackawanna, PA, Health & Welfare
(Allied Health), 7.125s, 2005 500 543,640
----------
$3,754,518
- -------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 4.7%
Erie County, PA, Industrial Development Authority
(International Paper Co.), 5.3s, 2012 $ 500 $ 515,020
Erie County, PA, Industrial Development Authority
(International Paper Co.), 7.625s, 2018 250 286,878
New Morgan, PA, Industrial Development
Authority (Browning Ferris Co.), 6.5s, 2019 500 538,545
Northampton County, PA, Industrial Development
Authority (Bethlehem Steel), 7.55s, 2017 750 817,657
----------
$2,158,100
- -------------------------------------------------------------------------------------
Insured Health Care Revenue - 5.9%
Allegheny County, PA, Hospital Authority (South
Hills Health System), MBIA, 5.8s, 2016 $ 500 $ 537,295
Blair County, PA, Hospital Authority (Altoona),
AMBAC, 5.5s, 2008 470 510,129
Dauphin County, PA, General Authority Hospital
Rev. (Hapsco), MBIA, 5.8s, 2002 355 376,406
Lehigh County, PA, Hospital Rev. (Lehigh Valley),
MBIA, 7s, 2016 250 309,288
Lycoming County, PA, Authority Hospital Rev.
(Williamsport Hospital Obligation Group), Connie
Lee, 5.375s, 2010 750 794,332
Sayre, PA, Health Care Facilities (VHA, PA),
AMBAC, 6.375s, 2022 160 171,698
----------
$2,699,148
- -------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 0.6%
Montgomery County, PA, Redevelopment Authority
(KBF Associates), 6.5s, 2025 $ 250 $ 264,645
- -------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 3.5%
Puerto Rico Highway & Transportation Authority,
5.5s, 2008 $ 500 $ 527,390
Puerto Rico Highway & Transportation Authority,
5.5s, 2013 500 540,515
Puerto Rico Highway & Transportation Authority,
MBIA, 5.5s, 2015 500 546,205
----------
$1,614,110
- -------------------------------------------------------------------------------------
Single Family Housing Revenue - 7.5%
Pennsylvania Housing Finance Agency, FHA-VA,
5.75s, 2013 $1,000 $1,039,030
Pennsylvania Housing Finance Agency,
6.75s, 2014 500 534,440
Pennsylvania Housing Finance Agency, 6.4s, 2016 500 530,045
</TABLE>
20 - MPA
<PAGE>
Portfolio of Investments - 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 $ 265,115
Pennsylvania Housing Finance Agency,
6.125s, 2024 405 422,079
Philadelphia, PA, Redevelopment Authority,
6.1s, 2010 200 208,216
Pittsburgh, PA, Urban Development Corp.,
5.5s, 2010 400 409,516
-----------
$ 3,408,441
- -------------------------------------------------------------------------------------
Solid Waste Revenue - 1.2%
York County, PA, Solid Waste Systems Rev., FGIC,
5.5s, 2011 $ 485 $ 527,341
- -------------------------------------------------------------------------------------
Special Assessment District - 2.2%
Pennsylvania Intergovernmental Cooperative
Authority, Special Tax Rev., FGIC, 5.25s, 2016 $1,000 $ 1,022,060
- -------------------------------------------------------------------------------------
Turnpike Revenue - 3.4%
Pennsylvania Turnpike Commission, 5.25s, 2012 $ 500 $ 525,670
Southeastern Pennsylvania Transportation
Authority, Special Rev., FGIC, 5.25s, 2013 500 521,880
Southeastern Pennsylvania Transportation
Authority, Special Rev., FGIC, 5.25s, 2015 500 516,360
-----------
$ 1,563,910
- -------------------------------------------------------------------------------------
Universities - 6.3%
Cumberland County, PA, Municipal Authority
(Messiah College), AMBAC, 5.125s, 2015 $ 300 $ 305,127
Pennsylvania Higher Education Facilities Authority
Rev. (Temple University), MBIA, 5.25s, 2014 500 518,410
Pennsylvania Higher Education Facilities Authority
Rev. (Thomas Jefferson University), 6s, 2019 625 639,012
Philadephia, PA, Authority for Industrial
Development (Girard Estate Facilities Leasing),
5.5s, 2014 880 921,026
Philadelphia, PA, Hospital & Higher Education
Facilities Authority Rev. (Community College),
AMBAC, 5s, 2018 500 495,110
-----------
$ 2,878,685
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
Water and Sewer Utility Revenue - 8.9%
Philadelphia, PA, Water Rev., MBIA, 6.25s, 2012 $1,050 $ 1,224,300
Philadelphia, PA, Water Rev., FSA, 5.75s, 2013 300 317,340
Philadelphia, PA, Water Rev., MBIA, 5.5s, 2014 1,000 1,046,920
Pittsburgh, PA, Water & Sewer Authority, FGIC,
5s, 2018 500 495,060
Pittsburgh, PA, Water & Sewer Authority, FSA,
5s, 2019 1,000 986,110
-----------
$ 4,069,730
- -------------------------------------------------------------------------------------
Other - 6.2%
Lehigh County, PA, General Purpose Authority
(Kidspeace Obligation Group), 6s, 2018 $ 250 $ 251,855
Pennsylvania Convention Center Rev., 6.75s, 2019 250 273,055
Pennsylvania Finance Authority Rev., 6.6s, 2009 900 990,018
Pennsylvania Industrial Development Authority,
AMBAC, 7s, 2007 300 351,348
Pennsylvania Industrial Development Authority,
AMBAC, 5.8s, 2009 400 441,096
Philadelphia, PA, Industrial Development
Authority, MBIA, 5.35s, 2012 500 523,144
-----------
$ 2,830,516
- -------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $41,438,046) $43,925,800
- -------------------------------------------------------------------------------------
Floating Rate Demand Notes - 4.6%
- -------------------------------------------------------------------------------------
Allegheny County, PA, Hospital Development
Authority Rev. (Aces Presbyterian University
Hospital), due 03/01/18 $ 500 $ 500,000
Allegheny County, PA, Hospital Development
Authority Rev. (Presbyterian University Health
System), due 03/01/20 1,600 1,600,000
- -------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 2,100,000
-----------
Total Investments (Identified Cost, $43,538,046) $46,025,800
Other Assets, Less Liabilities - (0.8%) (347,729)
- -------------------------------------------------------------------------------------
Net assets - 100.0% $45,678,071
- -------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
21 - MPA
<PAGE>
Portfolio of Investments - March 31, 1999
MFS SOUTH CAROLINA MUNICIPAL BOND FUND
Municipal Bonds - 96.6%
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 10.4%
Charleston County, SC, 5.5s, 2014 $1,250 $ 1,309,275
Commonwealth of Puerto Rico, 6.5s, 2013 3,300 3,926,076
Edgefield County, SC, School District, 5s, 2014 1,410 1,446,702
Greenville, SC, Memorial Auditorium District
(Bi-Lo Center), AMBAC, 5s, 2019 1,015 1,004,860
North Charleston, SC (Coliseum & Convention),
MBIA, 5.125s, 2015 3,000 3,035,940
Puerto Rico Public Finance Corp., AMBAC,
5.375s, 2019 1,300 1,470,326
Richland County, SC, School District No. 1,
5s, 2016 1,975 1,997,930
State of South Carolina, 5.3s, 2016 5,000 4,701,250
-----------
$18,892,359
- -------------------------------------------------------------------------------------
State and Local Appropriation - 4.3%
Berkeley County, SC, School District (Berkeley
School Facilities Group, Inc.), AMBAC, 5s, 2016+ $1,500 $ 1,481,220
Greenville, SC, Memorial Auditorium District,
Public Facilities Corp. (Bi-Lo Center), AMBAC,
4.75s, 2014 2,210 2,188,519
Hilton Head Island, SC, Public Finance Corp.,
Certificates of Participation, AMBAC, 5.75s, 2014+ 1,750 1,897,402
Puerto Rico Public Buildings Authority, 5.7s, 2009+ 1,000 1,103,150
Puerto Rico Public Buildings Authority, 5.5s, 2021+ 1,000 1,065,320
-----------
$ 7,735,611
- -------------------------------------------------------------------------------------
Refunded and Special Obligations - 13.1%
Berkeley County, SC, School District, AMBAC,
6.3s, 2004+ $1,800 $ 2,015,370
Calhoun, SC, Solid Waste Disposal Rev. (Eastman
Kodak), 6.75s, 2017 1,000 1,205,310
Columbia, SC, Waterworks & Sewer Rev., 0s, 2004 1,500 1,238,835
Commonwealth of Puerto Rico, 6.5s, 2004 2,000 2,275,640
Greenville County, SC, Certificates of Participation
(Greenville Technical College), AMBAC, 5.9s, 2005+ 850 949,594
Myrtle Beach, SC, Public Finance Corp.,
Certificates of Participation (Convention Center),
6.875s, 2002+ 2,500 2,776,075
Puerto Rico Aqueduct & Sewer Authority Rev.,
9s, 2005 750 922,463
Puerto Rico Highway & Transportation Authority
Rev., 6.625s, 2002 300 330,990
Puerto Rico Public Improvement Rev., 6.8s, 2002 425 471,155
Richland County, SC, Certificates of Participation,
FGIC, 0s, 2005+ 1,160 911,807
Richland County, SC, Certificates of Participation,
FGIC, 0s, 2006+ 1,160 869,037
South Carolina Jobs Economic Development
Authority (Carolina Hospital System), 7.55s, 2002 2,000 2,272,380
South Carolina Public Service Authority (Santee
Cooper), 6.625s, 2002 2,000 2,209,020
Spartanburg, SC, Waterworks Rev., FGIC,
6.05s, 2006 2,750 3,082,997
Williamsburg County, SC, School District Public
Facilities Corp., Certificates of Participation,
7.5s, 2003+ 175 201,838
Williamsburg County, SC, School District Public
Facilities Corp., Certificates of Participation,
7.5s, 2003+ 190 219,138
Williamsburg County, SC, School District Public
Facilities Corp., Certificates of Participation,
7.5s, 2003+ 205 236,439
</TABLE>
<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+ $ 220 $ 253,739
Williamsburg County, SC, School District Public
Facilities Corp., Certificates of Participation,
7.5s, 2003+ 270 311,407
Williamsburg County, SC, School District Public
Facilities Corp., Certificates of Participation,
7.5s, 2003+ 315 363,309
Williamsburg County, SC, School District Public
Facilities Corp., Certificates of Participation,
7.5s, 2003+ 635 732,384
-----------
$23,848,927
- -------------------------------------------------------------------------------------
Airport and Port Revenue - 1.9%
Horry County, SC, Airport Rev., "A", FSA,
5.7s, 2027 $2,250 $ 2,375,685
Richland Lexington, SC, Airport Rev. (Columbia
Airport), "A", AMBAC, 5.7s, 2026 1,000 1,047,690
-----------
$ 3,423,375
- -------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 13.9%
Camden, SC, Public Utility Rev., Refunding &
Improvement, MBIA, 5.5s, 2017 $1,500 $ 1,572,795
Colleton & Dorchester Counties, SC, Pollution
Control Rev., 6.6s, 2014 3,000 3,275,910
Fairfield County, SC, Pollution Control Rev.
(South Carolina Electric Co.), 6.5s, 2014 1,250 1,363,138
Oconee County, SC, Pollution Control Rev.
(Duke Power Co.), 7.5s, 2017 1,000 1,032,290
Piedmont, SC, Municipal Power Agency, FGIC,
6.25s, 2021 4,600 5,391,338
Puerto Rico Electric Power Authority, MBIA,
6.125s, 2008 1,025 1,172,559
South Carolina Public Service Authority, MBIA,
5.25s, 2013 1,965 2,039,257
South Carolina Public Service Authority, MBIA,
7.37s, 2013++ 3,000 3,285,540
South Carolina Public Service Authority, FGIC,
5.875s, 2023 2,000 2,170,620
South Carolina Public Service Authority, "B",
AMBAC, 5.5s, 2023 1,000 1,036,580
South Carolina Public Service Authority (South
Carolina Electric & Gas), MBIA, 5s, 2019 3,000 2,951,640
-----------
$25,291,667
- -------------------------------------------------------------------------------------
Health Care Revenue - 9.1%
Greenville County, SC, First Mortgage Rev.
(Chestnut Hill), 10.125s, 2016* $1,860 $ 930,000
Greenville, SC, Hospital System, Hospital Facilities
Rev., 6s, 2020 5,400 6,023,646
Greenville, SC, Hospital System, Hospital Facilities
Rev., 5.25s, 2023 2,040 2,050,526
Greenville, SC, Hospital System, Hospital Facilities
Rev., "A", 5.25s, 2017 2,785 2,817,501
Horry County, SC, Hospital Facilities Rev. (Conway
Hospital), 6.75s, 2012 4,320 4,660,978
-----------
$16,482,651
- -------------------------------------------------------------------------------------
</TABLE>
22 - MSC
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Revenue (Corporate Guarantee) - 9.1%
Charleston County, SC, Industrial Rev. (Zeigler
Coal Holdings), 6.95s, 2028 $ 600 $ 597,678
Chester County, SC, Industrial Development Rev.
(Springs Industries, Inc), 7.35s, 2014 1,000 1,078,110
Chester County, SC, Industrial Development Rev.
(Springs Industries, Inc.), 7.8s, 2014 1,025 1,093,132
Darlington County, SC, Industrial Development
Rev. (Nucor Corp.), 5.75s, 2023 2,000 2,065,720
Darlington County, SC, Industrial Development
Rev. (Sonoco Products Co.), 6.125s, 2025 1,500 1,593,345
Florence County, SC, Industrial Development Rev.
(Stone Container Corp.), 7.375s, 2007 785 837,124
Greenville County, SC, Industrial Development
Rev. (Kroger Co.), 7.85s, 2015 500 560,580
Lexington County, SC, Industrial Rev. (J. B. White
& Co.), 8s, 2005 480 512,798
Richland County, SC, Pollution Control Rev. (Union
Camp Corp.), 6.55s, 2020 1,800 1,945,476
Richland County, SC, Pollution Control Rev. (Union
Camp Corp.), 6.75s, 2022 2,000 2,152,900
York City, SC, Industrial Development Rev.
(Hoechst Celanese), 5.7s, 2024 4,000 4,048,120
------------
$ 16,484,983
- -------------------------------------------------------------------------------------
Insured Health Care Revenue - 7.0%
Charleston County, SC (Care Alliance Health
Services), FSA, 5.125s, 2014 $2,000 $ 2,033,140
Charleston County, SC (Care Alliance Health
Services), FSA, 5s, 2019 1,500 1,475,430
Charleston County, SC, Hospital Facilities Rev.
(Medical Society Health), MBIA, 5s, 2022 2,450 2,380,910
Lexington County, SC, Hospital Rev., FSA,
5.125s, 2021 1,500 1,487,160
South Carolina Jobs Economic Development
Authority, Hospital Facilities Rev. (Anderson Area
Medical Center), MBIA, 5.25s, 2015 1,750 1,786,085
Spartanburg County, SC, Health Service Rev.,
AMBAC, 5.3s, 2025 1,000 1,013,740
Spartanburg County, SC, Hospital Facilities Rev.
(Health Services District, Inc.), AMBAC,
5.3s, 2020 2,500 2,544,250
------------
$ 12,720,715
- -------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 2.4%
South Carolina Housing Finance & Development
Authority (Fairway Apartments), FHA, 7.625s, 2033 $1,915 $ 2,006,844
South Carolina Housing, Finance & Development
Authority (Hunting Ridge Apartments), 6.75s, 2025 1,000 1,071,340
South Carolina Housing, Finance & Development
Authority (Runaway Bay Apartments),
6.125s, 2015 1,300 1,362,946
------------
$ 4,441,130
- -------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 1.2%
Puerto Rico Highway & Transportation Authority,
5.5s, 2013 $1,000 $ 1,081,030
Virgin Islands Public Finance Authority, 5.5s, 2018 1,000 1,007,220
------------
$ 2,088,250
- --------------------------------------------------------------------------------
Single Family Housing Revenue
South Carolina Housing, Finance & Development
Authority Rev., 8.6s, 2019 $ 80 $ 81,290
- --------------------------------------------------------------------------------
Solid Waste Revenue - 1.1%
Orangeburg County, SC, Solid Waste Disposal
Facilities Rev., AMBAC, 5.7s, 2024 $2,000 $ 2,063,860
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
Turnpike Revenue - 0.8%
South Carolina Transportation Infrastructure Bank
Rev., MBIA, 5s, 2015 $1,500 $ 1,520,130
- -------------------------------------------------------------------------------------
Universities - 1.7%
Coastal Carolina University, SC, MBIA,
6.875s, 2026 $1,000 $ 1,139,110
Greenville County, SC (Greenville Technical
College), AMBAC, 5s, 2017 1,000 991,710
South Carolina Educational Facilities Authority,
Private Nonprofit Institutions (Furman
University), AMBAC, 5s, 2019 500 493,060
University of South Carolina, University Rev.,
MBIA, 5.75s, 2026 515 550,540
------------
$ 3,174,420
- -------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 19.8%
Cayce, SC, Waterworks & Sewage Rev., FSA,
5s, 2017 $1,500 $ 1,482,090
Charleston County, SC, Waterworks & Sewer
Rev., 6s, 2012 2,000 2,131,980
Charleston, SC, Waterworks & Sewer Rev.,
5.25s, 2015 1,000 1,034,150
Charleston, SC, Waterworks & Sewer Rev., 6s, 2018 1,500 1,585,755
Charleston, SC, Waterworks & Sewer Rev., MBIA,
5s, 2022 3,150 3,099,537
Columbia, SC, Waterworks & Sewer Rev., 0s, 2005 2,245 1,765,895
Columbia, SC, Waterworks & Sewer Rev., 0s, 2006 9,330 7,020,172
Columbia, SC, Waterworks & Sewer Rev.,
5.375s, 2012 3,500 3,693,270
Greenville, SC, Waterworks Rev., 5.5s, 2022 1,000 1,029,270
Myrtle Beach, SC, Water & Sewer Rev., MBIA,
5.5s, 2013 1,000 1,048,450
South Carolina Water Resources Authority Rev.
(Local Government Program), 7.25s, 2020 3,000 3,141,810
Spartanburg, SC, Waterworks Rev., FGIC, 5s, 2013 1,000 1,021,070
Spartanburg, SC, Waterworks Rev., FGIC, 5s, 2014 1,000 1,016,220
Spartanburg, SC, Waterworks Rev., FGIC, 5.25s, 2023 2,000 2,047,900
Western Carolina Regional Sewer Authority Rev.,
AMBAC, 0s, 2007 4,000 2,841,840
York County, SC, Water & Sewer Rev., 6.5s, 2025 2,000 2,058,120
------------
$ 36,017,529
- -------------------------------------------------------------------------------------
Other - 0.8%
North Charleston, SC, Municipal Golf Course
Mortgage Rev., 5s, 2009 $ 500 $ 493,945
North Charleston, SC, Municipal Golf Course
Mortgage Rev., 5.5s, 2019 1,000 979,660
------------
$ 1,473,605
- -------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $163,161,269) $175,740,502
- -------------------------------------------------------------------------------------
Floating Rate Demand Notes - 0.7%
- -------------------------------------------------------------------------------------
Harris County, TX, Hospital Rev. (Methodist
Hospital), due 12/01/25 $ 900 $ 900,000
Lincoln County, WY, Pollution Control Rev. (Exxon
Corp.), due 11/01/14 400 400,000
- -------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 1,300,000
- -------------------------------------------------------------------------------------
Total Investments (Identified Cost, $164,461,269) $177,040,502
Other Assets, Less Liabilities - 2.7% 4,971,883
- -------------------------------------------------------------------------------------
Net assets - 100.0% $182,012,385
- -------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
23 - MSC
<PAGE>
Portfolio of Investments - March 31, 1999
MFS TENNESSEE MUNICIPAL BOND FUND
Municipal Bonds - 96.7%
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 15.3%
Commonwealth of Puerto Rico, 5.375s, 2025 $1,640 $ 1,686,724
Commonwealth of Puerto Rico, 5.4s, 2025 3,000 3,110,880
Johnson City, TN, FGIC, 0s, 2012 1,690 907,091
Knoxville, TN, Public Improvement, 5.25s, 2015 1,000 1,027,180
Metropolitan Government of Nashville & Davidson
County, TN, 5.125s, 2025 3,250 3,262,317
Rutherford County, TN, 0s, 2015 1,500 637,995
Shelby County, TN, 5.25s, 2010 1,500 1,608,240
Shelby County, TN, 0s, 2012 3,000 1,605,780
Shelby County, TN, 0s, 2013 3,960 1,971,328
State of Tennessee, 5s, 2016 4,000 4,073,280
State of Tennessee, 5s, 2017 1,520 1,541,310
-----------
$21,432,125
- -------------------------------------------------------------------------------------
State and Local Appropriation - 2.9%
Gatlinburg, TN, Public Building Authority
(Gatlinburg Convention Center), AMBAC,
6.9s, 2012+ $1,000 $ 1,083,900
Puerto Rico Public Buildings Authority, 5.5s, 2021+ 1,000 1,065,320
Tennessee Local Development Authority Rev.,
MBIA, 5.125s, 2013 1,845 1,888,321
-----------
$ 4,037,541
- ------------------------------------------------------------------------------------
Refunded and Special Obligations - 16.1%
Knox County, TN, Industrial Development Board,
0s, 2016 $5,825 $ 2,381,726
Metropolitan Government of Nashville & Davidson
County, TN, 6.125s, 2002 2,255 2,457,792
Metropolitan Government of Nashville & Davidson
County, TN, Water & Sewer Rev., AMBAC,
6.075s, 2002 2,000 2,153,620
Mt. Juliet, TN, Public Building Authority
(Madison), MBIA, 7.7s, 2004 1,100 1,371,557
Mt. Juliet, TN, Public Building Authority
(Madison), MBIA, 7.8s, 2004 3,500 4,379,305
Shelby County, TN, 0s, 2005 1,000 616,160
Shelby County, TN, 5.75s, 2006 1,000 1,104,360
Territory of Virgin Islands, 7.75s, 2001 335 362,293
West Knox Utility District, TN, Water & Sewer
Rev., MBIA, 0s, 2002 1,315 1,141,959
West Knox Utility District, TN, Water & Sewer
Rev., MBIA, 0s, 2003 1,045 871,122
West Knox Utility District, TN, Water & Sewer
Rev., MBIA, 0s, 2004 1,920 1,528,090
West Knox Utility District, TN, Water & Sewer
Rev., MBIA, 0s, 2005 1,920 1,458,067
West Knox Utility District, TN, Water & Sewer
Rev., MBIA, 0s, 2006 1,920 1,388,525
West Knox Utility District, TN, Water & Sewer
Rev., MBIA, 0s, 2007 1,920 1,319,731
-----------
$22,534,307
- -------------------------------------------------------------------------------------
Airport and Port Revenue - 1.6%
Memphis-Shelby County, TN, Airport Authority
(North West Link & Parent Co.), 6.125s, 2016 $1,000 $ 1,015,410
Metropolitan Nashville Airport Authority, TN,
Airport Rev., FGIC, 5s, 2012 1,250 1,279,700
-----------
$ 2,295,110
- -------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 6.8%
Greater Dickson, TN, Gas Authority, Gas System
Rev., FSA, 4.75s, 2018 $1,000 $ 961,430
Harpeth Valley, TN, Utilities Improvement, MBIA,
4.75s, 2013 1,000 995,610
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
Electric and Gas Utility Revenue - continued
Jackson, TN, Electric Systems Rev., MBIA,
5s, 2018 $1,000 $ 991,340
Lawrenceburg, TN, Electric Rev., MBIA, 5.5s, 2026 1,255 1,301,084
Metropolitan Government of Nashville & Davidson
County, TN, MBIA, 0s, 2009 3,250 2,062,450
Metropolitan Government of Nashville & Davidson
County, TN, MBIA, 0s, 2010 2,480 1,483,585
Metropolitan Government of Nashville & Davidson
County, TN, MBIA, 0s, 2012 3,305 1,761,565
-----------
$ 9,557,064
- -------------------------------------------------------------------------------------
Health Care Revenue - 3.9%
Cookeville, TN, Industrial Development Board,
Hospital Rev. (Cookeville General), 5.75s, 2010 $2,000 $ 2,098,660
Knox County, TN, Health, Education & Housing
Facilities Board (East Tennessee Children's),
6.5s, 2012 1,000 1,073,260
Metropolitan Government of Nashville & Davidson
County, TN, Health & Educational Facilities
Board Rev. (Adventist Health System),
5.25s, 2020 1,000 966,080
Springfield, TN, Health & Higher Educational
Facilities (Northcrest Medical Center),
5.25s, 2013 1,290 1,285,717
-----------
$ 5,423,717
- -------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 8.0%
Bristol, TN, Industrial Development Authority
(Kmart Corp.), 7.5s, 2008 $1,105 $ 1,224,572
Hardeman County, TN (Correctional Facilities
Corp.), 7.75s, 2017 1,000 1,108,280
Hardeman County, TN (Corrections Corp. of
America), 7.375s, 2017 500 540,400
Humphreys County, TN, Certificates of
Participation (DuPont), 6.7s, 2024 1,750 1,957,778
Knox County,TN, Industrial Development Board
(Kroger Co.), 8.1s, 2003 2,000 2,208,860
Lawrenceburg, TN, Industrial Development Board
(Tridon, Inc.), 9.875s, 2006 1,000 1,035,350
McMinn County, TN, Industrial Development
Board, Pollution Control Rev. (Bowater),
7.625s, 2016 1,000 1,069,560
Memphis-Shelby County, TN, Airport Authority
(Federal Express Corp.), 6.2s, 2014 1,000 1,062,950
Metropolitan Government of Nashville & Davidson
County, TN (Wilson Sporting), 7.75s, 2014 1,000 1,046,490
-----------
$11,254,240
- -------------------------------------------------------------------------------------
Insured Health Care Revenue - 11.1%
Bristol, TN, Health & Educational Facilities Board
(Bristol Memorial), FGIC, 5.45s, 2021 $2,825 $ 2,882,065
Jackson, TN, Hospital Rev. (Jackson-Madison
County General Hospital), AMBAC, 5s, 2018 1,000 985,470
Johnson City, TN, Health & Education Financing
Authority (Johnson City Medical Center
Hospital), MBIA, 5.25s, 2016 1,375 1,397,165
Johnson City, TN, Health & Educational Refunding
& Improvement (Johnson City Medical Center
Hospital), MBIA, 5s, 2018 3,000 2,955,900
Knox County, TN, Health, Education & Housing
Facilities Board (Fort Sanders), MBIA,
5.75s, 2014 3,250 3,576,398
</TABLE>
24 - MTN
<PAGE>
Portfolio of Investments - continued
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 $ 3,686,475
------------
$ 15,483,473
- -------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 5.1%
Franklin, TN, Industrial Development Rev.
(Landings Apartments), FSA, 6s, 2026 $1,000 $ 1,052,200
Franklin, TN, Industrial Development Rev. (Sussex
Downs), FHA, 6.75s, 2027 1,000 1,083,540
Jackson, TN, Health, Education & Housing
Facilities Board (Posthouse Apartments), FHA,
7.1s, 2028 1,610 1,720,768
Metropolitan Government of Nashville & Davidson
County, TN, Health & Education Facility Board
Rev. (Herman Street), FHA, 7.25s, 2032 495 530,283
Metropolitan Government of Nashville & Davidson
County, TN, Industrial Development Board, FHA,
6.95s, 2026 1,000 1,072,140
Metropolitan Government of Nashville & Davidson
County, TN, Industrial Development Board, FHA,
7.5s, 2029 695 721,876
Metropolitan Government of Nashville & Davidson
County, TN, Industrial Development Board, FHA,
7.7s, 2029 1,000 1,034,240
------------
$ 7,215,047
- -------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 1.3%
Tennessee Local Development Authority Rev.,
Community Provider Loan, 7s, 2021 $1,000 $ 1,084,440
Virgin Islands Public Finance Authority,
5.875s, 2018 730 753,418
------------
$ 1,837,858
- -------------------------------------------------------------------------------------
Single Family Housing Revenue - 4.5%
Shelby County, TN, Single Family Mortgage Rev.,
FHA, 0s, 2015 $4,665 $ 938,738
Tennessee Housing Development Agency, 0s, 2006 3,955 2,860,098
Tennessee Housing Development Agency, 0s, 2016 5,000 1,920,750
Tennessee Housing Development Agency, 7.125s, 2026 590 613,128
------------
$ 6,332,714
- -------------------------------------------------------------------------------------
Turnpike Revenue - 3.7%
Puerto Rico Highway & Transportation Authority,
MBIA, 5.5s, 2015 $1,000 $ 1,092,410
Puerto Rico Highway & Transportation Authority
Rev., FSA, 5s, 2016 4,000 4,053,840
------------
$ 5,146,250
- -------------------------------------------------------------------------------------
Universities - 4.4%
Jackson, TN, Health, Educational & Housing
Facilities Board (Lambuth University), Asset
Guaranty, 5.9s, 2015 $1,000 $ 1,077,510
Metropolitan Government of Nashville & Davidson
County, TN, Health, Educational & Housing
Facilities Board (McKendree Village, Inc.),
5.125s, 2020 1,000 980,510
Metropolitan Government of Nashville & Davidson
County, TN, Health, Educational & Housing
Facilities Board (Vanderbilt University),
5.25s, 2012 1,000 1,044,090
Metropolitan Government of Nashville & Davidson
County, TN, Health, Educational & Housing
Facilities Board (Vanderbilt University),
5.3s, 2013 1,875 1,958,775
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
Universities - continued
Metropolitan Government of Nashville & Davidson
County, TN, Health, Educational & Housing
Facilities Board (Vanderbilt University),
5.375s, 2014 $1,000 $ 1,046,260
------------
$ 6,107,145
- -------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 12.0%
Clarksville, TN, Water, Sewer & Gas, MBIA,
5.25s, 2018 $1,000 $ 1,017,110
Madison, TN, Utility Waterworks Refunding,
MBIA, 5s, 2019 2,750 2,722,472
Metropolitan Government of Nashville & Davidson
County, TN, Water & Sewer Rev., FGIC, 5.2s,
2013 2,000 2,101,860
Metropolitan Government of Nashville & Davidson
County, TN, Water & Sewer Rev., FGIC,
5.1s, 2016 2,565 2,572,567
Metropolitan Government of Nashville & Davidson
County, TN, Water & Sewer Rev., AMBAC,
8.723s, 2022++ 1,000 1,155,930
Mt. Juliet, TN, Public Building Authority (New
Market), 8.375s, 2024 550 562,700
Mt. Juliet, TN, Public Building Authority (Tipton),
7.5s, 2004 275 281,124
Poplar Grove, TN, Utility District, Waterworks
Rev., 6.375s, 2011 500 528,905
Puerto Rico Aqueduct & Sewer Authority
Rev., 6.25s, 2012 2,000 2,313,140
White House Utility District, TN, Robertson &
Sumner Counties Waterworks, FGIC, 0s, 2014 3,590 1,757,125
White House Utility District, TN, Robertson &
Sumner Counties Waterworks, FGIC, 5.25s, 2017 1,700 1,729,087
------------
$ 16,742,020
- -------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $126,147,386) $135,398,611
- -------------------------------------------------------------------------------------
Floating Rate Demand Notes - 3.3%
- -------------------------------------------------------------------------------------
District of Columbia, due 08/15/38 $1,000 $ 1,000,000
Harris County, TX, Hospital Rev. (Methodist
Hospital), due 12/01/25 600 600,000
Hillsborough County, FL, Pollution Control Rev.,
due 05/15/18 700 700,000
Jacksonville, FL, Pollution Control Rev. (Power &
Light), due 05/01/29 2,100 2,100,000
Putnam County, GA, Pollution Control Rev.
(Georgia Power Co.), due 06/01/23 200 200,000
- -------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 4,600,000
- -------------------------------------------------------------------------------------
Total Investments (Identified Cost, $130,747,386) $139,998,611
Other Assets, Less Liabilities 62,619
- -------------------------------------------------------------------------------------
Net assets - 100.0% $140,061,230
- -------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
25 - MTN
<PAGE>
Portfolio of Investments - March 31, 1999
MFS VIRGINIA MUNICIPAL BOND FUND
Municipal Bonds - 100.5%
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 18.8%
Bristol, VA, MBIA, 5.3s, 2018 $1,250 $ 1,286,225
Chesapeake, VA, Public Improvement, 5.375s, 2013 3,500 3,686,830
Commonwealth of Puerto Rico, 5.5s, 2013 2,000 2,172,920
Fairfax County, VA, Public Improvement, 5.5s, 2013 2,470 2,580,656
Fairfax County, VA, Public Improvement, 4.75s, 2016 7,710 7,619,639
Fairfax County, VA, Public Improvement, 4.75s, 2017 7,695 7,556,259
Fairfax County, VA, Redevelopment & Housing
Authority, 5.5s, 2017 2,225 2,306,813
Hampton, VA, Refunding Public Improvement, 5s, 2014 1,000 1,037,960
Lebanon, VA, 6.375s, 2011 1,625 1,785,745
Loudoun County, VA, 5.25s, 2014 1,585 1,678,753
Loudoun County, VA, 5.25s, 2015 480 503,942
Loudoun County, VA, 5s, 2016 1,000 1,010,750
Newport News, VA, 5s, 2017 3,340 3,345,745
Newport News, VA, 5s, 2018 6,670 6,694,746
Norfolk, VA, Parking System Rev., MBIA, 5s, 2020 2,880 2,865,110
Puerto Rico Highway & Transportation Authority
Rev., FSA, 5.5s, 2015 2,000 2,184,820
Richmond, VA, 0s, 2006 1,000 755,830
Richmond, VA, 0s, 2006 2,500 1,889,575
Richmond, VA, 6.5s, 2006 2,000 2,121,980
Richmond, VA, 0s, 2007 5,280 3,800,808
Richmond, VA, 0s, 2008 2,000 1,374,380
Richmond, VA, 0s, 2008 5,270 3,621,491
Richmond, VA, 0s, 2009 5,175 3,378,551
Richmond, VA, 5.5s, 2009 5,000 5,484,900
Spotsylvania County, VA, FGIC, 6s, 2009 4,270 4,801,103
Virginia Public School Authority, School
Financing, 5.125s, 2017 1,000 1,015,350
-----------
$76,560,881
- -------------------------------------------------------------------------------------
State and Local Appropriation - 11.8%
Blue Ridge, VA, Regional Jail Authority, MBIA,
5.2s, 2017 $1,500 $ 1,522,575
Blue Ridge, VA, Regional Jail Authority, MBIA,
5.2s, 2021 4,830 4,886,752
Chesapeake, VA, Industrial Development Authority
(Chesapeake Court House), MBIA, 6.25s, 2011+ 3,985 4,497,949
Chesapeake, VA, Industrial Development Authority
(Chesapeake Court House), MBIA, 5.25s, 2017+ 2,000 2,044,800
Chesterfield County, VA, Industrial Development
Authority, Public Facilities, 7.5s, 2008+ 1,720 1,874,026
Henrico County, VA, Industrial Development
Authority, Lease Rev., 6.5s, 2010+ 5,000 5,607,700
Portsmouth, VA, Industrial Development Authority
Rev., Hotel Coference Center & Parking, FSA,
5.125s, 2014 1,170 1,199,660
Portsmouth, VA, Industrial Development Authority
Rev., Hotel Conference Center & Parking, FSA,
5.125s, 2015 1,000 1,018,050
Portsmouth, VA, Industrial Development Authority
Rev., Hotel Conference Center & Parking, FSA,
5.125s, 2016 1,295 1,312,508
Portsmouth, VA, Industrial Development Authority
Rev., Hotel Conference Center & Parking, FSA,
5.125s, 2017 1,360 1,372,254
Puerto Rico Public Buildings Authority, 5.25s, 2021+ 3,075 3,109,778
Puerto Rico Public Finance Corp., 7.643s, 2019 500 569,030
Virginia Biotechnology Research Park
(Biotech Two), 5.25s, 2018+ 8,800 8,873,040
Virginia Public Building Authority, MBIA, 0s, 2007+ 13,305 9,284,362
Virginia Public Building Authority, 5s, 2011 1,000 1,035,460
-----------
$48,207,944
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
Refunded and Special Obligations - 8.0%
Albemarle County, VA, Industrial Development
Authority, Health Services Rev., 6.5s, 2002 $1,000 $ 1,104,920
Arlington County, VA, Industrial Development
Authority (Arlington Hospital), 7.125s, 2001 1,000 1,099,980
Carroll County, VA, Solid Waste Authority
Rev., 7.5s, 2001 2,265 2,508,057
Fairfax County, VA, Redevelopment & Housing
Authority (Little River Glen), 8.95s, 1999 3,705 3,811,482
Fairfax, Fauquier & Loudoun Counties, VA, Health
Center Commission, Nursing Home Rev., 9s, 2000 1,840 2,009,335
Hampton Roads, VA, Medical College General
Rev., 6.875s, 2001 1,500 1,648,515
New Kent County, VA, Industrial Development
Authority, Public Facilities, 7.5s, 2001+ 700 771,974
Newport News, VA, 6.5s, 2000 875 933,380
Newport News, VA, 6.5s, 2000 2,205 2,352,118
Portsmouth, VA, 6.375s, 2001 1,555 1,682,370
Puerto Rico Aqueduct & Sewer Authority
Rev., 9s, 2005 4,150 5,104,292
Puerto Rico Aqueduct & Sewer Authority
Rev., 10.25s, 2009 400 537,360
Virginia Beach, VA, Certificates of Participation
(Judical Center), FGIC, 7.25s, 2000+ 4,955 5,312,008
Virginia Beach, VA, Water & Sewer Rev.,
6.625s, 2002 1,400 1,531,866
Virginia Public School Authority, 6.5s, 2004 1,875 2,129,794
-----------
$32,537,451
- -------------------------------------------------------------------------------------
Airport and Port Revenue - 8.2%
Metropolitan Washington, DC, Airport
Rev., 7.6s, 2014 $5,030 $ 5,338,339
Metropolitan Washington, DC, Airport
Rev., 5.5s, 2016 2,465 2,529,115
Metropolitan Washington, DC, Airport Rev., MBIA,
5s, 2018 2,000 1,946,460
Metropolitan Washington, DC, Airport Rev.,
5.75s, 2020 11,000 11,452,430
Metropolitan Washington, DC, Airport Rev., "A",
MBIA, 6.625s, 2019 1,000 1,090,400
Peninsula Airport Commission, VA, 7.3s, 2021 2,400 2,589,648
Puerto Rico Ports Authority (American Airlines),
6.3s, 2023 2,000 2,125,560
Puerto Rico Ports Authority (American Airlines),
6.25s, 2026 6,000 6,437,160
-----------
$33,509,112
- -------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 3.1%
Halifax County, VA, Industrial Authority
Rev. (Old Dominion Electric), 6s, 2022 $5,000 $ 5,152,900
Pittsylvania County, VA, Industrial Development
Authority Rev., 7.5s, 2014 4,000 4,372,840
Puerto Rico Electric Power Authority, 6s, 2015 3,000 3,242,820
-----------
$12,768,560
- -------------------------------------------------------------------------------------
Health Care Revenue - 4.3%
Lynchburg, VA, Industrial Development Authority,
5.2s, 2018 $1,000 $ 997,480
Martinsville, VA, Industrial Development Authority
(Beverley Enterprises), 6.75s, 2004 1,230 1,244,440
Peninsula Ports, VA, Health Care Rev. (Riverside
Health System), 6.625s, 2010 1,500 1,654,335
Peninsula Ports, VA, Health Care Rev. (Riverside
Health System), 5s, 2018 4,000 3,941,200
</TABLE>
26 - MVA
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
Health Care Revenue - continued
Virginia Beach, VA, Development Authority
(Beverly Enterprises), 10s, 2010 $1,210 $ 1,291,348
Virginia Beach, VA, Development Authority
(Sentara Health System), 5.25s, 2014 4,240 4,352,318
Virginia Beach, VA, Development Authority
(Sentara Health System), 4.75s, 2018 4,000 3,818,040
-----------
$17,299,161
- -------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 6.4%
Bedford County, VA, Industrial Development
Authority Rev. (Georgia Pacific Corp.),
5.6s, 2025 $6,000 $ 6,001,620
Isle Wight County, VA, Industrial Development
(Union Camp), 6.55s, 2024 8,000 8,726,800
Isle Wight County, VA, Industrial Development
(Union Camp), 6.1s, 2027 3,500 3,656,170
Loudoun, VA, Industrial Development Authority
Rev. (Dulles Airport Marriott Hotel), 7.125s, 2015 2,000 2,169,600
Lynchburg, VA, Industrial Development Authority
(Kroger Co.), 7.9s, 2011 1,000 1,101,990
Virginia Peninsula Ports Authority Rev. (Zeigler
Coal), 6.9s, 2022 1,500 1,501,575
West Point, VA, Industrial Development Authority,
Solid Waste Disposal Rev. (Chesapeake Corp.),
6.375s, 2019 2,600 2,763,072
-----------
$25,920,827
- -------------------------------------------------------------------------------------
Insured Health Care Revenue - 10.2%
Albemarle County, VA, Industrial Development
Authority, First Mortgage Rev., FHA, 8.9s, 2026 $2,150 $ 2,321,118
Danville, VA, Industrial Development Authority
Hospital Rev. (Danville Regional Medical Center),
AMBAC, 5.2s, 2018 2,500 2,555,525
Fredericksburg, VA, Industrial Development
(Medicorp Health Systems), AMBAC, 5.25s, 2023 11,000 11,123,970
Front Royal-Warren County, VA, Industrial
Development Authority, FHA, 9.45s, 2024 1,000 1,066,400
Hanover County, VA, Industrial Development
Authority, MBIA, 6s, 2009 1,550 1,737,411
Hanover County, VA, Industrial Development
Authority (Memorial Regional Medical Center),
MBIA, 6.5s, 2008 1,000 1,160,850
Hanover County, VA, Industrial Development
Authority (Memorial Regional Medical Center),
MBIA, 6.5s, 2009 1,510 1,754,499
Henrico County, VA, Industrial Development
Authority Rev. (Bon Secours Health), MBIA,
6.25s, 2020 1,500 1,735,905
Medical College of Virginia, Hospital Authority
Rev., MBIA, 5.125s, 2018 3,000 2,994,180
Peninsula Ports Authority, VA, (Whittaker
Memorial), FHA, 8.7s, 2023 2,100 2,136,057
Roanoke, VA, Industrial Development Authority,
Hospital Rev. (Roanoke Memorial), MBIA,
6.125s, 2017 6,000 6,816,720
Winchester, VA, Industrial Development Authority,
AMBAC, 9.652s, 2014++ 4,900 6,151,068
-----------
$41,553,703
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
Multi-Family Housing Revenue - 3.5%
Alexandria, VA, Redevelopment & Housing
Finance Authority (Jefferson Village
Apartments), 9s, 2018 $ 4,000 $ 4,121,200
Norfolk, VA, Redevelopment & Housing Authority
(Dockside Apartments), FHA, 7.375s, 2028 2,000 2,107,360
Virginia Housing Development Authority, 6.5s, 2013 2,300 2,478,457
Virginia Housing Development Authority, 5.1s, 2015 1,550 1,541,010
Virginia Housing Development Authority, 5.95s, 2016 1,905 2,017,204
Virginia Housing Development Authority, 6.6s, 2022 2,040 2,165,032
-----------
$14,430,263
- -------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 2.6%
Commonwealth of Puerto Rico, "A", AMBAC,
5s, 2021 $ 3,000 $ 2,992,020
Puerto Rico Highway & Transportation Authority,
5.5s, 2018 1,450 1,518,672
Virgin Islands Public Finance Authority,
5.625s, 2025 1,000 1,016,100
Virginia Transportation Board, US Route 58,
5.125s, 2021 5,000 5,002,500
-----------
$10,529,292
- -------------------------------------------------------------------------------------
Single Family Housing Revenue - 7.9%
Virginia Housing Development Authority, 7.77s,
2019++ $ 7,500 $ 7,969,650
Virginia Housing Development Authority, 6.2s, 2021 15,000 15,507,300
Virginia Housing Development Authority, 6.3s, 2025 8,500 8,888,960
-----------
$32,365,910
- -------------------------------------------------------------------------------------
Solid Waste Revenue - 0.1%
Arlington County, VA, Industrial Development
Authority, Resource Recovery Rev., FSA,
5.25s, 2010 $ 500 $ 523,605
- -------------------------------------------------------------------------------------
Turnpike Revenue - 3.7%
Chesapeake Bay, VA, Bridge & Tunnel Authority,
FGIC, 0s, 2005 $ 4,535 $ 3,504,557
North Virginia Transportation District, Commuter
Rail (Railway Express), FSA, 5.375s, 2013 3,220 3,392,270
North Virginia Transportation District, Commuter
Rail (Virginia Railway Express), MBIA, 6s, 2010 1,240 1,398,646
Pocahontas Parkway Assn., VA, Toll Road
Rev., 0s, 2012 1,500 726,375
Pocahontas Parkway Assn., VA, Toll Road
Rev., 0s, 2013 1,500 683,115
Pocahontas Parkway Assn., VA, Toll Road
Rev., 0s, 2014 1,500 641,790
Pocahontas Parkway Assn., VA, Toll Road
Rev., 0s, 2015 1,500 597,600
Pocahontas Parkway Assn., VA, Toll Road
Rev., 0s, 2016 1,500 560,070
Virginia Transportation Board, Transportation
Contract Rev., 6.5s, 2018 3,500 3,741,605
-----------
$2,028
- -------------------------------------------------------------------------------------
</TABLE>
27 - MVA
<PAGE>
Portfolio of Investments - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
Universities - 3.6%
Hampton Roads, VA, Medical College General
Rev., 6.875s, 2016 $2,000 $ 2,135,820
Loudoun County, VA, Industrial Development
Authority (George Washington University)
6.25s, 2012 2,710 2,894,009
Roanoke County, VA, Industrial Development
Authority (Hollins College), 5.25s, 2023 1,000 991,980
University of Virginia, University Rev.,
5.125s, 2015 2,540 2,591,892
Virginia College Building Authority, Educational
Facilities Rev. (Hampden Sydney College),
5s, 2016 1,730 1,732,232
Virginia College Building Authority, Educational
Facilities Rev. (Hampton University), 5s, 2018 1,655 1,619,153
Virginia College Building Authority, Educational
Facilities Rev. (Marymount), 7s, 2022 2,500 2,785,525
------------
$ 14,750,611
- -------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 5.2%
Chesterfield County, VA, Water & Sewer Rev.,
0s, 2007 $6,000 $ 4,152,420
Chesterfield County, VA, Water & Sewer Rev.,
0s, 2008 6,135 4,007,321
Chesterfield County, VA, Water & Sewer Rev.,
0s, 2009 6,135 3,817,442
Chesterfield County, VA, Water & Sewer Rev.,
0s, 2010 7,005 4,106,892
Hanover County, VA, Water & Sewer Systems,
MBIA, 5.25s, 2026 2,000 2,028,380
Henrico County, VA, Water & Sewer Rev.,
5.25s, 2013 1,195 1,248,990
Norfolk, VA, Water Rev., FSA, 5s, 2013 1,905 1,927,631
------------
$ 21,289,076
- -------------------------------------------------------------------------------------
Other - 3.1%
Danville, VA, Industrial Development Authority,
Industrial Development Rev. (Piedmont Mall),
8s, 2013 $2,875 $ 2,928,906
New River Valley, VA, Regional Jail Authority,
MBIA, 5.125s, 2019 6,905 6,938,075
Pamunkey, VA, Regional Jail Authority, MBIA,
5.75s, 2018 2,500 2,691,525
------------
$ 12,558,506
- -------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $385,225,758) $410,050,930
- -------------------------------------------------------------------------------------
Floating Rate Demand Notes - 0.3%
- -------------------------------------------------------------------------------------
District of Columbia, due 08/15/38 $ 500 $ 500,000
New Castle, PA, Area Hospital Authority
(Jameson Memorial Hospital), due 07/01/26 600 600,000
- -------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 1,100,000
- -------------------------------------------------------------------------------------
Total Investments (Identified Cost, $386,325,758) $411,150,930
Other Assets, Less Liabilities - (0.8%) (3,103,005)
- -------------------------------------------------------------------------------------
Net assets - 100.0% $408,047,925
- -------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
MFS WEST VIRGINIA MUNICIPAL BOND FUND
Municipal Bonds - 97.3%
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
General Obligation - 16.5%
Charleston, WV, Public Improvement, 7.2s, 2008 $1,240 $ 1,499,978
Charleston, WV, Public Improvement, 7.2s, 2009 1,140 1,388,281
Jefferson County, WV, Board of Education, FGIC,
6.85s, 2009 1,680 1,998,746
Monongalia County, WV, Board of Education,
MBIA, 7s, 2005 500 574,220
State of West Virginia, FGIC, 5s, 2015 1,500 1,498,020
State of West Virginia, FGIC, 5.5s, 2017 2,565 2,634,691
State of West Virginia, FGIC, 5s, 2021 4,000 3,904,880
State of West Virginia, FGIC, 5.25s, 2026 8,000 8,025,520
State of West Virginia, Water Development
Authority Rev., FSA, 6.2s, 2024 3,000 3,331,020
-----------
$24,855,356
- -------------------------------------------------------------------------------------
State and Local Appropriation - 9.4%
Charlestown, WV, Urban Renewal Authority Lease
Rev., FSA, 5.05s, 2014 $1,500 $ 1,514,295
Huntington, WV, Municipal Development Authority
Rev., MBIA, 5.1s, 2018 2,740 2,729,752
Puerto Rico Public Buildings Authority, 5.25s,
2021+ 3,115 3,150,231
West Virginia Building Commission, Lease Rev.
(West Virginia Regional Jail), AMBAC,
5.375s, 2018+ 3,000 3,160,680
West Virginia School Building Authority,
Refunding Capital Improvement, "B", FSA,
5.25s, 2021 3,550 3,590,151
-----------
$14,145,109
- -------------------------------------------------------------------------------------
Refunded and Special Obligations - 12.4%
Cabell, WV, Board of Education, MBIA, 6s, 2006 $ 500 $ 558,425
Kanawha County, WV, Building Commission (St.
Francis Hospital), 7.5s, 2007 215 245,274
Kanawha, Merc, & Nicholas Counties, WV, Single
Family Mortage Rev., 0s, 2014 2,230 943,067
Ohio County, WV, Board of Education, MBIA,
5.25s, 2018 1,180 1,224,899
Puerto Rico Aqueduct & Sewer Authority Rev.,
9s, 2005 1,500 1,844,925
West Virginia Building Commission, Lease Rev.
(West Virginia Regional Jail), MBIA, 7s, 2000+ 1,000 1,062,960
West Virginia Building Commission, Lease Rev.
(West Virginia Regional Jail), MBIA, 0s, 2007+ 3,150 2,204,622
West Virginia Building Commission, Lease Rev.
(West Virginia Regional Jail), MBIA, 0s, 2008+ 3,050 2,034,899
West Virginia Building Commission, Lease Rev.
(West Virginia Regional Jail), MBIA, 0s, 2009+ 2,500 1,585,300
West Virginia Parkways, Economic Development
& Tourism Authority, FGIC, 0s, 2005 2,250 1,738,372
West Virginia Parkways, Economic Development
& Tourism Authority, FGIC, 0s, 2007 2,000 1,399,760
West Virginia Parkways, Economic Development
Authority, FGIC, 0s, 2006 2,500 1,840,150
West Virginia Parkways, Economic Development
Authority, FGIC, 0s, 2008 610 406,980
West Virginia Water Development Authority,
7.625s, 2000 500 541,485
West Virginia Water Development Authority,
7.4s, 2001 750 833,993
West Virginia Water Development Authority,
7.1s, 2009 235 270,734
-----------
$18,735,845
- -------------------------------------------------------------------------------------
</TABLE>
28 - MWV
<PAGE>
Portfolio of Investments - continued
Municipal Bonds - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
Electric and Gas Utility Revenue - 12.2%
Marshall County, WV, Pollution Control Rev. (Ohio
Power Co.), 6.85s, 2022 $2,000 $ 2,158,420
Marshall County, WV, Pollution Control Rev. (Ohio
Power Co.), MBIA, 6.85s, 2022 3,150 3,457,975
Mason County, WV, Pollution Control Rev.
(Appalachian Power), MBIA, 6.6s, 2022 7,000 7,706,230
Puerto Rico Electric Power Authority, MBIA, 0s, 2017 3,705 1,527,831
Putnam County, WV, Pollution Control Rev.
(Applachian Power Co.), MBIA, 6.6s, 2019 3,200 3,506,240
------------
$ 18,356,696
- -------------------------------------------------------------------------------------
Health Care Revenue - 7.1%
Berkeley County, WV, Building Commission,
Hospital Rev. (City Hospital), 6.5s, 2022 $2,500 $ 2,644,475
Monongalia County, WV, Health Facilities Rev.
(Beverly Enterprises, Inc.), 10s, 2007 775 807,782
Ohio County, WV, County Commission Health
System (Ohio Valley Medical Center), 5.75s, 2013 750 744,810
West Virginia Hospital Finance Authority
(Charleston Area Medical Center), 6.5s, 2023 2,000 2,146,200
West Virginia Hospital Finance Authority (Fairmont
General Hospital), 6.625s, 2019 2,000 2,141,420
West Virginia Hospital Finance Authority (General
Division Medical Building), 7.25s, 2014 2,000 2,216,680
------------
$ 10,701,367
- -------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 13.2%
Braxton County, WV, Solid Waste Disposal
(Weyerhaeuser Co.), 6.5s, 2025 $2,000 $ 2,186,240
Jackson County, WV, Pollution Control Rev.
(Kaiser Aluminum & Chemical Corp.), 6.5s, 2008 3,235 3,244,996
Kanawha County, WV, Commercial Development
Rev. (Kroger Co.), 8s, 2011 1,000 1,101,850
Kanawha County, WV, Commercial Development
Rev. (May Department Stores Co.), 6.5s, 2003 3,000 3,268,410
Kanawha County, WV, Pollution Control Rev.
(Union Carbide Corp.), 8s, 2020 2,000 2,120,640
Monongalia County, WV, Commercial
Development Rev. (Kroger Co.), 7.7s, 2012 2,000 2,225,180
Ohio County, WV, Industrial Development Rev.
(Kroger Co.), 8.125s, 2011 2,000 2,214,800
Putnam County, WV, Industrial Development Rev.
(Rite Aid Corp.), 10.375s, 2002 590 592,702
South Charleston, WV, Pollution Control Rev.
(Union Carbide Corp.), 7.625s, 2005 2,500 2,893,925
------------
$ 19,848,743
- -------------------------------------------------------------------------------------
Insured Health Care Revenue - 7.4%
Harrison County, WV, Building Commission Rev.
(Maplewood Retirement), AMBAC, 5.25s, 2021 $2,625 $ 2,656,710
Monongalia County, WV, Building Commission,
Health Rev. (Monongalia General Hospital),
MBIA, 6.625s, 2011 1,000 1,067,280
Randolph County, WV, Community Health System
Rev. (Davis Health System, Inc.), FSA, 5.2s, 2021 1,000 999,260
West Virginia Hospital Finance Authority (Cabell
Huntington Hospital), AMBAC, 6.25s, 2019 5,000 5,468,550
West Virginia Hospital Finance Authority (West
Virginia University Hospital), AMBAC, 5s, 2018 1,000 978,170
------------
$ 11,169,970
- -------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 0.9%
Huntington, WV, Housing Corp., Multi-Family Rev.,
FNMA, 7.5s, 2024 $ 800 $ 844,704
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Principal Amount
Issuer (000 Omitted) Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
Multi-Family Housing Revenue - continued
Webster County, WV, Housing Development Rev.
(Circlebrook), FHA, 6.35s, 2008 $ 485 $ 515,759
------------
$ 1,360,463
- -------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 0.3%
Virgin Islands Public Finance Authority,
5.625s, 2025 $ 500 $ 508,050
- -------------------------------------------------------------------------------------
Single Family Housing Revenue - 2.6%
Berkeley County, WV, Residential Mortgage Rev.,
7.875s, 2012 $ 145 $ 150,658
Charles Town, WV, Residential Mortgage Rev.,
6.2s, 2011 380 396,169
Mason County, WV, 0s, 2014 1,700 546,023
West Virginia Housing Development Fund, 7.2s, 2020 1,765 1,865,640
West Virginia Housing Development Fund, 5.3s, 2023 1,000 998,290
------------
$ 3,956,780
- -------------------------------------------------------------------------------------
Turnpike Revenue - 4.9%
Puerto Rico Highway & Transportation Authority,
5.5s, 2013 $2,000 $ 2,162,060
West Virginia Parkways, Economic Development
& Tourism Authority, FGIC, 0s, 2006 1,885 1,400,442
West Virginia Parkways, Economic Development
& Tourism Authority, FGIC, 8.184s, 2019++ 3,300 3,721,410
------------
$ 7,283,912
- -------------------------------------------------------------------------------------
Universities - 2.0%
West Virginia University Rev. (West Virginia
University), AMBAC, 5s, 2017 $1,000 $ 991,660
West Virgina University Rev. (West Virginia
Dormitory), AMBAC, 5s, 2022 2,000 1,954,560
------------
$ 2,946,220
- -------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 7.2%
Beckley, WV, Industrial Development Rev.
(Beckley Water Co.), 7s, 2017 $2,000 $ 2,166,880
Charleston, WV, Sewer Rev., MBIA, 6.5s, 2017 2,260 2,485,616
Fairmont, WV, Waterworks Rev., AMBAC, 5.25s, 2015 1,825 1,902,289
Fairmont, WV, Waterworks Rev., AMBAC, 5.25s, 2017 1,000 1,019,770
West Virginia Water Development Authority, FSA,
5s, 2018 1,270 1,249,667
West Virginia Water Development Authority, FSA,
5.25s, 2035 2,000 2,015,280
------------
$ 10,839,502
- -------------------------------------------------------------------------------------
Other - 1.2%
West Virginia Building Commission, Lottery Rev.,
MBIA, 5.25s, 2010 $1,750 $ 1,851,448
- -------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $134,480,252) $146,559,461
- -------------------------------------------------------------------------------------
Floating Rate Demand Notes - 1.1%
- -------------------------------------------------------------------------------------
District of Columbia, due 08/15/38 $1,300 $ 1,300,000
Jackson County, MS, Pollution Control Rev.
(Chevron USA, Inc.), due 12/01/16 400 400,000
- -------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 1,700,000
- -------------------------------------------------------------------------------------
Total Investments (Identified Cost, $136,180,252) $148,259,461
Other Assets, Less Liabilities - 1.6% 2,362,348
- -------------------------------------------------------------------------------------
Net assets - 100.0% $150,621,809
- -------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements
</TABLE>
Portfolio Footnotes:
*Non-income producing security -- in default.
+Restricted security.
++Inverse floating rate security.
29 - MWV
<PAGE>
Financial Statements
Statements of Assets and Liabilities
<TABLE>
<CAPTION>
Mississippi New York
March 31, 1999 Fund Fund
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments -
Identified cost $ 71,051,605 $132,575,394
Unrealized appreciation 6,130,383 12,405,219
------------ ------------
Total, at value $ 77,181,988 $144,980,613
Cash 9,130 83,088
Receivable for Fund shares sold 182,390 410,779
Receivable for investments sold -- 35,000
Interest receivable 1,277,035 2,045,524
Other assets 996 1,904
------------ ------------
Total assets $ 78,651,539 $147,556,908
------------ ------------
Liabilities:
Distributions payable $ 181,908 $ 236,294
Payable for Fund shares reacquired 69,961 48,027
Payable for investments purchased -- --
Payable to affiliates -
Management fee 854 1,602
Shareholder servicing agent fee 240 451
Distribution and service fee 992 1,619
Administrative fee 32 60
Accrued expenses and other liabilities 63,280 94,419
------------ ------------
Total liabilities $ 317,267 $ 382,472
------------ ------------
Net assets $ 78,334,272 $147,174,436
------------ ------------
Net assets consist of:
Paid-in capital $ 75,321,153 $135,244,630
Unrealized appreciation on investments 6,130,383 12,405,219
Accumulated net realized loss on investments (3,200,255) (470,730)
Accumulated undistributed (distributions in excess of)
net investment income 82,991 (4,683)
------------ ------------
Total $ 78,334,272 $147,174,436
------------ ------------
Shares of beneficial interest outstanding:
Class A 6,732,225 10,361,445
Class B 1,153,201 2,699,102
Class C -- --
------------ ------------
Total shares of beneficial interest outstanding 7,885,426 13,060,547
------------ ------------
Net assets:
Class A $ 66,868,799 $116,766,597
Class B 11,465,473 30,407,839
Class C -- --
------------ ------------
Total net assets $ 78,334,272 $147,174,436
------------ ------------
Class A shares:
Net asset value per share
(net assets [divided by] shares of beneficial interest outstanding) $ 9.93 $ 11.27
------------ ------------
Offering price per share (100 [divided by] 95.25 of net asset value per share) $ 10.43 $ 11.83
------------ ------------
Class B shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) $ 9.94 $ 11.27
------------ ------------
Class C shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) -- --
------------ ------------
<CAPTION>
North Carolina Pennsylvania
March 31, 1999 Fund Fund
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments -
Identified cost $393,073,037 $ 43,538,046
Unrealized appreciation 31,097,902 2,487,754
------------ ------------
Total, at value $424,170,939 $ 46,025,800
Cash 68,896 61,080
Receivable for Fund shares sold 332,377 25,354
Receivable for investments sold 18,238,413 30,000
Interest receivable 6,521,722 641,386
Other assets 5,606 2,009
------------ ------------
Total assets $449,337,953 $ 46,785,629
------------ ------------
Liabilities:
Distributions payable $ 694,542 $ 70,285
Payable for Fund shares reacquired 568,781 6,610
Payable for investments purchased 17,234,928 1,026,435
Payable to affiliates -
Management fee 4,698 497
Shareholder servicing agent fee 1,321 --
Distribution and service fee 5,283 2,174
Administrative fee 176 --
Accrued expenses and other liabilities 134,804 1,557
------------ ------------
Total liabilities $ 18,644,533 $ 1,107,558
------------ ------------
Net assets $430,693,420 $ 45,678,071
------------ ------------
Net assets consist of:
Paid-in capital $400,895,282 $ 44,633,387
Unrealized appreciation on investments 31,097,902 2,487,754
Accumulated net realized loss on investments (849,895) (1,468,977)
Accumulated undistributed (distributions in excess of)
net investment income (449,869) 25,907
------------ ------------
Total $430,693,420 $ 45,678,071
------------ ------------
Shares of beneficial interest outstanding:
Class A 30,040,572 2,191,883
Class B 4,289,766 2,417,394
Class C 1,161,223 --
------------ ------------
Total shares of beneficial interest outstanding 35,491,561 4,609,277
------------ ------------
Net assets:
Class A $364,576,333 $ 21,695,040
Class B 52,033,028 23,983,031
Class C 14,084,059 --
------------ ------------
Total net assets $430,693,420 $ 45,678,071
------------ ------------
Class A shares:
Net asset value per share
(net assets [divided by] shares of beneficial interest outstanding) $ 12.14 $ 9.90
------------ ------------
Offering price per share (100 [divided by] 95.25 of net asset value per share) $ 12.75 $ 10.39
------------ ------------
Class B shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) $ 12.13 $ 9.92
------------ ------------
Class C shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) $ 12.13 --
------------ ------------
</TABLE>
On sales of $100,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class
B, and Class C shares.
See notes to financial statements
30
<PAGE>
Financial Statements - continued
Statements of Assets and Liabilities - continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
South Carolina
March 31, 1999 Fund
- -----------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments -
Identified cost $164,461,269
Unrealized appreciation 12,579,233
------------
Total, at value $177,040,502
Cash 37,471
Receivable for Fund shares sold 384,196
Receivable for investments sold 9,536,779
Interest receivable 2,343,741
Other assets 2,319
------------
Total assets $189,345,008
------------
Liabilities:
Distributions payable $ 307,272
Payable for Fund shares reacquired 120,761
Payable for investments purchased 6,801,026
Payable to affiliates -
Management fee 1,985
Shareholder servicing agent fee 558
Distribution and service fee 2,378
Administrative fee 75
Accrued expenses and other liabilities 98,568
------------
Total liabilities $ 7,332,623
------------
Net assets $182,012,385
------------
Net assets consist of:
Paid-in capital $169,108,414
Unrealized appreciation on investments 12,579,233
Accumulated undistributed net realized
gain (loss) on investments 426,551
Accumulated undistributed (distributions in excess of)
net investment income (101,813)
------------
Total $182,012,385
------------
Shares of beneficial interest outstanding:
Class A 11,682,365
Class B 2,904,325
Class C --
------------
Total shares of beneficial interest outstanding 14,586,690
------------
Net assets:
Class A $145,786,879
Class B 36,225,506
Class C --
------------
Total net assets $182,012,385
------------
Class A shares:
Net asset value per share
(net assets [divided by] shares of beneficial interest outstanding) $ 12.48
------------
Offering price per share (100 [divided by] 95.25 of net asset value per share $ 13.10
------------
Class B shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) $ 12.47
------------
Class C shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) --
------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Tennessee Virginia
March 31, 1999 Fund Fund
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments -
Identified cost $ 130,747,386 $386,325,758
Unrealized appreciation 9,251,225 24,825,172
------------- ------------
Total, at value $ 139,998,611 $411,150,930
Cash 42,535 74,771
Receivable for Fund shares sold 302,355 397,582
Receivable for investments sold -- 12,532,120
Interest receivable 1,702,469 5,890,017
Other assets 1,666 5,338
------------- ------------
Total assets $ 142,047,636 $430,050,758
------------- ------------
Liabilities:
Distributions payable $ 244,300 $ 788,454
Payable for Fund shares reacquired 38,503 464,493
Payable for investments purchased 1,616,610 20,613,603
Payable to affiliates -
Management fee 1,527 4,441
Shareholder servicing agent fee 429 1,249
Distribution and service fee 1,739 4,631
Administrative fee 57 167
Accrued expenses and other liabilities 83,241 125,795
------------- ------------
Total liabilities $ 1,986,406 $ 22,002,833
------------- ------------
Net assets $ 140,061,230 $408,047,925
------------- ------------
Net assets consist of:
Paid-in capital $ 129,923,047 $385,926,778
Unrealized appreciation on investments 9,251,225 24,825,172
Accumulated undistributed net realized
gain (loss) on investments 824,769 (1,711,217)
Accumulated undistributed (distributions in excess of)
net investment income 62,189 (992,808)
------------- ------------
Total $ 140,061,230 $408,047,925
------------- ------------
Shares of beneficial interest outstanding:
Class A 10,789,132 31,535,951
Class B 2,095,327 3,073,431
Class C -- 562,185
------------- ------------
Total shares of beneficial interest outstanding 12,884,459 35,171,567
------------- ------------
Net assets:
Class A $ 117,295,928 $365,880,147
Class B 22,765,302 35,644,364
Class C -- 6,523,414
------------- ------------
Total net assets $ 140,061,230 $408,047,925
------------- ------------
Class A shares:
Net asset value per share
(net assets [divided by] shares of beneficial interest outstanding) $ 10.87 $ 11.60
------------- ------------
Offering price per share (100 [divided by] 95.25 of net asset value per share) $ 11.41 $ 12.18
------------- ------------
Class B shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) $ 10.86 $ 11.60
------------- ------------
Class C shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) -- $ 11.60
------------- ------------
<CAPTION>
- -----------------------------------------------------------------------------------------------
West Virginia
March 31, 1999 Fund
- -----------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments -
Identified cost $136,180,252
Unrealized appreciation 12,079,209
------------
Total, at value $148,259,461
Cash 66,800
Receivable for Fund shares sold 191,072
Receivable for investments sold 20,000
Interest receivable 2,549,018
Other assets 1,924
------------
Total assets $151,088,275
------------
Liabilities:
Distributions payable $ 258,764
Payable for Fund shares reacquired 111,331
Payable for investments purchased --
Payable to affiliates -
Management fee 1,638
Shareholder servicing agent fee 461
Distribution and service fee 1,738
Administrative fee 61
Accrued expenses and other liabilities 92,473
------------
Total liabilities $ 466,466
------------
Net assets $150,621,809
------------
Net assets consist of:
Paid-in capital $141,846,242
Unrealized appreciation on investments 12,079,209
Accumulated undistributed net realized
gain (loss) on investments (2,794,663)
Accumulated undistributed (distributions in excess of)
net investment income (508,979)
------------
Total $150,621,809
------------
Shares of beneficial interest outstanding:
Class A 11,362,659
Class B 1,462,075
Class C --
------------
Total shares of beneficial interest outstanding 12,824,734
------------
Net assets:
Class A $133,456,157
Class B 17,165,652
Class C --
------------
Total net assets $150,621,809
------------
Class A shares:
Net asset value per share
(net assets [divided by] shares of beneficial interest outstanding) $ 11.75
------------
Offering price per share (100 [divided by] 95.25 of net asset value per share) $ 12.34
------------
Class B shares:
Net asset value and offering price per share
(net assets [divided by] shares of beneficial interest outstanding) $ 11.74
------------
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
31
<PAGE>
Financial Statements - continued
Statements of Operations
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Mississippi New York North Carolina Pennsylvania
Year Ended March 31, 1999 Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income:
Interest income $4,353,532 $ 8,463,128 $ 24,726,675 $2,201,934
---------- ------------ ------------ ----------
Expenses -
Management fee $ 421,088 $ 794,340 $ 2,360,841 $ 228,312
Trustees' compensation 17,430 18,411 20,063 17,694
Shareholder servicing agent fee 86,069 162,359 482,539 46,896
Distribution and service fee (Class A) -- 288,997 1,293,941 --
Distribution and service fee (Class B) 83,668 287,201 483,772 170,157
Distribution and service fee (Class C) -- -- 108,492 --
Administrative fee 9,599 18,071 53,811 5,215
Custodian fee 28,841 52,288 141,150 16,763
Printing 7,124 13,258 35,513 5,027
Postage 3,733 7,999 21,120 2,724
Auditing fees 32,765 33,258 31,759 30,765
Legal fees 4,140 1,106 4,663 3,393
Miscellaneous 46,907 55,250 129,983 28,185
---------- ------------ ------------ ----------
Total expenses $ 741,364 $ 1,732,538 $ 5,167,647 $ 555,131
Fees paid indirectly (11,839) (27,531) (68,633) (8,239)
Reduction of expenses by investment adviser (92,749) (174,958) (519,591) (199,040)
---------- ------------ ------------ ----------
Net expenses $ 636,776 $ 1,530,049 $ 4,579,423 $ 347,852
---------- ------------ ------------ ----------
Net investment income $3,716,756 $ 6,933,079 $ 20,147,252 $1,854,082
---------- ------------ ------------ ----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 76,525 $ 2,297,680 $ 5,879,765 $ 186,127
Futures contracts 18,037 23,730 (738,171) 4,145
---------- ------------ ------------ ----------
Net realized gain on investments $ 94,562 $ 2,321,410 $ 5,141,594 $ 190,272
Change in unrealized appreciation (depreciation) on investments 308,084 (2,186,539) (5,778,205) 119,606
---------- ------------ ------------ ----------
Net realized and unrealized gain (loss) on investments $ 402,646 $ 134,871 $ (636,611) $ 309,878
---------- ------------ ------------ ----------
Increase in net assets from operations $4,119,402 $ 7,067,950 $ 19,510,641 $2,163,960
========== ============ ============ ==========
</TABLE>
See notes to financial statements
32
<PAGE>
Financial Statements - continued
Statements of Operations - continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
South Carolina Tennessee Virginia West Virginia
Year Ended March 31, 1999 Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income:
Interest income $ 9,938,078 $ 7,437,623 $ 23,219,418 $8,571,570
------------ ------------ ------------ ----------
Expenses -
Management fee $ 980,307 $ 701,813 $ 2,232,327 $ 810,284
Trustees' compensation 19,268 19,090 19,962 19,150
Shareholder servicing agent fee 200,373 143,458 456,269 165,623
Distribution and service fee (Class A) 511,304 376,654 1,284,437 457,498
Distribution and service fee (Class B) 320,229 199,023 341,856 165,063
Distribution and service fee (Class C) -- -- 44,052 --
Administrative fee 22,313 16,004 50,821 18,443
Custodian fee 61,266 45,301 137,937 52,436
Printing 15,754 9,372 33,742 12,850
Postage 8,918 5,105 17,671 5,613
Auditing fees 30,759 32,258 22,458 31,458
Legal fees 4,042 3,211 4,553 4,263
Miscellaneous 67,364 50,742 132,396 58,433
------------ ------------ ------------ ----------
Total expenses $ 2,241,897 $ 1,602,031 $ 4,778,481 $1,801,114
Fees paid indirectly (23,726) (23,489) (87,571) (19,708)
Reduction of expenses by investment adviser (216,017) (154,783) (491,314) (178,516)
------------ ------------ ------------ ----------
Net expenses $ 2,002,154 $ 1,423,759 $ 4,199,596 $1,602,890
------------ ------------ ------------ ----------
Net investment income $ 7,935,924 $ 6,013,864 $ 19,019,822 $6,968,680
------------ ------------ ------------ ----------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) -
Investment transactions $ 1,538,393 $ 1,015,510 $ 4,967,452 $ 444,899
Futures contracts 51,424 36,108 119,136 41,103
------------ ------------ ------------ ----------
Net realized gain on investments $ 1,589,817 $ 1,051,618 $ 5,086,588 $ 486,002
Change in unrealized depreciation on investments (2,199,147) (1,234,421) (5,493,034) (796,403)
------------ ------------ ------------ ----------
Net realized and unrealized loss on investments $ (609,330) $ (182,803) $ (406,446) $ (310,401)
------------ ------------ ------------ ----------
Increase in net assets from operations $ 7,326,594 $ 5,831,061 $ 18,613,376 $6,658,279
------------ ------------ ------------ ----------
</TABLE>
See notes to financial statements
33
<PAGE>
Financial Statements - continued
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Mississippi
Year Ended March 31, 1999 Fund
- ------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 3,716,756
Net realized gain on investments 94,562
Net unrealized gain (loss) on investments 308,084
------------
Increase in net assets from operations $ 4,119,402
------------
Distributions declared to shareholders -
From net investment income (Class A) $ (3,287,679)
From net investment income (Class B) (454,600)
From net investment income (Class C) --
In excess of net investment income (Class A) --
In excess of net investment income (Class B) --
------------
Total distributions declared to shareholders $ (3,742,279)
------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 7,347,508
Net asset value of shares issued to shareholders
in reinvestment of distributions 1,634,892
Cost of shares reacquired (7,804,067)
------------
Net increase (decrease) in net assets from Fund
share transactions $ 1,178,333
------------
Total increase (decrease) in net assets $ 1,555,456
Net assets:
At beginning of period 76,778,816
------------
At end of period $ 78,334,272
============
Accumulated undistributed (distributions in excess of)
net investment income included in net assets at end of period $ 82,991
============
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
New York North Carolina Pennsylvania
Year Ended March 31, 1999 Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 6,933,079 $ 20,147,252 $ 1,854,082
Net realized gain on investments 2,321,410 5,141,594 190,272
Net unrealized gain (loss) on investments (2,186,539) (5,778,205) 119,606
------------- -------------- ------------
Increase in net assets from operations $ 7,067,950 $ 19,510,641 $ 2,163,960
------------- -------------- ------------
Distributions declared to shareholders -
From net investment income (Class A) $ (5,734,216) $ (17,636,624) $ (968,779)
From net investment income (Class B) (1,208,410) (1,992,249) (895,842)
From net investment income (Class C) -- (445,446) --
In excess of net investment income (Class A) (3,870) -- --
In excess of net investment income (Class B) (815) -- --
------------- -------------- ------------
Total distributions declared to shareholders $ (6,947,311) $ (20,074,319) $ (1,864,621)
------------- -------------- ------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 29,293,927 $ 95,174,583 $ 9,693,546
Net asset value of shares issued to shareholders
in reinvestment of distributions 4,020,370 11,591,211 1,050,475
Cost of shares reacquired (32,254,619) (108,484,241) (4,833,679)
------------- -------------- ------------
Net increase (decrease) in net assets from Fund
share transactions $ 1,059,678 $ (1,718,447) $ 5,910,342
------------- -------------- ------------
Total increase (decrease) in net assets $ 1,180,317 $ (2,282,125) $ 6,209,681
Net assets:
At beginning of period 145,994,119 432,975,545 39,468,390
------------- -------------- ------------
At end of period $ 147,174,436 $ 430,693,420 $ 45,678,071
============= ============== ============
Accumulated undistributed (distributions in excess of)
net investment income included in net assets at end of period $ (4,683) $ (449,869) $ 25,907
============= ============== ============
</TABLE>
See notes to financial statements
34
<PAGE>
Financial Statements - continued
Statements of Changes in Net Assets - continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
South Carolina Tennessee
Year Ended March 31, 1999 Fund Fund
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 7,935,924 $ 6,013,864
Net realized gain on investments 1,589,817 1,051,618
Net unrealized loss on investments (2,199,147) (1,234,421)
------------- -------------
Increase in net assets from operations $ 7,326,594 $ 5,831,061
------------- -------------
Distributions declared to shareholders -
From net investment income (Class A) $ (6,682,276) $ (5,137,762)
From net investment income (Class B) (1,253,648) (821,549)
From net investment income (Class C) -- --
From net realized gain on investments (Class A) -- (337,988)
From net realized gain on investments (Class B) -- (64,567)
In excess of net investment income (Class A) (23,065) --
In excess of net investment income (Class B) (4,327) --
------------- -------------
Total distributions declared to shareholders $ (7,963,316) $ (6,361,866)
------------- -------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 21,347,777 $ 23,846,170
Net asset value of shares issued to shareholders
in reinvestment of distributions 4,185,898 3,141,165
Cost of shares reacquired (19,791,022) (13,464,339)
------------- -------------
Net increase (decrease) in net assets from Fund
share transactions $ 5,742,653 $ 13,522,996
------------- -------------
Total increase (decrease) in net assets $ 5,105,931 $ 12,992,191
Net assets:
At beginning of period 176,906,454 127,069,039
------------- -------------
At end of period $ 182,012,385 $ 140,061,230
------------- -------------
Accumulated undistributed (distributions in excess of)
net investment income included in net assets at end of period $ (101,813) $ 62,189
------------- -------------
<CAPTION>
- ------------------------------------------------------------------------------------------------
Virginia West Virginia
Year Ended March 31, 1999 Fund Fund
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 19,019,822 $ 6,968,680
Net realized gain on investments 5,086,588 486,002
Net unrealized loss on investments (5,493,034) (796,403)
------------- -------------
Increase in net assets from operations $ 18,613,376 $ 6,658,279
------------- -------------
Distributions declared to shareholders -
From net investment income (Class A) $ (17,358,181) $ (6,282,387)
From net investment income (Class B) (1,394,357) (686,293)
From net investment income (Class C) (179,277) --
From net realized gain on investments (Class A) -- --
From net realized gain on investments (Class B) -- --
In excess of net investment income (Class A) -- (26,990)
In excess of net investment income (Class B) -- (2,948)
------------- -------------
Total distributions declared to shareholders $ (18,931,815) $ (6,998,618)
------------- -------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 56,562,932 $ 15,549,189
Net asset value of shares issued to shareholders
in reinvestment of distributions 9,409,188 3,876,569
Cost of shares reacquired (66,614,366) (13,937,487)
------------- -------------
Net increase (decrease) in net assets from Fund
share transactions $ (642,246) $ 5,488,271
------------- -------------
Total increase (decrease) in net assets $ (960,685) $ 5,147,932
Net assets:
At beginning of period 409,008,610 145,473,877
------------- -------------
At end of period $ 408,047,925 $ 150,621,809
------------- -------------
Accumulated undistributed (distributions in excess of)
net investment income included in net assets at end of period $ (992,808) $ (508,979)
------------- -------------
</TABLE>
See notes to financial statements
35
<PAGE>
Financial Statements - continued
Statements of Changes in Net Assets - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Mississippi
Year Ended March 31, 1998 Fund
- -------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 3,797,478
Net realized gain on investments 1,058,128
Net unrealized gain on investments 3,159,311
-------------
Increase in net assets from operations $ 8,014,917
-------------
Distributions declared to shareholders -
From net investment income (Class A) $ (3,282,482)
From net investment income (Class B) (453,554)
From net investment income (Class C) --
-------------
Total distributions declared to shareholders $ (3,736,036)
-------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 4,313,446
Net asset value of shares issued to shareholders
in reinvestment of distributions 1,609,390
Cost of shares reacquired (11,066,227)
-------------
Net increase (decrease) in net assets from Fund share
transactions $ (5,143,391)
-------------
Total increase (decrease) in net assets $ (864,510)
Net assets:
At beginning of period 77,643,326
-------------
At end of period $ 76,778,816
=============
Accumulated undistributed (distributions in excess of)
net investment income included in net assets at end of period $ 108,514
=============
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
New York North Carolina Pennsylvania
Year Ended March 31, 1998 Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 7,382,451 $ 20,821,970 $ 1,877,514
Net realized gain on investments 557,413 4,101,800 370,355
Net unrealized gain on investments 8,128,220 17,339,006 1,973,736
------------- ------------- -------------
Increase in net assets from operations $ 16,068,084 $ 42,262,776 $ 4,221,605
------------- ------------- -------------
Distributions declared to shareholders -
From net investment income (Class A) $ (5,984,379) $ (18,623,468) $ (912,228)
From net investment income (Class B) (1,119,683) (1,800,152) (971,524)
From net investment income (Class C) -- (300,815) --
------------- ------------- -------------
Total distributions declared to shareholders $ (7,104,062) $ (20,724,435) $ (1,883,752)
------------- ------------- -------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 30,612,726 $ 53,922,184 $ 7,256,261
Net asset value of shares issued to shareholders
in reinvestment of distributions 4,100,520 12,040,260 1,024,716
Cost of shares reacquired (45,994,931) (78,460,580) (12,981,830)
------------- ------------- -------------
Net increase (decrease) in net assets from Fund share
transactions $ (11,281,685) $ (12,498,136) $ (4,700,853)
------------- ------------- -------------
Total increase (decrease) in net assets $ (2,317,663) $ 9,040,205 $ (2,363,000)
Net assets:
At beginning of period 148,311,782 423,935,340 41,831,390
------------- ------------- -------------
At end of period $ 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 $ 9,547 $ (573,058) $ 36,446
============= ============= =============
</TABLE>
See notes to financial statements
36
<PAGE>
Financial Statements - continued
Statements of Changes in Net Assets - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
South Carolina Tennessee
Year Ended March 31, 1998 Fund Fund
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 8,350,683 $ 6,153,537
Net realized gain on investments 2,305,563 1,327,353
Net unrealized gain on investments 6,822,281 5,784,067
------------- -------------
Increase in net assets from operations $ 17,478,527 $ 13,264,957
------------- -------------
Distributions declared to shareholders -
From net investment income (Class A) $ (7,292,328) $ (5,444,688)
From net investment income (Class B) (1,058,355) (708,849)
From net investment income (Class C) -- --
In excess of net investment income (Class A) (10,662) (29,444)
In excess of net investment income (Class B) (1,547) (3,833)
In excess of net investment income (Class C) -- --
------------- -------------
Total distributions declared to shareholders $ (8,362,892) $ (6,186,814)
------------- -------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 17,049,823 $ 11,515,607
Net asset value of shares issued to shareholders
in reinvestment of distributions 4,449,578 3,023,395
Cost of shares reacquired (24,487,967) (16,983,923)
------------- -------------
Net increase (decrease) in net assets from Fund share transactions $ (2,988,566) $ (2,444,921)
------------- -------------
Total increase (decrease) in net assets $ 6,127,069 $ 4,633,222
Net assets:
At beginning of period 170,779,385 122,435,817
------------- -------------
At end of period $ 176,906,454 $ 127,069,039
------------- -------------
Accumulated undistributed (distributions in excess of)
net investment income included in net assets at end of period $ (144,164) $ 7,636
------------- -------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Virginia West Virginia
Year Ended March 31, 1998 Fund Fund
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 20,266,708 $ 7,072,929
Net realized gain on investments 6,279,954 345,141
Net unrealized gain on investments 13,748,696 5,401,673
------------- -------------
Increase in net assets from operations $ 40,295,358 $ 12,819,743
------------- -------------
Distributions declared to shareholders -
From net investment income (Class A) $ (18,762,689) $ (6,433,739)
From net investment income (Class B) (1,362,739) (639,190)
From net investment income (Class C) (141,280) --
In excess of net investment income (Class A) (62,418) (68,917)
In excess of net investment income (Class B) (4,534) (6,847)
In excess of net investment income (Class C) (470) --
------------- -------------
Total distributions declared to shareholders $ (20,334,130) $ (7,148,693)
------------- -------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 43,445,071 $ 9,813,340
Net asset value of shares issued to shareholders
in reinvestment of distributions 9,957,896 3,862,325
Cost of shares reacquired (77,289,917) (13,566,545)
------------- -------------
Net increase (decrease) in net assets from Fund share transactions $ (23,886,950) $ 109,120
------------- -------------
Total increase (decrease) in net assets $ (3,925,722) $ 5,780,170
Net assets:
At beginning of period 412,934,332 139,693,707
------------- -------------
At end of period $ 409,008,610 $ 145,473,877
------------- -------------
Accumulated undistributed (distributions in excess of)
net investment income included in net assets at end of period $ (1,185,067) $ (505,444)
------------- -------------
</TABLE>
See notes to financial statements
37
<PAGE>
Financial Statements - continued
Financial Highlights
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Mississippi Fund
- -------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
------------------------
1999 1998
------------------------
Class A
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.88 $ 9.35
------ ------
Income from investment operations# -
Net investment income[sec] $ 0.49 $ 0.49
Net realized and unrealized gain (loss) on investments 0.06 0.52
------ ------
Total from investment operations $ 0.55 $ 1.01
------ ------
Less distributions declared to shareholders -
From net investment income++++ $(0.50) $(0.48)
From net realized gain on investments++++++ -- --
In excess of net realized gain on investments -- --
------ ------
Total distributions declared to shareholders $(0.50) $(0.48)
------ ------
Net asset value - end of period $ 9.93 $ 9.88
------ ------
Total return++ 5.62% 11.02%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 0.73% 0.78%
Net investment income 4.94% 5.04%
Portfolio turnover 6% 18%
Net assets at end of period (000 omitted) $66,869 $66,061
<CAPTION>
Year Ended March 31,
---------------------------------
1997 1996 1995
---------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.35 $ 9.15 $ 9.19
------ ------ ------
Income from investment operations# -
Net investment income[sec] $ 0.48 $ 0.52 $ 0.54
Net realized and unrealized gain (loss) on investments 0.00 0.20 (0.01)
------ ------ ------
Total from investment operations $ 0.48 $ 0.72 $ 0.53
------ ------ ------
Less distributions declared to shareholders -
From net investment income++++ $(0.48) $(0.52) $(0.54)
From net realized gain on investments++++++ -- -- (0.00)
In excess of net realized gain on investments -- -- (0.03)
------ ------- ------
Total distributions declared to shareholders $(0.48) $(0.52) $(0.57)
------ ------- ------
Net asset value - end of period $ 9.35 $ 9.35 $ 9.15
------ ------- ------
Total return++ 5.22% 7.99% 6.08%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 0.87% 0.45% 0.22%
Net investment income 5.14% 5.51% 5.99%
Portfolio turnover 17% 31% 47%
Net assets at end of period (000 omitted) $66,630 $74,435 $79,033
</TABLE>
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursing agent. For fiscal years ending after
September 1, 1995, the Fund's expenses are calculated without reduction for
this expense offset arrangement.
+Total returns for Class A shares do not include the applicable sales
charge.
If the charge had been included, the results would have been lower.
++For the years ended March 31, 1996, and 1995, the per share distributions
in excess of net investment income were less than $0.01.
+++For the year ended March 31, 1995, the per share distribution from net
realized gain on investments was less than $0.01.
[sec]Subject to reimbursment by the Fund, the investment adviser agreed to
maintain the expenses of the Fund, exclusive of management and distribution
and service fees, at not more than 0.40% of average daily net assets for
certain of the periods indicated. The investment adviser voluntarily waived
a portion of its management fee for certain of the periods indicated. To
the extent actual expenses were over/under this limitation and the waiver
had not been in place, the net investment income per share and the ratios
would have been:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.48 $ 0.48 -- $ 0.48 $ 0.48
Ratios (to average net assets):
Expenses## 0.85% 0.85% -- 0.88% 0.93%
Net investment income 4.82% 4.97% -- 5.08% 5.28%
</TABLE>
See notes to financial statements
38
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Mississippi Fund
- -------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
------------------------
1999 1998
------------------------
Class B
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.89 $ 9.36
------ ------
Income from investment operations# -
Net investment income[sec] $ 0.41 $ 0.41
Net realized and unrealized gain on investments 0.06 0.53
------ ------
Total from investment operations $ 0.47 $ 0.94
------ ------
Less distributions declared to shareholders -
From net investment income++ $(0.42) $ (0.41)
From net realized gain on investments++++ -- --
In excess of net realized gain on investments -- --
------- -------
Total distributions declared to shareholders $(0.42) $ (0.41)
------- -------
Net asset value - end of period $ 9.94 $ 9.89
------- -------
Total return 4.80% 10.15%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.51% 1.56%
Net investment income 4.16% 4.26%
Portfolio turnover 6% 18%
Net assets at end of period (000 omitted) $11,465 $10,717
<CAPTION>
Year Ended March 31,
---------------------------------
1997 1996 1995
---------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.36 $ 9.16 $ 9.19
------- ------ ------
Income from investment operations# -
Net investment income[sec] $ 0.40 $ 0.44 $ 0.45
Net realized and unrealized gain on investments 0.00 0.20 0.00
------ ------ ------
Total from investment operations $ 0.40 $ 0.64 $ 0.45
------ ------ ------
Less distributions declared to shareholders -
From net investment income++ $(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 $(0.40) $(0.44) $(0.48)
------ ------ ------
Net asset value - end of period $ 9.36 $ 9.36 $ 9.16
------ ------- ------
Total return 4.33% 7.11% 5.14%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.72% 1.28% 1.23%
Net investment income 4.29% 4.67% 4.97%
Portfolio turnover 17% 31% 47%
Net assets at end of period (000 omitted) $11,014 $11,475 $ 9,429
</TABLE>
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursing agent. For fiscal years ending after
September 1, 1995, the Fund's expenses are calculated without reduction for
this expense offset arrangement.
++For the years ended March 31, 1996, and 1995, the per share distributions
in excess of net investment income were less than $0.01.
++++For the year ended March 31, 1995, the per share distribution from net
realized gain on investments was less than $0.01.
[sec]Subject to reimbursment by the Fund, the investment adviser agreed to
maintain the expenses of the Fund, exclusive of management and distribution
and service fees, at not more than 0.40% of average daily net assets for
certain of the periods indicated. The investment adviser voluntarily waived
a portion of its management fee for certain of the periods indicated. To
the extent actual expenses were over/under this limitation and the waiver
had not been in place, the net investment income per share and the ratios
would have been:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.40 $ 0.40 -- $ 0.40 $ 0.38
Ratios (to average net assets):
Expenses## 1.63% 1.63% -- 1.71% 2.01%
Net investment income 4.04% 4.19% -- 4.24% 4.19%
</TABLE>
See notes to financial statements
39
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
New York Fund
- -------------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
------------------------------------------------------------
1999 1998 1997 1996 1995
------------------------------------------------------------
Class A
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.26 $ 10.60 $ 10.66 $ 10.49 $ 10.50
-------- -------- -------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.56 $ 0.57 $ 0.55 $ 0.55 $ 0.56
Net realized and unrealized gain (loss) on investments 0.01 0.64 (0.06) 0.17 0.05
-------- -------- -------- -------- --------
Total from investment operations $ 0.57 $ 1.21 $ 0.49 $ 0.72 $ 0.61
------- -------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.56) $ (0.55) $ (0.55) $ (0.55) $ (0.56)
In excess of net investment income++++ (0.00) -- -- (0.00) (0.01)
In excess of net realized gain on investments -- -- -- -- (0.05)
-------- -------- -------- -------- --------
Total distributions declared to shareholders $ (0.56) $ (0.55) $ (0.55) $ (0.55) $ (0.62)
-------- -------- -------- -------- --------
Net asset value - end of period $ 11.27 $ 11.26 $ 10.60 $ 10.66 $ 10.49
-------- -------- -------- -------- --------
Total return++ 5.14% 11.59% 4.68% 6.98% 6.03%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 0.93% 1.03% 1.11% 1.10% 1.07%
Net investment income 4.93% 5.14% 5.18% 5.09% 5.43%
Portfolio turnover 26% 41% 64% 102% 147%
Net assets at end of period (000 omitted) $116,767 $119,376 $121,588 $134,449 $146,597
</TABLE>
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursing agent. For fiscal years ending after
September 1, 1995, the Fund's expenses are calculated without reduction for
this expense offset arrangement.
++Total returns for Class A shares do not include the applicable sales
charge. If the charge had been included, the results would have been lower.
++++For the years ended March 31, 1999 and 1996, the per share distributions in
excess of net investment income were less than $0.01.
[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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.55 $ 0.56 -- $ 0.54 $ 0.55
Ratios (to average net assets):
Expenses## 1.05% 1.10% -- 1.20% 1.18%
Net investment income 4.81% 5.07% -- 4.99% 5.31%
</TABLE>
See notes to financial statements
40
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
New York Fund
- -------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
--------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.26 $ 10.59 $ 10.66 $ 10.49 $ 10.50
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.47 $ 0.49 $ 0.47 $ 0.47 $ 0.47
Net realized and unrealized gain (loss) on investments 0.01 0.64 (0.07) 0.17 0.05
------- ------- ------- ------- -------
Total from investment operations $ 0.48 $ 1.13 $ 0.40 $ 0.64 $ 0.52
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.47) $ (0.46) $ (0.47) $ (0.47) $ (0.47)
In excess of net investment income++ ( 0.00) -- -- (0.00) (0.01)
In excess of net realized gain on investments -- -- -- -- (0.05)
------- ------- -------- ------- -------
Total distributions declared to shareholders $ (0.47) $ (0.46) $ (0.47) $ (0.47) $ (0.53)
------- ------- ------- ------- -------
Net asset value - end of period $ 11.27 $ 11.26 $ 10.59 $ 10.66 $ 10.49
------- ------- ------- ------- -------
Total return 4.46% 10.78% 3.77% 6.10% 5.17%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.68% 1.78% 1.92% 1.92% 1.89%
Net investment income 4.18% 4.39% 4.37% 4.27% 4.58%
Portfolio turnover 26% 41% 64% 102% 147%
Net assets at end of period (000 omitted) $30,408 $26,618 $26,724 $28,068 $11,885
</TABLE>
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursing agent. For fiscal years ending after
September 1, 1995, the Fund's expenses are calculated without reduction for
this expense offset arrangement.
++For the years ended March 31, 1999 and 1996, the per share distributions in
excess of net investment income were less than $0.01.
[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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.46 $ 0.48 -- -- $ 0.47
Ratios (to average net assets):
Expenses## 1.80% 1.85% -- -- 1.91%
Net investment income 4.06% 4.32% -- -- 4.57%
</TABLE>
See notes to financial statements
41
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
North Carolina Fund
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 12.15 $ 11.56 $ 11.57 $ 11.42 $ 11.48
-------- -------- -------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.59 $ 0.59 $ 0.59 $ 0.59 $ 0.61
Net realized and unrealized gain (loss) on investments (0.02) 0.59 (0.01) 0.15 0.03
-------- -------- -------- -------- --------
Total from investment operations $ 0.57 $ 1.18 $ 0.58 $ 0.74 $ 0.64
-------- -------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income++++ $ (0.58) $ (0.59) $ (0.59) $ (0.59) $ (0.60)
From net realized gain on investments -- -- -- -- (0.06)
In excess of net realized gain on investments -- -- -- -- (0.04)
-------- -------- -------- -------- --------
Total distributions declared to shareholders $ (0.58) $ (0.59) $ (0.59) $ (0.59) $ (0.70)
-------- -------- -------- -------- --------
Net asset value - end of period $ 12.14 $ 12.15 $ 11.56 $ 11.57 $ 11.42
-------- -------- -------- -------- --------
Total return++ 4.76% 10.36% 5.09% 6.56% 5.86%
Ratios (to average net assets)/Supplemental data[sec]
Expenses## 0.98% 1.03% 1.08% 1.17% 1.16%
Net investment income 4.76% 4.92% 5.05% 5.04% 5.38%
Portfolio turnover 30% 24% 33% 30% 58%
Net assets at end of period (000 omitted) $364,576 $380,595 $377,112 $409,347 $429,131
</TABLE>
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursing agent. For fiscal years ending after
September 1, 1995, the Fund's expenses are calculated without reduction for
this expense offset arrangement.
++Total returns for Class A shares do not include the applicable sales
charge.
If the charge had been included, the results would have been lower.
++++For the years ended March 31, 1997 and 1996, the per share distributions in
excess of net investment income were less than $0.01.
[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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.57 $ 0.58 $ 0.58 -- --
Ratios (to average net assets):
Expenses## 1.10% 1.13% 1.15% -- --
Net investment income 4.64% 4.82% 4.98% -- --
</TABLE>
See notes to financial statements
42
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
North Carolina Fund
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 12.15 $ 11.55 $ 11.56 $ 11.42 $ 11.47
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.50 $ 0.51 $ 0.50 $ 0.50 $ 0.52
Net realized and unrealized gain (loss) on investments (0.02) 0.60 0.00 0.14 0.05
------- ------- ------- ------- -------
Total from investment operations $ 0.48 $ 1.11 $ 0.50 $ 0.64 $ 0.57
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income++ $ (0.50) $ (0.51) $ (0.51) $ (0.50) $ (0.52)
From net realized gain on investments -- -- -- -- (0.06)
In excess of net realized gain on investments -- -- -- -- (0.04)
------- ------- ------- ------- -------
Total distributions declared to shareholders $ (0.50) $ (0.51) $ (0.51) $ (0.50) $ (0.62)
------- ------- ------- ------- -------
Net asset value - end of period $ 12.13 $ 12.15 $ 11.55 $ 11.56 $ 11.42
------- ------- ------- ------- -------
Total return 4.00% 9.75% 4.36% 5.70% 5.20%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.63% 1.68% 1.78% 1.90% 1.88%
Net investment income 4.11% 4.27% 4.36% 4.30% 4.64%
Portfolio turnover 30% 24% 33% 30% 58%
Net assets at end of period (000 omitted) $52,033 $44,238 $39,035 $33,847 $26,260
</TABLE>
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursing agent. For fiscal years ending after
September 1, 1995, the Fund's expenses are calculated without reduction for
this expense offset arrangement.
++For the years ended March 31, 1997, and 1996, the per share distributions
in excess of net investment income were less than $0.01.
[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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.49 $ 0.50 $ 0.49 -- --
Ratios (to average net assets):
Expenses## 1.75% 1.78% 1.85% -- --
Net investment income 3.99% 4.17% 4.29% -- --
</TABLE>
See notes to financial statements
43
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
North Carolina Fund
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------
Class C
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 12.15 $ 11.55 $ 11.56 $ 11.41 $ 11.47
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.50 $ 0.51 $ 0.52 $ 0.51 $ 0.53
Net realized and unrealized gain (loss) on investments (0.02) 0.60 (0.02) 0.15 0.04
------- ------- ------- ------- -------
Total from investment operations $ 0.48 $ 1.11 $ 0.50 $ 0.66 $ 0.57
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income++ $ (0.50) $ (0.51) $ (0.51) $ (0.51) $ (0.53)
From net realized gain on investments -- -- -- -- (0.06)
In excess of net realized gain on investments -- -- -- -- (0.04)
------- ------- ------- ------- --------
Total distributions declared to shareholders $ (0.50) $ (0.51) $ (0.51) $ (0.51) $ (0.63)
------- ------- -------- ------- --------
Net asset value - end of period $ 12.13 $ 12.15 $ 11.55 $ 11.56 $ 11.41
------- ------- -------- ------- --------
Total return 4.00% 9.75% 4.41% 5.87% 5.18%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.63% 1.68% 1.73% 1.83% 1.81%
Net investment income 4.11% 4.27% 4.40% 4.38% 4.71%
Portfolio turnover 30% 24% 33% 30% 58%
Net assets at end of period (000 omitted) $14,084 $ 8,143 $ 7,789 $ 9,352 $ 8,149
</TABLE>
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursing agent. For fiscal years ending after
September 1, 1995, the Fund's expenses are calculated without reduction for
this expense offset arrangement.
++For the years ended March 31, 1997, and 1996, the per share distributions
in excess of net investment income were less than $0.01.
[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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.49 $ 0.50 $ 0.51 -- --
Ratios (to average net assets):
Expenses## 1.75% 1.78% 1.80% -- --
Net investment income 3.99% 4.17% 4.33% -- --
</TABLE>
See notes to financial statements
44
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Pennsylvania Fund
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.82 $ 9.26 $ 9.37 $ 9.29 $ 9.15
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.48 $ 0.50 $ 0.53 $ 0.54 $ 0.54
Net realized and unrealized gain (loss) on investments 0.08 0.56 (0.10) 0.09 0.18
------- ------- ------- ------- -------
Total from investment operations $ 0.56 $ 1.06 $ 0.43 $ 0.63 $ 0.72
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income++++ $ (0.48) $ (0.50) $ (0.54) $(0.55) $ (0.54)
From net realized gain on investments -- -- -- -- (0.01)
In excess of net realized gain on investments -- -- -- -- (0.03)
------- ------- ------- ------- -------
Total distributions declared to shareholders $ (0.48) $ (0.50) $ (0.54) $ (0.55) $ (0.58)
------- ------- ------- ------- -------
Net asset value - end of period $ 9.90 $ 9.82 $ 9.26 $ 9.37 $ 9.29
------- ------- ------- ------- -------
Total return++ 5.85% 11.65% 4.67% 6.85% 8.14%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 0.45% 0.40% 0.10% 0.10% 0.01%
Net investment income 4.85% 5.15% 5.66% 5.76% 5.97%
Portfolio turnover 8% 31% 42% 40% 49%
Net assets at end of period (000 omitted) $21,695 $18,918 $16,933 $18,030 $16,411
</TABLE>
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Funds's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursing agent. For fiscal years ending after
September 1, 1995, the Fund's expenses are calculated without reduction for
this expense offset arrangement.
++Total returns for Class A shares do not include the applicable sales
charge. If the charge had been included, the results would have been lower.
++++For the year ended March 31, 1997, the per share distribution in excess of
net investment income was less than $0.01.
[sec]Subject to reimbursement by the Fund, the investment adviser agreed to
maintain expenses of the Fund, exclusive of management and distribution and
service fees, at not more than 0.00% of average daily net assets. The
investment adviser voluntarily waived a portion of its management fee for
certain of the periods indicated. To the extent actual expenses were
over/under this limitation and the waiver had not been in place, the net
investment income per share and the ratios would have been:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.43 $ 0.44 $ 0.45 $ 0.45 $ 0.43
Ratios (to average net assets):
Expenses## 0.93% 0.99% 0.95% 1.00% 1.18%
Net investment income 4.37% 4.56% 4.81% 4.86% 4.80%
</TABLE>
See notes to financial statements
45
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Pennsylvania Fund
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
--------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.84 $ 9.28 $ 9.39 $ 9.29 $ 9.15
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.41 $ 0.42 $ 0.46 $ 0.50 $ 0.45
Net realized and unrealized gain (loss) on investments 0.08 0.56 (0.11) 0.07 0.18
------- ------- ------- ------- -------
Total from investment operations $ 0.49 $ 0.98 $ 0.35 $ 0.57 $ 0.63
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income++ $ (0.41) $ (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 $ (0.41) $ (0.42) $ (0.46) $ (0.47) $ (0.49)
------- ------- ------- ------- -------
Net asset value - end of period $ 9.92 $ 9.84 $ 9.28 $ 9.39 $ 9.29
------- ------- ------- ------- -------
Total return 5.02% 10.76% 3.83% 6.23% 7.07%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.23% 1.19% 0.90% 0.88% 1.01%
Net investment income 4.07% 4.36% 4.86% 4.98% 4.96%
Portfolio turnover 8% 31% 42% 40% 49%
Net assets at end of period (000 omitted) $23,983 $20,551 $24,898 $24,170 $ 7,699
</TABLE>
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund
with its custodian and dividend disbursing agent. For fiscal years ending
after September 1, 1995, the Fund's expenses are calculated without
reduction for this expense offset arrangement.
++For the year ended March 31, 1997, the per share distribution in excess of
net investment income was less than $0.01.
[sec]Subject to reimbursement by the Fund, the investment adviser agreed to
maintain expenses of the Fund, exclusive of management and distribution and
service fees, at not more than 0.00% of average daily net assets. The
investment adviser voluntarily waived a portion of its management fee for
certain of the periods indicated. To the extent actual expenses were
over/under this limitation and the waiver had not been in place, the net
investment income per share and the ratios would have been:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.33 $ 0.36 $ 0.38 $ 0.41 $ 0.34
Ratios (to average net assets):
Expenses ## 1.71% 1.78% 1.75% 1.85% 2.26%
Net investment income 3.59% 3.77% 4.01% 4.01% 3.72%
</TABLE>
See notes to financial statements
46
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
South Carolina Fund
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 12.52 $ 11.88 $ 11.97 $ 11.86 $ 11.79
-------- -------- -------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.57 $ 0.60 $ 0.62 $ 0.62 $ 0.63
Net realized and unrealized gain (loss) on investments (0.04) 0.64 (0.10) 0.11 0.15
-------- -------- -------- -------- --------
Total from investment operations $ 0.53 $ 1.24 $ 0.52 $ 0.73 $ 0.78
--------- -------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income++++ $ (0.57) $ (0.60) $ (0.61) $ (0.62) $ (0.62)
From net realized gain on investments -- -- -- -- (0.06)
In excess of net realized gain on investments -- -- -- -- (0.03)
-------- -------- -------- -------- --------
Total distributions declared to shareholders $ (0.57) $ (0.60) $ (0.61) $ (0.62) $ (0.71)
-------- -------- -------- -------- --------
Net asset value - end of period $ 12.48 $ 12.52 $ 11.88 $ 11.97 $ 11.86
-------- -------- -------- -------- --------
Total return++ 4.33% 10.62% 4.46% 6.20% 6.93%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.02% 1.06% 1.10% 1.20% 1.19%
Net investment income 4.55% 4.86% 5.17% 5.10% 5.37%
Portfolio turnover 25% 29% 13% 18% 30%
Net assets at end of period (000 omitted) $145,787 $148,820 $148,908 $166,801 $171,045
</TABLE>
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursing agent. For fiscal years ending after
September 1, 1995, the Fund's expenses are calculated without reduction for
this expense offset arrangement.
++Total returns for Class A shares do not include the applicable sales
charge. If the charge had been included, the results would have been lower.
++++For the years ended March 31, 1999, 1998 and 1996, the per share
distributions in excess of net investment income were less than $0.01.
[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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.56 $ 0.59 $ 0.16 -- --
Ratios (to average net assets):
Expenses## 1.14% 1.16% 1.16% -- --
Net investment income 4.43% 4.76% 5.11% -- --
</TABLE>
See notes to financial statements
47
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
South Carolina Fund
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 12.52 $ 11.88 $ 11.97 $ 11.86 $ 11.78
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.48 $ 0.52 $ 0.54 $ 0.52 $ 0.54
Net realized and unrealized gain (loss) on investments (0.04) 0.64 (0.10) 0.12 0.17
------- ------- ------- ------- -------
Total from investment operations $ 0.44 $ 1.16 $ 0.44 $ 0.64 $ 0.71
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income++ $ (0.49) $ (0.52) $ (0.53) $ (0.53) $ (0.54)
From net realized gain on investments -- -- -- -- (0.06)
In excess of net realized gain on investments -- -- -- -- (0.03)
------- ------- ------- ------- -------
Total distributions declared to shareholders $ (0.49) $ (0.52) $ (0.53) $ (0.53) $ (0.63)
------- ------- ------- ------- -------
Net asset value - end of period $ 12.47 $ 12.52 $ 11.88 $ 11.97 $ 11.86
------- ------- ------- ------- -------
Total return 3.57% 9.91% 3.73% 5.43% 6.26%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.67% 1.71% 1.79% 1.92% 1.90%
Net investment income 3.90% 4.21% 4.48% 4.35% 4.63%
Portfolio turnover 25% 29% 13% 18% 30%
Net assets at end of period (000 omitted) $36,226 $28,086 $21,871 $18,420 $12,964
</TABLE>
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursing agent. For fiscal years ending after
September 1, 1995, the Fund's expenses are calculated without reduction for
this expense offset arrangement.
++For the years ended March 31, 1999, 1998, 1996, and 1995, the per share
distributions in excess of net investment income were less than $0.01.
[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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.47 $ 0.51 $ 0.53 -- --
Ratios (to average net assets):
Expenses## 1.79% 1.81% 1.85% -- --
Net investment income 3.78% 4.11% 4.42% -- --
</TABLE>
See notes to financial statements
48
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Tennessee Fund
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.91 $ 10.32 $ 10.40 $ 10.27 $ 10.26
-------- -------- -------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.53 $ 0.53 $ 0.55 $ 0.54 $ 0.56
Net realized and unrealized gain (loss) on investments (0.02) 0.60 (0.09) 0.13 0.02
-------- -------- -------- -------- --------
Total from investment operations $ 0.51 $ 1.13 $ 0.46 $ 0.67 $ 0.58
-------- -------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.52) $ (0.53) $ (0.54) $ (0.54) $ (0.56)
From net realized gain on investments++++ (0.03) -- -- -- (0.00)
In excess of net investment income++++++ -- (0.01) -- (0.00) --
In excess of net realized gain on investments -- -- -- -- (0.01)
-------- -------- -------- -------- --------
Total distributions declared to shareholders $ (0.55) $ (0.54) $ (0.54) $ (0.54) $ (0.57)
-------- -------- -------- -------- --------
Net asset value - end of period $ 10.87 $ 10.91 $ 10.32 $ 10.40 $ 10.27
-------- -------- -------- -------- --------
Total return++ 4.80% 11.11% 4.48% 6.66% 5.86%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.02% 1.07% 1.10% 1.21% 1.22%
Net investment income 4.79% 4.97% 5.26% 5.18% 5.52%
Portfolio turnover 16% 26% 20% 20% 27%
Net assets at end of period (000 omitted) $117,296 $108,871 $108,000 $109,811 $117,572
</TABLE>
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with
its custodian and dividend disbursing agent. For fiscal years ending after
September 1, 1995, the Fund's expenses are calculated without reduction
for this expense offset arrangement.
++Total returns for Class A shares do not include the applicable sales
charge. If the charge had been included, the results would have been
lower.
++++For the year ended March 31, 1995, the per share distribution from net
realized gain on investments was less than $0.01.
++++++For the year ended March 31, 1996, the per share distribution in excess of
net investment income was less than $0.01.
[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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.51 $ 0.52 $ 0.54 -- --
Ratios (to average net assets):
Expenses## 1.14% 1.17% 1.16% -- --
Net investment income 4.67% 4.87% 5.20% -- --
</TABLE>
See notes to financial statements
49
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Tennessee Fund
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 10.91 $ 10.31 $ 10.39 $ 10.26 $ 10.26
------- -------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.45 $ 0.46 $ 0.47 $ 0.46 $ 0.48
Net realized and unrealized gain (loss) on investments (0.02) 0.61 (0.09) 0.14 0.01
------- -------- ------- ------- -------
Total from investment operations $ 0.43 $ 1.07 $ 0.38 $ 0.60 $ 0.49
------- -------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.45) $ (0.46) $ (0.46) $ (0.47) $ (0.48)
From net realized gain on investments++ (0.03) -- -- -- (0.00)
In excess of net investment income++++ -- (0.01) -- (0.00) --
In excess of net realized gain on investments -- -- -- -- (0.01)
------- -------- ------- ------- -------
Total distributions declared to shareholders $ (0.48) $ (0.47) $ (0.46) $ (0.47) $ (0.49)
------- -------- ------- ------- -------
Net asset value - end of period $ 10.86 $ 10.91 $ 10.31 $ 10.39 $ 10.26
------- -------- ------- ------- -------
Total return 4.04% 10.51% 3.76% 5.89% 5.00%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.67% 1.72% 1.79% 1.93% 1.94%
Net investment income 4.14% 4.32% 4.57% 4.43% 4.80%
Portfolio turnover 16% 26% 20% 20% 27%
Net assets at end of period (000 omitted) $22,765 $ 18,198 $14,436 $12,935 $10,006
</TABLE>
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursing agent. For fiscal years ending after
September 1, 1995, the Fund's expenses are calculated without reduction for
this expense offset arrangement.
++For the year ended March 31, 1995, the per share distribution from net
realized gain on investments was less than $0.01.
++++For the year ended March 31, 1996, the per share distribution in excess of
net investment income was less than $0.01.
[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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.44 $ 0.45 $ 0.46 -- --
Ratios (to average net assets):
Expenses## 1.79% 1.82% 1.85% -- --
Net investment income 4.02% 4.22% 4.51% -- --
</TABLE>
See notes to financial statements
50
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Virginia Fund
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.61 $ 11.06 $ 11.21 $ 11.09 $ 11.15
-------- -------- -------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.55 $ 0.57 $ 0.59 $ 0.59 $ 0.56
Net realized and unrealized gain (loss) on investments (0.01) 0.55 (0.15) 0.13 0.04
-------- -------- -------- -------- --------
Total from investment operations $ 0.54 $ 1.12 $ 0.44 $ 0.72 $ 0.60
-------- -------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income++++ $ (0.55) $ (0.57) $ (0.59) $ (0.60) $ (0.61)
From net realized gain on investments -- -- -- -- (0.04)
In excess of net realized gain on investments -- -- -- -- (0.01)
-------- -------- -------- -------- --------
Total distributions declared to shareholders $ (0.55) $ (0.57) $ (0.59) $ (0.60) $ (0.66)
-------- -------- -------- -------- --------
Net asset value - end of period $ 11.60 $ 11.61 $ 11.06 $ 11.21 $ 11.09
-------- -------- -------- -------- --------
Total return++ 4.71% 10.32% 3.97% 6.52% 5.67%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 0.99% 1.03% 1.08% 1.18% 1.16%
Net investment income 4.73% 4.97% 5.27% 5.20% 4.91%
Portfolio turnover 24% 39% 42% 42% 27%
Net assets at end of period (000 omitted) $365,880 $373,024 $379,185 $418,408 $430,688
</TABLE>
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursing agent. For fiscal years ending after
September 1, 1995, the Fund's expenses are calculated without reduction for
this expense offset arrangement.
++Total returns for Class A shares do not include the applicable sales
charge. If the charge had been included, the results would have been lower.
++++For the years ended March 31, 1998, 1996, and 1995, the per share
distributions in excess of net investment income were less than $0.01.
[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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.54 $ 0.56 $ 0.58 -- --
Ratios (to average net assets):
Expenses## 1.11% 1.13% 1.14% -- --
Net investment income 4.61% 4.87% 5.21% -- --
</TABLE>
See notes to financial statements
51
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Virginia Fund
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
--------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $ 11.61 $ 11.06 $ 11.21 $ 11.08 $ 11.14
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.47 $ 0.49 $ 0.51 $ 0.51 $ 0.53
Net realized and unrealized gain (loss) on investments (0.01) 0.56 (0.15) 0.13 (0.01)
------- ------- ------- ------- -------
Total from investment operations $ 0.46 $ 1.05 $ 0.36 $ 0.64 $ 0.52
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.47) $ (0.49) $ (0.51) $ (0.51) $ (0.53)
From net realized gain on investments -- -- -- -- (0.04)
In excess of net investment income++ -- (0.01) -- (0.00) (0.00)
In excess of net realized gain on investments -- -- -- -- (0.01)
------- ------- ------- ------- -------
Total distributions declared to shareholders $ (0.47) $ (0.50) $ (0.51) $ (0.51) $ (0.58)
------- ------- ------- ------- -------
Net asset value - end of period $ 11.60 $ 11.61 $ 11.06 $ 11.21 $ 11.08
------- ------- ------- ------- -------
Total return 4.04% 9.61% 3.24% 5.85% 4.91%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.64% 1.68% 1.78% 1.90% 1.88%
Net investment income 4.08% 4.32% 4.57% 4.46% 4.84%
Portfolio turnover 24% 39% 42% 42% 27%
Net assets at end of period (000 omitted) $35,644 $32,902 $30,567 $28,420 $22,007
</TABLE>
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursing agent. For fiscal years ending after
September 1, 1995, the Fund's expenses are calculated without reduction for
this expense offset arrangement.
++For the years ended March 31, 1996, and 1995, the per share distributions
in excess of net investment income were less than $0.01.
[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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.46 $ 0.48 $ 0.50 -- --
Ratios (to average net assets):
Expenses## 1.76% 1.78% 1.84% -- --
Net investment income 3.96% 4.22% 4.51% -- --
</TABLE>
See notes to financial statements
52
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Virginia Fund
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------
Class C
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.61 $ 11.06 $ 11.21 $ 11.07 $ 11.14
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.47 $ 0.49 $ 0.52 $ 0.51 $ 0.56
Net realized and unrealized gain (loss) on investments (0.01) 0.56 (0.16) 0.15 (0.04)
------- ------- ------- ------- -------
Total from investment operations $ 0.46 $ 1.05 $ 0.36 $ 0.66 $ 0.52
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.47) $ (0.49) $ (0.51) $ (0.52) $ (0.54)
From net realized gain on investment income -- -- -- -- (0.04)
In excess of net investment income++ -- (0.01) -- (0.00) (0.00)
In excess of net realized gain on investments -- -- -- -- (0.01)
------- ------- ------- ------- --------
Total distributions declared to shareholders $ (0.47) $ (0.50) $ (0.51) $ (0.52) $ (0.59)
------- ------- ------- ------- --------
Net asset value - end of period 11.60 $ 11.61 $ 11.06 $ 11.21 $ 11.07
------- ------- ------- ------- --------
Total return 4.04% 9.61% 3.30% 6.02% 4.85%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.64% 1.68% 1.72% 1.83% 1.80%
Net investment income 4.08% 4.32% 4.63% 4.53% 4.90%
Portfolio turnover 24% 39% 42% 42% 27%
Net assets at end of period (000 omitted) $ 6,523 $ 3,082 $ 3,182 $ 3,366 $ 2,300
</TABLE>
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursing agent. For fiscal years ending after
September 1, 1995, the Fund's expenses are calculated without reduction for
this expense offset arrangement.
++For the years ended March 31, 1996, and 1995, the per share distributions
in excess of net investment income were less than $0.01.
[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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.46 $ 0.48 $ 0.51 -- --
Ratios (to average net assets):
Expenses## 1.76% 1.78% 1.78% -- --
Net investment income 3.96% 4.22% 4.57% -- --
</TABLE>
See notes to financial statements
53
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
West Virginia Fund
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.77 $ 11.31 $ 11.33 $ 11.21 $ 11.19
-------- -------- -------- -------- --------
Income from investment operations# -
Net investment income[sec] $ 0.56 $ 0.58 $ 0.60 $ 0.61 $ 0.62
Net realized and unrealized gain (loss) on investments (0.01) 0.47 (0.02) 0.12 0.03
-------- -------- -------- -------- --------
Total from investment operations $ 0.55 $ 1.05 $ 0.58 $ 0.73 $ 0.65
-------- -------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income $ (0.57) $ (0.58) $ (0.60) $ (0.61) $ (0.62)
In excess of net investment income++++ (0.00) ( 0.01) -- (0.00) --
In excess of net realized gain on investments -- -- -- -- (0.01)
-------- -------- -------- -------- --------
Total distributions declared to shareholders $ (0.57) $ (0.59) $ (0.60) $ (0.61) $ (0.63)
-------- -------- -------- -------- --------
Net asset value - end of period $ 11.75 $ 11.77 $ 11.31 $ 11.33 $ 11.21
-------- -------- -------- -------- --------
Total return++ 4.73% 9.42% 5.20% 6.58% 6.07%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.02% 1.10% 1.17% 1.22% 1.19%
Net investment income 4.78% 4.98% 5.28% 5.30% 5.62%
Portfolio turnover 13% 17% 21% 11% 23%
Net assets at end of period (000 omitted) $133,456 $130,002 $126,107 $134,514 $127,616
</TABLE>
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursing agent. For fiscal years ending after
September 1, 1995, the Fund's expenses are calculated without reduction for
this expense offset arrangement.
++Total returns for Class A shares do not include the applicable sales
charge. If the charge had been included, the results would have been lower.
++++For the years ended March 31, 1999, and 1996, the per share distributions
in excess of net investment income were less than $0.01.
[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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.55 $ 0.57 -- -- --
Ratios (to average net assets):
Expenses## 1.14% 1.17% -- -- --
Net investment income 4.66% 4.91% -- -- --
</TABLE>
See notes to financial statements
54
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
West Virginia Fund
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,
---------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 11.77 $ 11.31 $ 11.33 $ 11.21 $ 11.19
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income[sec] $ 0.49 $ 0.51 $ 0.52 $ 0.52 $ 0.53
Net realized and unrealized gain (loss) on investments (0.03) 0.46 (0.02) 0.12 0.04
------- ------- ------- ------- -------
Total from investment operations $ 0.46 $ 0.97 $ 0.50 $ 0.64 $ 0.57
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income++ $ (0.49) $ (0.51) $ (0.52) $ (0.52) $ (0.54)
In excess of net realized gain on investments -- -- -- -- (0.01)
------- ------- ------- ------- -------
Total distributions declared to shareholders $ (0.49) (0.51) $ (0.52) $ (0.52) $ (0.55)
------- ------- ------- ------- -------
Net asset value - end of period $ 11.74 $ 11.77 $ 11.31 $ 11.33 $ 11.21
------- ------- ------- ------- -------
Total return 3.97% 8.72% 4.47% 5.81% 5.30%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## 1.67% 1.75% 1.87% 1.94% 1.91%
Net investment income 4.13% 4.33% 4.57% 4.56% 4.87%
Portfolio turnover 13% 17% 21% 11% 23%
Net assets at end of period (000 omitted) $17,166 $15,472 $13,587 $12,647 $10,046
</TABLE>
#Per share data are based on average shares outstanding.
##The Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its
custodian and dividend disbursing agent. For fiscal years ending after
September 1, 1995, the Fund's expenses are calculated without reduction for
this expense offset arrangement.
++For the years ended March 31, 1999, 1998, 1996, and 1995, the per share
distributions in excess of net investment income were less than $0.01.
[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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.48 $ 0.50 -- -- --
Ratios (to average net assets):
Expenses## 1.79% 1.82% -- -- --
Net investment income 4.01% 4.26% -- -- --
</TABLE>
See notes to financial statements
55
<PAGE>
Notes to Financial Statements
(1) Business and Organization
MFS Municipal Series Trust (the Trust) is organized as a Massachusetts business
trust and is registered under the Investment Company Act of 1940, as amended, as
an open-end management investment company. The Trust presently consists of 16
Funds, as follows: MFS Municipal Income Fund, MFS Alabama Municipal Bond Fund,
MFS Arkansas Municipal Bond Fund, MFS California Municipal Bond Fund, MFS
Florida Municipal Bond Fund, MFS Georgia Municipal Bond Fund, MFS Maryland
Municipal Bond Fund, MFS Massachusetts Municipal Bond Fund, MFS Mississippi
Municipal Bond Fund* (Mississippi Fund), MFS New York Municipal Bond Fund* (New
York Fund), MFS North Carolina Municipal Bond Fund* (North Carolina Fund), MFS
Pennsylvania Municipal Bond Fund* (Pennsylvania Fund), MFS South Carolina
Municipal Bond Fund* (South Carolina Fund), MFS Tennessee Municipal Bond Fund*
(Tennessee Fund), MFS Virginia Municipal Bond Fund* (Virginia Fund), and MFS
West Virginia Municipal Bond Fund* (West Virginia Fund). Each Fund, except MFS
Municipal Income Fund, is non-diversified.
*These Funds are included within these financial statements.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Because each Fund invests primarily in the securities of a single state and its
political subdivisions, each Fund is vulnerable to the effects of changes in the
legal and economic environment of the particular state.
Investment Valuations - Debt securities (other than short-term obligations which
mature in 60 days or less), including listed issues, are valued on the basis of
valuations furnished by dealers or by a pricing service with consideration to
factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading characteristics,
and other market data, without exclusive reliance upon exchange or
over-the-counter prices. Short-term obligations, which mature in 60 days or
less, are valued at amortized cost, which approximates market value. Futures
contracts listed on commodities exchanges are reported at market value using
closing settlement prices. Securities for which there are no such quotations or
valuations are valued at fair value as determined in good faith by or at the
direction of the Trustees.
Futures Contracts - Each Fund may enter into futures contracts for the delayed
delivery of securities or contracts based on financial indices at a fixed price
on a future date. In entering such contracts, each Fund is required to deposit
with the broker either in cash or securities an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received by
the Fund each day, depending on the daily fluctuations in the value of the
contract, and are recorded for financial statement purposes as unrealized gains
or losses by the Fund. Each Fund's investment in futures contracts is designed
to hedge against anticipated future changes in interest rates or securities
prices. Investments in interest rate futures for purposes other than hedging may
be made to modify the duration of the portfolio without incurring the additional
transaction costs involved in buying and selling the underlying securities.
Should interest rates or securities prices move unexpectedly, the Fund may not
achieve the anticipated benefits of the futures contracts and may realize a
loss.
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
additions to the cost basis of the security. Costs that are incurred to
negotiate the terms or conditions of capital infusions or that are expected to
result in a plan of reorganization are reported as realized losses. Ongoing
costs incurred to protect or enhance an investment, or costs incurred to pursue
other claims or legal actions, are expensed.
Fees Paid Indirectly - The Trust's custody fee is calculated as a percentage of
each Funds' 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 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
56
<PAGE>
Notes to Financial Statements - continued
investment income and net realized gain reported on these financial statements
may differ from that reported on the Fund's tax return and, consequently, the
character of distributions to shareholders reported in the financial highlights
may differ from that reported to shareholders on Form 1099-DIV.
Distributions paid by each Fund from net interest received on tax-exempt
municipal bonds are not includable by shareholders as gross income for federal
income tax purposes because each Fund intends to meet certain requirements of
the Code applicable to regulated investment companies, which will enable each
Fund to pay exempt-interest dividends. 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 distributions from paid-in
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. During
the year ended March 31, 1999, the following amounts were reclassified from
accumulated net realized gain (loss) on investments to accumulated undistributed
(distributions in excess of) net investment income due to differences between
book and tax accounting for accrued market discount on disposal of securities:
<TABLE>
<CAPTION>
New York North Carolina South Carolina Virginia West Virginia
Fund Fund Fund Fund Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$2 $50,256 $69,743 $104,252 $26,403
</TABLE>
These changes had no effect on the net assets or net asset value per share of
the Funds.
At March 31, 1999, the following Funds, for federal income tax purposes, had a
capital loss carryforward which may be applied against any net taxable realized
gains of each succeeding year until the earlier of their utilization or
expiration.
<TABLE>
<CAPTION>
Mississippi New York North Carolina Pennsylvania Virginia West Virginia
Expiration Date Fund Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
March 31, 2003 $ -- $ -- $ (686,899) $ -- $ -- $ --
March 31, 2004 $ (2,962,632) $ -- $ -- $ (935,505) $ -- $ (2,079,974)
March 31, 2005 $ (228,833) $ (446,982) $ -- $ (533,472) $ (1,711,218) $ (714,690)
------------ ---------- ---------- ------------ ------------ ------------
Total $ (3,191,465) $ (446,982) $ (686,899) $ (1,468,977) $ (1,711,218) $ (2,794,664)
------------ ---------- ---------- ------------ ------------ ------------
</TABLE>
Multiple Classes of Shares of Beneficial Interest - Each Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on the value
of settled shares outstanding of each class, without distinction between share
classes. Dividends are declared separately for each class. No class has
preferential dividend rights; differences in per share dividend rates are
generally due to differences in separate class expenses. Class B shares will
convert to Class A shares approximately eight years after purchase.
(3) Transactions with Affiliates
Investment Adviser - The Trust has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.55% of
each Fund's average daily net assets. The investment adviser has voluntarily
agreed to waive a portion of its fee with respect to each Fund, which is
reflected as a reduction of expenses in the Statement of Operations.
The Pennsylvania Fund has a temporary expense reimbursement agreement whereby
MFS has voluntarily agreed to pay all of the Pennsylvania Fund's operating
expenses, exclusive of management, distribution and service fees. The
Pennsylvania Fund in turn will pay MFS an expense reimbursement fee not greater
than 0.40% of its average daily net assets. To the extent that the expense
reimbursement fee exceeds the Pennsylvania Fund's actual expenses, the excess
will be applied to amounts paid by MFS in prior years. At March 31, 1999, the
aggregate unreimbursed expenses owed to MFS by the Pennsylvania Fund amounted to
$214,288. During the year ended March 31, 1999, MFS did not impose the
reimbursement fee of $166,738.
The Trust pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Trust, all of whom receive
remuneration for their services to the Trust from MFS. Certain officers and
Trustees of the Fund are officers or directors of MFS, MFS Fund Distributors,
Inc. (MFD), and MFS Service Center, Inc. (MFSC). The Trust has an unfunded
defined benefit plan for all of its independent Trustees and Mr. Bailey.
Included in Trustees' compensation for the year ended March 31, 1999, is a net
periodic pension expense for each Fund, as follows:
<TABLE>
<CAPTION>
Mississippi New York North Carolina Pennsylvania South Carolina Tennessee Virginia West Virginia
Fund Fund Fund Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$4,722 $5,678 $5,854 $4,972 $6,115 $6,234 $5,846 $5,846
</TABLE>
57
<PAGE>
Notes to Financial Statements - continued
Administrator - The Trust has an administrative services agreement with MFS to
provide the Trust with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, each Fund pays MFS an administrative fee
at the following annual percentages of each Fund's average daily net assets:
<TABLE>
<S> <C>
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
</TABLE>
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$32,149, $18,378, $93,621, $22,079, $38,746, $29,488, $100,381, and $52,864 for
the year ended March 31, 1999, 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.
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 $14,407, $26,486, $8,410,
$11,621, $28,038, and $7,884 for the New York, North Carolina, South Carolina,
Tennessee, Virginia, and West Virginia Funds, respectively, for the year ended
March 31, 1999. Fees incurred under the distribution plan during the year ended
March 31, 1999, 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 of Trust 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 the Trust may determine. For the Pennsylvania Fund, payments of the 0.25% per
annum Class A service fee will commence on the date that the net assets of the
Fund attributable to Class A shares first equals 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 $5,719, $6,414, $2,550, $2,106, $3,139, and $3,233 for the New York,
North Carolina, South Carolina, Tennessee, Virginia and West Virginia Funds,
respectively, for Class B shares, for the year ended March 31, 1999. MFS
retained the service fee for accounts not attributable to a securities dealer,
which amounted to $51 for the North Carolina Fund for Class C shares for the
year ended March 31, 1999. Fees incurred under the distribution plan during the
year ended March 31, 1999, 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 year
ended March 31, 1999, were 1.00% and 1.00% of each of the Fund's average daily
net assets attributable to Class C shares for the North Carolina and Virginia
Funds, respectively, on an annualized basis. Except in the case of the 0.25% per
annum Class B service fee paid by the Mississippi Fund upon sale of Class B
shares in the first year, payment of the Class B service fee will be suspended
until such date as the Trustees of the 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 on 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
redemption's of Class B shares in the event of a shareholder redemption within
six years of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the year ended March 31, 1999,
for Class A, Class B, and Class C shares, were as follows:
58
<PAGE>
Notes to Financial Statements - continued
<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 $ -- $ -- $ 442 $ -- $ -- $ 18 $ 3,937 $ 3
Class B $15,725 $47,716 $96,529 $19,721 $43,987 $55,141 $87,226 $48,299
Class C $ -- $ -- $ 5,784 $ -- $ -- $ -- $ 177 $ --
</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%.
(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 $5,545 $37,852 $128,017 $8,421 $46,295 $28,536 $99,843 $21,085
Sales 4,814 38,706 135,457 3,196 43,145 19,756 94,334 18,165
</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's omitted):
<TABLE>
<CAPTION>
North
Mississippi New York Carolina
Fund Fund Fund
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Aggregate cost $71,060 $132,599 $393,236
------- -------- --------
Gross unrealized appreciation $ 6,155 $ 12,579 $ 31,586
Gross unrealized depreciation (33) (197) (651)
------- -------- --------
Net unrealized appreciation $ 6,122 $ 12,382 $ 30,935
------- -------- --------
<CAPTION>
South West
Pennsylvania Carolina Tennessee Virginia Virginia
Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aggregate cost $43,538 $164,524 $130,747 $386,326 $136,180
------- -------- -------- -------- --------
Gross unrealized appreciation $ 2,549 $ 13,663 $ 9,368 $ 25,096 $ 12,167
Gross unrealized depreciation (61) (1,146) (117) (271) (88)
------- -------- -------- -------- --------
Net unrealized appreciation $ 2,488 $ 12,517 $ 9,251 $ 24,825 $ 12,079
------- -------- -------- -------- --------
</TABLE>
(5) Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest. Transactions in Fund shares
were as follows:
<TABLE>
<CAPTION>
Mississippi Fund New York Fund North Carolina Fund
Class A Shares -------------------------- ------------------------- ---------------------------
Year Ended March 31, 1999 (000 Omitted) Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 523 $ 5,207 1,889 $ 21,362 6,127 $ 74,691
Shares issued to shareholders in reinvestment
of distributions 147 1,466 298 3,372 826 10,078
Shares reacquired (623) (6,193) (2,428) (27,459) (8,228) (100,378)
---- --------- ------ --------- ------ ----------
Net increase (decrease) 47 $ 480 (241) $ (2,725) (1,275) $ (15,609)
==== ========= ====== ========= ====== ==========
Year Ended March 31, 1998 (000 Omitted) Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
Shares sold 340 $ 3,311 2,457 $ 27,162 3,557 $ 43,014
Shares issued to shareholders in reinvestment
of distributions 150 1,455 315 3,486 894 10,719
Shares reacquired (930) (9,013) (3,645) (40,239) (5,766) (69,369)
----- --------- ------ --------- ------- ----------
Net decrease (440) $ (4,247) (873) $ (9,591) (1,315) $ (15,636)
===== ========= ====== ========= ======= ==========
</TABLE>
59
<PAGE>
Notes to Financial Statements - continued
<TABLE>
<CAPTION>
Class A Shares Pennsylvania Fund South Carolina Fund Tennessee Fund
-------------------------- ------------------------- ---------------------------
Year Ended March 31, 1999 (000 Omitted) Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 443 $ 4,392 860 $ 10,768 1,562 $ 17,019
Shares issued to shareholders in reinvestment
of distributions 62 614 280 3,515 244 2,671
Shares reacquired (240) (2,376) (1,345) (16,841) (992) (10,839)
---- -------- ------ --------- ----- ---------
Net increase (decrease) 265 $ 2,630 (205) $ (2,558) 814 $ 8,851
==== ======== ====== ========= ===== =========
Year Ended March 31, 1998 (000 Omitted) Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
Shares sold 394 $ 3,820 722 $ 8,866 613 $ 6,529
Shares issued to shareholders in reinvestment
of distributions 58 562 313 3,853 248 2,663
Shares reacquired (353) (3,408) (1,682) (20,677) (1,356) (14,510)
----- -------- ------- --------- ------ ---------
Net increase (decrease) 99 $ 974 (647) $ (7,958) (495) $ (5,318)
===== ======== ======= ========= ====== =========
Virginia Fund West Virginia Fund
------------------------- ---------------------------
Year Ended March 31, 1999 (000 Omitted) Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
Shares sold 3,914 $ 45,669 1,029 $ 12,137
Shares issued to shareholders in reinvestment
of distributions 742 8,649 292 3,451
Shares reacquired (5,247) (61,190) (1,003) (11,832)
---------- --------- --------- ---------
Net increase (decrease) (591) $ (6,872) 318 $ 3,756
========== ========= ========= =========
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 A Shares Mississippi Fund New York Fund North Carolina Fund
-------------------------- ------------------------- ---------------------------
Year Ended March 31, 1999 (000 Omitted) Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
Shares sold 215 $ 2,140 701 $ 7,932 1,067 $ 13,003
Shares issued to shareholders in reinvestment
of distributions 17 169 57 649 103 1,259
Shares reacquired (162) (1,611) (424) (4,796) (522) (6,357)
-------- -------- ---------- --------- --------- ---------
Net increase 70 $ 698 334 $ 3,785 648 $ 7,905
-------- -------- ---------- --------- --------- ---------
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
-------------------------- ------------------------- ---------------------------
Year Ended March 31, 1999 (000 Omitted) Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
Shares sold 533 $ 5,302 842 $ 10,580 624 $ 6,827
Shares issued to shareholders in reinvestment
of distributions 44 436 53 671 43 470
Shares reacquired (248) (2,458) (235) (2,950) (240) (2,625)
-------- -------- ---------- --------- --------- ---------
Net increase 329 $ 3,280 660 $ 8,301 427 $ 4,672
-------- -------- ---------- --------- --------- ---------
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
-------- -------- ---------- --------- --------- ---------
</TABLE>
60
<PAGE>
Notes to Financial Statements - continued
<TABLE>
<CAPTION>
Class B Shares Virginia Fund West Virginia Fund
--------------------------- -------------------------
Year Ended March 31, 1999 (000 Omitted) Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 611 $ 7,115 290 $ 3,412
Shares issued to shareholders in reinvestment of distributions 53 616 36 426
Shares reacquired (425) (4,951) (179) (2,106)
---- -------- ---- --------
Net increase 239 $ 2,780 147 $ 1,732
==== ======== ==== ========
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
===== ======== ====== ========
North Carolina Fund Virginia Fund
Class C Shares --------------------------- -------------------------
Year Ended March 31, 1999 (000 Omitted) Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------------
Shares sold 619 $ 7,481 325 $ 3,779
Shares issued to shareholders in reinvestment of distributions 21 254 12 144
Shares reacquired (149) (1,749) (41) (473)
------- -------- -------- --------
Net increase 491 $ 5,986 296 $ 3,450
======= ======== ======== ========
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 $720 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of Fund
shares. Interest is charged to each fund, based on its borrowings, at a rate
equal to the bank's base rate. In addition, a commitment fee, based on the
average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated to
each of the Funds for the year ended March 31, 1999, ranged from $307 to $3,251.
(7) Financial Instruments
The Trust trades financial instruments with off-balance-sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates. These financial instruments include futures contracts.
The notional or contractual amounts of these instruments represent the
investment a Fund has in particular classes of financial instruments and does
not necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered. At March 31, 1999,
there were no open future contracts.
61
<PAGE>
Independent Auditors' Report
To the Trustees of MFS Municipal Trust and Shareholders of the Portfolios of MFS
Municipal Series Trust:
We have audited the accompanying statements of assets and liabilities, including
the portfolio of investments, of MFS Mississippi Municipal Bond Fund, MFS New
York Municipal Bond Fund, MFS North Carolina Municipal Bond Fund, MFS
Pennsylvania Municipal Bond Fund, MFS South Carolina Municipal Bond Fund, MFS
Tennessee Municipal Bond Fund, MFS Virginia Municipal Bond Fund, and MFS West
Virginia Municipal Bond Fund (portfolios of MFS Municipal Series Trust) as of
March 31, 1999, the related statements of operations for the year then ended,
the statements of changes in net assets for the years ended March 31, 1999 and
1998, and the financial highlights for each of the years in the five-year period
ended March 31, 1999. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
March 31, 1999 by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of each of the
aforementioned portfolios of MFS Municipal Series Trust at March 31, 1999, the
results of its operations, the changes in its net assets, and its financial
highlights for the respective stated periods in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
May 7, 1999
62
<PAGE>
Federal Tax Information
In January 2000, shareholders will be mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1999.
The Tennessee Fund has designated $402,555 as a capital gain dividend.
For federal income tax purposes, approximately 99% of the total dividends paid
by each Fund from net investment income during the year ended March 31, 1999, is
designated as an exempt-interest dividend.
63
<PAGE>
MFS' Year 2000 Readiness Disclosure
MFS Investment Managementt, as an investment adviser and on behalf of the MFS
funds, is committed to the effective use of technology in managing our portfolio
investments, delivering high-quality service to MFS fund shareholders,
retirement plan participants, and MFS' institutional clients, and supporting the
financial advisers who sell our products. With that in mind, we created a
separately funded Year 2000 Program Management Office in 1996 comprised of a
specialized staff reporting directly to MFS senior management.
The Year 2000 (Y2K) problem arises because calendar-year fields in computers and
software applications traditionally have used two-digit codes so that, for
example, the year 1998 is coded as "98," with the "19" being implied. In the
year 2000, unless necessary corrections have been made, computer applications
may assume "00" refers to 1900 rather than 2000, thus resulting in systems
failures or miscalculations. To address this issue, our team of dedicated
business and technology managers, working with outside experts, is taking steps
to ascertain the Y2K readiness of MFS' internal systems and is working with our
external systems vendors to determine whether they expect their systems to be
ready.
MFS recognizes that fund shareholders and institutional clients also are
concerned about whether the companies whose securities are held in their
portfolios are addressing Y2K issues. As part of the MFS(R) Original
Research(SM) process of evaluating portfolio investments, one of the many
relevant factors that MFS' portfolio managers and research analysts may consider
is a company's Y2K readiness. Each year, MFS' research analysts and portfolio
managers conduct more than 1,000 on-site meetings with companies whose
securities are, or may be, held in fund and client portfolios, and host an
additional 1,500 meetings at MFS' headquarters. When assessing the Y2K readiness
of these companies, MFS' research analysts and portfolio managers may rely upon
discussions at these meetings as well as SEC disclosure documents and
third-party reports.
Y2K readiness is an enormously complex, worldwide issue. No company or
institution can guarantee that it will be unaffected by the Y2K issue. While MFS
is taking significant steps to protect the integrity of its internal systems,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on MFS, shareholders of MFS funds, participants in retirement
plans administered by MFS, or MFS' institutional clients.
If you have further questions regarding MFS' Year 2000 Readiness Program, please
visit our Web site at www.mfs.com or contact the MFS Year 2000 Program
Management Office by e-mail at [email protected] or by letter at 500 Boylston Street,
Boston, MA 02116-3741.
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
Michael L. Dawson*
John P. Kihn*
Treasurer
W. Thomas London*
Assistant Treasurers
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
*Affiliated with the Investment Adviser
Secretary
Stephen E. Cavan*
Assistant Secretary
James R. Bordewick, Jr.*
Custodian
State Street Bank and Trust Company
Auditors
Deloitte & Touche LLP
Investor Information
For MFS stock and bond market outlooks,
call toll free: 1-800-637-4458 anytime from
a touch-tone telephone.
For information on MFS mutual funds, call
your financial adviser or, for an information
kit, call toll free: 1-800-637-2929 any
business day from 9 a.m. to 5 p.m. Eastern
time (or leave a message anytime).
Investor Service
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
For general information, call toll free:
1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
For service to speech- or hearing-impaired,
call toll free: 1-800-637-6576 any business
day from 9 a.m. to 5 p.m. Eastern time.
(To use this service, your phone must be equipped
with a Telecommunications Device for the Deaf.)
For share prices, account balances, and
exchanges, call toll free: 1-800-MFS-TALK
(1-800-637-8255) anytime from a touch-tone
telephone.
World Wide Web
www.mfs.com
65
<PAGE>
MFS(R) Municipal -----------------
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Paid
MFS(R) Mississippi Municipal Bond Fund MFS
MFS(R) New York Municipal Bond Fund -----------------
MFS(R) North Carolina Municipal Bond Fund
MFS(R) Pennsylvania Municipal Bond Fund
MFS(R) South Carolina Municipal Bond Fund
MFS(R) Tennessee Municipal Bond Fund
MFS(R) Virginia Municipal Bond Fund
MFS(R) West Virginia Municipal Bond Fund
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INVESTMENT MANAGEMENT
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(C)1999 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
