UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-5912
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MFS MUNICIPAL INCOME TRUST
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(Exact name of registrant as specified in charter)
500 Boylston Street, Boston, Massachusetts 02116
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(Address of principal executive offices) (Zip code)
James R. Bordewick, Jr.
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
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(Name and address of agents for service)
Registrant's telephone number, including area code: (617) 954-5000
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Date of fiscal year end: October 31, 2003
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Date of reporting period: April 30, 2004
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ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) Mutual Funds
SEMIANNUAL REPORT 4/30/04
MFS(R) MUNICIPAL INCOME TRUST
A path for pursuing opportunity
[graphic omitted]
[logo] M F S(R)
INVESTMENT MANAGEMENT
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MFS(R) PRIVACY POLICY: A COMMITMENT TO YOU
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Privacy is a concern for every investor today. At MFS Investment Management(R)
and the MFS funds, we take this concern very seriously. We want you to
understand our policies about every MFS investment product and service that we
offer and how we protect the nonpublic personal information of investors who
have a direct relationship with us and our wholly owned subsidiaries.
Throughout our business relationship, you provide us with personal information;
we maintain information and records about you, your investments, and the
services you use. Examples of the nonpublic personal information we maintain
include
o data from investment applications and other forms
o share balances and transactional history with us, our affiliates, or others
o facts from a consumer reporting agency
We do not disclose any nonpublic personal information about our customers or
former customers to anyone except as permitted by law. We may share information
with companies or financial institutions that perform marketing services on our
behalf or to other financial institutions with which we have joint marketing
arrangements.
Access to your nonpublic personal information is limited to appropriate
personnel who provide products, services, or information to you. We maintain
physical, electronic, and procedural safeguards that comply with applicable
federal regulations.
If you have any questions about MFS' privacy policy, please call 1-800-225-2606
any business day between 8 a.m. and 8 p.m. Eastern time.
Note: If you own MFS products or receive MFS services in the name of a third
party such as a bank or broker-dealer, their privacy policy may apply to you
instead of ours.
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
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MFS(R) MUNICIPAL INCOME TRUST
The trust seeks to provide a high level of current income exempt from federal
income taxes.
New York Stock Exchange Symbol: MFM
TABLE OF CONTENTS
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MFS PRIVACY POLICY
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LETTER FROM THE CEO 1
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MFS ORIGINAL RESEARCH(R) 5
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MANAGEMENT REVIEW 6
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PORTFOLIO MANAGER'S PROFILE 10
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PERFORMANCE SUMMARY 11
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DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN 13
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PORTFOLIO OF INVESTMENTS 14
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FINANCIAL STATEMENTS 35
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NOTES TO FINANCIAL STATEMENTS 40
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TRUSTEES AND OFFICERS 50
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CONTACT INFORMATION 53
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LETTER FROM THE CEO
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Dear Shareholders,
[Photo of Robert J. Manning]
Our firm was built on the strength of MFS Original Research(R), our in-depth
analysis of every security we consider for our portfolios. We've been honing
this process since 1932, when we created one of the mutual fund industry's
first research departments. And we continue to fine-tune this process so that
we can provide strong and consistent long-term investment performance to help
you achieve your financial goals.
While we have achieved strong investment performance in many of our
portfolios, our goal is to achieve the same strong results across all asset
classes. To ensure that our portfolio teams are doing the best possible job
for our firm's clients and shareholders, I am focusing the vast majority of my
time on the three key elements that I believe truly differentiate MFS from its
competitors: people, process, and culture.
PEOPLE
Our people have always been our most valuable resource. Our philosophy is to
deliver consistent, repeatable investment results by hiring the most talented
investors in our industry. We recruit from the nation's top business schools
and hire experienced analysts, both domestically and around the globe.
Our analysts are the engine that powers our entire investment team because
their recommendations have a direct impact on the investment performance of
our portfolios. To demonstrate our ongoing commitment in this area, we
increased the number of equity analysts at MFS from less than 40 at the end of
2000 to over 50 in April 2004. During that same period, we doubled the average
investment experience of our new domestic equity analysts, from
2.6 years to 5.3 years, by recruiting more seasoned analysts to the firm.
Moreover, our international network of investment personnel now spans key
regions of the world with offices in London, Mexico City, Singapore, and
Tokyo, as well as Boston.
One of the major advantages that MFS has over many of its competitors is that
the position of research analyst is a long-term career for many members of our
team, not simply a steppingstone toward becoming a portfolio manager. We have
worked to elevate the stature of the analyst position to be on par with that
of a portfolio manager. In fact, an exceptional research analyst has the
opportunity to earn more at MFS than some portfolio managers.
At the same time, we look within the firm to promote talented analysts who
choose a path toward becoming a portfolio manager. We rarely hire portfolio
managers from our competitors because we believe the best investors are those
steeped in the MFS process and culture. In the past few months, we have
identified four senior research analysts who will assume roles on the
management teams of several of our larger portfolios. MFS is fortunate to have
a deep bench of talented investment personnel, and we welcome the opportunity
to put their skills to work for our clients.
PROCESS
MFS was built on the strength of its bottom-up approach to researching
securities. We have enhanced the mentoring process for our research analysts
by calling on several of our most seasoned portfolio managers to supplement
the work of Director of Global Equity Research David A. Antonelli. These
portfolio managers will be taking a special interest in developing the careers
of our research analysts and strengthening our investment process. Kenneth J.
Enright of our value equity group will work with a team of domestic analysts;
David E. Sette-Ducati of our small- and mid-cap equity team will work with
analysts concentrating on small- and mid-cap companies; and Barnaby Wiener of
our international equity team in London heads the European equity research
team.
We have combined the bottom-up approach of our research process with a top-
down approach to risk controls on portfolio composition. We have a very strong
quantitative team under the leadership of industry veteran Deborah H. Miller,
who represents the equity management department on the Management Committee of
the firm. Quantitative analysis helps us generate investment ideas and, more
importantly, assess the appropriate level of risk for each portfolio. The risk
assessment is designed to assure that each portfolio operates within its
investment objectives.
Additionally, we have increased the peripheral vision of our investment
personnel across asset classes through the collaboration of our Equity, Fixed
Income, Quantitative Analysis, and Risk Management teams. We recently codified
this key aspect of our culture by forming an Investment Management Committee,
composed of key members of these teams. This Committee will work to ensure
that all teams are sharing information, actively debating investment ideas,
and creating a unified investment team.
CULTURE
Teamwork is at the heart of our ability to deliver consistent and competitive
investment performance over time. At MFS, each member of our team is involved
in our success; we have no superstars. The collaborative nature of our process
works to assure a consistent investment approach across all of our products
and provides a high level of continuity in portfolio management because our
investment performance never depends on the contributions of just a single
individual. Our culture is based on an environment of teamwork that allows our
investment personnel to be successful. In turn, we demand superior investment
results from every member of our team.
We have created a meritocracy at our firm based on investment results. We hold
all of our portfolio managers accountable for the performance of their
portfolios and their contributions to the team. We also track the equity and
fixed-income ratings of our analysts so we can evaluate them based on the
performance of their recommendations. We align bonus compensation to
investment performance by weighting rewards to those who have created the
greatest long-term benefit for our shareholders and who contribute most
successfully to the Original Research(SM) process.
The strength of our culture has resulted in a tremendous amount of stability,
both in terms of people and assets under management. Although we have dismissed
members of our team whose performance did not meet MFS' high standards, only
one member of our investment team has voluntarily left the firm over the past
six months, based on a decision to retire from the industry. Similarly, our
firm's assets under management have remained quite steady in the midst of a
challenging enveronment.
In short, we can help you achieve your financial goals by hiring talented
people, following a disciplined process, and maintaining our firm's unique
culture. The recent enhancements described in this letter reflect the
collaborative spirit and the depth of resources in our investment teams.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
CEO, President, and Chief Investment Officer
MFS Investment Management(R)
May 19, 2004
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
The opinions expressed in this letter are those of MFS, and no forecasts can
be guaranteed.
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MFS ORIGINAL RESEARCH(R)
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THE MFS(R) DIFFERENCE
For 80 years MFS has been offering investors clear paths to pursuing specific
investment objectives. Today, millions of individuals and thousands of
institutions all over the world look to MFS to manage their assets with
insight and care.
Our success, we believe, has to do with the fact that we see investors as
people with plans, not just dollars to invest.
When you invest with MFS, you invest with a company dedicated to helping you
realize your long-term financial goals.
INVESTORS CHOOSE MFS FOR OUR
o global asset management expertise across all asset classes
o time-tested money management process for pursuing consistent results
o full spectrum of investment products backed by MFS Original Research(R)
o resources and services that match real-life needs
TURNING INFORMATION INTO OPPORTUNITY
Sound investments begin with sound information. MFS has been doing its own
research and analyzing findings in-house for decades. The process we use to
uncover opportunity is called MFS Original Research(R).
MFS ORIGINAL RESEARCH INVOLVES:
o meeting with the management of 3,000 companies each year to assess their
business plans and the managers' ability to execute those plans
o making onsite visits to more than 2,000 companies annually to gain first-hand
knowledge of their operations and products
o analyzing financial statements and balance sheets
o talking extensively with companies' customers and competitors
o developing our own proprietary estimates of companies' earnings
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MANAGEMENT REVIEW
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MARKET ENVIRONMENT
Over the six-month period ended April 30, 2004, long-term U.S. Treasury bond
yields rose modestly, with 10-year treasury yields increasing from 4.29% to
4.50%. The path upward, however, was marked by significant volatility in the
overall bond market.
Previous to the period, in the summer of 2003 and into early September, bond
prices had declined as fixed-income investors, in our view, became concerned
that the economic recovery was accelerating faster than expected.
In the fall and winter of 2003, however, bond prices revived as several
factors combined to drive rates down. Economic reports indicated that
inflation was well contained while job growth remained weak. Although most
other measures indicated the U.S. economy was improving, we believe investors
were concerned that consumer spending might falter because laid-off workers
were not finding new jobs. The Federal Reserve Board (the Fed) appeared to sum
up the situation in its statements that interest rates could remain low for
the foreseeable future.
As the period came to a close in March and April of 2004, bonds reversed
direction again. Long-term rates climbed sharply as the United States finally
began to experience strong job growth, and the market began to anticipate that
a Fed rate increase was imminent. Just after the period ended, the Fed's press
release after its May 4 meeting contained the first indication in several
years that rates were indeed going up: "At this juncture, ... the [Federal
Open Market] Committee believes that policy accommodation can be removed at a
pace that is likely to be measured."
The accelerating U.S. recovery over the period was generally positive for
lower quality bonds. Growth in GDP (gross domestic product), business profits,
and other measures pointed toward improving corporate fundamentals - business
factors such as earnings and cash flow growth.
In response, we believe investors moved away from the risk aversion or "flight
to quality" that had characterized the bond market in late 2002 and early
2003. Riskier, lower-rated classes of bonds showed the best performance over
the period, as investors sought out higher-yielding debt. This caused spreads
- the differences between yields on "AAA"-rated municipals and riskier "BBB"-
rated issues - to tighten (decrease) over the period. Within categories,
lower-rated bonds generally outperformed higher-rated issues. While bonds
across most asset classes were hurt by rising rates in the final months of the
period, lower-rated debt was less affected than higher-rated issues.
For the period as a whole, the performance of municipal bonds relative to
Treasuries of comparable maturities was mixed. On the shorter end of the yield
curve - maturities of 10 years and less - municipal bonds underperformed
Treasuries. On the longer end of the curve, however, municipal bonds
outperformed Treasuries.
In the closing months of the period, municipal bond prices were under pressure
from several factors in addition to the rising rates mentioned earlier. A
large amount of new issuance, particularly in March of 2004, increased the
supply of municipal bonds and put downward pressure on prices. We saw
additional pressure on bond prices in April as investors anticipated
California's largest-ever municipal bond issue in U.S. history, set to take
place in May. A third negative factor for municipal prices toward the end of
the period was seasonal fluctuation, because bond selling has historically
been higher in March and April as investors liquidate positions to pay tax
bills.
PORTFOLIO CONCENTRATION AS OF 4/30/04
QUALITY RATINGS
"AAA" 17.9%
"AA" 4.3%
"A" 8.8%
"BBB" 35.0%
"BB" 18.4%
"B" 13.1%
"CCC" 1.1%
Not Rated and Other 1.4%
The portfolio is actively managed, and current holdings may be different.
Percentages based on assets on 4/30/04.
CONTRIBUTORS TO PERFORMANCE
In the area of credit quality, relative performance was helped by the trust's
overweighting in lower-quality debt relative to its Lehman benchmark. During a
period when spreads were tightening, lower-rated bonds outperformed higher-
rated bonds, and the trust's overweighting in debt rated "BBB" and below
helped relative returns. (The Lehman Index is composed primarily of high-grade
securities rated "A" or better and does not include securities rated below
"BBB.")
The portfolio's positioning on the yield curve also helped relative results.
(A yield curve for bonds is a graph showing yield against time remaining to
maturity.) In managing the trust, we try to pick what we believe is the
optimal spot on the yield curve - a time to maturity that optimizes the
combination of yield and risk. Our research has for some time indicated that
the 15- to 20-year part of the yield curve is that optimal spot, and the trust
has historically tended to be overweighted in that area. This overweighting
helped relative performance during the period, as short-term rates rose more
than long-term rates and the yield curve flattened. The trust's relative
overweighting in the longer part of the yield curve, which saw smaller price
declines, and underweighting in the shorter end of the curve, where bond
prices declined more, helped relative performance.
DETRACTORS FROM PERFORMANCE
Duration - a measure of the trust's holdings' sensitivity to interest rate
changes - was the key detractor from the trust's relative performance during
the period. We strive to position the trust with a duration comparable to that
of its Lipper peer group of closed-end high-yield municipal portfolios. During
the period, that strategy resulted in the trust having a longer average
duration than that of its benchmark, the Lehman Brothers Municipal Bond Index
(the Lehman Index). During a period of rising interest rates, that longer
duration meant the trust's holdings, on average, suffered larger price
declines than the holdings in our benchmark.
Respectfully,
/s/ Geoffrey L. Schechter
Geoffrey L. Schechter
Portfolio Manager
Note to shareholders: Effective February 17, 2004, Geoffrey L. Schechter
became the sole manager of the portfolio. Prior to that date, the trust was
managed by a team composed of Geoffrey L. Schechter and Michael W. Roberge.
The views expressed in this report are those of the portfolio manager only
through the end of the period of the report as stated on the cover and do not
necessarily reflect the views of MFS or any other person in the MFS
organization. These views are subject to change at any time based on market and
other conditions, and MFS disclaims any responsibility to update such views.
These views may not be relied upon as investment advice or as an indication of
trading intent on behalf of any MFS Fund. References to specific securities are
not recommendations of such securities, and may not be representative of any MFS
Fund's current or future investments.
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Visit mfs.com for our latest economic and investment outlook.
o Under Updates & Announcements, click Week in Review for a summary of recent
investment-related news.
o From Week in Review, link to MFS Global Investment Perspective for our current
view of the world.
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PORTFOLIO MANAGER'S PROFILE
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Geoffrey L. Schechter, CFA, CPA, is Senior Vice President of MFS Investment
Management(R) (MFS(R)) and a portfolio manager of our municipal bond funds. He
also manages several other state municipal bond portfolios for MFS.
He joined MFS as Investment Officer in 1993 after working as a municipal credit
analyst with a major insurance company. He was named portfolio manager in 1993,
Assistant Vice President in 1994, and Vice President in 1995.
Geoff is a graduate of the University of Texas and has an M.B.A. degree from
Boston University. He holds the Chartered Financial Analyst (CFA) and
Certified Public Accountant (CPA) designations.
All portfolio managers at MFS are supported by an investment staff of over 160
professionals utilizing MFS Original Research(R), a global, issuer-oriented,
bottom-up process of selecting securities.
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PERFORMANCE SUMMARY THROUGH 4/30/04
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All results are historical. Investment return and principal value will
fluctuate, and shares, when sold, may be worth more or less than their original
cost. More recent returns may be different from those shown. Past performance
is no guarantee of future results. Price Summary
Six months ended 4/30/04
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Date Price
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Net asset value 10/31/2003 $7.69
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4/30/2004 $7.70
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New York Stock Exchange price 10/31/2003 $7.49
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3/9/2004(high)* $8.15
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4/29/2004(low)* $6.95
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4/30/2004 $7.13
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* For the period November 1, 2003, through April 30, 2004.
Total Return vs Benchmarks
Six months ended 4/30/04
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New York Stock Exchange price** (1.39)%
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Net asset value** 3.72%
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Lehman Brothers Municipal Bond Index# 1.19%
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Lipper Closed End High Yield Municipal Index+ 3.23%
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** Includes reinvestment of dividend and capital distributions.
+ Source: Lipper Inc., an independent firm that reports mutual fund
performance.
# Souce: Standard & Poor's Micropal, Inc.
INDEX DEFINITIONS
Lehman Brothers Municipal Bond Index A broad measure of the municipal bond
market.
LIPPER CLOSED END HIGH YIELD MUNICIPAL INDEX - An index composed of 10
closed-end funds (including MFS Municipal Income Trust) that invest at least
50% of their assets in lower-rated municipal debt securities.
It is not possible to invest directly in an index.
KEY RISK CONSIDERATIONS
Investments in high yield or lower-rated securities may provide greater returns
but are subject to greater-than-average risk.
The portfolio focuses on companies in a limited number of sectors making it more
susceptible to adverse economic, political, or reulatory developments affecting
those sectors than a portfolio that invests more broadly.
Because the portfolio invests in a limited number of companies a change in one
security's value may have a more significant effect on the portfolio's value.
Government guarantees apply to the underlying securities only and not to the
prices and yields of the portfolio.
The portfolio may invest in derivative securities which may include futures,
swaps, and options. These types of instruments can increase price fluctuation.
These risks may increase share price volatility. Please see the prospectus for
further information regarding these and other risk considerations.
In accordance with Section 23(c) of the Investment Company Act of 1940, the
trust hereby gives notice that it may from time to time repurchase shares of the
trust in the open market at the option of the Board of Trustees and on such
terms as the Trustees shall determine.
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DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
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The Trust offers a Dividend Reinvestment and Cash Purchase Plan that allows
you to reinvest either all of the distributions paid by the trust or only the
long-term capital gains. Purchases are made at the market price unless that
price exceeds the net asset value (the shares are trading at a premium). If
the shares are trading at a premium, purchases will be made at a discounted
price of either the net asset value or 95% of the market price, whichever is
greater. Twice each year you can also buy shares. Investments may be made in
any amount over $100 in January and July on the 15th of the month or
shortly thereafter.
If your shares are in the name of a brokerage firm, bank, or other nominee,
you can ask the firm or nominee to participate in the plan on your behalf. If
the nominee does not offer the plan, you may wish to request that your shares
be re-registered in your own name so that you can participate.
There is no service charge to reinvest distributions, nor are there brokerage
charges for shares issued directly by the trust. However, when shares are
bought on the New York Stock Exchange or otherwise on the open market, each
participant pays a pro rata share of the commissions. The automatic
reinvestment of distributions does not relieve you of any income tax that may
be payable (or required to be withheld) on the distributions.
To enroll in or withdraw from the plan, or if you have any questions, call
1-800-637-2304 any business day from 8 a.m. to 8 p.m. Eastern time. Please
have available the name of the trust and your account and Social Security
numbers. For certain types of registrations, such as corporate accounts,
instructions must be submitted in writing. Please call for additional details.
When you withdraw from the plan, you can receive the value of the reinvested
shares in one of two ways: a check for the value of the full and fractional
shares, or a certificate for the full shares and a check for the fractional
shares.
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Portfolio of Investments (unaudited) - 4/30/04
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The Portfolio of Investments is a complete list of all securities owned by the trust. It is
categorized by broad-based asset classes.
Municipal Bonds - 141.8%
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PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
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Airport & Port Revenue - 5.0%
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Chicago, IL, O'Hare International Airport Rev., RITES,
XLCA, 10.0738%, 2022+(+) $1,500 $1,690,350
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Cleveland Cuyahoga County, OH, Port Authority Rev.
(Cleveland City), "B", 4.5%, 2030 1,485 1,368,635
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Oklahoma City, OK, Airport Trust Rev., FSA, 5.75%, 2016 3,125 3,327,156
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Port Authority, NY, Special Obligations Rev. (JFK
International), MBIA, 5.75%, 2022 7,000 7,460,040
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Seattle, WA, Airport Trust Rev., FGIC, 5.625%, 2018 1,500 1,581,105
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$15,427,286
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Chemicals - 1.5%
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Michigan Strategic Fund Limited Rev. (Dow Chemical Co.),
4.6%, 2014 $1,500 $1,578,555
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Sweetwater County, WY, Solid Waste Disposal Rev. (FMC
Corp.), 7%, 2024 3,000 3,028,440
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$4,606,995
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General Obligations - General Purpose - 1.4%
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Jefferson County, OH, RADIAN, 7.125%, 2005(++) $1,000 $1,108,600
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Lake County, IL, Land Acquisition & Development,
5.75%, 2017 1,000 1,111,140
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New York City, NY, 6.125%, 2006(++) 2,000 2,178,260
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$4,398,000
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General Obligations - Improvement - 0.6%
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New Lenox, IL, Community Park Development Authority,
8.25%, 2004(++) $1,675 $1,737,059
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Healthcare Revenue - Hospitals - 37.6%
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Allegheny County, PA, Hospital Development Authority Rev.
(South Hills Health Systems), 6.75%, 2025 $500 $502,650
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Allegheny County, PA, Hospital Development Authority Rev.
(West Penn Allegheny Health), 9.25%, 2022 1,000 1,114,250
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Allegheny County, PA, Hospital Development Authority Rev.
(West Penn Allegheny Health), 9.25%, 2030 2,000 2,228,500
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Athens County, OH, Hospital Facilities Rev. (O'Bleness
Memorial Hospital), 7.125%, 2033 1,500 1,502,880
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Baldwin County, AL, Eastern Shore Health Care Authority
Rev. (Thomas Hospital), 5.75%, 2027 700 651,049
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Brookhaven, NY, Civic Facilities Rev. (Memorial Hospital
Medical Center, Inc.), 7.75%, 2010 905 956,694
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Chautauqua County, NY, Civic Facilities Rev. (Women's
Christian Assn.), 6.35%, 2017 275 271,604
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Chautauqua County, NY, Civic Facilities Rev. (Women's
Christian Assn.), 6.4%, 2029 980 912,419
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Chemung County, NY, Civic Facilities Rev. (St. Joseph's
Hospital-Elmira), 6%, 2013 590 581,817
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Chemung County, NY, Civic Facilities Rev. (St. Joseph's
Hospital-Elmira), 6.35%, 2013 150 151,152
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Chester County, PA, Health & Educational Facilities Rev.
(Chester County Hospital), 6.75%, 2021 1,625 1,606,101
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Citrus County, FL, Hospital Development Authority Rev.
(Citrus Memorial Hospital), 6.25%, 2023 995 1,014,870
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Colorado Health Facilities Authority Rev. (Parkview
Medical Center), 6.5%, 2020 1,230 1,296,334
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Colorado Health Facilities Authority Rev. (Parkview
Medical Center), 6.6%, 2025 1,000 1,056,790
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Colorado Health Facilities Authority Rev. (Portercare
Adventist Health Systems), 6.625%, 2026 675 734,535
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Comal County, TX, Health Facilities Development Rev.
(McKenna Memorial Hospital), 6.125%, 2022 500 500,535
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Crittenden County, AR, 7%, 2020 1,030 996,350
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Cumberland County PA, Municipal Authority Rev. (Carlisle
Hospital & Health Centers), 6.8%, 2004(++) 250 262,518
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Cuyahoga County, OH, Hospital Facilities Rev. (Canton,
Inc.), 7.5%, 2030 1,330 1,455,871
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Delaware Health Facilities Authority Rev. (Nanticoke
Memorial Hospital), 5.625%, 2032 1,250 1,272,238
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Denver, CO, Health & Hospital Authority Rev., 5.25%, 2013 635 643,801
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Denver, CO, Health & Hospital Authority Rev., 5.375%, 2018 1,500 1,461,405
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Denver, CO, Health & Hospital Authority Rev., 6%, 2023 250 251,023
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Denver, CO, Health & Hospital Authority Rev., 5.375%, 2028 860 782,118
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District of Columbia, Health & Hospital Authority Rev.
(Medstar University Hospital), 6.875%, 2031 1,200 1,350,108
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Farmington, NM, Hospital Rev. (San Juan Regional Medical
Center), "A", 5%, 2023 835 804,013
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Grand Forks, ND, Health Care Authority Rev. (Altru Health
Systems Obligation Group), 7.125%, 2024 755 813,611
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Gulfport, MS, Healthcare Authority Rev. (Memorial
Hospital), 5.75%, 2031 1,000 1,010,860
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Highlands County, FL, Health Facilities Authority Rev.
(Adventist/Sunbelt Hospital), 6%, 2031 900 944,784
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Houston County, AL, Health Care Authority Rev., AMBAC,
6.25%, 2030 2,000 2,229,340
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Huntsville, AL, Health Care Authority Rev., 5.625%, 2026 875 887,810
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Illinois Development Finance Authority, Hospital
Authority Rev. (Adventist/Sunbelt Hospital), 5.65%, 2024 1,750 1,764,823
-----------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Rev. (Centegra Heath
Systems), 5.25%, 2018 1,000 992,450
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Indiana Health Facilities Financing Authority, Hospital Rev.
(Munster Medical Research Foundation, Inc.), 6.375%, 2031 3,990 4,001,092
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Indiana Health Facilities Financing Authority, Hospital
Rev. (Riverview Hospital), 6.125%, 2031 1,000 1,009,690
-----------------------------------------------------------------------------------------------
Kentucky Economic Development Finance Authority, Health
Systems Rev. (Norton Healthcare, Inc.), 6.5%, 2020 5,000 5,223,000
-----------------------------------------------------------------------------------------------
Knox County, TN, Health Educational Housing Facilities
Board, Hospital Facilities Rev. (Baptist Health Systems),
6.5%, 2031 1,500 1,530,855
-----------------------------------------------------------------------------------------------
Lauderdale County & Florence, AL, Health Care Authority
Rev. (Coffee Health Group), MBIA, 5.625%, 2021 3,000 3,229,800
-----------------------------------------------------------------------------------------------
Lufkin, TX, Health Facilities Rev. (Memorial Health
System of East Texas), 6.875%, 2026 1,615 1,632,636
-----------------------------------------------------------------------------------------------
Lufkin, TX, Health Facilities Rev. (Memorial Health
System of East Texas), 5.7%, 2028 995 886,784
-----------------------------------------------------------------------------------------------
Macomb County, MI, Hospital Finance Authority Rev. (Mount
Clemens General Hospital), 5.75%, 2025 1,000 918,800
-----------------------------------------------------------------------------------------------
Macomb County, MI, Hospital Finance Authority Rev. (Mount
Clemens General Hospital), 5.875%, 2034 905 820,283
-----------------------------------------------------------------------------------------------
Maryland Health & Higher Educational Facilities Authority
Rev. (Medstar Health), 5.5%, 2033 380 367,202
-----------------------------------------------------------------------------------------------
Maryland Health & Higher Educational Facilities Authority
Rev. (North Arundel Hospital), 6.5%, 2031 1,500 1,640,175
-----------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority
Rev. (Anna Jaques Hospital), 6.875%, 2012 315 319,757
-----------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority
Rev. (Berkshire Health Systems), 6.25%, 2031 1,900 1,928,880
-----------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority
Rev. (Caritas Christi Obligation), 6.5%, 2012 600 665,340
-----------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority
Rev. (Caritas Christi Obligation), 5.7%, 2015 500 508,960
-----------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority
Rev. (Jordan Hospital), 5.25%, 2018 1,400 1,245,146
-----------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority
Rev. (Saints Memorial Medical Center), 6%, 2023 465 428,270
-----------------------------------------------------------------------------------------------
Miami Beach, FL, Health Facilities Rev. (Mount Sinai
Medical Center), 6.7%, 2019 995 1,015,149
-----------------------------------------------------------------------------------------------
Miami Beach, FL, Health Facilities Rev. (Mount Sinai
Medical Center), 6.75%, 2029 810 791,581
-----------------------------------------------------------------------------------------------
Mississippi Business Finance Corp., Health Facilities
Rev. (Rush Medical Foundation, Inc.), 5.625%, 2023 845 778,101
-----------------------------------------------------------------------------------------------
Mississippi Hospital Equipment, Health Facilities Rev.
(Rush Medical Foundation, Inc.), 5.4%, 2007 315 323,429
-----------------------------------------------------------------------------------------------
Mount Lebanon, PA, Hospital Authority Rev. (St. Clair
Memorial Hospital), 5.625%, 2032 435 428,127
-----------------------------------------------------------------------------------------------
Nassau County, NY, Industrial Development Agency, Civic
Facilities Rev. (North Shore Health System), 5.625%, 2010 820 889,536
-----------------------------------------------------------------------------------------------
Nassau County, NY, Industrial Development Agency, Civic
Facilities Rev. (North Shore Health System), 5.875%, 2011 610 669,024
-----------------------------------------------------------------------------------------------
New Hampshire Health & Educational Facilities Authority
Rev. (Covenant Health), 6.5%, 2017 960 1,052,189
-----------------------------------------------------------------------------------------------
New Hampshire Higher Educational & Health Facilities
Authority Rev. (Catholic Medical Center), 6.125%, 2032 1,000 999,270
-----------------------------------------------------------------------------------------------
New Hampshire Higher Educational & Health Facilities
Authority Rev. (Littleton Hospital), 5.8%, 2018 1,000 899,790
-----------------------------------------------------------------------------------------------
New Jersey Health Care Facilities, Financing Authority
Rev. (St. Peter's University Hospital), 6.875%, 2030 3,000 3,273,840
-----------------------------------------------------------------------------------------------
New York City, NY, Health & Hospital Corp. Rev., 5.25%, 2017 700 716,415
-----------------------------------------------------------------------------------------------
North Texas Health Facilities Development Corp. Rev.
(United Regional Health Care System, Inc.), 6%, 2023 1,000 1,033,500
-----------------------------------------------------------------------------------------------
Ohio County, WV, County Commission Health System Rev.
(Ohio Valley Medical Center), 5.75%, 2013 850 768,893
-----------------------------------------------------------------------------------------------
Oklahoma Development Finance Authority Rev. (Comanche
County Hospital), 6.6%, 2031 1,875 1,923,169
-----------------------------------------------------------------------------------------------
Rhode Island Health & Education Building Rev., Hospital
Financing (Lifespan Obligation Group), 6.375%, 2021 1,805 1,852,237
-----------------------------------------------------------------------------------------------
Rhode Island Health & Education Building Rev., Hospital
Financing (Lifespan Obligation Group), 6.5%, 2032 505 518,968
-----------------------------------------------------------------------------------------------
Royston, GA, Hospital Authority Rev. (Ty Cobb Healthcare
Systems, Inc.), 6.375%, 2014 955 933,341
-----------------------------------------------------------------------------------------------
Russell, KY (Bon Secours Health Systems), 5.85%, 2005(++) 3,000 3,202,020
-----------------------------------------------------------------------------------------------
Salt Lake City, UT, Hospital Authority Rev. INFLOS
(Intermountain Health Care), AMBAC, 12.202%, 2020(+),(++) 600 602,094
-----------------------------------------------------------------------------------------------
Scranton-Lackawanna, PA, Health & Welfare Authority Rev.
(Allied Rehab Hospital), 7.125%, 2005 555 559,801
-----------------------------------------------------------------------------------------------
Shelby County, TN, Health Educational and Housing
Facilities Board, Hospital Rev. (Methodist Healthcare),
6.25%, 2018 500 541,185
-----------------------------------------------------------------------------------------------
Shelby County, TN, Health Educational and Housing
Facilities Board, Hospital Rev. (Methodist Healthcare),
6.375%, 2019 1,000 1,076,670
-----------------------------------------------------------------------------------------------
South Carolina Jobs & Economic Development Authority (Bon
Secours Health Systems, Inc.), "A", 5.625%, 2030 710 695,055
-----------------------------------------------------------------------------------------------
South Carolina Jobs Economic Development Authority,
Hospital Facilities Rev. (Palmetto Health Alliance),
6.25%, 2031 835 860,008
-----------------------------------------------------------------------------------------------
South Dakota Health & Education Facilities Authority Rev.
(Prairie Lakes Health Care System), 5.625%, 2032 670 655,803
-----------------------------------------------------------------------------------------------
Southwestern Illinois Development Authority Rev.
(Anderson Hospital), 5.625%, 2029 1,500 1,423,380
-----------------------------------------------------------------------------------------------
Springfield, TN, Health & Educational Facilities Rev.
(Northcrest Medical Center), 5.25%, 2018 1,400 1,321,124
-----------------------------------------------------------------------------------------------
State of Arkansas, Development Finance Authority Rev.
(Washington Regional Medical Center), 7.25%, 2020 500 551,075
-----------------------------------------------------------------------------------------------
Steubenville, OH, Hospital Authority Rev. (Trinity Health
Center), 6.5%, 2030 1,300 1,362,478
-----------------------------------------------------------------------------------------------
Stillwater, OK, Medical Center Authority, 5.625%, 2023 1,000 977,470
-----------------------------------------------------------------------------------------------
Suffolk County, NY, Industrial Development Agency Rev.
(Southampton Hospital), 7.25%, 2020 750 730,238
-----------------------------------------------------------------------------------------------
Suffolk County, NY, Industrial Development Agency Rev.
(Southampton Hospital), 7.625%, 2030 750 745,080
-----------------------------------------------------------------------------------------------
Tallahassee, FL, Health Facilities Rev. (Tallahassee
Memorial Healthcare), 6.25%, 2020 3,085 3,002,600
-----------------------------------------------------------------------------------------------
Texas Metro Health Facilities Development Corp., Metro
Health Facilities Development Rev. (Wilson N. Jones
Memorial Hospital), 7.2%, 2021 700 700,350
-----------------------------------------------------------------------------------------------
Texas Metro Health Facilities Development Corp., Metro
Health Facilities Development Rev. (Wilson N. Jones
Memorial Hospital), 7.25%, 2031 1,000 999,450
-----------------------------------------------------------------------------------------------
Tom Green County, TX, Health Facilities Rev. (Shannon
Health System), 6.75%, 2021 1,250 1,314,088
-----------------------------------------------------------------------------------------------
Upper Illinois River Valley Development, Health
Facilities Rev. (Morris Hospital), 6.625%, 2031 600 628,212
-----------------------------------------------------------------------------------------------
Valley, AL, Special Care Facilities, Financing Authority
Rev. (Lanier Memorial Hospital), 5.6%, 2016 600 558,618
-----------------------------------------------------------------------------------------------
Wapello County, IA, Hospital Authority Rev. (Ottumwa
Regional Health Center), 6.375%, 2031 1,500 1,532,850
-----------------------------------------------------------------------------------------------
Weirton, WV, Municipal Hospital Building, Commission Rev.
(Weirton Hospital Medical Center), 6.375%, 2031 1,115 1,048,200
-----------------------------------------------------------------------------------------------
Weslaco, TX, Health Facilities Rev. (Knapp Medical
Center), 6.25%, 2032 1,000 1,013,250
-----------------------------------------------------------------------------------------------
West Plains, MO, Industrial Development Authority Rev.
(Ozarks Medical Center), 6.75%, 2024 170 171,173
-----------------------------------------------------------------------------------------------
West Shore Pennsylvania, Hospital Authority Rev. (Holy
Spirit Hospital), 6.2%, 2026 1,250 1,261,925
-----------------------------------------------------------------------------------------------
Wichita, KS, Hospital Authority Rev. (Via Christi Health
System), 6.25%, 2020 1,500 1,651,770
-----------------------------------------------------------------------------------------------
Wisconsin Health & Educational Facilities Authority Rev.
(Aurora Health Care, Inc.), 6.875%, 2030 1,000 1,103,250
-----------------------------------------------------------------------------------------------
Wisconsin Health & Educational Facilities Authority Rev.
(Aurora Health Care, Inc.), MBIA, 5.25%, 2017 5,000 5,284,100
-----------------------------------------------------------------------------------------------
Yonkers, NY, Industrial Development Agency, Civic
Facilities Rev. (St. John's Riverside Hospital), 6.8%,
2016 790 804,252
-----------------------------------------------------------------------------------------------
Yonkers, NY, Industrial Development Agency, Civic
Facilities Rev. (St. John's Riverside Hospital), 7.125%, 2031 490 493,376
-----------------------------------------------------------------------------------------------
$115,099,477
-----------------------------------------------------------------------------------------------
Healthcare Revenue - Long Term Care - 14.1%
-----------------------------------------------------------------------------------------------
Abilene, TX, Health Facilities Development Co.,
Retirement Facilities Rev. (Sears Methodist Retirement),
7%, 2033 $345 $346,680
-----------------------------------------------------------------------------------------------
Arizona Health Facilities Authority Rev. (The Terraces
Project), 7.75%, 2033 750 760,088
-----------------------------------------------------------------------------------------------
Bell County, TX, Health Facilities Development Rev.
(Advanced Living Technology), 7.75%, 2006 195 183,573
-----------------------------------------------------------------------------------------------
Bell County, TX, Health Facilities Development Rev.
(Advanced Living Technology), 8.125%, 2016 1,085 889,819
-----------------------------------------------------------------------------------------------
Bell County, TX, Health Facilities Development Rev.
(Advanced Living Technology), 8.5%, 2026 2,405 1,885,761
-----------------------------------------------------------------------------------------------
Cambria County, PA, Industrial Development Authority Rev.
(Beverly Enterprises, Inc.), 10%, 2012 480 535,651
-----------------------------------------------------------------------------------------------
Chester County, PA, Industrial Development Authority Rev.
(RHA Nursing Home), 8.5%, 2032 600 576,264
-----------------------------------------------------------------------------------------------
Clarion, PA, Industrial Development Authority Rev.
(Beverly Enterprises, Inc.), 7.5%, 2012 1,000 1,020,610
-----------------------------------------------------------------------------------------------
Colorado Health Facilities Authority Rev. (Covenant
Retirement Communities, Inc.), 6.125%, 2033 1,000 1,002,110
-----------------------------------------------------------------------------------------------
Colorado Health Facilities Authority Rev. (Evangelical
Lutheran Church), 6.9%, 2025 3,000 3,230,550
-----------------------------------------------------------------------------------------------
Colorado Health Facilities Authority Rev. (NBA Lifestyles
of Colorado Springs), GNMA, 5.6%, 2021 1,025 1,069,393
-----------------------------------------------------------------------------------------------
Contra Costa County, CA, Residential Rental Facilities
Rev. (Cypress Meadows), 7%, 2028* 1,840 1,609,190
-----------------------------------------------------------------------------------------------
Cumberland County, PA, Retirement Community Rev. (Wesley
Affiliated Services), 7.25%, 2035 1,000 1,000,110
-----------------------------------------------------------------------------------------------
Franklin County, OH, Healthcare Facilities Rev. (Ohio
Presbyterian Church), 7.125%, 2029 1,000 1,046,030
-----------------------------------------------------------------------------------------------
Fulton County, GA, Residential Care Facilities
(Canterbury Court), "A", 6.125%, 2034 330 320,120
-----------------------------------------------------------------------------------------------
Goldsboro, NC, Housing Authority Rev. (North Carolina
Housing Foundation, Inc.), 7.25%, 2029 385 329,321
-----------------------------------------------------------------------------------------------
Grand Prairie, TX, Housing Finance Corp., Independent
Senior Living Center Rev., 7.5%, 2017 600 578,988
-----------------------------------------------------------------------------------------------
Greenville County, SC, Hospital Rev. (Chestnut Hill) "A",
8%, 2015 2,380 2,107,490
-----------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Rev. (Lutheran
Senior Ministries), 7.375%, 2031 800 783,592
-----------------------------------------------------------------------------------------------
Iowa Finance Authority, Health Care Facilities Rev. (Care
Initiatives Project), 5.75%, 2018 895 811,890
-----------------------------------------------------------------------------------------------
Iowa Finance Authority, Health Care Facilities Rev. (Care
Initiatives Project), 9.25%, 2025 1,685 1,973,270
-----------------------------------------------------------------------------------------------
Jacksonville, FL, Health Care Facilities Rev. (National
Benevolent-Cypress Village), 6.25%, 2026* 1,245 893,288
-----------------------------------------------------------------------------------------------
Lenexa, KS, Health Care Facilities Rev. (Lakeview
Village, Inc.), 6.25%, 2026 500 497,550
-----------------------------------------------------------------------------------------------
Lenexa, KS, Health Care Facilities Rev. (Lakeview
Village, Inc.), 6.875%, 2032 500 514,830
-----------------------------------------------------------------------------------------------
Maine Health & Higher Educational Facilities Rev. (Piper
Shores), 7.5%, 2019 825 851,846
-----------------------------------------------------------------------------------------------
Massachusetts Industrial Finance Agency Rev. (Metro
Health Foundation, Inc.), 6.75%, 2027 1,500 1,394,445
-----------------------------------------------------------------------------------------------
Millbrae, CA, Residential Facilities Rev. (Magnolia of
Millbrae), 7.375%, 2027 1,940 2,004,505
-----------------------------------------------------------------------------------------------
Mocksville, NC (Housing Foundation, Inc.), 7.25%, 2029 385 329,321
-----------------------------------------------------------------------------------------------
Montgomery County, PA, Higher Education & Health
Authority Rev. (AHF/Montgomery), 10.5%, 2020 2,260 2,231,117
-----------------------------------------------------------------------------------------------
New Hampshire Business Finance Authority, Health Care
Facilities Rev. (Metro Health Foundation, Inc.), 6.55%, 2028 755 697,001
-----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority Rev.
(Courthouse Convalescent Center), 8.7%, 2014 650 653,309
-----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority Rev., First
Mortgage Gross Rev. (Wanaque Convalescent Center), 8.6%, 2011 1,000 1,001,720
-----------------------------------------------------------------------------------------------
New Jersey Health Care Facilities Financing Authority
Rev. (Cherry Hill), 8%, 2027 1,000 924,330
-----------------------------------------------------------------------------------------------
Oklahoma Development Finance Authority Rev. (Inverness
Village), 8%, 2032 1,010 953,753
-----------------------------------------------------------------------------------------------
Reedley, CA, Certificate of Participation (Mennonite
Home), 7.5%, 2026 2,800 2,801,344
-----------------------------------------------------------------------------------------------
Santa Fe, NM, Industrial Development Rev. (Casa Real
Nursing Home), 9.75%, 2013 940 943,685
-----------------------------------------------------------------------------------------------
Shelby County, TN, Health Educational Rev. (Germantown
Village), 7.25%, 2034 300 293,448
-----------------------------------------------------------------------------------------------
State of Hawaii, Department of Budget & Finance, Special
Purpose Rev. (Kahala Nui Senior Living Community), 8%, 2033 500 500,405
-----------------------------------------------------------------------------------------------
Sterling, IL (Hoosier Care), 7.125%, 2034 725 590,339
-----------------------------------------------------------------------------------------------
Washington County, FL, Industrial Development Authority
Rev. (Washington County), 10%, 2016 940 942,171
-----------------------------------------------------------------------------------------------
Waterford Township, MI, Economic Development Corp. Rev.
(Canterbury Health), 6%, 2039 1,535 1,116,406
-----------------------------------------------------------------------------------------------
Wilkinsburg, PA, Municipal Authority Health Rev.
(Monroeville Christian), 8.25%, 2027 990 933,194
-----------------------------------------------------------------------------------------------
$43,128,507
-----------------------------------------------------------------------------------------------
Human Services - 3.0%
-----------------------------------------------------------------------------------------------
Iowa Finance Authority, Community Provider (Boys & Girls
Home), 6.25%, 2028 $500 $451,240
-----------------------------------------------------------------------------------------------
Lehigh County, PA, Gen Purpose Authority (Kidspeace
Corp.), 6%, 2023 3,000 2,889,000
-----------------------------------------------------------------------------------------------
New York City, NY, Industrial Development Agency, Civic
Facility Rev. (Special Needs Facilities), 6.5%, 2017 1,030 1,051,929
-----------------------------------------------------------------------------------------------
NY, City Industrial Development Agency, Civic Facility
Rev. (A Very Special Place, Inc.), "A", 5.75%, 2029 1,000 856,770
-----------------------------------------------------------------------------------------------
Orange County, FL, Health Facilities Authority Rev. (GF/
Orlando Healthcare Facilities), 8.75%, 2011 635 633,286
-----------------------------------------------------------------------------------------------
Orange County, FL, Health Facilities Authority Rev. (GF/
Orlando Healthcare Facilities), 9%, 2031 1,000 1,014,710
-----------------------------------------------------------------------------------------------
Osceola County, FL, Industrial Development Authority Rev.
(Community Provider Pooled Loan), 7.75%, 2017 551 557,221
-----------------------------------------------------------------------------------------------
Westside Habilitation Center, Cheneyville, LA, Rev.,
8.375%, 2013 1,610 1,651,071
-----------------------------------------------------------------------------------------------
$9,105,227
-----------------------------------------------------------------------------------------------
Industrial Revenue - Airlines - 2.4%
-----------------------------------------------------------------------------------------------
Celevand, OH, Special Facilities Rev. (Continental
Airlines, Inc.), 5.375%, 2027 $500 $346,515
-----------------------------------------------------------------------------------------------
Dallas Fort Worth, TX, International Airport Facility
Improvement Corp. (American Airlines, Inc.), 6.375%, 2035 1,645 1,102,709
-----------------------------------------------------------------------------------------------
Dallas Fort Worth, TX, International Airport Facility
Improvement Corp. (American Airlines) "B", 6.05%, 2029 245 230,185
-----------------------------------------------------------------------------------------------
Hillsborough County, FL, Aviation Authority Rev. (Special
Purpose Facilities U.S. Air Corp.), 8.6%, 2022* 400 158,140
-----------------------------------------------------------------------------------------------
Houston, TX, Airport Systems Rev. (Special Facilities
Continental, Inc.) "E", 6.75%, 2029 1,000 832,930
-----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority (Continental
Airlines, Inc.), 7.2%, 2030 1,595 1,404,015
-----------------------------------------------------------------------------------------------
New York City, NY, Industrial Development Agencies Rev.
(Continental Airlines, Inc.), 7.25%, 2008 250 244,008
-----------------------------------------------------------------------------------------------
New York City, NY, Industrial Development Agencies Rev.
(Continental Airlines, Inc.), 8%, 2012 300 287,877
-----------------------------------------------------------------------------------------------
Tulsa, OK, Municipal Airport Trust Rev. (AMR Corp.),
5.8%, 2035 355 352,494
-----------------------------------------------------------------------------------------------
Tulsa, OK, Municipal Airport Trust Rev. (AMR Corp.) "B",
6%, 2035 2,500 2,325,975
-----------------------------------------------------------------------------------------------
$7,284,848
-----------------------------------------------------------------------------------------------
Industrial Revenue - Chemicals - 0.7%
-----------------------------------------------------------------------------------------------
Red River Authority, TX, Pollution Control Rev.
(Celanese), 6.7%, 2030 $2,125 $2,235,436
-----------------------------------------------------------------------------------------------
Industrial Revenue - Environmental Services - 3.4%
-----------------------------------------------------------------------------------------------
California Pollution Control Financing Authority, Solid
Waste Disposal Rev. (Browning Ferris, Inc.), 5.8%, 2016 $1,000 $924,570
-----------------------------------------------------------------------------------------------
Gloucester County, NJ, Solid Waste Resource Recovery Rev.
(Waste Management, Inc.), 6.85%, 2029 850 963,229
-----------------------------------------------------------------------------------------------
Henrico County, VA, Industrial Development Authority Rev.
(Browning Ferris Co.), 5.45%, 2014 1,750 1,599,920
-----------------------------------------------------------------------------------------------
Illinois Development Finance Authority, Solid Waste
Disposal Rev. (Waste Management, Inc.), 5.85%, 2007 4,500 4,767,570
-----------------------------------------------------------------------------------------------
Nevada Department of Business (Republic Services, Inc.),
5.625%, 2026 750 767,558
-----------------------------------------------------------------------------------------------
New Morgan, PA, Industrial Development Authority, Solid
Waste Disposal Rev. (New Morgan Landfill Co, Inc.),
6.5%, 2019 1,000 935,800
-----------------------------------------------------------------------------------------------
State of Ohio, Air Quality Development Authority Rev.
(USX Corp.), 5%, 2015 575 616,090
-----------------------------------------------------------------------------------------------
$10,574,737
-----------------------------------------------------------------------------------------------
Industrial Revenue - Metals - 0.5%
-----------------------------------------------------------------------------------------------
Indiana Development Finance Authority Rev. (Inland
Steel), 5.75%, 2011 $1,000 $829,240
-----------------------------------------------------------------------------------------------
Mobile County, AL, Industrial Development Authority Rev.
(Ipsco, Inc.), 6.875%, 2030 650 662,558
-----------------------------------------------------------------------------------------------
Ohio Solid Waste Rev. (Republic Engineered Steels, Inc.),
8.25%, 2014* 3,000 30
-----------------------------------------------------------------------------------------------
Ohio Solid Waste Rev. (Republic Engineered Steels, Inc.),
9%, 2021* 3,000 30
-----------------------------------------------------------------------------------------------
$1,491,858
-----------------------------------------------------------------------------------------------
Industrial Revenue - Other - 5.6%
-----------------------------------------------------------------------------------------------
Gulf Coast, TX, Industrial Development Authority (Valero
Energy Corp.), 5.6%, 2031 $1,750 $1,718,973
-----------------------------------------------------------------------------------------------
Gulf Coast, TX, Waste Disposal Rev. (Valero Energy
Corp.), 6.65%, 2032 1,000 1,061,800
-----------------------------------------------------------------------------------------------
Hardeman County, TN, Correctional Facilities Rev.,
7.75%, 2017 2,220 2,301,807
-----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority, Economic
Development Rev. (Holt Hauling & Warehousing),
8.4%, 2015+* 1,000 570,000
-----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority, Economic
Development Rev. (Holt Hauling & Warehousing),
8.6%, 2017+* 1,000 570,000
-----------------------------------------------------------------------------------------------
Park Creek Metropolitan District, CO, Rev., 7.875%, 2032# 1,270 1,267,930
-----------------------------------------------------------------------------------------------
Park Creek Metropolitan District, CO, Rev., 7.875%, 2032 580 588,439
-----------------------------------------------------------------------------------------------
Pennsylvania Economic Development Financing Authority,
Wastewater Treatment Rev. (Sunoco Co.), 7.6%, 2024 750 785,700
-----------------------------------------------------------------------------------------------
Pennsylvania Economic Development Financing Authority,
Finance Authority Facilities Rev. (Amtrak), "A",
6.25%, 2031 2,000 2,041,620
-----------------------------------------------------------------------------------------------
Philadelphia, PA, Industrial Development Authority Rev.
(Host Marriott LP), 7.75%, 2017 3,255 3,286,248
-----------------------------------------------------------------------------------------------
Port Corpus Christ, TX, Industrial Development Authority
Rev. (Citgo Petroleum Corp.), 8.25%, 2031 700 732,704
-----------------------------------------------------------------------------------------------
Port of New Orleans, LA, Industrial Development Rev.
(Avondale Industries), 8.25%, 2004(++) 165 165,853
-----------------------------------------------------------------------------------------------
Port of New Orleans, LA, Industrial Development Authority
Rev. (Avondale Industries), 8.5%, 2014(++) 1,515 1,565,722
-----------------------------------------------------------------------------------------------
Tooele County, UT, Hazardous Waste Treatment Rev. (Union
Pacific Corp.), 5.7%, 2026 385 384,276
-----------------------------------------------------------------------------------------------
$17,041,072
-----------------------------------------------------------------------------------------------
Industrial Revenue - Paper - 8.6%
-----------------------------------------------------------------------------------------------
Beauregard Parish, LA (Boise Cascade Corp.), 6.8%, 2027 $1,000 $1,010,040
-----------------------------------------------------------------------------------------------
Bedford County, VA, Industrial Development Authority Rev.
(Nekoosa Packaging), "A", 6.55%, 2025 1,000 995,150
-----------------------------------------------------------------------------------------------
Butler, AL, Solid Waste Disposal Rev. (James River
Corp.), 8%, 2028 500 512,705
-----------------------------------------------------------------------------------------------
Columbus County, NC, Industrial Facilities & Pollution
Control Financing Authority (International Paper, Co.),
"A", 6.15%, 2021 5,000 5,177,400
-----------------------------------------------------------------------------------------------
Courtland, AL, Solid Waste Disposal Rev. (Champion
International Corp.), 6.375%, 2029 2,000 2,028,400
-----------------------------------------------------------------------------------------------
Delta County, MI, Economic Development Corp.,
Environmental Improvements Rev. (Mead Westvaco Escanaba),
6.45%, 2023 500 520,800
-----------------------------------------------------------------------------------------------
Delta County, MI, Economic Development Corp.,
Environmental Improvements Rev. (Mead Westvaco Escanaba),
6.25%, 2027 1,000 1,045,210
-----------------------------------------------------------------------------------------------
Effingham County, GA, Development Authority, Solid Waste
Disposal Rev. (Fort James), 5.625%, 2018 850 812,209
-----------------------------------------------------------------------------------------------
Hodge, LA, Utilities Rev. (Stone Container Corp.), 7.45%, 2024 3,335 3,360,680
-----------------------------------------------------------------------------------------------
Isle Wight County, VA, Industrial Development Authority,
Solid Waste Disposal Facilities Rev. (Union Camp Corp.),
6.55%, 2024 4,000 4,099,600
-----------------------------------------------------------------------------------------------
Lowndes County, MS, Solid Waste Disposal & Pollution
Control Rev. (Weyerhaeuser Co.), 6.8%, 2022 2,000 2,281,220
-----------------------------------------------------------------------------------------------
Navajo County, AZ, Industrial Development Authority
(Stone Container Corp.), 7.2%, 2027 880 887,005
-----------------------------------------------------------------------------------------------
Onondaga County, NY, Industrial Development Authority
Rev., Solid Waste Disposal Rev. (Solvay Paperboard LLC),
6.8%, 2014 1,000 1,053,140
-----------------------------------------------------------------------------------------------
West Point, VA, Solid Waste Disposal Rev. (Chesapeake
Corp.), 6.25%, 2019 1,750 1,599,903
-----------------------------------------------------------------------------------------------
York County, SC, Pollution Control Rev. (Bowater, Inc.),
"A", 7.4%, 2010 1,045 1,052,440
-----------------------------------------------------------------------------------------------
$26,435,902
-----------------------------------------------------------------------------------------------
Industrial Revenue - Retail - 0.7%
-----------------------------------------------------------------------------------------------
Monongalia County, WV, Commercial Development Rev. (The
Kroger Co.), 7.7%, 2012 $2,000 $2,011,500
-----------------------------------------------------------------------------------------------
Miscellaneous Revenue - Entertainment & Tourism - 2.7%
-----------------------------------------------------------------------------------------------
California Statewide Communities Development Authority
Rev., East Valley Tourist (Cabazon Casino)"A", 9.25%, 2020 $1,155 $1,216,261
-----------------------------------------------------------------------------------------------
Capital Trust Agency of Florida Rev. (Seminole Tribe
Convention), 10%, 2033 3,500 4,254,075
-----------------------------------------------------------------------------------------------
Mississippi Development Bank, Special Obligation (Diamond
Lakes Utilities), 6.25%, 2017 1,000 1,010,550
-----------------------------------------------------------------------------------------------
Nevada Department of Business & Industry Rev. (Las Vegas
Monorail), 7.375%, 2040 1,765 1,703,331
-----------------------------------------------------------------------------------------------
$8,184,217
-----------------------------------------------------------------------------------------------
Miscellaneous Revenue - Other - 1.1%
-----------------------------------------------------------------------------------------------
Austin, TX, Convention Center (Convention Enterprises,
Inc.), 6.6%, 2021 $400 $418,944
-----------------------------------------------------------------------------------------------
Austin, TX, Convention Center (Convention Enterprises,
Inc.), 6.7%, 2028 600 626,970
-----------------------------------------------------------------------------------------------
Gallery Certificate Trust, PA, Parking Rev., FSA, 4.5%, 2013 955 961,666
-----------------------------------------------------------------------------------------------
Rockbridge County, VA, Industrial Development Authority
Rev. (Virginia Horse Center), 6.85%, 2021 700 646,331
-----------------------------------------------------------------------------------------------
Southwestern Illinois Development Authority Rev., Solid
Waste Disposal Rev., 5.9%, 2014 370 374,429
-----------------------------------------------------------------------------------------------
St. Louis County, MO, Industrial Development Authority
Rev. (Kiel Center Multipurpose Arena), 7.875%, 2024 300 307,743
-----------------------------------------------------------------------------------------------
$3,336,083
-----------------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 3.4%
-----------------------------------------------------------------------------------------------
Bexar County TX, Multi-Family Housing Rev. (American
Opportunity Housing), "A", MBIA, 5.7%, 2021 $1,250 $1,292,138
-----------------------------------------------------------------------------------------------
Charter Mac Equity Issuer Trust, 7.1%, 2009 1,000 1,129,580
-----------------------------------------------------------------------------------------------
Dallas Fort-Worth, TX, Housing Corp., 8.5%, 2011 895 897,918
-----------------------------------------------------------------------------------------------
Eaglebend, CO, Affordable Housing Corp., Multi-Family
Rev. (Housing Project), "A", 6.4%, 2017 1,000 977,340
-----------------------------------------------------------------------------------------------
Florida Multi-Family Housing Finance Agency Rev. (Center
Court Apartments), 8.5%, 2018 900 869,769
-----------------------------------------------------------------------------------------------
Memphis, TN, Educational & Housing Facilities (Wesley
Highland Terrace), 8.5%, 2024 115 114,000
-----------------------------------------------------------------------------------------------
Metropolitan Government of Nashville & Davidson County,
TN, Health & Educational & Housing Facilities Board Rev.
(Berkshire Place), GNMA, 6%, 2023 500 514,160
-----------------------------------------------------------------------------------------------
Munimae TE Bond Subsidiaries LLC, 6.875%, 2009# 2,000 2,130,960
-----------------------------------------------------------------------------------------------
Ridgeland, MS, Urban Renewal (Northbrook I & II
Apartments), 6.15%, 2019* 280 134,680
-----------------------------------------------------------------------------------------------
Ridgeland, MS, Urban Renewal (Northbrook I & III
Apartments), 6.25%, 2029* 475 225,877
-----------------------------------------------------------------------------------------------
San Bernardino County, CA (Equity Residential/Redlands),
"A", 5.2%, 2029 2,000 2,107,020
-----------------------------------------------------------------------------------------------
$10,393,442
-----------------------------------------------------------------------------------------------
Single Family Housing Revenue - Local - 1.7%
-----------------------------------------------------------------------------------------------
Cook County, IL, Single Family Mortgage Rev., "A", 0%, 2015 $105 $30,806
-----------------------------------------------------------------------------------------------
Corpus Christi, TX, Housing Finance Authority Rev., MBIA,
0%, 2011 3,000 1,486,290
-----------------------------------------------------------------------------------------------
Dallas, TX, Housing Finance Corp., Single Family Mortgage
Rev., MBIA, 0%, 2016 4,015 1,121,430
-----------------------------------------------------------------------------------------------
Jefferson Parish, LA, Single Family Mortgage Rev., GNMA,
6.625%, 2023 400 436,432
-----------------------------------------------------------------------------------------------
Jefferson Parish, LA, Single Family Mortgage Rev., GNMA,
6.3%, 2032 1,315 1,398,529
-----------------------------------------------------------------------------------------------
Sedgwick & Shawnee Counties, KS, Single Family Housing
Rev., GNMA, 6.45%, 2029 745 805,583
-----------------------------------------------------------------------------------------------
$5,279,070
-----------------------------------------------------------------------------------------------
Single Family Housing Revenue - State - 3.5%
-----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 7.15%, 2014 $13 $13,292
-----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 5.9%, 2023 330 345,622
-----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 6.9%, 2029 790 809,892
-----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 6.6%, 2032 385 401,297
-----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 6.375%, 2033 175 182,529
-----------------------------------------------------------------------------------------------
Georgia Housing & Finance Authority Rev., 5.65%, 2021 2,490 2,536,339
-----------------------------------------------------------------------------------------------
Louisiana Housing Finance Agency, Single Family Mortgage
Rev., GNMA, 6.4%, 2032 410 427,392
-----------------------------------------------------------------------------------------------
Minnesota Housing Finance Agency Rev., Residential
Housing Finance "B", 4.8%, 2023 330 336,544
-----------------------------------------------------------------------------------------------
Missouri Housing Development Commission, Single Family
Mortgage Rev. (Home Loan Program), GNMA, 6.35%, 2032 645 678,398
-----------------------------------------------------------------------------------------------
Missouri Housing Development Commission, Single Family
Mortgage Rev. (Home Loan Program), GNMA, 6.85%, 2032 300 328,581
-----------------------------------------------------------------------------------------------
Nebraska Investment Finance Authority, Single Family
Mortgage Rev., 0%, 2015 9,575 3,344,931
-----------------------------------------------------------------------------------------------
Single Family Housing Revenue - State - continued
-----------------------------------------------------------------------------------------------
Nebraska Investment Finance Authority, "C", 6.25%, 2021 $1,165 $1,198,575
-----------------------------------------------------------------------------------------------
New Hampshire Housing Finance Authority Rev., 5.875%, 2030 230 238,933
-----------------------------------------------------------------------------------------------
$10,842,325
-----------------------------------------------------------------------------------------------
Solid Waste Revenue - 2.7%
-----------------------------------------------------------------------------------------------
California Statewide Community Development Authority,
Solid Waste Facilities Rev. (Republic Services, Inc.),
"A", 4.95%, 2012 $1,000 $1,007,200
-----------------------------------------------------------------------------------------------
Delaware County, PA, Industrial Development Authority
Rev., Resource Recovery Facilities, "A", 6.1%, 2005 2,000 2,027,700
-----------------------------------------------------------------------------------------------
Delaware County, PA, Industrial Development Authority
Rev., Resource Recovery Facilities, "A", 6.5%, 2008 1,600 1,718,912
-----------------------------------------------------------------------------------------------
Massachusetts Development Finance Agency Rev. (Ogden
Haverhill Associates), 6.7%, 2014 725 763,128
-----------------------------------------------------------------------------------------------
Massachusetts Industrial Finance Agency Rev., Resource
Recovery Rev. (Ogden Haverhill Associates), 5.6%, 2019 2,850 2,753,585
-----------------------------------------------------------------------------------------------
$8,270,525
-----------------------------------------------------------------------------------------------
State & Local Appropriation - 1.6%
-----------------------------------------------------------------------------------------------
Chicago, IL, Public Building Commission, Building Rev.,
RITES, FGIC, 8.9164%, 2016+(+) $1,300 $1,524,068
-----------------------------------------------------------------------------------------------
Chicago, IL, Public Building Commission, Building Rev.,
RITES, FGIC, 8.9164%, 2017+(+) 1,050 1,223,775
-----------------------------------------------------------------------------------------------
College Park, GA (Civic Center), AMBAC, 5.75%, 2020 1,000 1,113,550
-----------------------------------------------------------------------------------------------
Houston, TX, Certificates of Participation, 6.3%, 2020 815 893,696
-----------------------------------------------------------------------------------------------
$4,755,089
-----------------------------------------------------------------------------------------------
Student Loan Revenue - 0.5%
-----------------------------------------------------------------------------------------------
Access to Loans for Learning, California Student Loan
Rev., 7.95%, 2030 $650 $667,472
-----------------------------------------------------------------------------------------------
Arizona Student Loan Acquisition Authority Rev., 7.625%, 2010 750 768,825
-----------------------------------------------------------------------------------------------
$1,436,297
-----------------------------------------------------------------------------------------------
Tax Assessment - 3.0%
-----------------------------------------------------------------------------------------------
Capital Region Community Development District of Florida,
Capital Improvement Rev., 5.95%, 2006 $385 $389,085
-----------------------------------------------------------------------------------------------
Chicago IL, Ryan Garfield Tax Increment Allocation,
10.125%, 2007 775 775,930
-----------------------------------------------------------------------------------------------
Concorde Estates Community Development District, FL,
Capital Improvement Rev., "B", 5%, 2011 650 631,924
-----------------------------------------------------------------------------------------------
Heritage Isles, FL, Community Development District, "A",
5.75%, 2005 145 145,068
-----------------------------------------------------------------------------------------------
Katy, TX, Development Authority Rev., 5.8%, 2011 920 953,194
-----------------------------------------------------------------------------------------------
Katy, TX, Development Authority Rev., 6%, 2018 1,325 1,342,994
-----------------------------------------------------------------------------------------------
Killarney Community Development District of Florida, "B",
5.125%, 2009 310 303,946
-----------------------------------------------------------------------------------------------
Markham, IL, Tax Increment Rev., 9%, 2012 1,080 1,083,521
-----------------------------------------------------------------------------------------------
Middle Village Community Development District, FL,
Special Assessment, "B", 5%, 2009 800 792,632
-----------------------------------------------------------------------------------------------
Panther Trace, FL, Community Development District Rev.,
Special Assessment, 5.4%, 2008 625 622,938
-----------------------------------------------------------------------------------------------
Preserve At Wilderness Lake Florida, Community
Development District, Capital Improvement,"B", 5%, 2009 665 654,400
-----------------------------------------------------------------------------------------------
Reunion East Community Development District, FL, Special
Assessment, 5.9%, 2007 275 279,109
-----------------------------------------------------------------------------------------------
Sterling Hill Community Development District of Florida,
Capital Improvement Rev., 5.5%, 2010 540 538,472
-----------------------------------------------------------------------------------------------
Villasol Community Development District of
Florida,Special Assessment Rev., "B", 5.375%, 2008 845 852,014
-----------------------------------------------------------------------------------------------
$9,365,227
-----------------------------------------------------------------------------------------------
Tax - Other - 1.3%
-----------------------------------------------------------------------------------------------
Black Hawk, CO, Device Tax Rev., 5.625%, 2017 $250 $239,370
-----------------------------------------------------------------------------------------------
Dade County, FL, Special Obligations Rev., Capital
Appreciation Bond, "B", AMBAC, 0%, 2008(++) 15,080 2,956,585
-----------------------------------------------------------------------------------------------
Virgin Islands Public Finance Authority Rev., 6%, 2006 250 264,230
-----------------------------------------------------------------------------------------------
Virgin Islands Public Finance Authority Rev., 5.875%, 2018 500 508,275
-----------------------------------------------------------------------------------------------
$3,968,460
-----------------------------------------------------------------------------------------------
Tobacco - 4.9%
-----------------------------------------------------------------------------------------------
Badger Tobacco, WI (Asset Securitization Corp.),
6.125%, 2027 $3,000 $2,781,630
-----------------------------------------------------------------------------------------------
California Statewide Financing Authority, Tobacco
Settlement, 5.625%, 2029 1,940 1,696,840
-----------------------------------------------------------------------------------------------
District of Columbia, Tobacco Settlement, 6.25%, 2024 1,260 1,176,664
-----------------------------------------------------------------------------------------------
Golden State Tobacco Securization, Tobacco Settlement,
5.375%, 2028 2,000 1,943,460
-----------------------------------------------------------------------------------------------
Golden State Tobacco Securization, Tobacco Settlement,
7.8%, 2042 1,000 1,055,170
-----------------------------------------------------------------------------------------------
Iowa Tobacco Settlement Authority, 5.3%, 2025 2,000 1,644,660
-----------------------------------------------------------------------------------------------
Louisiana Tobacco Settlement Authority, 5.5%, 2030 1,435 1,222,390
-----------------------------------------------------------------------------------------------
New Jersey Tobacco Settlement Authority, 5.75%, 2032 700 621,061
-----------------------------------------------------------------------------------------------
Rhode Island Tobacco Settlement Authority, 6%, 2023 370 339,253
-----------------------------------------------------------------------------------------------
South Carolina Tobacco Settlement Authority, 6.375%, 2028 1,000 910,370
-----------------------------------------------------------------------------------------------
Southern California Tobacco Settlement Authority, 5.25%, 2027 1,265 1,226,620
-----------------------------------------------------------------------------------------------
Washington Tobacco Settlement Authority, 6.5%, 2026 495 466,736
-----------------------------------------------------------------------------------------------
$15,084,854
-----------------------------------------------------------------------------------------------
Toll Roads - 1.2%
-----------------------------------------------------------------------------------------------
Arapahoe County, CO, Capital Improvement Highway Rev.,
"C", 0%, 2005(++) $1,000 $476,980
-----------------------------------------------------------------------------------------------
Niagara Falls, NY, Bridge Commission, Toll Rev., RITES,
FGIC, 9.1623%, 2015+(+) 1,500 1,790,700
-----------------------------------------------------------------------------------------------
Pocahontas Parkway Assn., VA, Toll Road Rev., 0%, 2011 1,000 424,320
-----------------------------------------------------------------------------------------------
Pocahontas Parkway Assn., VA, Toll Road Rev., 0%, 2012 1,000 377,190
-----------------------------------------------------------------------------------------------
Pocahontas Parkway Assn., VA, Toll Road Rev., 0%, 2015 1,750 732,165
-----------------------------------------------------------------------------------------------
$3,801,355
-----------------------------------------------------------------------------------------------
Transportation - Special Tax - 3.3%
-----------------------------------------------------------------------------------------------
Missouri Highways & Transportation Commission, State Road
Rev., "A", 5.625%, 2018 $4,500 $4,922,280
-----------------------------------------------------------------------------------------------
Telluride, CO (Gondola Transit Co.), 9%, 2006(++) 790 894,865
-----------------------------------------------------------------------------------------------
Telluride, CO, Real Estate Transfer Assessment Rev.
(Gondola Transit Co.), 11.5%, 2012(++) 2,900 4,306,007
-----------------------------------------------------------------------------------------------
$10,123,152
-----------------------------------------------------------------------------------------------
Universities - Colleges - 3.7%
-----------------------------------------------------------------------------------------------
California Educational Facilities Authority Rev. (L.A.
College of Chiropractic), 5.6%, 2017 $750 $703,148
-----------------------------------------------------------------------------------------------
Houston, TX, Community College Systems, MBIA,
7.875%, 2025 2,500 3,111,050
-----------------------------------------------------------------------------------------------
Illinois Educational Facilities Authority Rev. (Augustana
College), 5.625%, 2022 400 406,576
-----------------------------------------------------------------------------------------------
Islip, NY, Community Development Agency Rev. (New York
Institute of Technology), 7.5%, 2006(++) 2,500 2,800,200
-----------------------------------------------------------------------------------------------
Louisiana State University (Health Sciences Center
Project), MBIA, 6.375%, 2031 2,500 2,841,475
-----------------------------------------------------------------------------------------------
Savannah, GA, Economic Development Authority Rev.
(College of Art & Design, Inc.), 6.5%, 2013 625 741,263
-----------------------------------------------------------------------------------------------
State of Massachusetts, Development Finance Agency Rev.
(Eastern Nazarene College), 5.625%, 2029 750 607,755
-----------------------------------------------------------------------------------------------
$11,211,467
-----------------------------------------------------------------------------------------------
Universities - Secondary Schools - 1.7%
-----------------------------------------------------------------------------------------------
California Statewide Communities, Development Authority
Rev. (Aspire Public Schools Lodi Project), 7.25%, 2032 $1,250 $1,234,813
-----------------------------------------------------------------------------------------------
California Statewide Communities, Development Authority
Rev. (Escondido Charter High School), 7.5%, 2036 1,000 998,050
-----------------------------------------------------------------------------------------------
California Statewide Communities, Development Authority
Rev. (Escondido Charter High School), 7.5%, 2023 600 598,830
-----------------------------------------------------------------------------------------------
Michigan Municipal Bond Authority Rev. (Detroit Academy
of Arts & Sciences), 8%, 2031 1,000 956,810
-----------------------------------------------------------------------------------------------
Michigan Municipal Bond Authority Rev. (YMCA Service
Learning Academy), 7.625%, 2021 1,000 998,790
-----------------------------------------------------------------------------------------------
Pima County, AZ, Industrial Development Authority
Education Rev. (Arizona Charter Schools), "C", 6.75%, 2031 500 500,940
-----------------------------------------------------------------------------------------------
$5,288,233
-----------------------------------------------------------------------------------------------
Utilities - Cogeneration - 3.6%
-----------------------------------------------------------------------------------------------
Alaska Industrial Development Export Authority, Power
Rev., Upper Lynn Canal Regional Power, 5.8%, 2018 $830 $740,485
-----------------------------------------------------------------------------------------------
Carbon County, PA, Industrial Development Authority Rev.
(Panther Creek Partners), 6.65%, 2010 2,620 2,836,517
-----------------------------------------------------------------------------------------------
Klamath Falls, OR, Electric Rev. (Klamath Cogeneration),
6%, 2025 2,500 2,418,725
-----------------------------------------------------------------------------------------------
Mecklenburg County, VA, Industrial Development Authority
Rev. (UAE Mecklenburg, LP), 6.5%, 2017 800 807,272
-----------------------------------------------------------------------------------------------
Pennsylvania Economic Development Financing Authority
Rev., Resources Recovery Rev. (Northhampton Generating),
6.4%, 2009 350 355,950
-----------------------------------------------------------------------------------------------
Pennsylvania Economic Development Financing Authority
Rev., Resources Recovery Rev. (Northampton Generating),
6.5%, 2013 1,000 1,015,370
-----------------------------------------------------------------------------------------------
Pittsylvania County, VA, Industrial Development Authority
Rev. (Multi-trade of Pittsylvania), 7.5%, 2014 3,000 2,977,860
-----------------------------------------------------------------------------------------------
$11,152,179
-----------------------------------------------------------------------------------------------
Utilities - Investor Owned - 12.1%
-----------------------------------------------------------------------------------------------
Brazos River Authority, TX (Reliant Energy, Inc.), "A",
5.375%, 2019 $500 $491,420
-----------------------------------------------------------------------------------------------
Brazos River Authority, TX, Authority Texas Rev. (Reliant
Energy, Inc.), "B", AMBAC, 5.125%, 2020 2,000 2,047,920
-----------------------------------------------------------------------------------------------
Brazos River Authority, TX, Pollution Control Rev. (Texas
Utility Co.), 7.7%, 2033 $575 $652,556
-----------------------------------------------------------------------------------------------
Brazos River Authority, TX, Pollution Control Rev. (Texas
Utility Co.), "B", 6.3%, 2032 500 518,855
-----------------------------------------------------------------------------------------------
Brazos River Authority, TX, Pollution Control Rev. (Texas
Utility Co.), "C", 6.75%, 2038 1,000 1,073,300
-----------------------------------------------------------------------------------------------
Calcasieu Parish, LA, Industrial Development Board,
Pollution Control Rev. (Entergy Gulf States, Inc.),
5.45%, 2010 1,250 1,278,475
-----------------------------------------------------------------------------------------------
California Pollution Control Financing Authority,
Pollution Control Rev. (Pacific Gas & Electric Co.), MBIA,
5.35%, 2016 1,000 1,045,560
-----------------------------------------------------------------------------------------------
California Pollution Control Financing Authority,
Pollution Control Rev. (Southern California Edison Co.),
6.4%, 2024 1,000 1,013,820
-----------------------------------------------------------------------------------------------
Connecticut Development Authority, Pollution Control Rev.
(Connecticut Light & Power Co.), 5.85%, 2028 2,000 2,081,420
-----------------------------------------------------------------------------------------------
Connecticut Development Authority, Pollution Control Rev.
(Connecticut Light & Power Co.), 5.95%, 2028 2,270 2,347,657
-----------------------------------------------------------------------------------------------
Farmington, NM, Pollution Control Rev. (New Mexico Public
Service), 5.8%, 2022 2,105 2,209,176
-----------------------------------------------------------------------------------------------
Farmington, NM, Pollution Control Rev. (Public Service
Co. San Juan), "A", 6.3%, 2016 2,195 2,330,673
-----------------------------------------------------------------------------------------------
Forsyth, MT, Pollution Control Rev. (Portland General),
5.2%, 2033 230 240,739
-----------------------------------------------------------------------------------------------
Matagorda County, TX (Centerpoint Energy), 5.6%, 2027 1,500 1,496,115
-----------------------------------------------------------------------------------------------
Matagorda County, TX, Pollution Control Rev. (Central
Power & Light Co.), 4.55%, 2029 2,000 2,067,000
-----------------------------------------------------------------------------------------------
Matagorda County, TX, Pollution Control Rev. (Reliant
Energy), 5.95%, 2030 1,655 1,585,407
-----------------------------------------------------------------------------------------------
New Hampshire Business Finance Authority, Pollution
Control Rev. (Public Service of New Hampshire), 6%, 2021 1,000 1,033,390
-----------------------------------------------------------------------------------------------
Ohio Air Quality Development Authority Rev.,Pollution
Control, Rev. (Cleveland Electric)"B", 6%, 2020 3,000 3,048,750
-----------------------------------------------------------------------------------------------
Ohio Water Development, Pollution Control Rev. (Cleveland
Electric), 8%, 2023 2,500 2,613,925
-----------------------------------------------------------------------------------------------
Pima County, AZ, Industrial Development Authority Rev.
(Tucson Electric Power Co.), 6.1%, 2025 650 616,376
-----------------------------------------------------------------------------------------------
Pima County, AZ, Industrial Development Authority Rev.
(Tucson Electric Power Co.), 6%, 2029 2,905 2,809,280
-----------------------------------------------------------------------------------------------
Port Morrow, OR, Pollution Control Rev. (Portland General
Electric), 5.2%, 2033 550 587,703
-----------------------------------------------------------------------------------------------
Sullivan, IN, Pollution Control Rev. (Indiana- Michigan
Power Co.), "C", 5.95%, 2009 250 253,500
-----------------------------------------------------------------------------------------------
Trinity River Authority, TX, Pollution Control Rev. (TXU
Electric Co.), 6.25%, 2028 500 518,160
-----------------------------------------------------------------------------------------------
West Feliciana Parish, LA, Pollution Control Rev. (Gulf
States Utilities Co.), 7.7%, 2014 550 558,272
-----------------------------------------------------------------------------------------------
West Feliciana Parish, LA, Pollution Control Rev. (Gulf
States Utilities Co.), 5.8%, 2015 1,500 1,540,185
-----------------------------------------------------------------------------------------------
West Feliciana Parish, LA, Pollution Control Rev. (Gulf
States Utilities Co.), 5.8%, 2016 1,000 1,021,900
-----------------------------------------------------------------------------------------------
$37,081,534
-----------------------------------------------------------------------------------------------
Utilities - Municipal Owned - 3.0%
-----------------------------------------------------------------------------------------------
California State Department Water Resources Power Supply
Rev. "A", 5.75%, 2017 $1,250 $1,355,812
-----------------------------------------------------------------------------------------------
North Carolina Eastern Municipal Power Agency, Power
Systems Rev., "B", 5.55%, 2014 2,150 2,250,556
-----------------------------------------------------------------------------------------------
North Carolina Municipal Power Agency (Catawba Electric
Rev.) "B", 6.5%, 2020 2,000 2,195,960
-----------------------------------------------------------------------------------------------
Seattle, WA, Municipal Light & Power Rev., 5.625%, 2017 3,000 3,261,000
-----------------------------------------------------------------------------------------------
Southern California Public Power Authority (Transmission
Project Rev.), RIBS, 10.347%, 2012(+) 100 101,522
-----------------------------------------------------------------------------------------------
$9,164,850
-----------------------------------------------------------------------------------------------
Water & Sewer Utility Revenue - 1.7%
-----------------------------------------------------------------------------------------------
New York City, NY, Municipal Water Finance Authority,
Water & Sewer Systems Rev., 5.5%, 2033 $5,000 $5,156,650
-----------------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $428,135,490) $434,472,913
-----------------------------------------------------------------------------------------------
Floating Rate Demand Notes
-----------------------------------------------------------------------------------------------
Lincoln County, WY, Pollution Control Rev. (Exxon Mobile
Corp.), due 5/03/04 $100 $100,000
-----------------------------------------------------------------------------------------------
Sevier County, TN, Public Building Authority, due 5/05/04 65 65,000
-----------------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $165,000
-----------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $428,300,490) $434,637,913
-----------------------------------------------------------------------------------------------
Preferred Shares - (45.7)% $(140,008,228)
-----------------------------------------------------------------------------------------------
Other Assets, Less Liabilities -3.9% 11,825,806
-----------------------------------------------------------------------------------------------
Net Assets - 100.0% $306,455,491
-----------------------------------------------------------------------------------------------
* Non-income producing security - in default.
+ Restricted security.
(+) Inverse floating rate security.
(++) Refunded bond.
# SEC Rule 144A.
The following abbreviations for insurers and inverse floater are used in the Portfolio of
Investments and are defined:
Insurers Inverse Floaters
AMBAC = AMBAC Indemnity Corp. INFLOS = Inverse Floating Security
FGIC = Financial Guaranty Insurance Co. RIBS = Residual Interest Bonds
FSA = Financial Security Assurance Inc. RITES = Residual Interest Tax-Exempt Security
GNMA = Government National Mortgage Assn.
MBIA = Municipal Bond Investors Corp.
RADIAN = Radian Guaranty, Inc.
XLCA = XL Capital Insurance Co.
SEE NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES (unaudited)
--------------------------------------------------------------------------------------------------
This statement represents the trust's balance sheet, which details the assets
and liabilities composing the total value of the trust.
AT 4/30/04
ASSETS
Investments, at value (identified cost, $428,300,490) $434,637,913
--------------------------------------------------------------------------------------------------
Cash 68,509
--------------------------------------------------------------------------------------------------
Receivable for investments sold 3,226,649
--------------------------------------------------------------------------------------------------
Interest receivable 8,480,052
--------------------------------------------------------------------------------------------------
Unrealized appreciation on interest rate swap agreements 495,573
--------------------------------------------------------------------------------------------------
Other assets 2,181
--------------------------------------------------------------------------------------------------
Total assets $446,910,877
--------------------------------------------------------------------------------------------------
LIABILITIES
Distributions payable on common shares $174,032
--------------------------------------------------------------------------------------------------
Payable to affiliates
--------------------------------------------------------------------------------------------------
Management fee 9,399
--------------------------------------------------------------------------------------------------
Transfer agent and dividend disbursing costs 6,219
--------------------------------------------------------------------------------------------------
Administrative fee 162
--------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 257,346
--------------------------------------------------------------------------------------------------
Series T and Series TH auction preferred shares (5,600
shares issued and outstanding at $25,000 per share) at
liquidation value plus cumulative unpaid dividends 140,008,228
--------------------------------------------------------------------------------------------------
Total liabilities $140,455,386
--------------------------------------------------------------------------------------------------
Net assets applicable to common shares $306,455,491
--------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital - common shares $337,101,074
--------------------------------------------------------------------------------------------------
Unrealized appreciation on investments 6,832,996
--------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (44,146,866)
--------------------------------------------------------------------------------------------------
Accumulated undistributed net investment income 6,668,287
--------------------------------------------------------------------------------------------------
Net assets applicable to common shares $306,455,491
--------------------------------------------------------------------------------------------------
Preferred shares, at value (5,600 shares issued and
outstanding at $25,000 per share) 140,000,000
--------------------------------------------------------------------------------------------------
Net assets including preferred shares $446,455,491
--------------------------------------------------------------------------------------------------
Common shares of beneficial interest outstanding
(39,832,578 shares issued less 55,500 treasury shares) 39,777,078
--------------------------------------------------------------------------------------------------
Net asset value per common share ($306,455,491/39,777,078) $7.70
--------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF OPERATIONS (unaudited)
--------------------------------------------------------------------------------------------------
This statement describes how much the trust received in investment income and
paid in expenses. It also describes any gains and/or losses generated by trust
operations.
FOR THE SIX MONTHS ENDED 4/30/04
NET INVESTMENT INCOME
Interest income $14,193,718
--------------------------------------------------------------------------------------------------
Expenses
--------------------------------------------------------------------------------------------------
Management fee $1,781,016
--------------------------------------------------------------------------------------------------
Trustees' compensation 22,914
--------------------------------------------------------------------------------------------------
Administrative fee 24,697
--------------------------------------------------------------------------------------------------
Transfer agent and dividend disbursing costs 46,541
--------------------------------------------------------------------------------------------------
Preferred shares remarketing agent fee 174,692
--------------------------------------------------------------------------------------------------
Custodian fee 43,554
--------------------------------------------------------------------------------------------------
Printing 19,079
--------------------------------------------------------------------------------------------------
Postage 10,634
--------------------------------------------------------------------------------------------------
Auditing fees 29,655
--------------------------------------------------------------------------------------------------
Miscellaneous 60,520
--------------------------------------------------------------------------------------------------
Total expenses $2,213,302
--------------------------------------------------------------------------------------------------
Fees paid indirectly (1,178)
--------------------------------------------------------------------------------------------------
Net expenses $2,212,124
--------------------------------------------------------------------------------------------------
Net investment income $11,981,594
--------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
--------------------------------------------------------------------------------------------------
Realized loss (identified cost basis)
--------------------------------------------------------------------------------------------------
Investment transactions $(645,326)
--------------------------------------------------------------------------------------------------
Swap transactions (1,020,113)
--------------------------------------------------------------------------------------------------
Net realized loss on investments $(1,665,439)
--------------------------------------------------------------------------------------------------
Change in unrealized appreciation
--------------------------------------------------------------------------------------------------
Investments $2,193,855
--------------------------------------------------------------------------------------------------
Swap transactions (419,445)
--------------------------------------------------------------------------------------------------
Net unrealized gain on investments $1,774,410
--------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments $108,971
--------------------------------------------------------------------------------------------------
Distributions declared from preferred shares $(681,800)
--------------------------------------------------------------------------------------------------
Increase in net assets from operations $11,408,765
--------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------------------------
This statement describes the increases and/or decreases in net assets
resulting from operations, any distributions, and any shareholder
transactions.
SIX MONTHS ENDED YEAR ENDED
4/30/04 10/31/03
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $11,981,594 $24,126,026
--------------------------------------------------------------------------------------------------
Net realized loss on investments (1,665,439) (10,546,642)
--------------------------------------------------------------------------------------------------
Net unrealized gain on investments 1,774,410 12,101,897
--------------------------------------------------------------------------------------------------
Distributons declared from preferred shares from
net investment income (681,800) (1,449,560)
--------------------------------------------------------------------------------------------------
Increase in net assets from operations $11,408,765 $24,231,721
--------------------------------------------------------------------------------------------------
Distributions declared to shareholders
--------------------------------------------------------------------------------------------------
From net investment income $(10,847,111) $(21,191,726)
--------------------------------------------------------------------------------------------------
Trust share (principal) transactions
--------------------------------------------------------------------------------------------------
Net asset value of shares issued to common
shareholders in reinvestment of distributions 511,173 332,939
--------------------------------------------------------------------------------------------------
Total increase in net assets $1,072,827 $3,372,934
--------------------------------------------------------------------------------------------------
NET ASSETS
At beginning of period $305,382,664 $302,009,730
--------------------------------------------------------------------------------------------------
At end of period (including accumulated
undistributed net investment income of $6,628,287
and $6,215,604, respectively) $306,455,491 $305,382,664
--------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
------------------------------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the trust's financial performance for the semiannual period
and the past 5 fiscal years. Certain information reflects financial results for a single trust share. The total returns in the
table represent the rate by which an investor would have earned (or lost) on an investment in the trust (assuming reinvestment
of all distributions) held for the entire period.
SIX MONTHS YEAR ENDED 10/31
ENDED -------------------------------------------------------------------------
4/30/04 2003 2002 2001 2000 1999
(UNAUDITED)
Net asset value - beginning of
period $7.69 $7.61 $7.93 $7.79 $7.96 $8.55
------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS#(S)
Net investment income $0.30 $0.61 $0.64 $0.64 $0.53 $0.54
------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments --+++ 0.04 (0.38) 0.18 (0.17) (0.60)
------------------------------------------------------------------------------------------------------------------------------
Distributions declared to
shareholders on preferred shares (0.02) (0.04) (0.05) (0.10) -- --
---------------------------------- ----- ----- ----- ----- ----- ------
Total from investment operations $0.28 $0.61 $0.21 $0.72 $0.36 $(0.06)
---------------------------------- ----- ----- ----- ----- ----- ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net investment income,
common shares $(0.27) $(0.53) $(0.53) $(0.53) $(0.53) $(0.53)
------------------------------------------------------------------------------------------------------------------------------
Preferred shares offering cost
charge to paid-in capital $ -- $ -- $ -- $(0.05) $ -- $ --
---------------------------------- ----- ----- ----- ----- ----- ------
Net asset value - end of period $7.70 $7.69 $7.61 $7.93 $7.79 $7.96
---------------------------------- ----- ----- ----- ----- ----- ------
Common share market value, end
of period $7.13 $7.49 $7.15 $7.83 $7.38 $7.13
---------------------------------- ----- ----- ----- ----- ----- ------
Total return at common market
value (%)* (1.39)(++) 12.51 (2.23) 13.58 11.27 (17.20)
---------------------------------- ----- ----- ----- ----- ----- ------
RATIOS (%) TO AVERAGE
NET ASSETS APPLICABLE TO
COMMON SHARES/SUPPLEMENTAL DATA##
Expenses+ 1.43(+) 1.51 1.56 1.49 1.11 1.06
------------------------------------------------------------------------------------------------------------------------------
Net investment income+(S) 7.76(+) 7.98 8.26 8.12 6.76 6.49
------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 5 11 16 26 18 15
------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $306,455 $305,383 $302,010 $312,996 $305,789 $312,195
------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEAR ENDED 10/31
ENDED ----------------------------------------------------------------------
4/30/04 2003 2002 2001 2000 1999
(UNAUDITED)
SUPPLEMENTAL RATIOS (%):
Ratios of expenses to average
net assets including preferred
shares+## 0.99(+) 1.03 1.07 1.07 1.11 1.06
------------------------------------------------------------------------------------------------------------------------------
Preferred shares dividends 0.44(+) 0.48 0.68 1.28 -- --
------------------------------------------------------------------------------------------------------------------------------
Net investment income
available to common shares(S) 7.32(+) 7.50 7.58 6.84 6.76 6.49
------------------------------------------------------------------------------------------------------------------------------
SENIOR SECURITIES:
Total preferred shares
outstanding 5,600 5,600 5,600 5,600 -- --
------------------------------------------------------------------------------------------------------------------------------
Asset coverage per preferred
share++ $79,724 $79,533 $79,090 $80,897 -- --
------------------------------------------------------------------------------------------------------------------------------
Involuntary liquidation
preference per preferred
shares $25,000 $25,000 $25,000 $25,000 -- --
------------------------------------------------------------------------------------------------------------------------------
Approximate market value per
preferred share $25,000 $25,000 $25,000 $25,000 -- --
------------------------------------------------------------------------------------------------------------------------------
(S) As required, effective November 1, 2001, the trust has adopted the provisions of the AICPA Audit and Accounting Guide for
Investment Companies and began accreting market discount on debt securities. The effect of this change for the year ended
October 31, 2002 was to increase net investment income per share by $0.01, decrease net realized and unrealized gains and
losses per share by $0.01, and to increase the ratio of net investment income to average net assets by 0.07%. Per share,
ratios, and supplemental data for periods prior to November 1, 2001 have not been restated to reflect this change in
presentation.
+ Ratio excludes dividend payment on auction preferred shares.
++ Calculated by substracting the trust's total liabilities (not including preferred shares) from the trust's total assets
and dividing this by the number of preferred shares outstanding.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
(+) Annualized.
(++) Not annualized.
* As revised, to reflect transactions conducted prior to close, not including in closing activity on the NYSE at October 31,
2002. Such amount was previously reported as (2.64)%. Additionally, for the years ended October 31, 2000 and October 31,
1999, total returns previously reported were based on Net Asset Value (5.20% and (0.59)%, respectively).
SEE NOTES TO FINANCIAL STATEMENTS
------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited)
------------------------------------------------------------------------------
(1) BUSINESS AND ORGANIZATION
MFS Municipal Income Trust (the trust) is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as a non-diversified closed-end management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
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. The trust can invest up to 100% of its portfolio
in high-yield securities rated below investment grade. Investments in high-
yield securities involve greater degrees of credit and market risk than
investments in higher-rated securities and tend to be more sensitive to
economic conditions. Municipal securities backed by current or anticipated
revenues from a specific project or specific assets can be negatively affected
by the discontinuance of the taxation supporting the projects or assets or the
inability to collect revenues for the project or from the assets. If the
Internal Revenue Service determines an issuer of a municipal security has not
complied with applicable tax requirements, interest from the security could
become taxable and the security could decline in value.
INVESTMENT VALUATIONS - The trust uses independent pricing services approved
by the Board of Trustees wherever possible to value its portfolio securities.
Portfolio securities are valued at current market quotations where current
market quotations are readily available, or the trust may fair value portfolio
securities under the direction of the Board of Trustees when a determination
is made that current market quotations are not readily available. Bonds and
other fixed income securities (other than short-term obligations) in the
trust's portfolio are valued at an evaluated bid price as reported by an
independent pricing service, or to the extent a valuation is not reported by a
pricing service, such securities are valued on the basis of quotes from
brokers and dealers. Prices obtained from pricing services utilize both
dealer-supplied valuations and electronic data processing techniques which
take into account appropriate 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 quoted prices or exchange or over-the-counter prices, since such
valuations are believed to reflect more accurately the fair value of such
securities. Bonds and other fixed income securities for which it is determined
that current market quotations are not readily available will be fair valued
under the direction of the Board of Trustees. Short-term obligations with a
remaining maturity in excess of 60 days will be valued upon dealer-supplied
valuations. All other short-term obligations in the trust's portfolio are
valued at amortized cost, which constitutes market value as determined by the
Board of Trustees.
SWAP AGREEMENTS - The trust may enter into swap agreements. A swap is an
exchange of cash payments between the trust and another party, which is based
on a specific financial index. Cash payments are exchanged at specified
intervals and the expected income or expense is recorded on the accrual basis.
The value of the swap is adjusted daily and the change in value is recorded as
unrealized appreciation or depreciation. Risks may arise upon entering into
these agreements from the potential inability of counterparties to meet the
terms of their contract and from unanticipated changes in the value of the
financial index on which the swap agreement is based. The trust uses swaps for
both hedging and non-hedging purposes. For hedging purposes, the trust may use
swaps to reduce its exposure to interest rate fluctuations. For non-hedging
purposes, the trust may use swaps to take a position on anticipated changes in
the underlying financial index.
INTEREST RATE SWAP AGREEMENTS - Interest rate swap agreements are agreements
to exchange cash flows periodically based on a notional principal amount, for
example the exchange of fixed rate interest payments for floating rate
interest payments which are based on a specific financial index or the
exchange of two distinct floating rate payments. The net receivable or payable
associated with these payments is accrued daily and is recorded as net
interest income or expense. For financial statement purposes, the net interest
income or expense periodically recognized for an interest rate is recorded in
the same line item as any unrealized and realized gains or losses recognized
for that instrument. The primary risk associated with interest rate swap
agreements is that unfavorable changes in the fluctuation of interest rates
could adversely impact the trust.
RATE LOCK SWAP AGREEMENTS - The trust may enter into rate lock swap
agreements, which are used to reduce the interest rate risk of the portfolio.
A rate lock swap agreement is a payment or receipt of cash on a specified
future date, calculated as the difference between the strike rate and a
specific index yield on that date. The payment received or made at the end of
the measurement period is recorded as a realized gain or loss in the Statement
of Operations. The value of the swap is adjusted daily and the change in value
is recorded as unrealized appreciation or depreciation.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized or accreted for financial statement purposes in
accordance with accounting principles generally accepted in the United States
of America. All premium and original issue discount is amortized or accreted
for tax reporting purposes as required by federal income tax regulations. Some
securities may be purchased on a "when-issued" or "forward delivery" basis,
which means that the securities will be delivered to the trust 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 made directly to the security issuer,
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 reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the trust. This amount, for the six months ended April 30, 2004, is shown as a
reduction of total 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 tax-
exempt and taxable net income, including any net realized gain on investments.
Accordingly, no provision for federal income or excise tax is provided.
Distributions paid by the trust from net interest received on tax-exempt
municipal bonds are not includable by shareholders as gross income for federal
income tax purposes because the trust intends to meet certain requirements of
the Code applicable to regulated investment companies, which will enable the
trust 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. The trust
distinguishes between distributions on a tax basis and a financial reporting
basis and 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. Common
types of book and tax differences that could occur include differences in
accounting for defaulted bonds, capital losses, derivatives, and amortization
and accretion on debt securities.
The tax character of distributions declared for the years ended October 31,
2003 and October 31, 2002 was as follows:
10/31/03 10/31/02
Distributions declared from:
--------------------------------------------------------------------------------
Tax-exempt income $22,599,683 $22,909,900
--------------------------------------------------------------------------------
Ordinary income 41,603 64,159
--------------------------------------------------------------------------------
Total distributions declared $22,641,286 $22,974,059
--------------------------------------------------------------------------------
As of October 31, 2003 the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Undistributed ordinary income $171,028
-----------------------------------------------------------------
Undistributed tax-exempt income 7,053,948
-----------------------------------------------------------------
Capital loss carryforward (43,353,428)
-----------------------------------------------------------------
Unrealized appreciation 5,948,263
-----------------------------------------------------------------
Other temporary differences (1,027,048)
-----------------------------------------------------------------
For federal income tax purposes, the capital loss carryforward may be applied
against any net taxable realized gains of each succeeding year until the
earlier of its utilization or expiration:
EXPIRATION DATE
October 31, 2004 $(8,774,606)
------------------------------------------------------------------
October 31, 2005 (16,518,819)
------------------------------------------------------------------
October 31, 2006 (1,383,806)
------------------------------------------------------------------
October 31, 2009 (2,847,429)
------------------------------------------------------------------
October 31, 2010 (2,883,947)
------------------------------------------------------------------
October 31, 2011 (10,944,821)
------------------------------------------------------------------
Total $(43,353,428)
------------------------------------------------------------------
AUCTION PREFERRED SHARES - The trust issued 2,800 shares of Auction Preferred
Shares (APS), series T and 2,800 of Auction Preferred Shares (APS), series TH.
Dividends are cumulative at a rate that is reset every seven days for both
series through an auction process. During the six months ended April 30, 2004,
the dividend rates ranged from 1.31% to 1.83%. The trust pays an annual fee
equivalent to 0.25% of the preferred share liquidation value for remarketing
efforts associated with the preferred auction. The APS are redeemable at the
option of the trust in whole or in part at the redemption price equal to $25,000
per share, plus accumulated and unpaid dividends. The APS are also subject to
mandatory redemption if certain requirements relating to its asset maintenance
coverage are not satisfied. The trust is required to maintain certain asset
coverage with respect to the APS as defined in the trust's By-Laws and the
Investment Company Act of 1940.
In accordance with the provisions of FASB 150, "Accounting for certain
financial instruments with characteristics of both Liabilities and Equity",
effective for the current period, the trust has reclassified its Auction
Preferred Shares ("APS") outside of permanent equity in the Net Assets section
of the Statement of Assets and Liabilities. In addition, distributions to APS
shareholders are now classified as a component of the "Increase in net assets
from operations" on the Statement of Operations and Statement of Changes in
Net Assets and as a component of the "Total from investment operations" in the
Financial Highlights. Prior year amounts presented have been reclassified to
conform to this period's presentation. This change has no impact of the net
assets applicable to common shares of the trust.
(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 0.40% of
the trust's average daily net assets and 6.32% of investment income. Management
fees incurred for the six months ended April 30, 2004 were 0.79% of average
daily net assets, including preferred shares, on an annualized basis.
The trust pays compensation to the Independent Trustees ("Trustees") in the
form of both a retainer and attendance fees, and pays no compensation directly
to its Trustees who are officers of the investment adviser, or to officers of
the trust, all of whom receive remuneration for their services to the trust
from MFS. Certain officers and Trustees of the trust are officers or directors
of MFS and MFS Service Center, Inc. (MFSC). The trust has an unfunded, defined
benefit plan for retired Trustees. Included in Trustees' compensation is a
pension expense of $5,398 for retired trustees for the six months ended April
30, 2004.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to certain funds
for which MFS acts as investment adviser. Under an administrative services
agreement between the funds and MFS, MFS is entitled to partial reimbursement of
the costs MFS incurs to provide these services, subject to review and approval
by the Board of Trustees. The trust is allocated a portion of these
administrative costs based on its size and relative average net assets. Prior to
April 1, 2004, the maximum amount was based on the following annual percentages
of the trust's average daily net assets:
First $2 billion 0.0175%
-------------------------------------------------------
Next $2.5 billion 0.0130%
-------------------------------------------------------
Next $2.5 billion 0.0005%
-------------------------------------------------------
In excess of $7 billion 0.0000%
-------------------------------------------------------
Effective April 1, 2004 the maximum amount is based on the following annual
percentages of the trust's average daily net assets:
First $2 billion 0.01120%
--------------------------------------------------------
Next $2.5 billion 0.00832%
--------------------------------------------------------
Next $2.5 billion 0.00032%
--------------------------------------------------------
In excess of $7 billion 0.0000%
--------------------------------------------------------
For the six months ended April 30, 2004, the trust paid MFS $24,697 equivalent
to 0.0110% of average daily net assets including preferred shares, to
partially reimburse MFS for the costs of providing administrative services.
TRANSFER AGENT - Included in transfer agent and dividend disbursing costs is a
fee paid to MFSC, a wholly owned subsidiary of MFS, for its services as
registrar and dividend disbursing agent for the trust. The agreement provides
that the trust will pay MFSC an account maintenance fee of no more than $9.00
and a dividend services fee of $0.75 per reinvestment. These fees amounted to
$32,576 for the six months ended April 30, 2004. Also included in transfer agent
and dividend disbursing costs are out-of-pocket expenses, paid to MFSC, which
amounted to $8,715 for the six months ended April 30, 2004, as well as other
expenses paid to unaffiliated vendors.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities and
short-term obligations, aggregated $21,043,063 and $23,523,580, respectively.
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the trust as computed on a federal income tax basis, are
as follows:
Aggregate cost $427,660,278
----------------------------------------------------------
Gross unrealized appreciation $20,723,066
----------------------------------------------------------
Gross unrealized depreciation (13,745,431)
----------------------------------------------------------
Net unrealized appreciation $6,977,635
----------------------------------------------------------
(5) SHARES OF BENEFICIAL INTEREST
The trust's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. The Trustees have
authorized 39,777,078 full and fractional shares of beneficial interest. The
Trustees have authorized share repurchase by the trust of up to 10% annually
of its own shares of beneficial interest. During the six months ended
April 30, 2004, the trust did not repurchase any shares. Transactions in trust
shares were as follows:
Six months ended Year ended
4/30/04 10/31/03
SHARES AMOUNT SHARES AMOUNT
Shares issued to shareholders in
reinvestment of distributions 64,891 $511,173 42,903 $332,939
--------------------------------------------------------------------------------
(6) LINE OF CREDIT
The trust and other affiliated funds participate in an $800 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each fund, based on its borrowings, at a rate equal to the bank's
base rate plus 0.50%. 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 calendar quarter. The commitment fee
allocated to the trust for the six months ended April 30, 2004, was $373. The
trust had no significant borrowings during the period.
(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 and foreign currency exchange rates. These financial
instruments include swap agreements. The notional or contractual amounts of
these instruments represent the investment the trust 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.
Swap Agreements
Interest Rate Swaps
NOTIONAL UNREALIZED
PRINCIPAL AMOUNT CASH FLOWS RECEIVED CASH FLOWS PAID APPRECIATION
EXPIRATION (000 OMITTED) BY THE TRUST BY THE TRUST (DEPRECIATION)
5/18/19 9,000 Floating - 7 day BMA Swap Fixed - 4.184% $(2,989)
Index
----------------------------------------------------------------------------------------------------------------
10/6/19 30,000 Floating - 7 Day BMA Swap Fixed - 4.128% 565,774
Index
----------------------------------------------------------------------------------------------------------------
6/16/24 20,000 Floating - 7 Day BMA Swap Fixed - 4.423% (67,212)
Index
----------------------------------------------------------------------------------------------------------------
$495,573
----------------------------------------------------------------------------------------------------------------
At April 30, 2004, the trust had sufficient cash and/or securities to cover
any margin requirements under these contracts.
(8) RESTRICTED SECURITIES
The trust may invest not more than 15% of its total assets in securities which
are subject to legal or contractual restrictions on resale. At April 30, 2004
the trust owned the following restricted securities, excluding securities
issued under Rule 144A, constituting 1.7% of net assets, including preferred
shares, which may not be publicly sold without registration under the
Securities Act of 1933. The trust does not have the right to demand that such
securities be registered. The value of these securities is determined by
valuations furnished by dealers or by a pricing service, or if not available,
in good faith at the direction of the Trustees.
DATE OF PRINCIPAL
DESCRIPTION ACQUISITION AMOUNT COST VALUE
Chicago, IL, O'Hare International
Airport Rev., RITES, XLCA, 10.0738%,
2022 8/21/03 1,500,000 $1,599,510 $1,690,350
------------------------------------------------------------------------------------------------------------
Chicago, IL, Public Building
Commission, Building Rev., RITES,
FGIC, 8.9164%, 2016 3/11/99 1,300,000 1,403,610 1,524,068
------------------------------------------------------------------------------------------------------------
Chicago, IL, Public Building
Commission, Building Rev., RITES,
FGIC, 8.9164%, 2017 3/11/99 1,050,000 1,123,542 1,223,775
------------------------------------------------------------------------------------------------------------
New Jersey Economic Development
Authority, Economic Development Rev.
(Holt Hauling & Warehousing), 8.4%,
2015 1/30/97 1,000,000 1,049,280 570,000
------------------------------------------------------------------------------------------------------------
New Jersey Economic Development
Authority, Economic Development Rev.
(Holt Hauling & Warehousing), 8.6%,
2017 1/30/97 1,000,000 1,051,940 570,000
------------------------------------------------------------------------------------------------------------
Niagara Falls, NY, Bridge
Commission, Toll Rev., RITES, FGIC,
9.1623%, 2015 5/21/99 1,500,000 1,609,680 1,790,700
------------------------------------------------------------------------------------------------------------
$7,368,893
------------------------------------------------------------------------------------------------------------
(9) CONCENTRATION OF CREDIT RISK
For the six months ended April 30, 2004, 12.1% of securities in the portfolio
of investments are backed by letters of credit or bond insurance of various
financial institutions and financial guaranty assurance agencies. The
percentage of investments insured by or supported (backed) by a letter of
credit from any one institution or agency did not exceed 6.0% of
total investments.
(10) LEGAL PROCEEDINGS
On March 31, 2004, MFS settled an administrative proceeding with the
Securities and Exchange Commission ("SEC") regarding disclosure of brokerage
allocation practices in connection with fund sales. Under the terms of the
settlement, in which MFS neither admitted nor denied any wrongdoing, MFS
agreed to pay (one dollar) $1.00 in disgorgement and $50 million in penalty to
certain MFS funds, pursuant to a plan administered by an independent
distribution consultant. The agreement with the SEC is reflected in an order
of the SEC. The settlement order states that MFS failed to adequately disclose
to the Boards and Trustees and to shareholders of the MFS funds the specifics
of its preferred arrangements with certain brokerage firms selling MFS fund
shares. The settlement order states that MFS had in place policies designed to
obtain best execution of all fund trades. As part of the settlement, MFS has
retained an independent compliance consultant to review the completeness of
its disclosure to fund trustees and to fund shareholders of strategic
alliances between MFS or its affiliates and broker-dealers and other financial
advisers who support the sale of fund shares. The brokerage allocation
practices which were the subject of this proceeding were discontinued by MFS
in November 2003.
In addition, in February, 2004, MFS reached agreement with the SEC, the New York
Attorney General ("NYAG") and the Bureau of Securities Regulation of the State
of New Hampshire ("NH") to settle administrative proceedings alleging false and
misleading information in certain MFS fund prospectuses regarding market timing
and related matters (the "February Settlements"). These regulators alleged that
prospectus language for certain MFS funds was false and misleading because,
although the prospectuses for those funds in the regulators' view indicated that
the funds prohibited market timing, MFS did not limit trading activity in 11
domestic large cap stock, high grade bond and money market funds. MFS' former
Chief Executive Officer, John W. Ballen, and former President, Kevin R. Parke,
also reached agreement with the SEC in which they agreed to, among other terms,
monetary fines and temporary suspensions from association with any investment
adviser or registered investment company. Messrs. Ballen and Parke have resigned
their positions with, and will not be returning to, MFS and the MFS funds. Under
the terms of the February Settlements, MFS and the executives neither admit nor
deny wrongdoing.
Under the terms of the February Settlements, a $225 million pool has been
established for distribution to shareholders in certain of the MFS funds
offered to retail investors ("Retail Funds"), which has been funded by MFS and
of which $50 million is characterized as a penalty. This pool will be
distributed in accordance with a methodology developed by an independent
distribution consultant in consultation with MFS and the Board of Trustees of
the Retail Funds, and acceptable to the SEC. MFS has further agreed with NYAG
to reduce its management fees in the aggregate amount of approximately $25
million annually over the next five years, and not to increase certain
management fees during this period. MFS has also paid an administrative fine
to NH in the amount of $1 million, which will be used for investor education
purposes (NH retained $250,000 and $750,000 was contributed to the North
American Securities Administrators Association's Investor Protection Trust).
In addition, under the terms of the February Settlements, MFS is in the
process of adopting certain governance changes and reviewing its policies
and procedures.
Since December 2003, MFS, Sun Life Financial Inc., various MFS funds, the
Trustees of these MFS funds, and certain officers of MFS have been named as
defendants in multiple lawsuits filed in federal and state courts. The
lawsuits variously have been commenced as class actions or individual actions
on behalf of investors who purchased, held or redeemed shares of the funds
during specified periods, as class actions on behalf of participants in
certain retirement plan accounts, or as derivative actions on behalf of the
MFS funds. The lawsuits generally allege that some or all of the defendants
(i) permitted or acquiesced in market timing and/or late trading in some of
the MFS funds, inadequately disclosed MFS' internal policies concerning market
timing and such matters, and received excessive compensation as fiduciaries to
the MFS funds, or (ii) permitted or acquiesced in the improper use of fund
assets by MFS to support the distribution of fund shares and inadequately
disclosed MFS' use of fund assets in this manner. The actions assert that some
or all of the defendants violated the federal securities laws, including the
Securities Act of 1933 and the Securities Exchange Act of 1934, the Investment
Company Act of 1940 and the Investment Advisers Act of 1940, the Employee
Retirement Income Security Act of 1974, as well as fiduciary duties and other
violations of common law. The lawsuits seek unspecified compensatory damages.
Insofar as any of the actions is appropriately brought derivatively on behalf
of any of the MFS funds, any recovery will inure to the benefit of the funds.
The defendants are reviewing the allegations of the multiple complaints and
will respond appropriately. Additional lawsuits based on similar allegations
may be filed in the future.
Any potential resolution of these matters may include, but not be limited to,
judgments or settlements for damages against MFS, the MFS funds, or any other
named defendant. As noted above, as part of the regulatory settlements, MFS
has established a restitution pool in the amount of $225 million to compensate
certain shareholders of the Retail Funds for damages that they allegedly
sustained as a result of market timing or late trading in certain of the
funds, and will pay $50 million to compensate certain MFS funds based upon the
amount of brokerage commissions allocated in recognition of fund sales. It is
not clear whether these amounts will be sufficient to compensate shareholders
for all of the damage they allegedly sustained, whether certain shareholders
or putative class members may have additional claims to compensation, or
whether the damages that may be awarded in any of the actions will exceed
these amounts. In the event the MFS funds incur any losses, costs or expenses
in connection with such lawsuits, the Boards of Trustees of the affected funds
may pursue claims on behalf of such funds against any party that may have
liability to the funds in respect thereof.
While these developments primarily relate to MFS' open-end funds, there can be
no assurance that these developments, or the adverse publicity associated with
these developments, will not result in an increase to the market discount of
the Trust's shares or other adverse consequences.
----------------------------------------------------------------------------------------------------------------------
TRUSTEES AND OFFICERS -- IDENTIFICATION AND BACKGROUND
----------------------------------------------------------------------------------------------------------------------
The Trustees and officers of the Trust are listed below, together with their principal occupations during the past
five years. (Their titles may have varied during that period.) The business address of each Trustee and officer is
500 Boylston Street, Boston, Massachusetts 02116.
PRINCIPAL OCCUPATIONS & OTHER
POSITION(s) HELD TRUSTEE/OFFICER DIRECTORSHIPS(2) DURING
NAME, DATE OF BIRTH WITH FUND SINCE(1) THE PAST FIVE YEARS
------------------- ---------------- --------------- -----------------------------
INTERESTED TRUSTEES
John W. Ballen(3) Trustee and President August 2001 until Massachusetts Financial Services
(born 09/12/59) February 2004 Company, Chief Executive Officer and
Director (until February 2004)
Robert J. Manning(3) Trustee and President February 2004 Massachusetts Financial Services
(born 10/20/63) Company, Chief Executive Officer,
President, Chief Investment Officer
and Director
Kevin R. Parke(3) Trustee January 2002 until Massachusetts Financial Services
(born 12/14/59) February 2004 Company, President, Chief Investment
Officer and Director (until February
2004)
Robert C. Pozen(3) Trustee February 2004 Massachusetts Financial Services
(born 08/08/46) Company, Chairman (since February
2004); Harvard Law School (education),
John Olin Visiting Professor (since
July 2002); Secretary of Economic
Affairs, The Commonwealth of
Massachusetts (January 2002 to
December 2002); Fidelity Investments,
Vice Chairman (June 2000 to December
2001); Fidelity Management & Research
Company (investment adviser),
President (March 1997 to July 2001);
The Bank of New York (financial
services), Director; Bell Canada
Enterprises (telecommunications),
Director; Telesat (satellite
communications), Director
Jeffrey L. Shames(3) Trustee October 1993 until Massachusetts Financial Services
(born 06/02/55) February 2004 Company, Chairman (until February
2004)
INDEPENDENT TRUSTEES
J. Atwood Ives Chairman February 1992 Private investor; KeySpan Corporation
(born 05/01/36) (energy related services), Director;
Eastern Enterprises (diversified
services company), Chairman, Trustee
and Chief Executive Officer (until
November 2000)
Lawrence H. Cohn, M.D. Trustee August 1993 Brigham and Women's Hospital, Chief of
(born 03/11/37) Cardiac Surgery; Harvard Medical
School, Professor of Surgery
David H. Gunning Trustee January 2004 Cleveland-Cliffs, Inc. (mining
(born 05/30/42) products and service provider), Vice
Chairman/Director (since April 2001);
Encinitos Ventures (private investment
company), Principal (1997 to April
2001); Lincoln Electric Holdings, Inc.
(welding equipment manufacturer),
Director; Southwest Gas Corporation
(natural gas distribution company),
Director
William R. Gutow Trustee December 1993 Private investor and real estate
(born 09/27/41) consultant; Capitol Entertainment
Management Company (video franchise),
Vice Chairman
Amy B. Lane Trustee January 2004 Retired; Merrill Lynch & Co., Inc.,
(born 02/08/53) Managing Director, Investment Banking
Group (1997 to February 2001); Borders
Group, Inc. (book and music retailer),
Director; Federal Realty Investment
Trust (real estate investment trust),
Trustee
Lawrence T. Perera Trustee July 1981 Hemenway & Barnes (attorneys), Partner
(born 06/23/35)
William J. Poorvu Trustee August 1982 Private investor; Harvard University
(born 04/10/35) Graduate School of Business
Administration, Class of 1961 Adjunct
Professor in Entrepreneurship
Emeritus; CBL & Associates Properties,
Inc. (real estate investment trust),
Director
J. Dale Sherratt Trustee August 1993 Insight Resources, Inc. (acquisition
(born 09/23/38) planning specialists), President;
Wellfleet Investments (investor in
health care companies), Managing
General Partner (since 1993);
Cambridge Nutraceuticals (professional
nutritional products), Chief Executive
Officer (until May 2001)
Elaine R. Smith Trustee February 1992 Independent health care industry
(born 04/25/46) consultant
Ward Smith Trustee October 1992 Private investor
(born 09/13/30)
OFFICERS
Robert J. Manning(3) President and Trustee February 2004 Massachusetts Financial Services
(born 10/20/63) Company, Chief Executive Officer,
President, Chief Investment Officer
and Director.
John W. Ballen(3) President and Trustee August 2001 until Massachusetts Financial Services
(born 09/12/59) February 2004 Company, Chief Executive Officer and
Director (until February 2004)
James R. Bordewick, Jr.(3) Assistant Secretary September 1990 Massachusetts Financial Services
(born 03/06/59) and Assistant Clerk Company, Senior Vice President and
Associate General Counsel
Stephen E. Cavan(3) Secretary and Clerk December 1989 Massachusetts Financial Services
(born 11/06/53) until March 2004 Company, Senior Vice President,
General Counsel and Secretary (until
March 2004)
Stephanie A. DeSisto(3) Assistant Treasurer May 2003 Massachusetts Financial Services
(born 10/01/53) Company, Vice President (since April
2003); Brown Brothers Harriman & Co.,
Senior Vice President (November 2002
to April 2003); ING Groep N.V./Aeltus
Investment Management, Senior Vice
President (prior to November 2002)
Robert R. Flaherty(3) Assistant Treasurer August 2000 Massachusetts Financial Services
(born 09/18/63) Company, Vice President (since August
2000); UAM Fund Services, Senior Vice
President (prior to August 2000)
Richard M. Hisey(3) Treasurer August 2002 Massachusetts Financial Services
(born 08/29/58) Company, Senior Vice President (since
July 2002); The Bank of New York,
Senior Vice President (September 2000
to July 2002); Lexington Global Asset
Managers, Inc., Executive Vice
President and Chief Financial Officer
(prior to September 2000); Lexington
Funds, Chief Financial Officer (prior
to September 2000)
Ellen Moynihan(3) Assistant Treasurer April 1997 Massachusetts Financial Services
(born 11/13/57) Company, Vice President
James O. Yost(3) Assistant Treasurer September 1990 Massachusetts Financial Services
(born 06/12/60) Company, Senior Vice President
------------------
(1) Date first appointed to serve as Trustee/Officer of an MFS fund. Each Trustee has served continuously since
appointment unless indicated otherwise.
(2) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e.,
"public companies").
(3) "Interested person" of MFS within the meaning of the Investment Company Act of 1940 (referred to as the 1940
Act) which is the principal federal law governing investment companies like the series/the fund. The address of
MFS is 500 Boylston Street, Boston, Massachusetts 02116.
The Trust holds annual shareholder meetings for the purpose of electing Trustees, and Trustees are elcted for fixed
terms. The Board of Trustees is currently divided into three classes, each having a term of three years. Each year
the term of one class expires. Each Trustee's term of office expires on the date of the third annual meeting
following the election to office of the Trustee's class. Each Trustee will serve until next elected or his or her
earlier death, resignation, retirement or removal.
Each of the Trust's Trustees and officers holds comparable positions with certain other funds of which MFS or a
subsidiary is the investment adviser or distributor, and, in the case of the officers, with certain affiliates of
MFS. Each Trustee serves as a board member of 109 funds within the MFS Family of Funds.
The Statement of Additional Information contains further information about the Trustees and is available without
charge upon request by calling 1-800-225-2606.
-------------------------------------------------------------------------------------------------------------------
INVESTMENT ADVISER CUSTODIAN
Massachusetts Financial Services Company State Street Bank and Trust Company
500 Boylston Street, Boston, MA 02116-3741 225 Franklin Street, Boston, MA 02110
PORTFOLIO MANAGER
Geoffrey Schechter
------------------------------------------------------------------------------
CONTACT INFORMATION AND NUMBER OF SHAREHOLDERS
------------------------------------------------------------------------------
INVESTOR INFORMATION
Transfer Agent, Registrar and Dividend Disbursing Agent
Call 1-800-637-2304 any business day from 8 a.m. to 8 p.m. Eastern
time
Write to: State Street Bank and Trust Company
c/o MFS Service Center, Inc.
P.O. Box 55024
Boston, MA 02205-5024
A general description of the MFS Funds proxy voting policies is available
without charge, upon request, by calling 1-800-225-2606, by visiting the About
MFS section of mfs.com or by visiting the SEC's website at http://www.sec.gov.
NUMBER OF SHAREHOLDERS
As of April 30, 2004, our records indicate that there are 3,641 registered
shareholders and approximately 13,150 shareholders owning trust shares in
"street" name, such as through brokers, banks, and other financial
intermediaries.
If you are a "street" name shareholder and wish to directly receive our
reports, which contain important information about the trust, please write or
call:
State Street Bank and Trust Company
c/o MFS Service Center, Inc.
P.O. Box 55024
Boston, MA 02205-5024
1-800-637-2304
[logo] M F S(R)
INVESTMENT MANAGEMENT
500 Boylston Street
Boston, MA 02116-3741
(C) 2004 MFS Investment Management(R)
500 Boylston Street, Boston, MA 02116
MFM-SEM-6/04 40M
ITEM 2. CODE OF ETHICS.
Applicable for semi-annual reports if the registrant has amended the code of
ethics during the period covered by the report or has granted a waiver,
including an implicit waiver, from a provision of the code of ethics.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not Applicable for semi-annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not Applicable for semi-annual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not Applicable for semi-annual reports.
ITEM 6. SCHEDULE OF INVESTMENTS
Not applicable at this time. [Applicable for periods ending on or after July 9,
2004 (beginning with Form N-CSRs filed at the end of September, 2004 for July
31, 2004 reporting period.)]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not Applicable for semi-annual reports.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable at this time. [Required for closed-end funds for periods ending
on or after June 15, 2004 (beginning with N-CSR's filed at the end of August,
2004 for June 30, 2004 reporting period.)]
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
ITEM 10. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures as conducted within 90 days of the filing date of this Form
N-CSR, the registrant's principal financial officer and principal executive
officer have concluded that those disclosure controls and procedures
provide reasonable assurance that the material information required to be
disclosed by the registrant on this report is recorded, processed,
summarized and reported within the time periods specified in the Securities
and Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during
the registrant's last fiscal half-year (the registrant's second fiscal
half-year in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrant's internal
control over financial reporting.
ITEM 11. EXHIBITS.
(a) File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(1) [**An amendment to the code of ethics, that is the subject of the
disclosure required by Item 2, to the extent that the registrant
intends to satisfy the Item 2 requirements through filing of an
exhibit: The amendment is attached hereto.**][**APPLICABLE IF THE
REGISTRANT HAS AMENDED ITS CODE OF ETHICS DURING THE PERIOD COVERED BY
REPORT**]
(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Act (17 CFR 270.30a-2): Attached hereto.
(3) Any written solicitation to purchase securities under 23c-1 under the
Act (17 C.F.R. 270.23c-1) sent or given during the period covered by
the report by or on behalf of the registrant to 10 or more persons. Not
applicable at this time. [For closed-end funds for periods ending on or
after June 15, 2004 (beginning with N-CSR's filed at the end of August
2004 for June 30, 2004 reporting period.)]
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the Act (17 CFR
270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17
CFR 240.13a-14(b) or 240.15d-14(b)) and Section 1350 of Chapter 63 of Title
18 of the United States Code (18 U.S.C. 1350) as an exhibit. A
certification furnished pursuant to this paragraph will not be deemed
"filed" for the purposes of Section 18 of the Exchange Act (15 U.S.C. 78r),
or otherwise subject to the liability of that section. Such certification
will not be deemed to be incorporated by reference into any filing under
the Securities Act of 1933 or the Exchange Act, except to the extent that
the registrant specifically incorporates it by reference: Attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) MFS MUNICIPAL INCOME TRUST
By (Signature and Title)* ROBERT J. MANNING
--------------------------------------------------
Robert J. Manning, President
Date: June 23, 2004
-------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* ROBERT J. MANNING
--------------------------------------------------
Robert J. Manning, President (Principal Executive
Officer)
Date: June 23, 2004
-------------
By (Signature and Title)* RICHARD M. HISEY
--------------------------------------------------
Richard M. Hisey, Treasurer (Principal Financial
Officer and Accounting Officer)
Date: June 23, 2004
-------------
* Print name and title of each signing officer under his or her signature.