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 811-4841
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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)
Susan S. Newton
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
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Date of reporting period: April 30, 2005
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ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) MUNICIPAL INCOME TRUST 4/30/05
SEMIANNUAL REPORT
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M F S(SM)
INVESTMENT MANAGEMENT(R)
SEMIANNUAL REPORT
LETTER FROM THE CEO 1
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PORTFOLIO COMPOSITION 2
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MANAGEMENT REVIEW 3
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PERFORMANCE SUMMARY 5
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DIVIDEND REINVESTMENT AND
CASH PURCHASE PLAN 8
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PORTFOLIO OF INVESTMENTS 9
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FINANCIAL STATEMENTS 31
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NOTES TO FINANCIAL STATEMENTS 37
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REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM 48
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RESULTS OF SHAREHOLDER MEETING 49
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PROXY VOTING POLICIES AND INFORMATION 50
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QUARTERLY PORTFOLIO DISCLOSURE 50
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CONTACT INFORMATION BACK COVER
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LETTER FROM THE CEO
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Dear Shareholders,
[Photo of Robert J. Manning]
As a professional investor for more than 20 years, I've often been asked to
name the single most important factor in investment success. My answer is
always the same: diversification. At MFS we talk about applying a disciplined
diversification(SM) strategy to a portfolio as a three step process: allocate
among the major asset classes; diversify within each asset class; and rebalance
regularly to avoid unnecessary risk.
Individual investors sometimes assume that the amount they're putting away is
too small to allow for diversification. My response would be that a good
investment plan, developed with the help of an investment professional, should
provide a way to properly diversify your contributions.
Remember that the purpose of diversification is to own investments that
historically have not moved in sync with each other - in the hope that, in any
given period, underperforming holdings will be somewhat counteracted by other
outperforming holdings. If none of your asset classes did badly in the past
year or so, you're probably not properly diversified.
Americans today have more of their wealth tied up in the markets than in any
previous period of our history, but we are not yet making the most of our
opportunities. While neither asset allocation nor diversification can guarantee
a profit or protect against a loss, I would voice the opinion that, to a large
extent, a failure to have a plan, diversify contributions, and rebalance a
portfolio annually has been behind many U.S. investors' failure to reach their
long-term financial goals.
For more information on how to apply a disciplined diversification(SM) strategy
to your portfolio, I would urge you to contact your own investment
professional. You may also want to refer to information on the subject on our
Website, MFS.COM.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
June 15, 2005
The opinions expressed in this letter are those of MFS, and no forecasts can
be guaranteed.
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PORTFOLIO COMPOSITION
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PORTFOLIO STRUCTURE*
Bonds 100.0%
TOP FIVE BOND INDUSTRIES*
Healthcare Revenue - Hospitals 28.1%
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Healthcare Revenue - Long-Term Care 9.0%
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Utilities - Investor Owned 8.6%
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Industrial Revenue - Paper 6.2%
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Tobacco 3.7%
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CREDIT QUALITY OF BONDS**
AAA 13.4%
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AA 4.3%
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A 9.8%
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BBB 33.2%
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BB 10.4%
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B 4.5%
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CCC 2.8%
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CC 0.1%
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Not Rated 21.5%
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PORTFOLIO FACTS
Average Duration 7.2
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Average Life 17.1 yrs.
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Average Maturity*** 18.5 yrs.
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Average Credit Quality**** BBB+
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Average Short-Term Credit Quality A-1
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* For purposes of this graphical presentation, the bond component includes
both accrued interest amounts and the equivalent exposure from any
derivative holdings, if applicable.
** Each security is assigned a rating from Moody's Investors Service. If not
rated by Moody's, the rating will be that assigned by Standard & Poor's.
Likewise, if not assigned a rating by Standard & Poor's, it will be based
on the rating assigned by Fitch, Inc. For those portfolios that hold a
security which is not rated by any of the three agencies, the security is
considered Not Rated. Holdings in U.S. Treasuries and government agency
mortgage-backed securities, if any, are included in a "AAA"-rating
category. Percentages are based on the total market value of investments
as of 4/30/05.
*** The average maturity shown is calculated using the final stated maturity
on the portfolio's holdings without taking into account any holdings
which have been pre-refunded to an earlier date or which have a mandatory
put date prior to the stated maturity. The average life shown takes into
account these earlier dates.
**** The Portfolio Average Credit Quality rating is based upon a market
weighted average of portfolio holdings.
Percentages are based on net assets including preferred shares as of 4/30/05,
unless otherwise noted.
The portfolio is actively managed, and current holdings may be different.
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MANAGEMENT REVIEW
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SUMMARY OF RESULTS
For the six months ended April 30, 2005, shares of the MFS Municipal Income
Trust provided a total return of 5.36%, at net asset value. In comparison, the
trust's benchmarks, the Lehman Brothers Municipal Bond Index (the Lehman Index)
and the Lipper Closed-End High Yield Municipal Index, returned 1.93% and 5.07%,
respectively. The trust seeks to provide high current income exempt from federal
income taxes. The trust invests 80% of its assets, under normal circumstances,
in tax exempt securities which are rated below the three highest rating
categories of recognized rating agencies.
MARKET ENVIRONMENT
The U.S. fixed-income market experienced a flattening of the yield curve during
the six-month period. (A yield curve for bonds shows the relationship between
yield and time to maturity.) The U.S. Federal Reserve Board raised its target
federal funds rate four times, continuing its steady drumbeat of quarter-point
rate hikes that had begun on June 30, 2004. But while the Fed seemed committed
to a course of gradually raising short-term rates, several factors caused
long-term rates to stagnate or retreat.
Job growth, which had shot up in the spring of 2004, ebbed and flowed during the
period; uncertainty about the employment situation helped to push down yields on
longer-dated bonds. Another factor that held long-term rates down was overseas
demand for U.S. Treasuries, especially from foreign central banks. However,
moderate GDP growth and inflation concerns kept shorter-term interest rates
moving up. For the period as a whole, the net effect was a substantial
flattening of the yield curve as short-term rates rose significantly while
long-term rates were generally flat to down.
CONTRIBUTORS TO PERFORMANCE
Security selection and an overweighting in the strong-performing health care
sector boosted the trust's performance relative to one of our benchmarks, the
Lehman Index. Security selection in the utilities, industrials, and
transportation sectors also aided relative results during the period.
Relative performance was also positively impacted by credit quality. The trust
benefited from its exposure to high yield debt, as "BBB"-rated bonds
outperformed higher-quality issues over the period. In addition, the trust's
positions in non-investment-grade debt, which is not held by the Lehman Index,
also aided relative returns.
DETRACTORS FROM PERFORMANCE
Our positioning along the yield curve detracted from relative performance for
the period. (A yield curve graphically depicts the yields of different maturity
bonds of the same credit quality and type. A normal yield curve is upward
sloping, with short-term rates lower than long-term rates.) Compared with the
Lehman Index, the trust was underweighted in bonds on the long end of the curve
(represented by bonds with durations of 11-to-25+ years). (Duration is a
measure of a portfolio's sensitivity to changes in interest rates.) On a
relative basis, our underweighting in longer-maturity bonds hurt relative
performance as long-term municipal bond rates declined during the period.
Respectfully,
/s/ Geoffrey Schechter
Geoffrey Schechter
Portfolio Manager
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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PERFORMANCE SUMMARY THROUGH 4/30/05
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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 more or less than those shown. Past performance
is no guarantee of future results.
PRICE SUMMARY
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Six months ended 4/30/05
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Date Price
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Net asset value 10/31/04 $7.86
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4/30/05 $8.00
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New York Stock Exchange price 10/31/04 $7.83
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2/02/05 (high)* $8.05
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3/23/05 (low)* $7.32
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4/30/05 $7.85
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* For the period November 1, 2004 through April 30, 2005.
TOTAL RETURN VS BENCHMARKS
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Six months ended 4/30/05
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New York Stock Exchange price** 3.78%
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Net asset value** 5.36%
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Lehman Brothers Municipal Bond Index# 1.93%
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Lipper Closed-End High Yield Municipal Index+ 5.07%
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** Includes reinvestment of dividends and capital gains distributions.
+ Source: Lipper Inc., an independent firm that reports mutual fund
performance.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITIONS
Lehman Brothers Municipal Bond Index - is a market-value-weighted index
representative of the tax-exempt bond market.
Lipper Closed-End High Yield Municipal Index - measures the performance of the
closed-end funds in the Lipper database which invest at least 50% of assets in
lower-rated municipal debt issues.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
The trust's shares may trade at a discount to net asset value. Shareholders do
not have the right to cause the trust to repurchase their shares at net asset
value. The trust's shares also may trade at a premium to their net asset value.
When trust shares trade at a premium, buyers pay more than the asset value
underlying trust shares, and shares purchased at a premium would receive less
than the amount paid for them in the event of the trust's liquidation. As a
result, the total return that is calculated based on the net asset value and New
York Stock Exchange price can be different.
The trust's monthly distributions may include a return of capital to
shareholders. Distributions that are treated for federal income tax purposes as
a return of capital will reduce each shareholder's basis in his or her shares
and, to the extent the return of capital exceeds such basis, will be treated as
gain to the shareholder from a sale of shares. Returns of shareholder capital
have the effect of reducing the trust's assets and increasing the trust's
expense ratio.
From time to time the trust may receive proceeds from litigation settlements,
without which performance would be lower.
KEY RISK CONSIDERATIONS
The portfolio invests in municipal securities that are general obligations
backed by the full faith and credit of the municipal issuer and revenue
obligations that are not backed by the issuer. Therefore, revenue obligations
are subject to a higher degree of credit risk than general obligations.
Any municipal security that is 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 project 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 significantly in value.
The portfolio may invest in derivative securities, which may include futures,
options and swaps. These types of instruments can increase price fluctuation.
The portfolio invests in high yield or lower-rated securities which may provide
greater returns but are subject to greater-than-average risk.
A portion of income may be subject to state, federal, and/or alternative minimum
tax. Capital gains, if any, are subject to a capital gains tax.
The portfolio's value will fluctuate in response to market conditions and
issuer, regulatory, economic, or political developments. In general, fixed
income securities will decline when interest rates rise and will increase when
interest rates fall. Many fixed income securities also involve credit risk,
which is the risk that issuers may fail to make timely principal or interest
payments. In addition, fixed income securities with longer maturity dates will
be subject to greater price fluctuations than those with shorter maturity
periods.
The portfolio may invest a higher percentage of its assets in a small number of
issuers. The portfolio is more susceptible to any (non-diversified) single
economic, political or regulatory event affecting those issuers than is a
diversified fund.
These risks may increase share price volatility.
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) - 4/30/05
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The Portfolio of Investments is a complete list of all securities owned by your trust. It is
categorized by broad-based asset classes.
Municipal Bonds - 142.4%
ISSUER PAR AMOUNT $ VALUE
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Airport & Port Revenue - 5.4%
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Chicago, IL, O'Hare International Airport Rev. RITES, FSA,
8.206%, 2022+(+) $ 1,500,000 $ 1,862,190
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Cleveland Cuyahoga County, OH, Port Authority Rev.
(Cleveland City Project), "B", 4.5%, 2030 1,455,000 1,472,664
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Dayton Montgomery County, OH, Port Authority Rev. (Parking
Garage Project), 6.125%, 2024 1,130,000 1,197,032
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Oklahoma City, OK, Airport Trust Rev., FSA, 5.75%, 2016 3,125,000 3,392,594
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Port Authority, NY, Special Obligations Rev. (JFK
International), MBIA, 5.75%, 2022 7,000,000 7,539,490
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Seattle, WA, Airport Trust Rev., FGIC, 5.625%, 2018 1,500,000 1,629,465
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$ 17,093,435
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Chemicals - 0.6%
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Red River Authority, TX, Pollution Control Rev. (Celanese
Project), 6.7%, 2030 $ 1,920,000 $ 2,023,200
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General Obligations - General Purpose - 2.6%
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Jefferson County, OH, ASST GTY, 7.125%, 2005(++) $ 1,000,000 $ 1,045,930
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Lake County, IL, Land Acquisition & Development, 5.75%, 2017 1,000,000 1,119,140
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New York City, NY, 6.125%, 2006(++) 2,000,000 2,081,540
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New York City, NY, "M", 5%, 2035 3,800,000 3,935,014
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$ 8,181,624
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General Obligations - Schools - 0.5%
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Aledo, TX, Independent School District, School Building,
"A", PSF, 5.125%, 2033 $ 955,000 $ 1,004,832
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Leander, TX, Independent School District, Capital
Appreciation, Refunding, School Building, FGIC, 0%, 2026 1,285,000 420,208
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Leander, TX, Independent School District, Capital
Appreciation, Refunding, School Building, FGIC, 0%, 2031 1,295,000 313,144
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$ 1,738,184
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Healthcare Revenue - Hospitals - 39.8%
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Allegheny County, PA, Hospital Development Authority Rev.
(South Hills Health Systems), "B", 6.75%, 2025 $ 500,000 $ 533,235
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Allegheny County, PA, Hospital Development Authority Rev.
(West Penn Allegheny Health), 9.25%, 2030 2,000,000 2,353,880
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Allegheny County, PA, Hospital Development Authority Rev.
(West Penn Allegheny Health), "B", 9.25%, 2022 1,000,000 1,179,560
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Athens County, OH, Hospital Facilities Rev. (O'Bleness
Memorial Hospital), "A", 7.125%, 2033 1,500,000 1,568,850
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Baldwin County, AL, Eastern Shore Health Care Authority Rev.
(Thomas Hospital), 5.75%, 2027 700,000 697,340
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Brookhaven, NY, Civic Facilities Rev. (Memorial Hospital
Medical Center, Inc.), 7.75%, 2010 805,000 865,697
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California Valley Health Systems, COP, 6.875%, 2023 740,000 747,111
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Chautauqua County, NY, Industrial Development Agency, Civic
Facilities Rev. (Women's Christian Assn.), "A", 6.35%, 2017 255,000 260,085
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Chautauqua County, NY, Industrial Development Agency, Civic
Facilities Rev. (Women's Christian Assn.), "A", 6.4%, 2029 980,000 983,067
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Chemung County, NY, Civic Facilities Rev. (St. Joseph's
Hospital-Elmira), "A", 6%, 2013 540,000 546,901
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Chemung County, NY, Civic Facilities Rev. (St. Joseph's
Hospital-Elmira), "B", 6.35%, 2013 140,000 144,073
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Chester County, PA, Health & Educational Facilities Rev.
(Chester County Hospital), 6.75%, 2021 1,625,000 1,739,611
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Citrus County, FL, Hospital Development Authority Rev.
(Citrus Memorial Hospital), 6.25%, 2023 985,000 1,051,310
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Coffee County, GA, Hospital Authority Rev. (Coffee Regional
Medical Center, Inc.), 5%, 2026 40,000 40,585
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Colorado Health Facilities Authority Rev. (Parkview Medical
Center), 6.5%, 2020 1,230,000 1,372,606
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Colorado Health Facilities Authority Rev. (Parkview Medical
Center), 6.6%, 2025 1,000,000 1,109,760
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Colorado Health Facilities Authority Rev. (Portercare
Adventist Health Systems), 6.625%, 2026 675,000 754,738
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Comal County, TX, Health Facilities Development Rev.
(McKenna Memorial Hospital), "A", 6.125%, 2022 500,000 537,355
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Crittenden County, AR, Arkansas Hospital Rev., 7%, 2020 1,030,000 1,038,034
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Cuyahoga County, OH, Hospital Facilities Rev. (Canton,
Inc.), 7.5%, 2030 1,330,000 1,498,764
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Delaware Health Facilities Authority Rev. (Nanticoke
Memorial Hospital), 5.625%, 2032 1,250,000 1,328,163
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Denver, CO, Health & Hospital Authority Rev., 5.25%, 2013 635,000 656,063
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Denver, CO, Health & Hospital Authority Rev., 5.375%, 2018 1,500,000 1,544,295
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Denver, CO, Health & Hospital Authority Rev., 5.375%, 2028 860,000 866,020
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Denver, CO, Health & Hospital Authority Rev., "A", 6%, 2023 250,000 263,280
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District of Columbia, Health & Hospital Authority Rev.
(Medstar University Hospital), "D", 6.875%, 2007(++) 1,200,000 1,285,716
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Gaylord, MI, Hospital Finance Authority Rev. (Otsego
Memorial Hospital), 6.2%, 2025 250,000 249,350
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Gaylord, MI, Hospital Finance Authority Rev. (Otsego
Memorial Hospital), 6.5%, 2031 295,000 295,277
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Grand Forks, ND, Health Care Authority Rev. (Altru Health
Systems Obligation Group), 7.125%, 2024 755,000 828,869
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Gulfport, MS, Hospital Facilities Rev. (Memorial Hospital),
5.75%, 2031 1,000,000 1,055,510
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Highlands County, FL, Health Facilities Authority Rev.
(Adventist/Sunbelt Hospital), 6%, 2031 900,000 981,306
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Houston County, AL, Health Care Authority Rev., AMBAC,
6.25%, 2030 2,000,000 2,270,680
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Huntsville, AL, Health Care Authority Rev., 5.625%, 2026 875,000 921,051
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Illinois Development Finance Authority, Hospital Authority
Rev. (Adventist/Sunbelt Hospital), 5.65%, 2024 1,750,000 1,842,260
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Illinois Health Facilities Authority Rev. (Centegra Heath
Systems), 5.25%, 2018 1,000,000 1,024,160
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Indiana Health Facilities Financing Authority, Hospital Rev.
(Community Hospital Project), "A", AMBAC, 5%, 2035 1,780,000 1,840,840
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Indiana Health Facilities Financing Authority, Hospital Rev.
(Munster Medical Research Foundation, Inc.), 6.375%, 2031 3,990,000 4,222,497
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Indiana Health Facilities Financing Authority, Hospital Rev.
(Riverview Hospital), 6.125%, 2031 1,000,000 1,053,730
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Joplin, MO, Industrial Development Authority Health
Facilities Rev. (Freeman Health Systems), 5.5%, 2029 440,000 459,373
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Joplin, MO, Industrial Development Authority Health
Facilities Rev. (Freeman Health Systems), 5.75%, 2035 475,000 509,452
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Kentucky Economic Development Finance Authority, Health
Systems Rev. (Norton Healthcare, Inc.), 6.5%, 2020 5,000,000 5,539,750
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Knox County, TN, Health Educational Housing Facilities
Board, Hospital Facilities Rev. (Baptist Health Systems),
6.5%, 2031 1,725,000 1,804,454
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Lauderdale County & Florence, AL, Health Care Authority Rev.
(Coffee Health Group), MBIA, 5.625%, 2021 3,000,000 3,312,450
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Lufkin, TX, Health Facilities Rev. (Memorial Health System
of East Texas), 6.875%, 2026 1,590,000 1,663,951
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Lufkin, TX, Health Facilities Rev. (Memorial Health System
of East Texas), 5.7%, 2028 995,000 1,025,915
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Macomb County, MI, Hospital Finance Authority Rev. (Mount
Clemens General Hospital), 5.75%, 2025 1,000,000 1,007,540
-----------------------------------------------------------------------------------------------
Macomb County, MI, Hospital Finance Authority Rev. (Mount
Clemens General Hospital), 5.875%, 2034 905,000 904,520
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Maryland Health & Higher Educational Facilities Authority
Rev. (Medstar Health), 5.5%, 2033 380,000 400,284
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Maryland Health & Higher Educational Facilities Authority
Rev. (North Arundel Hospital), 6.5%, 2031 1,500,000 1,708,665
-----------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority Rev.
(Berkshire Health Systems), 6.25%, 2031 1,900,000 2,036,116
-----------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority Rev.
(Caritas Christi), 6.5%, 2012 600,000 666,114
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Massachusetts Health & Educational Facilities Authority Rev.
(Caritas Christi), 5.7%, 2015 500,000 518,760
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Massachusetts Health & Educational Facilities Authority Rev.
(Jordan Hospital), 5.25%, 2018 1,400,000 1,331,610
-----------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority Rev.
(Northern Berkshire Health), "B", 6.375%, 2034 890,000 895,963
-----------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority Rev.
(Saints Memorial Medical Center), 6%, 2023 465,000 466,814
-----------------------------------------------------------------------------------------------
Miami Beach, FL, Health Facilities Rev. (Mount Sinai Medical
Center), 6.75%, 2029 810,000 899,440
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Miami Beach, FL, Health Facilities Rev. (Mount Sinai Medical
Center), "A", 6.7%, 2019 995,000 1,093,545
-----------------------------------------------------------------------------------------------
Mississippi Business Finance Corp., Health Facilities Rev.
(Rush Medical Foundation, Inc.), 5.625%, 2023 845,000 827,272
-----------------------------------------------------------------------------------------------
Mississippi Hospital Equipment, Health Facilities Rev. (Rush
Medical Foundation, Inc.), 5.4%, 2007 210,000 214,152
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Montgomery, AL, Special Care Facilities, Financing Authority
Rev. (Baptist Health), "A-2", MBIA, 0% to 2007, 5% to 2022 1,725,000 1,581,825
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Montgomery, AL, Special Care Facilities, Financing Authority
Rev. (Baptist Health), "C", 5.25%, 2029 760,000 773,095
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Mount Lebanon, PA, Hospital Authority Rev. (St. Clair
Memorial Hospital), 5.625%, 2032 435,000 457,033
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Nassau County, NY, Industrial Development Agency, Civic
Facilities Rev. (North Shore Health System), 5.625%, 2010 725,000 782,942
-----------------------------------------------------------------------------------------------
Nassau County, NY, Industrial Development Agency, Civic
Facilities Rev. (North Shore Health System), 5.875%, 2011 550,000 603,504
-----------------------------------------------------------------------------------------------
New Hampshire Health & Educational Facilities Authority Rev.
(Covenant Health), 6.5%, 2017 915,000 1,047,025
-----------------------------------------------------------------------------------------------
New Hampshire Higher Educational & Health Facilities
Authority Rev. (Catholic Medical Center), 6.125%, 2032 1,000,000 1,045,680
-----------------------------------------------------------------------------------------------
New Hampshire Higher Educational & Health Facilities
Authority Rev. (Littleton Hospital), 5.8%, 2018 1,000,000 979,620
-----------------------------------------------------------------------------------------------
New Jersey Health Care Facilities, Financing Authority Rev.
(St. Peter's University Hospital), 6.875%, 2030 3,000,000 3,331,800
-----------------------------------------------------------------------------------------------
New York City, NY, Industrial Development Agency, Civic
Facilities Rev. (Staten Island University Hospital), "A",
6.375%, 2031 500,000 500,545
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New York City, NY, Health & Hospital Corp. Rev., 5.25%, 2017 700,000 733,383
-----------------------------------------------------------------------------------------------
North Texas Health Facilities Development Corp. Rev. (United
Regional Health Care System, Inc.), 6%, 2023 1,000,000 1,073,670
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Ohio County, WV, County Commission Health System Rev. (Ohio
Valley Medical Center), 5.75%, 2013 850,000 806,854
-----------------------------------------------------------------------------------------------
Oklahoma Development Finance Authority Rev. (Comanche County
Hospital), 6.6%, 2031 1,665,000 1,836,778
-----------------------------------------------------------------------------------------------
Rhode Island Health & Education Building Rev., Hospital
Financing (Lifespan Obligated Group), 6.5%, 2032 505,000 563,752
-----------------------------------------------------------------------------------------------
Rhode Island Health & Education Building Rev., Hospital
Financing (Lifespan Obligation Group), 6.375%, 2021 1,805,000 2,040,462
-----------------------------------------------------------------------------------------------
Royston, GA, Hospital Authority Rev. (Ty Cobb Healthcare
Systems, Inc.), 6.375%, 2014 955,000 961,933
-----------------------------------------------------------------------------------------------
Russell, KY (Bon Secours Health Systems), ETM, 5.85%, 2005 (++) 3,000,000 3,053,400
-----------------------------------------------------------------------------------------------
Salt Lake City, UT, Hospital Authority Rev. INFLOS, AMBAC,
ETM (Intermountain Health Care), 10.732%, 2020(+),(++) 600,000 601,812
-----------------------------------------------------------------------------------------------
Scranton-Lackawanna, PA, Health & Welfare Authority Rev.
(Allied Rehab Hospital), 7.125%, 2005 285,000 285,479
-----------------------------------------------------------------------------------------------
Shelby County, TN, Educational & Hospital Facilities Board
Hospital Rev. (Methodist Healthcare), 6.375%, 2012(++) 625,000 745,525
-----------------------------------------------------------------------------------------------
Shelby County, TN, Educational & Housing Facilities Board
Hospital Rev. (Methodist Healthcare), 6.25%, 2012(++) 315,000 373,209
-----------------------------------------------------------------------------------------------
Shelby County, TN, Educational & Housing Facilities Board
Hospital Rev. (Methodist Healthcare), ETM, 6.25%, 2018(++) 185,000 215,172
-----------------------------------------------------------------------------------------------
Shelby County, TN, Educational & Housing Facilities Board
Hospital Rev. (Methodist Healthcare), ETM, 6.375%, 2019(++) 375,000 444,705
-----------------------------------------------------------------------------------------------
South Carolina Jobs & Economic Development Authority,
Hospital Facilities Rev. (Palmetto Health Alliance), 6.25%, 2031 835,000 908,839
-----------------------------------------------------------------------------------------------
South Carolina Jobs & Economic Development Authority (Bon
Secours Health Systems, Inc.), "A", 5.625%, 2030 710,000 739,813
-----------------------------------------------------------------------------------------------
South Carolina Medical University, Hospital Facilities Rev.,
"A", MBIA, 5%, 2031 685,000 710,701
-----------------------------------------------------------------------------------------------
South Dakota Health & Education Facilities Authority Rev.
(Prairie Lakes Health Care System), 5.625%, 2032 670,000 693,946
-----------------------------------------------------------------------------------------------
Southwestern Illinois Development Authority Rev. (Anderson
Hospital), 5.625%, 2029 870,000 898,710
-----------------------------------------------------------------------------------------------
Springfield, TN, Health & Educational Facilities Rev.
(Northcrest Medical Center), 5.25%, 2018 1,400,000 1,403,696
-----------------------------------------------------------------------------------------------
State of Arkansas, Development Finance Authority Rev.
(Washington Regional Medical Center), 7.25%, 2020 500,000 560,000
-----------------------------------------------------------------------------------------------
Steubenville, OH, Hospital Authority Rev. (Trinity Health
Center), 6.5%, 2030 1,300,000 1,443,923
-----------------------------------------------------------------------------------------------
Stillwater, OK, Medical Center Authority, 5.625%, 2023 1,000,000 1,055,960
-----------------------------------------------------------------------------------------------
Suffolk County, NY, Industrial Development Agency Rev.
(Southampton Hospital), 7.25%, 2020 720,000 741,852
-----------------------------------------------------------------------------------------------
Suffolk County, NY, Industrial Development Agency Rev.
(Southampton Hospital), 7.625%, 2030 740,000 777,784
-----------------------------------------------------------------------------------------------
Tallahassee, FL, Health Facilities Rev. (Tallahassee
Memorial Healthcare), 6.25%, 2020 3,085,000 3,214,138
-----------------------------------------------------------------------------------------------
Texas Metro Health Facilities Development Corp., Metro
Health Facilities Development Rev. (Wilson N. Jones Memorial
Hospital), 7.2%, 2021 700,000 717,395
-----------------------------------------------------------------------------------------------
Texas Metro Health Facilities Development Corp., Metro
Health Facilities Development Rev. (Wilson N. Jones Memorial
Hospital), 7.25%, 2031 1,000,000 1,020,570
-----------------------------------------------------------------------------------------------
Tom Green County, TX, Health Facilities Rev. (Shannon Health
System), 6.75%, 2021 1,250,000 1,351,850
-----------------------------------------------------------------------------------------------
Upper Illinois River Valley Development, Health Facilities
Rev. (Morris Hospital), 6.625%, 2031 600,000 659,784
-----------------------------------------------------------------------------------------------
Valley, AL, Special Care Facilities, Financing Authority
Rev. (Lanier Memorial Hospital), 5.6%, 2016 600,000 602,274
-----------------------------------------------------------------------------------------------
Wapello County, IA, Hospital Authority Rev. (Ottumwa
Regional Health Center), 6.375%, 2031 1,500,000 1,591,995
-----------------------------------------------------------------------------------------------
Weirton, WV, Municipal Hospital Building, Commission Rev.
(Weirton Hospital Medical Center), 6.375%, 2031 1,115,000 1,125,336
-----------------------------------------------------------------------------------------------
Weslaco, TX, Health Facilities Rev. (Knapp Medical Center),
6.25%, 2032 1,000,000 1,068,150
-----------------------------------------------------------------------------------------------
West Plains, MO, Industrial Development Authority Rev.
(Ozarks Medical Center), 6.75%, 2024 170,000 175,175
-----------------------------------------------------------------------------------------------
West Shore Pennsylvania, Hospital Authority Rev. (Holy
Spirit Hospital), 6.2%, 2026 1,250,000 1,346,425
-----------------------------------------------------------------------------------------------
Wichita, KS, Hospital Authority Rev. (Via Christi Health
System), 6.25%, 2020 1,500,000 1,693,695
-----------------------------------------------------------------------------------------------
Wisconsin Health & Educational Facilities Authority Rev.
(Aurora Health Care, Inc.), 6.875%, 2030 1,000,000 1,160,810
-----------------------------------------------------------------------------------------------
Wisconsin Health & Educational Facilities Authority Rev.
(Aurora Health Care, Inc.), MBIA, 5.25%, 2017 5,000,000 5,310,750
-----------------------------------------------------------------------------------------------
Yonkers, NY, Industrial Development Agency, Civic Facilities
Rev. (St. John's Riverside Hospital), 6.8%, 2016 755,000 788,212
-----------------------------------------------------------------------------------------------
Yonkers, NY, Industrial Development Agency, Civic Facilities
Rev. (St. John's Riverside Hospital), "A", 7.125%, 2031 490,000 508,297
-----------------------------------------------------------------------------------------------
Yonkers, NY, Industrial Development Agency, Civic Facilities
Rev. (St. Joseph's Hospital), "C", 6.2%, 2020 750,000 665,970
-----------------------------------------------------------------------------------------------
$ 126,613,022
-----------------------------------------------------------------------------------------------
Healthcare Revenue - Long Term Care - 12.6%
-----------------------------------------------------------------------------------------------
Abilene, TX, Health Facilities Development Co., Retirement
Facilities Rev. (Sears Methodist Retirement), "A", 7%, 2033 $ 345,000 $ 364,786
-----------------------------------------------------------------------------------------------
Arizona Health Facilities Authority Rev. (The Terraces
Project), 7.75%, 2033+ 750,000 790,913
-----------------------------------------------------------------------------------------------
Bell County, TX, Health Facilities Development Rev.
(Advanced Living Technology), 7.75%, 2006 130,000 126,312
-----------------------------------------------------------------------------------------------
Bell County, TX, Health Facilities Development Rev.
(Advanced Living Technology), 8.125%, 2016 1,085,000 961,809
-----------------------------------------------------------------------------------------------
Bell County, TX, Health Facilities Development Rev.
(Advanced Living Technology), 8.5%, 2026 2,405,000 2,102,499
-----------------------------------------------------------------------------------------------
Bridgeport, CT, Senior Living Facility Rev. (3030 Park
Retirement Community), 7.25%, 2035 1,020,000 1,061,188
-----------------------------------------------------------------------------------------------
Cambria County, PA, Industrial Development Authority Rev.
(Beverly Enterprises, Inc.), 10%, 2012 440,000 487,551
-----------------------------------------------------------------------------------------------
Chester County, PA, Industrial Development Authority Rev.
(RHA Nursing Home), 8.5%, 2032 595,000 596,017
-----------------------------------------------------------------------------------------------
Clarion, PA, Industrial Development Authority Rev. (Beverly
Enterprises, Inc.), 7.5%, 2012 1,000,000 1,024,670
-----------------------------------------------------------------------------------------------
Colorado Health Facilities Authority Rev. (Covenant
Retirement Communities, Inc.), "B", 6.125%, 2033 1,000,000 1,079,680
-----------------------------------------------------------------------------------------------
Colorado Health Facilities Authority Rev. (Evangelical
Lutheran), 6.9%, 2025 3,000,000 3,457,710
-----------------------------------------------------------------------------------------------
Contra Costa County, CA, Residential Rental Facilities Rev.
(Cypress Meadows), 7%, 2028* 217,707 43,537
-----------------------------------------------------------------------------------------------
Cumberland County, PA, Retirement Community Rev. (Wesley
Affiliated Services), 7.25%, 2035 1,000,000 1,069,420
-----------------------------------------------------------------------------------------------
Franklin County, OH, Healthcare Facilities Rev. (Ohio
Presbyterian), 7.125%, 2029 1,000,000 1,107,530
-----------------------------------------------------------------------------------------------
Fulton County, GA, Residential Care Facilities (Canterbury
Court), "A", 6.125%, 2034 330,000 333,132
-----------------------------------------------------------------------------------------------
Grand Prairie, TX, Housing Finance Corp., Independent Senior
Living Center Rev., 7.5%, 2017 600,000 606,366
-----------------------------------------------------------------------------------------------
Greenville County, SC, Hospital Rev. (Chestnut Hill) "A",
8%, 2015 2,255,000 2,281,203
-----------------------------------------------------------------------------------------------
Iowa Finance Authority, Health Care Facilities Rev. (Care
Initiatives Project), 5.75%, 2018 895,000 894,266
-----------------------------------------------------------------------------------------------
Iowa Finance Authority, Health Care Facilities Rev. (Care
Initiatives Project), 9.25%, 2025 1,665,000 2,024,041
-----------------------------------------------------------------------------------------------
Lenexa, KS, Health Care Facilities Rev. (Lakeview Village,
Inc.), 6.875%, 2032 500,000 538,155
-----------------------------------------------------------------------------------------------
Lenexa, KS, Health Care Facilities Rev. (Lakeview Village,
Inc.), "B", 6.25%, 2026 500,000 512,675
-----------------------------------------------------------------------------------------------
Maine Health & Higher Educational Facilities Rev. (Piper
Shores), 7.5%, 2009(++) 825,000 932,283
-----------------------------------------------------------------------------------------------
Massachusetts Industrial Finance Agency Rev. (Metro Health
Foundation, Inc.), 6.75%, 2027+ 1,470,000 1,461,165
-----------------------------------------------------------------------------------------------
Millbrae, CA, Residential Facilities Rev. (Magnolia of
Millbrae), "A", 7.375%, 2027 1,920,000 2,022,182
-----------------------------------------------------------------------------------------------
Montgomery County, PA, Higher Education & Health Authority
Rev. (AHF/Montgomery), 10.5%, 2020 2,220,000 2,284,047
-----------------------------------------------------------------------------------------------
Montgomery County, PA, Industrial Development Authority Rev.
(Whitemarsh Continuing Care), 6.125%, 2028 250,000 261,013
-----------------------------------------------------------------------------------------------
Montgomery County, PA, Industrial Development Authority Rev.
(Whitemarsh Continuing Care), 6.25%, 2035 700,000 730,912
-----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority Rev. (Courthouse
Convalescent Center), "A", 8.7%, 2014 650,000 651,716
-----------------------------------------------------------------------------------------------
New Jersey Health Care Facilities Financing Authority Rev.
(Cherry Hill), 8%, 2027 1,000,000 1,051,940
-----------------------------------------------------------------------------------------------
Norfolk, VA, Redevelopment & Housing Authority Rev. (Fort
Norfolk Retirement Community), "A", 6%, 2025 125,000 126,783
-----------------------------------------------------------------------------------------------
Norfolk, VA, Redevelopment & Housing Authority Rev. (Fort
Norfolk Retirement Community), "A", 6.125%, 2035 90,000 90,713
-----------------------------------------------------------------------------------------------
Oklahoma Development Finance Authority Rev. (Inverness
Village), 8%, 2032 250,000 202,798
-----------------------------------------------------------------------------------------------
Reedley, CA, Certificate of Participation (Mennonite Home),
7.5%, 2026 2,760,000 2,854,696
-----------------------------------------------------------------------------------------------
Santa Fe, NM, Industrial Development Rev. (Casa Real Nursing
Home), 9.75%, 2013 895,000 901,757
-----------------------------------------------------------------------------------------------
Shelby County, TN, Health Educational Rev. (Germantown
Village), 7.25%, 2034 820,000 861,131
-----------------------------------------------------------------------------------------------
State of Hawaii, Department of Budget & Finance, Special
Purpose Rev. (Kahala Nui Senior Living Community), 8%, 2033 500,000 555,490
-----------------------------------------------------------------------------------------------
Sterling, IL (Hoosier Care), 7.125%, 2034 715,000 621,442
-----------------------------------------------------------------------------------------------
Washington County, FL, Industrial Development Authority Rev.
(Washington County), 10%, 2016 905,000 907,534
-----------------------------------------------------------------------------------------------
Waterford Township, MI, Economic Development Corp. Rev.
(Canterbury Health), 6%, 2039 1,500,000 1,219,995
-----------------------------------------------------------------------------------------------
Wilkinsburg, PA, Municipal Authority Health Rev.
(Monroeville Christian/Judea), 8.25%, 2027 985,000 988,162
-----------------------------------------------------------------------------------------------
$ 40,189,219
-----------------------------------------------------------------------------------------------
Human Services - 2.8%
-----------------------------------------------------------------------------------------------
Cheneyville, LA, Westside Habilitation Center Rev.,
8.375%, 2013 $ 1,410,000 $ 1,435,183
-----------------------------------------------------------------------------------------------
Iowa Finance Authority, Community Provider (Boys & Girls
Home), 6.25%, 2028 500,000 483,160
-----------------------------------------------------------------------------------------------
Lehigh County, PA, General Purpose Authority (Kidspeace
Corp.), 6%, 2023 3,000,000 2,860,350
-----------------------------------------------------------------------------------------------
New York City, NY, Industrial Development Agency, Civic
Facility Rev. (Special Needs Facilities), 6.5%, 2017 1,030,000 1,073,456
-----------------------------------------------------------------------------------------------
New York City, NY, Industrial Development Agency, Civic
Facility Rev. (A Very Special Place, Inc.), "A", 5.75%, 2029 1,000,000 919,860
-----------------------------------------------------------------------------------------------
Orange County, FL, Health Facilities Authority Rev. (GF/
Orlando Healthcare Facilities), 8.75%, 2011 575,000 578,864
-----------------------------------------------------------------------------------------------
Orange County, FL, Health Facilities Authority Rev. (GF/
Orlando Healthcare Facilities), 9%, 2031 1,000,000 1,029,250
-----------------------------------------------------------------------------------------------
Osceola County, FL, Industrial Development Authority Rev.
(Community Provider), 7.75%, 2017 454,000 455,053
-----------------------------------------------------------------------------------------------
$ 8,835,176
-----------------------------------------------------------------------------------------------
Industrial Revenue - Airlines - 3.1%
-----------------------------------------------------------------------------------------------
Alliance Airport Authority, Inc., Special Facilities Rev.
(AMR Corp.), 7.5%, 2029 $ 1,205,000 $ 943,515
-----------------------------------------------------------------------------------------------
Dallas Fort Worth, TX, International Airport Facility
Improvement Corp. (Delta Airlines, Inc.), 7.625%, 2021 875,000 370,720
-----------------------------------------------------------------------------------------------
Dallas Fort Worth, TX, International Airport Facility
Improvement Corp. (American Airlines, Inc.), 7.25%, 2030 300,000 225,750
-----------------------------------------------------------------------------------------------
Dallas Fort Worth, TX, International Airport Facility
Improvement Corp. (American Airlines, Inc.), 6.375%, 2035 2,150,000 1,470,063
-----------------------------------------------------------------------------------------------
Dallas Fort Worth, TX, International Airport Facility
Improvement Corp. (American Airlines, Inc.) "B", 6.05%, 2029 690,000 680,368
-----------------------------------------------------------------------------------------------
Houston, TX, Airport Systems Special Facilities Rev.
(Continental, Inc.) "E", 6.75%, 2029 1,000,000 866,500
-----------------------------------------------------------------------------------------------
Metropolitan Knoxville, TN, Airport Authority Special
Purpose Rev. (Northwest Airlines), 8%, 2032 465,000 464,075
-----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority, Special
Facilities Rev. (Continental Airlines, Inc.), 7.2%, 2030 1,595,000 1,448,180
-----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority, Special
Facilities Rev. (Continental Airlines, Inc.), 6.25%, 2029 505,000 410,464
-----------------------------------------------------------------------------------------------
New York City, NY, Industrial Development Agencies Rev.
(Continental Airlines, Inc.), 7.25%, 2008 205,000 203,141
-----------------------------------------------------------------------------------------------
New York City, NY, Industrial Development Agencies Rev.
(Continental Airlines, Inc.), 8%, 2012 300,000 283,617
-----------------------------------------------------------------------------------------------
Tulsa, OK, Municipal Airport Trust Rev. (AMR Corp.), "B",
6%, 2035 2,500,000 2,393,125
-----------------------------------------------------------------------------------------------
$ 9,759,518
-----------------------------------------------------------------------------------------------
Industrial Revenue - Chemicals - 1.0%
-----------------------------------------------------------------------------------------------
Sweetwater County, WY, Solid Waste Disposal Rev. (FMC
Corp.), "A", 7%, 2024 $ 3,000,000 $ 3,032,610
-----------------------------------------------------------------------------------------------
Industrial Revenue - Environmental Services - 3.5%
-----------------------------------------------------------------------------------------------
California Pollution Control Financing Authority, Solid
Waste Disposal Rev. (Browning Ferris, Inc.), "A", 5.8%, 2016 $ 1,000,000 $ 960,760
-----------------------------------------------------------------------------------------------
California Statewide Community Development Authority, Solid
Waste Facilities Rev. (Republic Services, Inc.), "A", 4.95%, 2012 1,000,000 1,060,860
-----------------------------------------------------------------------------------------------
Gloucester County, NJ, Solid Waste Resource Recovery Rev.
(Waste Management, Inc.), 6.85%, 2029 850,000 947,827
-----------------------------------------------------------------------------------------------
Henrico County, VA, Industrial Development Authority Rev.
(Browning Ferris, Inc.), 5.45%, 2014 1,750,000 1,656,305
-----------------------------------------------------------------------------------------------
Illinois Development Finance Authority, Solid Waste Disposal
Rev. (Waste Management, Inc.), 5.85%, 2007 4,500,000 4,656,060
-----------------------------------------------------------------------------------------------
Nevada Department of Business (Republic Services, Inc.),
5.625%, 2026 750,000 809,543
-----------------------------------------------------------------------------------------------
New Morgan, PA, Industrial Development Authority, Solid
Waste Disposal Rev. (New Morgan Landfill Co, Inc./Browning
Ferris, Inc.), 6.5%, 2019 1,000,000 1,000,110
-----------------------------------------------------------------------------------------------
$ 11,091,465
-----------------------------------------------------------------------------------------------
Industrial Revenue - Metals - 0.2%
-----------------------------------------------------------------------------------------------
Mobile County, AL, Industrial Development Authority Rev.
(Ipsco, Inc.), 6.875%, 2030 $ 650,000 $ 709,417
-----------------------------------------------------------------------------------------------
State of Ohio, Solid Waste Rev. (Republic Engineered
Steels), 8.25%, 2014* 3,000,000 0
-----------------------------------------------------------------------------------------------
$ 709,417
-----------------------------------------------------------------------------------------------
Industrial Revenue - Other - 4.6%
-----------------------------------------------------------------------------------------------
Gulf Coast, TX, Industrial Development Authority (Valero
Energy Corp.), 5.6%, 2031 $ 1,750,000 $ 1,760,658
-----------------------------------------------------------------------------------------------
Gulf Coast, TX, Waste Disposal Rev. (Valero Energy Corp.),
6.65%, 2032 1,000,000 1,090,390
-----------------------------------------------------------------------------------------------
Hardeman County, TN, Correctional Facilities Rev., 7.75%, 2017 2,220,000 2,318,945
-----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority, Economic
Development Rev. (Holt Hauling & Warehousing), 8.4%, 2015+** 1,000,000 520,140
-----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority, Economic
Development Rev. (Holt Hauling & Warehousing), 8.6%, 2017+** 1,000,000 520,100
-----------------------------------------------------------------------------------------------
Park Creek Metropolitan District, CO, Rev., Custodial
Receipts, CR-1, 7.875%, 2032## 1,270,000 1,319,314
-----------------------------------------------------------------------------------------------
Park Creek Metropolitan District, CO, Rev., Custodial
Receipts, CR-2, 7.875%, 2032## 580,000 602,521
-----------------------------------------------------------------------------------------------
Pennsylvania Economic Development Financing Authority,
Finance Authority Facilities Rev. (Amtrak), "A", 6.25%, 2031 2,000,000 2,077,860
-----------------------------------------------------------------------------------------------
Philadelphia, PA, Industrial Development Authority Rev.
(Host Marriott LP), 7.75%, 2017 3,255,000 3,308,415
-----------------------------------------------------------------------------------------------
Port Corpus Christ, TX, Industrial Development Authority
Rev. (Citgo Petroleum Corp.), 8.25%, 2031 700,000 752,955
-----------------------------------------------------------------------------------------------
Tooele County, UT, Hazardous Waste Treatment Rev. (Union
Pacific Corp.), 5.7%, 2026 385,000 402,082
-----------------------------------------------------------------------------------------------
$ 14,673,380
-----------------------------------------------------------------------------------------------
Industrial Revenue - Paper - 8.8%
-----------------------------------------------------------------------------------------------
Beauregard Parish, LA (Boise Cascade Corp.), 6.8%, 2027 $ 1,000,000 $ 1,079,850
-----------------------------------------------------------------------------------------------
Bedford County, VA, Industrial Development Authority Rev.
(Nekoosa Packaging), "A", 6.55%, 2025 1,000,000 1,047,210
-----------------------------------------------------------------------------------------------
Butler, AL, Industrial Development Board, Solid Waste
Disposal Rev. (Georgia Pacific Corp.), 5.75%, 2028 155,000 156,967
-----------------------------------------------------------------------------------------------
Columbus County, NC, Industrial Facilities & Pollution
Control Financing Authority (International Paper, Co.),
"A", 6.15%, 2021 5,000,000 5,212,750
-----------------------------------------------------------------------------------------------
Courtland, AL, Solid Waste Disposal Rev. (Champion
International Corp.), 6.375%, 2029 2,000,000 2,049,560
-----------------------------------------------------------------------------------------------
Delta County, MI, Economic Development Corp., Environmental
Improvements Rev. (Mead Westvaco Escanaba), 6.45%, 2012(++) 500,000 570,395
-----------------------------------------------------------------------------------------------
Delta County, MI, Economic Development Corp., Environmental
Improvements Rev. (Mead Westvaco Escanaba), "A",
6.25%, 2012(++) 1,000,000 1,126,240
-----------------------------------------------------------------------------------------------
Effingham County, GA, Development Authority, Solid Waste
Disposal Rev. (Fort James), 5.625%, 2018 850,000 875,602
-----------------------------------------------------------------------------------------------
Hodge, LA, Utilities Rev. (Stone Container Corp.), 7.45%, 2024 3,335,000 4,016,541
-----------------------------------------------------------------------------------------------
Isle Wight County, VA, Industrial Development Authority, Solid
Waste Disposal Facilities Rev. (Union Camp Corp.), 6.55%, 2024 4,000,000 4,052,720
-----------------------------------------------------------------------------------------------
Lowndes County, MS, Solid Waste Disposal & Pollution Control
Rev. (Weyerhaeuser Co.), 6.8%, 2022 2,000,000 2,459,520
-----------------------------------------------------------------------------------------------
Navajo County, AZ, Industrial Development Authority (Stone
Container Corp.), 7.2%, 2027 880,000 917,752
-----------------------------------------------------------------------------------------------
Onondaga County, NY, Industrial Development Authority Rev.,
Solid Waste Disposal Rev. (Solvay Paperboard LLC), 6.8%, 2014 1,000,000 1,062,910
-----------------------------------------------------------------------------------------------
West Point, VA, Industrial Development Authority, Solid
Waste Disposal Rev. (Chesapeake Corp.), 6.25%, 2019 1,750,000 1,764,070
-----------------------------------------------------------------------------------------------
West Point, VA, Industrial Development Authority, Solid
Waste Disposal Rev. (Chesapeake Corp.), "A", 6.375%, 2019 700,000 705,593
-----------------------------------------------------------------------------------------------
York County, SC, Pollution Control Rev. (Bowater, Inc.),
"A", 7.4%, 2010 935,000 942,069
-----------------------------------------------------------------------------------------------
$ 28,039,749
-----------------------------------------------------------------------------------------------
Miscellaneous Revenue - Entertainment & Tourism - 1.7%
-----------------------------------------------------------------------------------------------
California Statewide Communities Development Authority Rev.,
East Valley Tourist (Cabazon Casino) "A", 9.25%, 2020## $ 1,155,000 $ 1,286,647
-----------------------------------------------------------------------------------------------
Capital Trust Agency of Florida Rev. (Seminole Tribe
Convention), 10%, 2033 2,000,000 2,243,780
-----------------------------------------------------------------------------------------------
Mississippi Development Bank, Special Obligation (Diamond
Lakes Utilities), 6.25%, 2017 1,000,000 1,032,320
-----------------------------------------------------------------------------------------------
Sandoval County, NM (Santa Ana Pueblo), 7.75%, 2015 675,000 695,365
-----------------------------------------------------------------------------------------------
$ 5,258,112
-----------------------------------------------------------------------------------------------
Miscellaneous Revenue - Other - 0.9%
-----------------------------------------------------------------------------------------------
Austin, TX, Convention Center (Convention Enterprises,
Inc.), "A", 6.6%, 2021 $ 400,000 $ 432,808
-----------------------------------------------------------------------------------------------
Austin, TX, Convention Center (Convention Enterprises,
Inc.), "A", 6.7%, 2028 600,000 648,762
-----------------------------------------------------------------------------------------------
Cleveland-Cuyahoga County, OH, Port Authority Rev. (Myers
University), "E", 5.6%, 2025 135,000 136,588
-----------------------------------------------------------------------------------------------
Gallery Certificate Trust, PA, Parking Rev., FSA, 4.5%, 2013## 875,000 875,455
-----------------------------------------------------------------------------------------------
Southwestern Illinois Development Authority Rev., Solid
Waste Disposal Rev., 5.9%, 2014 340,000 347,698
-----------------------------------------------------------------------------------------------
St. Louis County, MO, Industrial Development Authority Rev.
(Kiel Center Multipurpose Arena), 7.875%, 2024 300,000 300,519
-----------------------------------------------------------------------------------------------
Summit County, OH, Port Authority Building (Seville), "A",
5.1%, 2025 210,000 210,000
-----------------------------------------------------------------------------------------------
$ 2,951,830
-----------------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 4.7%
-----------------------------------------------------------------------------------------------
Bexar County TX, Multi-Family Housing Rev. (American
Opportunity Housing), "A", MBIA, 5.7%, 2021 $ 1,250,000 $ 1,322,938
-----------------------------------------------------------------------------------------------
Charter Mac Equity Issuer Trust, 7.1%, 2009 1,000,000 1,092,320
-----------------------------------------------------------------------------------------------
Charter Mac Equity Issuer Trust, 6%, 2019## 2,000,000 2,124,840
-----------------------------------------------------------------------------------------------
Dallas Fort Worth, TX, Housing Corp., 8.5%, 2011 815,000 816,646
-----------------------------------------------------------------------------------------------
Eaglebend, CO, Affordable Housing Corp., Multi-Family Rev.
(Housing Project), "A", 6.4%, 2017 1,000,000 999,890
-----------------------------------------------------------------------------------------------
Florida Multi-Family Housing Finance Agency Rev. (Center
Court Apartments), 8.5%, 2018 865,000 841,567
-----------------------------------------------------------------------------------------------
GMAC Municipal Mortgage Trust, "C-1", 5.7%, 2040## 500,000 506,110
-----------------------------------------------------------------------------------------------
GMAC Municipal Mortgage Trust, "B-1", 5.6%, 2039## 1,000,000 1,030,070
-----------------------------------------------------------------------------------------------
Memphis, TN, Educational & Housing Facilities (Wesley
Highland Terrace), 8.5%, 2024 115,000 114,870
-----------------------------------------------------------------------------------------------
Metropolitan Government of Nashville & Davidson County, TN,
Health & Educational & Housing Facilities Board Rev.
(Berkshire Place), GNMA, 6%, 2023 500,000 530,800
-----------------------------------------------------------------------------------------------
Munimae TE Bond Subsidiary LLC, 6.875%, 2009 2,000,000 2,167,800
-----------------------------------------------------------------------------------------------
Munimae TE Bond Subsidiary LLC, 5.4%, 2049## 1,000,000 987,630
-----------------------------------------------------------------------------------------------
Ridgeland, MS, Urban Renewal (Northbrook I & II Apartments),
6.15%, 2019** 280,000 145,600
-----------------------------------------------------------------------------------------------
Ridgeland, MS, Urban Renewal (Northbrook I & III
Apartments), "A", 6.25%, 2029** 475,000 247,000
-----------------------------------------------------------------------------------------------
San Bernardino County, CA (Equity Residential/Redlands),
"A", 5.2%, 2029 2,000,000 2,085,500
-----------------------------------------------------------------------------------------------
$ 15,013,581
-----------------------------------------------------------------------------------------------
Single Family Housing - Local - 1.5%
-----------------------------------------------------------------------------------------------
Cook County, IL, Single Family Mortgage Rev., "A", 0%, 2015 $ 80,000 $ 15,714
-----------------------------------------------------------------------------------------------
Corpus Christi, TX, Housing Finance Authority Rev., "B",
MBIA, 0%, 2011 3,000,000 1,640,070
-----------------------------------------------------------------------------------------------
Dallas, TX, Housing Finance Corp., Single Family Mortgage
Rev., MBIA, 0%, 2016 3,360,000 1,040,928
-----------------------------------------------------------------------------------------------
Jefferson Parish, LA, Single Family Mortgage Rev., GNMA,
6.625%, 2023 315,000 333,922
-----------------------------------------------------------------------------------------------
Jefferson Parish, LA, Single Family Mortgage Rev., GNMA,
6.3%, 2032 975,000 1,033,344
-----------------------------------------------------------------------------------------------
Sedgwick & Shawnee Counties, KS, Single Family Housing Rev.,
"A", GNMA, 6.45%, 2029 640,000 673,120
-----------------------------------------------------------------------------------------------
$ 4,737,098
-----------------------------------------------------------------------------------------------
Single Family Housing - State - 2.8%
-----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 6.9%, 2029 $ 585,000 $ 614,753
-----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 6.375%, 2033 120,000 124,397
-----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., "A-2", 7.15%, 2014 8,000 8,111
-----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., "C-2", 5.9%, 2023 245,000 251,764
-----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., "C-2", 6.6%, 2032 265,000 270,904
-----------------------------------------------------------------------------------------------
Georgia Housing & Finance Authority Rev., 5.65%, 2021 2,490,000 2,572,693
-----------------------------------------------------------------------------------------------
Louisiana Housing Finance Agency, Single Family Mortgage
Rev., GNMA, 6.4%, 2032 315,000 325,776
-----------------------------------------------------------------------------------------------
Minnesota Housing Finance Agency Rev., Residential Housing
Finance "B", 4.8%, 2023 295,000 300,183
-----------------------------------------------------------------------------------------------
Missouri State Housing Development Commission, Single Family
Mortgage Rev. (Home Loan Program), 6.35%, 2032 420,000 439,568
-----------------------------------------------------------------------------------------------
Missouri State Housing Development Commission, Single Family
Mortgage Rev. (Home Loan Program), GNMA, 6.85%, 2032 205,000 213,409
-----------------------------------------------------------------------------------------------
Nebraska Investment Finance Authority Single Family Mortgage
Rev., 0%, 2015 7,600,000 2,931,244
-----------------------------------------------------------------------------------------------
Nebraska Investment Finance Authority, "C", 6.25%, 2021 730,000 753,791
-----------------------------------------------------------------------------------------------
New Hampshire Housing Finance Authority Rev., "B",
5.875%, 2030 140,000 143,031
-----------------------------------------------------------------------------------------------
$ 8,949,624
-----------------------------------------------------------------------------------------------
Solid Waste Revenue - 1.7%
-----------------------------------------------------------------------------------------------
Delaware County, PA, Industrial Development Authority Rev.,
Resource Recovery Facilities (American Ref-fuel), "A",
6.5%, 2008 $ 1,600,000 $ 1,674,320
-----------------------------------------------------------------------------------------------
Massachusetts Development Finance Agency Rev. (Ogden
Haverhill Associates), 6.7%, 2014 725,000 775,960
-----------------------------------------------------------------------------------------------
Massachusetts Industrial Finance Agency Rev., Resource
Recovery Rev. (Ogden Haverhill Associates), 5.6%, 2019 2,850,000 2,890,698
-----------------------------------------------------------------------------------------------
$ 5,340,978
-----------------------------------------------------------------------------------------------
State & Agency - Other - 0.4%
-----------------------------------------------------------------------------------------------
West Virginia, Higher Education Facilities Rev., "B", FGIC,
5%, 2034 $ 1,270,000 $ 1,326,566
-----------------------------------------------------------------------------------------------
State & Local Agencies - 2.7%
-----------------------------------------------------------------------------------------------
Chicago, IL, Public Building Commission, Building Rev.,
RITES, FGIC, 9.257%, 2016+(+) $ 1,300,000 $ 1,645,124
-----------------------------------------------------------------------------------------------
Chicago, IL, Public Building Commission, Building Rev.,
RITES, FGIC, 9.257%, 2017+(+) 1,050,000 1,331,841
-----------------------------------------------------------------------------------------------
College Park, GA, Industrial Development Authority Rev.
(Civic Center), AMBAC, 5.75%, 2020 1,000,000 1,125,540
-----------------------------------------------------------------------------------------------
Golden State, CA, Tobacco Securitization Corp., Tobacco
Settlement Rev., Enhanced, "B", 5.375%, 2028 2,000,000 2,097,320
-----------------------------------------------------------------------------------------------
Houston, TX, COP, 6.3%, 2020 815,000 881,700
-----------------------------------------------------------------------------------------------
King George County, VA, Industrial Development Authority
Lease Rev., FSA, 5%, 2036 1,300,000 1,357,421
-----------------------------------------------------------------------------------------------
$ 8,438,946
-----------------------------------------------------------------------------------------------
Student Loan Revenue - 0.2%
-----------------------------------------------------------------------------------------------
Access to Loans for Learning, California Student Loan Rev.,
7.95%, 2030 $ 650,000 $ 690,307
-----------------------------------------------------------------------------------------------
Tax - Other - 1.8%
-----------------------------------------------------------------------------------------------
Black Hawk, CO, Device Tax Rev., 5.625%, 2017 $ 250,000 $ 250,913
-----------------------------------------------------------------------------------------------
Dade County, FL, Special Obligations Rev., Capital
Appreciation Bond, "B", AMBAC, 0%, 2008(++) 15,080,000 3,041,033
-----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority Rev. Cigarette
Tax, 5.5%, 2024 340,000 359,424
-----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority Rev. Cigarette
Tax, 5.75%, 2029 615,000 651,789
-----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority Rev. Cigarette
Tax, 5.5%, 2031 270,000 280,233
-----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority Rev. Cigarette
Tax, 5.75%, 2034 410,000 430,221
-----------------------------------------------------------------------------------------------
Virgin Islands Public Finance Authority Rev., 6%, 2006 250,000 255,633
-----------------------------------------------------------------------------------------------
Virgin Islands Public Finance Authority Rev., "E", 5.875%, 2018 500,000 518,865
-----------------------------------------------------------------------------------------------
$ 5,788,111
-----------------------------------------------------------------------------------------------
Tax Assessment - 4.2%
-----------------------------------------------------------------------------------------------
Allegheny County, PA, Redevelopment Authority Rev.
(Pittsburgh Mills), 5.1%, 2014 $ 235,000 $ 243,277
-----------------------------------------------------------------------------------------------
Allegheny County, PA, Redevelopment Authority Rev.
(Pittsburgh Mills), 5.6%, 2023 150,000 157,896
-----------------------------------------------------------------------------------------------
Capital Region Community Development District of FL, Capital
Improvement Rev., "B", 5.95%, 2006 160,000 161,267
-----------------------------------------------------------------------------------------------
Chicago IL, Ryan Garfield Tax Increment Allocation, 10.125%, 2007 610,000 610,817
-----------------------------------------------------------------------------------------------
Concorde Estates Community Development District, FL, Capital
Improvement Rev., "B", 5%, 2011 905,000 910,611
-----------------------------------------------------------------------------------------------
Fishhawk Community Development District of FL, 5.125%, 2009 1,055,000 1,062,459
-----------------------------------------------------------------------------------------------
Heritage Isles, FL, Community Development District, "A",
5.75%, 2005 135,000 135,000
-----------------------------------------------------------------------------------------------
Katy, TX, Development Authority Rev., 5.8%, 2011 870,000 909,141
-----------------------------------------------------------------------------------------------
Katy, TX, Development Authority Rev., "B", 6%, 2018 925,000 966,422
-----------------------------------------------------------------------------------------------
Killarney, FL, Community Development District, "B", 5.125%, 2009 565,000 570,085
-----------------------------------------------------------------------------------------------
Lakes By The Bay South Community Development District, FL,
Special Assessment, "B", 5.3%, 2009 1,140,000 1,151,822
-----------------------------------------------------------------------------------------------
Markham, IL, Tax Increment Rev., 9%, 2012 1,010,000 1,013,727
-----------------------------------------------------------------------------------------------
Middle Village Community Development District, FL, Special
Assessment, "B", 5%, 2009 745,000 749,679
-----------------------------------------------------------------------------------------------
Old Palm Community Development District, FL, Special
Assessment (Palm Beach Gardens), "A", 5.9%, 2035 255,000 262,056
-----------------------------------------------------------------------------------------------
Old Palm Community Development District, FL, Special
Assessment (Palm Beach Gardens), "B", 5.375%, 2014 455,000 463,122
-----------------------------------------------------------------------------------------------
Panther Trace, FL, Community Development District Rev.,
5.4%, 2008 150,000 151,041
-----------------------------------------------------------------------------------------------
Panther Trace, FL, Community Development District Rev., "B",
5%, 2010 730,000 737,431
-----------------------------------------------------------------------------------------------
Parkway Center, FL, Community Development District Rev.,
"B", 5.625%, 2014 1,260,000 1,288,552
-----------------------------------------------------------------------------------------------
Preserve At Wilderness Lake, FL, Community Development
District, Capital Improvement, "B", 5%, 2009 645,000 644,071
-----------------------------------------------------------------------------------------------
Reunion East Community Development District, FL, Special
Assessment, 5.9%, 2007 195,000 197,946
-----------------------------------------------------------------------------------------------
Sterling Hill Community Development District, FL, Capital
Improvement Rev., 5.5%, 2010 535,000 542,517
-----------------------------------------------------------------------------------------------
Villasol Community Development District, FL, Special
Assessment Rev., "B", 5.375%, 2008 515,000 522,416
-----------------------------------------------------------------------------------------------
$ 13,451,355
-----------------------------------------------------------------------------------------------
Tobacco - 5.1%
-----------------------------------------------------------------------------------------------
Badger Tobacco, WI (Asset Securitization Corp.), 6.125%, 2027 $ 4,305,000 $ 4,406,469
-----------------------------------------------------------------------------------------------
California Statewide Financing Authority, Tobacco
Settlement, 5.625%, 2029 1,795,000 1,793,259
-----------------------------------------------------------------------------------------------
District of Columbia, Tobacco Settlement, 6.25%, 2024 1,210,000 1,237,431
-----------------------------------------------------------------------------------------------
Golden State, CA, Tobacco Securitization, Tobacco
Settlement, "A", 5%, 2021 980,000 987,183
-----------------------------------------------------------------------------------------------
Golden State, CA, Tobacco Securitization, Tobacco
Settlement, 7.8%, 2042 1,000,000 1,148,440
-----------------------------------------------------------------------------------------------
Iowa Tobacco Settlement Authority, Tobacco Settlement Rev.,
Asset Backed, "B", 5.3%, 2025 2,000,000 1,893,320
-----------------------------------------------------------------------------------------------
Louisiana Tobacco Settlement Authority, 5.5%, 2030 1,435,000 1,413,977
-----------------------------------------------------------------------------------------------
New Jersey Tobacco Settlement Authority, 5.75%, 2032 1,005,000 1,004,266
-----------------------------------------------------------------------------------------------
South Carolina Tobacco Settlement Authority, 6.375%, 2028 1,000,000 1,027,470
-----------------------------------------------------------------------------------------------
South Carolina Tobacco Settlement Authority, "B", 6%, 2022 1,260,000 1,280,047
-----------------------------------------------------------------------------------------------
Washington Tobacco Settlement Authority, 6.5%, 2026 160,000 167,194
-----------------------------------------------------------------------------------------------
$ 16,359,056
-----------------------------------------------------------------------------------------------
Toll Roads - 1.6%
-----------------------------------------------------------------------------------------------
Arapahoe County, CO, Capital Improvement Highway Rev., "C",
0%, 2005(++) $ 1,000,000 $ 482,260
-----------------------------------------------------------------------------------------------
E-470 Public Highway Authority, Colorado Rev., Capital
Appreciation, "B", MBIA, 0%, 2027 4,115,000 1,267,214
-----------------------------------------------------------------------------------------------
Niagara Falls, NY, Bridge Commission, Toll Rev., RITES,
FGIC, 7.285%, 2015+(+) 1,500,000 1,850,580
-----------------------------------------------------------------------------------------------
Pocahontas Parkway Assn., VA, Toll Road Rev., 0%, 2011 1,000,000 618,400
-----------------------------------------------------------------------------------------------
Pocahontas Parkway Assn., VA, Toll Road Rev., 0%, 2015 1,750,000 972,423
-----------------------------------------------------------------------------------------------
$ 5,190,877
-----------------------------------------------------------------------------------------------
Transportation - Special Tax - 3.1%
-----------------------------------------------------------------------------------------------
Missouri Highways & Transportation Commission, State Road
Rev., "A", 5.625%, 2018 $ 4,500,000 $ 4,983,345
-----------------------------------------------------------------------------------------------
Telluride, CO (Gondola Transit Co.), 9%, 2006(++) 750,000 794,798
-----------------------------------------------------------------------------------------------
Telluride, CO, Real Estate Transfer Assessment Rev. (Gondola
Transit Co.), ETM, 11.5%, 2012(++) 2,900,000 4,220,196
-----------------------------------------------------------------------------------------------
$ 9,998,339
-----------------------------------------------------------------------------------------------
Universities - Colleges - 3.8%
-----------------------------------------------------------------------------------------------
California Educational Facilities Authority Rev. (L.A.
College of Chiropractic), 5.6%, 2017 $ 750,000 $ 735,900
-----------------------------------------------------------------------------------------------
Houston, TX, Community College Systems, MBIA, 7.875%, 2025 2,500,000 3,181,575
-----------------------------------------------------------------------------------------------
Illinois Educational Facilities Authority Rev. (Augustana
College), "A", 5.625%, 2022 400,000 428,588
-----------------------------------------------------------------------------------------------
Islip, NY, Community Development Agency Rev. (New York
Institute of Technology), 7.5%, 2006(++) 2,500,000 2,647,100
-----------------------------------------------------------------------------------------------
Louisiana State University (Health Sciences Center Project),
MBIA, 6.375%, 2031 2,500,000 2,874,850
-----------------------------------------------------------------------------------------------
Savannah, GA, Economic Development Authority Rev. (College
of Art & Design, Inc.), 6.5%, 2009(++) 625,000 713,063
-----------------------------------------------------------------------------------------------
State of Massachusetts, Development Finance Agency Rev.
(Eastern Nazarene College), 5.625%, 2029 500,000 483,710
-----------------------------------------------------------------------------------------------
University of Arkansas, University Rev. (UAMS Campus), "B",
MBIA, 5%, 2034 300,000 315,507
-----------------------------------------------------------------------------------------------
University of Colorado Enterprise Systems Rev., Refunding &
Improvement, FGIC, 5%, 2030 635,000 671,017
-----------------------------------------------------------------------------------------------
$ 12,051,310
-----------------------------------------------------------------------------------------------
Universities - Secondary Schools - 1.4%
-----------------------------------------------------------------------------------------------
California Statewide Communities, Development Authority Rev.
(Escondido Charter High School), 7.5%, 2023 $ 585,000 $ 599,356
-----------------------------------------------------------------------------------------------
California Statewide Communities, Development Authority Rev.
(Escondido Charter High School), 7.5%, 2036 1,000,000 1,026,430
-----------------------------------------------------------------------------------------------
Michigan Municipal Bond Authority Rev. (Detroit Academy of
Arts & Sciences), 8%, 2031 1,000,000 1,057,740
-----------------------------------------------------------------------------------------------
Michigan Municipal Bond Authority Rev. (YMCA Service
Learning Academy), 7.625%, 2021 1,000,000 1,076,580
-----------------------------------------------------------------------------------------------
Pima County, AZ, Industrial Development Authority Education
Rev. (Arizona Charter Schools), "C", 6.75%, 2031 500,000 527,505
-----------------------------------------------------------------------------------------------
$ 4,287,611
-----------------------------------------------------------------------------------------------
Utilities - Cogeneration - 2.2%
-----------------------------------------------------------------------------------------------
Alaska Industrial Development Export Authority, Power Rev.,
Upper Lynn Canal Regional Power, 5.8%, 2018 $ 830,000 $ 796,211
-----------------------------------------------------------------------------------------------
Carbon County, PA, Industrial Development Authority Rev.
(Panther Creek Partners), 6.65%, 2010 2,370,000 2,555,879
-----------------------------------------------------------------------------------------------
Klamath Falls, OR, Electric Rev. (Klamath Cogeneration),
6%, 2025 2,260,000 2,283,278
-----------------------------------------------------------------------------------------------
Pennsylvania Economic Development Financing Authority Rev.,
Resources Recovery Rev. (Northampton Generating), 6.4%, 2009 350,000 354,330
-----------------------------------------------------------------------------------------------
Pennsylvania Economic Development Financing Authority Rev.,
Resources Recovery Rev. (Northampton Generating), 6.5%, 2013 1,000,000 1,012,620
-----------------------------------------------------------------------------------------------
$ 7,002,318
-----------------------------------------------------------------------------------------------
Utilities - Investor Owned - 12.2%
-----------------------------------------------------------------------------------------------
Brazos River Authority, TX (Reliant Energy, Inc.), "A",
5.375%, 2019 $ 500,000 $ 512,070
-----------------------------------------------------------------------------------------------
Brazos River Authority, TX, Authority Texas Rev. (Reliant
Energy, Inc.), "B", AMBAC, 5.125%, 2020 2,000,000 2,103,440
-----------------------------------------------------------------------------------------------
Brazos River Authority, TX, Pollution Control Rev. (Texas
Utility Co.), 7.7%, 2033 575,000 677,511
-----------------------------------------------------------------------------------------------
Brazos River Authority, TX, Pollution Control Rev. (Texas
Utility Co.), "B", 6.3%, 2032 500,000 537,840
-----------------------------------------------------------------------------------------------
Brazos River Authority, TX, Pollution Control Rev. (Texas
Utility Co.), "C", 6.75%, 2038 715,000 781,266
-----------------------------------------------------------------------------------------------
Calcasieu Parish, LA, Industrial Development Board,
Pollution Control Rev. (Entergy Gulf States, Inc.), 5.45%, 2010 1,250,000 1,267,813
-----------------------------------------------------------------------------------------------
California Pollution Control Financing Authority, Pollution
Control Rev. (Southern California Edison Co.), "B", 6.4%, 2024 1,000,000 1,003,330
-----------------------------------------------------------------------------------------------
Connecticut Development Authority, Pollution Control Rev.
(Connecticut Light & Power Co.), 5.85%, 2028 2,000,000 2,131,820
-----------------------------------------------------------------------------------------------
Connecticut Development Authority, Pollution Control Rev.
(Connecticut Light & Power Co.), 5.95%, 2028 2,270,000 2,411,830
-----------------------------------------------------------------------------------------------
Farmington, NM, Pollution Control Rev. (New Mexico Public
Service), 5.8%, 2022 2,105,000 2,149,016
-----------------------------------------------------------------------------------------------
Farmington, NM, Pollution Control Rev. (New Mexico Public
Service), "A", 6.3%, 2016 2,195,000 2,348,496
-----------------------------------------------------------------------------------------------
Forsyth, MT, Pollution Control Rev. (Portland General),
5.2%, 2033 230,000 242,869
-----------------------------------------------------------------------------------------------
Matagorda County, TX (Centerpoint Energy), 5.6%, 2027 1,500,000 1,559,415
-----------------------------------------------------------------------------------------------
Matagorda County, TX, Pollution Control Rev. (Central Power
& Light Co.), 4.55%, 2029 2,000,000 2,041,960
-----------------------------------------------------------------------------------------------
Matagorda County, TX, Pollution Control Rev. (Reliant
Energy), 5.95%, 2030 1,655,000 1,684,211
-----------------------------------------------------------------------------------------------
Mecklenburg County, VA, Industrial Development Authority
Rev. (UAE Mecklenburg, LP), 6.5%, 2017 800,000 897,048
-----------------------------------------------------------------------------------------------
New Hampshire Business Finance Authority, Pollution Control
Rev. (Public Service of New Hampshire), 6%, 2021 1,000,000 1,052,710
-----------------------------------------------------------------------------------------------
Ohio Air Quality Development Authority Rev., Pollution
Control, Rev. (Cleveland Electric) "B", 6%, 2020 3,000,000 3,167,340
-----------------------------------------------------------------------------------------------
Pennsylvania Economic Development Financing Authority Rev.
(Reliant Energy Seward), "A", 6.75%, 2036 1,155,000 1,246,926
-----------------------------------------------------------------------------------------------
Pima County, AZ, Industrial Development Authority Rev.
(Tucson Electric Power Co.), "A", 6.1%, 2025 650,000 650,852
-----------------------------------------------------------------------------------------------
Pima County, AZ, Industrial Development Authority Rev.
(Tucson Electric Power Co.), "C", 6%, 2029 2,905,000 2,909,096
-----------------------------------------------------------------------------------------------
Pittsylvania County, VA, Industrial Development Authority
Rev. (Multi-trade of Pittsylvania), 7.5%, 2014 3,000,000 3,094,020
-----------------------------------------------------------------------------------------------
Port Morrow, OR, Pollution Control Rev. (Portland General
Electric), 5.2%, 2033 550,000 580,773
-----------------------------------------------------------------------------------------------
Trinity River Authority, TX, Pollution Control Rev. (TXU
Electric Co.), 6.25%, 2028 500,000 545,295
-----------------------------------------------------------------------------------------------
West Feliciana Parish, LA, Pollution Control Rev. (Gulf
States Utilities Co.), 7.7%, 2014 550,000 552,107
-----------------------------------------------------------------------------------------------
West Feliciana Parish, LA, Pollution Control Rev. (Gulf
States Utilities Co.), 5.8%, 2015 1,500,000 1,503,555
-----------------------------------------------------------------------------------------------
West Feliciana Parish, LA, Pollution Control Rev. (Gulf
States Utilities Co.), 5.8%, 2016 1,000,000 1,014,360
-----------------------------------------------------------------------------------------------
$ 38,666,969
-----------------------------------------------------------------------------------------------
Utilities - Municipal Owned - 2.9%
-----------------------------------------------------------------------------------------------
California State Department Water Resources Power Supply
Rev. "A", 5.75%, 2017 $ 1,250,000 $ 1,396,613
-----------------------------------------------------------------------------------------------
North Carolina Eastern Municipal Power Agency, Power Systems
Rev., "B", 5.55%, 2014 2,150,000 2,297,168
-----------------------------------------------------------------------------------------------
North Carolina Municipal Power Agency (Catawba Electric
Rev.) "B", 6.5%, 2020 2,000,000 2,252,520
-----------------------------------------------------------------------------------------------
Seattle, WA, Municipal Light & Power Rev., 5.625%, 2017 3,000,000 3,299,520
-----------------------------------------------------------------------------------------------
Southern California Public Power Authority (Transmission
Project Rev.), RIBS, 9.688%, 2012(+) 100,000 101,282
-----------------------------------------------------------------------------------------------
$ 9,347,103
-----------------------------------------------------------------------------------------------
Water & Sewer Utility Revenue - 2.0%
-----------------------------------------------------------------------------------------------
New York City, NY, Municipal Water & Sewer Finance Authority
Rev., 5.5%, 2033 $ 5,000,000 $ 5,435,150
-----------------------------------------------------------------------------------------------
New York City, NY, Municipal Water & Sewer Finance
Authority, Rev., "D", 5%, 2038 760,000 792,452
-----------------------------------------------------------------------------------------------
$ 6,227,602
-----------------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $425,622,669) $453,057,692
-----------------------------------------------------------------------------------------------
Floating Rate Demand Notes - 0.2%
-----------------------------------------------------------------------------------------------
Allegheny County, PA, Hospital Development Authority Rev.
(Presbyterian University Hospital), "B", 3%, due 5/05/05 $ 100,000 $ 100,000
-----------------------------------------------------------------------------------------------
Massachusetts Health & Higher Educational Facilities
Authority Rev., Capital Assets Program, "D", 3%, due 5/02/05 200,000 200,000
-----------------------------------------------------------------------------------------------
New Castle, PA, Area Hospital Authority (Jameson Memorial
Hospital), 3.03%, due 5/04/05 125,000 125,000
-----------------------------------------------------------------------------------------------
Pinellas County, FL, Health Facilities Authority Rev.,
Pooled Hospital Loan Program, 3.05%, due 5/02/05 100,000 100,000
-----------------------------------------------------------------------------------------------
Sevier County, TN, Public Building Authority, 3.02%,
due 5/05/05 65,000 65,000
-----------------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $ 590,000
-----------------------------------------------------------------------------------------------
Total Investments(+) (Identified Cost, $426,212,669) $ 453,647,692
-----------------------------------------------------------------------------------------------
Preferred Shares (Issued by the Trust) - (44.0)% $(140,031,488)
-----------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 1.4% 4,616,192
-----------------------------------------------------------------------------------------------
Net Assets - 100.0% $ 318,232,396
-----------------------------------------------------------------------------------------------
* Non-income producing security - in default.
+ Restricted security.
(+) Inverse floating rate security.
(++) Refunded bond.
** Interest received was less than stated coupon rate.
## SEC Rule 144A restriction.
(+) As of April 30, 2005 one security representing $0 and 0% of net assets was fair
valued in accordance with the policies adopted by the Board of Trustees.
The following abbreviations are used in the Portfolio of Investments and are defined:
COP= Certificate of Participation
ETM= Escrowed to Maturity
Insurers Inverse Floaters
AMBAC = AMBAC Indemnity Corp. INFLOS = Inverse Floating Security
ASST GTY = Asset Guaranty Insurance Co. RIBS = Residual Interest Bonds
FGIC = Financial Guaranty Insurance Co. RITES = Residual Interest Tax-Exempt Security
FSA = Financial Security Assurance, Inc.
GNMA = Government National Mortgage Assn.
MBIA = Municipal Bond Investors Corp.
PSF = Permanent School Fund
SEE NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES (unaudited)
--------------------------------------------------------------------------------------------------
This statement represents your trust's balance sheet, which details the assets
and liabilities composing the total value of your trust.
AT 4/30/05
ASSETS
Investments, at value (identified cost, $426,212,669) $453,647,692
--------------------------------------------------------------------------------------------------
Cash 5,111
--------------------------------------------------------------------------------------------------
Receivable for investments sold 1,177,585
--------------------------------------------------------------------------------------------------
Interest receivable 8,522,560
--------------------------------------------------------------------------------------------------
Unrealized appreciation on interest rate swap agreements 62,617
--------------------------------------------------------------------------------------------------
Other assets 2,181
--------------------------------------------------------------------------------------------------
Total assets $463,417,746
--------------------------------------------------------------------------------------------------
LIABILITIES
Distributions payable on common shares $160,659
--------------------------------------------------------------------------------------------------
Payable for investments purchased 3,780,933
--------------------------------------------------------------------------------------------------
Unrealized depreciation on interest rate swap agreements 885,581
--------------------------------------------------------------------------------------------------
Payable to affiliates
--------------------------------------------------------------------------------------------------
Management fee 24,217
--------------------------------------------------------------------------------------------------
Transfer agent and dividend disbursing costs 28,842
--------------------------------------------------------------------------------------------------
Administrative fee 394
--------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 273,236
--------------------------------------------------------------------------------------------------
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 140,031,488
--------------------------------------------------------------------------------------------------
Total liabilities $145,185,350
--------------------------------------------------------------------------------------------------
Net assets applicable to common shares $318,232,396
--------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital - common shares $328,467,761
--------------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) on investments 26,612,059
--------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (43,550,605)
--------------------------------------------------------------------------------------------------
Accumulated undistributed net investment income 6,703,181
--------------------------------------------------------------------------------------------------
Net assets applicable to common shares $318,232,396
--------------------------------------------------------------------------------------------------
Preferred shares, at value (5,600 shares issued and
outstanding at $25,000 per share) 140,000,000
--------------------------------------------------------------------------------------------------
Net assets including preferred shares $458,232,396
--------------------------------------------------------------------------------------------------
Common shares of beneficial interest outstanding
(39,850,554 shares issued less 55,500 treasury shares) 39,795,054
--------------------------------------------------------------------------------------------------
Net asset value per common share ($318,232,396/39,795,054) $8.00
--------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF OPERATIONS (unaudited)
--------------------------------------------------------------------------------------------------
This statement describes how much your trust received in investment income and
paid in expenses. It also describes any gains and/or losses generated by trust
operations.
SIX MONTHS ENDED 4/30/05
NET INVESTMENT INCOME
Interest income $14,339,373
--------------------------------------------------------------------------------------------------
Expenses
--------------------------------------------------------------------------------------------------
Management fee $1,786,817
--------------------------------------------------------------------------------------------------
Trustees' compensation 22,569
--------------------------------------------------------------------------------------------------
Transfer agent and dividend disbursing costs 76,160
--------------------------------------------------------------------------------------------------
Administrative fee 20,655
--------------------------------------------------------------------------------------------------
Preferred shares remarketing agent fee 173,704
--------------------------------------------------------------------------------------------------
Custodian fee 59,664
--------------------------------------------------------------------------------------------------
Printing 25,272
--------------------------------------------------------------------------------------------------
Postage 43,218
--------------------------------------------------------------------------------------------------
Auditing fees 20,722
--------------------------------------------------------------------------------------------------
Legal fees 5,836
--------------------------------------------------------------------------------------------------
Miscellaneous 73,432
--------------------------------------------------------------------------------------------------
Total expenses $2,308,049
--------------------------------------------------------------------------------------------------
Fees paid indirectly (11,547)
--------------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser (705)
--------------------------------------------------------------------------------------------------
Net expenses $2,295,797
--------------------------------------------------------------------------------------------------
Net investment income $12,043,576
--------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) (identified cost basis)
--------------------------------------------------------------------------------------------------
Investment transactions $(5,406,680)
--------------------------------------------------------------------------------------------------
Swap transactions (2,461,265)
--------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments $(7,867,945)
--------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
--------------------------------------------------------------------------------------------------
Investments $11,259,513
--------------------------------------------------------------------------------------------------
Swap transactions 1,980,646
--------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments $13,240,159
--------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments $5,372,214
--------------------------------------------------------------------------------------------------
Distributions declared from preferred shares $(1,285,744)
--------------------------------------------------------------------------------------------------
Change in net assets from operations $16,130,046
--------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENTS 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
4/30/05 10/31/04
(UNAUDITED)
CHANGE IN NET ASSETS
FROM OPERATIONS
Net investment income $12,043,576 $23,772,695
--------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (7,867,945) (1,940,843)
--------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments 13,240,159 8,313,314
--------------------------------------------------------------------------------------------------
Distributions declared from preferred shares (1,285,744) (1,507,808)
-------------------------------------------------------- ------------ -------------
Change in net assets from operations $16,130,046 $28,637,358
-------------------------------------------------------- ------------ -------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(10,863,889) $(21,706,248)
-------------------------------------------------------- ------------ -------------
TRUST SHARE (PRINCIPAL) TRANSACTIONS
Net asset value of shares issued to common shareholders
in reinvestment of distributions $141,292 $511,173
-------------------------------------------------------- ------------ -------------
Total change in net assets $5,407,449 $7,442,283
-------------------------------------------------------- ------------ -------------
NET ASSETS
At beginning of period $312,824,947 $305,382,664
--------------------------------------------------------------------------------------------------
At end of period (including accumulated undistributed
net investment income of $6,703,181 and $6,809,238,
respectively) $318,232,396 $312,824,947
--------------------------------------------------------------------------------------------------
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 (or, if shorter, the period of the trust's operation). 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 -----------------------------------------------------------------------
4/30/05 2004 2003 2002 2001 2000
(UNAUDITED)
Net asset value, beginning of period $7.86 $7.69 $7.61 $7.93 $7.79 $7.96
-------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS#(S)
Net investment income^ $0.30 $0.60 $0.61 $0.64 $0.64 $0.53
-------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 0.14 0.16 0.04 (0.38) 0.18 (0.17)
-------------------------------------------------------------------------------------------------------------------------------
Distributions declared to
shareholders on preferred
shares (0.03) (0.04) (0.04) (0.05) (0.10) --
------------------------------------ ------ ------ ------ ------ ------ ------
Total from investment
operations $0.41 $0.72 $0.61 $0.21 $0.72 $0.36
------------------------------------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net investment income,
common shares $(0.27) $(0.55) $(0.53) $(0.53) $(0.53) $(0.53)
------------------------------------ ------ ------ ------ ------ ------ ------
Preferred shares offering
cost charged to paid-in
capital $-- $-- $-- $-- $(0.05) $--
------------------------------------ ------ ------ ------ ------ ------ ------
Net asset value, end of period $8.00 $7.86 $7.69 $7.61 $7.93 $7.79
------------------------------------ ------ ------ ------ ------ ------ ------
Common share market value, end
of period $7.85 $7.83 $7.49 $7.15 $7.83 $7.38
------------------------------------ ------ ------ ------ ------ ------ ------
Total return at common market
value (%)& 3.78(++) 12.22 12.51 (2.23) 13.58 11.27
-------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEAR ENDED 10/31
ENDED ----------------------------------------------------------------------
4/30/05 2004 2003 2002 2001 2000
(UNAUDITED)
RATIOS (%) TO AVERAGE
NET ASSETS APPLICABLE TO
COMMON SHARES/SUPPLEMENTAL DATA:^
Expenses##+ 1.48(+) 1.46 1.51 1.56 1.49 1.11
------------------------------------------------------------------------------------------------------------------------------
Net investment income+(S) 7.73(+) 7.70 7.98 8.26 8.12 6.76
------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 7 9 11 16 26 18
------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $318,232 $312,825 $305,383 $302,010 $312,996 $305,789
------------------------------------------------------------------------------------------------------------------------------
^ Effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the trust for its proportional share of
substantially all of Independent Chief Compliance Officer service fees paid to Tarantino LLC. If this fee had been incurred
by the trust, the net investment income per share and the ratios would have been:
Net investment income+(S) $0.30* $0.60* $-- $-- $-- $--
------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
APPLICABLE TO COMMON SHARES:
Expenses##+ 1.48*(+) 1.46* -- -- -- --
------------------------------------------------------------------------------------------------------------------------------
Net investment income+(S) 7.73*(+) 7.70* -- -- -- --
------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL RATIOS (%):
Ratios of expenses to average
net assets including preferred
shares##+ 1.02(+) 1.00 1.03 1.07 1.07 1.11
------------------------------------------------------------------------------------------------------------------------------
Preferred shares dividends 0.82(+) 0.49 0.48 0.68 1.28 --
------------------------------------------------------------------------------------------------------------------------------
Net investment income
available to common shares(S) 6.90(+) 7.22 7.50 7.58 6.84 6.76
------------------------------------------------------------------------------------------------------------------------------
SENIOR SECURITIES:
Total preferred shares
outstanding 5,600 5,600 5,600 5,600 5,600 --
------------------------------------------------------------------------------------------------------------------------------
Asset coverage per preferred
share++ $81,827 $80,862 $79,533 $79,090 $80,897 --
------------------------------------------------------------------------------------------------------------------------------
Involuntary liquidation
preference per preferred share $25,000 $25,000 $25,000 $25,000 $25,000 --
------------------------------------------------------------------------------------------------------------------------------
Approximate market value per
preferred share $25,000 $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 data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
(+) Annualized.
(++) Not annualized.
* The reimbursement per share amount and ratios were less than $0.01 and 0.01%, respectively.
& From time to time the trust may receive proceeds from litigation settlements, without which performance would be lower.
SEE NOTES TO FINANCIAL STATEMENTS
------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited)
------------------------------------------------------------------------------
(1) BUSINESS AND ORGANIZATION
MFS Municipal Income Trust (the trust) is a non-diversified trust that is
organized as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as a closed-end management
investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. 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 - 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. 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 approximates market value as determined by the Board of
Trustees. When pricing service information or market quotations are not readily
available, securities are priced at fair value as determined under the direction
of 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 and foreign exchange 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 swap 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.
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 U.S. generally accepted accounting principles. All premium and original
issue discount is amortized or accreted for tax reporting purposes as required
by federal income tax regulations. The trust may receive proceeds from
litigation settlements involving its portfolio holdings. Any proceeds received
are reflected in realized gain/loss in the statement of operations, or in
unrealized gain/loss if the security is still held by the trust. 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, 2005, 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, and amortization and accretion
on debt securities.
The tax character of distributions declared for the years ended October 31, 2004
and October 31, 2003 was as follows:
10/31/04 10/31/03
Distributions declared from:
------------------------------------------------------------------------------
Tax-exempt income $23,043,028 $22,599,683
------------------------------------------------------------------------------
Ordinary income 171,028 41,603
------------------------------------------------------------------------------
Total distributions declared $23,214,056 $22,641,286
------------------------------------------------------------------------------
As of October 31, 2004 the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Undistributed tax-exempt income $7,792,198
----------------------------------------------------------
Undistributed ordinary income 60,086
----------------------------------------------------------
Capital loss carryforward (36,437,335)
----------------------------------------------------------
Unrealized appreciation (depreciation) 14,002,173
----------------------------------------------------------
Other temporary differences (918,644)
----------------------------------------------------------
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, 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)
----------------------------------------------------------
October 31, 2012 (1,858,513)
----------------------------------------------------------
Total $(36,437,335)
----------------------------------------------------------
AUCTION PREFERRED SHARES - The trust has 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,
2005 the dividend rates ranged from 1.495% to 2.76%. 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.
(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 gross investment income.
Management fees from net assets and gross investment income incurred for the six
months ended April 30, 2005 were at an effective rate of 0.79% of average daily
net assets, including preferred shares, on an annualized basis.
The trust pays compensation to its Independent Trustees in the form of a
retainer, attendance fees, and additional compensation to Board and Committee
chairpersons, 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
Independent Trustees. Included in Trustees' compensation is a pension expense of
$4,687 for retired Independent Trustees for the six months ended April 30, 2005.
This trust and certain other MFS funds (the "funds") have entered into a
services agreement (the "Agreement") which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an Independent
Chief Compliance Officer (ICCO) for the funds. The ICCO is an officer of the
funds and the sole member of Tarantino LLC. MFS has agreed to reimburse each of
the funds for a proportional share of substantially all of the payments made by
the funds to Tarantino LLC and also to provide office space and other
administrative support and supplies to the ICCO. The funds can terminate the
Agreement with Tarantino LLC at any time under the terms of the Agreement.
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. Each fund is allocated a portion of these
administrative costs based on its size and relative average net assets. The
trust paid MFS an administrative fee up to the following annual percentage rates
of the trust's average daily net assets:
BEGINNING OF
PERIOD THROUGH
EFFECTIVE DATE 2/28/05 3/01/05
First $2 billion 0.01120% 0.01626%
-----------------------------------------------------------------------
Next $2.5 billion 0.00832% 0.01206%
-----------------------------------------------------------------------
Next $2.5 billion 0.00032% 0.00056%
-----------------------------------------------------------------------
In excess of $7 billion 0.00000% 0.00000%
-----------------------------------------------------------------------
For the six months ended April 30, 2005, the trust paid MFS $20,655, equivalent
to 0.00915% 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
$32,615 for the six months ended April 30, 2005. Also included in transfer agent
and dividend disbursing costs are out-of-pocket expenses, paid to MFSC, which
amounted to $38,009 for the six months ended April 30, 2005, as well as other
expenses paid to unaffiliated vendors.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$36,847,003 and $33,046,551, 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 $425,560,577
----------------------------------------------------------
Gross unrealized appreciation $31,180,209
----------------------------------------------------------
Gross unrealized depreciation (3,093,094)
----------------------------------------------------------
Net unrealized appreciation (depreciation) $28,087,115
----------------------------------------------------------
(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 the repurchase by the trust of up to 10% annually of its own shares
of beneficial interest.
During the six months ended April 30, 2005, the trust did not repurchase any
shares. Transactions in the trust were as follows:
Six months ended 4/30/05 Year ended 10/31/04
SHARES AMOUNT SHARES AMOUNT
Shares issued to shareholders in
reinvestment of distributions 17,976 $141,292 64,891 $511,173
--------------------------------------------------------------------------------
(6) LINE OF CREDIT
The trust and other affiliated funds participate in a $1 billion 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 Federal Reserve funds
rate plus 0.35%. 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, 2005 was $1,255, and is included in
miscellaneous expense. The trust had no significant borrowings during the six
months ended April 30, 2005.
(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
PRINCIPAL UNREALIZED
AMOUNT OF CASH FLOWS PAID CASH FLOWS RECEIVED APPRECIATION
EXPIRATION CURRENCY CONTRACT BY THE TRUST BY THE TRUST (DEPRECIATION)
8/16/15 USD 12,000,000 Fixed - 10 Year BMA Floating - 7 Day BMA $(148,850)
Swap Index, (3.799%) Swap Index
------------------------------------------------------------------------------------------------------------------------
10/06/20 USD 30,000,000 Fixed - 15 Year BMA Floating - 7 Day BMA (736,731)
Swap Index, (4.101%) Swap Index
------------------------------------------------------------------------------------------------------------------------
8/16/25 USD 20,000,000 Fixed - 20 Year LIBOR Floating - 3 Month 62,617
Swap Index, (4.954%) LIBOR Swap Index
------------------------------------------------------------------------------------------------------------------------
$(822,964)
------------------------------------------------------------------------------------------------------------------------
(8) RESTRICTED SECURITIES
At April 30, 2005, the trust owned the following restricted securities which are
subject to legal or contractual restrictions on resale, excluding securities
issued under Rule 144A, constituting 2.18% 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
DESCRIPTION ACQUISITION PAR AMOUNT COST VALUE
Arizona Health Facilities Authority Rev.
(The Terraces Project), 7.75%, 2033 10/17/03 750,000 $736,845 $790,913
--------------------------------------------------------------------------------------------------------------------
Chicago, IL, O'Hare International Airport
Rev., RITES, FSA, 8.206%, 2022 8/21/03 1,500,000 1,599,510 1,862,190
--------------------------------------------------------------------------------------------------------------------
Chicago, IL, Public Building Commission,
Building Rev., RITES, FGIC, 9.257%, 2016 3/11/99 1,300,000 1,403,610 1,645,124
--------------------------------------------------------------------------------------------------------------------
Chicago, IL, Public Building Commission,
Building Rev., RITES, FGIC, 9.257%, 2017 3/11/99 1,050,000 1,123,542 1,331,841
--------------------------------------------------------------------------------------------------------------------
Massachusetts Industrial Finance Agency
Rev. (Metro Health Foundation, Inc.),
6.75%, 2027, 7/18/96 1,470,000 985,940 1,461,165
--------------------------------------------------------------------------------------------------------------------
New Jersey Economic Development Authority,
Economic Development Rev. (Holt Hauling &
Warehousing), 8.4%, 2015 1/30/97 1,000,000 1,049,280 520,140
--------------------------------------------------------------------------------------------------------------------
New Jersey Economic Development Authority,
Economic Development Rev. (Holt Hauling &
Warehousing), 8.6%, 2017 1/30/97 1,000,000 1,051,940 520,100
--------------------------------------------------------------------------------------------------------------------
Niagara Falls, NY, Bridge Commission, Toll
Rev., RITES, FGIC, 7.285%, 2015 5/21/99 1,500,000 1,609,680 1,850,580
--------------------------------------------------------------------------------------------------------------------
$9,982,053
--------------------------------------------------------------------------------------------------------------------
(9) CONCENTRATION OF CREDIT RISK
At April 30, 2005, 19.27% 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 9.46% 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 MFS fund sales (the term "MFS funds" means the
open-end registered management investment companies sponsored by MFS). 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 developed by an independent
distribution consultant. The brokerage allocation practices which were the
subject of this proceeding were discontinued by MFS in November 2003. The
agreement with the SEC is reflected in an order of the SEC. The SEC settlement
order states that MFS failed to adequately disclose to the Boards of Trustees
and to shareholders of the MFS funds the specifics of its preferred arrangements
with certain brokerage firms selling MFS fund shares. The SEC settlement order
states that MFS had in place policies designed to obtain best execution of all
MFS fund trades. As part of the settlement, MFS retained an independent
compliance consultant to review the completeness of its current policies and
practices regarding disclosure to MFS fund trustees and to MFS fund shareholders
of strategic alliances between MFS or its affiliates and broker-dealers and
other financial intermediaries who support the sale of MFS fund shares. Pursuant
to the SEC order, on July 28, 2004, MFS transferred these settlement amounts to
the SEC, and those MFS funds entitled to these settlement amounts accrued an
estimate of their pro rata portion of these amounts. The final distribution plan
was approved by the SEC on January 21, 2005, and the affected MFS funds received
the payment on February 16, 2005.
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 open-end retail fund ("MFS retail funds")
prospectuses regarding market timing and related matters (the "February
Settlements"). These regulators alleged that prospectus language for certain MFS
retail funds was false and misleading because, although the prospectuses for
those funds in the regulators' view indicated that they prohibited market
timing, MFS did not limit trading activity in 11 domestic large cap stock, high
grade bond and money market retail funds. MFS' former Chief Executive Officer
and former President 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. These individuals
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 MFS 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 MFS 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, MFS Fund Distributors, Inc., MFS Service Center, Inc.,
MFS Corporation Retirement Committee, Sun Life Financial Inc., various MFS
funds, certain current and/or former 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 MFS funds during specified periods, as ERISA actions by
participants in certain retirement plan accounts on behalf of those accounts, or
as derivative actions on behalf of the MFS funds. The lawsuits relating to
market timing and related matters have been transferred to, and consolidated
before, the United States District Court for the District of Maryland, as part
of a multi-district litigation of market timing and related claims involving
several other fund complexes (In re Mutual Funds Investment Litigation (Alger,
Columbia, Janus, MFS, One Group, Putnam, Allianz Dresdner), No. 1:04-md-15863
(transfer began March 19, 2004)). The market timing cases related to the MFS
complex are Riggs v. MFS et al., Case No. 04-cv-01162-JFM (direct), Hammerslough
v. MFS et al., Case No. 04-md-01620 (derivative) and Anita Walker v. MFS et al.,
Case No. 1:04-CV-01758 (ERISA). The plaintiffs in these consolidated lawsuits
generally seek injunctive relief including removal of the named Trustees,
adviser and distributor, rescission of contracts and 12b-1 Plans, disgorgement
of fees and profits, monetary damages, punitive damages, attorney's fees and
costs and other equitable and declaratory relief. Two lawsuits alleging improper
brokerage allocation practices and excessive compensation are pending in the
United States District Court for the District of Massachusetts (Forsythe v. Sun
Life Financial Inc., et al., No. 04cv10584 (GAO) (a consolidated action) and
Marcus Dumond, et al. v. Massachusetts Financial Servs. Co., et al., No.
04cv11458 (GAO)). The plaintiffs in these lawsuits generally seek compensatory
damages, punitive damages, recovery of fees, rescission of contracts, an
accounting, restitution, declaratory relief, equitable and/or injunctive relief
and attorney's fees and costs. The various 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 (ii) received excessive
compensation as fiduciaries to the MFS funds, or (iii) permitted or acquiesced
in the improper use of fund assets by MFS to support the distribution of MFS
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. 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 MFS funds. In February,
March, and April 2005, the defendants filed separate motions to dismiss all
claims of the various lawsuits. The parties continue to brief the issues for the
courts and various hearing dates have been scheduled. 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 certain MFS retail funds for damages that they allegedly
sustained as a result of market timing or late trading in certain of the MFS
retail funds, and distributed $50 million to affected MFS funds to compensate
those funds based upon the amount of brokerage commissions allocated in
recognition of MFS 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 MFS funds may pursue claims on behalf of such funds
against any party that may have liability to the funds in respect thereof.
Review of these matters by the independent Trustees of the MFS funds and their
counsel is continuing. There can be no assurance that these regulatory actions
and lawsuits, or the adverse publicity associated with these developments, will
not result in increased fund redemptions, reduced sales of fund shares, or other
adverse consequences to the MFS funds.
While these developments relate to MFS and the 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
MFS closed-end fund shares or other adverse consequences.
-------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------------------------------
To the Trustees and Shareholders of MFS Municipal Income Trust:
We have reviewed the accompanying statement of assets and liabilities, including
the portfolio of investments, of the MFS Municipal Income Trust (the "Trust"),
as of April 30, 2005, and the related statement of operations, statement of
changes in net assets, and the financial highlights for the six-month period
then ended. These interim financial statements are the responsibility of the
Trust's management.
We conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such interim financial statements for them to be in conformity with
accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the statement of assets and
liabilities, including the portfolio of investments, of the MFS Municipal Income
Trust (the "Trust"), as of October 31, 2004, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended; and in our report dated
December 20, 2004, we expressed an unqualified opinion on those financial
statements.
The statement of changes in net assets for the year ended October 31, 2004 and
the financial highlights for the five year in period ended October 31, 2004
taken from these financial statements are included herein.
DELOITTE & TOUCHE LLP
June 23, 2005
------------------------------------------------------------------------------
RESULTS OF SHAREHOLDER MEETING (unaudited) - 4/30/05
------------------------------------------------------------------------------
At the annual meeting of shareholders of MFS Municipal Income Trust, which was
held on March 23, 2005, the following actions were taken:
ITEM 1. To elect a Board of Trustees of common shares:
NUMBER OF COMMON SHARES
-----------------------------------
NOMINEE AFFIRMATIVE WITHHOLD AUTHORITY
Lawrence H. Cohn 33,510,589.098 711,390.470
------------------------------------------------------------------------------
David H. Gunning 33,593,762.597 628,216.971
------------------------------------------------------------------------------
William R. Gutow 33,550,884.597 671,094.971
------------------------------------------------------------------------------
Michael Hegarty 33,588,449.111 633,530.457
------------------------------------------------------------------------------
Amy B. Lane 33,597,396.800 624,582.768
------------------------------------------------------------------------------
Robert J. Manning 33,551,202.597 670,776.971
------------------------------------------------------------------------------
Robert C. Pozen 33,580,041.597 641,937.971
------------------------------------------------------------------------------
J. Dale Sherratt 33,563,431.597 658,547.971
------------------------------------------------------------------------------
Laurie J. Thomsen 33,563,990.260 657,989.308
------------------------------------------------------------------------------
ITEM 2. To elect a Board of Trustees of preferred shares:
NUMBER OF PREFERRED SHARES
-----------------------------------
NOMINEE AFFIRMATIVE WITHHOLD AUTHORITY
J. Atwood Ives 5,187.000 23.000
------------------------------------------------------------------------------
Lawrence T. Perera 5,187.000 23.000
------------------------------------------------------------------------------
------------------------------------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION
------------------------------------------------------------------------------
A general description of the MFS funds' proxy voting policies and procedures is
available without charge, upon request, by calling 1-800-225-2606, by visiting
the Proxy Voting section of mfs.com or by visiting the SEC's Web site at
http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is available
without charge by visiting the Proxy Voting section of mfs.com or by visiting
the SEC's Web site at http://www.sec.gov.
------------------------------------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE
------------------------------------------------------------------------------
The fund will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The fund's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-0102
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-800-SEC-0330. The fund's Form N-Q is available on
the EDGAR database on the Commission's Internet website at http://www.sec.gov,
and copies of this information may be obtained, upon payment of a duplicating
fee, by electronic request at the following e-mail address: publicinfo@sec.gov
or by writing the Public Reference Section at the above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
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
NUMBER OF SHAREHOLDERS
As of April 30, 2005, our records indicate that there are 3,332 registered
shareholders and approximately 13,835 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
M F S(SM)
INVESTMENT MANAGEMENT(R)
(C) 2005 MFS Investment Management(R)
500 Boylston Street, Boston, MA 02116.
MFM-SEM-06/05 24M
ITEM 2. CODE OF ETHICS.
The Registrant has amended its Code of Ethics to reflect that the Registrant's
Principal Financial Officer has changed.
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
A schedule of investments of the Registrant is included as part of the report to
shareholders of the Registrant under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable for semi-annual reports.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable at this time.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
=========================================================================================================
MFS MUNICIPAL INCOME TRUST
--------------------------------------------------------------------------------------------------------
(C) TOTAL
NUMBER OF (D) MAXIMUM NUMBER
SHARES (OR APPROXIMATE
PURCHASED AS DOLLAR VALUE)
PART OF OF SHARES THAT
(A) TOTAL PUBLICLY MAY YET BE
NUMBER OF (B) AVERAGE ANNOUNCED PURCHASED UNDER
SHARES PRICE PAID PLANS OR THE PLANS
PERIOD PURCHASED PER SHARE PROGRAMS OR PROGRAMS
========================================================================================================
=========================================================================================================
11/1/04-11/30/04 0 n/a 0 3,973,301
---------------------------------------------------------------------------------------------------------
12/1/04-12/31/04 0 n/a 0 3,973,301
---------------------------------------------------------------------------------------------------------
1/1/05-1/31/05 0 n/a 0 3,973,301
---------------------------------------------------------------------------------------------------------
2/1/05-2/28/05 0 n/a 0 3,973,301
---------------------------------------------------------------------------------------------------------
3/1/05-3/31/05 0 n/a 0 3,979,505
---------------------------------------------------------------------------------------------------------
4/1/05-4/30/05 0 n/a 0 3,979,505
---------------------------------------------------------------------------------------------------------
Total 0 n/a 0
=========================================================================================================
Note: The Board of Trustees approves procedures to repurchase shares annually.
The notification to shareholders of the program is part of the semi-annual and
annual reports sent to shareholders. These annual programs begin on March 1st of
each year. The programs conform to the conditions of Rule 10b-18 of the
securities Exchange Act of 1934 and limit the aggregate number of shares that
may be purchased in each annual period (March 1 through the following February
28) to 10% of the Registrant's outstanding shares as of the first day of the
plan year (March 1). The aggregate number of shares available for purchase for
the March 1, 2005 plan year are 3,979,505.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no material changes to the procedures by which shareholders may send
recommendations to the Board for nominees to the Registrant's Board since the
Registrant last provided disclosure as to such procedures in response to the
requirements of Item 7(d)(2)(ii)(G) of Schedule 14A.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Act) 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 second fiscal quarter covered by the report that has materially
affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(1) Any code of ethics, or amendment thereto, 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: Code of
Ethics attached hereto.
(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 Rule 23c-1 under
the Act sent or given during the period covered by the report by or on
behalf of the Registrant to 10 or more persons. Not applicable.
(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, 2005
-------------
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, 2005
-------------
By (Signature and Title)* MARIA F. DWYER
----------------------------------------------------
Maria F. Dwyer, Treasurer (Principal
Financial Officer and Accounting Officer)
Date: June 23, 2005
-------------
* Print name and title of each signing officer under his or her signature.