<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
75 YEARS
WE INVENTED THE MUTUAL FUND(R)
[Graphic Omitted]
MFS(R) MUNICIPAL HIGH
INCOME FUND
SEMIANNUAL REPORT o JULY 31, 1999
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DIVERSIFYING YOUR INVESTMENT PORTFOLIO (see page 42)
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<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 3
Performance Summary ....................................................... 7
Portfolio of Investments .................................................. 10
Financial Statements ...................................................... 28
Notes to Financial Statements ............................................. 34
MFS' Year 2000 Readiness Disclosure ....................................... 41
Trustees and Officers ..................................................... 45
MFS(R) ORIGINAL RESEARCH(SM)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Dear Shareholders,
It has been almost two years since financial turmoil began to rock markets in
Asia, Russia, and Latin America. Even developed markets such as Europe and the
United States were not immune. In the U.S. equity market, for example,
investors focused on a narrow group of 50 of the largest-company growth stocks
because they seemed to offer less volatility in uncertain times. Fixed-income
investors also became more concerned about risk, moving money into U.S.
Treasury securities and out of corporate and municipal bonds and mortgage-
backed securities.
The narrowness of the market was just one of three broad issues that dominated
the U.S. equity market until recently. The other two were a slowdown in
corporate earnings growth and high valuations, with stocks of many companies
selling at extremely high prices relative to their earnings.
Although these have been challenging issues, we now see signs that we feel
demonstrate each one is changing for the better. Today, we believe the markets
are presenting more opportunities for investors to diversify, for our portfolio
managers to find good values, and for us to show the benefits of staying with
our long-term objectives and strategies. Investors seem to be regaining
confidence in a wider range of companies. Stocks of some small and mid-sized
companies, as well as some large industrial companies, have begun to perform
better in the past months than they had for the previous year or so. These
companies appear to have benefited from signs of stability in emerging markets
and a continuation of economic growth in the United States.
U.S. companies also have produced better earnings. Corporate earnings were, on
average, relatively flat in 1998. However, we expect earnings to grow 12% to
14% this year because more companies have benefited from the strong economy
and from aggressive consolidation and cost-cutting measures they have taken
over the past several years.
Based on their earnings projections, our analysts estimate that the U.S. stock
market is still about 30% overvalued. While there has been some shift to a wider
group of stocks, many investors are still focusing on the large-company stocks.
As a result, most of the overvaluation is in the 50 largest stocks in the
Standard & Poor's 500 Composite Index (the S&P 500), a popular, unmanaged index
of common stock total return performance. That means about 450 stocks are
selling at more attractive prices, particularly given what we see as the
improved earnings outlooks for these and many small and mid-sized companies not
in the S&P 500. These companies also benefit from consolidation, cost cutting,
and global growth. Because they are smaller, they may be able to respond to
these changes more quickly, and thus they have the potential to grow faster than
the big companies.
The past two years have challenged investors. However, we believe we are well
positioned for the current environment because our analysts and portfolio
managers continue to rely on MFS(R) Original Research(SM) to help evaluate the
long-term investment potential of each holding being considered for our
portfolios. Also, we believe our discipline of staying with our clearly defined
investment strategies can help us offer investment products with the potential
to sustain returns over a variety of market cycles.
We appreciate your confidence and welcome any questions or comments you may
have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
August 14, 1999
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of Michael W. Roberge]
Michael W. Roberge
For the six months ended July 31, 1999, Class A shares of the Fund provided a
total return of -0.97%, Class B shares -1.37%, and Class C shares -1.46%.
These returns, which include the reinvestment of distributions but exclude the
effects of any sales charges, compare to a -1.70% return over the same period
for the Lehman Brothers Municipal Bond Index (the Lehman Index), an unmanaged
index of investment-grade municipal bonds rated "Baa" or higher. The average
municipal high-yield debt fund tracked by Lipper Analytical Services, Inc., an
independent firm that reports mutual fund performance, returned -1.01% over
the same period.
Q. CAN YOU DESCRIBE THE BOND MARKET AND, SPECIFICALLY, THE MUNICIPAL BOND
MARKET DURING THE PERIOD?
A. Yields on U.S. Treasury bonds are actually up 100 basis points, or 1.00% for
1999. There has been a significant bond market sell-off due to strong
economic growth and renewed fears of inflation. Also, international markets
are starting to rebound which, coupled with continued domestic growth,
intensifies worries about inflation. Compared to the Treasury market,
municipals have performed relatively well this year. Municipal prices have
fallen less than half compared to Treasuries. This is a reversal of 1998,
when we had the second largest supply ever of municipals, which made them
cheap relative to Treasuries. Now, in 1999, with municipal supply down 25%,
municipal prices have traded closer to normal historic levels relative to
Treasuries.
Q. HOW DOES THIS RISE IN INTEREST RATES RELATE TO THE HIGH-YIELD MUNICIPAL
BOND MARKET?
A. A fund like this in the current environment will be less affected by
interest rates than either a higher-quality bond fund or the Lehman Index
will be. It is important to remember that the Lehman Index is comprised of
higher-quality bonds than those found in the Fund, which primarily invests
in lower-quality municipal issues rated "Baa" or below. Higher-quality bonds
tend to be more interest-rate sensitive, so the moderate increase in rates
during the period had a more negative impact on the Lehman Index than it did
on our Fund.
Q. HAS THERE BEEN MUCH YIELD DIFFERENCE BETWEEN LOWER-RATED AND HIGHER-RATED
BONDS SO FAR THIS YEAR?
A. The quality spread, that is, the difference an investor is paid in yield to
buy a lower-rated bond versus a "AAA"-rated bond, continues to be narrow due
to the strong demand by the market for yield. In this situation, the name of
the game is to be very selective and try to avoid mistakes, and this is
where we have focused our attention. We do a lot of fundamental research on
current bond holdings and on potential purchases in order to try to avoid
mistakes that could hurt our performance. Our goal in this type of market is
to find opportunities where we think we are getting paid to take credit risk
and not take undue risk for modest incremental yield.
Q. WHAT AREAS OF THE MUNICIPAL HIGH-YIELD MARKET HAVE CONTRIBUTED TO THE
FUND'S PERFORMANCE?
A. One sector we currently favor is multifamily housing. We believe the
underpinnings for that industry have been strong. As the economy continues
to be relatively healthy, we look for areas in which the supply of housing
is not meeting the demand for housing. Our research focus is to identify
markets where the fastest-growing population is the 25- to 34-year-olds who
aren't ready to purchase their first houses, so they seek rental housing.
Most of the population growth is in the southeast part of the country and,
therefore, most of the new bonds we are buying are from that region. Another
sector we currently favor is electric utilities. This sector is going
through changes due to deregulation. This means there should be
consolidations, and we believe they will create investment opportunities. As
the industry consolidates, the well-positioned firms will survive and be
stronger. It is our goal to be invested in such firms.
Q. WHAT SECTOR HAVE YOU BEEN THE MOST CAUTIOUS ABOUT?
A. We are cautious about health care. We are not avoiding this sector, but we
are concerned about the changes in federal funding for Medicare that was
part of the 1997 balanced budget agreement. These changes have hit hospitals
pretty hard. We believe hospitals will continue to be affected over the next
couple of years. We favor the rural hospitals which face modest competition,
compared to the urban hospitals which have been greatly affected by the
constraints imposed by health maintenance organizations.
Q. WHAT IS YOUR OUTLOOK FOR THE REMAINDER OF THE YEAR?
A. We are cautious about interest rates because growth is strong and we have
seen some indication of possible inflation. In such an environment, a fund
like the MFS(R) Municipal High Income Fund is likely to outperform the
Lehman Index or an investment-grade bond fund. An economic downturn is the
biggest risk to this Fund and to others like it. Currently, we do not see
any signs of recession-like pressures which could affect the Fund.
/s/ Michael W. Roberge
Michael W. Roberge
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. The manager's views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
It is not possible to invest directly in an index.
<PAGE>
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PORTFOLIO MANAGER'S PROFILE
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MICHAEL W. ROBERGE IS VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R) AND
PORTFOLIO MANAGER OF MFS(R) MUNICIPAL HIGH INCOME FUND AND MFS(R)
MUNICIPAL INCOME TRUST, A CLOSED-END FUND.
MR. ROBERGE JOINED MFS IN 1996 AS A CREDIT ANALYST IN THE MUNICIPAL
FIXED INCOME DEPARTMENT AND WAS NAMED PORTFOLIO MANAGER IN 1997. PRIOR
TO JOINING MFS, HE WORKED AS A MUNICIPAL CREDIT ANALYST AND PORTFOLIO
MANAGER WITH ANOTHER MAJOR MUTUAL FUND FIRM. BEFORE THAT, HE WAS A
CREDIT ANALYST WITH MOODY'S INVESTORS SERVICE, INC. MR. ROBERGE IS A
1990 GRADUATE OF BEMIDJI STATE UNIVERSITY AND EARNED AN M.B.A. DEGREE
FROM HOFSTRA UNIVERSITY IN 1992. HE IS A CHARTERED FINANCIAL ANALYST AS
WELL AS A MEMBER OF THE BOSTON MUNICIPAL ANALYSTS FORUM AND THE NATIONAL
FEDERATION OF MUNICIPAL ANALYSTS.
ALL PORTFOLIO MANAGERS AT MFS INVESTMENT MANAGEMENT(R) ARE SUPPORTED BY
AN INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS(R) ORIGINAL
RESEARCH(SM), A COMPANY-ORIENTED, BOTTOM-UP PROCESS OF SELECTING
SECURITIES.
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This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other MFS
product is available from your financial consultant, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
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FUND FACTS
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OBJECTIVE: SEEKS HIGH CURRENT INCOME EXEMPT FROM FEDERAL
INCOME TAXES.
COMMENCEMENT OF
INVESTMENT OPERATIONS: FEBRUARY 24, 1984
CLASS INCEPTION: CLASS A FEBRUARY 24, 1984
CLASS B SEPTEMBER 7, 1993
CLASS C SEPTEMBER 25, 1998
SIZE: $1.6 BILLION NET ASSETS AS OF JULY 31, 1999
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PERFORMANCE SUMMARY
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for
the applicable time periods. Investment results reflect the percentage change
in net asset value, including reinvestment of dividends. (See Notes
to Performance Summary for more information.)
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN THROUGH JULY 31, 1999
<TABLE>
<CAPTION>
CLASS A
6 Months 1 Year 3 Years 5 Years 10 Years
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return -0.97% +2.41% +20.27% +36.13% +86.72%
- ------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +2.41% + 6.34% + 6.36% + 6.44%
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SEC Results -- -2.45% + 4.63% + 5.33% + 5.93%
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<CAPTION>
CLASS B
6 Months 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return -1.37% +1.66% +17.22% +30.05% +76.71%
- ------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +1.66% + 5.44% + 5.39% + 5.86%
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SEC Results -- -2.21% + 4.54% + 5.08% + 5.86%
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<CAPTION>
CLASS C
6 Months 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return -1.46% +1.60% +19.31% +35.05% +85.23%
- ------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +1.60% + 6.06% + 6.19% + 6.36%
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SEC Results -- +0.60% + 6.06% + 6.19% + 6.36%
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</TABLE>
<PAGE>
NOTES TO PERFORMANCE SUMMARY
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class
B share ("B") SEC results reflect the applicable contingent deferred sales
charge (CDSC), which declines over six years from 4% to 0%. Class C shares
("C") have no initial sales charge but, like B, have higher annual fees and
expenses than A. C SEC results reflect the 1% CDSC applicable to shares
redeemed within 12 months.
B and C results include the performance and the operating expenses
(e.g., Rule 12b-1 fees) of A for periods prior to the inception of B and C.
Because operating expenses of B and C are higher than those of A, B and C
performance generally would have been lower than A performance. The A
performance included in the B and C SEC performance has been adjusted to
reflect the CDSC generally applicable to B and C rather than the initial sales
charge generally applicable to A.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and
waivers may be rescinded at any time. See the prospectus for details. All
results are historical and assume the reinvestment of dividends and capital
gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS.
A small portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to a capital gains tax. See
the prospectus for details.
<PAGE>
PORTFOLIO CONCENTRATION AS OF JULY 31, 1999
QUALITY RATINGS
Source: Standard & Poor's and Moody's
"AAA" 22.6%
"AA" 7.2%
"A" 4.1%
"BBB" 23.7%
"BB" 5.2%
"B" 1.8%
Not Rated 35.4%
The portfolio is actively managed, and current holdings may be different.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) - July 31, 1999
Municipal Bonds - 98.6%
<CAPTION>
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PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
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<S> <C> <C>
General Obligation - 4.3%
Birmingham, AL, 5.75s, 2019 $ 1,000 $ 1,037,830
Chicago, IL, FGIC, 5.125s, 2025 5,000 4,673,600
Cypress-Fairbanks, TX, Independent School District, 5s, 2018 4,500 4,244,850
District of Columbia, 6s, 2026 5,000 5,159,500
Douglas County, CO, Douglas & Elebert Counties School
District, FGIC, 5.25s, 2016 2,720 2,673,814
Fort Bend, TX, Independent School District, 5.5s, 2015 3,715 3,748,695
Houston, TX, Independent School District, 7.068s, 2017+(++) 5,000 4,781,700
Manchester, NH, 5.875s, 2019 2,325 2,407,166
Markham, IL, 9s, 2012 2,630 2,669,450
New York City, NY, 6.875s, 2003 120 128,346
New York City, NY, 7.1s, 2011 120 127,862
New York City, NY, FSA, 7s, 2022 70 74,594
New York City, NY, 5.875s, 2024 7,000 7,185,430
New York City, NY, 6.125s, 2025 3,675 3,839,787
New York City, NY, FGIC, 6.125s, 2025 8,000 8,446,640
New York City, NY, 5.5s, 2037 5,000 4,876,250
Orleans Parish, LA, School Board, FGIC, 0s, 2015 9,860 4,287,227
Richardson, TX, Hospital Authority Rev. (Baylor-Richardson),
5.25s, 2013 1,500 1,415,670
State of South Carolina, 5.768s, 2016+(++) 2,000 1,683,800
Ukiah, CA, Unified School District, FGIC, 0s, 2017 4,795 1,794,193
Ukiah, CA, Unified School District, FGIC, 0s, 2018 4,085 1,433,876
West Warwick, RI, 7.3s, 2008 184 200,702
West Warwick, RI, 7.45s, 2013 570 626,931
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$ 67,517,913
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State and Local Appropriation - 3.7%
Chicago, IL, Public Building Commerce Rev., 7.068s, 2016+(++) $ 6,000 $ 5,857,020
Chicago, IL, Public Building Commerce Rev., 7.068s, 2017+(++) 4,500 4,369,140
Delaware Valley, PA, Regional Finance Authority,
AMBAC, 7.033s, 2018+(++) 7,000 7,201,460
District of Columbia, Certificates of Participation, 7.3s, 2013 2,500 2,732,600
Metropolitan Transportation Authority, NY,
Transportation Facility Rev., 5.25s, 2017 5,000 4,835,650
New York Dormitory Authority Rev., FSA, 5.25s, 2014 5,935 5,932,508
New York Dormitory Authority Rev., 5s, 2018 5,000 4,670,800
New York Dormitory Authority Rev. (Bronx-Lebanon), 5.2s, 2016 1,000 952,860
New York Dormitory Authority Rev. (City University), 5s, 2018 10,000 9,336,900
New York Dormitory Authority Rev. (North General Hospital),
5.2s, 2016 1,570 1,495,990
New York Dormitory Authority Rev. (St. Clare's Hospital),
5.3s, 2019 2,000 1,910,740
New York Dormitory Authority Rev. (Wyckoff Heights Medical
Center), 5.3s, 2021 1,000 948,900
New York Urban Development Corp. Rev., Correctional
Facilities Service Contract, AMBAC, 5.25s, 2015 3,000 2,989,830
New York Urban Development Corp. Rev., Correctional
Facilities Service Contract, AMBAC, 5.25s, 2016 5,000 4,917,900
--------------
$ 58,152,298
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Refunded and Special Obligations - 19.5%
Arapahoe County, CO, Capital Improvement, Highway
Rev., 0s, 2005 $76,375 $ 28,001,366
Arapahoe County, CO, Capital Improvement, Highway
Rev., 0s, 2006 69,000 10,855,770
Austin, TX, Utilities System Rev., 10.75s, 2000 1,780 1,877,597
Clermont County, OH, Hospital Facilities Rev. (Mercy
Health Systems), AMBAC, MRVICS, 9.271s, 2001(++) 1,300 1,482,806
Daphne, AL, Special Care Facilities Financing
Authority (1st Mortgage Rev.), 0s, 2008 89,975 57,601,995
Daphne, AL, Special Care Facilities Financing
Authority (2nd Mortgage Rev.), 0s, 2008 4,500 2,880,900
Daphne, AL, Special Care Facilities Financing
Authority (Presbyterian), 0s, 2008 48,475 8,806,938
Denver, CO, City & County Airport Rev., 8s, 2000 100 106,967
Denver, CO, City & County Airport Rev., 8.5s, 2000 255 274,342
Denver, CO, City & County Airport Rev., 7.75s, 2001 425 465,273
Denver, CO, City & County Airport Rev., 8.75s, 2001 1,530 1,707,923
Denver, CO, City & County Airport Rev., 8.875s, 2001 1,325 1,482,649
Desert Hospital District, CA, Hospital Rev. (Desert
Hospital Corp.), 8.904s, 2002(++) 4,000 4,633,400
District of Columbia, Hospital Rev. (Washington
Hospital), 7.125s, 2002 1,750 1,918,228
Doylestown, PA, Hospital Authority (Doylestown
Hospital), 7.2s, 2003 2,200 2,455,970
Fairfax, Fauquier & Loudoun Counties, VA, Health
Center Commission, Nursing Home Rev., 9s, 2000 1,810 1,948,012
Foothill/Eastern Transportation Corridor Agency, CA,
Toll Road Rev., 0s, 2018 44,190 16,515,571
Hannibal, MO, Industrial Development Authority
(Hannibal Regional Healthcare), 9.5s, 2001+ 3,000 3,440,820
Illinois Health Facilities Rev. (Memorial
Hospital-Woodstock), 7.25s, 2002 1,500 1,640,670
Jefferson County, OH, Asset Guaranty, 7.125s, 2005 8,660 10,003,253
Jenks Township, PA, Municipal Authority Rev., 8s, 2003 4,650 5,288,863
Kansas City, MO, Industrial Development Authority
(Kingswood), 9s, 2003 5,250 6,301,575
Martha's Vineyard, MA, Land Bank (Land Acquisition),
8.125s, 2001 2,600 2,801,370
Massachusetts Health & Education Facilities Authority
(Fairview Extended Care Facility), 10.25s, 2001 3,000 3,336,090
Massachusetts Industrial Finance Agency (Curry
College), 8s, 2004 1,375 1,610,153
Massachusetts Industrial Finance Agency (Emerson
College), 8.9s, 2001 3,000 3,252,870
Massachusetts Industrial Finance Agency (Glenmeadow
Retirement Community), 8.375s, 2006 2,300 2,804,505
Massachusetts Industrial Finance Agency (Glenmeadow
Retirement Community), 8.625s, 2006 3,520 4,341,110
Massachusetts Industrial Finance Agency, Tunnel Rev
(Mass. Turnpike), 9s, 2000 10,745 11,554,528
Mesa County, CO, Residual Rev., 0s, 2003 25,125 9,170,374
Mississippi Hospital Equipment & Facilities Authority
Rev. (Rush Medical Foundation), 8.75s, 2001 2,800 3,028,312
New Jersey Economic Development Authority (Geriatric
& Medical Services), 9.625s, 2004 330 353,503
New Lenox, IL, Community Park Development Authority,
8.25s, 2004 4,205 4,959,966
New York City, NY, 6.875s, 2002 880 947,470
New York City, NY, FSA, 7s, 2002 1,630 1,761,769
New York City, NY, 7.1s, 2002 880 952,107
New York City, NY, 6.125s, 2006 1,325 1,452,081
New York Energy Research & Development Authority,
Electric Facilities Rev., 7.15s, 2002 495 539,535
New York Energy Research & Development Authority,
Electric Facilities Rev., 7.15s, 2002 4,425 4,835,684
New York Local Government Assistance Corp., 7s, 2001 800 853,464
North Carolina Medical Care Commission, Hospital Rev
(Valdese General Hospital), 8.75s, 2001 1,820 2,024,677
Prince William County, VA, Industrial Development
Authority, Residential Care Facility (Westminster
at Lake Ridge), 10s, 2002 3,500 4,012,120
San Joaquin Hills, CA, Transportation Corridor Agency,
Toll Road Rev., 0s, 2005 1,500 1,179,150
San Joaquin Hills, CA, Transportation Corridor Agency,
Toll Road Rev., 0s, 2007 4,000 2,835,240
San Joaquin Hills, CA, Transportation Corridor Agency,
Toll Road Rev., 0s, 2008 5,400 3,623,940
San Joaquin Hills, CA, Transportation Corridor Agency,
Toll Road Rev., 0s, 2011 13,400 7,602,758
South Carolina Public Service Authority (Santee Co-op),
7.1s, 2001 2,000 2,148,280
South Tucson, AZ, Municipal Property Corp., 8.75s, 2000 865 909,219
Spirit Lake, IA, Industrial Development Rev. (Crystal
Tips, Inc.), 0s, 2008# 5,041 6,628,147
Telluride, CO, Gondola Transit Co., Real Estate
Transfer Assessment Rev., 11.5s, 2012 5,025 7,691,968
Telluride, CO, Gondola Transit Co., Real Estate
Transfer Assessment Rev., 11.5s, 2012 975 1,497,064
Texas Turnpike Authority (Houston Ship Channel
Bridge), 12.625s, 2002 21,090 26,225,837
Virgin Islands Public Financing Authority, 7.25s, 2002 2,000 2,221,160
Walton, GA, Industrial Development Rev. (Ultima
Rubber Products), 10s, 2000 3,885 4,153,725
Washington Public Power Supply System Rev. (Nuclear
Project #1), 14.375s, 2001 400 440,444
Williamsburg County, SC, School District, Public
Facilities Rev., 7.5s, 2000 85 87,398
Williamsburg County, SC, School District, Public
Facilities Rev., 7.5s, 2001 95 100,334
Williamsburg County, SC, School District, Public
Facilities Rev., 7.5s, 2002 115 124,473
Williamsburg County, SC, School District, Public
Facilities Rev., 7.5s, 2003 130 143,751
Williamsburg County, SC, School District, Public
Facilities Rev., 7.5s, 2003 150 168,416
Williamsburg County, SC, School District, Public
Facilities Rev., 7.5s, 2003 165 185,257
Williamsburg County, SC, School District, Public
Facilities Rev., 7.5s, 2003 235 263,851
Williamsburg County, SC, School District, Public
Facilities Rev., 7.5s, 2003 250 280,693
Williamsburg County, SC, School District, Public
Facilities Rev., 7.5s, 2003 290 325,603
Williamsburg County, SC, School District, Public
Facilities Rev., 7.5s, 2003 335 376,128
Williamsburg County, SC, School District, Public
Facilities Rev., 7.5s, 2003 360 404,197
Williamsburg County, SC, School District, Public
Facilities Rev., 7.5s, 2003 390 437,880
--------------
$ 304,337,489
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Airport and Port Revenue - 6.4%
Chicago, IL, O'Hare International Airport, Special
Facilites Rev. (United Airlines), 8.5s, 2018 $ 4,500 $ 4,707,945
Chicago, IL, O'Hare International Airport, Special
Facilities Rev. (United Airlines), 8.85s, 2018 5,595 6,023,969
Cleveland, OH, Airport Special Facilities Rev
(Continental Airlines), 9s, 2019 9,120 9,455,251
Dallas-Fort Worth, TX, International Airport Facility
Improvement Corp. (Delta), 7.625s, 2021 4,500 4,815,720
Denver, CO, City & County Airport Rev., 8.875s, 2012 3,675 4,042,721
Denver, CO, City & County Airport Rev., 7.75s, 2021 1,625 1,744,291
Denver, CO, City & County Airport Rev., 8.5s, 2023 2,695 2,862,952
Denver, CO, City & County Airport Rev., 8.75s, 2023 4,240 4,641,359
Denver, CO, City & County Airport Rev., 8s, 2025 1,040 1,098,438
Denver, CO, City & County Airport Rev., 6.875s, 2032 7,130 7,545,037
Fulton County, GA, Development Authority, 5.3s, 2013 1,000 951,740
Hillsborough County, FL, Aviation Authority Rev. (US
Air), 8.6s, 2022 4,275 4,677,064
Kenton County, KY, Airport Board Special Facilities
(Delta Airlines), 7.5s, 2020 16,570 17,737,522
Port Authority, NY (JFK International Air Terminal),
MBIA, 5.75s, 2022 7,000 7,138,180
Tulsa, OK, Municipal Airport Trust Rev. (American
Airlines), 7.375s, 2020 4,000 4,200,680
Tulsa, OK, Municipal Airport Trust Rev. (American
Airlines), 7.6s, 2030 14,210 15,097,272
Wayne Charter County, MI, Airport Rev. (Detroit
Metropolitan Wayne County), 5s, 2019 3,000 2,782,620
--------------
$ 99,522,761
- ------------------------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 12.0%
Alaska Industrial Development & Export Authority,
Power Rev. (Upper Lynn Canal Regional Power),
5.875s, 2032 $ 1,800 $ 1,671,444
Beaver County, PA, Industrial Development Authority,
Pollution Control Rev. (Ohio Edison Co.), 4.65s, 2033 9,000 8,904,150
Brazos River Authority, TX (Reliant Energy, Inc.),
5.375s, 2019 8,750 8,274,962
Calcasieu Parish, LA, Industrial Development Board,
Pollution Control Rev. (Energy Gulf States, Inc.),
5.45s, 2010 4,800 4,618,032
Clark County, NV, Industrial Development Rev
(Nevada Power Co.), FGIC, 6.7s, 2022 4,000 4,264,880
Clark County, NV, Industrial Development Rev
(Nevada Power Co.), 5.6s, 2030 10,000 9,358,900
Clark County, NV, Industrial Development Rev
(Nevada Power Co.), 5.9s, 2032 9,000 8,795,430
Connecticut Development Authority, Pollution Control
Rev. (Connecticut Light & Power), 5.85s, 2028 8,300 8,164,627
Farmington, NM, Pollution Control Rev. (Tucson
Electric Power Co.), 6.95s, 2020 3,000 3,241,350
Klamath Falls, OR, Electric Rev. (Klamath
Cogeneration), 6s, 2025 10,000 9,732,600
Long Island, NY, Power Authority Rev., FSA, 5.125s, 2016 4,000 3,885,080
Long Island, NY, Power Authority Rev., FSA, 5.125s, 2022 3,000 2,830,350
Matagorda County, TX (Reliant Energy), 5.95s, 2030 8,000 7,968,000
McAlester, OK, Public Works Authority, Utility System
Rev., FSA, 5.75s, 2020 5,970 6,042,715
Midland, MI, Environmental Development Authority,
Pollution Control Rev. (Midland Cogeneration),
9.5s, 2009 4,500 4,753,035
Municipal Electric Authority, GA, Project #1, AMBAC,
8.426s, 2022(++) 9,900 10,822,284
New Hampshire Business Finance Authority, Pollution
Control Rev. (United Illuminating Co.), 5.875s, 2033 2,985 2,970,075
New Jersey Economic Development Authority (Vineland
Cogeneration), 7.875s, 2019 7,550 8,113,154
New York Energy Research & Development Authority,
Electric Facilities Rev., 7.15s, 2019 1,155 1,253,706
New York Energy Research & Development Authority,
Electric Facilities Rev., 7.15s, 2022 1,625 1,763,873
New York Research and Development Authority,
Electrical Facilities Rev. (Consolidated Edison),
AMBAC, 7.5s, 2026 4,750 4,862,243
Ohio Water Development, Pollution Control Rev
(Cleveland Electric), 8s, 2023 4,700 5,268,982
Ohio Water Development, Pollution Control Rev
(Cleveland Electric), 5.58s, 2033 5,000 4,994,700
Pennsylvania Economic Development Financing
Authority, Resources Recovery Rev., 6.5s, 2013 2,300 2,390,482
Pennsylvania Economic Development Financing
Authority, Resources Recovery Rev., 6.6s, 2019 5,000 5,228,650
Pima County, AZ, Industrial Development Authority
(Tuscon Electric Power Co.), 6.1s, 2025 2,000 1,956,520
Pima County, AZ, Industrial Development Authority
(Tuscon Electric Power Co.), 6s, 2029 5,000 4,918,700
Pima County, AZ, Industrial Development Authority
(Tuscon Electric Power Co.), 6s, 2029 11,000 10,659,000
Pittsylvania County, VA, Industrial Development
Authority, 7.55s, 2019 10,000 10,768,600
Southern California Public Power Authority,
Transmission Project Rev., RIBS, 7.812s, 2012(++) 7,850 8,609,644
West Feliciana Parish, LA, Pollution Control Rev
(Gulf States Utilities Co.), 5.8s, 2015 2,500 2,457,800
West Feliciana Parish, LA, Pollution Control Rev
(Gulf States Utilities Co.), 9s, 2015 $ 2,500 2,642,925
West Feliciana Parish, LA, Pollution Control Rev
(Gulf States Utilities Co.), 8s, 2024 4,000 4,116,880
--------------
$ 186,303,773
- ------------------------------------------------------------------------------------------------------
Health Care Revenue - 16.7%
Arkansas Development Finance Authority Rev. (White
River Medical Center), 5.55s, 2019 $ 1,000 $ 944,670
Baltimore County, MD, Nursing Facility Mortgage Rev
(Eastpoint Rehabilation & Nursing Center), 6.75s, 2028 1,250 1,189,038
Baxter County, AR, Hospital Rev. (Baxter County
Regional Hospital), 5.6s, 2021 3,000 2,860,920
Bell County, TX, Health Facilities Development Corp.
(Advanced Living Technology), 7.25s, 2001 170 167,350
Bell County, TX, Health Facilities Development Corp.
(Advanced Living Technology), 7.75s, 2006 395 378,394
Bell County, TX, Health Facilities Development Corp.
(Advanced Living Technology), 8.125s, 2016 1,420 1,320,998
Bell County, TX, Health Facilities Development Corp.
(Advanced Living Technology), 8.5s, 2026 3,150 2,910,568
Bell County, TX, Health Facilities Development Corp.
(Kings Daughters Hospital), 9.25s, 2008 1,005 1,050,748
Berlin, MD, Hospital Rev. (Atlantic General
Hospital), 8.375s, 2022 1,307 1,379,993
Brevard County, FL, Health Facilites Authority
(Beverly Enterprises), 10s, 2010 1,145 1,212,418
Cambria County, PA, Industrial Development Authority
(Beverly Enterprises), 10s, 2012 960 1,221,072
Chautauqua County, NY, Industrial Development Agency,
Civic Facility Rev. (Womans Christian Assn.), 6.35s, 2017 1,500 1,459,680
Chautauqua County, NY, Industrial Development Agency,
Civic Facility Rev. (Womans Christian Assn.), 6.4s, 2029 3,500 3,377,360
Chemung County, NY, Industrial Development Agency,
Civic Facilities Rev. (St. Joseph's Hospital
Elmira), 6s, 2013 3,000 2,948,520
Chemung County, NY, Industrial Development Agency,
Civic Facilities Rev. (St. Joseph's Hospital
Elmira), 6.35s, 2013 2,000 1,985,940
Cheneyville, LA, Westside Habilitation Center, 8.375s, 2013 5,700 6,140,724
Chester County, PA, Health & Education Facilities
Authority (Jefferson Health Systems), 5.375s, 2027 5,000 4,701,750
Chester County, PA, Industrial Development Authority
(RHA/PA Nursing Home), 10.125s, 2019* 1,908 1,564,560
Connecticut Health & Educational Facilities (Johnson
Evergreen), 8.5s, 2014 1,350 1,444,027
Contra Costa County, CA, Residential Rental
Facilities Rev. (Cypress Meadows), 7s, 2028 3,000 2,880,810
Denver, CO, Health & Hospital Rev., 5.375s, 2018 3,700 3,472,820
Denver, CO, Health & Hospital Rev., 5.375s, 2028 5,000 4,577,300
District of Columbia, Hospital Rev. (Hospital for
Sick Children), 8.875s, 2021 930 983,791
Elkhart County, IN, Hospital Authority Rev. (Elkhart
General Hospital, Inc), 5.25s, 2018 1,000 938,040
Goldsboro, NC, Housing Authority Rev. (North Carolina
Housing Foundation, Inc.), 7.25s, 2029 2,225 2,211,561
Grand Junction, CO, Hospital Rev. (Community
Hospital), 6.9s, 2017 2,900 2,989,378
Illinois Health Facilities Authority Rev. (Centegra
Health Systems), 5.25s, 2018 1,500 1,382,460
Indiana Health Facilities Financing Authority Rev
(Metro Health/Indiana, Inc.), 6.3s, 2023 3,965 3,844,226
Iowa Finance Authority, Health Care Facilities Rev
(Care Initiatives), 5.75s, 2018 1,200 1,160,640
Jacksonville, FL, Health Facilities Authority
(National Benevolent), 7s, 2022 1,000 1,071,710
Jacksonville, FL, Industrial Development Rev
(Beverly Enterprises), 9.75s, 2011 875 905,844
Jefferson County, KY, Health Care Facility Rev
(Beverly Enterprises, Inc.), 5.875s, 2007 250 248,460
Kansas City, MO, Industrial Development Authority
(Bishop Spencer Place, Inc.), 8s, 2024 7,720 8,298,537
Lee County, FL, Industrial Development Authority
(Beverly Enterprises), 10s, 2010 835 898,285
Louisiana Public Facilities Authority (Southwest
Medical Center), 11s, 2006 1,192 202,708
Loves Park, IL (Hoosier Care), 7.125s, 2034 2,000 2,001,380
Lufkin, TX, Health Facilities Development Corp.
(Memorial Health System of East Texas), 6.875s, 2026 1,410 1,528,158
Lufkin, TX, Health Facilities Development Corp.
(Memorial Health System of East Texas), 5.7s, 2028 2,800 2,645,888
Luzerne County, PA, Industrial Development Authority
(Beverly Enterprises), 10.125s, 2008 1,150 1,194,471
Martin County, FL, Industrial Development Authority
(Beverly Enterprises), 9.8s, 2010 2,550 2,646,594
Massachusetts Health & Educational Facilities
Authority Rev. (Caritas Christi), 5.7s, 2015 3,500 3,395,700
Massachusetts Health & Educational Facilities
Authority Rev. (Jordan Hospital), 5.25s, 2018 6,000 5,547,960
Massachusetts Health & Educational Facilities
Authority Rev. (St. Memorial Medical Center), 6s, 2023 13,530 13,075,933
Massachusetts Industrial Finance Agency, 9.25s, 2009 3,535 3,609,129
Massachusetts Industrial Finance Agency (GF Revere),
8.875s, 2025 7,635 8,592,047
Massachusetts Industrial Finance Agency (Metropolitan
Health Foundation, Inc.), 6.75s, 2027 5,830 5,916,226
Massachusetts Industrial Finance Agency (WNR, Inc.),
9s, 2023(+) 1,050 899,220
Mecosta County, MI, General Hospital Rev., 6s, 2018 1,200 1,178,424
Michigan Hospital Finance Authority Rev. (Genesys
Regional Medical), 5.375s, 2013 1,350 1,284,538
Michigan Hospital Finance Authority Rev. (Genesys
Regional Medical), 5.5s, 2018 9,000 8,460,090
Michigan Hospital Finance Authority Rev. (Genesys
Regional Medical), 5.5s, 2027 4,000 3,688,760
Michigan Hospital Finance Authority Rev. (Memorial
Healthcare Center), 5.875s, 2021 1,000 979,780
Millbrae, CA, Residential Facility (Magnolia Of
Millbrae), 7.375s, 2027 3,000 3,156,030
Mississippi Business Finance Corp., Health Facilities
Rev. (Medical Foundation, Inc.), 5.375s, 2015 1,000 949,690
Mississippi Business Finance Corp., Health Facilities
Rev. (Medical Foundation, Inc.), 5.625s, 2023 2,000 1,902,720
Mocksville, NC, 7.25s, 2029 2,200 2,186,712
Monongalia County, WV, Health Facilities Rev
(Beverly Enterprises, Inc.), 5.875s, 2007 500 497,015
Montgomery County, PA, Higher Education & Health
Authority Rev. (AHF/Montgomery), 10.5s, 2020 2,415 2,520,946
New Hampshire Business Finance Authority, Health Care
Facilities Rev. (Metropolitian Health Foundation,
Inc.), 6.55s, 2028 3,000 2,908,530
New Hampshire Higher Educational & Health Facilities
Authority Rev. (Littleton Hospital Assn.), 5.9s, 2018 1,750 1,718,167
New Hampshire Industrial Development Authority (Tall
Pines), 11.25s, 2016 2,095 2,164,868
New Jersey Economic Development Authority (Burnt
Tavern Convalescent Center), 9s, 2013 1,700 1,829,846
New Jersey Economic Development Authority (Courthouse
Convalescent Center), 8.7s, 2014 1,350 1,417,662
New Jersey Economic Development Authority (Geriatric
& Medical Services), 10.5s, 2020 3,000 3,085,650
New Jersey Economic Development Authority (Geriatric
& Medical Services), 9.625s, 2022 1,350 1,443,460
New Jersey Economic Development Authority (Greenwood
Health Care), 9.75s, 2011 2,825 2,978,991
New Jersey Economic Development Authority (Wanaque
Convalescent Center), 8.5s, 2009 700 757,554
New Jersey Economic Development Authority (Wanaque
Convalescent Center), 8.6s, 2011 1,000 1,084,790
New Jersey Health Care Facilities Financing Authority
(Cherry Hill), 8s, 2027 4,000 4,286,800
New Mexico Hospital Equipment Loan Council, Hospital
Rev. (Memorial Medical Center, Inc.), 5.375s, 2018 2,600 2,436,980
New York City, NY, Health & Hospital Corp. Rev., 5.25s, 2017 2,000 1,898,520
North Carolina Medical Care Commission, Hospital Rev
(Duke University Hospital), 5.25s, 2026 5,000 4,738,600
North Carolina Medical Care Commission, Hospital Rev
(Pitt County Memorial Hospital), 5s, 2018 1,350 1,242,823
North Central, TX, Health Facilities Development
Corp. (Baylor University Medical Center), 10.07s, 2016(++) 4,300 4,861,967
Ohio County, WV, County Commission Health System
(Ohio Valley Medical Center), 5.75s, 2013 5,000 4,855,200
Osceola County, FL, Industrial Development Rev
(Community Provider Pooled Loan), 7.75s, 2017 2,700 2,855,709
Portsmouth, VA, Industrial Development Authority
(Beverly Enterprises), 10s, 2011 1,795 1,952,332
Reedley, CA, Certificates of Participation (Mennonite
Home), 7.5s, 2026 5,380 5,571,528
Rochester, MN, Health Care Facilities Rev. (Mayo
Medical Foundation), 8.57s, 2021 2,000 2,100,420
San Francisco, CA, City & County (Coventry Park),
8.5s, 2026 9,435 10,631,641
Santa Fe, NM, Industrial Development Rev. (Casa Real
Nursing Home), 9.75s, 2013 1,785 1,921,017
Seminole County, FL, Industrial Development Authority
(Friendly Village), 10s, 2011 800 802,392
Sierra View, CA, Local Health Care District, 5.4s, 2022 4,000 3,788,360
Southwestern Illinois Development Authority Rev
(Anderson Hospital), 5.375s, 2015 1,385 1,303,049
Southwestern Illinois Development Authority Rev
(Anderson Hospital), 5.5s, 2020 1,625 1,530,279
Southwestern Illinois Development Authority Rev
(Anderson Hospital), 5.625s, 2029 5,700 5,336,796
Springfield, TN, Health & Educational Facilities
(Northcrest Medical Center), 5.25s, 2018 5,000 4,604,000
Springfield, TN, Health & Educational Facilities
(Northcrest Medical Center), 5.375s, 2024 5,000 4,567,650
Sterling, IL (Hoosier Care), 7.125s, 2034 1,400 1,400,966
Vincennes, IN, Economic Development Authority (Lodge
of the Wabash), 12.5s, 2015 1,930 1,891,400
Waterford Township, MI, Economic Development Corp.
Rev. (Canterbury Health), 6s, 2039 3,190 2,966,700
Westerville, OH, Industrial Development Rev. (1st
Mortgage Health Care), 10s, 2008 465 470,213
Wilkins Area, PA, Industrial Development Authority
(Beverly Enterprises), 10s, 2011 950 1,037,495
Wilkinsburg, PA, Municipal Authority Health
(Monroeville Christian), 8.25s, 2027 7,100 7,096,379
Yonkers, NY, Industrial Development Agency (St
Joseph Hospital), 6.15s, 2015 2,000 1,953,740
--------------
$ 259,675,185
- ------------------------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 13.1%
Baltimore County, MD, Pollution Control (Bethlehem
Steel), 7.55s, 2017 $ 1,850 $ 1,982,700
Burns Habor, IN, Solid Waste Disposal Facilities Rev
(Bethlehem Steel), 8s, 2024 10,455 11,362,808
Butler, AL, Industrial Development Board, Solid Waste
Rev. (James River), 8s, 2028 4,500 5,029,965
Cambria County, PA, Industrial Development Authority
(Beverly Enterprises), 7.5s, 2015 4,390 4,646,990
Courtland, AL, Industrial Development Board, Solid
Waste Disposal Rev. (Champion International Corp.),
6.375s, 2029 2,500 2,576,375
Delaware County, PA, Industrial Development Authority
(Resources Recovery Facility), 5.5s, 2002 600 602,376
Delaware County, PA, Industrial Development Authority
(Resources Recovery Facility), 6s, 2003 1,800 1,831,986
Delaware County, PA, Industrial Development Authority
(Resources Recovery Facility), 6.1s, 2005 3,460 3,535,774
DeQueen, AR, Industrial Development Board
(Weyerhaeuser Co.), 9s, 2006 1,000 1,003,260
Eastern Band of Cherokee Indian Community, NC
(Carolina Mirror Co.), 10.25s, 2009+ 2,740 2,741,754
Eastern Band of Cherokee Indian Community, NC
(Carolina Mirror Co.), 11s, 2012+ 950 950,570
Florence County, SC, Industrial Development Rev
(Stone Container Corp.), 7.375s, 2007 2,995 3,158,168
Gulf Coast Waste Disposal Authority, TX (USX Corp.), 5.5s, 2017 3,000 2,889,630
Hardeman County, TN (Correctional Facilities Corp.), 7.75s, 2017 6,500 7,083,245
Hernando County, FL, Water & Sewer Rev. (Florida
Crushed Stone), 8.5s, 2014 8,555 9,668,604
Hodge Village, LA, Utilities Rev. (Stone Container), 9s, 2010 6,800 7,056,700
Indiana Development Finance Authority Rev. (Inland
Steel), 5.75s, 2011 3,000 2,774,190
Indiana Development Finance Authority Rev. (Inland
Steel), 7.25s, 2011 10,000 10,287,500
Kanawha County, WV, Pollution Control Rev. (Union
Carbide Corp.), 5.1s, 2012 1,000 950,970
Lawrenceburg, TN, Industrial Development Board
(Tridon, Inc.), 9.875s, 2006 2,100 2,173,500
Maine Finance Authority (Bowater), 7.75s, 2022 8,500 9,275,285
Massachusetts Development Finance Agency (Springfield
Resources Recovery), 5.625s, 2019 2,225 2,189,378
Massachusetts Port Authority Rev., Special Facilities
(Bosfuel), MBIA, 5.75s, 2039 5,000 5,008,400
Mesa County, CO (Joy Technologies), 8.5s, 2006* 5,050 3,535,000
Michigan Strategic Funding Obligation Rev. (United
Waste Systems), 5.2s, 2010 1,500 1,447,995
New Jersey Economic Development Authority (Holt
Hauling & Warehousing), 8.4s, 2015 4,000 4,244,640
New Jersey Economic Development Authority (Holt
Hauling & Warehousing), 8.6s, 2017 8,000 8,524,800
Ohio Solid Waste Rev. (Republic Engineered Steels),
8.25s, 2014 7,000 7,363,020
Onondaga County, NY Industrial Development Agency,
Solid Waste Disposal Facility Rev. (Solvay
Paperboard LLC), 6.8s, 2014 3,800 3,861,712
Owyhee County, ID, Industrial Development Rev
(Environsafe), 8.25s, 2002 4,000 4,184,400
Perry County, KY, Solid Waste Disposal Resources
(TJ International), 7s, 2024 11,000 11,715,660
Philadelphia, PA, Industrial Development Authority Rev
(Host Marriott LP), 7.75s, 2017 2,000 2,178,600
Port Corpus Christi, TX, Industrial Development Corp.
Rev. (Valero Energy Corp.), 5.4s, 2018 2,400 2,226,264
Port of New Orleans, LA (Avondale Industries), 8.5s, 2014 22,040 24,462,416
Power County, ID, Pollution Control Rev. (FMC Corp.),
5.625s, 2014 1,000 988,120
Savannah, GA, Economic Development Authority,
Industrial Development Rev. (Stone Container
Corp.), 7.4s, 2026 7,500 8,129,400
Schuylkill County, PA, Industrial Development
Authority (Pine Grove Landfill, Inc.), 5.1s, 2019 1,000 968,280
Spokane County, WA, Industrial Development Corp.
(Kaiser Aluminum & Chemical Corp.), 7.6s, 2027 3,700 3,999,663
St. Charles Parish, LA, Pollution Control Rev. (Union
Carbide Corp.), 5.1s, 2012 2,000 1,901,940
Sweetwater County, WY, Solid Waste Disposal Rev. (FMC
Corp.), 6.9s, 2024 3,000 3,185,610
Tooele County, UT, Pollution Control Rev. (Laidlaw
Environmental Services), 7.55s, 2027 5,000 5,446,000
Virginia Peninsula Ports Authority Rev. (Zeigler Coal),
6.9s, 2022 5,000 4,981,700
Westmoreland County, PA, Industrial Development Corp.
(Valley Landfill), 5.1s, 2018 2,500 2,438,575
--------------
$ 204,563,923
- ------------------------------------------------------------------------------------------------------
Insured Health Care Revenue - 1.8%
Chester County, PA, Health & Education Facilities
Authority (Jefferson Health Systems), AMBAC, 5.25s, 2022 $ 5,000 $ 4,775,800
Illinois Health Facilities Authority Rev. (Sisters of
Mercy), MBIA, 9.867s, 2015(++) 5,200 5,953,324
Lauderdale County & Florence, AL, Health Care
Authority Rev. (Coffee Health Group), MBIA, 5.75s, 2012 775 801,032
Lauderdale County & Florence, AL, Health Care
Authority Rev. (Coffee Health Group), MBIA, 5.75s, 2013 1,765 1,813,308
Massachusetts Health & Educational Facilities
(Harvard Pilgrim Health), FSA, 5s, 2018 3,435 3,230,206
Montana Health Facility Authority (Deaconess
Hospital), AMBAC, RIBS, 9.884s, 2016(++) 4,000 4,383,480
North Central, TX, Health Facilities Development
Corp. (Presbyterian Hospital), MBIA, 9.595s, 2021(++) 4,000 4,496,880
Philadelphia, PA, Hospital & Higher Education
Facilities Authority Rev., FGIC, 6.956s, 2012(++) 2,000 1,973,280
--------------
$ 27,427,310
- ------------------------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 2.9%
Alexandria, VA, Redevelopment & Housing Finance
Authority (Jefferson Village Apartments), 9s, 2018 $ 2,000 $ 2,043,320
Austin, TX, Housing Finance Corp. (Woodland Heights
Apartments), 7.25s, 2027 4,000 4,489,120
California Statewide Community Development Authority
(Equity Residential), 5.2s, 2029 3,940 3,914,863
California Statewide Community Development Authority
(Irvine Apartments), 5.25s, 2025 3,500 3,390,730
Charter Mac Equity Issuer Trust, 6.625s, 2009 8,000 8,000,000
Dallas, TX, Housing Finance Corp., 8.5s, 2011 3,005 3,113,180
Florida Multi-Family Housing Finance Agency Rev
(Center Court Apartments), 8.5s, 2018 1,735 1,777,195
Maplewood, RI, Housing Development Corp. (Terrace
Apartments), 6.9s, 2025 3,995 4,158,875
Maryland Community Development Administration, 0s, 2032 11,550 929,544
Munimae Te Bond Subsidiary LLC, 6.875s, 2009## 6,000 6,075,000
Ridgeland, MS, Urban Renewal, Multifamily Housing
Rev. (Northbrook I & III Apartments), 6.25s, 2029 5,000 4,805,150
Texas Housing & Community Board (Harbors & Plumtree),
10s, 2026+ 1,755 1,770,848
Virginia Housing & Development Authority, 0s, 2017 2,060 396,962
--------------
$ 44,864,787
- ------------------------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 0.2%
Black Hawk, CO, Device Tax Rev., 5.625s, 2021 $ 1,250 $ 1,193,950
Virgin Islands Public Finance Authority, 6s, 2006 500 512,180
Virgin Islands Public Finance Authority, 5.875s, 2018 1,500 1,493,715
--------------
$ 3,199,845
- ------------------------------------------------------------------------------------------------------
Single Family Housing Revenue - 7.2%
California Rural Home Mortgage Finance Authority, 0s
to 1999, 5.75s to 2029 $ 1,455 $ 1,591,435
California Rural Home Mortgage Finance Authority,
5.2s, 2030 1,800 1,913,148
Chicago, IL, Capital Appreciation, Single Family
Mortgage Rev., FGIC, 0s, 2017 3,545 498,179
Colorado Housing Finance Authority, 6.55s, 2025 1,125 1,210,320
Colorado Housing Finance Authority, 7.4s, 2027 1,410 1,527,072
Colorado Housing Finance Authority, 6.35s, 2029 3,750 3,953,813
Colorado Housing Finance Authority, 6.45s, 2030 3,000 3,190,110
Colorado Housing Finance Authority, 6.8s, 2030 2,250 2,442,780
Connecticut Housing Finance Authority, 5.85s, 2028 4,075 4,111,471
Cook County, IL, Single Family Mortgage Rev., 0s, 2015 1,640 290,477
Corpus Christi, TX, Housing Finance Corp., MBIA, 0s, 2011 3,395 1,059,478
Delaware Single Family Housing Authority Rev., 6.75s, 2024 2,605 2,705,970
East Baton Rouge, LA, Capital Appreciation Rev., MBIA, 0s, 2010 4,955 1,480,752
El Paso, TX, Housing Finance Corp., Single Family
Mortgage Rev., 8.75s, 2011 510 541,375
Florida Housing Finance Agency Rev., 0s, 2016 3,980 728,857
Georgia Housing & Finance Authority Rev., FHA, 0s, 2031 59,820 5,656,579
Hawaii Housing Finance & Development Corp., 5.75s, 2030 5,000 5,013,450
Jefferson County, CO, Single Family Mortgage Rev.,
MBIA, 8.875s, 2013 175 183,108
Jefferson County, TX, Housing Finance Corp., Single
Family Mortgage Rev., MBIA, 0s, 2015 2,755 483,585
Jefferson Parish, LA, Home Mortgage Authority Rev.,
6.75s, 2030 1,350 1,465,196
Maryland Community Development Administration, 7.3s, 2025 4,770 5,013,652
Maryland Community Development Administration, 6s, 2039 3,500 3,551,135
Mississippi Home Corp., Single Family Senior Housing
Rev., FGIC, 9.25s, 2012 137 143,346
Missouri Housing Development Commission Meeting Rev.,
6.3s, 2030 3,500 3,701,530
Missouri Housing Development Commission Meeting Rev.,
6.7s, 2030 4,500 4,873,410
Nebraska Investment Finance Authority Housing Rev.,
6.3s, 2028 2,485 2,549,511
Nevada Housing Division, Single Family Mortgage Rev.,
0s, 2015 286 58,422
New Castle County, DE, Single Family Mortgage Rev.,
FGIC, 0s, 2016 670 121,096
New Mexico Mortgage Finance Authority, 6.9s, 2024 2,185 2,270,390
New Mexico Mortgage Finance Authority, 6.75s, 2029 2,000 2,161,040
New Mexico Mortgage Finance Authority, 6.25s, 2030 2,000 2,118,260
North Carolina Housing Finance Agency, 5.85s, 2028 9,110 9,186,524
North Dakota Housing Finance Agency, Single Family
Mortgage Rev., 8.3s, 2012 250 257,865
North Dakota Housing Finance Agency, Single Family
Mortgage Rev., 6.8s, 2023 775 806,543
North Dakota Housing Finance Agency, Single Family
Mortgage Rev., 5.9s, 2029 2,225 2,241,687
Ohio Housing Finance Agency, Single Family Mortgage
Rev., 8.832s, 2031(++) 1,250 1,359,875
Oklahoma Housing Finance Agency, 5.375s, 2020 2,000 1,940,340
Oklahoma Housing Finance Agency, 6.8s, 2026 2,000 2,152,020
Pima County, AZ, Industrial Development Authority
(Tucson Electric Power Co.), 6.2s, 2030 4,000 4,231,960
Reno County, KS, Single Family Mortgage Rev., AMBAC, 0s, 2014 1,825 329,814
Sedgwick & Shawnee Counties, KS, 5.5s to 1999, 6.5s to 2022 6,575 7,017,432
Sedgwick & Shawnee Counties, KS, 5.5s to 2000, 6.5s to 2026 3,375 3,637,237
South Dakota Housing Development Authority,
Homeownership Mortgage, 5.8s, 2028 4,990 5,010,209
Texas Veteran Housing Assistance Program, 7s, 2025 1,100 1,148,961
Wisconsin Housing & Economic Development Authority,
Homeownership Rev., 9.855s, 2022(++) 970 1,033,331
Wyoming Community Development Authority, 5.85s, 2028 4,485 4,524,468
--------------
$ 111,487,213
- ------------------------------------------------------------------------------------------------------
Solid Waste Revenue - 0.9%
Henrico County, VA, Industrial Development Authority
Rev. (Browning-Ferris), 5.3s, 2011 $ 3,000 $ 2,941,740
Hudson County, NJ, Solid Waste System Rev., 6s, 2019 2,000 1,999,480
Massachusetts Industrial Finance Agency (Ogden
Haverhill), 5.5s, 2013 2,500 2,454,625
Massachusetts Industrial Finance Agency (Ogden
Haverhill), 5.6s, 2019 5,000 4,891,950
Southwestern Illinois Development Authority, Solid
Waste Disposal Rev., 5.9s, 2014 2,500 2,398,150
--------------
$ 14,685,945
- ------------------------------------------------------------------------------------------------------
Special Assesment District - 1.6%
Broadview, IL, Tax Increment Rev., 5.25s, 2012### $ 4,180 $ 3,993,238
Broadview, IL, Tax Increment Rev., 5.375s, 2015 3,400 3,196,272
Denver, CO, Urban Renewal Tax (Downtown Denver), 8.5s, 2013 1,300 1,332,526
Denver, CO, Urban Renewal Tax (Downtown Denver), 7.25s, 2017 1,250 1,315,825
Denver, CO, Urban Renewal Tax (Musicland), 8.5s, 2017 950 973,769
Katy, TX, Development Authority Rev., 5.8s, 2011 3,500 3,423,525
Katy, TX, Development Authority Rev., 6s, 2018 6,000 5,852,160
Lake Elsinore, CA, Public Financing Authority, 5s, 2009 2,000 1,916,360
Lake Elsinore, CA, Public Financing Authority, 5.15s, 2014 3,205 3,030,327
--------------
$ 25,034,002
- ------------------------------------------------------------------------------------------------------
Student Loan Revenue - 0.9%
Arizona Student Loan Acquisition Authority, "C", 7.625s, 2010 $ 4,610 $ 4,998,346
Arizona Student Loan Acquisition Authority, "D", 7.25s, 2010 2,970 3,077,722
Pennsylvania Higher Education Assistance Agency,
AMBAC, 8.138s, 2022(++) 2,700 3,078,945
South Dakota Student Loan Rev. (Education Loans,
Inc.), 5.6s, 2020 2,700 2,641,167
--------------
$ 13,796,180
- ------------------------------------------------------------------------------------------------------
Turnpike Revenue - 2.5%
Florida Mid-Bay Bridge Authority Rev., 8.5s, 2022 $ 2,500 $ 2,771,925
Foothill/Eastern Transportation Corridor Agency, CA,
Toll Road Rev., 0s to 2005, 7.15s to 2013 5,000 4,227,850
Los Angeles, CA, 6.3s, 2015(++) 5,310 5,459,529
New Jersey Transport Trust Fund Authority,
Transportation Systems, 5.625s, 2012 1,800 1,858,482
New Jersey Transport Trust Fund Authority,
Transportation Systems, 5.625s, 2014 1,000 1,028,700
New York Thruway Authority, Service Contract Rev
(Local Highway & Bridges), MBIA, 5.375s, 2014 5,000 5,047,950
Pocahontas Parkway Assn., VA, Toll Road Rev., 0s, 2011 2,700 1,316,277
Pocahontas Parkway Assn., VA, Toll Road Rev., 0s, 2012 2,100 1,004,451
Pocahontas Parkway Assn., VA, Toll Road Rev., 0s, 2012 1,700 775,829
Pocahontas Parkway Assn., VA, Toll Road Rev., 0s, 2013 7,000 3,142,510
Pocahontas Parkway Assn., VA, Toll Road Rev., 0s, 2014 6,600 2,778,204
Pocahontas Parkway Assn., VA, Toll Road Rev., 0s, 2015 7,250 2,836,490
Pocahontas Parkway Assn., VA, Toll Road Rev., 0s, 2016 2,000 731,900
State of Florida, 6.568s, 2017(++) 2,300 2,130,513
Telluride, CO, Gondola Transit Co., 9s, 2016 2,405 2,748,338
West Virginia Parkways, Economic Development &
Tourism Authority, FGIC, RIBS, 8.032s, 2019(++) 1,200 1,273,488
--------------
$ 39,132,436
- ------------------------------------------------------------------------------------------------------
Universities - 1.1%
California Educational Facilities Authority Rev
(L.A. College of Chiropractic), 5.6s, 2017 $ 2,000 $ 1,986,020
Illinois Development Finance Authority, Economic
Development Rev. (Latin School of Chicago), 5.6s, 2018 850 805,171
Illinois Development Finance Authority, Economic
Development Rev. (Latin School of Chicago), 5.65s, 2028 1,730 1,613,675
Islip, NY, Community Development Agency Rev. (New
York Institute of Technology), 7.5s, 2026 6,000 6,447,120
Massachusetts Development Finance Agency Rev
(Williston Northampton School), 6.5s, 2028 1,700 1,688,950
Nassau County, NY, Industrial Development Agency, Civic
Facilities Rev. (New York Institute of Technology), 6.15s, 2029 3,300 3,218,160
New Hampshire Higher Educational & Health Facilities
(Franklin Pierce Law Center), 5.5s, 2018 1,200 1,138,932
--------------
$ 16,898,028
- ------------------------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 1.0%
Detroit, MI, Sewer Disposal Rev., 7.871s, 2023(++) $ 1,500 $ 1,697,715
Detroit, MI, Sewer Disposal Rev., 7.871s, 2023(++) 500 515,075
Harrisburg, PA, Authority Water Rev., FGIC, 8.02s, 2015(++) 2,000 2,173,960
New York City, NY, Municipal Water Finance Authority
Rev., FSA, 5.375s, 2026 2,500 2,449,675
New York City, NY, Municipal Water Finance Authority
Rev., 5.75s, 2029 8,590 8,667,654
--------------
$ 15,504,079
- ------------------------------------------------------------------------------------------------------
Other - 2.8%
Brush, CO, Industrial Development Rev. (Training
Centers International, Ltd.), 9.5s, 2015* $ 8,789 $ 4,482,507
Colorado River, TX, Municipal Water District, 6.25s, 2004 3,000 2,973,510
Danville, VA, Industrial Development Authority Rev
(Piedmont Mall), 8s, 2017 8,280 8,455,950
District of Columbia (National Public Radio), 7.7s, 2023 3,500 3,840,130
Harris County, TX, Cultural Education Facility (Space
Center Houston), 9.25s, 2023 70 71,931
Iowa Finance Authority Community Provider Rev. (Boys
& Girls Home), 6.25s, 2028 2,000 1,909,500
Lehigh County, PA, General Purpose Authority
(Kidspeace Obligation Group), 6s, 2018 5,000 4,919,650
Massachusetts Industrial Finance Agency (Brandon
Residential Treatment), 8.75s, 2024 5,170 5,713,884
Memphis, TN, Health, Educational & Housing Facilities
Board (Wesley Highland Terrace), 8.5s, 2024 5,485 5,594,700
New Hampshire Higher Educational & Health Facilities
Authority Rev. (Child & Family Services), 6.125s, 2019 1,505 1,460,392
Rail Connections Inc., MA Rev., 0s, 2015 375 138,375
Rail Connections Inc., MA Rev., 0s, 2016 450 154,552
Rail Connections Inc., MA Rev., 0s, 2017 975 311,620
Rail Connections Inc., MA Rev., 0s, 2018 1,235 368,981
St. Louis County, MO, Industrial Development
Authority (Eagle Golf Enterprises), 10s, 2005 2,200 2,367,596
St. Louis County, MO, Industrial Development
Authority (Kiel Center Arena), 7.875s, 2024 1,000 1,075,520
--------------
$ 43,838,798
- ------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $1,477,282,544) $1,535,941,965
- ------------------------------------------------------------------------------------------------------
Floating Rate Demand Notes - 1.3%
- ------------------------------------------------------------------------------------------------------
Allegheny County, PA, Hospital Development Authority
Rev. (Aces Presbyterian University Hospital), due 08/05/99 $ 700 $ 700,000
Burke County, GA, Development Authority, Pollution
Control Rev. (Georgia Power Co.), due 08/02/99 1,200 1,200,000
California Statewide Community Development (Sutter
Health), due 08/02/99 2,400 2,400,000
Harris County, TX, Hospital Rev. (Methodist
Hospital), due 08/02/99 1,600 1,600,000
Heard County, GA, Development Authority, Pollution
Control Rev. (Georgia Power Co.), due 08/02/99 100 100,000
Hillsborough County, FL, Pollution Control Rev., due 08/02/99 200 200,000
Manatee County, FL, Pollution Control Rev. (Florida
Power & Light Co.), due 08/02/99 2,200 2,200,000
New York City, NY, due 08/02/99 1,100 1,100,000
New York City, NY, Municipal Water Finance Authority
Rev., due 08/02/99 300 300,000
Pinellas County, FL, Health Facility Authority, due 08/02/99 10,850 10,850,000
- ------------------------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Amortized Cost and Value $ 20,650,000
- ------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,497,932,544) $1,556,591,965
Other Assets, Less Liabilities - 0.1% 1,841,613
- ------------------------------------------------------------------------------------------------------
Net assets - 100.0% $1,558,433,578
- ------------------------------------------------------------------------------------------------------
* Non-income-producing security - in default.
# Payment-in-kind security.
## SEC Rule 144A restriction.
### Security segregated as collateral for an open futures contract.
+ Restricted security.
(+) Security valued by or at the direction of the Trustees.
(++) Inverse floating rate security.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- -------------------------------------------------------------------------------
JULY 31, 1999
- -------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $1,497,932,544) $1,556,591,965
Cash 21,020
Receivable for daily variation margin on open futures
contracts 19,031
Receivable for Fund shares sold 3,448,438
Receivable for investments sold 817,431
Interest receivable 21,668,071
Other assets 18,346
--------------
Total assets $1,582,584,302
--------------
Liabilities:
Distributions payable $ 4,807,846
Payable for Fund shares reacquired 1,875,425
Payable for investments purchased 16,965,725
Payable to affiliates -
Management fee 46,964
Shareholder servicing agent fee 8,539
Distribution and service fee 157,367
Administrative fee 1,204
Accrued expenses and other liabilities 287,654
--------------
Total liabilities $ 24,150,724
--------------
Net assets $1,558,433,578
==============
Net assets consist of:
Paid-in capital $1,655,857,142
Unrealized appreciation on investments 58,726,193
Accumulated net realized loss on investments (157,013,757)
Accumulated undistributed net investment income 864,000
--------------
Total $1,558,433,578
==============
Shares of beneficial interest outstanding 179,401,217
===========
Class A shares:
Net asset value per share
(net assets of $1,162,251,625 / 133,826,174 shares of
beneficial interest outstanding) $8.68
=====
Offering price per share (100 / 95.25 of net asset
value per share) $9.11
=====
Class B shares:
Net asset value and offering price per share
(net assets of $381,737,344 / 43,913,546 shares of
beneficial interest outstanding) $8.69
=====
Class C shares:
Net asset value and offering price per share
(net assets of $14,444,609 / 1,661,497 shares of
beneficial interest outstanding) $8.69
=====
On sales of $100,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class
B, and Class C shares.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations (Unaudited)
- -------------------------------------------------------------------------------
SIX MONTHS ENDED JULY 31, 1999
- -------------------------------------------------------------------------------
Net investment income:
Interest Income $ 50,711,211
------------
Expenses -
Management fee $ 4,624,469
Trustees' compensation 37,554
Shareholder servicing agent fee 804,394
Distribution and service fee (Class B) 1,532,448
Distribution and service fee (Class C) 43,218
Administrative fee 109,047
Custodian fee 147,676
Printing 32,162
Postage 34,527
Auditing fees 17,529
Legal fees 97,600
Miscellaneous 562,578
------------
Total expenses $ 8,043,202
Fees paid indirectly (143,060)
Reduction of expenses by investment adviser (371,876)
------------
Net expenses $ 7,528,266
------------
Net investment income $ 43,182,945
------------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) -
Investment transactions $ 15,256,868
Futures contracts 1,482,012
------------
Net realized gain on investments $ 16,738,880
------------
Change in unrealized depreciation -
Investments $(75,604,112)
Futures contracts (340,255)
------------
Net unrealized loss on investments $(75,944,367)
------------
Net realized and unrealized loss on investments $(59,205,487)
------------
Decrease in net assets from operations $(16,022,542)
============
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ---------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JULY 31, 1999 JANUARY 31, 1999
(UNAUDITED)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 43,182,945 $ 81,520,636
Net realized gain on investments 16,738,880 375,373
Net unrealized loss on investments (75,944,367) (6,636,995)
-------------- --------------
Increase (decrease) in net assets from operations $ (16,022,542) $ 75,259,014
-------------- --------------
Distributions declared to shareholders -
From net investment income (Class A) $ (34,937,311) $ (66,082,785)
From net investment income (Class B) (9,637,149) (15,565,956)
From net investment income (Class C) (212,727) (19,190)
-------------- --------------
Total distributions declared to shareholders $ (44,787,187) $ (81,667,931)
-------------- --------------
Net increase in net assets from Fund share transactions $ 84,830,257 $ 169,066,341
-------------- --------------
Total increase in net assets $ 24,020,528 $ 162,657,424
Net assets:
At beginning of period 1,534,413,050 1,371,755,626
-------------- --------------
At end of period (including accumulated undistributed
net investment income of $864,000 and $2,468,242,
respectively) $1,558,433,578 $1,534,413,050
============== ==============
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JANUARY 31,
SIX MONTHS ENDED -----------------------------------------------------------------------------
JULY 31, 1999 1999 1998 1997 1996 1995
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value -
beginning of period $ 9.03 $ 9.07 $ 8.73 $ 9.12 $ 8.60 $ 9.38
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.25 $ 0.53 $ 0.57 $ 0.61 $ 0.61 $ 0.64
Net realized and unrealized
gain (loss) on investments (0.34) (0.04) 0.34 (0.36) 0.59 (0.75)
------ ------ ------ ------ ------ ------
Total from investment
operations $(0.09) $ 0.49 $ 0.91 $ 0.25 $ 1.20 $(0.11)
------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders from net
investment income $(0.26) $(0.53) $(0.57) $(0.64) $(0.68) $(0.67)
------ ------ ------ ------ ------ ------
Net asset value - end of
period $ 8.68 $ 9.03 $ 9.07 $ 8.73 $ 9.12 $ 8.60
====== ====== ====== ====== ====== ======
Total return(+) (0.97)%++ 5.54% 10.81% 2.87% 13.92% (1.04)%
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 0.79%+ 0.81% 0.89% 0.93% 0.93% 1.04%
Net investment income 5.79%+ 5.84% 6.42% 6.96% 6.83% 7.27%
Portfolio turnover 15% 12% 19% 17% 20% 32%
Net assets at end of period
(000 omitted) $1,162,252 $1,168,479 $1,107,181 $988,178 $1,009,031 $920,043
(S) The investment adviser voluntarily waived a portion of its fee for certain of the periods indicated. If this fee had been
incurred by the Fund, the net investment income per share and the ratios would have been:
Net investment income $0.25 $0.53 -- -- -- --
Ratios (to average net assets):
Expenses## 0.84%+ 0.82% -- -- -- --
Net investment income 5.74%+ 5.83% -- -- -- --
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to January 31, 1995, are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash maintained
by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1, 1995, the Fund's
expenses were calculated without reduction for this expense offset arrangement.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JANUARY 31,
SIX MONTHS ENDED ------------------------------------------------------------------------
JULY 31, 1999 1999 1998 1997 1996 1995
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of
period $ 9.04 $ 9.08 $ 8.74 $ 9.12 $ 8.60 $ 9.38
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.22 $ 0.45 $ 0.49 $ 0.52 $ 0.52 $ 0.57
Net realized and unrealized
gain (loss) on investments (0.34) (0.04) 0.34 (0.35) 0.59 (0.78)
------ ------ ------ ------ ------ ------
Total from investment
operations $(0.12) $ 0.41 $ 0.83 $ 0.17 $ 1.11 $(0.21)
------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders from net
investment income $(0.23) $(0.45) $(0.49) $(0.55) $(0.59) $(0.57)
------ ------ ------ ------ ------ ------
Net asset value - end of
period $ 8.69 $ 9.04 $ 9.08 $ 8.74 $ 9.12 $ 8.60
====== ====== ====== ====== ====== ======
Total return (1.37)%++ 4.62% 9.87% 1.96% 12.78% (2.13)%
Ratios (to average net assets)/
Supplemental data:(S)
Expenses## 1.61%+ 1.69% 1.73% 1.86% 1.91% 2.10%
Net investment income 4.97%+ 4.95% 5.50% 6.00% 5.84% 6.32%
Portfolio turnover 15% 12% 19% 17% 20% 32%
Net assets at end of period
(000 omitted) $381,737 $363,062 $264,575 $125,971 $77,808 $55,675
(S) The investment adviser voluntarily waived a portion of its fee for certain of the periods indicated. If this fee had been
incurred by the Fund, the net investment income per share and the ratios would have been:
Net investment income $ 0.22 $ 0.45 -- -- -- --
Ratios (to average net assets)
Expenses## 1.66%+ 1.70% -- -- -- --
Net investment income 4.92%+ 4.94% -- -- -- --
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to January 31, 1995, are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash maintained
by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1, 1995, the Fund's
expenses are calculated without reduction for this expense offset arrangement.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
JULY 31, 1999 JANUARY 31, 1999*
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 9.04 $ 9.10
------ ------
Income from investment operations# -
Net investment income(S) $ 0.21 $ 0.15
Net realized and unrealized loss on investments (0.34) (0.06)
------ ------
Total from investment operations $(0.13) $ 0.09
------ ------
Less distributions declared to shareholders from
net investment income $(0.22) $(0.15)
------ ------
Net asset value - end of period $ 8.69 $ 9.04
====== ======
Total return (1.46)%++ 0.96%++
Ratios (to average net assets)/Supplemental data:(S)
Expenses## 1.79%+ 1.75%+
Net investment income 4.79%+ 4.45%+
Portfolio turnover 15% 12%
Net assets at end of period (000,000 omitted) $14,445 $2,872
(S) The investment adviser voluntarily waived a portion of its fee for certain of the periods indicated. If
this fee had been incurred by the Fund, the net investment income per share and the ratios would have
been:
Net investment income $0.21 $0.15
Ratios (to average net assets)
Expenses## 1.84%+ 1.76%+
Net investment income 4.74%+ 4.44%+
* For the period from the inception of Class C, September 25, 1998, through January 31, 1999.
+ Annualized.
++ Not annualized.
# Per share data is based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of
cash maintained by the Fund with its custodian and dividend disbursing agent. The Fund's expenses are
calculated without reduction for this expense offset arrangement.
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Municipal High Income Fund (the Fund) is a non-diversified series of MFS
Series Trust III (the Trust). The Trust is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The Fund 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.
Investment Valuations - Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues, are valued on the
basis of valuations furnished by dealers or by a pricing service with
consideration to factors such as institutional-size trading in similar groups
of securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data, without exclusive reliance upon
exchange or over-the-counter prices. Short-term obligations, which mature in
60 days or less, are valued at amortized cost, which approximates market
value. Futures contracts listed on commodities exchanges are reported at
market value using closing settlement prices. Securities for which
there are no such quotations or valuations are valued at fair value as
determined in good faith by or at the direction of the Trustees.
Futures Contracts - The Fund may enter into futures contracts for the delayed
delivery of securities or contracts based on financial indices at a fixed
price on a future date. In entering such contracts, the Fund is required to
deposit with the broker either in cash or securities an amount equal to a
certain percentage of the contract amount. Subsequent payments are made or
received by the Fund each day, depending on the daily fluctuations in the
value of the contract, and are recorded for financial statement purposes as
unrealized gains or losses by the Fund. The Fund's investment in futures
contracts is designed to hedge against anticipated future changes in interest
rates or securities prices. Investments in interest rate futures for purposes
other than hedging may be made to modify the duration of the portfolio without
incurring the additional transaction costs involved in buying and selling the
underlying securities. Investments in index contracts for purposes other than
hedging, may be made when the Fund has cash on hand and wishes to participate
in anticipated market appreciation while the cash is being invested. Should
interest rates or securities prices move unexpectedly, the Fund may not
achieve the anticipated benefits of the futures contracts and may realize a
loss.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and original issue discount is amortized or accreted for financial statement
and tax reporting purposes as required by federal income tax regulations.
Interest payments received in additional securities are recorded on the ex-
interest date in an amount equal to the value of the security on such date.
The Fund uses the effective interest method for reporting interest income on
payment-in-kind (PIK) bonds. Legal fees and other related expenses incurred to
preserve and protect the value of a security owned are added to the cost of
the security; other legal fees are expensed. Capital infusions, which are
generally non-recurring, incurred to protect or enhance the value of high-
yield debt securities, are reported as additions to the cost basis of the
security. Costs that are incurred to negotiate the terms or conditions of
capital infusions or that are expected to result in a plan of reorganization
are reported as realized losses. Ongoing costs incurred to protect or enhance
an investment, or costs incurred to pursue other claims or legal actions, are
expensed.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's month end net assets. The fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the Fund. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net income,
including any net realized gain on investments. Accordingly, no provision for
federal income or excise tax is provided. Distributions paid by the Fund from
net interest received on tax-exempt municipal bonds are not includable by
shareholders as gross income for federal tax purposes because the Fund intends
to meet certain requirements of the Code applicable to regulated investment
companies, which will enable the Fund to pay exempt-interest dividends. The
portion of such interest, if any, earned on private activity bonds issued
after August 7, 1986, may be considered a tax-preference item to shareholders.
Distributions to shareholders are recorded on the ex-dividend date. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits are reported in the financial statements as distributions from paid-in
capital. Differences in the recognition or classification of income between
the financial statements and tax earnings and profits, which result in
temporary over-distributions for financial statement purposes, are classified
as distributions in excess of net investment income or net realized gains.
At January 31, 1999, the Fund, for federal income tax purposes, had a capital
loss carryforward of $173,677,480 which may be applied against any net taxable
realized gains of each succeeding year until the earlier of its utilization or
expiration on January 31, 2000, ($4,786,449), January 31, 2001, ($5,199,093),
January 31, 2002, ($28,166,887), January 31, 2003, ($27,178,219), January 31,
2004, ($30,637,034), January 31, 2005, ($26,148,057), January 31, 2006,
($45,409,970), and January 2007, ($6,151,771).
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on the value
of settled shares outstanding of each class, without distinction between share
classes. Dividends are declared separately for each class. Differences in per
share dividend rates are generally due to differences in separate class
expenses. Class B shares will convert to Class A shares approximately eight
years after purchase.
(3) Transactions with Affiliates
Investment Adviser - The Fund 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 the following annual
rates:
BASED ON AVERAGE NET ASSETS BASED ON GROSS INCOME
- ---------------------------------------- ------------------------------------
First $1.3 billion 0.30% 4.75%
In excess of $1.3 billion 0.25%
The investment adviser has voluntarily agreed to waive a portion of its fee,
which is shown as a reduction of expenses in the Statement of Operations.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from MFS. Certain officers and
Trustees of the Fund are officers or directors of MFS, MFS Fund Distributors,
Inc. (MFD) and MFS Service Center, Inc. (MFSC). The Fund has an unfunded
defined benefit plan for all of its independent Trustees and Mr. Bailey.
Included in Trustees' compensation is a net periodic pension expense of
$13,092 for the six months ended July 31, 1999.
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee
at the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$384,750 for the six months ended July 31, 1999, as its portion of the sales
charge on sales of Class A shares of the Fund. The Trustees have adopted a
distribution plan relating to Class B and C shares pursuant to Rule 12b-1 of
the Investment Company Act of 1940 as follows:
The Fund's distribution plan provides that the Fund will pay MFD a
distribution fee of 0.75% per annum, and a service fee of up to 0.25% per
annum, of the Fund's average daily net assets attributable to Class B and C
shares. Except in the case of the 0.25% per annum Class B service fee paid by
the Fund upon sale of Class B shares in the first year, payment of the Class B
service fee will be suspended until such date as the Trustees of the Trust may
determine. MFD will pay to securities dealers that enter into a sales
agreement with MFD all or a portion of the service fee attributable to Class B
shares and Class C shares, and will pay to such security dealers all of the
distribution fee attributed to Class C shares. The service fee is intended to
be consideration for services rendered by the dealer with respect to Class B
and C shares. MFD retains the service fee for accounts not attributable to a
securities dealer, which amounted to $0, and $0 for Class B and Class C
shares, respectively, for the six months ended July 31, 1999. Fees incurred
under the distribution plan during the six months ended July 31, 1999, were
0.82% and 1.00% of average daily net assets attributable to Class B and Class
C shares, respectively on an annualized basis.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months following
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class B shares in the event of a shareholder redemption within
six years of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the six months ended July 31,
1999, were $16,005, $541,543, and $2,372 for Class A, Class B, and Class C
shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as
a percentage of the Fund's average daily net assets at an effective annual
rate of 0.10%. Prior to April 1, 1999, the fee was calculated as a percentage
of the Fund's average daily net assets at an effective annual rate of 0.1125%.
(4) Portfolio Securities
Purchases and sales of investments, other than short-term obligations,
aggregated $322,890,226 and $231,207,982, respectively.
The cost and unrealized appreciation and depreciation in value of the
investments owned by the Fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $1,497,932,544
--------------
Gross unrealized appreciation $ 84,651,033
Gross unrealized depreciation (25,991,612)
--------------
Net unrealized appreciation $ 58,659,421
==============
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
SIX MONTHS ENDED JULY 31, 1999 YEAR ENDED JANUARY 31, 1999
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 14,596,589 $ 129,808,363 30,441,333 $ 274,551,872
Shares issued to shareholders
in reinvestment of
distributions 1,479,929 13,084,017 2,806,743 25,325,360
Shares reacquired (11,657,672) (103,341,012) (25,859,959) (233,386,980)
----------- ------------- ----------- -------------
Net increase 4,418,846 $ 39,551,368 7,388,117 $ 66,490,252
=========== ============= =========== =============
<CAPTION>
Class B Shares
SIX MONTHS ENDED JULY 31, 1999 YEAR ENDED JANUARY 31, 1999
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 6,342,261 $ 56,381,621 14,320,086 $ 129,318,514
Shares issued to shareholders
in reinvestment of
distributions 368,080 3,256,129 560,385 5,061,249
Shares reacquired (2,969,190) (26,298,778) (3,840,591) (34,674,697)
----------- ------------- ----------- -------------
Net increase 3,741,151 $ 33,338,972 11,039,880 $ 99,705,066
=========== ============= =========== =============
<CAPTION>
Class C Shares
SIX MONTHS ENDED JULY 31, 1999 PERIOD ENDED JANUARY 31, 1999*
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,391,632 $ 12,359,559 326,949 $ 2,954,503
Shares issued to shareholders
in reinvestment of
distributions 10,903 97,184 1,060 9,568
Shares reacquired (58,804) (516,826) (10,243) (93,048)
----------- ------------- ----------- -------------
Net increase 1,343,731 $ 11,939,917 317,766 $ 2,871,023
=========== ============= =========== =============
* For the period from the inception of Class C, September 25, 1998, through January 31, 1999.
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in a $820 million unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made to temporarily finance the repurchase of Fund shares.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the bank's base rate. In addition, a commitment fee, based on the average daily
unused portion of the line of credit, is allocated among the participating funds
at the end of each quarter. The commitment fee allocated to the Fund for six
months ended July 31, 1999, was $5,525. The Fund had no significant borrowings
during the period.
(7) Financial Instruments
The Fund trades instruments with off-balance-sheet risk in the normal course
of its investing activities in order to manage exposure to market risks such
as interest rates. These financial instruments include futures contracts. The
notional or contractual amounts of these instruments represent the investment
the Fund has in particular classes of financial instruments and does not
necessarily represent the amounts potentially subject to risk. The measurement
of the risks associated with these instruments is meaningful only when all
related and offsetting transactions are considered.
UNREALIZED
APPRECIATION
DESCRIPTION EXPIRATION CONTRACTS POSITION (DEPRECIATION)
- --------------------------------------------------------------------------------
U.S. Treasury Bond September 1999 75 Short $227,772
Municipal Bond Index September 1999 54 Long (161,000)
--------
$ 66,772
========
At July 31, 1999, the Fund had sufficient cash and/or securities to cover any
margin requirements under these contracts.
(8) Restricted Securities
The Fund may invest not more than 15% of its net assets in securities which are
subject to legal or contractual restrictions on resale. At July 31, 1999, the
Fund owned the following restricted securities, excluding securities issued
under rule 144A, constituting 2.1% of net assets which may not be publicly sold
without registration under the Securities Act of 1933. The Fund 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, are valued at fair value as determined in good
faith by or at the direction of the Trustees.
DATE OF PAR
DESCRIPTION ACQUISITION AMOUNT COST VALUE
- --------------------------------------------------------------------------------
Chicago, IL, Public Building
Commerce Rev., 7.068s, 2016 3/18/99 $6,000,000 $6,478,200 $5,857,020
Chicago, IL, Public Building
Commerce Rev., 7.068s, 2017 3/18/99 4,500,000 4,815,180 4,369,140
Delaware Valley, PA, Regional
Finance Authority, AMBAC,
7.033s, 2018 9/2/98 7,000,000 8,059,800 7,201,460
Eastern Band of Cherokee Indian
Community, NC (Carolina
Mirror Co.) 10.25s, 2009 1/3/94 2,740,000 2,842,750 2,741,754
Eastern Band of Cherokee Indian
Community, NC (Carolina
Mirror Co.) 11s, 2012 9/19/86 950,000 858,875 950,570
Hannibal, MO, Industrial
Development Authority,
9.5s, 2001 3/23/92 3,000,000 2,971,470 3,440,820
Houston, TX, Independent School
District, 7.068s, 2017 3/11/99 5,000,000 5,249,100 4,781,700
State of South Carolina,
5.768s, 2016 4/8/99 2,000,000 1,892,280 1,683,800
Texas Housing & Community Board
(Harbors & Plumtree),
10s, 2026 11/12/96 1,755,000 1,755,000 1,770,848
-----------
$32,797,112
===========
<PAGE>
MFS' YEAR 2000 READINESS DISCLOSURE
MFS Investment Management(R), as an investment adviser and on behalf of the MFS
funds, is committed to the effective use of technology in managing our portfolio
investments, delivering high-quality service to MFS fund shareholders,
retirement plan participants, and MFS' institutional clients, and supporting the
financial consultants who sell our products. With that in mind, we created a
separately funded Year 2000 Program Management Office in 1996 comprised of a
specialized staff reporting directly to MFS senior management.
The Year 2000 (Y2K) problem arises because calendar-year fields in computers
and software applications traditionally have used two-digit codes so that, for
example, the year 1998 is coded as "98," with the "19" being implied. In the
year 2000, unless necessary corrections have been made, computer applications
may assume "00" refers to 1900 rather than 2000, thus resulting in systems
failures or miscalculations. To address this issue, our team of dedicated
business and technology managers, working with outside experts, is taking
steps to ascertain the Y2K readiness of MFS' internal systems and is working
with our external systems vendors to determine whether they expect their
systems to be ready.
MFS recognizes that fund shareholders and institutional clients also are
concerned about whether the companies whose securities are held in their
portfolios are addressing Y2K issues. As part of the MFS(R) Original Research
(SM) process of evaluating portfolio investments, one of the many relevant
factors that MFS' portfolio managers and research analysts may consider is a
company's Y2K readiness. Each year, MFS' research analysts and portfolio
managers conduct more than 1,000 on-site meetings with companies whose
securities are, or may be, held in fund and client portfolios, and host an
additional 1,500 meetings at MFS' headquarters. When assessing the Y2K readiness
of these companies, MFS' research analysts and portfolio managers may rely upon
discussions at these meetings as well as SEC disclosure documents and
third-party reports.
Y2K readiness is an enormously complex, worldwide issue. No company or
institution can guarantee that it will be unaffected by the Y2K issue. While
MFS is taking significant steps to protect the integrity of its internal
systems, there can be no assurance that these steps will be sufficient to
avoid any adverse impact on MFS, shareholders of MFS funds, participants in
retirement plans administered by MFS, or MFS' institutional clients.
If you have further questions regarding MFS' Year 2000 Readiness Program,
please visit our Web site at www.mfs.com or contact the MFS Year 2000 Program
Management Office by e-mail at [email protected] or by letter at 500 Boylston
Street, Boston, MA 02116-3741.
<PAGE>
<TABLE>
MFS(R) MUNICIPAL HIGH INCOME FUND
<S> <C>
TRUSTEES SECRETARY
Richard B. Bailey* - Private Investor; Stephen E. Cavan*
Former Chairman and Director (until 1991),
MFS Investment Management ASSISTANT SECRETARY
James R. Bordewick, Jr.*
J. Atwood Ives - Chairman and Chief Executive
Officer, Eastern Enterprises (diversified CUSTODIAN
services company) State Street Bank and Trust Company
Lawrence T. Perera - Partner, Hemenway INVESTOR INFORMATION
& Barnes (attorneys) For MFS stock and bond market outlooks, call
toll free: 1-800-637-4458 anytime from a
William J. Poorvu - Adjunct Professor, Harvard touch-tone telephone.
University Graduate School of Business
Administration For information on MFS mutual funds, call your
financial consultant or, for an information
Charles W. Schmidt - Private Investor kit, call toll free: 1-800-637-2929 any
business day from 9 a.m. to 5 p.m. Eastern time
Arnold D. Scott* - Senior Executive (or leave a message anytime).
Vice President, Director, and Secretary,
MFS Investment Management INVESTOR SERVICE
MFS Service Center, Inc.
Jeffrey L. Shames* - Chairman, Chief P.O. Box 2281
Executive Officer, and Director, Boston, MA 02107-9906
MFS Investment Management
For general information, call toll free:
Elaine R. Smith - Independent Consultant 1-800-225-2606 any business day from 8 a.m. to
8 p.m. Eastern time.
David B. Stone - Chairman and Director,
North American Management Corp. For service to speech- or hearing-impaired,
(investment advisers) call toll free: 1-800-637-6576 any business day
from 9 a.m. to 5 p.m. Eastern time. (To use
INVESTMENT ADVISER this service, your phone must be equipped with
Massachusetts Financial Services Company a Telecommunications Device for the Deaf.)
500 Boylston Street
Boston, MA 02116-3741 For share prices, account balances, and
exchanges, call toll free: 1-800-MFS-TALK
DISTRIBUTOR (1-800-637-8255) anytime from a touch-tone
MFS Fund Distributors, Inc. telephone.
500 Boylston Street
Boston, MA 02116-3741 WORLD WIDE WEB
www.mfs.com
CHAIRMAN AND PRESIDENT
Jeffrey L. Shames*
PORTFOLIO MANAGER
Michael W. Roberge*
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
MFS(R) MUNICIPAL HIGH ------------
INCOME FUND BULK RATE
U.S. POSTAGE
[Logo] M F S(R) PAID
INVESTMENT MANAGEMENT MFS
We invented the mutual fund(R) ------------
500 Boylston Street
Boston, MA 02116-3741
(c)1999 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
MMH-3 9/99 50M 25/225/325
