<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
[Graphic Omitted]
MFS(R) MUNICIPAL HIGH
INCOME FUND
ANNUAL REPORT o JANUARY 31, 2000
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MUTUAL FUND GIFT KITS (see page 43)
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<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 4
Performance Summary ....................................................... 8
Portfolio of Investments .................................................. 11
Financial Statements ...................................................... 28
Notes to Financial Statements ............................................. 34
Independent Auditors' Report .............................................. 41
MFS' Year 2000 Readiness Disclosure ....................................... 42
Trustees and Officers ..................................................... 45
MFS ORIGINAL RESEARCH(R)
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]
Jeffrey L. Shames
Dear Shareholders,
One could easily argue that the Internet represents the greatest technological
development most of us may see in our lifetimes. There is no disputing that this
new communication medium is changing forever the way we work, play, and shop.
One might also argue that investing in this new technology represents the
investment opportunity of a lifetime. The question for any investor is whether
and how to take advantage of it.
The popular press, it seems, would have us believe that by surfing the Web, we
can learn everything we need to know about investing. Indeed, there is no doubt
that Internet-delivered information and brokerage services enable individual
investors to be well informed and to trade at bargain prices. But we believe the
numbers and facts argue that, for most of us, mutual funds purchased through an
investment professional will continue to be one of the best products for
long-term investing in this new millennium.
According to a survey by the Investment Company Institute, the national
association of American investment companies, 44% of American households own
stock or bond mutual funds, while only 25.5% own individual stocks.(1) Of course
that doesn't tell us how well they did owning those funds or stocks, but another
statistic gives us a clue. In the third quarter of 1999, during a period of
volatility in the greatest bull market in history, a quarter of the 7,500 stocks
tracked by Morningstar, a popular rating service, lost more than 20% of their
value. But during the same period, less than 1% of the mutual funds tracked by
Morningstar -- 6 out of 10,000 funds -- were down by a similar amount.(2) So an
investor's chance of picking one of those losing stocks was about 25 times
greater than his or her chance of picking an equally losing fund.
The numbers also show that a majority of Americans seek professional advice when
buying mutual funds. Outside of employer-sponsored retirement plans,
approximately 68% of fund shareholders state that their primary method of
purchasing shares is through an investment professional.(1)
Why do we at MFS(R) believe that mutual funds plus professional advice will
continue to define the best course of action for many investors? Let's look at
some of the characteristics of a successful long-term investment approach:
o HAVING A PLAN AND STICKING TO IT: Our experience is that successful
investors -- those whose lives are enriched by the fruits of their investing
-- share two characteristics. They have a plan for reaching their monetary
goals, and they stick with that plan through up as well as down markets. And
for many investors, working with an investment professional may be the best
way to develop a plan. Although the Internet abounds with calculators for
developing all sorts of investment plans, none has your investment
professional's high level of experience and an understanding of your unique
situation. And no calculator can counsel you during a down market, when you
may be tempted to abandon your goals and your plan.
o DIVERSIFICATION: Few investors can afford to own a large number of holdings,
so poor performance of one company can potentially drag down their entire
portfolio. This is especially true when investing in volatile new areas such
as the Internet. On the other hand, a diversified mutual fund that owns
dozens or even hundreds of holdings is better positioned to survive a
disappointment in one or several investments.
o GOOD IN A DOWN MARKET: As we enter the tenth year of the greatest bull
market in history, it's easy to forget that market downturns are an almost
inevitable part of investing. Few mutual funds, of course, are going to be
up when the overall market is down. But as the numbers above from the third
quarter of 1999 demonstrate, mutual funds may be less likely to suffer the
extreme downturns experienced by a large number of individual holdings when
the market heads south.
o MFS ORIGINAL RESEARCH(R): The Internet is one of the greatest research tools
ever invented, but it's still not the same as being eyeball to eyeball with
the management of a company and discussing their plans for their firm's
future.
o GOOD PERFORMANCE AT AN ACCEPTABLE LEVEL OF RISK: Investing in individual
stocks or bonds does indeed offer the potential of exhilarating performance
that few mutual funds even attempt. The downside is that the most exciting
investments are also likely to be the ones that give you sleepless nights.
The diversification and professional management of mutual funds help make
them inherently less risky than individual stock picking, and funds are
available in a wide range of risk profiles.
We believe that now, more than ever, mutual funds sold by an investment
professional may offer many investors the best way to participate in whatever
investment opportunities the new millennium may bring. The combination of
professional portfolio management and professional advice recognizes the key
reason that investors give us their money: because they don't want to make a
hobby or a second profession out of investing; they simply want their money to
work for them so they have a better likelihood of realizing their dreams.
As always, we appreciate your confidence in MFS 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)
February 15, 2000
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(1) Source: Investment Company Institute.
(2) Source: Morningstar CEO Don Phillips' keynote address at The Baltimore Sun's
Dollars and Sense Conference, 10/99. In the period 7/1/99 through 9/ 30/99,
of the 7,500 stocks tracked by Morningstar, 1,865 lost 20% or more; of the
10,000 mutual funds tracked by Morningstar, six lost 20% or more. Mutual
fund results are at net asset value; if sales charges had been reflected,
results would have been lower.
Investments in mutual funds will fluctuate and may be worth more or less upon
redemption.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of Michael W. Roberge]
Michael W. Roberge
For the 12 months ended January 31, 2000, Class A shares of the Fund provided a
total return of -5.09%, Class B shares -5.85%, and Class C shares -6.04%. These
returns, which include the reinvestment of any distributions but exclude the
effects of any sales charges, compare to a -3.63% return for the Fund's
benchmark, the Lehman Brothers Municipal Bond Index (the Lehman Index), an
unmanaged index of investment-grade municipal bonds rated "Baa" or higher. The
average high-yield municipal debt fund tracked by Lipper Inc., an independent
firm that reports mutual fund performance, returned -6.04% over the same period.
Q. WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE OVER THE PAST 12 MONTHS?
A. We were actually dealing with two conflicting factors, one somewhat positive
and the other negative for the Fund. Although we were in an environment of
rising interest rates -- which made 1999 the worst year for bond funds
overall since 1994 -- a high-yield portfolio such as this one is generally
less sensitive to interest rates than a higher-grade municipal fund. That
was a factor that worked in our favor, relative to other types of bond
funds.
The factor that worked against us was a widening of credit spreads, for the
first time in about four years. The credit spread is the interest-rate
premium that we are paid to own riskier high-yield bonds, as compared to
less risky high-grade muni bonds. When the spread widens, the prices of the
bonds that we currently own go down, negatively impacting performance.
We believe the spread widening occurred for a couple of reasons. The first
was a significant amount of tax-related fourth-quarter redemptions in
high-yield municipal funds by investors seeking to offset taxable gains in
their equity holdings with losses in their bond funds. The second factor
that caused spreads to widen was weakness in the health care sector. An
enormous part of the high-yield market is comprised of health care issues --
tax-exempt bonds issued by hospitals, nursing homes, and assisted living
facilities. Cutbacks in Medicaid reimbursements have made investors
increasingly afraid of health care issues, causing spreads in that sector to
widen considerably in late 1999 and early 2000.
Q. IS THERE A POSITIVE SIDE TO THIS WIDENING OF SPREADS?
A. Yes, very much so. The good news is that larger credit spreads mean there's
more value in the market now, meaning that we're being paid more to take the
credit risks of high-yield issues. For a research-oriented firm like MFS,
which we believe does a very good job of analyzing credit risk, we feel the
current environment presents great opportunities.
Q. COULD YOU ELABORATE ON THE ROLE OF MFS ORIGINAL RESEARCH(R) IN THE FUND?
A. To understand the role of research in a high-yield fund, it may help to
first explain the kinds of bonds we own. Many people think of municipal
bonds as only being issued by governments, such as the City of Boston, and
being backed by the full faith and credit of those governments. But
high-yield municipal funds can invest in virtually anything that is tax
exempt, which covers a much broader spectrum. We own, for example,
corporate-backed bonds issued by airline, steel, and paper companies,
revenue bonds issued by turnpike authorities, project bonds issued by
multifamily housing projects, and health care-related bonds as mentioned
earlier. Many of these securities are backed only by the issuing company or
by revenues of the project itself. There is always the risk, known as
"credit risk," that poor performance or bankruptcy of a project or company
could lower the value of its bonds.
Thus, we feel the name of the game in a high-yield fund is avoiding
defaults. This is where we believe MFS Original Research(R) sets us apart,
by allowing us to find high-yield opportunities that add value to the
portfolio without taking on undue risk. For example, even though we were
invested in the health care sector, which had a rough year, we were able to
avoid some of the problems in that sector, including several hospital
defaults.
Q. WHAT IS YOUR BIG-PICTURE OUTLOOK ON THE ECONOMY?
A. We think the economy is going to begin to slow as the Federal Reserve
Board's (the Fed's) rate hikes start to impact interest-rate-sensitive
industries like autos and housing. Overall business investment will probably
slow down a bit. But we don't anticipate the Fed's having to hike rates to
such an extent that it puts the economy into recession. We think the Fed
will be able to bring rates up enough to get growth down to a reasonable
level. That, we believe, will allow the economy to continue to grow at a
healthy pace without inflation becoming a problem.
Q. GIVEN YOUR ECONOMIC VIEW, WHAT IS YOUR OUTLOOK FOR THE FUND?
A. We believe there may be three factors coming together that could be very
constructive for the portfolio. Interest rates may begin to go down by the
end of the year, which would help bonds in general. The economy, we believe,
will continue to grow moderately, which bodes well for credit risk, the
primary risk in a high-yield portfolio. And finally, we believe the quality
of our research may allow us to take advantage of the current situation of
widening credit spreads to find value in the market. So for these three
reasons, we believe that now may be a very good time for investors to be
looking at the portfolio.
/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.
<PAGE>
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PORTFOLIO MANAGER'S PROFILE
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MICHAEL W. ROBERGE IS SENIOR VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT AND
PORTFOLIO MANAGER OF MUNICIPAL HIGH INCOME FUND AND MFS 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, VICE PRESIDENT IN 1998, AND
SENIOR VICE PRESIDENT IN 2000. 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 ARE SUPPORTED BY AN
INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS ORIGINAL RESEARCH, A
GLOBAL, ISSUER-ORIENTED, BOTTOM-UP PROCESS OF SELECTING SECURITIES.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other MFS
product is available from your investment professional, 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: $1.3 billion net assets as of January 31, 2000
PERFORMANCE SUMMARY
The following information illustrates the historical performance of the Fund's
original share class in comparison to various market indicators. Performance
results include the deduction of the maximum applicable sales charge and reflect
the percentage change in net asset value, including reinvestment of dividends.
Benchmark comparisons are unmanaged and do not reflect any fees or expenses. The
performance of other share classes will be greater than or less than the line
shown. (See Notes to Performance Summary.) It is not possible to invest directly
in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended January 31, 2000)
MFS Municipal Lehman Brothers
High Income Municipal
Fund - Class A Bond Index
-------------------------------------------------------
1/90 $ 9,525 $10,000
1/92 10,998 12,116
1/94 13,093 14,939
1/96 14,761 16,576
1/98 16,827 18,953
1/00 16,855 19,479
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
THROUGH JANUARY 31, 2000
<TABLE>
<CAPTION>
CLASS A
1 Year 3 Years 5 Years 10 Years
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<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge -5.09% +11.00% +30.08% +76.9
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Average Annual Total Return Excluding Sales Charge -5.09% + 3.54% + 5.40% + 5.87%
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Average Annual Total Return Including Sales Charge -9.60% + 1.87% + 4.38% + 5.36%
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<CAPTION>
CLASS B
1 Year 3 Years 5 Years 10 Years
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<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge -5.85% + 8.22% +24.45% +66.8
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Average Annual Total Return Excluding Sales Charge -5.85% + 2.67% + 4.47% + 5.25%
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Average Annual Total Return Including Sales Charge -9.42% + 1.78% + 4.15% + 5.25%
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<CAPTION>
CLASS C
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge -6.04% + 9.57% +28.41% +74.67%
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Average Annual Total Return Excluding Sales Charge -6.04% + 3.09% + 5.13% + 5.74%
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Average Annual Total Return Including Sales Charge -6.93% + 3.09% + 5.13% + 5.74%
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<CAPTION>
COMPARATIVE INDICES
1 Year 3 Years 5 Years 1 0 Years
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<S> <C> <C> <C> <C>
Average high-yield municipal debt fund(+) -6.04% + 3.09% + 5.28% + 6.11%
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Lehman Brothers Municipal Bond Index# -3.63% + 4.21% + 6.22% + 6.89%
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(+) Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
</TABLE>
NOTES TO PERFORMANCE SUMMARY
Class A Share Performance Including Sales Charge takes into account the
deduction of the maximum 4.75% sales charge. Class B Share Performance Including
Sales Charge takes into account the deduction of the applicable contingent
deferred sales charge (CDSC), which declines over six years from 4% to 0%. Class
C Share Performance Including Sales Charge takes into account the deduction of
the 1% CDSC applicable to Class C shares redeemed within 12 months.
Class B and C share performance include the performance of the Fund's Class A
shares for periods prior to their inception (blended performance). Class B and C
blended performance has been adjusted to take into account the CDSC applicable
to Class B and C shares rather than the initial sales charge (load) applicable
to Class A shares. These blended performance figures have not been adjusted to
take into account differences in class-specific operating expenses. Because
operating expenses of Class B and C shares are higher than those of Class A, the
blended Class B and C share performance is higher than it would have been had
Class B and C shares been offered for the entire period.
All 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 capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MORE RECENT
RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS.
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.
PORTFOLIO CONCENTRATION AS OF JANUARY 31, 2000
QUALITY (U.S. PORTION ONLY)
Source: Standard & Poor's and Moody's
Not Rated 34.6%
"AAA" 25.2%
"BBB" 20.5%
"BB" 6.9%
"AA" 6.0%
"A" 5.8%
Other 0.4%
"B" 0.6%
The portfolio is actively managed, and current holdings may be different.
<PAGE>
PORTFOLIO OF INVESTMENTS -- January 31, 2000
Municipal Bonds - 97.8%
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PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
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General Obligation - 4.3%
Birmingham, AL, 5.75s, 2019 $ 1,000 $ 971,390
Chicago, IL, FGIC, 5.125s, 2025 5,000 4,204,750
Chicago, IL, City Colleges Capital Improvement,
FGIC, 6s, 2011 1,680 1,734,886
Cranston, RI, FGIC, 6.375s, 2014 855 900,281
District of Columbia, 6s, 2026 5,000 4,632,250
Forsyth County, GA, School District, 6s, 2016 1,700 1,725,483
Hamilton, OH, City School District, 6.15s, 2014 1,000 1,045,340
Houston County, AL, AMBAC, 6.25s, 2019 3,500 3,550,400
Houston, TX, Independent School District, 6.449s,
2017+(++) 5,000 4,065,000
Jackson, MI, Public Schools System, FGIC, 6s, 2013 1,500 1,539,555
Manchester, NH, 5.875s, 2019 2,325 2,263,062
Markham, IL, 9s, 2012 2,575 2,613,625
New York City, NY, 6.875s, 2003 120 125,804
New York City, NY, 7.1s, 2011 80 83,834
New York City, NY, 5.875s, 2024 7,000 6,689,550
New York City, NY, 6.125s, 2025 3,675 3,594,481
New York City, NY, 5.5s, 2037 5,000 4,323,700
New York City, NY, FGIC, 6.125s, 2025 8,000 7,883,360
New York City, NY, FSA, 7s, 2022 70 72,833
Richardson, TX, Hospital Authority Rev. (Baylor-
Richardson), 5.25s, 2013 1,500 1,237,590
State of South Carolina, 5.149s, 2016+(++) 2,000 1,352,480
Ukiah, CA, Unified School District, FGIC, 0s, 2017 4,795 1,652,933
Ukiah, CA, Unified School District, FGIC, 0s, 2018 4,085 1,313,123
West Warwick, RI, 7.3s, 2008 184 194,849
West Warwick, RI, 7.45s, 2013 570 609,717
--------------
$ 58,380,276
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State and Local Appropriation - 3.4%
Chicago, IL, Public Building Commerce Rev., 6.449s,
2016+(++) $ 6,000 $ 5,146,800
Chicago, IL, Public Building Commerce Rev., 6.449s,
2017+(++) 4,500 3,810,690
Delaware Valley, PA, Regional Finance Authority,
AMBAC, 7.031s, 2018+(++) 7,000 6,357,120
District of Columbia, Certificates of Participation,
7.3s, 2013 2,500 2,631,650
Metropolitan Transportation Authority, NY,
Transportation Facility Rev., 5.25s, 2017 5,000 4,447,950
New York Dormitory Authority Rev., FSA, 5.25s, 2014 5,935 5,534,387
New York Dormitory Authority Rev., Office General
Services, 5s, 2018 5,000 4,247,950
New York Dormitory Authority Rev. (Bronx-Lebanon),
5.2s, 2016 1,000 852,670
New York Dormitory Authority Rev. (City University),
5s, 2018 10,000 8,485,300
New York Dormitory Authority Rev. (North General
Hospital), 5.2s, 2016 1,570 1,338,692
New York Dormitory Authority Rev. (St. Clare's
Hospital), 5.3s, 2019 2,000 1,670,480
New York Dormitory Authority Rev. (Wyckoff Heights
Medical Center), 5.3s, 2021 1,000 819,680
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$ 45,343,369
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Refunded and Special Obligations - 18.3%
Arapahoe County, CO, Capital Improvement, Highway
Rev., 0s, 2006 $69,000 $ 10,746,750
Austin, TX, Utilities System Rev., 10.75s, 2000 1,780 1,813,464
Clermont County, OH, Hospital Facilities Rev. (Mercy
Health Systems), AMBAC, MVRICs, 9.411s, 2001(++) 1,300 1,448,733
Daphne, AL, Special Care Facilities Financing
Authority
(1st Mortgage Rev.), 0s, 2008 89,975 56,630,265
Daphne, AL, Special Care Facilities Financing
Authority
(2nd Mortgage Rev.), 0s, 2008 4,500 2,832,300
Daphne, AL, Special Care Facilities Financing
Authority (Presbyterian), 0s, 2008 48,475 8,658,605
Denver, CO, City & County Airport Rev., 8s, 2000 100 104,864
Denver, CO, City & County Airport Rev., 8.5s, 2000 255 268,375
Denver, CO, City & County Airport Rev., 8.875s, 2000 1,325 1,442,567
Denver, CO, City & County Airport Rev., 7.75s, 2001 425 454,631
Denver, CO, City & County Airport Rev., 8.75s, 2001 1,530 1,662,529
Desert Hospital District, CA, Hospital Rev. (Desert
Hospital Corp.), FSA, 9.014s, 2002(++) 4,000 4,477,800
District of Columbia, Hospital Rev. (Washington
Hospital), 7.125s, 2002 1,750 1,874,355
Doylestown, PA, Hospital Authority (Doylestown
Hospital), 7.2s, 2003 2,200 2,394,348
Fairfax, Fauquier & Loudoun Counties, VA, Health
Center Commission, Nursing Home Rev., 9s, 2000 1,810 1,862,689
Hannibal, MO, Industrial Development Authority
(Hannibal Regional Healthcare), 9.5s, 2001+ 2,995 3,332,379
Illinois Health Facilities Authority Rev. (Memorial
Hospital-Woodstock), 7.25s, 2002 1,500 1,604,790
Jenks Township, PA, Municipal Authority Rev., 8s,
2003 4,650 5,146,760
Kansas City, MO, Industrial Development Authority
(Kingswood), 9s, 2003 5,050 5,873,049
Martha's Vineyard, MA, Land Bank (Land Acquisition),
8.125s, 2001 2,600 2,737,774
Massachusetts Health & Education Facilities Authority
(Fairview Extended Care Facility), 10.25s, 2001 3,000 3,248,430
Massachusetts Industrial Finance Agency (Curry
College), 8s, 2004 1,350 1,536,840
Massachusetts Industrial Finance Agency (Emerson
College), 8.9s, 2001 3,000 3,183,720
Massachusetts Industrial Finance Agency (Glenmeadow
Retirement Community), 8.375s, 2006 2,300 2,706,410
Massachusetts Industrial Finance Agency (Glenmeadow
Retirement Community), 8.625s, 2006 3,520 4,187,040
Massachusetts Industrial Finance Agency, Tunnel Rev.
(Mass. Turnpike), 9s, 2000 10,570 11,062,879
Mesa County, CO, Residual Rev., 0s, 2003 25,125 9,225,900
Michigan Hospital Finance Authority Rev. (Genesys
Regional Medical), 5.375s, 2013 1,350 1,303,223
Mississippi Hospital Equipment & Facilities Authority
Rev. (Rush Medical Foundation), 8.75s, 2001 2,800 2,966,460
New Jersey Economic Development Authority (Geriatric
& Medical Services), 9.625s, 2004 330 347,731
New Jersey Economic Development Authority (Geriatric
& Medical Services), 9.625s, 2022 1,350 1,421,631
New Lenox, IL, Community Park Development Authority,
8.25s, 2004 4,205 4,805,432
New York City, NY, 6.875s, 2002 880 928,409
New York City, NY, 7.1s, 2002 920 974,510
New York City, NY, 6.125s, 2006 1,325 1,408,369
New York City, NY, FSA, 7s, 2002 1,630 1,725,110
New York Energy Research & Development Authority,
Electric Facilities Rev., 7.15s, 2002 495 528,046
New York Energy Research & Development Authority,
Electric Facilities Rev., 7.15s, 2002 4,425 4,730,679
New York Local Government Assistance Corp., 7s, 2001 800 839,376
North Carolina Medical Care Commission, Hospital Rev.
(Valdese General Hospital), 8.75s, 2001 1,775 1,922,449
North Central, TX, Health Facilities Development
Corp. (Baylor University Medical Center), 9.614s,
2001(++) 4,300 4,754,596
North Central, TX, Health Facilities Development
Corp. (Presbyterian Hospital), MBIA,
9.215s, 2001(++) 4,000 4,406,240
Prince William County, VA, Industrial Development
Authority, Residential Care Facility (Westminster
at Lake Ridge), 10s, 2002 3,500 3,890,180
San Joaquin Hills, CA, Transportation Corridor
Agency, Toll Road Rev., 0s, 2011 13,400 7,444,638
South Carolina Public Service Authority
(Santee Co-op), 7.1s, 2001 2,000 2,109,200
South Tucson, AZ, Municipal Property Corp., 8.75s,
2000 865 886,461
Spirit Lake, IA, Industrial Development Rev.
(Crystal Tips, Inc.), 0s, 2008# 5,287 6,687,253
Telluride, CO, Gondola Transit Co., Real Estate
Transfer Assessment Rev., 11.5s, 2012 5,025 7,423,734
Telluride, CO, Gondola Transit Co., Real Estate
Transfer Assessment Rev., 11.5s, 2012 975 1,395,878
Texas Turnpike Authority (Houston Ship Channel
Bridge), 12.625s, 2002 21,035 25,108,428
Walton, GA, Industrial Development Rev. (Ultima
Rubber Products), 10s, 2000 3,885 4,032,280
Washington Public Power Supply System Rev. (Nuclear
Project #1), 14.375s, 2001 400 428,144
Williamsburg County, SC, School District, Public
Facilities Rev., 7.5s, 2000 85 85,705
Williamsburg County, SC, School District, Public
Facilities Rev., 7.5s, 2001 95 98,461
Williamsburg County, SC, School District, Public
Facilities Rev., 7.5s, 2002 115 121,570
Williamsburg County, SC, School District, Public
Facilities Rev., 7.5s, 2003 130 140,011
Williamsburg County, SC, School District, Public
Facilities Rev., 7.5s, 2003 2,175 2,379,667
--------------
$ 245,812,117
- -------------------------------------------------------------------------------
Airport and Port Revenue - 6.9%
Chicago, IL, O'Hare International Airport, Special
Facilites Rev. (United Airlines), 8.5s, 2018 $ 4,500 $ 4,612,140
Chicago, IL, O'Hare International Airport, Special
Facilities Rev. (United Airlines), 8.85s, 2018 5,595 5,862,833
Dallas-Fort Worth, TX, International Airport Facility
Improvement Corp. (Delta), 7.625s, 2021 4,500 4,654,665
Denver, CO, City & County Airport Rev., 8.875s, 2012 3,675 3,963,524
Denver, CO, City & County Airport Rev., 7.75s, 2021 1,625 1,708,509
Denver, CO, City & County Airport Rev., 8.5s, 2023 2,695 2,803,204
Denver, CO, City & County Airport Rev., 8.75s, 2023 4,240 4,526,455
Denver, CO, City & County Airport Rev., 8s, 2025 1,040 1,076,618
Denver, CO, City & County Airport Rev., 6.875s, 2032 7,130 6,847,509
Fulton County, GA, Development Authority, 5.3s, 2013 1,000 885,830
Hillsborough County, FL, Aviation Authority Rev. (US
Air), 8.6s, 2022 4,275 4,550,225
Kenton County, KY, Airport Board Special Facilities
(Delta Airlines), 7.5s, 2020 16,570 16,958,069
New Jersey Economic Development Authority, Special
Facilities Rev. (Continental Airlines, Inc.),
6.625s, 2012 5,250 5,203,170
Niagara, NY, Frontier Transport Authority (Buffalo-
Niagara International Airport), MBIA, 5.875s, 2013 1,485 1,487,228
Port Authority, NY (JFK International Air Terminal),
MBIA, 5.75s, 2022 7,000 6,616,750
Tulsa, OK, Municipal Airport Trust Rev. (American
Airlines), 7.375s, 2020 4,000 4,035,280
Tulsa, OK, Municipal Airport Trust Rev. (American
Airlines), 7.6s, 2030 14,210 14,575,339
Wayne Charter County, MI, Airport Rev. (Detroit
Metropolitan Wayne County), 5s, 2019 3,000 2,560,920
--------------
$ 92,928,268
- -------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 12.1%
Alaska Industrial Development & Export Authority,
Power Rev. (Upper Lynn Canal Regional Power),
5.875s, 2032 $ 1,800 $ 1,522,548
Brazos River Authority, TX (Reliant Energy, Inc.),
5.375s, 2019 8,750 7,438,638
Calcasieu Parish, LA, Industrial Development Board,
Pollution Control Rev. (Energy Gulf States, Inc.),
5.45s, 2010 4,800 4,437,216
Clark County, NV, Industrial Development Rev.
(Nevada Power Co.), FGIC, 6.7s, 2022 4,000 4,143,000
Clark County, NV, Industrial Development Rev.
(Nevada Power Co.), 5.6s, 2030 10,000 8,154,200
Clark County, NV, Industrial Development Rev.
(Nevada Power Co.), 5.9s, 2032 9,000 7,651,260
Connecticut Development Authority, Pollution Control
Rev. (Connecticut Light & Power), 5.85s, 2028 8,300 7,225,233
Farmington, NM, Pollution Control Rev., 6.3s, 2016 2,240 2,101,546
Farmington, NM, Pollution Control Rev., 5.8s, 2022 4,915 4,193,969
Farmington, NM, Pollution Control Rev. (Tucson
Electric Power Co.), 6.95s, 2020 3,000 2,896,470
Klamath Falls, OR, Electric Rev. (Klamath
Cogeneration), 6s, 2025 10,000 8,421,700
Long Island , NY, Power Authority Rev.,
5.125s, 2016 3,500 3,142,825
Matagorda County, TX (Reliant Energy)
5.95s, 2030 8,000 6,885,440
McAlester, OK, Public Works Authority, Utility
System Rev., FSA, 5.75s, 2020 5,970 5,637,411
Midland, MI, Environmental Development Authority,
Pollution Control Rev. (Midland Cogeneration),
9.5s, 2009 4,500 4,646,205
Municipal Electric Authority, GA, Project #1, AMBAC,
8.426s, 2022(++) 9,900 9,730,908
New Hampshire Business Finance Authority, Pollution
Control Rev. (United Illuminating Co.), 5.875s,
2033 2,985 2,653,396
New Jersey Economic Development Authority
(Vineland Cogeneration), 7.875s, 2019 7,550 7,888,316
New York Energy Research & Development Authority,
Electric Facilities Rev., 7.15s, 2019 1,155 1,187,744
New York Energy Research & Development Authority,
Electric Facilities Rev., 7.15s, 2022 1,625 1,668,583
New York Energy Research & Development Authority,
Electrical Facilities Rev. (Consolidated Edison),
AMBAC, 7.5s, 2026 4,750 4,843,147
North Carolina Municipal Power Agency (Catawba
Electric), 6.375s, 2013 2,750 2,704,845
Ohio Water Development, Pollution Control Rev.
(Cleveland Electric), 8s, 2023 4,700 4,999,860
Pennsylvania Economic Development Financing
Authority, Resources Recovery Rev., 6.5s, 2013 2,300 2,214,371
Pennsylvania Economic Development Financing
Authority, Resources Recovery Rev., 6.6s, 2019 5,000 4,774,100
Pima County, AZ, Industrial Development Authority
(Tuscon Electric Power Co.), 6.1s, 2025 2,000 1,714,520
Pima County, AZ, Industrial Development Authority
(Tuscon Electric Power Co.), 6s, 2029 16,000 13,587,040
Pittsylvania County, VA, Industrial Development
Authority, 7.55s, 2019 10,000 10,271,400
Southern California Public Power Authority,
Transmission Project Rev., RIBS, 7.812s, 2012(++) 7,850 8,101,357
West Feliciana Parish, LA, Pollution Control Rev.
(Entergy Gulf States), 6.6s, 2028 3,335 3,123,828
West Feliciana Parish, LA, Pollution Control Rev.
(Gulf States Utilities Co.), 5.8s, 2015 2,500 2,265,525
West Feliciana Parish, LA, Pollution Control Rev.
(Gulf States Utilities Co.), 9s, 2015 2,500 2,592,950
--------------
$ 162,819,551
- -------------------------------------------------------------------------------
Health Care Revenue - 15.4%
Arkansas Development Finance Authority Rev. (White
River Medical Center), 5.55s, 2019 $ 1,000 $ 810,010
Baltimore County, MD, Nursing Facility Mortgage Rev.
(Eastpoint Rehabilation & Nursing Center),
6.75s, 2028 1,250 1,050,000
Baxter County, AR, Hospital Rev., 5.6s, 2021 3,000 2,353,860
Bell County, TX, Health Facilities Development Corp.
(Advanced Living Technology), 7.25s, 2001 115 111,252
Bell County, TX, Health Facilities Development Corp.
(Advanced Living Technology), 7.75s, 2006 395 356,337
Bell County, TX, Health Facilities Development Corp.
(Advanced Living Technology), 8.125s, 2016 1,420 1,192,204
Bell County, TX, Health Facilities Development Corp.
(Advanced Living Technology), 8.5s, 2026 3,150 2,594,151
Bell County, TX, Health Facilities Development Corp.
(Kings Daughters Hospital), 9.25s, 2008 1,005 1,035,180
Berlin, MD, Hospital Rev. (Atlantic General
Hospital), 8.375s, 2022 1,307 1,313,548
Brevard County, FL, Health Facilites Authority
(Beverly Enterprises), 10s, 2010 1,145 1,188,636
Cambria County, PA, Industrial Development Authority
(Beverly Enterprises), 10s, 2012 960 1,127,366
Chautauqua County, NY, Industrial Development Agency,
Civic Facility Rev. (Womans Christian Assn.),
6.35s, 2017 1,500 1,340,295
Chautauqua County, NY, Industrial Development Agency,
Civic Facility Rev. (Womans Christian Assn.), 6.4s,
2029 3,500 2,892,295
Chemung County, NY, Industrial Development Agency,
Civic Facilities Rev. (St. Joseph's Hospital-
Elmira), 6s, 2013 2,850 2,480,155
Chemung County, NY, Industrial Development Agency,
Civic Facilities Rev. (St. Joseph's Hospital-
Elmira), 6.35s, 2013 1,910 1,683,608
Cheneyville, LA, Westside Habilitation Center,
8.375s, 2013 5,600 5,762,232
Chester County, PA, Health & Education Facilities
Authority (Jefferson Health Systems), 5.375s, 2027 5,000 3,999,900
Chester County, PA, Industrial Development Authority
(RHA/PA Nursing Home), 10.125s, 2019* 1,908 1,431,000
Connecticut Health & Educational Facilities (Johnson
Evergreen), 8.5s, 2014 1,350 1,411,884
Contra Costa County, CA, Residential Rental
Facilities Rev. (Cypress Meadows), 7s, 2028 3,000 2,462,760
Denver, CO, Health & Hospital Rev., 5.375s, 2018 3,700 2,918,116
Denver, CO, Health & Hospital Rev., 5.375s, 2028 5,000 3,677,000
District of Columbia, Hospital Rev. (Hospital for
Sick Children), 8.875s, 2021 915 945,744
Elkhart County, IN, Hospital Authority Rev. (Elkhart
General Hospital, Inc), 5.25s, 2018 1,000 858,440
Goldsboro, NC, Housing Authority Rev. (North Carolina
Housing Foundation, Inc.), 7.25s, 2029 2,225 1,993,444
Grand Junction, CO, Hospital Rev. (Community
Hospital), 6.9s, 2017 2,900 2,717,967
Illinois Health Facilities Authority Rev. (Centegra
Health Systems), 5.25s, 2018 1,500 1,167,630
Indiana Health Facilities Financing Authority Rev.
(Metro Health/Indiana, Inc.), 6.3s, 2023 3,935 3,316,143
Iowa Finance Authority, Health Care Facilities Rev.
(Care Initiatives), 5.75s, 2018 1,200 963,600
Jacksonville, FL, Health Facilities Authority
(National Benevolent), 7s, 2022 1,000 1,003,070
Jefferson County, KY, Health Care Authority Rev.
(Beverly Enterprises, Inc.), 5.875s, 2007 250 234,393
Kansas City, MO, Industrial Development Authority
(Bishop Spencer Place, Inc.), 8s, 2024 7,720 7,897,483
Lee County, FL, Industrial Development Authority
(Beverly Enterprises), 10s, 2010 800 840,632
Louisiana Public Facilities Authority (Southwest
Medical Center), 11s, 2006 1,111 188,922
Loves Park, IL (Hoosier Care), 7.125s, 2034 1,995 1,727,969
Lufkin, TX, Health Facilities Development Corp.
(Memorial Health System of East Texas), 6.875s,
2026 1,395 1,284,851
Lufkin, TX, Health Facilities Development Corp.
(Memorial Health System of East Texas), 5.7s, 2028 2,800 2,137,576
Maine Health & Higher Educational Facilities,
7.5s, 2019 1,500 1,429,215
Massachusetts Health & Education Facilities Authority
(Caritas Christi), 5.7s, 2015 3,500 2,875,495
Massachusetts Health & Education Facilities Authority
(Jordan Hospital), 5.25s, 2018 4,600 3,563,022
Massachusetts Health & Education Facilities Authority
(St. Memorial Medical Center), 6s, 2023 13,530 10,846,054
Massachusetts Industrial Finance Agency, 9.25s, 2009 3,535 3,543,731
Massachusetts Industrial Finance Agency (GF Revere),
8.875s, 2025 7,550 8,087,560
Massachusetts Industrial Finance Agency (Metropolitan
Health Foundation, Inc.), 6.75s, 2027 5,830 5,165,030
Massachusetts Industrial Finance Agency (WNR, Inc.),
9s, 2023(+) 1,050 899,220
Mecosta County, MI, General Hospital Rev., 6s, 2018 1,200 1,016,232
Michigan Hospital Finance Authority Rev. (Memorial
Healthcare Center), 5.875s, 2021 1,000 827,380
Millbrae, CA, Residential Facility (Magnolia Of
Millbrae), 7.375s, 2027 3,000 2,918,130
Mississippi Business Finance Corp., Health Facilities
Rev. (Medical Foundation, Inc.), 5.375s, 2015 1,000 789,720
Mississippi Business Finance Corp., Health Facilities
Rev. (Medical Foundation, Inc.), 5.625s, 2023 2,000 1,530,140
Mocksville, NC (Housing Foundation, Inc.), 7.25s,
2029 2,200 1,977,954
Monongalia County, WV, Health Facilities Rev.
(Beverly Enterprises, Inc.), 5.875s, 2007 500 470,345
Montgomery County, PA, Higher Education & Health
Authority Rev. (AHF/Montgomery), 10.5s, 2020 2,415 2,458,108
New Hampshire Business Finance Authority, Health Care
Facilities Rev. (Metropolitian Health Foundation,
Inc.), 6.55s, 2028 3,000 2,549,520
New Hampshire Higher Educational & Health Facilities
Authority Rev. (Littleton Hospital Assn.), 5.9s,
2018 1,750 1,454,320
New Hampshire Industrial Development Authority (Tall
Pines), 11.25s, 2016* 1,265 63,250
New Jersey Economic Development Authority (Burnt
Tavern Convalescent Center), 9s, 2013 1,700 1,779,135
New Jersey Economic Development Authority (Courthouse
Convalescent Center), 8.7s, 2014 1,350 1,411,155
New Jersey Economic Development Authority (Geriatric
& Medical Services), 10.5s, 2020 3,000 2,922,120
New Jersey Economic Development Authority (Greenwood
Health Care), 9.75s, 2011 2,705 2,845,768
New Jersey Economic Development Authority (Wanaque
Convalescent Center), 8.5s, 2009 700 734,013
New Jersey Economic Development Authority (Wanaque
Convalescent Center), 8.6s, 2011 1,000 1,050,700
New Jersey Health Care Facilities Financing Authority
(Cherry Hill), 8s, 2027 4,000 4,007,880
New Mexico Hospital Equipment Loan Council, Hospital
Rev. (Memorial Medical Center, Inc.), 5.375s, 2018 2,600 2,055,248
New York City, NY, Health & Hospital Corp. Rev.,
5.25s, 2017 2,000 1,614,760
North Carolina Medical Care Commission, Hospital Rev.
(Pitt County Memorial Hospital), 5s, 2018 1,350 1,140,453
Ohio County, WV, County Commission Health System
(Ohio Valley Medical Center), 5.75s, 2013 5,000 4,297,350
Osceola County, FL, Industrial Development Rev.
(Community Provider Pooled Loan), 7.75s, 2017 2,700 2,715,417
Portsmouth, VA, Industrial Development Authority
(Beverly Enterprises), 10s, 2011 1,795 1,902,000
Reedley, CA, Certificates of Participation (Mennonite
Home), 7.5s, 2026 5,320 5,203,811
Rochester, MN, Health Care Facilities Rev. (Mayo
Medical Foundation), 8.51s, 2021 2,000 2,021,060
Royston, GA, Hospital Authority Rev. (Ty Cobb
Healthcare Systems, Inc.), 6.375s, 2014 800 726,008
Royston, GA, Hospital Authority Rev. (Ty Cobb
Healthcare Systems, Inc.), 6.5s, 2027 1,155 1,017,266
San Francisco, CA, City & County (Coventry Park),
8.5s, 2026 9,435 9,453,115
Santa Fe, NM, Industrial Development Rev. (Casa Real
Nursing Home), 9.75s, 2013 1,740 1,827,557
Seminole County, FL, Industrial Development Authority
(Friendly Village), 10s, 2011 770 770,847
Sierra View, CA, Local Health Care District, 5.4s,
2022 4,000 3,045,920
Southwestern Illinois Development Authority Rev.
(Anderson Hospital), 5.375s, 2015 1,385 1,120,216
Southwestern Illinois Development Authority Rev.
(Anderson Hospital), 5.5s, 2020 1,625 1,269,564
Southwestern Illinois Development Authority Rev.
(Anderson Hospital), 5.625s, 2029 4,200 3,149,538
Springfield, TN, Health & Educational Facilities
(Northcrest Medical Center), 5.25s, 2018 3,600 2,690,172
Springfield, TN, Health & Educational Facilities
(Northcrest Medical Center), 5.375s, 2024 5,000 3,635,150
Sterling, IL (Hoosier Care), 7.125s, 2034 1,395 1,230,027
Suffolk County, NY, Industrial Development Agency
(Southampton Hospital), 7.25s, 2020 3,500 3,202,395
Suffolk County, NY, Industrial Development Agency
(Southampton Hospital), 7.625s, 2030 1,500 1,367,985
Waterford Township, MI, Economic Development Corp.
Rev. (Canterbury Health), 6s, 2039 3,190 2,377,794
West Plains, MO, Industrial Development Authority,
Hospital Rev. (Ozarks Medical Center), 6.75s, 2024 810 704,854
Westerville, OH, Industrial Development Rev. (1st
Mortgage Health Care), 10s, 2008 445 447,897
Wilkins Area, PA, Industrial Development Authority
(Beverly Enterprises), 10s, 2011 950 1,009,708
Wilkinsburg, PA, Municipal Authority Health
(Monroeville Christian), 8.25s, 2027 7,100 6,872,658
Yonkers, NY, Industrial Development Agency (St.
Joseph Hospital), 6.15s, 2015 2,000 1,713,140
--------------
$ 206,266,760
- -------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 13.8%
Baltimore County, MD, Pollution Control (Bethlehem
Steel), 7.55s, 2017 $ 1,850 $ 1,880,359
Burns Habor, IN, Solid Waste Disposal Facilities Rev.
(Bethlehem Steel), 8s, 2024### 10,455 10,890,764
Butler, AL, Industrial Developement Board, Solid
Waste Rev. (James River Corp.), 8s, 2028 4,500 4,824,675
Cambria County, PA, Industrial Development Authority
(Beverly Enterprises), 7.5s, 2015 4,390 4,419,325
Courtland, AL, Industrial Development Board, Solid
Waste Disposal Rev. (Champion International Corp.),
6.375s, 2029 2,500 2,312,400
Delaware County, PA, Industrial Development Authority
(Resources Recovery Facility), 5.5s, 2002 600 589,866
Delaware County, PA, Industrial Development Authority
(Resources Recovery Facility), 6s, 2003 1,800 1,774,008
Delaware County, PA, Industrial Development Authority
(Resources Recovery Facility), 6.1s, 2005 3,460 3,365,438
DeQueen, AR, Industrial Development Board
(Weyerhaeuser Co.), 9s, 2006 1,000 1,002,800
Florence County, SC, Industrial Development Rev.
(Stone Container Corp.), 7.375s, 2007 2,650 2,712,805
Gulf Coast Waste Disposal Authority, TX, (USX Corp.),
5.5s, 2017 3,000 2,594,040
Hardeman County, TN, (Correctional Facilities Corp.),
7.75s, 2017 6,500 6,690,515
Hernando County, FL, Water & Sewer Rev. (Florida
Crushed Stone), 8.5s, 2014 8,555 9,229,134
Hodge Village, LA, Utilities Rev. (Stone Container),
9s, 2010 7,800 7,968,402
Indiana Development Finance Authority Rev. (Inland
Steel), 5.75s, 2011 3,000 2,559,570
Indiana Development Finance Authority Rev. (Inland
Steel), 7.25s, 2011 10,000 9,567,800
Kanawha County, WV, Pollution Control Rev. (Union
Carbide Corp.), 5.1s, 2012 1,000 895,330
Luzerne County, PA, Industrial Development Authority
(Beverly Enterprise, Inc.), 6.75s, 2008 1,800 1,709,766
Maine Finance Authority (Bowater), 7.75s, 2022 8,500 8,816,455
Massachusetts Development Finance Agency Rev.
(Springfield Resources Recovery), 5.625s, 2019 2,225 2,002,700
Massachusetts Port Authority Rev., Special Facilities
(Bosfuel), MBIA, 5.75s, 2039 5,000 4,574,600
Mesa County, CO, 8.5s, 2006* 5,050 3,787,500
Michigan Strategic Funding Obligation Rev. (United
Waste Systems), 5.2s, 2010 1,500 1,261,365
New Jersey Economic Development Authority (Holt
Hauling & Warehousing), 8.4s, 2015 4,000 4,116,400
New Jersey Economic Development Authority (Holt
Hauling & Warehousing), 8.6s, 2017 8,000 8,297,760
Ohio Solid Waste Rev. (Republic Engineered Steels),
8.25s, 2014 7,000 3,500,000
Onondaga County, NY, Industrial Development Agency,
Solid Waste Disposal Facility Rev. (Solvay
Paperboard LLC), 6.8s, 2014 3,800 3,696,906
Owyhee County, ID, Industrial Development Rev.
(Environsafe), 8.25s, 2002 4,000 4,070,440
Perry County, KY, Solid Waste Disposal Resources
(TJ International), 7s, 2024 11,000 11,237,930
Philadelphia, PA, Industrial Development Authority
Rev. (Host Marriott LP), 7.75s, 2017 2,000 2,090,460
Port of New Orleans, LA (Avondale Industries), 8.5s,
2014 22,040 23,534,533
Power County, ID, Pollution Control Rev. (FMC Corp.),
5.625s, 2014 1,000 907,070
Savannah, GA, Economic Development Authority
(Stone Container Corp.), 7.4s, 2026 7,500 7,310,775
Schuylkill County, PA, Industrial Development
Authority (Pine Grove Landfill, Inc.), 5.1s, 2019 1,000 845,730
Spokane County, WA, Industrial Development Corp.
(Kaiser Aluminum & Chemical Corp.), 7.6s, 2027 3,700 3,768,080
St. Charles Parish, LA, Pollution Control Rev.
(Union Carbide Corp.), 5.1s, 2012 2,000 1,790,660
Sweetwater County, WY, Solid Waste Disposal Rev.
(FMC Corp.), 6.9s, 2024 3,000 3,033,870
Tooele County, UT, Pollution Control Rev. (Laidlaw
Environmental Services), 7.55s, 2027 5,000 5,081,250
Virginia Peninsula Ports Authority Rev.
(Zeigler Coal), 6.9s, 2022 5,000 4,228,100
Westmoreland County, PA, Industrial Development Corp.
(Valley Landfill), 5.1s, 2018 2,500 2,113,350
--------------
$ 185,052,931
- -------------------------------------------------------------------------------
Insured Health Care Revenue - 1.8%
Chester County, PA, Health & Education Facilities
Authority (Jefferson Health Systems), AMBAC,
5.25s, 2022 $ 5,000 $ 4,294,350
Illinois Health Facilities Authority Rev.
(Sisters of Mercy), MBIA, 9.417s, 2015(++) 5,200 5,531,448
Lauderdale County & Florence, AL, Health Care
Authority Rev. (Coffee Health Group), MBIA,
5.75s, 2012 775 757,857
Lauderdale County & Florence, AL, Health Care
Authority Rev. (Coffee Health Group), MBIA,
5.75s, 2013 1,765 1,714,521
Massachusetts Health & Education Facilities Authority
(Harvard Pilgrim Health), FSA, 5s, 2018 3,435 2,786,712
Michigan Hospital Finance Authority Rev. (Mercy Mount
Clemens), MBIA, 5.75s, 2017 3,100 2,996,956
Montana Health Facility Authority (Deaconess
Hospital), AMBAC, RIBS, 9.884s, 2016(++) 4,000 4,164,440
Philadelphia, PA, Hospital & Higher Education
Facilities Authority Rev., FGIC, 6.504s, 2012(++) 2,000 1,874,180
--------------
$ 24,120,464
- -------------------------------------------------------------------------------
Multi-Family Housing Revenue - 3.4%
Alexandria, VA, Redevelopment & Housing Finance
Authority (Jefferson Village Apartments),
9s, 2018 $ 2,000 $ 2,053,920
Austin, TX, Housing Finance Corp. (Woodland
Heights Apartments), 7.25s, 2027 4,000 4,282,720
California Statewide Community Development Authority
(Equity Residential), 5.2s, 2029 3,940 3,752,653
California Statewide Community Development Authority
(Irvine Apartments), 5.25s, 2025 3,500 3,222,730
Charter Mac Equity Issuer Trust, 6.625s, 2009 8,000 7,722,800
Dallas, TX, Housing Finance Corp., 8.5s, 2011 2,870 2,879,327
Florida Multi-Family Housing Finance Agency Rev.
(Center Court Apartments), 8.5s, 2018 1,735 1,654,600
Maplewood, RI, Housing Development Corp. (Terrace
Apartments), 6.9s, 2025 3,990 4,066,129
Maryland Community Development Administration, 0s,
2032 11,550 955,185
Maryland Community Development Administration, 6s,
2039 3,500 3,290,525
Munimae Te Bond Subsidiary LLC, 6.875s, 2009## 6,000 5,892,960
Ridgeland, MS, Urban Renewal, Multifamily Housing
Rev. (Northbrook I & III Apartments), 6.25s, 2029 5,000 4,278,900
Texas Housing & Community Board (Harbors & Plumtree),
10s, 2026+ 1,750 1,635,218
Virginia Housing & Development Authority, 0s, 2017 2,060 409,384
--------------
$ 46,097,051
- -------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 0.2%
Black Hawk, CO, Device Tax Rev., 5.625s, 2021 $ 1,250 $ 1,001,412
Virgin Islands Public Finance Authority, 6s, 2006 500 499,870
Virgin Islands Public Finance Authority,
5.875s, 2018 1,500 1,365,780
--------------
$ 2,867,062
- -------------------------------------------------------------------------------
Single Family Housing Revenue - 6.2%
California Housing Finance Agency Rev., MBIA,
0s, 2027 $ 6,875 $ 1,511,950
California Rural Home Mortgage Finance Authority,
GNMA, 5.2s, 2030 1,800 1,855,386
Chicago, IL, Single Family Mortgage Rev., FNMA/GNMA,
7.05s, 2030 900 957,420
Colorado Housing Finance Authority, 7.15s, 2014 500 527,320
Colorado Housing Finance Authority, 6.75s, 2021 1,145 1,196,548
Colorado Housing Finance Authority, 6.55s, 2025 1,110 1,151,081
Colorado Housing Finance Authority, 7.4s, 2027 1,270 1,338,885
Colorado Housing Finance Authority, 6.8s, 2030 2,250 2,322,967
Connecticut Housing Finance Authority, ,
5.85s, 2028 4,015 3,760,770
Cook County, IL, Single Family Mortgage Rev.,
0s, 2015 1,435 268,302
Corpus Christi, TX, Housing Finance Corp., MBIA,
0s, 2011 3,395 1,112,270
Delaware Single Family Housing Authority Rev.,
6.75s, 2024 2,605 2,641,522
East Baton Rouge, LA, Capital Appreciation Rev.,
MBIA, 0s, 2010 3,275 1,032,804
El Paso, TX, Housing Finance Corp., Single Family
Mortgage Rev., 8.75s, 2011 470 492,612
Florida Housing Finance Agency Rev., 0s, 2016 2,485 477,915
Georgia Housing & Finance Authority Rev., FHA,
0s, 2031 25,110 2,462,035
Hawaii Housing Finance & Development Corp.,
5.75s, 2030 5,000 4,554,100
Jefferson County, CO, Single Family Mortgage Rev.,
MBIA, 8.875s, 2013 145 149,594
Jefferson County, TX, Housing Finance Corp., Single
Family Mortgage Rev., MBIA, 0s, 2015 2,380 440,871
Jefferson Parish, LA, Home Mortgage Authority Rev.,
GNMA, 6.75s, 2030 1,350 1,413,234
Lee County, FL, Housing Finance Authority Rev.,
FNMA/GNMA, 7s, 2031 800 843,840
Maryland Community Development Administration,
7.3s, 2025 4,705 4,818,908
Mississippi Home Corp., Single Family Senior Housing
Rev., FGIC, 9.25s, 2012 117 121,299
Missouri Housing Development Commission, Mortgage
Rev., GNMA, 6.45s, 2029 1,040 1,075,994
Missouri Housing Development Commission, Mortgage
Rev., GNMA, 6.3s, 2030 3,500 3,580,640
Missouri Housing Development Commission, Mortgage
Rev., GNMA, 6.7s, 2030 4,500 4,712,220
New Castle County, DE, Single Family Mortgage Rev.,
FGIC, 0s, 2016 560 106,333
New Mexico Mortgage Finance Authority, Single Family
Mortgage Rev., 6.9s, 2024 2,035 2,073,014
North Dakota Housing Finance Agency, Single Family
Mortgage Rev., 8.3s, 2012 190 194,494
North Dakota Housing Finance Agency, Single Family
Mortgage Rev., 6.8s, 2023 705 719,438
North Dakota Housing Finance Agency, Single Family
Mortgage Rev., 5.9s, 2029 2,190 2,043,686
Ohio Housing Finance Agency, Single Family Mortgage
Rev., GNMA, 8.832s, 2031(++) 1,000 1,060,820
Oklahoma Housing Finance Agency, 5.375s, 2020 1,960 1,762,412
Oklahoma Housing Finance Agency, 6.8s, 2026 2,000 2,088,740
Pima County, AZ, Industrial Development Authority,
7.05s, 2030 2,800 2,988,804
Reno County, KS, Single Family Mortgage Rev., AMBAC,
0s, 2014 1,325 253,115
Sedgwick & Shawnee Counties, KS, GNMA, 6.5s, 2022 6,375 6,488,284
Sedgwick & Shawnee Counties, KS, GNMA, 5.5s, 2026 3,375 3,492,281
South Dakota Housing Development Authority,
Homeownership Mortgage, 5.8s, 2028 4,734 4,358,499
Texas Housing & Community Affairs, Residential
Mortgage Rev., 7.1s, 2021 5,000 5,291,900
Texas Veteran Housing Assistance Program, 7s, 2025 1,100 1,120,988
Wisconsin Housing & Economic Development Authority,
Homeownership Rev., RIBS, 9.855s, 2022(++) 870 904,757
Wyoming Community Development Authority, 5.85s, 2028 4,285 3,951,670
--------------
$ 83,719,722
- -------------------------------------------------------------------------------
Solid Waste Revenue - 1.0%
Henrico County, VA, Industrial Development Authority
Rev. (Browning-Ferris), 5.3s, 2011 $ 3,000 $ 2,739,960
Hudson County, NJ, Solid Waste System Rev., 6s, 2019 2,000 1,841,960
Massachusetts Industrial Finance Agency (Ogden
Haverhill), 5.5s, 2013 2,500 2,188,825
Massachusetts Industrial Finance Agency (Ogden
Haverhill), 5.6s, 2019 5,000 4,167,600
Southwestern Illinois Development Authority Rev.,
Solid Waste Disposal Rev., 5.9s, 2014 2,500 2,283,125
--------------
$ 13,221,470
- -------------------------------------------------------------------------------
Special Assesment District - 1.8%
Broadview, IL, Tax Increment Rev., 5.25s, 2012 $ 4,180 $ 3,864,954
Broadview, IL, Tax Increment Rev., 5.375s, 2015### 3,400 3,048,032
Denver, CO, Urban Renewal Tax (Downtown Denver),
8.5s, 2013 1,255 1,256,883
Denver, CO, Urban Renewal Tax (Downtown Denver),
7.25s, 2017 1,250 1,288,712
Denver, CO, Urban Renewal Tax (Musicland), 8.5s, 2017 950 951,425
Katy, TX, Development Authority Rev., 5.8s, 2011 3,500 3,201,940
Katy, TX, Development Authority Rev., 6s, 2018 6,000 5,353,020
Lake Elsinore, CA, Public Financing Authority, 5s,
2009 2,000 1,856,040
Lake Elsinore, CA, Public Financing Authority, 5.15s,
2014 3,205 2,844,213
--------------
$ 23,665,219
- -------------------------------------------------------------------------------
Student Loan Revenue - 1.1%
Arizona Student Loan Acquisition Authority, "B",
6.15s, 2029 $ 1,500 $ 1,418,385
Arizona Student Loan Acquisition Authority, "C",
7.625s, 2010 4,610 4,895,313
Arizona Student Loan Acquisition Authority, "D",
7.25s, 2010 2,970 3,007,362
Pennsylvania Higher Education Assistance Agency,
AMBAC, 8.138s, 2022(++) 2,700 2,687,958
South Dakota Student Loan Rev. (Education Loans,
Inc.), 5.6s, 2020 2,700 2,452,626
--------------
$ 14,461,644
- -------------------------------------------------------------------------------
Turnpike Revenue - 2.1%
Florida Mid-Bay Bridge Authority Rev., 8.5s, 2022 $ 2,500 $ 2,701,600
Foothill/Eastern Transportation Corridor Agency, CA,
Toll Road Rev., 0s to 2005, 7.15s to 2013 5,000 4,207,050
Los Angeles, CA, 7s, 2015+(++) 5,310 4,650,604
New Jersey Economic Development Authority, Special
Facilities Rev., FSA, 6s, 2016 1,350 1,360,557
Pocahontas Parkway Assn., VA, Toll Road Rev.,
0s, 2011 2,700 1,159,326
Pocahontas Parkway Assn., VA, Toll Road Rev.,
0s, 2012 2,100 858,564
Pocahontas Parkway Assn., VA, Toll Road Rev.,
0s, 2012 1,700 674,271
Pocahontas Parkway Assn., VA, Toll Road Rev.,
0s, 2013 7,000 2,647,400
Pocahontas Parkway Assn., VA, Toll Road Rev.,
0s, 2014 6,600 2,306,832
Pocahontas Parkway Assn., VA, Toll Road Rev.,
0s, 2015 7,250 2,339,430
Pocahontas Parkway Assn., VA, Toll Road Rev.,
0s, 2016 2,000 595,240
State of Florida, 5.949s, 2017+(++) 2,300 1,733,418
Telluride, CO, Gondola Transit Co., 9s, 2016 2,340 2,567,167
West Virginia Parkways, Economic Development &
Tourism Authority, FGIC, 7.452s, 2019(++) 1,200 1,123,764
--------------
$ 28,925,223
- -------------------------------------------------------------------------------
Universities - 1.5%
California Educational Facilities Authority Rev.
(L.A. College of Chiropractic), 5.6s, 2017 $ 2,000 $ 1,774,680
Illinois Development Finance Authority, Economic
Development Rev. (Latin School of Chicago), 5.6s,
2018 850 759,730
Illinois Development Finance Authority, Economic
Development Rev. (Latin School of Chicago), 5.65s,
2028 1,730 1,494,253
Islip, NY, Community Development Agency Rev. (New
York Institute of Technology), 7.5s, 2026 6,000 6,082,320
Massachusetts Development Finance Agency Rev.
(Williston Northampton School), 6.5s, 2028 1,650 1,477,162
Nassau County, NY, Industrial Development Agency,
Civic Facilities Rev. (New York Institute of
Technology), 6.15s, 2029 3,300 2,890,899
New Hampshire Higher Educational & Health Facilities
Authority Rev. (Franklin Pierce Law Center), 5.5s,
2018 1,200 1,037,112
Ohio State University, 6s, 2017 500 502,100
Savannah, GA, Economic Development Authority (College
Of Art & Design, Inc.), 6.2s, 2009 820 805,470
Savannah, GA, Economic Development Authority (College
Of Art & Design, Inc.), 6.5s, 2013 2,000 1,951,640
University of Akron, OH, FGIC, 6s, 2015 1,040 1,044,420
--------------
$ 19,819,786
- -------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 1.2%
Detroit, MI, Sewer Disposal Rev., 6.756s, 2023(++) $ 1,500 $ 1,634,400
Detroit, MI, Sewer Disposal Rev., 6.756s, 2023(++) 500 440,875
Harrisburg, PA, Authority Water Rev., FGIC, 7.32s,
2015(++) 2,000 1,996,300
New York City, NY, Municipal Water Finance Authority
Rev., FSA, 5.375s, 2026 2,500 2,233,475
New York City, NY, Municipal Water Finance Authority
Rev., 5.75s, 2029 8,590 7,917,661
State of Virginia, Clean Water Rev., 5.75s, 2019 2,500 2,425,050
--------------
$ 16,647,761
- -------------------------------------------------------------------------------
Other - 3.3%
Alabama Building Renovation Authority, AMBAC,
6s, 2017 $ 1,805 $ 1,787,167
Alabama Building Renovation Authority, AMBAC,
6s, 2018 1,155 1,140,759
Boise City, ID, Urban Renewalagy (Urban Renewal Ada
County Courts), AMBAC, 6s, 2015 1,000 1,002,850
Brush, CO, Industrial Development Rev. (Training
Centers International, Ltd.), 9.5s, 2015* 8,789 2,021,523
Colorado River, TX, Municipal Water District, 6.25s,
2004+ 3,000 2,881,350
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 3,697,155
Harris County, TX, Cultural Education Facility
(Space Center Houston), 9.25s, 2023 70 67,612
Iowa Finance Authority Community Provider Rev. (Boys
& Girls Home), 6.25s, 2028 2,000 1,720,080
Lehigh County, PA, General Purpose Authority
(Kidspeace Obligation Group), 6s, 2018 5,000 4,379,450
Massachusetts Industrial Finance Agency (Brandon
Residential Treatment), 8.75s, 2024 5,110 5,457,633
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 1,450 1,286,585
Rail Connections Inc., MA Rev., 0s, 2015 375 128,100
Rail Connections Inc., MA Rev., 0s, 2016 450 142,096
Rail Connections Inc., MA Rev., 0s, 2017 975 284,281
Rail Connections Inc., MA Rev., 0s, 2018 1,235 333,067
St. Louis County, MO, Industrial Development
Authority (Eagle Golf Enterprises), 10s, 2005 2,200 2,315,170
St. Louis County, MO, Industrial Development
Authority (Kiel Center Arena), 7.875s, 2024 1,000 1,045,741
--------------
$ 43,741,269
- -------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $1,365,252,290) $1,313,889,943
- -------------------------------------------------------------------------------
Floating Rate Demand Notes - 1.1%
- -------------------------------------------------------------------------------
Capital Projects Finance Authority, Florida Rev.,
due 02/07/00 $ 3,700 $ 3,700,000
Gulf Breeze, FL Rev., due 02/07/00 3,300 3,300,000
Harris County, TX, Hospital Rev. (Methodist
Hospital),
due 02/01/00 5,800 5,800,000
New Castle, PA, Area Hospital Authority (Jameson
Memorial Hospital), due 02/01/00 1,300 1,300,000
Piedmont, SC, Municipal Power Agency Electric Rev.,
due 02/01/00 200 200,000
Pinellas County, FL, Health Facility Authority, due
02/01/00 150 150,000
- -------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Amortized Cost
and Value $ 14,450,000
- -------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,379,702,290) $1,328,339,943
Other Assets, Less Liabilities - 1.1% 14,817,112
- -------------------------------------------------------------------------------
Net assets - 100.0% $1,343,157,055
- -------------------------------------------------------------------------------
* 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.
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------
JANUARY 31, 2000
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $1,379,702,290) $1,328,339,943
Cash 110,002
Receivable for daily variation margin on open futures
contracts 21,875
Receivable for Fund shares sold 1,734,458
Receivable for investments sold 523,227
Interest receivable 21,148,660
Other assets 18,345
--------------
Total assets $1,351,896,510
--------------
Liabilities:
Distributions payable $ 4,522,545
Payable for Fund shares reacquired 3,748,204
Payable to affiliates -
Management fee 60,161
Shareholder servicing agent fee 10,942
Distribution and service fee 40,706
Administrative fee 1,571
Accrued expenses and other liabilities 355,326
--------------
Total liabilities $ 8,739,455
--------------
Net assets $1,343,157,055
==============
Net assets consist of:
Paid-in capital $1,548,823,211
Unrealized depreciation on investments (51,678,721)
Accumulated net realized loss on investments (153,792,985)
Accumulated distribution in excess of net investment
income (194,450)
---------------
Total $1,343,157,055
==============
Shares of beneficial interest outstanding 166,514,340
===========
Class A shares:
Net asset value per share
(net assets of $985,621,895 / 122,221,615 shares of
beneficial interest outstanding) $8.06
=====
Offering price per share (100 / 95.25 of the net asset
value per share) $8.46
=====
Class B shares:
Net asset value and offering price per share
(net assets of $340,157,332 / 42,140,156 shares of
beneficial interest outstanding) $8.07
=====
Class C shares:
Net asset value and offering price per share
(net assets of $17,377,828 / 2,152,569 shares of
beneficial interest outstanding) $8.07
=====
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
- ------------------------------------------------------------------------------
YEAR ENDED JANUARY 31, 2000
- ------------------------------------------------------------------------------
Net investment income:
Interest income $ 101,428,507
-------------
Expenses -
Management fee $ 9,219,242
Trustees' compensation 68,741
Shareholder servicing agent fee 1,549,610
Distribution and service fee (Class B) 3,001,498
Distribution and service fee (Class C) 124,520
Administrative fee 185,776
Custodian fee 333,864
Printing 71,914
Postage 70,510
Auditing fees 35,823
Legal fees 53,706
Miscellaneous 876,097
-------------
Total expenses $ 15,591,301
Fees paid indirectly (299,015)
Reduction of expenses by investment adviser (867,983)
-------------
Net expenses $ 14,424,303
-------------
Net investment income $ 87,004,204
-------------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) -
Investment transactions $ 18,802,592
Futures contracts 1,252,533
-------------
Net realized gain on investments $ 20,055,125
-------------
Change in unrealized depreciation -
Investments $(185,625,880)
Futures contracts (723,401)
-------------
Net unrealized loss on investments $(186,349,281)
-------------
Net realized and unrealized loss on investments $(166,294,156)
-------------
Decrease in net assets from operations $ (79,289,952)
=============
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------------------
YEAR ENDED JANUARY 31, 2000 1999
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 87,004,204 $ 81,520,636
Net realized gain on investments 20,055,125 375,373
Net unrealized loss on investments (186,349,281) (6,636,995)
--------------- ---------------
Increase (decrease) in net assets from operations $ (79,289,952) $ 75,259,014
--------------- ---------------
Distributions declared to shareholders -
From net investment income (Class A) $ (69,225,299) $ (66,082,785)
From net investment income (Class B) (19,611,814) (15,565,956)
From net investment income (Class C) (635,333) (19,190)
In excess of net investment income (Class A) (224,315) --
In excess of net investment income (Class B) (63,549) --
In excess of net investment income (Class C) (2,059) --
--------------- ---------------
Total distributions declared to shareholders $ (89,762,369) $ (81,667,931)
--------------- ---------------
Net increase (decrease) in net assets from Fund share transactions $ (22,203,674) $ 169,066,341
--------------- ---------------
Total increase (decrease) in net assets $ (191,255,995) $ 162,657,424
Net assets:
At beginning of period 1,534,413,050 1,371,755,626
--------------- ---------------
At end of period (including accumulated (distributions in excess of)
undistributed net investment income of $(194,450) and $2,468,242, respectively) $ 1,343,157,055 $ 1,534,413,050
=============== ===============
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
- -------------------------------------------------------------------------------------------------------------------
YEAR ENDED JANUARY 31, 2000 1999 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------
CLASS A
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.03 $ 9.07 $ 8.73 $ 9.12 $ 8.60
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.51 $ 0.53 $ 0.57 $ 0.61 $ 0.61
Net realized and unrealized gain
(loss) on investments (0.95) (0.04) 0.34 (0.36) 0.59
------ ------ ------ ------ ------
Total from investment operations $(0.44) $ 0.49 $ 0.91 $ 0.25 $ 1.20
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.53) $(0.53) $(0.57) $(0.64) $(0.68)
In excess of net investment income (0.00)+ -- -- -- --
------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.53) $(0.53) $(0.57) $(0.64) $(0.68)
------ ------ ------ ------ ------
Net asset value - end of period $ 8.06 $ 9.03 $ 9.07 $ 8.73 $ 9.12
====== ====== ====== ====== ======
Total return(+) (5.09)% 5.54% 10.81% 2.87% 13.92%
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.76% 0.81% 0.89% 0.93% 0.93%
Net investment income 5.94% 5.84% 6.42% 6.96% 6.83%
Portfolio turnover 27% 12% 19% 17% 20%
Net assets at end of period (000 Omitted) $985,622 $1,168,479 $1,107,181 $988,178 $,009,031
(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 $ 0.50 $ 0.53 -- -- --
Ratios (to average net assets):
Expenses## 0.82% 0.82% -- -- --
Net investment income 5.88% 5.83% -- -- --
+ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- --------------------------------------------------------------------------------------------------------------
YEAR ENDED JANUARY 31, 2000 1999 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------
CLASS B
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 9.04 $ 9.08 $ 8.74 $ 9.12 $ 8.60
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.44 $ 0.45 $ 0.49 $ 0.52 $ 0.52
Net realized and unrealized gain (loss)
on investments (0.95) (0.04) 0.34 (0.35) 0.59
------ ------ ------ ------ ------
Total from investment operations $(0.51) $ 0.41 $ 0.83 $ 0.17 $ 1.11
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.46) $(0.45) $(0.49) $(0.55) $(0.59)
In excess of net investment income (0.00)+ -- -- -- --
------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.46) $(0.45) $(0.49) $(0.55) $(0.59)
------ ------ ------ ------ ------
Net asset value - end of period $ 8.07 $ 9.04 $ 9.08 $ 8.74 $ 9.12
====== ====== ====== ====== ======
Total return (5.85)% 4.62% 9.87% 1.96% 12.78%
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.57% 1.69% 1.73% 1.86% 1.91%
Net investment income 5.13% 4.95% 5.50% 6.00% 5.84%
Portfolio turnover 27% 12% 19% 17% 20%
Net assets at end of period (000 Omitted) $340,157 $363,062 $264,575 $125,971 $77,808
(S) The investment adviser and distributor voluntarily waived a portion of their fees for certain of the periods
indicated. If these fees had been incurred by the Fund, the net investment income per share and the ratios
would have been:
Net investment income $ 0.43 $ 0.45 $ 0.49 -- --
Ratios (to average net assets):
Expenses## 1.63% 1.70% 1.80% -- --
Net investment income 5.07% 4.94% 5.43% -- --
+ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
JANUARY 31, 2000 JANUARY 31, 1999*
- -----------------------------------------------------------------------------------------------------------
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) $ 0.43 $ 0.15
Net realized and unrealized loss on investments (0.96) (0.06)
------ ------
Total from investment operations $(0.53) $ 0.09
------ ------
Less distributions declared to shareholders -
From net investment income $(0.44) $(0.15)
In excess of net investment income (0.00)+++ --
------ ------
Total distributions declared to shareholders $(0.44) $(0.15)
------ ------
Net asset value - end of period $ 8.07 $ 9.04
====== ======
Total return (6.04)% 0.96%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.76% 1.75%+
Net investment income 4.94% 4.45%+
Portfolio turnover 27% 12%
Net assets at end of period (000 Omitted) $17,378 $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 $ 0.42 $ 0.15
Ratios (to average net assets):
Expenses## 1.82% 1.76%+
Net investment income 4.88% 4.44%+
* For the period from the inception of Class C, September 25, 1998, through January 31, 1999.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(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 in good faith, at fair value, by 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 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 made directly to the security issuer, which
are generally non-recurring, incurred to protect or enhance the value of
high-yield debt securities, are reported as additions to the cost basis of the
security. Costs that are incurred to negotiate the terms or conditions of
capital infusions or that are expected to result in a plan of reorganization are
reported as realized losses. Ongoing costs incurred to protect or enhance an
investment, or costs incurred to pursue other claims or legal actions, are
expensed.
Fees Paid Indirectly - The 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 income 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 be reported in the financial statements as distributions from
paid-in-capital. Differences in the recognition or classification of income
between the financial statements and tax earnings and profits, which result in
temporary over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. During
the year ended January 31, 2000, accumulated undistributed net investment income
was increased by $95,473, and accumulated net realized loss on investments was
decreased by $95,473, due to differences between book and tax accounting for
defaulted bonds and market discount. This change had no effect on the net assets
or net asset value per share.
At January 31, 2000, the Fund, for federal income tax purposes, had a capital
loss carryforward of $154,428,458 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, 2002, ($18,933,325), 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 31, 2007, ($6,121,853).
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 daily net
assets 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 $26,099 for the year ended
January 31, 2000.
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
$611,029 for the year ended January 31, 2000, 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 year ended
January 31, 2000. Fees incurred under the distribution plan during the year
ended January 31, 2000, were 0.81% and 1.00% of average daily net assets
attributable to Class B and Class C shares on an annualized basis, respectively.
Certain purchases of 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 year ended January 31,
2000, were $61,154, $1,294,886, and $9,289 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 annual rate of 0.1125%.
(4) Portfolio Securities
Purchases and sales of investments, other than short-term obligations,
aggregated $398,101,754 and $427,194,362, respectively.
The cost and unrealized appreciation or depreciation in value of the investments
owned by the Fund, as computed on a federal income tax basis, are as follows:
Aggregate cost $1,379,702,290
--------------
Gross unrealized appreciation $ 40,891,084
Gross unrealized depreciation (92,253,431)
--------------
Net unrealized depreciation $ (51,362,347)
==============
(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
YEAR ENDED JANUARY 31, 2000 YEAR ENDED JANUARY 31, 1999
------------------------------ ------------------------------
SHARES AMOUNT SHARE AMOUNT
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 27,734,810 $ 239,618,620 30,441,333 $ 274,551,872
Shares issued to shareholders
in reinvestment of
distributions 2,977,187 25,569,363 2,806,743 25,325,360
Shares reacquired (37,897,710) (322,177,295) (25,859,959) (233,386,980)
------------- ------------- ------------- -------------
Net increase (decrease) (7,185,713) $ (56,989,312) 7,388,117 $ 66,490,252
============= ============= ============= =============
<CAPTION>
Class B Shares
YEAR ENDED JANUARY 31, 2000 YEAR ENDED JANUARY 31, 1999
------------------------------ ------------------------------
SHARES AMOUNT SHARE AMOUNT
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 10,417,197 $ 90,612,464 14,320,086 $ 129,318,514
Shares issued to shareholders
in reinvestment of
distributions 772,825 6,633,134 560,385 5,061,249
Shares reacquired (9,222,261) (78,516,621) (3,840,591) (34,674,697)
------------- ------------- ------------- -------------
Net increase 1,967,761 $ 18,728,977 11,039,880 $ 99,705,066
============= ============= ============= =============
<CAPTION>
Class C Shares
YEAR ENDED JANUARY 31, 2000 YEAR ENDED JANUARY 31, 1999
------------------------------ ------------------------------
SHARES AMOUNT SHARE AMOUNT
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,428,300 $ 21,062,648 326,949 $ 2,954,503
Shares issued to shareholders
in reinvestment of
distributions 34,058 289,328 1,060 9,568
Shares reacquired (627,555) (5,295,315) (10,243) (93,048)
------------- ------------- ------------- -------------
Net increase 1,834,803 $ 16,056,661 317,766 $ 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 year
ended January 31, 2000, was $10,534.
(7) Financial Instruments
The Fund trades financial instruments with off-balance-sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates. These financial instruments include futures contracts.
The notional or contractual amounts of these instruments represent the
investment 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 March 2000 175 Short $ 215,602
Municipal Bond Index March 2000 175 Long (531,976)
---------
$(316,374)
=========
At January 31, 2000, 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 January 31, 2000, the
Fund owned the following restricted securities, excluding securities issued
under Rule 144A, constituting 2.6% 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, in good faith, at fair value, by the Trustees.
<TABLE>
<CAPTION>
DATE OF PAR
DESCRIPTION ACQUISITION AMOUNT COST VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Chicago, IL, Public Building Commerce Rev.,
6.449s, 2016 3/18/99 $6,000,000 $6,478,200 $ 5,146,800
Chicago, IL, Public Building Commerce Rev.,
6.449s, 2017 3/18/99 4,500,000 4,510,000 3,810,690
Colorado River, TX, Municipal Water District,
6.25s, 2004 5/6/98 3,000,000 3,000,000 2,881,350
Delaware Valley, PA, Regional Finance
Authority, AMBAC, 7.031s, 2018 9/2/98 7,000,000 8,010,799 6,357,120
Hannibal, MO, Industrial Development
Authority, 9.5s, 2001 3/23/92 2,994,778 2,966,926 3,332,379
Houston, TX, Independent School District,
6.449s, 2017 3/11/99 5,000,000 5,227,127 4,065,000
Los Angeles, CA, 7s, 2015 7/21/99 5,310,000 5,556,530 4,650,604
State of Florida, 5.949s, 2017 4/9/99 2,300,000 2,332,844 1,733,418
State of South Carolina, 5.149s, 2016 4/8/99 2,000,000 1,896,953 1,352,480
Texas Housing & Community Board (Harbors &
Plumtree), 10s, 2026 11/12/96 1,750,000 1,750,000 1,635,218
-----------
$34,965,059
===========
</TABLE>
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees of MFS Series Trust III and Shareholders of MFS Municipal High
Income Fund:
We have audited the accompanying statement of assets and liabilities of MFS
Municipal High Income Fund, including the schedule of portfolio investments as
of January 31, 2000, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of January 31, 2000, by correspondence with
the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Municipal High Income Fund at January 31, 2000, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended, in conformity with accounting principles
generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
March 8, 2000
<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, [Graphic Omitted]
retirement plan participants, and MFS' institutional
clients, and supporting the financial consultants who sell
our products.
MFS can now say that it is ready for the Year 2000. Our testing has demonstrated
that MFS' computer hardware and software will recognize "00" as the Year 2000
and will not confuse those digits with 1900. All of our critical business
applications and processes have been successfully tested, and we have adopted
companywide policies that will help us maintain our readiness through the
remainder of the year. Any new technology that is brought into the company
before the end of the year will be held to the same stringent standards as our
current technology. We have also developed a vendor readiness survey, contacted
over 700 of our vendors, and established an ongoing process to review responses,
as well as to review readiness statements of new vendors and products.
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 Original Research(R)
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.
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 fund shareholders, retirement plan participants, or
institutional clients.
If you have further questions regarding MFS' Year 2000 Readiness Program, please
visit our Web site at www.mfs.com, call our toll-free line, 1-800-637-4406, or
write to 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
J. Atwood Ives+ - Chairman and Chief Executive Stephen E. Cavan*
Officer, Eastern Enterprises (diversified services
company) ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Lawrence T. Perera+ - Partner, Hemenway & Barnes
(attorneys) CUSTODIAN
State Street Bank and Trust Company
William J. Poorvu+ - Adjunct Professor, Harvard
University Graduate School of Business AUDITORS
Administration Ernst & Young LLP
Charles W. Schmidt+ - Private Investor INVESTOR INFORMATION
For information on MFS mutual funds, call your
Arnold D. Scott* - Senior Executive Vice investment professional or, for an information
President, Director, and Secretary, MFS Investment kit, call toll free: 1-800-637-2929 any business
Management day from 9 a.m. to 5 p.m. Eastern time (or leave a
message anytime).
Jeffrey L. Shames* - Chairman and Chief Executive
Officer, MFS Investment Management INVESTOR SERVICE
MFS Service Center, Inc.
Elaine R. Smith+ - Independent Consultant P.O. Box 2281
Boston, MA 02107-9906
David B. Stone+ - Chairman, North American
Management Corp. (investment adviser) For general information, call toll free:
1-800-225-2606 any business day from 8 a.m. to 8
INVESTMENT ADVISER p.m. Eastern time.
Massachusetts Financial Services Company
500 Boylston Street For service to speech- or hearing-impaired, call
Boston, MA 02116-3741 toll free: 1-800-637-6576 any business day from 9
a.m. to 5 p.m. Eastern time. (To use this service,
DISTRIBUTOR your phone must be equipped with a
MFS Fund Distributors, Inc. Telecommunications Device for the Deaf.)
500 Boylston Street
Boston, MA 02116-3741 For share prices, account balances, exchanges, or
stock and bond outlooks, call toll free:
CHAIRMAN AND PRESIDENT 1-800-MFS-TALK (1-800-637-8255) anytime from a
Jeffrey L. Shames* touch-tone telephone.
PORTFOLIO MANAGER WORLD WIDE WEB
Michael W. Roberge* www.mfs.com
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
+ Independent Trustee
* MFS Investment Management
</TABLE>
<PAGE>
MFS (R)MUNICIPAL HIGH ------------
INCOME FUND BULK RATE
U.S. POSTAGE
PAID
MFS
[Logo] M F S(R) ------------
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
500 Boylston Street
Boston, MA 02116-3741
(c)2000 MFS Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116
MMH-2 03/00 57M 25/225/325
