<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
[Graphic Omitted]
MFS(R) MUNICIPAL HIGH
INCOME FUND
SEMIANNUAL REPORT o JULY 31, 2000
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 4
Performance Summary ....................................................... 9
Portfolio of Investments .................................................. 12
Financial Statements ...................................................... 29
Notes to Financial Statements ............................................. 35
Trustees and Officers ..................................................... 41
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,
I'm sure you've noticed that whenever financial markets suffer a large
decline, as they did very dramatically this past spring, there's a flurry of
information on "how to deal with market volatility" -- both in the popular
press and from those of us in the investment business. Our own thinking on
this is that, first, for long-term investors volatility is not necessarily
something to be feared; occasional volatility may in fact be healthy for the
markets.
Second, our experience has been that when markets begin to fall, it's often
too late to act. The best response may be to do nothing -- if you're properly
prepared with a long-term plan, created with the help of your investment
professional. To help you create or update that plan and take market
volatility in stride, here are some points you may want to consider the next
time you talk with your investment professional.
1. VOLATILITY CAN BE A GOOD THING
We would argue that the markets today are much healthier than they were before
the period of volatility this past spring, in the sense that stock prices have
returned to more reasonable levels and we have a stronger base for future
growth. Perhaps the worst of the market's wrath descended on companies with
very high prices, relative to their earnings, or with business concepts that
looked great in the euphoria of a booming market but in the end appeared to
have no fundamental backing. It has always been our view that one of the best
protections against market volatility is to invest in stocks and bonds of
fundamentally good companies selling at reasonable prices. When discussing
potential investments with your investment professional, you may want to ask
how they fared in previous periods of volatility, as well as in the good
times.
2. INVEST FOR THE LONG TERM
You've heard that before, but we think it's still probably the most important
concept in investing. Time is one of an investor's greatest allies. Over
nearly all long-term periods -- 5, 10, 20 years, and more -- stock and bond
returns, as represented by most common indices, have been positive and have
considerably outpaced inflation. Investing is the best way we know of to make
your money work for you while you're doing something else.
Where investors can get into trouble is by confusing investing with trading.
In our view, traders who buy securities with the intention of selling them at
a profit in a matter of hours, days, or weeks are gambling. We believe this
seldom turns out to be a good strategy for increasing your wealth.
3. INVEST REGULARLY
Waiting for the "right time" to invest is almost always a poor strategy,
because only in retrospect do we know when that right time really was. Periods
of volatility are probably the worst times to make an investment decision.
Faced with turmoil in the markets, many investors have opted to simply stay on
the sidelines.
On the other hand, we think one of the best techniques for investing is
through automatic monthly or quarterly deductions from a checking or savings
account. This approach has at least three major benefits. First, you can
formulate a long-term plan -- how much to invest, how often, and into what
portfolios -- in a calm, rational manner, working with your investment
professional. Second, with this approach you invest regularly without
agonizing over the decision each time you buy shares.
And, third, if you invest equal amounts of money at regular intervals, you'll
be taking advantage of a strategy called dollar-cost averaging: by investing a
fixed amount while the share cost fluctuates, you end up with an average share
cost to you that is lower than the average share price over your investment
period.(1) If all this sounds familiar, it's probably because you're already
taking advantage of dollar-cost averaging by investing regularly for
retirement through a 401(k) or similar account at work.
4. DIVERSIFY
One of the dangers of not having an investment plan is that you may be tempted
to simply chase performance, i.e., move money into whatever asset class
appears to be outperforming at the moment -- small, mid, or large cap; growth
or value; United States or international; stocks or bonds. The problem with
this approach is that by the time a particular area is generally recognized as
"hot," you may have already missed some of the best performance.
International investing offers a case in point. In the 1980s, international
investments, as represented by the Morgan Stanley Capital International (MSCI)
Europe, Australia, Far East (EAFE) Index, outperformed U.S. investments, as
represented by the Standard & Poor's 500 Composite Index (S&P 500), in 7 out
of 10 years.(2) For the decade, the MSCI EAFE's average annual performance was
23%, compared to 18% for the S&P 500. Going into the 1990s, then, an investor
looking only at recent performance might have favored international
investments over U.S. investments.
But the 1990s turned out to be virtually a mirror image of the '80s. Domestic
investments outperformed international investments in 7 out of 10 years, with
the S&P 500 returning an average of 18% annually for the decade and the MSCI
EAFE returning a 7% annual average. Looking ahead, however, we are optimistic
about international markets because we feel that many of the same forces that
propelled the current U.S. economic boom -- deregulation, restructuring, and
increased adoption of technology -- have taken root overseas.
The lesson to be learned is that nobody really knows what asset class will be
the next to outperform or how long that performance will be sustained. We would
suggest that one way to potentially profit from swings in the market -- to
potentially be invested in various asset classes before the market shifts in
their favor -- is with a diversified portfolio covering several asset classes.
If you haven't already done so, we encourage you to discuss these thoughts with
your investment professional and factor them into your long-range financial
planning. Hopefully, the next time the markets appear to be going wild, you'll
feel confident enough in your plan to view periods of volatility as a time of
potential opportunity -- or perhaps just a time to sit back and do nothing.
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)
August 15, 2000
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(1) The use of a systematic investing program does not guarantee a profit or
protect against a loss in declining markets. You should consider your
financial ability to continue to invest through periods of low prices.
(2) Sources: Lipper Inc. Decade performance: '80s -- 12/31/79-12/31/89,
'90s -- 12/31/89-12/31/99. The MSCI EAFE Index is an unmanaged,
market-capitalization-weighted total return index that measures the
performance of the same developed-country global stock markets included in
the MSCI World Index but excludes the United States, Canada, and the South
African mining component. The S&P 500 is a popular, unmanaged index of
common stock total return performance. It is not possible to invest directly
in an index. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
A prospectus containing more complete information on any MFS product,
including all charges and expenses, can be obtained from your investment
professional. Please read it carefully before you invest or send money.
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 six months ended July 31, 2000, Class A shares of the fund provided a
total return of 4.83%, Class B shares 4.42%, and Class C shares 4.31%. These
returns, which include the reinvestment of any distributions but exclude the
effects of any sales charges, compare to a 6.40% 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.
During the same period, the average high-yield municipal debt fund tracked by
Lipper Inc., an independent firm that reports mutual fund performance, returned
3.49%.
Q. WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE OVER THE PERIOD?
A. We think three main factors drive the performance of a high-yield municipal
bond fund such as ours: credit risk, the quality of the fund's research as
it relates to credit risk, and interest rates. Credit risk -- the risk that
a bond will be downgraded or will default -- is the primary risk in a high-
yield portfolio. We believe we outperformed our Lipper peer group over the
period largely because our research helped us avoid some of the credit
problems in our market, particularly among hospitals and nursing homes.
Q. DOES THAT MEAN YOU HAVE CUT BACK ON INVESTMENTS IN THE TROUBLED HEALTH
CARE SECTOR?
A. On the contrary, we see this as an opportunity. Because of some high-
profile hospital and nursing home problems and reductions in medicare
funding, many investors have fled the health care sector, so the premiums
that have been paid to investors to own bonds in that sector have grown
dramatically. In other words, the yield of these bonds has climbed
significantly in relation to investment-grade bonds. Although health care is
a challenging sector to be in, we think that through individual security
selection we could potentially reap some significant gains for investors.
Something that investors should keep in mind is that health care issues
represent a huge portion of the municipal high-yield market, including a
majority of the new issues that come to market. So in order to stay fully
invested, a municipal high-yield fund, in our view, has to own health care
bonds. The key is finding the financially healthy ones and avoiding defaults
and credit problems. This is where we think the quality of our in-house
Original Research(SM) process -- which may include meetings with hospital or
nursing home managements, meetings with employees and competitors, and
intense financial and competitive analysis -- gives us an edge.
For example, our research indicates that HMOs are vigorously clamping down
on the rates they will pay hospitals for insured services. So one of the
things we have done is to generally avoid hospitals in urban areas, where
cost competition has tended to be intense because of heavy HMO penetration.
Instead we have invested in several "sole community providers" -- hospitals
in more rural areas that tend to have little or no direct competition.
Another factor we view as potentially positive for health care investments
is that Congress is already starting to talk about restoring some of the
health care funding that it had previously cut.
Q. HOW DID THE INTEREST RATE ENVIRONMENT AFFECT PERFORMANCE?
A. Although the Federal Reserve Board (the Fed) caused short-term interest
rates to rise over the period by raising the rate it charges banks for
overnight borrowings, interest rates actually declined for both long-term
Treasuries and municipal bonds. (Principal value and interest on Treasury
securities are guaranteed by the U.S. government if held to maturity.) The
decline in long-term rates helped the fund's performance by increasing the
prices of bonds that we owned.
Q. WHY DID LONG-TERM RATES DECLINE IF THE FED WAS RAISING RATES?
A. In our experience, long-term bonds tend to be influenced more by what
investors think about long-term inflation than by short-term rate changes.
It appears to us that the market felt the Fed's rate hikes were doing a good
job of bringing growth down and keeping inflationary forces at bay; we think
this perception that inflation would remain benign helped bring down
long-term rates. Another factor was the Fed's announcement that it would use
some of the budget surplus to buy back 30-year Treasuries. Investors
perceived that the supply of 30-year notes would be shrinking, and that
drove their prices up and yields down.
What happened in the Treasury market is that the yield curve inverted; as
short-term rates were going up, long-term rates were coming down, which is
the opposite of the normal curve.
Q. WHY DID THE FUND UNDERPERFORM ITS INDEX IF IT OUTPERFORMED ITS PEERS?
A. The Lehman Index actually measures a slightly different investment universe
than that of our fund. First, the Lehman Index is a high-grade (investment-
grade), rather than a high-yield, index. And over the recent period, high-
grade bond prices generally rose faster than those of high-yield issues,
causing the Lehman Index to outperform. Second, the high-grade bonds in the
Lehman Index tend to be more sensitive to interest rate changes than the
municipal high-yield issues in which we invest. Therefore, the Lehman Index
may benefit more than our fund from a decrease in interest rates.
Q. WHAT IS YOUR OUTLOOK FOR THE ECONOMY AND FOR THE FUND?
A. We're optimistic on each of the three factors that we mentioned earlier as
driving performance: interest rates, credit risk, and the ability of our
research to make a difference. We agree with the market's apparent
perception that the Fed has done its job by raising rates and cooling down
the economy. We expect to see a flat to declining interest-rate environment
by the end of the year, which would be positive for fixed-income investing
in general.
We also expect the economy to continue to grow at a healthy but slower pace,
with little inflation and without a recession. That bodes well for credit
risk. Although the growth that we have had year to date in gross domestic
product (GDP) has been higher than expected, our research indicates that
most of that growth has been in corporate technology spending, which was
largely plowed back into productivity enhancements. In our view, spending
growth that improves productivity is not inflationary -- as opposed to
growth in consumer spending, which does tend to be inflationary.
Finally, we believe our research will continue to uncover opportunities in
the high-yield market. In addition to health care, another sector we like is
electric utilities. We think the trend toward consolidation in the industry
offers potential for our research to find utilities with lower-grade bonds
that may enjoy an upgrade if they are acquired by a higher-grade company.
(When a bond's rating is upgraded because its issuer is perceived to have
improved its creditworthiness, the bond is considered less risky and
therefore its price rises.) An example in the portfolio is Entergy Corp.
(formerly Gulf States Utilities), an investor-owned utility with a "BB+"
bond rating. The company announced at the end of the period that it planned
to merge with Florida Power and Light, an "A"-rated company. If, as we
expect, that merger is completed, our position in Entergy should benefit
significantly as its bonds cross over from high-yield to investment-grade
status.
/s/ Michael W. Roberge
Michael W. Roberge
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. The manager's views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
It is not possible to invest directly in an index.
<PAGE>
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PORTFOLIO MANAGER'S PROFILE
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MICHAEL W. ROBERGE IS SENIOR VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R)
AND PORTFOLIO MANAGER OF MFS(R) MUNICIPAL HIGH INCOME FUND AND MFS(R)
MUNICIPAL INCOME TRUST, A CLOSED-END FUND.
MR. ROBERGE JOINED MFS IN 1996 AS A CREDIT ANALYST IN THE MUNICIPAL FIXED
INCOME DEPARTMENT AND WAS NAMED PORTFOLIO MANAGER IN 1997, 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(R) ARE SUPPORTED BY AN
INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS ORIGINAL
RESEARCH(R), A GLOBAL, ISSUER-ORIENTED, BOTTOM-UP PROCESS OF SELECTING
SECURITIES.
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This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other MFS
product is available from your 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 JULY 31, 2000
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PERFORMANCE SUMMARY
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for
the applicable time periods. Investment results reflect the percentage change
in net asset value, including the reinvestment of dividends. (See Notes to
Performance Summary.)
<TABLE>
TOTAL RATES OF RETURN THROUGH JULY 31, 2000
<CAPTION>
CLASS A
6 Months 1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return
Excluding Sales Charge +4.83% +0.47% +10.36% +27.42% +79.67%
------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge -- +0.47% + 3.34% + 4.97% + 6.03%
------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including
Sales Charge -- -4.30% + 1.68% + 3.95% + 5.52%
------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
6 Months 1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return
Excluding Sales Charge +4.42% -0.32% + 7.63% +22.05% +68.70%
------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge -- -0.32% + 2.48% + 4.07% + 5.37%
------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including
Sales Charge -- -4.09% + 1.60% + 3.75% + 5.37%
------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C
6 Months 1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return
Excluding Sales Charge +4.31% -0.53% + 8.39% +25.15% +76.47%
------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge -- -0.53% + 2.72% + 4.59% + 5.84%
------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including
Sales Charge -- -1.47% + 2.72% + 4.59% + 5.84%
------------------------------------------------------------------------------------------------------------
</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 JULY 31, 2000
QUALITY
Source: Standard & Poor's and Moody's
Not Rated 33.3%
"AAA" 24.3%
"BBB" 21.1%
"BB" 7.4%
"AA" 6.0%
"A" 5.9%
"B" 1.3%
Other 0.7%
The portfolio is actively managed, and current holdings may be different.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS -- (Unaudited) July 31, 2000
Municipal Bonds - 97.5%
<CAPTION>
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PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
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<S> <C> <C>
General Obligation - 5.9%
Birmingham, AL, 5.75s, 2019 $ 1,000 $ 1,010,720
Chicago, IL, Board Of Education, RITES, 5.072s, 2020+(++)(++) 7,910 7,296,184
Commonwealth of Massachusetts, 6s, 2015 3,750 3,941,138
Cranston, RI, FGIC, 6.375s, 2014 855 930,411
Delaware County, OH, 6.25s, 2020 1,000 1,052,350
District of Columbia, 6s, 2026 5,000 4,815,400
Essex County, NJ, RITES, 6.678s, 2020+(++)(++) 6,000 6,149,880
Forsyth County, GA, School District, 6s, 2016 1,700 1,797,835
Hidalgo County, TX, AMBAC, 6s, 2016 1,010 1,057,581
Houston County, AL, AMBAC, 6.25s, 2019 3,500 3,703,595
Houston, TX, Independent School District, RITES,
5.267s, 2017+(++)(++) 5,000 4,697,000
Kane, Cook & DuPage Counties, IL, School District,
FSA, 6.5s, 2017 1,355 1,456,205
Kane, Cook & DuPage Counties, IL, School District,
FSA, 6.375s, 2019 1,255 1,330,325
Lane County, OR, 6.25s, 2016 1,000 1,063,030
Lane County, OR, 6.25s, 2017 1,370 1,454,200
Linn County, OR, Community School District, MBIA,
6.125s, 2017 1,000 1,054,350
Linn County, OR, Community School District, MBIA,
6.125s, 2019 1,105 1,158,151
Los Angeles, CA, RITES, 5.761s, 2015+(++)(++) 5,310 5,406,642
Manchester, NH, 5.875s, 2019 2,325 2,360,642
Markham, IL, 9s, 2012 2,575 2,613,625
New York City, NY, 6.875s, 2003 120 125,492
New York City, NY, 7.1s, 2011 80 83,741
New York City, NY, 5.875s, 2024 7,000 7,073,500
New York City, NY, 6.125s, 2025 3,675 3,748,868
New York City, NY, FGIC, 6.125s, 2025 8,000 8,243,680
New York City, NY, FSA, 7s, 2022 70 72,803
Richardson, TX, Hospital Authority Rev. (Baylor-
Richardson), 5.25s, 2013 1,500 1,271,745
Wasco County, OR, 6s, 2016 1,245 1,311,595
Wasco County, OR, 6s, 2018 1,485 1,553,963
West Warwick, RI, 7.3s, 2008 169 180,472
West Warwick, RI, 7.45s, 2013 570 610,179
--------------
$ 78,625,302
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State and Local Appropriation - 2.4%
Chicago, IL, Public Building Commerce Rev., RITES,
5.254s, 2017+(++)(++) $ 4,500 $ 4,287,870
College Park, GA, Business & Industrial Development
Authority (Civic Center), AMBAC, 5.75s, 2020 3,000 3,043,110
Delaware Valley, PA, Regional Finance Authority,
RITES, AMBAC, 6.152s, 2018(++)(++) 7,000 6,982,430
District of Columbia, Certificates of Participation,
7.3s, 2013 2,500 2,632,400
Houston, TX, 7.875s, 2025 4,800 4,884,000
New York Dormitory Authority Rev., Office General
Services, 5s, 2018 5,000 4,547,250
New York Dormitory Authority Rev. (Bronx-Lebanon),
5.2s, 2016 1,000 946,400
New York Dormitory Authority Rev. (North General
Hospital), 5.2s, 2016 1,570 1,485,848
New York Dormitory Authority Rev. (St. Clare's
Hospital), 5.3s, 2019 2,000 1,864,840
New York Dormitory Authority Rev. (Wyckoff Heights
Medical Center), 5.3s, 2021 1,000 922,650
--------------
$ 31,596,798
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Refunded and Special Obligations - 17.0%
Arapahoe County, CO, Capital Improvement, Highway
Rev., 0s, 2005 $69,000 $ 11,235,270
Clermont County, OH, Hospital Facilities Rev. (Mercy
Health Systems), AMBAC, 8.801s, 2001(++)(++) 1,300 1,407,406
Daphne, AL, Special Care Facilities Financing
Authority (1st Mortgage Rev.), 0s, 2008 89,975 60,084,405
Daphne, AL, Special Care Facilities Financing
Authority (2nd Mortgage Rev.), 0s, 2008 4,500 3,005,055
Daphne, AL, Special Care Facilities Financing
Authority (Presbyterian), 0s, 2008 48,475 9,186,497
Denver, CO, City & County Airport Rev., 8s, 2000 100 102,947
Denver, CO, City & County Airport Rev., 8.5s, 2000 255 262,867
Denver, CO, City & County Airport Rev., 8.875s, 2000 1,325 1,419,128
Denver, CO, City & County Airport Rev., 7.75s, 2001 425 449,582
Denver, CO, City & County Airport Rev., 8.75s, 2001 1,530 1,636,335
Desert Hospital District, CA, Hospital Rev. (Desert
Hospital Corp.), 8.187s, 2002(++)(++) 4,000 4,444,680
District of Columbia, Hospital Rev. (Washington
Hospital), 7.125s, 2002 1,750 1,866,708
Doylestown, PA, Hospital Authority (Doylestown
Hospital), 7.2s, 2003 2,200 2,389,464
Hannibal, MO, Industrial Development Authority
(Hannibal Regional Healthcare), 9.5s, 2001+ 2,920 3,195,093
Illinois Health FacilitiesAuthority Rev. (Memorial
Hospital-Woodstock), 7.25s, 2002 1,500 1,596,075
Jenks Township, PA, Municipal Authority Rev., 8s, 2003 4,650 5,111,373
Kansas City, MO, Industrial Development Authority
(Kingswood), 9s, 2003 5,050 5,824,619
Martha's Vineyard, MA, Land Bank (Land Acquisition),
8.125s, 2001 2,600 2,699,450
Massachusetts Health & Education Facilities Authority
(Fairview Extended Care Facility), 10.25s, 2001 3,000 3,158,790
Massachusetts Industrial Finance Agency (Curry
College), 8s, 2004 1,325 1,506,671
Massachusetts Industrial Finance Agency (Emerson
College), 8.9s, 2001 3,000 3,113,040
Massachusetts Industrial Finance Agency (Glenmeadow
Retirement Community), 8.375s, 2006 2,300 2,729,525
Massachusetts Industrial Finance Agency (Glenmeadow
Retirement Community), 8.625s, 2006 3,520 4,219,635
Mesa County, CO, Residual Rev., 0s, 2003 25,125 9,505,039
Mississippi Hospital Equipment & Facilities Authority
Rev. (Rush Medical Foundation), 8.75s, 2001 2,800 2,902,844
New Lenox, IL, Community Park Development Authority,
8.25s, 2004 4,050 4,628,988
New York City, NY, 6.875s, 2002 880 923,278
New York City, NY, 7.1s, 2002 920 968,208
New York City, NY, FSA, 7s, 2002 1,630 1,714,287
New York City, NY, 6.125s, 2006 1,320 1,428,161
New York Energy Research & Development Authority,
Electric Facilities Rev., 7.15s, 2002 495 526,205
New York Energy Research & Development Authority,
Electric Facilities Rev., 7.15s, 2002 4,425 4,703,952
New York Local Government Assistance Corp., 7s, 2001 800 829,688
North Carolina Medical Care Commission, Hospital Rev
(Valdese General Hospital), 8.75s, 2001 1,775 1,891,902
North Central, TX, Health Facilities Development Corp.
(Baylor University Medical Center), 9.107s, 2001(++)(++) 4,300 4,628,950
North Central, TX, Health Facilities Development Corp.
(Presbyterian Hospital), RITES, MBIA, 8.815s, 2001(++)(++) 4,000 4,297,840
Prince William County, VA, Industrial Development
Authority, Residential Care Facility (Westminster at Lake
Ridge), 10s, 2002 3,500 3,820,740
San Joaquin Hills, CA, Transportation Corridor
Agency, Toll Road Rev., 0s, 2011 13,400 7,972,062
South Carolina Public Service Authority (Santee Co-op),
7.1s, 2001 2,000 2,087,880
Spirit Lake, IA, Industrial Development Rev. (Crystal
Tips, Inc.), 0s, 2008# 5,544 7,162,789
Telluride, CO, Gondola Transit Co., Real Estate
Transfer Assessment Rev., 11.5s, 2012 5,025 7,598,604
Telluride, CO, Gondola Transit Co., Real Estate
Transfer Assessment Rev., 11.5s, 2012 975 1,408,904
Texas Turnpike Authority (Houston Ship Channel
Bridge), 12.625s, 2002 21,035 24,494,626
Washington Public Power Supply System Rev. (Nuclear
Project #1), 14.375s, 2001 200 209,072
Williamsburg County, SC, School District, Public
Facilities Rev., 7.5s, 2001 95 97,124
Williamsburg County, SC, School District, Public
Facilities Rev., 7.5s, 2002 115 120,675
Williamsburg County, SC, School District, Public
Facilities Rev., 7.5s, 2003 2,305 2,512,415
--------------
$ 227,078,848
--------------------------------------------------------------------------------------------------------
Airport and Port Revenue - 6.7%
Chicago, IL, O'Hare International Airport, Special
Facilities Rev. (United Airlines), 6.75s, 2011 $ 2,000 $ 2,059,960
Chicago, IL, O'Hare International Airport, Special
Facilities Rev. (United Airlines), 8.85s, 2018 5,450 5,642,603
Dallas-Fort Worth, TX, International Airport Facility
Improvement Corp. (Delta), , 7.625s, 2021 4,500 4,642,020
Denver, CO, City & County Airport Rev., 8.875s, 2012 3,675 3,916,007
Denver, CO, City & County Airport Rev., 7.75s, 2021 1,625 1,704,788
Denver, CO, City & County Airport Rev., 8.5s, 2023 2,695 2,771,349
Denver, CO, City & County Airport Rev., 8.75s, 2023 4,240 4,497,368
Denver, CO, City & County Airport Rev., 8s, 2025 1,040 1,068,038
Denver, CO, City & County Airport Rev., 6.875s, 2032 7,130 7,112,531
Hillsborough County, FL, Aviation Authority Rev. (US
Air), 8.6s, 2022 4,275 4,436,510
Kenton County, KY, Airport Board Special Facilities
(Delta Airlines), 7.5s, 2020 16,570 17,044,068
New Jersey Economic Development Authority, Special Facilities
Rev. (Continental Airlines, Inc.), 6.625s, 2012 5,250 5,308,432
Port Authority, NY (JFK International Air Terminal),
MBIA, 5.75s, 2022 7,000 6,981,870
State of Hawaii, Special Facilities Rev. (Continental
Airlines, Inc.), 7s, 2020 1,000 977,450
Tulsa, OK, Municipal Airport Trust Rev. (American
Airlines), 7.375s, 2020 4,000 4,055,920
Tulsa, OK, Municipal Airport Trust Rev. (American
Airlines), 7.6s, 2030 14,210 14,603,901
Wayne Charter County, MI, Airport Rev. (Detroit
Metropolitan Wayne County), 5s, 2019 3,000 2,719,110
--------------
$ 89,541,925
--------------------------------------------------------------------------------------------------------
Electric and Gas Utility Revenue - 11.5%
Alaska Industrial Development & Export Authority, Power Rev
(Upper Lynn Canal Regional Power), 5.875s, 2032 $ 1,800 $ 1,586,538
Calcasieu Parish, LA, Industrial Development Board, Pollution
Control Rev. (Energy Gulf States, Inc.), 5.45s, 2010 4,800 4,483,584
Clark County, NV, Industrial Development Rev. (Nevada
Power Co.), FGIC, 6.7s, 2022 4,000 4,175,080
Clark County, NV, Industrial Development Rev. (Nevada
Power Co.), 5.6s, 2030 10,000 8,440,400
Clark County, NV, Industrial Development Rev. (Nevada
Power Co.), 5.9s, 2032 9,000 7,971,930
Connecticut Development Authority, Pollution Control
Rev. (Connecticut Light & Power), 5.85s, 2028 16,500 14,617,680
Farmington, NM, Pollution Control Rev. (San Juan
Public Services Co.), 6.3s, 2016 3,240 3,122,712
Farmington, NM, Pollution Control Rev. (Tucson
Electric Power Co.), 6.95s, 2020 3,000 2,988,870
Farmington, NM, Pollution Control Rev., "A", 5.8s, 2022 4,500 4,009,995
Farmington, NM, Pollution Control Rev., "C", 5.8s, 2022 4,915 4,379,806
Klamath Falls, OR, Electric Rev. (Klamath Cogeneration),
6s, 2025 10,000 8,833,300
Matagorda County, TX (Reliant Energy), 5.95s, 2030 8,000 7,193,920
Municipal Electric Authority, GA, Project #1, AMBAC,
7.325s, 2022(++)(++) 9,900 10,211,751
New Hampshire Business Finance Authority, Pollution
Control Rev. (United Illuminating Co.), 5.875s, 2033 2,985 2,785,930
New Jersey Economic Development Authority (Vineland
Cogeneration), 7.875s, 2019 7,405 7,728,969
New York Energy Research & Development Authority,
Electric Facilities Rev., 7.15s, 2019 1,155 1,200,149
New York Energy Research & Development Authority,
Electric Facilities Rev., 7.15s, 2022 1,625 1,686,766
New York Energy Research & Development Authority,
Electrical Facilities Rev. (Consolidated Edison),
AMBAC, 7.5s, 2026 4,750 4,808,900
North Carolina Municipal Power Agency, No. 1, Catawba
Electric Rev., 6.375s, 2013 2,750 2,823,232
Ohio Water Development, Pollution Control Rev
(Cleveland Electric), 8s, 2023 4,700 5,021,997
Pennsylvania Economic Development Financing
Authority, Resources Recovery Rev., 6.5s, 2013 2,300 2,223,755
Pennsylvania Economic Development Financing
Authority, Resources Recovery Rev., 6.6s, 2019 5,000 4,825,000
Pima County, AZ, Industrial Development Authority
(Tuscon Electric Power Co.), 6.1s, 2025 2,000 1,818,560
Pima County, AZ, Industrial Development Authority
(Tuscon Electric Power Co.), 6s, 2029 14,000 12,733,280
Pittsylvania County, VA, Industrial Development
Authority, 7.55s, 2019 10,000 10,306,300
Southern California Public Power Authority,
Transmission Project Rev., RIBS, 7.184s, 2012(++)(++) 4,800 5,091,408
West Feliciana Parish, LA, Pollution Control Rev
(Entergy Gulf States), 6.6s, 2028 3,335 3,136,234
West Feliciana Parish, LA, Pollution Control Rev
(Gulf States Utilities Co.), 5.8s, 2015 1,500 1,389,660
West Feliciana Parish, LA, Pollution Control Rev
(Gulf States Utilities Co.), 9s, 2015 2,500 2,594,225
West Feliciana Parish, LA, Pollution Control Rev
(Gulf States Utilities Co.), 5.8s, 2016 1,500 1,399,125
--------------
$ 153,589,056
--------------------------------------------------------------------------------------------------------
Health Care Revenue - 16.1%
Arkansas Development Finance Authority (White River
Medical Center), 5.55s, 2019 $ 1,000 $ 843,590
Baltimore County, MD, Nursing Facility Mortgage Rev
(Eastpoint Rehabilation & Nursing Center), 6.75s, 2028 1,250 962,500
Baxter County, AR, Hospital Rev., 5.6s, 2021 3,000 2,495,220
Bell County, TX, Health Facilities Development Corp.
(Advanced Living Technology), 7.25s, 2001 115 112,391
Bell County, TX, Health Facilities Development Corp.
(Advanced Living Technology), 7.75s, 2006 395 360,777
Bell County, TX, Health Facilities Development Corp.
(Advanced Living Technology), 8.125s, 2016 1,420 1,208,874
Bell County, TX, Health Facilities Development Corp.
(Advanced Living Technology), 8.5s, 2026 3,150 2,627,510
Bell County, TX, Health Facilities Development Corp.
(Kings Daughters Hospital), 9.25s, 2008 925 953,120
Berlin, MD, Hospital Rev. (Atlantic General
Hospital), 8.375s, 2022 1,287 1,296,995
Brevard County, FL, Health Facilites Authority
(Beverly Enterprises), 10s, 2010 1,095 1,137,289
Cambria County, PA, Industrial Development Authority
(Beverly Enterprises), 10s, 2012 900 1,064,601
Chautauqua County, NY, Industrial Development Agency,
Civic Facility Rev. (Womans Christian Assn.), 6.35s, 2017 1,500 1,372,500
Chautauqua County, NY, Industrial Development Agency,
Civic Facility Rev. (Womans Christian Assn.), 6.4s, 2029 3,500 2,894,885
Chemung County, NY, Industrial Development Agency,
Civic Facilities Rev. (St. Joseph's Hospital-Elmira), 6s, 2013 2,850 2,503,298
Chemung County, NY, Industrial Development Agency,
Civic Facilities Rev. (St. Joseph's Hospital-
Elmira), 6.35s, 2013 1,910 1,699,900
Cheneyville, LA, Westside Habilitation Center, 8.375s, 2013 5,460 5,642,255
Chester County, PA, Health & Education Facilities
Authority (Jefferson Health Systems), 5.375s, 2027 5,000 4,321,050
Chester County, PA, Industrial Development Authority
(RHA/PA Nursing Home), 10.125s, 2019* 1,908 1,202,040
Colorado Health Facilities Authority Rev. (National
Benevolent), 7.125s, 2030 1,300 1,309,620
Connecticut Health & Educational Facilities (Johnson
Evergreen), 8.5s, 2014 1,350 1,406,079
Contra Costa County, CA, Residential Rental
Facilities Rev. (Cypress Meadows), 7s, 2028 3,000 2,502,930
Crittenden County, AR, 7.15s, 2025 1,165 1,183,162
Cuyahoga County, OH, Hospital Facilities (Canton, Inc.),
7.5s, 2030 3,500 3,499,090
Denver, CO, Health & Hospital Rev., 5.375s, 2018 3,700 3,089,833
Denver, CO, Health & Hospital Rev., 5.375s, 2028 5,000 3,969,450
District of Columbia, Hospital Rev. (Hospital for
Sick Children), 8.875s, 2021 915 939,174
Elkhart County, IN, Hospital Authority Rev. (Elkhart
General Hospital, Inc), 5.25s, 2018 1,000 892,790
Goldsboro, NC, Housing Authority Rev. (North Carolina
Housing Foundation, Inc.), 7.25s, 2029 2,225 2,049,425
Grand Forks, ND, Health Care Systems (Altru Health
Systems Obligation Group), 7.125s, 2024 1,500 1,511,595
Grand Junction, CO, Hospital Rev. (Community Hospital),
6.9s, 2017 2,900 2,741,544
Illinois Health Facilities Authority Rev. (Centegra
Health Systems), 5.25s, 2018 1,500 1,265,775
Indiana Health Facilities Financing Authority Rev
(Metro Health/Indiana, Inc.), 6.3s, 2023 3,900 3,339,726
Iowa Finance Authority, Health Care Facilities Rev
(Care Initiatives), 5.75s, 2018 1,200 975,540
Jacksonville, FL, Health Facilities Authority
(National Benevolent), 7s, 2022 1,000 1,007,740
Jefferson County, KY, Health Care Authority Rev
(Beverly Enterprises, Inc.), 5.875s, 2007 250 237,765
Kansas City, MO, Industrial Development Authority
(Bishop Spencer Place, Inc.), 8s, 2024 7,720 7,934,848
Lee County, FL, Industrial Development Authority
(Beverly Enterprises), 10s, 2010 800 830,896
Louisiana Public Facilities Authority (Southwest
Medical Center), 11s, 2006# 1,074 182,625
Loves Park, IL (Hoosier Care), 7.125s, 2034 1,990 1,751,220
Lufkin, TX, Health Facilities Development Corp.
(Memorial Health System of East Texas), 6.875s, 2026 1,395 1,298,926
Lufkin, TX, Health Facilities Development Corp.
(Memorial Health System of East Texas), 5.7s, 2028 3,305 2,551,526
Maine Health & Higher Educational Facilities, 7.5s, 2019 1,500 1,448,250
Maryland Health & Higher Educational Facilities
(University of Maryland Medical System), 6.75s, 2030 1,000 1,007,410
Massachusetts Health & Education Facilities Authority
(Caritas Christi), 5.7s, 2015 3,500 3,032,295
Massachusetts Health & Education Facilities Authority
(Jordan Hospital), 5.25s, 2018 4,600 3,708,704
Massachusetts Health & Education Facilities Authority
(St. Memorial Medical Center), 6s, 2023 13,530 10,602,784
Massachusetts Industrial Finance Agency (GF Revere),
8.875s, 2025 7,550 8,101,679
Massachusetts Industrial Finance Agency (Metropolitan
Health Foundation, Inc.), 6.75s, 2027 5,830 5,253,646
Massachusetts Industrial Finance Agency (WNR, Inc.),
9s, 2023(+) 1,050 899,220
Mecosta County, MI, General Hospital Rev., 6s, 2018 1,200 1,025,832
Michigan Hospital Finance Authority Rev. (Memorial
Healthcare Center), 5.875s, 2021 1,000 827,580
Millbrae, CA, Residential Facility (Magnolia Of
Millbrae), 7.375s, 2027 3,000 2,987,010
Mississippi Business Finance Corp., Health Facilities
Rev. (Medical Foundation, Inc.), 5.375s, 2015 1,000 799,410
Mississippi Business Finance Corp., Health Facilities
Rev. (Medical Foundation, Inc.), 5.625s, 2023 2,000 1,547,800
Mocksville, NC (Housing Foundation, Inc.), 7.25s, 2029 2,200 2,033,372
Monongalia County, WV, Health Facilities Rev
(Beverly Enterprises, Inc.), 5.875s, 2007 500 476,625
Montgomery County, PA, Higher Education & Health
Authority Rev. (AHF/Montgomery), 10.5s, 2020 2,390 2,436,294
New Hampshire Business Finance Authority, Health Care
Facilities Rev. (Metropolitian Health Foundation,
Inc.), 6.55s, 2028 3,000 2,590,890
New Hampshire Higher Educational & Health Facilities
Authority Rev. (Littleton Hospital Assn.), 5.9s, 2018 1,750 1,447,758
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 1,769,938
New Jersey Economic Development Authority (Courthouse
Convalescent Center), 8.7s, 2014 1,350 1,410,318
New Jersey Economic Development Authority (Geriatric
& Medical Services), 10.5s, 2020 3,000 2,957,100
New Jersey Economic Development Authority (Greenwood
Health Care), 9.75s, 2011 2,705 2,820,152
New Jersey Economic Development Authority (Wanaque
Convalescent Center), 8.5s, 2009 700 731,675
New Jersey Economic Development Authority (Wanaque
Convalescent Center), 8.6s, 2011 1,000 1,046,940
New Jersey Health Care Facilities Financing Authority
(Cherry Hill), 8s, 2027 4,000 4,004,680
New Mexico Hospital Equipment Loan Council, Hospital
Rev. (Memorial Medical Center, Inc.), 5.375s, 2018 2,600 2,164,292
New York City, NY, Health & Hospital Corp. Rev.,
5.25s, 2017 2,000 1,798,440
Ohio County, WV, County Commission Health System
(Ohio Valley Medical Center), 5.75s, 2013 5,000 4,343,050
Osceola County, FL, Industrial Development Rev
(Community Provider Pooled Loan), 7.75s, 2017 2,700 2,727,999
Portsmouth, VA, Industrial Development Authority
(Beverly Enterprises), 10s, 2011 1,705 1,790,182
Reedley, CA, Certificates of Participation (Mennonite
Home), 7.5s, 2026 5,320 5,146,142
Rochester, MN, Health Care Facilities Rev. (Mayo
Medical Foundation), 7.692s, 2021 2,000 2,087,560
Royston, GA, Hospital Authority Rev. (Ty Cobb
Healthcare Systems, Inc.), 6.375s, 2014 800 733,296
Royston, GA, Hospital Authority Rev. (Ty Cobb
Healthcare Systems, Inc.), 6.5s, 2027 1,155 1,028,966
San Francisco, CA, City & County (Coventry Park),
8.5s, 2026 9,435 9,573,223
Santa Fe, NM, Industrial Development Rev. (Casa Real
Nursing Home), 9.75s, 2013 1,740 1,817,587
Seminole County, FL, Industrial Development Authority
(Friendly Village), 10s, 2011 770 771,024
Sierra View, CA, Local Health Care District, 5.4s, 2022 4,000 3,220,720
Southwestern Illinois Development Authority Rev
(Anderson Hospital), 5.375s, 2015 1,385 1,150,686
Southwestern Illinois Development Authority Rev
(Anderson Hospital), 5.5s, 2020 1,625 1,323,091
Southwestern Illinois Development Authority Rev
(Anderson Hospital), 5.625s, 2029 4,200 3,330,432
Springfield, TN, Health & Educational Facilities
(Northcrest Medical Center), 5.25s, 2018 3,600 2,791,836
Springfield, TN, Health & Educational Facilities
(Northcrest Medical Center), 5.375s, 2024 5,000 3,752,400
State of Arkansas, Development Finance Authority
(Washington Regional Medical Center), 7.25s, 2020 2,500 2,470,600
Sterling, IL (Hoosier Care), 7.125s, 2034 1,390 1,244,981
Suffolk County, NY, Industrial Development Agency
(Southampton Hospital), 7.25s, 2020 3,500 3,247,300
Suffolk County, NY, Southhampton Hospital Assn.,
7.625s, 2030 1,500 1,423,050
Waterford Township, MI, Economic Development Corp.
Rev. (Canterbury Health), 6s, 2039 3,190 2,417,478
West Plains, MO, Industrial Development Authority,
Hospital Rev. (Ozarks Medical Center), 6.75s, 2024 810 712,630
Westerville, OH, Industrial Development Rev. (1st
Mortgage Health Care), 10s, 2008 445 448,146
Wilkins Area, PA, Industrial Development Authority
(Beverly Enterprises), 10s, 2011 900 947,619
Wilkinsburg, PA, Municipal Authority Health
(Monroeville Christian), 8.25s, 2027 7,100 7,109,372
Yonkers, NY, Industrial Development Agency (St
Joseph Hospital), 6.15s, 2015 2,000 1,732,380
--------------
$ 215,505,168
--------------------------------------------------------------------------------------------------------
Industrial Revenue (Corporate Guarantee) - 13.8%
Baltimore County, MD, Pollution Control (Bethelehem
Steel), 7.55s, 2017 $ 1,850 $ 1,851,110
Burns Habor, IN, Solid Waste Disposal Facilities Rev
(Bethlehem Steel), 8s, 2024 10,455 10,796,774
Butler, AL, Industrial Developement Board, Solid
Waste Rev. (James River Corp.), 8s, 2028 4,500 4,841,415
Cambria County, PA, Industrial Development Authority
(Beverly Enterprises), 7.5s, 2015 4,390 4,393,424
Carbon County, PA, Industrial Development Authority
(Panther Creek Partners), 6.65s, 2010 2,500 2,518,750
Courtland, AL, Industrial Development Board, Solid Waste
Disposal Rev. (Champion International Corp.), 6.375s, 2029 2,500 2,387,700
Delaware County, PA, Industrial Development Authority
(Resources Recovery Facility), 5.5s, 2002 600 591,108
Delaware County, PA, Industrial Development Authority
(Resources Recovery Facility), 6s, 2003 1,800 1,763,622
Delaware County, PA, Industrial Development Authority
(Resources Recovery Facility), 6.1s, 2005 3,460 3,338,450
DeQueen, AR, Industrial Development Board
(Weyerhaeuser Co.), 9s, 2006 1,000 1,003,440
Florence County, SC, Industrial Development Rev
(Stone Container Corp.), 7.375s, 2007 2,650 2,654,850
Gulf Coast Waste Disposal Authority, TX (USX Corp.),
5.5s, 2017 3,000 2,700,510
Hardeman County, TN (Correctional Facilities Corp.),
7.75s, 2017 6,500 6,787,430
Hernando County, FL, Water & Sewer Rev. (Florida
Crushed Stone), 8.5s, 2014 8,555 9,234,010
Hodge Village, LA, Utilities Rev. (Stone Container),
9s, 2010 7,800 7,969,806
Indiana Development Finance Authority Rev. (Inland
Steel), 5.75s, 2011 3,000 2,551,290
Indiana Development Finance Authority Rev. (Inland
Steel), 7.25s, 2011 10,000 9,719,200
Luzerne County, PA, Industrial Development Authority
(Beverly Enterprise, Inc.), 6.75s, 2008 1,800 1,732,734
Maine Finance Authority (Bowater), 7.75s, 2022 8,500 8,856,235
Massachusetts Development Finance Agency (Springfield
Resources Recovery), 5.625s, 2019 2,225 2,104,249
Massachusetts Port Authority Rev., Special Facilities
(Bosfuel), MBIA, 5.75s, 2039 5,000 4,857,300
Mesa County, CO (Joy Technologies, Inc.), 8.5s, 2006* 5,050 3,787,500
Mobile County, AL (Ipsco, Inc.), 6.875s, 2030 2,850 2,859,519
New Jersey Economic Development Authority (Holt
Hauling & Warehousing), 8.4s, 2015 4,000 4,013,160
New Jersey Economic Development Authority (Holt
Hauling & Warehousing), 8.6s, 2017 8,000 8,040,720
Ohio Solid Waste Rev. (Republic Engineered Steels),
8.25s, 2014 7,000 2,555,000
Onondaga County, NY, Industrial Development Agency,
Solid Waste Disposal Facility Rev. (Solvay
Paperboard LLC), 6.8s, 2014 3,800 3,732,208
Owyhee County, ID, Industrial Development Rev
(Environsafe), 8.25s, 2002 4,000 4,078,280
Perry County, KY, Solid Waste Disposal Resources
(TJ International), 7s, 2024 11,000 11,385,330
Philadelphia, PA, Industrial Development Authority Rev
(Host Marriott LP), 7.75s, 2017 2,000 2,108,740
Port of New Orleans, LA (Avondale Industries), 8.5s, 2014 21,785 23,679,206
Power County, ID, Pollution Control Rev. (FMC Corp.),
5.625s, 2014 1,000 964,740
Savannah, GA, Economic Development Authority (Stone
Container Corp.), 7.4s, 2026 7,500 7,412,100
Schuylkill County, PA, Industrial Development
Authority (Pine Grove Landfill, Inc.), 5.1s, 2019 1,000 871,940
Spokane County, WA, Industrial Development Corp.
(Kaiser Aluminum & Chemical Corp.), 7.6s, 2027 3,700 3,704,255
Sweetwater County, WY, Solid Waste Disposal Rev. (FMC
Corp.), 6.9s, 2024 3,000 3,063,810
Sweetwater County, WY, Solid Waste Disposal Rev., "A"
(FMC Corp.), 7s, 2024 5,885 5,964,860
Tooele County, UT, Pollution Control Rev. (Laidlaw
Environmental Services), 7.55s, 2027* 5,000 500,000
Virginia Peninsula Ports Authority Rev. (Zeigler Coal),
6.9s, 2022 5,000 2,750,000
--------------
$ 184,124,775
--------------------------------------------------------------------------------------------------------
Insured Health Care Revenue - 1.4%
Illinois Health Facilities Authority Rev. (Sisters of
Mercy), RITES, MBIA, 8.937s, 2015(++)(++) $ 5,200 $ 5,746,104
Massachusetts Health & Education Facilities Authority
(Harvard Pilgrim Health), FSA, 5s, 2018 3,435 2,992,675
Michigan Hospital Finance Authority Rev. (Mercy Mount
Clemens), MBIA, 5.75s, 2017 3,100 3,130,473
Montana Health Facility Authority (Deaconess
Hospital), AMBAC, RIBS, 8.486s, 2016(++)(++) 4,000 4,206,040
Philadelphia, PA, Hospital & Higher Education Facilities
Authority Rev. (Pennsylvania Hospital), FGIC, 5.993s, 2012(++)(++) 2,000 2,004,400
--------------
$ 18,079,692
--------------------------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 3.9%
Alexandria, VA, Redevelopment & Housing Finance
Authority (Jefferson Village Apartments), 9s, 2018 $ 2,000 $ 2,055,380
Austin, TX, Housing Finance Corp. (Woodland Heights
Apartments), 7.25s, 2027 4,000 4,414,760
California Statewide Community Development Authority
(Equity Residential), 5.2s, 2029 3,940 3,880,388
California Statewide Community Development Authority
(Irvine Apartments), 5.25s, 2025 3,500 3,341,765
Charter Mac Equity Issuer Trust, 6.625s, 2009 8,000 7,809,520
Dallas, TX, Housing Finance Corp., 8.5s, 2011 2,870 2,894,309
Florida Multi-Family Housing Finance Agency Rev
(Center Court Apartments), 8.5s, 2018 1,695 1,646,591
Maplewood, RI, Housing Development Corp. (Terrace
Apartments), 6.9s, 2025 3,985 4,096,022
Maryland Community Development Administration, 0s, 2032 11,550 990,875
Maryland Community Development Administration, 6s, 2039 3,500 3,480,540
Memphis, TN, Health, Educational & Housing Facilities
Board (Wesley Highland Terrace), 8.5s, 2024 5,485 5,526,576
Munimae Te Bond Subsidiary LLC, 6.875s, 2009## 6,000 5,931,480
Ridgeland, MS, Urban Renewal, Multifamily Housing
Rev. (Northbrook I & III Apartments), 6.25s, 2029 5,000 4,426,750
Texas Housing & Community Board (Harbors & Plumtree),
10s, 2026+ 1,740 1,655,349
Virginia Housing & Development Authority, 0s, 2017 2,060 419,395
--------------
$ 52,569,700
--------------------------------------------------------------------------------------------------------
Sales and Excise Tax Revenue - 0.3%
Black Hawk, CO, Device Tax Rev., 5.625s, 2021 $ 1,250 $ 1,043,300
Illinois Sales Tax, 6.25s, 2015 1,500 1,599,270
Territory of Virgin Islands, Public Finance
Authority, 6s, 2006 500 502,390
Territory of Virgin Islands, Public Finance Authority,
5.875s, 2018 1,500 1,398,885
--------------
$ 4,543,845
--------------------------------------------------------------------------------------------------------
Single Family Housing Revenue - 5.5%
California Housing Finance Agency Rev., Home
Mortgage, MBIA, 0s, 2027 $ 6,765 $ 1,538,090
California Rural Home Mortgage Finance Authority,
GNMA, 6.55s, 2030 1,800 1,899,108
Chicago, IL, Single Family Mortgage Rev., FNMA/GNMA,
7.05s, 2030 900 961,254
Colorado Housing Finance Authority, 7.15s, 2014 470 503,896
Colorado Housing Finance Authority, 6.75s, 2021 1,145 1,217,650
Colorado Housing Finance Authority, 6.55s, 2025 1,105 1,165,477
Colorado Housing Finance Authority, 7.4s, 2027 1,195 1,263,223
Colorado Housing Finance Authority, FHA, 7.15s, 2030 1,000 1,101,170
Connecticut Housing Finance Authority, , 5.85s, 2028 3,945 3,838,879
Cook County, IL, Single Family Mortgage Rev., 0s, 2015 1,300 257,088
Corpus Christi, TX, Housing Finance Corp., MBIA, 0s, 2011 3,395 1,167,031
Delaware Single Family Housing Authority Rev., 6.75s, 2024 2,595 2,674,874
East Baton Rouge, LA, Capital Appreciation Rev., MBIA,
0s, 2010 2,055 683,000
El Paso, TX, Housing Finance Corp., Single Family
Mortgage Rev., 8.75s, 2011 427 465,225
Florida Housing Finance Agency Rev., 0s, 2016 1,280 257,869
Georgia Housing & Finance Authority Rev., FHA, 0s, 2031 23,365 2,362,435
Jefferson County, CO, Single Family Mortgage Rev.,
MBIA, 8.875s, 2013 110 113,923
Jefferson County, TX, Housing Finance Corp., Single
Family Mortgage Rev., MBIA, 0s, 2015 2,165 422,262
Jefferson Parish, LA, Home Mortgage Authority Rev.,
GNMA/FNMA, 7.5s, 2026 1,000 1,094,790
Jefferson Parish, LA, Home Mortgage Authority Rev.,
GNMA, 6.75s, 2030 1,350 1,428,449
Lee County, FL, Housing Finance Authority Rev., GNMA,
7s, 2031 800 849,320
Louisiana Housing Finance Agency Mortgage Rev.,
GNMA/FNMA, 7.55s, 2031 2,580 2,860,833
Maricopa County, AZ, FNMA/GNMA, 6s, 2024 500 553,145
Maryland Community Development Administration, 7.3s, 2025 4,505 4,604,741
Mississippi Home Corp., Single Family Senior Housing
Rev., FGIC, 9.25s, 2012 102 105,138
Missouri Housing Development Commission, Mortgage
Rev., GNMA, 6.7s, 2030 4,455 4,693,031
Missouri Housing Development Commission, Mortgage
Rev., GNMA/FNMA, 7.45s, 2031 1,000 1,100,740
New Castle County, DE, Single Family Mortgage Rev.,
FGIC, 0s, 2016 505 100,798
New Mexico Mortgage Finance Authority, Single Family
Mortgage Rev., 6.9s, 2024 1,990 2,052,864
North Dakota Housing Finance Agency, Single Family
Mortgage Rev., 8.3s, 2012 185 188,774
North Dakota Housing Finance Agency, Single Family
Mortgage Rev., 6.8s, 2023 665 685,475
North Dakota Housing Finance Agency, Single Family
Mortgage Rev., 5.9s, 2029 2,160 2,116,498
Ohio Housing Finance Agency, Single Family Mortgage
Rev., GNMA, 9.162s, 2031(++)(++) 970 1,023,660
Oklahoma Housing Finance Agency, 5.375s, 2020 1,960 1,869,311
Oklahoma Housing Finance Agency, 7.55s, 2028 1,000 1,117,170
Pima County, AZ, Industrial Development Authority,
GNMA, 7.05s, 2030 2,800 3,050,768
Reno County, KS, Single Family Mortgage Rev., AMBAC,
0s, 2014 1,075 216,881
San Bernardino County, CA, Single Family Mortgage
Rev., GNMA/FNMA, 6.45s, 2020 1,750 1,892,380
Sedgwick & Shawnee Counties, KS, GNMA, 6.875s, 2026 3,375 3,590,561
South Dakota Housing Development Authority,
Homeownership Mortgage, FHLMC, 5.8s, 2028 4,735 4,601,662
Texas Housing & Community Affairs, Residential
Mortgage Rev., GNMA/FNMA, 7.1s, 2021 4,915 5,233,246
Texas Veteran Housing Assistance Program, 7s, 2025 1,100 1,140,271
Wisconsin Housing & Economic Development,
Homeownership Rev., RIBS, 9.296s, 2022(++)(++) 870 900,398
Wyoming Community Development Authority, 5.85s, 2028 4,250 4,136,397
--------------
$ 73,099,755
--------------------------------------------------------------------------------------------------------
Solid Waste Revenue - 1.0%
Henrico County, VA, Industrial Development Authority
Rev. (Browning-Ferris), 5.3s, 2011 $ 3,000 $ 2,750,970
Hudson County, NJ, Solid Waste System Rev., 6s, 2019 2,000 1,910,000
Massachusetts Industrial Finance Agency (Ogden
Haverhill), 5.5s, 2013 2,475 2,221,560
Massachusetts Industrial Finance Agency (Ogden
Haverhill), 5.6s, 2019 5,425 4,653,891
Southwestern Illinois Development Authority Rev.,
Solid Waste Disposal Rev., 5.9s, 2014 2,500 2,332,625
--------------
$ 13,869,046
--------------------------------------------------------------------------------------------------------
Special Assessment District - 1.6%
Broadview, IL, Tax Increment Rev., 5.25s, 2012 $ 4,180 $ 4,045,111
Broadview, IL, Tax Increment Rev., 5.375s, 2015 3,400 3,201,304
Denver, CO, Urban Renewal Tax (Downtown Denver), 8.5s, 2013 1,205 1,214,170
Denver, CO, Urban Renewal Tax (Downtown Denver), 7.25s, 2017 1,250 1,295,775
Denver, CO, Urban Renewal Tax (Musicland), 8.5s, 2017 950 957,230
Katy, TX, Development Authority Rev., 5.8s, 2011 3,000 2,805,000
Katy, TX, Development Authority Rev., 6s, 2018 6,000 5,505,000
Lake Elsinore, CA, Public Financing Authority, 5.15s, 2014 3,205 3,023,405
--------------
$ 22,046,995
--------------------------------------------------------------------------------------------------------
Student Loan Revenue - 1.3%
Access To Loans For Learning, California Student Loan
Corp. Rev., 7.95s, 2030 $ 2,700 $ 2,719,845
Arizona Student Loan Acquisition Authority, "B", 6.15s, 2029 1,500 1,505,760
Arizona Student Loan Acquisition Authority, "C", 7.625s, 2010 4,610 4,912,001
Arizona Student Loan Acquisition Authority, "D", 7.25s, 2010 2,970 3,037,538
Pennsylvania Higher Education Assistance Agency, AMBAC,
8.138s, 2022(++)(++) 2,700 2,910,627
South Dakota Student Loan Rev. (Education Loans, Inc.), 5.6s, 2020 2,700 2,521,125
--------------
$ 17,606,896
--------------------------------------------------------------------------------------------------------
Turnpike Revenue - 2.5%
Florida Mid-Bay Bridge Authority Rev., 8.5s, 2022 $ 2,500 $ 2,667,175
Foothill/Eastern Transportation Corridor Agency, CA,
Toll Road Rev., 0s to 2005, 7.15s to 2013 5,000 4,535,400
Illinois Regional Transport Authority, MBIA, 6.25s, 2018 4,460 4,805,650
New Jersey Turnpike Authority, RITES, 5.804s, 2020+(++)(++) 5,000 4,851,500
Pocahontas Parkway Assn., VA, Toll Road Rev., 0s, 2011 2,700 1,233,792
Pocahontas Parkway Assn., VA, Toll Road Rev., 0s, 2012 2,100 924,630
Pocahontas Parkway Assn., VA, Toll Road Rev., 0s, 2012 1,700 719,423
Pocahontas Parkway Assn., VA, Toll Road Rev., 0s, 2013 7,000 2,860,970
Pocahontas Parkway Assn., VA, Toll Road Rev., 0s, 2014 6,600 2,501,466
Pocahontas Parkway Assn., VA, Toll Road Rev., 0s, 2015 7,250 2,545,692
Pocahontas Parkway Assn., VA, Toll Road Rev., 0s, 2016 2,000 649,940
State of Florida, RITES, 4.767s, 2017+(++)(++) 2,300 2,018,342
Telluride, CO, Gondola Transit Co., 9s, 2016 2,340 2,574,351
West Virginia Parkways, Economic Development &
Tourism Authority, FGIC, 6.815s, 2019(++)(++) 1,200 1,203,756
--------------
$ 34,092,087
--------------------------------------------------------------------------------------------------------
Universities - 1.8%
California Education Facilities Authority Rev. (L.A
College of Chiropractic), 5.6s, 2017 $ 2,000 $ 1,932,920
Illinois Development Finance Authority, Economic
Development Rev. (Latin School of Chicago), 5.6s, 2018 850 792,727
Illinois Development Finance Authority, Economic
Development Rev. (Latin School of Chicago), 5.65s, 2028 1,730 1,574,248
Islip, NY, Community Development Agency Rev. (New
York Institute of Technology), 7.5s, 2026 6,000 6,162,180
Massachusetts Development Finance Agency Rev
(Williston Northampton School), 6.5s, 2028 1,500 1,383,660
Nassau County, NY, Industrial Development Agency,
Civic Facilities Rev. (New York Institute of Technology),
6.15s, 2029 3,300 2,980,659
New Hampshire Higher Educational & Health Facilities
Authority Rev. (Franklin Pierce Law Center), 5.5s, 2018 1,200 1,105,320
New York Dormitory Authority Rev., RITES, 4.848s, 2017+(++)(++) 6,500 5,735,470
Savannah, GA, Economic Development Authority (College
Of Art & Design, Inc.), 6.2s, 2009 820 847,249
Savannah, GA, Economic Development Authority (College
Of Art & Design, Inc.), 6.5s, 2013 2,000 2,000,000
--------------
$ 24,514,433
--------------------------------------------------------------------------------------------------------
Water and Sewer Utility Revenue - 2.0%
Detroit, MI, Sewer Disposal Rev., FGIC, 6.655s, 2023(++)(++) $ 1,500 $ 1,637,610
Detroit, MI, Sewer Disposal Rev., FGIC, 6.655s, 2023(++)(++) 500 491,130
Forsyth County, GA, Water & Sewage Authority, 6.25s, 2017 1,000 1,071,100
Forsyth County, GA, Water & Sewage Authority, 6.25s, 2019 1,010 1,075,014
Harrisburg, PA, Authority Water Rev., RITES, FGIC,
7.07s, 2015(++)(++) 2,000 2,062,960
Massachusetts Water Resources Authority, RITES, 7.79s, 2019+(++)(++) 765 961,146
Michigan Municipal Bond Authority Rev., RITES, 5.767s, 2021+(++)(++) 7,585 7,285,847
New York City, NY, Municipal Water Finance Authority
Rev., 5.75s, 2029 8,590 8,589,313
Phoenix, AR, Wastewater Systems Rev., FGIC, 6.25s, 2017 1,000 1,066,390
State of Virginia, Clean Water Rev., 5.75s, 2019 2,500 2,548,725
--------------
$ 26,789,235
--------------------------------------------------------------------------------------------------------
Other - 2.8%
Alabama Building Renovation Authority, AMBAC, 6s, 2017 $ 1,805 $ 1,866,171
Alabama Building Renovation Authority, AMBAC, 6s, 2018 1,155 1,194,143
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 2,918,700
Danville, VA, Industrial Development Authority Rev
(Piedmont Mall), 8s, 2017 8,280 8,476,650
District of Columbia (National Public Radio), 7.7s, 2023 3,500 3,696,175
Harris County, TX, Cultural Education Facility (Space
Center Houston), 9.25s, 2023 70 69,163
Iowa Finance Authority, Community Provider Rev. (Boys
& Girls Home), 6.25s, 2028 2,000 1,773,020
Lehigh County, PA, General Purpose Authority
(Kidspeace Obligation Group), 6s, 2018 5,000 4,499,900
Massachusetts Industrial Finance Agency (Brandon
Residential Treatment), 8.75s, 2024 5,110 5,475,518
New Hampshire Higher Educational & Health Facilities
Authority Rev. (Child & Family Services), 6.125s, 2019 1,450 1,321,675
Rail Connections Inc., MA, Rev., 0s, 2015 375 145,478
Rail Connections Inc., MA, Rev., 0s, 2016 450 162,571
Rail Connections Inc., MA, Rev., 0s, 2017 975 327,151
Rail Connections Inc., MA, Rev., 0s, 2018 1,235 385,098
St. Louis County, MO, Industrial Development
Authority (Eagle Golf Enterprises), 10s, 2005 2,200 2,309,120
St. Louis County, MO, Industrial Development Authority
(Kiel Center Arena), 7.875s, 2024 1,000 1,046,800
--------------
$ 37,688,856
--------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $1,326,039,730) $1,304,962,412
--------------------------------------------------------------------------------------------------------
Floating Rate Demand Notes - 1.3%
--------------------------------------------------------------------------------------------------------
Bartow County, GA, Development Authority, Pollution
Control Rev. (Georgia Power Co.), due 08/03/00 $ 1,000 $ 1,000,000
Burke County, GA, Development Authority, Pollution
Control Rev. (Georgia Power Co.), due 08/03/00 500 500,000
Harris County, TX, Hospital Rev. (Methodist Hospital),
due 08/03/00 2,850 2,850,000
Mount Vernon, IN, Pollution Control Rev. (General
Electric Co.), due 08/03/00 2,700 2,700,000
New York City, NY, Municipal Water & Sewer Finance
Authority, due 08/03/00 300 300,000
Sevier County, TN, Public Building Authority, due 08/03/00 9,700 9,700,000
--------------------------------------------------------------------------------------------------------
Total Floating Rate Demand Notes,
at Amortized Cost and Value $ 17,050,000
--------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,343,089,730) $1,322,012,412
Other Assets, Less Liabilities - 1.2% 16,160,539
--------------------------------------------------------------------------------------------------------
Net assets - 100.0% $1,338,172,951
--------------------------------------------------------------------------------------------------------
* Non-income producing security in default.
# Payment-in-kind security.
## SEC Rule 144A restriction.
+ Restricted security.
(+) Security valued by or at the direction of the Trustees.
(++) Inverse floating rate security.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
-------------------------------------------------------------------------------
JULY 31, 2000
-------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $1,343,089,730) $1,322,012,412
Cash 12,338
Receivable for investments sold 1,453,379
Receivable for fund shares sold 1,966,160
Interest receivable 20,365,974
Other assets 8,794
--------------
Total assets $1,345,819,057
--------------
Liabilities:
Distributions payable $ 4,458,413
Payable for investments purchased 1,428,608
Payable for fund shares reacquired 1,250,051
Payable to affiliates -
Management fee 59,890
Shareholder servicing agent fee 10,892
Distribution and service fee 70,322
Administrative fee 1,906
Accrued expenses and other liabilities 366,024
--------------
Total liabilities $ 7,646,106
--------------
Net assets $1,338,172,951
==============
Net assets consist of:
Paid-in capital $1,523,991,434
Unrealized depreciation on investments (21,077,318)
Accumulated net realized loss on investments (163,322,696)
Accumulated distributions in excess of net investment
income (1,418,469)
--------------
Total $1,338,172,951
==============
Shares of beneficial interest outstanding 163,465,715
===========
Class A shares:
Net asset value per share
(net assets of $976,634,373 / 119,334,074 shares of
beneficial interest outstanding) $8.18
=====
Offering price per share (100 / 95.25 of net asset
value per share) $8.59
=====
Class B shares:
Net asset value and offering price per share
(net assets of $342,356,644 / 41,790,606 shares of
beneficial interest outstanding) $8.19
=====
Class C shares:
Net asset value and offering price per share
(net assets of $19,181,934 / 2,341,035 shares of
beneficial interest outstanding) $8.19
=====
On sales of $100,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class
B, and Class C shares.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations (Unaudited)
-------------------------------------------------------------------------------
SIX MONTHS ENDED JULY 31, 2000
-------------------------------------------------------------------------------
Net investment income:
Interest Income $47,320,201
-----------
Expenses -
Management fee $ 4,221,356
Trustees' compensation 26,494
Shareholder servicing agent fee 660,385
Distribution and service fee (Class B) 1,333,061
Distribution and service fee (Class C) 85,757
Administrative fee 108,771
Custodian fee 179,895
Printing 30,959
Postage 35,929
Auditing fees 17,800
Legal fees 19,398
Miscellaneous 529,937
-----------
Total expenses $ 7,249,742
Fees paid indirectly (156,126)
Reduction of expenses by investment adviser (549,572)
-----------
Net expenses $ 6,544,044
-----------
Net investment income $40,776,157
-----------
Realized and unrealized gain (loss) on investments:
Realized loss (identified cost basis) -
Investment transactions $(9,084,055)
Futures contracts (445,656)
-----------
Net realized loss on investments $(9,529,711)
-----------
Change in unrealized appreciation -
Investments $30,285,029
Futures contracts 316,374
-----------
Net unrealized gain on investments $30,601,403
-----------
Net realized and unrealized gain on investments $21,071,692
-----------
Increase in net assets from operations $61,847,849
===========
See notes to financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
<CAPTION>
---------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JULY 31, 2000 JANUARY 31, 2000
(UNAUDITED)
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 40,776,157 $ 87,004,204
Net realized gain (loss) on investments (9,529,711) 20,055,125
Net unrealized gain (loss) on investments 30,601,403 (186,349,281)
-------------- --------------
Increase (decrease) in net assets from operations $ 61,847,849 $ (79,289,952)
-------------- --------------
Distributions declared to shareholders -
From net investment income (Class A) $ (30,908,405) $ (69,225,299)
From net investment income (Class B) (9,405,131) (19,611,814)
From net investment income (Class C) (462,621) (635,333)
In excess of net investment income (Class A) (927,809) (224,315)
In excess of net investment income (Class B) (282,323) (63,549)
In excess of net investment income (Class C) (13,887) (2,059)
-------------- --------------
Total distributions declared to shareholders $ (42,000,176) $ (89,762,369)
-------------- --------------
Net decrease in net assets from fund share transactions $ (24,831,777) $ (22,203,674)
-------------- --------------
Total decrease in net assets $ (4,984,104) $ (191,255,995)
Net assets:
At beginning of period 1,343,157,055 1,534,413,050
-------------- --------------
At end of period (including accumulated distributions
in excess of net investment income of $1,418,469 and
$194,450, respectively) $1,338,172,951 $1,343,157,055
============== ==============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JANUARY 31,
SIX MONTHS ENDED ---------------------------------------------------------------------------------
JULY 31, 2000 2000 1999 1998 1997 1996
(UNAUDITED)
----------------------------------------------------------------------------------------------------------------------------------
CLASS A
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value -
beginning of period $ 8.06 $ 9.03 $ 9.07 $ 8.73 $ 9.12 $ 8.60
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.26 $ 0.51 $ 0.53 $ 0.57 $ 0.61 $ 0.61
Net realized and unrealized
gain (loss) on investments 0.12 (0.95) (0.04) 0.34 (0.36) 0.59
------ ------ ------ ------ ------ ------
Total from investment
operations $ 0.38 $(0.44 $ 0.49 $ 0.91 $ 0.25 $ 1.20
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.25) $(0.53) $(0.53) $(0.57) $(0.64) $(0.68)
In excess of net investment
income (0.01) (0.00)+++ -- -- -- --
------ ------ ------ ------ ------ ------
Total distributions declared
to shareholders $(0.26) $(0.53) $(0.53) $(0.57) $(0.64) $(0.68)
------ ------ ------ ------ ------ ------
Net asset value - end of
period $ 8.18 $ 8.06 $ 9.03 $ 9.07 $ 8.73 $ 9.12
====== ====== ====== ====== ====== ======
Total return(+) 4.83%++ (5.09)% 5.54% 10.81% 2.87% 13.92%
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 0.79%+ 0.76% 0.81% 0.89% 0.93% 0.93%
Net investment income 6.34%+ 5.94% 5.84% 6.42% 6.96% 6.83%
Portfolio turnover 16% 27% 12% 19% 17% 20%
Net assets at end of period
(000 omitted) $976,634 $985,622 $1,168,479 $1,107,181 $988,178 $1,009,031
(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 $ 0.26 $ 0.50 $ 0.53 -- -- --
Ratios (to average net assets):
Expenses## 0.87%+ 0.82% 0.82% -- -- --
Net investment income 6.26%+ 5.88% 5.83% -- -- --
+ 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.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JANUARY 31,
SIX MONTHS ENDED ----------------------------------------------------------------------------------
JULY 31, 2000 2000 1999 1998 1997 1996
(UNAUDITED)
-----------------------------------------------------------------------------------------------------------------------------------
CLASS B
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of
period $ 8.07 $ 9.04 $ 9.08 $ 8.74 $ 9.12 $ 8.60
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.22 $ 0.44 $ 0.45 $ 0.49 $ 0.52 $ 0.52
Net realized and unrealized
gain (loss) on investments 0.13 (0.95) (0.04) 0.34 (0.35) 0.59
------ ------ ------ ------ ------ ------
Total from investment
operations $ 0.35 $(0.51) $ 0.41 $ 0.83 $ 0.17 $ 1.11
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.22) $(0.46) $(0.45) $(0.49) $(0.55) $(0.59)
In excess of net investment
income (0.01) (0.00)+++ -- -- -- --
------ ------ ------ ------ ------ ------
Total distributions declared
to shareholders $(0.23) $(0.46) $(0.45) $(0.49) $(0.55) $(0.59)
------ ------ ------ ------ ------ ------
Net asset value - end of
period $ 8.19 $ 8.07 $ 9.04 $ 9.08 $ 8.74 $ 9.12
====== ====== ====== ====== ====== ======
Total return 4.42%++ (5.85)% 4.62% 9.87% 1.96% 12.78%
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 1.58%+ 1.57% 1.69% 1.73% 1.86% 1.91%
Net investment income 5.55%+ 5.13% 4.95% 5.50% 6.00% 5.84%
Portfolio turnover 16% 27% 12% 19% 17% 20%
Net assets at end of period
(000 omitted) $342,357 $340,157 $363,062 $264,575 $125,971 $77,808
(S) The investment adviser voluntarily waived a portion of its fee for certain of the periods indicated. If this fee had been
incurred by the fund, the net investment income per share and the ratios would have been:
Net investment income $ 0.22 $ 0.43 $ 0.45 -- -- --
Ratios (to average net assets):
Expenses## 1.66%+ 1.63% 1.70% -- -- --
Net investment income 5.47%+ 5.07% 4.94% -- -- --
+ 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.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
JULY 31, 2000 JANUARY 31, 2000 JANUARY 31, 1999*
(UNAUDITED)
------------------------------------------------------------------------------------------------------------------------
CLASS C
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 8.07 $ 9.04 $ 9.10
------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.21 $ 0.43 $ 0.15
Net realized and unrealized gain (loss) on
investments 0.13 (0.96) (0.06)
------ ------ ------
Total from investment operations $ 0.34 $(0.53) $ 0.09
------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.21) $(0.44) $(0.15)
In excess of net investment income (0.01) (0.00)+++ --
------ ------ ------
Total distributions declared to shareholders $(0.22) $(0.44) $(0.15)
------ ------ ------
Net asset value - end of period $ 8.19 $ 8.07 $ 9.04
====== ====== ======
Total return 4.31%++ (6.04)% 0.96%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.79%+ 1.76% 1.75%+
Net investment income 5.33%+ 4.94% 4.45%+
Portfolio turnover 16% 27% 12%
Net assets at end of period
(000 omitted) $19,182 $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 $0.21 $0.42 $0.15
Ratios (to average net assets):
Expenses## 1.87%+ 1.82% 1.76%+
Net investment income 5.25%+ 4.88% 4.44%+
* For the period from the inception of Class C shares, 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.
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Municipal High Income Fund (the fund) is a non-diversified series of MFS
Series Trust III (the trust). The trust is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The fund can invest up to 100% of its portfolio in high-yield securities rated
below investment grade. Investments in high-yield securities involve greater
degrees of credit and market risk than investments in higher-rated securities
and tend to be more sensitive to economic conditions.
Investment Valuations - Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues, are valued on the
basis of valuations furnished by dealers or by a pricing service with
consideration to factors such as institutional-size trading in similar groups
of securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data, without exclusive reliance upon
exchange or over-the-counter prices. Short-term obligations, which mature in
60 days or less, are valued at amortized cost, which approximates market
value. Futures contracts listed on commodities exchanges are reported at
market value using closing settlement prices. Securities for which there are
no such quotations or valuations are valued 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. 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 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 total 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 tax-
exempt and net taxable 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 only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in-capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains.
At January 31, 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 that differ in their respective distribution and service
fees. All shareholders bear the common expenses of the fund based on the value
of settled shares outstanding of each class, without distinction between share
classes. Dividends are declared separately for each class. Differences in per
share dividend rates are generally due to differences in separate class
expenses. Class B shares will convert to Class A shares approximately eight
years after purchase.
(3) Transactions with Affiliates
Investment Adviser - The fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at the following annual
rates:
BASED ON AVERAGE NET ASSETS BASED ON GROSS INCOME
---------------------------------------- ---------------------------------
First $1.3 billion 0.30% 4.75%
In excess of $1.3 billion 0.25%
The investment adviser has voluntarily agreed to waive a portion of its fee,
which is shown as a reduction of expenses in the Statement of Operations.
The fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the fund, all of whom receive
remuneration for their services to the fund from MFS. Certain officers and
Trustees of the fund are officers or directors of MFS, MFS Fund Distributors,
Inc. (MFD) and MFS Service Center, Inc. (MFSC). The fund has an unfunded
defined benefit plan for all of its independent Trustees. Included in
Trustees' compensation is a net periodic pension expense of $7,074 for the six
months ended July 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 incurs an administrative fee at
the following annual percentages of the fund's average daily net assets:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$174,220 for the six months ended July 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 securities 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 $2 for Class B and Class C shares, respectively, for the six months
ended July 31, 2000. Fees incurred under the distribution plan during the six
months ended July 31, 2000, were 0.79% and 1.00% of average daily net assets
attributable to Class B and Class C shares, respectively, on an annualized
basis.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months following
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class B shares in the event of a shareholder redemption within
six years of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the six months ended July 31,
2000, were $121, $542,816, and $3,398 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 annual rate of 0.10%.
(4) Portfolio Securities
Purchases and sales of investments, other than short-term obligations,
aggregated $211,429,149 and $245,843,757, 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 $1,343,089,730
--------------
Gross unrealized appreciation $ 47,300,931
Gross unrealized depreciation (68,378,249)
--------------
Net unrealized depreciation $ (21,077,318)
==============
(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>
Class A shares
<CAPTION>
SIX MONTHS ENDED JULY 31, 2000 YEAR ENDED JANUARY 31, 2000
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 5,966,268 $ 48,388,362 27,734,810 $ 239,618,620
Shares issued to shareholders in
reinvestment of distributions 1,409,805 11,456,580 2,977,187 25,569,363
Shares reacquired (10,263,614) (83,351,455) (37,897,710) (322,177,295)
----------- ------------ ----------- -------------
Net decrease (2,887,541) $(23,506,513) (7,185,713) $ (56,989,312)
=========== ============ =========== =============
<CAPTION>
Class B shares
SIX MONTHS ENDED JULY 31, 2000 YEAR ENDED JANUARY 31, 2000
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,447,734 $ 28,013,519 10,417,197 $ 90,612,464
Shares issued to shareholders
in reinvestment of
distributions 401,360 3,265,348 772,825 6,633,134
Shares reacquired (4,198,644) (34,125,653) (9,222,261) (78,516,621)
----------- ------------ ----------- -------------
Net increase (decrease) (349,550) $ (2,846,786) 1,967,761 $ 18,728,977
=========== ============ =========== =============
<CAPTION>
Class C shares
SIX MONTHS ENDED JULY 31, 2000 YEAR ENDED JANUARY 31, 2000
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 602,856 $ 4,888,532 2,428,300 $ 21,062,648
Shares issued to shareholders
in reinvestment of
distributions 23,092 187,913 34,058 289,328
Shares reacquired (437,482) (3,554,923) (627,555) (5,295,315)
----------- ------------ ----------- -------------
Net increase 188,466 $ 1,521,522 1,834,803 $ 16,056,661
=========== ============ =========== =============
</TABLE>
(6) Line of Credit
The fund and other affiliated funds participate in a $1.1 billion unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each fund, based on its borrowings, at a rate equal to the 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 the six
months ended July 31, 2000, was $3,928.
(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.
(8) Restricted Securities
The fund may invest not more than 15% of its net assets in securities which are
subject to legal or contractual restrictions on resale. At July 31, 2000, the
fund owned the following restricted securities, excluding securities issued
under Rule 144A, constituting 4.2% 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, Board of
Education, RITES, 5.072s, 2020 2/9/00 $7,910,000 $6,211,881 $ 7,296,184
Chicago, IL, Public Building
Commerce Rev., RITES, 5.254s, 2017 3/18/99 4,500,000 4,800,137 4,287,870
Colorado River, TX, Municipal
Water District, 6.25s, 2004 5/6/98 3,000,000 3,000,000 2,918,700
Essex County, NJ, RITES, 6.678s, 2020 4/6/00 6,000,000 5,968,176 6,149,880
Hannibal, MO, Industrial Development
Authority (Hannibal Regional
Healthcare) 9.5s, 2001 3/23/92 2,920,000 2,893,030 3,195,093
Houston, TX, Independent School
District, RITES, 5.267s, 2017 3/11/99 5,000,000 5,220,530 4,697,000
Los Angeles, CA, RITES, 5.761s, 2015 7/21/99 5,310,000 5,553,257 5,406,642
Massachusetts Water Resource Authority,
RITES, 7.79s, 2019 3/16/00 765,000 903,205 961,146
Michigan Municipal Bond Authority,
RITES, 5.767s, 2021 2/23/00 7,585,000 6,633,841 7,285,847
New Jersey Turnpike Authority,
RITES, 5.804s, 2020 4/19/00 5,000,000 4,638,741 4,851,500
New York Dormitory Authority,
Rev., RITES, 4.848s, 2017 3/14/00 6,500,000 5,318,642 5,735,470
State of Florida, RITES,
4.767s, 2017 4/9/99 2,300,000 2,331,858 2,018,342
Texas Housing & Community Board
(Harbors & Plumtree), 10s, 2026 11/12/96 1,740,000 1,740,000 1,655,349
-----------
$56,459,023
===========
</TABLE>
<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 INVESTOR INFORMATION
Administration For information on MFS mutual funds, call your
investment professional or, for an information
Charles W. Schmidt+ - Private Investor kit, call toll free: 1-800-637-2929 any business
day from 9 a.m. to 5 p.m. Eastern time (or leave a
Arnold D. Scott* - Senior Executive message anytime).
Vice President, Director, and Secretary,
MFS Investment Management INVESTOR SERVICE
MFS Service Center, Inc.
Jeffrey L. Shames* - Chairman and Chief P.O. Box 2281
Executive Officer, MFS Investment Management Boston, MA 02107-9906
Elaine R. Smith+ - Independent Consultant For general information, call toll free:
1-800-225-2606 any business day from
David B. Stone+ - Chairman, North American 8 a.m. to 8 p.m. Eastern time.
Management Corp. (investment adviser)
For service to speech- or hearing-impaired, call
INVESTMENT ADVISER toll free: 1-800-637-6576 any business day from 9
Massachusetts Financial Services Company a.m. to 5 p.m. Eastern time. (To use this service,
500 Boylston Street your phone must be equipped with a
Boston, MA 02116-3741 Telecommunications Device for the Deaf.) For share
prices, account balances, exchanges, or stock and
DISTRIBUTOR bond outlooks, call toll free: 1-800-MFS-TALK
MFS Fund Distributors, Inc. (1-800-637-8255) anytime from a touch-tone
500 Boylston Street telephone.
Boston, MA 02116-3741
WORLD WIDE WEB
CHAIRMAN AND PRESIDENT www.mfs.com
Jeffrey L. Shames*
PORTFOLIO MANAGER
Michael W. Roberge*
TREASURER
James O. Yost*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
+ Independent Trustee
* MFS Investment Management
</TABLE>
<PAGE>
MFS(R) MUNICIPAL HIGH INCOME FUND ------------
BULK RATE
U.S. POSTAGE
[Logo] M F S(R) PAID
INVESTMENT MANAGEMENT MFS
We invented the mutual fund(R) ------------
500 Boylston Street
Boston, MA 02116-3741
(c)2000 MFS Investment Management.(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116
MMH-3 9/00 45M 25/225/325
