UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4841
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MFS MUNICIPAL INCOME TRUST
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(Exact name of registrant as specified in charter)
500 Boylston Street, Boston, Massachusetts 02116
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(Address of principal executive offices) (Zip code)
James R. Bordewick, Jr.
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
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(Name and address of agents for service)
Registrant's telephone number, including area code: (617) 954-5000
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Date of fiscal year end: October 31
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Date of reporting period: October 31, 2004
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ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) MUNICIPAL INCOME TRUST 10/31/04
ANNUAL REPORT
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[logo] M F S(R)
INVESTMENT MANAGEMENT
ANNUAL REPORT
LETTER FROM THE CEO 1
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PORTFOLIO COMPOSITION 5
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MANAGEMENT REVIEW 6
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PERFORMANCE SUMMARY 8
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DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN 10
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RESULTS OF SHAREHOLDER MEETING 11
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PORTFOLIO OF INVESTMENTS 12
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FINANCIAL STATEMENTS 34
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NOTES TO FINANCIAL STATEMENTS 39
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REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM 50
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TRUSTEES AND OFFICERS 51
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PROXY VOTING POLICIES AND INFORMATION 55
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QUARTERLY PORTFOLIO DISCLOSURE 55
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FEDERAL TAX INFORMATION 56
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CONTACT INFORMATION BACK COVER
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LETTER FROM THE CEO
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Dear Shareholders,
[Photo of Robert J. Manning]
For most investors, the main factor in determining long-term success is asset
allocation - how they spread their money among stocks, bonds, and cash. In
fact, the total returns of investors may be more influenced by their asset
allocation strategy than by their security selection within each asset class.
The principle behind asset allocation is simple: by diversifying across a
variety of types of securities, investors reduce the overall risk of their
portfolio because gains in one area are likely to offset losses in another.
One of the dangers of not having an asset allocation plan is the temptation to
simply chase performance, by moving money into whichever asset class appears to
be outperforming at the moment. The problem with this approach is that by the
time a particular area of the market comes into favor, investors may have
already missed some of the best performance. We would suggest that one way to
benefit from swings in the market is to acquire a diversified portfolio so that
investors hold a range of asset classes before the market swings in their
direction.
UNDERSTAND YOUR EMOTIONS
It usually takes a bear market for people to appreciate the benefits of
diversification. At MFS, we believe proper asset allocation is important in all
market environments. But we understand that there are emotional components of
investment decisions that sometimes keep investors from achieving their long
term goals. The three common behaviors that negatively impact investment
decisions are overconfidence, looking backwards, and loss aversion.
o Overconfidence. After experiencing gains in the market, particularly during
a bull market, investors have a natural tendency to overestimate their own
abilities. During the global bull market of the late 1990s, for example, a
large number of investors traded their own stocks and made significant
profits. However, most of these same investors later handed back those
profits - and then some - because they focused more on short-term blips in
the market and less on the fundamental factors that affect a company's
long-term prospects.
o Looking backwards. Although security prices are determined by expectations
about the future, many investors make choices based on the recent past.
Investors who have achieved momentary success in the market tend to take on
too much risk, believing that better- than-average returns can be easily
duplicated. On the other hand, those who have had negative experiences tend
to become overly cautious and take on too little risk. Recent historical
experience tends to dictate an investor's frame of reference and may lead
to irrational decisions.
o Loss aversion. Simply put, investors would rather avoid the immediate pain
of losses than enjoy the future pleasure of gains. As a result, some
investors tend to overreact to short-term downturns in the market by
seeking to mitigate their losses, rather than remaining invested to benefit
from the long-term growth potential of the stock and bond markets.
THINK LIKE A PROFESSIONAL INVESTOR
Asset allocation helps reduce the emotional factors that tend to affect the
long-term returns of investors. Professional investors - those who manage
assets for money management firms, pension funds, and endowments - have tended
to outperform the average retirement investor because they focus on asset
allocation. For example, the investment performance of the average 401(k)
participant has lagged these professional investors by more than two percentage
points a year, on average, over the past 10 years.(1)
We think asset allocation is one of the most important decisions for investors.
A study of the performance of 91 large U.S. corporate pension plans with assets
of more than $100 million over a 10-year period beginning in 1974 concluded
that asset allocation policies accounted for 93.6% of their returns, while
individual security selection and the timing of their investments accounted for
only 6.4% for their overall performance.(2)
Professional investors target a realistic level of return based on the amount
of risk they are willing to take, then set allocations to meet their goals. On
average, U.S. professional investors allocate 35% to 40% of their assets to
domestic equity stocks; 20% to 30% to fixed income issues; 10% to international
stocks; and between 10% and 20% to other investment classes such as real
estate.(3) And within those categories, they hold a broad range of styles and
asset classes.
In contrast, 401(k) participants who held company stock in their retirement
plans at the end of 2002 had roughly 42% of their retirement assets in company
stock while the rest was allocated to either growth or value stock funds.(4)
These participants virtually ignored the broad range of equity, fixed-income,
and international offerings provided by their retirement plans.
ALLOCATE, DIVERSIFY, REBALANCE
We recommend working with a professional adviser to find an optimal mix of
investments based on your individual goals. In our view, a disciplined asset
allocation strategy is composed of three simple steps: allocate, diversify and
rebalance.
o Allocate. Investors should work with their financial adviser to specify
their long-term goals and tolerance for risk. Then investors should
allocate their assets across the major asset classes - stocks, bonds, and
cash - to help them pursue an investment return that is consistent with
their risk tolerance level.
o Diversify. By diversifying their assets, investors trade some performance
in the top performing categories for a more predictable and stable
portfolio. At the same time, investors should include different investment
styles and market capitalizations of stocks and a range of fixed-income
investments, as well as U.S. and non-U.S. securities. Because security
subclasses tend to move in and out of favor during various market and
economic environments, a broad portfolio increases the benefits of
diversification.
o Rebalance. We suggest that investors consult with their professional
advisers periodically to rebalance their portfolios to maintain the
percentages that they have dedicated to each asset class. Allocations can
shift as markets rise and fall, making for a riskier or more conservative
portfolio than an investor originally intended. For example, a portfolio of
50% stocks and 50% bonds at the start of 2000 would have shifted to 32%
stocks and 68% bonds at the end of 2002 because of the weak stock
market.(5)
In short, these three simple concepts - allocate, diversify and rebalance -
help take emotion out of the investment process and help prevent investors
from trying to outguess the market. An asset allocation strategy cannot turn a
down market cycle into a good one, but it is an invaluable tool to manage risk
and keep investors on track toward reaching their long-term investment goals.
A DISCIPLINED INVESTMENT PROCESS IS PARAMOUNT
Disciplined diversification has helped investors pursue long-term, above-
average results through the years. Since 1924, when we invented the mutual
fund, MFS(R) has strived to give investors the products and tools they need to
maintain well-diversified portfolios. MFS provides a variety of products in
each asset class as well as a family of asset allocation funds. These asset
allocation portfolios cover a range from conservative to moderate, growth, and
aggressive growth allocations, each with a strategy based on a distinct level
of risk. We recommend developing a comprehensive financial plan with an
investment advisor who is familiar with your risk tolerance, your individual
goals, and your financial situation.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
November 15, 2004
Asset allocation and diversification can not guarantee a profit or protect
against a loss.
The opinions expressed in this letter are those of MFS, and no forecasts can
be guaranteed.
(1) Source: Watson Wyatt
(2) "Determinants of Portfolio Performance," in Financial Analysts Journal,
January/February 1995, by Gary P. Brinson, L. Randolph Hood, and Gilbert L.
Beebower
(3) Source: Greenwich Associates
(4) Source: Hewitt Associates
(5) Source: Lipper Inc.
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PORTFOLIO COMPOSITION
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PORTFOLIO STRUCTURE
Bonds 99.0%
Cash & Other Net Assets 1.0%
TOP FIVE BOND INDUSTRIES*
Healthcare/Hospitals 27.5%
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Healthcare/Long Term Care 9.8%
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Investor Owned Utilities 7.8%
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Industrial Development Bonds/Paper 6.1%
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Industrial Development Bonds/Other 3.7%
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CREDIT QUALITY**
AAA 12.0%
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AA 4.2%
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A 10.0%
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BBB 32.6%
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BB 10.1%
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B 4.1%
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CCC 2.8%
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CC 0.3%
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D 0.0%
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Not Rated 23.5%
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Other 0.4%
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PORTFOLIO FACTS
Average Duration 8.5
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Average Life 17.0 Yrs
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Average Maturity*** 18.4 Yrs
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Average Quality BBB+
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Average Quality Short Term Bonds A-1
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Percentages are based on net assets including preferred shares as of 10/31/04.
* For purposes of this graphical presentation, the bond component includes
both accrued interest amounts and the equivalent exposure from any
derivative holdings, if applicable.
** Credit quality ratings are based on a weighted average of each security's
rating from Moody's Investors Service. If not rated by Moody's, the rating
will be that assigned by Standard & Poor's. Likewise, if not assigned a
rating by Standard & Poor's, it will be based on the ratings assigned by
Fitch, Inc. If not rated by any of the three agencies, the security is
considered not rated, except for U.S. Treasuries and mortgage-backed
securities, which are included in the "AAA"-rating category.
*** The average maturity shown is calculated using the final stated maturity
on the portfolio's holdings without taking into account any holdings which
have been pre-refunded to an earlier date or which have a mandatory put
date prior to the stated maturity. The average life shown takes into
account these earlier dates.
The portfolio is actively managed, and current holdings may be different.
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MANAGEMENT REVIEW
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SUMMARY OF RESULTS
For the year ended October 31, 2004, the net asset value of MFS Municipal
Income Trust was up 9.72%, outpacing the 6.03% return for the Lehman Brothers
Municipal Bond Index.
MARKET ENVIRONMENT
In 2004, many measures of economic growth, including employment, corporate
spending, and earnings growth continued to improve, though we feel that near-
record-high oil prices, concerns about rising interest rates, and an unsettled
geopolitical environment adversely affected U.S. markets. The U.S. Federal
Reserve Board raised interest rates three times during the period, and this
appears to have set expectations for an ongoing series of modest
rate hikes.
CONTRIBUTORS TO RELATIVE PERFORMANCE
Strong security selection within the health care and utilities sectors was the
principal source of the fund's relative outperformance for the period relative
to its benchmark, the Lehman Brothers Municipal Bond Index. Our positioning
along the yield curve also helped boost relative results. Shorter-maturity
bonds experienced larger price declines than longer-maturity bonds over the
period. The trust's overweighted position in bonds with maturities in the 15-
to 20-year range, therefore, worked to its benefit as these bonds outperformed
shorter-maturity bonds. Our underweighted position in shorter-maturity bonds
also helped relative performance as that end of the curve underperformed
longer-maturity bonds.
In addition, the trust's relative performance was positively impacted by
credit quality. As a high-yield-oriented portfolio, the trust was overweighted
in "BBB"-rated bonds which are the lowest quality investment-grade issues. The
trust benefited as "BBB"-rated bonds outperformed higher-quality issues over
the period. In addition, the trust's positions in noninvestment-grade debt,
which is not held by the benchmark, also aided relative results.
DETRACTORS FROM RELATIVE PERFORMANCE
Duration - a measure of the trust's sensitivity to changes in interest rates -
detracted modestly from relative performance during the 12-month period. The
fund was slightly long in duration - i.e., more sensitive to interest rate
changes - relative to its benchmark. Our longer duration stance modestly hurt
performance, mainly during March and April of 2004, when rates rose sharply and
bond prices retreated.
The views expressed in this report are those of the portfolio manager only
through the end of the period of the report as stated on the cover and do not
necessarily reflect the views of MFS or any other person in the MFS
organization. These views are subject to change at any time based on market and
other conditions, and MFS disclaims any responsibility to update such views.
These views may not be relied upon as investment advice or as an indication of
trading intent on behalf of any MFS fund. References to specific securities are
not recommendations of such securities and may not be representative of any MFS
fund's current or future investments.
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PERFORMANCE SUMMARY THROUGH 10/31/04
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All results are historical. Investment return and principal value will
fluctuate, and shares, when sold, may be worth more or less than their original
cost. More recent returns may be more or less than those shown. Past performance
is no guarantee of future results.
PRICE SUMMARY
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Year ended 10/31/04
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Date Price
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Net asset value 10/31/2003 $7.69
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10/31/2004 $7.86
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New York Stock Exchange Price 10/31/2003 $7.49
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3/9/2004 (high)* $8.15
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5/10/2004 (low)* $6.83
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10/31/2004 $7.83
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* For the period from November 1, 2003, through October 31, 2004.
TOTAL RETURN VS BENCHMARKS
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Year ended 10/31/04
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New York Stock Exchange price** 12.22%
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Net asset value** 9.72%
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Lehman Brothers Municipal Bond Index# 6.03%
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Lipper Closed End High Yield Municipal Index+ 8.72%
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** Includes reinvestment of dividend and capital gain distributions.
+ Source: Lipper Inc., an independent firm that reports mutual fund
performance.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITIONS
Lipper Closed End High Yield Municipal Index - an index composed of 10 closed-
end funds (including MFS Municipal Income Trust) that invests at least 50% of
their assets in lower rated municipal debt securities.
Lehman Brothers Municipal Bond Index - measures the municipal bond market.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
The trust's shares may trade at a discount to net asset value. Shareholders do
not have the right to cause the trust to repurchase their shares at net asset
value. The trust's shares also may trade at a premium to their net asset value.
When trust shares trade at a premium, buyers pay more than the asset value
underlying trust shares, and shares purchased at a premium would receive less
than the amount paid for them in the event of the trust's liquidation. As a
result, the total return that is calculated based on the net asset value and
New York Stock Exchange price can be different.
The trust's monthly distributions may include a return of capital to
shareholders. Distributions that are treated for federal income tax purposes as
a return of capital will reduce each shareholder's basis in his or her shares
and, to the extent the return of capital exceeds such basis, will be treated as
gain to the shareholder from a sale of shares. Returns of shareholder capital
have the effect of reducing the trust's assets and increasing the trust's
expense ratio.
KEY RISK CONSIDERATIONS
A portion of income may be subject to state, federal, and/or alternative
minimum tax. Capital gains, if any, are subject to a capital gains tax.
The portfolio may invest in derivative securities, which may include futures
and options. These types of instruments can increase price fluctuation.
The portfolio may invest in government guaranteed securities. These guarantees
apply to the underlying securities only and not to the prices and yields of the
portfolio.
Investments in high yield or lower-rated securities may provide greater returns
but are subject to greater-than-average risk.
The portfolio may invest a higher precentage of its assets in a small number of
issuers', the portfolio is more susceptible to any (non-diversified) single
economic, political or regulatory event affecting those issuers than is a
diversified fund.
The portfolio may focus in a limited number of states making it more
susceptible to adverse economic, political, or regulatory developments
affecting those states than a portfolio that invests more broadly.
The portfolio's value will fluctuate in response to market conditions and
issuer, regulatory, economic, or political developments. In general, fixed
income securities will decline when interest rates rise and will increase when
interest rates fall. Many fixed income securities also involve credit risk,
which is the risk that issuers may fail to make timely principal or interest
payments. In addition, fixed income securities with longer maturity dates will
be subject to greater price fluctuations than those with shorter maturity
periods. Please see the prospectus for further information on these and other
risk considerations.
In accordance with Section 23(c) of the Investment Company Act of 1940, the
trust hereby gives notice that it may from time to time repurchase shares of
the trust in the open market at the option of the Board of Trustees and on such
terms as the Trustees shall determine.
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DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
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The trust offers a Dividend Reinvestment and Cash Purchase Plan that allows you
to reinvest either all of the distributions paid by the trust or only the
long-term capital gains. Purchases are made at the market price unless that
price exceeds the net asset value (the shares are trading at a premium). If the
shares are trading at a premium, purchases will be made at a discounted price
of either the net asset value or 95% of the market price, whichever is greater.
Twice each year you can also buy shares. Investments may be made in any amount
over $100 in January and July on the 15th of the month or shortly thereafter.
If your shares are in the name of a brokerage firm, bank, or other nominee, you
can ask the firm or nominee to participate in the plan on your behalf. If the
nominee does not offer the plan, you may wish to request that your shares be
re-registered in your own name so that you can participate.
There is no service charge to reinvest distributions, nor are there brokerage
charges for shares issued directly by the trust. However, when shares are
bought on the New York Stock Exchange or otherwise on the open market, each
participant pays a pro rata share of the commissions. The automatic
reinvestment of distributions does not relieve you of any income tax that may
be payable (or required to be withheld) on the distributions.
To enroll in or withdraw from the plan, or if you have any questions, call
1-800-637-2304 any business day from 8 a.m. to 8 p.m. Eastern time. Please have
available the name of the trust and your account and Social Security numbers.
For certain types of registrations, such as corporate accounts, instructions
must be submitted in writing. Please call for additional details. When you
withdraw from the plan, you can receive the value of the reinvested shares in
one of two ways: a check for the value of the full and fractional shares, or a
certificate for the full shares and a check for the fractional shares.
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RESULTS OF SHAREHOLDER MEETING (unaudited) - 10/31/04
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At the annual meeting of shareholders of MFS Municipal Income Trust, which was
held on October 7, 2004, the following actions were taken:
ITEM 1. The election of the following Trustees of the trust by holders of
common shares:
NUMBER OF COMMON SHARES
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NOMINEE FOR WITHHOLD AUTHORITY
Robert J. Manning 34,383,020.097 732,400.089
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Lawrence H. Cohn M.D. 34,390,236.535 725,183.651
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Lawrence T. Perera 34,412,202.034 703,218.152
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ITEM 2. The election of the following Trustees of the trust by holders of
preferred shares:
NUMBER OF PREFERRED SHARES
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NOMINEE FOR WITHHOLD AUTHORITY
Elaine R. Smith 5,104 10
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ITEM 3. The ratification of the election of Deloitte & Touche LLP as the
independent public accountants to be employed by the trust for the
fiscal year ending October 31, 2004.
NUMBER OF SHARES
Affirmative 34,507,755.100
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Against 258,535.969
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Abstain 349,129.117
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PORTFOLIO OF INVESTMENTS - 10/31/04
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The Portfolio of Investments is a complete list of all securities owned by your fund. It is
categorized by broad-based asset classes.
Municipal Bonds - 141.7%
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ISSUER PAR AMOUNT $ VALUE
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Airport & Port Revenue - 5.5%
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Chicago, IL, O'Hare International Airport Rev. RITES, XLCA,
9.0787%, 2022+(+) $1,500,000 $1,784,490
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Cleveland Cuyahoga County, OH, Port Authority Rev.
(Cleveland City Project), "B", 4.5%, 2030 1,485,000 1,485,772
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Dayton Montgomery County, OH, Port Authority Rev. (Parking
Garage Project), 6.125%, 2024 1,130,000 1,176,161
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Oklahoma City, OK, Airport Trust Rev., FSA, 5.75%, 2016 3,125,000 3,430,344
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Port Authority, NY, Special Obligations Rev. (JFK
International), MBIA, 5.75%, 2022 7,000,000 7,667,730
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Port of Seattle, Rev, FGIC, 5.625%, 2018 1,500,000 1,646,835
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$17,191,332
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Chemicals - 0.7%
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Red River Authority, TX, Pollution Control Rev. (Celanese
Project), 6.7%, 2030 $2,125,000 $2,136,071
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General Obligations - General Purpose - 1.4%
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Jefferson County, OH, ASST GTY, 7.125%, 2005(++) $1,000,000 $1,075,390
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Lake County, IL, Land Acquisition & Development, 5.75%, 2017 1,000,000 1,139,350
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New York City, NY, 6.125%, 2006(++) 2,000,000 2,134,480
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$4,349,220
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Healthcare Revenue - Hospitals - 38.2%
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Allegheny County, PA, Hospital Development Authority Rev.
(South Hills Health Systems), 6.75%, 2025 $500,000 $530,125
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Allegheny County, PA, Hospital Development Authority Rev.
(West Penn Allegheny Health), 9.25%, 2022 1,000,000 1,152,480
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Allegheny County, PA, Hospital Development Authority Rev.
(West Penn Allegheny Health), 9.25%, 2030 2,000,000 2,304,520
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Athens County, OH, Hospital Facilities Rev. (O'Bleness
Memorial Hospital), 7.125%, 2033 1,500,000 1,536,840
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Baldwin County, AL, Eastern Shore Health Care Authority Rev.
(Thomas Hospital), 5.75%, 2027 700,000 679,315
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Brookhaven, NY, Civic Facilities Rev. (Memorial Hospital
Medical Center, Inc.), 7.75%, 2010 805,000 859,965
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Chautauqua County, NY, Civic Facilities Rev. (Women's
Christian Assn.), 6.35%, 2017 275,000 278,033
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Chautauqua County, NY, Civic Facilities Rev. (Women's
Christian Assn.), 6.4%, 2029 980,000 931,804
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Chemung County, NY, Civic Facilities Rev. (St. Joseph's
Hospital-Elmira), 6%, 2013 590,000 593,617
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Chemung County, NY, Civic Facilities Rev. (St. Joseph's
Hospital-Elmira), 6.35%, 2013 150,000 153,782
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Chester County, PA, Health & Educational Facilities Rev.
(Chester County Hospital), 6.75%, 2021 1,625,000 1,718,226
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Citrus County, FL, Hospital Development Authority Rev.
(Citrus Memorial Hospital), 6.25%, 2023 985,000 1,035,441
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Coffee County, GA, Hospital Authority Rev. (Coffee Regional
Medical Center, Inc.), 5%, 2026 40,000 39,008
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Colorado Health Facilities Authority Rev. (Parkview Medical
Center), 6.5%, 2020 1,230,000 1,365,497
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Colorado Health Facilities Authority Rev. (Parkview Medical
Center), 6.6%, 2025 1,000,000 1,102,410
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Colorado Health Facilities Authority Rev. (Portercare
Adventist Health Systems), 6.625%, 2026 675,000 748,791
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Comal County, TX, Health Facilities Development Rev.
(McKenna Memorial Hospital), 6.125%, 2022 500,000 513,145
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Crittenden County, AR, Arkansas Hospital Rev., 7%, 2020 1,030,000 1,027,291
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Cumberland County PA, Municipal Authority Rev. (Carlisle
Hospital & Health Centers), 6.8%, 2004(++) 250,000 255,425
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Cuyahoga County, OH, Hospital Facilities Rev. (Canton,
Inc.), 7.5%, 2030 1,330,000 1,476,832
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Delaware Health Facilities Authority Rev. (Nanticoke
Memorial Hospital), 5.625%, 2032 1,250,000 1,311,900
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Denver, CO, Health & Hospital Authority Rev., 5.25%, 2013 635,000 658,216
----------------------------------------------------------------------------------------------
Denver, CO, Health & Hospital Authority Rev., 5.375%, 2018 1,500,000 1,535,850
----------------------------------------------------------------------------------------------
Denver, CO, Health & Hospital Authority Rev., 5.375%, 2028 860,000 858,306
----------------------------------------------------------------------------------------------
Denver, CO, Health & Hospital Authority Rev., "A", 6%, 2023 250,000 256,628
----------------------------------------------------------------------------------------------
District of Columbia, Health & Hospital Authority Rev.
(Medstar University Hospital), "D", 6.875%, 2007(++) 1,200,000 1,330,044
----------------------------------------------------------------------------------------------
Farmington, NM, Hospital Rev. (San Juan Regional Medical
Center), "A", 5%, 2023 835,000 838,975
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Grand Forks, ND, Health Care Authority Rev. (Altru Health
Systems Obligation Group), 7.125%, 2024 755,000 824,656
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Gulfport, MS, Healthcare Authority Rev. (Memorial Hospital),
5.75%, 2031 1,000,000 1,044,180
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Highlands County, FL, Health Facilities Authority Rev.
(Adventist/Sunbelt Hospital), 6%, 2031 900,000 968,571
----------------------------------------------------------------------------------------------
Houston County, AL, Health Care Authority Rev., AMBAC,
6.25%, 2030 2,000,000 2,271,160
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Huntsville, AL, Health Care Authority Rev., 5.625%, 2026 875,000 909,694
----------------------------------------------------------------------------------------------
Illinois Development Finance Authority, Hospital Authority
Rev. (Adventist/Sunbelt Hospital), 5.65%, 2024 1,750,000 1,829,765
----------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Rev. (Centegra Heath
Systems), 5.25%, 2018 1,000,000 1,016,740
----------------------------------------------------------------------------------------------
Indiana Health Facilities Financing Authority, Hospital Rev.
(Munster Medical Research Foundation, Inc.), 6.375%, 2031 3,990,000 4,106,029
----------------------------------------------------------------------------------------------
Indiana Health Facilities Financing Authority, Hospital Rev.
(Riverview Hospital), 6.125%, 2031 1,000,000 1,038,060
----------------------------------------------------------------------------------------------
Kentucky Economic Development Finance Authority, Health
Systems Rev. (Norton Healthcare, Inc.), 6.5%, 2020 5,000,000 5,442,700
----------------------------------------------------------------------------------------------
Knox County, TN, Health Educational Housing Facilities
Board, Hospital Facilities Rev. (Baptist Health Systems),
6.5%, 2031 1,725,000 1,723,931
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Lauderdale County & Florence, AL, Health Care Authority Rev.
(Coffee Health Group), MBIA, 5.625%, 2021 3,000,000 3,340,650
----------------------------------------------------------------------------------------------
Lufkin, TX, Health Facilities Rev. (Memorial Health System
of East Texas), 6.875%, 2026 1,615,000 1,698,076
----------------------------------------------------------------------------------------------
Lufkin, TX, Health Facilities Rev. (Memorial Health System
of East Texas), 5.7%, 2028 995,000 1,009,507
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Macomb County, MI, Hospital Finance Authority Rev. (Mount
Clemens General Hospital), 5.75%, 2025 1,000,000 933,850
----------------------------------------------------------------------------------------------
Macomb County, MI, Hospital Finance Authority Rev. (Mount
Clemens General Hospital), 5.875%, 2034 905,000 843,080
----------------------------------------------------------------------------------------------
Maryland Health & Higher Educational Facilities Authority
Rev. (Medstar Health), 5.5%, 2033 380,000 387,855
----------------------------------------------------------------------------------------------
Maryland Health & Higher Educational Facilities Authority
Rev. (North Arundel Hospital), 6.5%, 2031 1,500,000 1,664,475
----------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority Rev.
(Berkshire Health Systems), 6.25%, 2031 1,900,000 1,989,357
----------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority Rev.
(Caritas Christi), 6.5%, 2012 600,000 672,114
----------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority Rev.
(Caritas Christi), 5.7%, 2015 500,000 517,935
----------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority Rev.
(Jordan Hospital), 5.25%, 2018 1,400,000 1,304,576
----------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority Rev.
(Northern Berkshire Health), "B", 6.375%, 2034 890,000 878,902
----------------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities Authority Rev.
(Saints Memorial Medical Center), 6%, 2023 465,000 451,013
----------------------------------------------------------------------------------------------
Miami Beach, FL, Health Facilities Rev. (Mount Sinai Medical
Center), 6.75%, 2029 810,000 859,532
----------------------------------------------------------------------------------------------
Miami Beach, FL, Health Facilities Rev. (Mount Sinai Medical
Center), "A", 6.7%, 2019 995,000 1,034,442
----------------------------------------------------------------------------------------------
Mississippi Business Finance Corp., Health Facilities Rev.
(Rush Medical Foundation, Inc.), 5.625%, 2023 845,000 807,524
----------------------------------------------------------------------------------------------
Mississippi Hospital Equipment, Health Facilities Rev. (Rush
Medical Foundation, Inc.), 5.4%, 2007 315,000 323,829
----------------------------------------------------------------------------------------------
Mount Lebanon, PA, Hospital Authority Rev. (St. Clair
Memorial Hospital), 5.625%, 2032 435,000 448,202
----------------------------------------------------------------------------------------------
Nassau County, NY, Industrial Development Agency, Civic
Facilities Rev. (North Shore Health System), 5.625%, 2010 725,000 796,057
----------------------------------------------------------------------------------------------
Nassau County, NY, Industrial Development Agency, Civic
Facilities Rev. (North Shore Health System), 5.875%, 2011 550,000 612,046
----------------------------------------------------------------------------------------------
New Hampshire Health & Educational Facilities Authority Rev.
(Covenant Health), 6.5%, 2017 915,000 1,030,812
----------------------------------------------------------------------------------------------
New Hampshire Higher Educational & Health Facilities
Authority Rev. (Catholic Medical Center), 6.125%, 2032 1,000,000 1,029,900
----------------------------------------------------------------------------------------------
New Hampshire Higher Educational & Health Facilities
Authority Rev. (Littleton Hospital), 5.8%, 2018 1,000,000 961,280
----------------------------------------------------------------------------------------------
New Jersey Health Care Facilities, Financing Authority Rev.
(St. Peter's University Hospital), 6.875%, 2030 3,000,000 3,320,190
----------------------------------------------------------------------------------------------
New York City, NY, Industrial Development Agency, Civic
Facilities Rev. (Staten Island University Hospital), 6.375%, 2031 500,000 479,225
----------------------------------------------------------------------------------------------
New York City, NY, Health & Hospital Corp. Rev., 5.25%, 2017 700,000 731,220
----------------------------------------------------------------------------------------------
North Texas Health Facilities Development Corp. Rev. (United
Regional Health Care System, Inc.), 6%, 2023 1,000,000 1,059,810
----------------------------------------------------------------------------------------------
Ohio County, WV, County Commission Health System Rev. (Ohio
Valley Medical Center), 5.75%, 2013 850,000 797,649
----------------------------------------------------------------------------------------------
Oklahoma Development Finance Authority Rev. (Comanche County
Hospital), 6.6%, 2031 1,875,000 1,968,544
----------------------------------------------------------------------------------------------
Rhode Island Health & Education Building Rev., Hospital
Financing (Lifespan Obligated Group), 6.5%, 2032 505,000 537,588
----------------------------------------------------------------------------------------------
Rhode Island Health & Education Building Rev., Hospital
Financing (Lifespan Obligation Group), 6.375%, 2021 1,805,000 1,933,317
----------------------------------------------------------------------------------------------
Royston, GA, Hospital Authority Rev. (Ty Cobb Healthcare
Systems, Inc.), 6.375%, 2014 955,000 955,325
----------------------------------------------------------------------------------------------
Russell, KY, (Bon Secours Health Systems), ETM,
5.85%, 2005(++) 3,000,000 3,121,620
----------------------------------------------------------------------------------------------
Salt Lake City, UT, Hospital Authority Rev. (Intermountain
Health Care), AMBAC, INFLOS, ETM, 11.725%, 2020(+),(++) 600,000 602,244
----------------------------------------------------------------------------------------------
Scranton-Lackawanna, PA, Health & Welfare Authority Rev.
(Allied Rehab Hospital), 7.125%, 2005 285,000 286,935
----------------------------------------------------------------------------------------------
Shelby County, TN, Educational & Hospital Facilities Board
Hospital Rev. (Methodist Healthcare), 6.375%, 2019 625,000 759,481
----------------------------------------------------------------------------------------------
Shelby County, TN, Educational & Housing Facilities Board
Hospital Rev. (Methodist Healthcare), 6.25%, 2018 315,000 380,076
----------------------------------------------------------------------------------------------
Shelby County, TN, Educational & Housing Facilities Board
Hospital Rev. (Methodist Healthcare), ETM, 6.25%, 2018(++) 185,000 217,114
----------------------------------------------------------------------------------------------
Shelby County, TN, Educational & Housing Facilities Board
Hospital Rev. (Methodist Healthcare), ETM, 6.375%, 2019(++) 375,000 449,194
----------------------------------------------------------------------------------------------
South Carolina Jobs & Economic Development Authority,
Hospital Facilities Rev. (Palmetto Health Alliance), 6.25%, 2031 835,000 883,422
----------------------------------------------------------------------------------------------
South Carolina Jobs & Economic Development Authority (Bon
Secours Health Systems, Inc.), "A", 5.625%, 2030 710,000 730,114
----------------------------------------------------------------------------------------------
South Dakota Health & Education Facilities Authority Rev.
(Prairie Lakes Health Care System), 5.625%, 2032 670,000 681,022
----------------------------------------------------------------------------------------------
Southwestern Illinois Development Authority Rev. (Anderson
Hospital), 5.625%, 2029 1,500,000 1,500,075
----------------------------------------------------------------------------------------------
Springfield, TN, Health & Educational Facilities Rev.
(Northcrest Medical Center), 5.25%, 2018 1,400,000 1,377,936
----------------------------------------------------------------------------------------------
State of Arkansas, Development Finance Authority Rev.
(Washington Regional Medical Center), 7.25%, 2020 500,000 553,435
----------------------------------------------------------------------------------------------
Steubenville, OH, Hospital Authority Rev. (Trinity Health
Center), 6.5%, 2030 1,300,000 1,416,454
----------------------------------------------------------------------------------------------
Stillwater, OK, Medical Center Authority, 5.625%, 2023 1,000,000 1,028,250
----------------------------------------------------------------------------------------------
Suffolk County, NY, Industrial Development Agency Rev.
(Southampton Hospital), 7.25%, 2020 750,000 750,503
----------------------------------------------------------------------------------------------
Suffolk County, NY, Industrial Development Agency Rev.
(Southampton Hospital), 7.625%, 2030 750,000 760,590
----------------------------------------------------------------------------------------------
Tallahassee, FL, Health Facilities Rev. (Tallahassee
Memorial Healthcare), 6.25%, 2020 3,085,000 3,173,478
----------------------------------------------------------------------------------------------
Texas Metro Health Facilities Development Corp., Metro
Health Facilities Development Rev. (Wilson N. Jones Memorial
Hospital), 7.2%, 2021 700,000 711,361
----------------------------------------------------------------------------------------------
Texas Metro Health Facilities Development Corp., Metro
Health Facilities Development Rev. (Wilson N. Jones Memorial
Hospital), 7.25%, 2031 1,000,000 1,016,200
----------------------------------------------------------------------------------------------
Tom Green County, TX, Health Facilities Rev. (Shannon Health
System), 6.75%, 2021 1,250,000 1,333,313
----------------------------------------------------------------------------------------------
Upper Illinois River Valley Development, Health Facilities
Rev. (Morris Hospital), 6.625%, 2031 600,000 642,072
----------------------------------------------------------------------------------------------
Valley, AL, Special Care Facilities, Financing Authority
Rev. (Lanier Memorial Hospital), 5.6%, 2016 600,000 597,462
----------------------------------------------------------------------------------------------
Wapello County, IA, Hospital Authority Rev. (Ottumwa
Regional Health Center), 6.375%, 2031 1,500,000 1,571,505
----------------------------------------------------------------------------------------------
Weirton, WV, Municipal Hospital Building, Commission Rev.
(Weirton Hospital Medical Center), 6.375%, 2031 1,115,000 1,104,296
----------------------------------------------------------------------------------------------
Weslaco, TX, Health Facilities Rev. (Knapp Medical Center),
6.25%, 2032 1,000,000 1,055,440
----------------------------------------------------------------------------------------------
West Plains, MO, Industrial Development Authority Rev.
(Ozarks Medical Center), 6.75%, 2024 170,000 173,788
----------------------------------------------------------------------------------------------
West Shore Pennsylvania, Hospital Authority Rev. (Holy
Spirit Hospital), 6.2%, 2026 1,250,000 1,298,050
----------------------------------------------------------------------------------------------
Wichita, KS, Hospital Authority Rev. (Via Christi Health
System), 6.25%, 2020 1,500,000 1,684,155
----------------------------------------------------------------------------------------------
Wisconsin Health & Educational Facilities Authority Rev.
(Aurora Health Care, Inc.), 6.875%, 2030 1,000,000 1,149,710
----------------------------------------------------------------------------------------------
Wisconsin Health & Educational Facilities Authority Rev.
(Aurora Health Care, Inc.), MBIA, 5.25%, 2017 5,000,000 5,420,950
----------------------------------------------------------------------------------------------
Yonkers, NY, Industrial Development Agency, Civic Facilities
Rev. (St. John's Riverside Hospital), 6.8%, 2016 755,000 781,719
----------------------------------------------------------------------------------------------
Yonkers, NY, Industrial Development Agency, Civic Facilities
Rev. (St. John's Riverside Hospital), 7.125%, 2031 490,000 503,103
----------------------------------------------------------------------------------------------
$119,360,901
----------------------------------------------------------------------------------------------
Healthcare Revenue - Long Term Care - 13.9%
----------------------------------------------------------------------------------------------
Abilene, TX, Health Facilities Development Co., Retirement
Facilities Rev. (Sears Methodist Retirement), 7%, 2033 $345,000 $358,762
----------------------------------------------------------------------------------------------
Arizona Health Facilities Authority Rev. (The Terraces
Project), 7.75%, 2033 750,000 776,820
----------------------------------------------------------------------------------------------
Bell County, TX, Health Facilities Development Rev.
(Advanced Living Technology), 7.75%, 2006 195,000 185,823
----------------------------------------------------------------------------------------------
Bell County, TX, Health Facilities Development Rev.
(Advanced Living Technology), 8.125%, 2016 1,085,000 877,591
----------------------------------------------------------------------------------------------
Bell County, TX, Health Facilities Development Rev.
(Advanced Living Technology), 8.5%, 2026 2,405,000 1,876,357
----------------------------------------------------------------------------------------------
Cambria County, PA, Industrial Development Authority Rev.
(Beverly Enterprises, Inc.), 10%, 2012 440,000 488,026
----------------------------------------------------------------------------------------------
Chester County, PA, Industrial Development Authority Rev.
(RHA Nursing Home), 8.5%, 2032 600,000 593,454
----------------------------------------------------------------------------------------------
Clarion, PA, Industrial Development Authority Rev. (Beverly
Enterprises, Inc.), 7.5%, 2012 1,000,000 1,020,920
----------------------------------------------------------------------------------------------
Colorado Health Facilities Authority Rev. (Covenant
Retirement Communities, Inc.), 6.125%, 2033 1,000,000 1,031,350
----------------------------------------------------------------------------------------------
Colorado Health Facilities Authority Rev. (Evangelical
Lutheran), 6.9%, 2025 3,000,000 3,385,050
----------------------------------------------------------------------------------------------
Contra Costa County, CA, Residential Rental Facilities Rev.
(Cypress Meadows), 7%, 2028* 1,840,000 1,633,478
----------------------------------------------------------------------------------------------
Cumberland County, PA, Retirement Community Rev. (Wesley
Affiliated Services), 7.25%, 2035 1,000,000 1,044,470
----------------------------------------------------------------------------------------------
Franklin County, OH, Healthcare Facilities Rev. (Ohio
Presbyterian), 7.125%, 2029 1,000,000 1,092,890
----------------------------------------------------------------------------------------------
Fulton County, GA, Residential Care Facilities (Canterbury
Court), "A", 6.125%, 2034 330,000 331,264
----------------------------------------------------------------------------------------------
Goldsboro, NC, Housing Authority Rev. (North Carolina
Housing Foundation, Inc.), 7.25%, 2029 385,000 334,168
----------------------------------------------------------------------------------------------
Grand Prairie, TX, Housing Finance Corp., Independent Senior
Living Center Rev., 7.5%, 2017 600,000 594,066
----------------------------------------------------------------------------------------------
Greenville County, SC, Hospital Rev. (Chestnut Hill) "A",
8%, 2015 2,320,000 2,070,739
----------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Rev. (Lutheran Senior
Ministries), 7.375%, 2031 800,000 805,320
----------------------------------------------------------------------------------------------
Iowa Finance Authority, Health Care Facilities Rev. (Care
Initiatives Project), 5.75%, 2018 895,000 835,581
----------------------------------------------------------------------------------------------
Iowa Finance Authority, Health Care Facilities Rev. (Care
Initiatives Project), 9.25%, 2025 1,665,000 2,014,933
----------------------------------------------------------------------------------------------
Jacksonville, FL, Health Care Facilities Rev. (National
Benevolent-Cypress Village), 6.25%, 2026* 1,245,000 1,167,188
----------------------------------------------------------------------------------------------
Lenexa, KS, Health Care Facilities Rev. (Lakeview Village,
Inc.), 6.25%, 2026 500,000 504,225
----------------------------------------------------------------------------------------------
Lenexa, KS, Health Care Facilities Rev. (Lakeview Village,
Inc.), 6.875%, 2032 500,000 524,215
----------------------------------------------------------------------------------------------
Maine Health & Higher Educational Facilities Rev. (Piper
Shores), 7.5%, 2019 825,000 872,479
----------------------------------------------------------------------------------------------
Massachusetts Industrial Finance Agency Rev. (Metro Health
Foundation, Inc.), 6.75%, 2027 1,500,000 1,443,555
----------------------------------------------------------------------------------------------
Millbrae, CA, Residential Facilities Rev. (Magnolia of
Millbrae), 7.375%, 2027 1,920,000 2,007,667
----------------------------------------------------------------------------------------------
Mocksville, NC, (North Carolina Housing Foundation, Inc.),
7.25%, 2029 385,000 334,168
----------------------------------------------------------------------------------------------
Montgomery County, PA, Higher Education & Health Authority
Rev. (AHF/Montgomery), 10.5%, 2020 2,220,000 2,236,006
----------------------------------------------------------------------------------------------
New Hampshire Business Finance Authority, Health Care
Facilities Rev. (Metro Health Foundation, Inc.), 6.55%, 2028 740,000 706,315
----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority Rev. (Courthouse
Convalescent Center), 8.7%, 2014 650,000 651,658
----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority Rev., First
Mortgage Gross Rev. (Wanaque Convalescent Center),
8.6%, 2011 1,000,000 1,002,090
----------------------------------------------------------------------------------------------
New Jersey Health Care Facilities Financing Authority Rev.
(Cherry Hill), 8%, 2027 1,000,000 936,960
----------------------------------------------------------------------------------------------
Oklahoma Development Finance Authority Rev. (Inverness
Village), 8%, 2032 1,010,000 845,037
----------------------------------------------------------------------------------------------
Reedley, CA, Certificate of Participation (Mennonite Home),
7.5%, 2026 2,760,000 2,845,118
----------------------------------------------------------------------------------------------
Santa Fe, NM, Industrial Development Rev. (Casa Real Nursing
Home), 9.75%, 2013 940,000 944,268
----------------------------------------------------------------------------------------------
Shelby County, TN, Health Educational Rev. (Germantown
Village), 7.25%, 2034 820,000 845,937
----------------------------------------------------------------------------------------------
State of Hawaii, Department of Budget & Finance, Special
Purpose Rev. (Kahala Nui Senior Living Community), 8%, 2033 500,000 533,665
----------------------------------------------------------------------------------------------
Sterling, IL (Hoosier Care), 7.125%, 2034 720,000 592,452
----------------------------------------------------------------------------------------------
Washington County, FL, Industrial Development Authority Rev.
(Washington County), 10%, 2016 940,000 942,538
----------------------------------------------------------------------------------------------
Waterford Township, MI, Economic Development Corp. Rev.
(Canterbury Health), 6%, 2039 1,535,000 1,132,032
----------------------------------------------------------------------------------------------
Wilkinsburg, PA, Municipal Authority Health Rev.
(Monroeville Christian/Judea), 8.25%, 2027 990,000 941,906
----------------------------------------------------------------------------------------------
$43,360,541
----------------------------------------------------------------------------------------------
Human Services - 2.8%
----------------------------------------------------------------------------------------------
Cheneyville, LA, Westside Habilitation Center Rev.,
8.375%, 2013 $1,510,000 $1,535,746
----------------------------------------------------------------------------------------------
Iowa Finance Authority, Community Provider (Boys & Girls
Home), 6.25%, 2028 500,000 466,920
----------------------------------------------------------------------------------------------
Lehigh County, PA, Gen Purpose Authority (Kidspeace Corp.),
6%, 2023 3,000,000 2,756,610
----------------------------------------------------------------------------------------------
New York City, NY, Industrial Development Agency, Civic
Facility Rev. (Special Needs Facilities), 6.5%, 2017 1,030,000 1,070,922
----------------------------------------------------------------------------------------------
New York City, NY, Industrial Development Agency, Civic
Facility Rev. (A Very Special Place, Inc.), "A", 5.75%, 2029 1,000,000 887,730
----------------------------------------------------------------------------------------------
Orange County, FL, Health Facilities Authority Rev. (GF/
Orlando Healthcare Facilities), 8.75%, 2011 575,000 575,449
----------------------------------------------------------------------------------------------
Orange County, FL, Health Facilities Authority Rev. (GF/
Orlando Healthcare Facilities), 9%, 2031 1,000,000 1,019,540
----------------------------------------------------------------------------------------------
Osceola County, FL, Industrial Development Authority Rev.
(Community Provider), 7.75%, 2017 454,000 457,963
----------------------------------------------------------------------------------------------
$8,770,880
----------------------------------------------------------------------------------------------
Industrial Revenue - Airlines - 2.6%
----------------------------------------------------------------------------------------------
Alliance Airport Authority, Inc., Special Facilities Rev.
(AMR Corp.), 7.5%, 2029 $990,000 $632,372
----------------------------------------------------------------------------------------------
Cleveland, OH, Special Facilities Rev. (Continental
Airlines, Inc.), 5.375%, 2027 500,000 324,865
----------------------------------------------------------------------------------------------
Dallas Fort Worth, TX, International Airport Facility
Improvement Corp. (American Airlines, Inc.), 7.25%, 2030 300,000 181,308
----------------------------------------------------------------------------------------------
Dallas Fort Worth, TX, International Airport Facility
Improvement Corp. (American Airlines, Inc.), 6.375%, 2035 2,150,000 1,217,029
----------------------------------------------------------------------------------------------
Dallas Fort Worth, TX, International Airport Facility
Improvement Corp. (American Airlines, Inc.) "B", 6.05%, 2029 495,000 470,834
----------------------------------------------------------------------------------------------
Hillsborough County, FL, Aviation Authority Rev. Special
Purpose Facilities (U.S. Air Corp.), 8.6%, 2022* 400,000 98,988
----------------------------------------------------------------------------------------------
Houston, TX, Airport Systems Rev. Special Facilities
(Continental, Inc.) "E", 6.75%, 2029 1,000,000 763,130
----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority (Continental
Airlines, Inc.), 7.2%, 2030 1,595,000 1,276,223
----------------------------------------------------------------------------------------------
New York City, NY, Industrial Development Agencies Rev.
(Continental Airlines, Inc.), 7.25%, 2008 205,000 204,719
----------------------------------------------------------------------------------------------
New York City, NY, Industrial Development Agencies Rev.
(Continental Airlines, Inc.), 8%, 2012 300,000 286,335
----------------------------------------------------------------------------------------------
Tulsa, OK, Municipal Airport Trust Rev. (AMR Corp.), 5.8%, 2035 355,000 354,510
----------------------------------------------------------------------------------------------
Tulsa, OK, Municipal Airport Trust Rev. (AMR Corp.) "B",
6%, 2035 2,500,000 2,263,525
----------------------------------------------------------------------------------------------
$8,073,838
----------------------------------------------------------------------------------------------
Industrial Revenue - Chemicals - 1.5%
----------------------------------------------------------------------------------------------
Michigan Strategic Fund Limited Rev. (Dow Chemical Co.),
4.6%, 2014 $1,500,000 $1,589,550
----------------------------------------------------------------------------------------------
Sweetwater County, WY, Solid Waste Disposal Rev. (FMC
Corp.), "A", 7%, 2024 3,000,000 3,051,540
----------------------------------------------------------------------------------------------
$4,641,090
----------------------------------------------------------------------------------------------
Industrial Revenue - Environmental Services - 3.6%
----------------------------------------------------------------------------------------------
California Pollution Control Financing Authority, Solid
Waste Disposal Rev. (Browning Ferris, Inc.), 5.8%, 2016 $1,000,000 $942,680
----------------------------------------------------------------------------------------------
California Statewide Community Development Authority, Solid
Waste Facilities Rev. (Republic Services, Inc.), "A", 4.95%,
2012 1,000,000 1,059,490
----------------------------------------------------------------------------------------------
Gloucester County, NJ, Solid Waste Resource Recovery Rev.
(Waste Management, Inc.), 6.85%, 2029 850,000 964,062
----------------------------------------------------------------------------------------------
Henrico County, VA, Industrial Development Authority Rev.
(Browning Ferris, Inc.), 5.45%, 2014 1,750,000 1,632,715
----------------------------------------------------------------------------------------------
Illinois Development Finance Authority, Solid Waste Disposal
Rev. (Waste Management, Inc.), 5.85%, 2007 4,500,000 4,772,385
----------------------------------------------------------------------------------------------
Nevada Department of Business (Republic Services, Inc.),
5.625%, 2026 750,000 803,258
----------------------------------------------------------------------------------------------
New Morgan, PA, Industrial Development Authority, Solid
Waste Disposal Rev. (New Morgan Landfill Co, Inc./Browning
Ferris, Inc.), 6.5%, 2019 1,000,000 986,390
----------------------------------------------------------------------------------------------
$11,160,980
----------------------------------------------------------------------------------------------
Industrial Revenue - Metals - 0.5%
----------------------------------------------------------------------------------------------
Indiana Development Finance Authority Rev. (Inland Steel),
5.75%, 2011 $1,000,000 $972,450
----------------------------------------------------------------------------------------------
Mobile County, AL, Industrial Development Authority Rev.
(Ipsco, Inc.), 6.875%, 2030 650,000 673,127
----------------------------------------------------------------------------------------------
Ohio Solid Waste Rev. (Republic Engineered Steels, Inc.),
8.25%, 2014* 3,000,000 30
----------------------------------------------------------------------------------------------
Ohio Solid Waste Rev. (Republic Engineered Steels, Inc.),
9%, 2021* 3,000,000 30
----------------------------------------------------------------------------------------------
$1,645,637
----------------------------------------------------------------------------------------------
Industrial Revenue - Other - 5.2%
----------------------------------------------------------------------------------------------
Gulf Coast, TX, Industrial Development Authority (Valero
Energy Corp.), 5.6%, 2031 $1,750,000 $1,766,065
----------------------------------------------------------------------------------------------
Gulf Coast, TX, Waste Disposal Rev. (Valero Energy Corp.),
6.65%, 2032 1,000,000 1,082,380
----------------------------------------------------------------------------------------------
Hardeman County, TN, Correctional Facilities Rev., 7.75%, 2017 2,220,000 2,320,522
----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority, Economic
Development Rev. (Holt Hauling & Warehousing),
8.4%, 2015+** 1,000,000 565,000
----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority, Economic
Development Rev. (Holt Hauling & Warehousing),
8.6%, 2017+** 1,000,000 565,000
----------------------------------------------------------------------------------------------
Park Creek Metropolitan District, CO, Rev., Custodial
Receipts, "CR-1" 7.875%, 2032## 1,270,000 1,311,021
----------------------------------------------------------------------------------------------
Park Creek Metropolitan District, CO, Rev., Custodial
Receipts, "CR-2", 7.875%, 2032## 580,000 598,734
----------------------------------------------------------------------------------------------
Pennsylvania Economic Development Financing Authority,
Finance Authority Facilities Rev. (Amtrak), "A", 6.25%, 2031 2,000,000 2,091,100
----------------------------------------------------------------------------------------------
Pennsylvania Economic Development Financing Authority,
Wastewater Treatment Rev. (Sunoco Co.), 7.6%, 2024 750,000 768,345
----------------------------------------------------------------------------------------------
Philadelphia, PA, Industrial Development Authority Rev.
(Host Marriott LP), 7.75%, 2017 3,255,000 3,313,720
----------------------------------------------------------------------------------------------
Port Corpus Christ, TX, Industrial Development Authority
Rev. (Citgo Petroleum Corp.), 8.25%, 2031 700,000 749,581
----------------------------------------------------------------------------------------------
State of Ohio, Air Quality Development Authority Rev. (USX
Corp.), 5%, 2015 575,000 631,137
----------------------------------------------------------------------------------------------
Tooele County, UT, Hazardous Waste Treatment Rev. (Union
Pacific Corp.), 5.7%, 2026 385,000 392,500
----------------------------------------------------------------------------------------------
$16,155,105
----------------------------------------------------------------------------------------------
Industrial Revenue - Paper - 8.8%
----------------------------------------------------------------------------------------------
Beauregard Parish, LA (Boise Cascade Corp.), 6.8%, 2027 $1,000,000 $1,044,970
----------------------------------------------------------------------------------------------
Bedford County, VA, Industrial Development Authority Rev.
(Nekoosa Packaging), "A", 6.55%, 2025 1,000,000 1,036,610
----------------------------------------------------------------------------------------------
Butler, AL, Solid Waste Disposal Rev. (James River Corp.),
8%, 2028 500,000 513,510
----------------------------------------------------------------------------------------------
Columbus County, NC, Industrial Facilities & Pollution
Control Financing Authority (International Paper, Co.), "A",
6.15%, 2021 5,000,000 5,215,250
----------------------------------------------------------------------------------------------
Courtland, AL, Solid Waste Disposal Rev. (Champion
International Corp.), 6.375%, 2029 2,000,000 2,027,000
----------------------------------------------------------------------------------------------
Delta County, MI, Economic Development Corp., Environmental
Improvements Rev. (Mead Westvaco Escanaba), 6.45%, 2023 500,000 541,085
----------------------------------------------------------------------------------------------
Delta County, MI, Economic Development Corp., Environmental
Improvements Rev. (Mead Westvaco Escanaba), 6.25%, 2027 1,000,000 1,069,900
----------------------------------------------------------------------------------------------
Effingham County, GA, Development Authority, Solid Waste
Disposal Rev. (Fort James), 5.625%, 2018 850,000 848,411
----------------------------------------------------------------------------------------------
Hodge, LA, Utilities Rev. (Stone Container Corp.), 7.45%, 2024 3,335,000 3,930,498
----------------------------------------------------------------------------------------------
Isle Wight County, VA, Industrial Development Authority,
Solid Waste Disposal Facilities Rev. (Union Camp Corp.),
6.55%, 2024 4,000,000 4,092,840
----------------------------------------------------------------------------------------------
Lowndes County, MS, Solid Waste Disposal & Pollution Control
Rev. (Weyerhaeuser Co.), 6.8%, 2022 2,000,000 2,399,600
----------------------------------------------------------------------------------------------
Navajo County, AZ, Industrial Development Authority (Stone
Container Corp.), 7.2%, 2027 880,000 917,567
----------------------------------------------------------------------------------------------
Onondaga County, NY, Industrial Development Authority Rev.,
Solid Waste Disposal Rev. (Solvay Paperboard LLC),
6.8%, 2014 1,000,000 1,062,520
----------------------------------------------------------------------------------------------
West Point, VA, Solid Waste Disposal Rev. (Chesapeake
Corp.), 6.25%, 2019 1,750,000 1,730,750
----------------------------------------------------------------------------------------------
York County, SC, Pollution Control Rev. (Bowater, Inc.),
"A", 7.4%, 2010 1,045,000 1,053,402
----------------------------------------------------------------------------------------------
$27,483,913
----------------------------------------------------------------------------------------------
Miscellaneous Revenue - Entertainment & Tourism - 2.7%
----------------------------------------------------------------------------------------------
California Statewide Communities Development Authority Rev.,
East Valley Tourist (Cabazon Casino)"A", 9.25%, 2020## $1,155,000 $1,227,800
----------------------------------------------------------------------------------------------
Capital Trust Agency of Florida Rev. (Seminole Tribe
Convention), 10%, 2033 3,500,000 4,309,795
----------------------------------------------------------------------------------------------
Mississippi Development Bank, Special Obligation (Diamond
Lakes Utilities), 6.25%, 2017 1,000,000 1,026,720
----------------------------------------------------------------------------------------------
Nevada Department of Business & Industry Rev. (Las Vegas
Monorail), 7.375%, 2040 1,130,000 1,143,978
----------------------------------------------------------------------------------------------
Sandoval County, NM (Santa Ana Pueblo), 7.75%, 2015## 675,000 694,879
----------------------------------------------------------------------------------------------
$8,403,172
----------------------------------------------------------------------------------------------
Miscellaneous Revenue - Other - 1.1%
----------------------------------------------------------------------------------------------
Austin, TX, Convention Center (Convention Enterprises,
Inc.), 6.6%, 2021 $400,000 $433,264
----------------------------------------------------------------------------------------------
Austin, TX, Convention Center (Convention Enterprises,
Inc.), 6.7%, 2028 600,000 642,210
----------------------------------------------------------------------------------------------
Gallery Certificate Trust, PA, Parking Rev., FSA, 4.5%, 2013## 955,000 957,569
----------------------------------------------------------------------------------------------
Rockbridge County, VA, Industrial Development Authority Rev.
(Virginia Horse Center), 6.85%, 2021 700,000 662,858
----------------------------------------------------------------------------------------------
Southwestern Illinois Development Authority Rev., Solid
Waste Disposal Rev., 5.9%, 2014 370,000 379,687
----------------------------------------------------------------------------------------------
St. Louis County, MO, Industrial Development Authority Rev.
(Kiel Center Multipurpose Arena), 7.875%, 2024 300,000 301,110
----------------------------------------------------------------------------------------------
$3,376,698
----------------------------------------------------------------------------------------------
Multi-Family Housing Revenue - 4.3%
----------------------------------------------------------------------------------------------
Bexar County, TX, Multi-Family Housing Rev. (American
Opportunity Housing), "A", MBIA, 5.7%, 2021 $1,250,000 $1,319,088
----------------------------------------------------------------------------------------------
Charter Mac Equity Issuer Trust, 7.1%, 2009## 1,000,000 1,121,470
----------------------------------------------------------------------------------------------
Charter Mac Equity Issuer Trust, 6%, 2019 2,000,000 2,129,920
----------------------------------------------------------------------------------------------
Dallas Fort Worth, TX, Housing Corp., 8.5%, 2011 815,000 818,203
----------------------------------------------------------------------------------------------
Eaglebend, CO, Affordable Housing Corp., Multi-Family Rev.
(Housing Project), "A", 6.4%, 2017 1,000,000 990,500
----------------------------------------------------------------------------------------------
Florida Multi-Family Housing Finance Agency Rev. (Center
Court Apartments), 8.5%, 2018 865,000 837,121
----------------------------------------------------------------------------------------------
Memphis, TN, Educational & Housing Facilities (Wesley
Highland Terrace), 8.5%, 2024 115,000 114,116
----------------------------------------------------------------------------------------------
Metropolitan Government of Nashville & Davidson County, TN,
Health & Educational & Housing Facilities Board Rev.
(Berkshire Place), GNMA, 6%, 2023 500,000 523,600
----------------------------------------------------------------------------------------------
Munimae TE Bond Subsidiaries LLC, 6.875%, 2009## 2,000,000 2,224,080
----------------------------------------------------------------------------------------------
Munimae TE Bond Subsidiary LLC, 5.4%, 2049## 1,000,000 998,430
----------------------------------------------------------------------------------------------
Ridgeland, MS, Urban Renewal (Northbrook I & II Apartments),
6.15%, 2019** 280,000 134,904
----------------------------------------------------------------------------------------------
Ridgeland, MS, Urban Renewal (Northbrook I & III
Apartments), 6.25%, 2029** 475,000 227,948
----------------------------------------------------------------------------------------------
San Bernardino County, CA (Equity Residential/Redlands),
"A", 5.2%, 2029 2,000,000 2,118,320
----------------------------------------------------------------------------------------------
$13,557,700
----------------------------------------------------------------------------------------------
Single Family Housing - Local - 1.6%
----------------------------------------------------------------------------------------------
Cook County, IL, Single Family Mortgage Rev., "A", 0%, 2015 $100,000 $30,978
----------------------------------------------------------------------------------------------
Corpus Christi, TX, Housing Finance Authority Rev., MBIA,
0%, 2011 3,000,000 1,560,210
----------------------------------------------------------------------------------------------
Dallas, TX, Housing Finance Corp., Single Family Mortgage
Rev., MBIA, 0%, 2016 3,620,000 1,063,846
----------------------------------------------------------------------------------------------
Jefferson Parish, LA, Single Family Mortgage Rev., GNMA,
6.625%, 2023 355,000 389,030
----------------------------------------------------------------------------------------------
Jefferson Parish, LA, Single Family Mortgage Rev., GNMA,
6.3%, 2032 1,105,000 1,173,532
----------------------------------------------------------------------------------------------
Sedgwick & Shawnee Counties, KS, Single Family Housing Rev.,
GNMA, 6.45%, 2029 745,000 809,234
----------------------------------------------------------------------------------------------
$5,026,830
----------------------------------------------------------------------------------------------
Single Family Housing - State - 3.1%
----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 7.15%, 2014 $8,000 $8,152
----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 5.9%, 2023 275,000 287,117
----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 6.9%, 2029 655,000 679,523
----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 6.6%, 2032 305,000 314,958
----------------------------------------------------------------------------------------------
Colorado Housing & Finance Authority Rev., 6.375%, 2033 140,000 150,612
----------------------------------------------------------------------------------------------
Georgia Housing & Finance Authority Rev., 5.65%, 2021 2,490,000 2,577,773
----------------------------------------------------------------------------------------------
Louisiana Housing Finance Agency, Single Family Mortgage
Rev., GNMA, 6.4%, 2032 355,000 367,109
----------------------------------------------------------------------------------------------
Minnesota Housing Finance Agency Rev., Residential Housing
Finance "B", 4.8%, 2023 315,000 322,176
----------------------------------------------------------------------------------------------
Missouri State Housing Development Commission, Single Family
Mortgage Rev. (Home Loan Program), GNMA 6.35%, 2032 500,000 524,810
----------------------------------------------------------------------------------------------
Missouri State Housing Development Commission, Single Family
Mortgage Rev. (Home Loan Program), GNMA, 6.85%, 2032 230,000 254,369
----------------------------------------------------------------------------------------------
Nebraska Investment Finance Authority Single Family Mortgage
Rev., 0%, 2015 8,525,000 3,126,459
----------------------------------------------------------------------------------------------
Nebraska Investment Finance Authority, "C", 6.25%, 2021 915,000 948,407
----------------------------------------------------------------------------------------------
New Hampshire Housing Finance Authority Rev., GNMA 5.875%,
2030 180,000 186,194
----------------------------------------------------------------------------------------------
$9,747,659
----------------------------------------------------------------------------------------------
Solid Waste Revenue - 2.3%
----------------------------------------------------------------------------------------------
Delaware County, PA, Industrial Development Authority Rev.,
Resource Recovery Facilities, (American Re-Fuel) "A",
6.5%, 2008 $1,600,000 $1,716,672
----------------------------------------------------------------------------------------------
Delaware County, PA, Industrial Development Authority Rev.,
Resource Recovery Facilities, (American Ref-fuel) "A",
6.1%, 2005 2,000,000 2,007,720
----------------------------------------------------------------------------------------------
Massachusetts Development Finance Agency Rev. (Ogden
Haverhill Associates), 6.7%, 2014 725,000 773,945
----------------------------------------------------------------------------------------------
Massachusetts Industrial Finance Agency Rev., Resource
Recovery Rev. (Ogden Haverhill Associates), 5.6%, 2019 2,850,000 2,860,517
----------------------------------------------------------------------------------------------
$7,358,854
----------------------------------------------------------------------------------------------
State & Local Agencies - 2.3%
----------------------------------------------------------------------------------------------
Chicago, IL, Public Building Commission, Building Rev.,
RITES, FGIC, 8.7328%, 2016+(+) $1,300,000 $1,683,604
----------------------------------------------------------------------------------------------
Chicago, IL, Public Building Commission, Building Rev.,
RITES, FGIC, 8.7328%, 2017+(+) 1,050,000 1,365,882
----------------------------------------------------------------------------------------------
College Park, GA (Civic Center), AMBAC, 5.75%, 2020 1,000,000 1,141,860
----------------------------------------------------------------------------------------------
Golden State, CA, Tobacco Securitization Corp., Tobacco
Settlement Rev., Enhanced, "B", 5.375%, 2028 2,000,000 2,067,940
----------------------------------------------------------------------------------------------
Houston, TX, Certificates of Participation, 6.3%, 2020 815,000 891,765
----------------------------------------------------------------------------------------------
$7,151,051
----------------------------------------------------------------------------------------------
Student Loan Revenue - 0.5%
----------------------------------------------------------------------------------------------
Access to Loans for Learning, California Student Loan Rev.,
7.95%, 2030 $650,000 $682,877
----------------------------------------------------------------------------------------------
Arizona Student Loan Acquisition Authority, Student Loan
Rev., 7.625%, 2010 750,000 767,543
----------------------------------------------------------------------------------------------
$1,450,420
----------------------------------------------------------------------------------------------
Tax Assessment - 3.7%
----------------------------------------------------------------------------------------------
Capital Region Community Development District of Florida,
Capital Improvement Rev., 5.95%, 2006 $265,000 $268,466
----------------------------------------------------------------------------------------------
Chicago IL, Ryan Garfield Tax Increment Allocation,
10.125%, 2007 775,000 776,163
----------------------------------------------------------------------------------------------
Concorde Estates Community Development District, Florida
Capital Improvement Rev., "B", 5%, 2011 650,000 649,799
----------------------------------------------------------------------------------------------
Fishhawk Community Development District of Florida,
5.125%, 2009 590,000 598,177
----------------------------------------------------------------------------------------------
Heritage Isles, FL, Community Development District, "A",
5.75%, 2005 135,000 135,259
----------------------------------------------------------------------------------------------
Katy, TX, Development Authority Rev., 5.8%, 2011 870,000 911,908
----------------------------------------------------------------------------------------------
Katy, TX, Development Authority Rev., 6%, 2018 1,025,000 1,068,552
----------------------------------------------------------------------------------------------
Killarney, FL, Community Development District, "B",
5.125%, 2009 310,000 313,004
----------------------------------------------------------------------------------------------
Lakes By The Bay South Community Development District,
Florida Special Assessment, "B", 5.3%, 2009 1,140,000 1,154,421
----------------------------------------------------------------------------------------------
Markham, IL, Tax Increment Rev., 9%, 2012 1,080,000 1,084,061
----------------------------------------------------------------------------------------------
Middle Village Community Development District, Florida
Special Assessment, "B", 5%, 2009 800,000 806,488
----------------------------------------------------------------------------------------------
Panther Trace, FL, Community Development District Rev.,
5.4%, 2008 425,000 429,705
----------------------------------------------------------------------------------------------
Parkway Center, FL, Community Development District Rev.,
"B", 5.625%, 2014 1,260,000 1,277,690
----------------------------------------------------------------------------------------------
Preserve At Wilderness Lake, FL, Community Development
District, Capital Improvement,"B", 5%, 2009 665,000 664,661
----------------------------------------------------------------------------------------------
Reunion East Community Development District, FL, Special
Assessment, 5.9%, 2007 225,000 230,166
----------------------------------------------------------------------------------------------
Sterling Hill Community Development District of Florida,
Capital Improvement Rev., 5.5%, 2010 540,000 548,289
----------------------------------------------------------------------------------------------
Villasol Community Development District of Florida, Special
Assessment Rev., "B", 5.375%, 2008 655,000 667,786
----------------------------------------------------------------------------------------------
$11,584,595
----------------------------------------------------------------------------------------------
Tax - Other - 1.8%
----------------------------------------------------------------------------------------------
Black Hawk, CO, Device Tax Rev., 5.625%, 2021 $250,000 $248,413
----------------------------------------------------------------------------------------------
Dade County, FL, Special Obligations Rev., Capital
Appreciation Bond, "B", AMBAC, 0%, 2008(++) 15,080,000 3,059,581
----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority Rev. Cigarette
Tax, 5.5%, 2024 340,000 347,640
----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority Rev. Cigarette
Tax, 5.75%, 2029 615,000 631,703
----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority Rev. Cigarette
Tax, 5.5%, 2031 270,000 271,609
----------------------------------------------------------------------------------------------
New Jersey Economic Development Authority Rev. Cigarette
Tax, 5.75%, 2034 410,000 420,640
----------------------------------------------------------------------------------------------
Virgin Islands Public Finance Authority Rev., 6%, 2006 250,000 261,213
----------------------------------------------------------------------------------------------
Virgin Islands Public Finance Authority Rev., "E",
5.875%, 2018 500,000 521,090
----------------------------------------------------------------------------------------------
$5,761,889
----------------------------------------------------------------------------------------------
Tobacco - 4.6%
----------------------------------------------------------------------------------------------
Badger Tobacco, WI (Asset Securitization Corp.),
6.125%, 2027 $3,190,000 $3,104,061
----------------------------------------------------------------------------------------------
California Statewide Financing Authority, Tobacco
Settlement, 5.625%, 2029 1,840,000 1,673,038
----------------------------------------------------------------------------------------------
District of Columbia, Tobacco Settlement, 6.25%, 2024 1,260,000 1,217,059
----------------------------------------------------------------------------------------------
Golden State Tobacco Securitization, "A", 5%, 2021 990,000 992,208
----------------------------------------------------------------------------------------------
Golden State Tobacco Securization, Tobacco Settlement,
7.8%, 2042 1,000,000 1,070,230
----------------------------------------------------------------------------------------------
Iowa Tobacco Settlement Authority, Tobacco Settlement Rev.,
Asset Backed, "B", 5.3%, 2025 2,000,000 1,691,100
----------------------------------------------------------------------------------------------
Louisiana Tobacco Settlement Authority, 5.5%, 2030 1,435,000 1,286,664
----------------------------------------------------------------------------------------------
New Jersey Tobacco Settlement Authority, 5.75%, 2032 1,005,000 936,771
----------------------------------------------------------------------------------------------
South Carolina Tobacco Settlement Authority, 6.375%, 2028 1,000,000 950,300
----------------------------------------------------------------------------------------------
Southern California Tobacco Settlement Authority,
5.25%, 2027 1,170,000 1,159,997
----------------------------------------------------------------------------------------------
Washington Tobacco Settlement Authority, 6.5%, 2026 160,000 157,781
----------------------------------------------------------------------------------------------
$14,239,209
----------------------------------------------------------------------------------------------
Toll Roads - 1.3%
----------------------------------------------------------------------------------------------
Arapahoe County, CO, Capital Improvement Highway Rev., "C",
0%, 2005(++) $1,000,000 $478,550
----------------------------------------------------------------------------------------------
Niagara Falls, NY, Bridge Commission, Toll Rev., RITES,
FGIC, 8.1705%, 2015+(+) 1,500,000 1,954,200
----------------------------------------------------------------------------------------------
Pocahontas Parkway Assn., VA, Toll Road Rev., 0%, 2011 1,000,000 479,780
----------------------------------------------------------------------------------------------
Pocahontas Parkway Assn., VA, Toll Road Rev., 0%, 2012 1,000,000 451,750
----------------------------------------------------------------------------------------------
Pocahontas Parkway Assn., VA, Toll Road Rev., 0%, 2015 1,750,000 803,845
----------------------------------------------------------------------------------------------
$4,168,125
----------------------------------------------------------------------------------------------
Transportation - Special Tax - 3.3%
----------------------------------------------------------------------------------------------
Missouri Highways & Transportation Commission, State Road
Rev., "A", 5.625%, 2018 $4,500,000 $5,066,640
----------------------------------------------------------------------------------------------
Telluride, CO (Gondola Transit Co.), 9%, 2006(++) 790,000 867,783
----------------------------------------------------------------------------------------------
Telluride, CO, Real Estate Transfer Assessment Rev. (Gondola
Transit Co.), ETM, 11.5%, 2012(++) 2,900,000 4,333,296
----------------------------------------------------------------------------------------------
$10,267,719
----------------------------------------------------------------------------------------------
Universities - Colleges - 3.7%
----------------------------------------------------------------------------------------------
California Educational Facilities Authority Rev. (L.A.
College of Chiropractic), 5.6%, 2017 $750,000 $724,268
----------------------------------------------------------------------------------------------
Houston, TX, Community College Systems, MBIA, 7.875%, 2025 2,500,000 3,245,825
----------------------------------------------------------------------------------------------
Illinois Educational Facilities Authority Rev. (Augustana
College), "A", 5.625%, 2022 400,000 426,140
----------------------------------------------------------------------------------------------
Islip, NY, Community Development Agency Rev. (New York
Institute of Technology), 7.5%, 2006(++) 2,500,000 2,730,325
----------------------------------------------------------------------------------------------
Louisiana State University (Health Sciences Center Project),
MBIA, 6.375%, 2031 2,500,000 2,913,525
----------------------------------------------------------------------------------------------
Savannah, GA, Economic Development Authority Rev. (College
of Art & Design, Inc.), 6.5%, 2009(++) 625,000 734,038
----------------------------------------------------------------------------------------------
State of Massachusetts, Development Finance Agency Rev.
(Eastern Nazarene College), 5.625%, 2029 750,000 639,075
----------------------------------------------------------------------------------------------
University of Arkansas, University Rev. (UAMS Campus), "B",
MBIA, 5%, 2034 300,000 307,080
----------------------------------------------------------------------------------------------
$11,720,276
----------------------------------------------------------------------------------------------
Universities - Secondary Schools - 1.3%
----------------------------------------------------------------------------------------------
California Statewide Communities, Development Authority Rev.
(Escondido Charter High School), 7.5%, 2023 $585,000 $593,208
----------------------------------------------------------------------------------------------
California Statewide Communities, Development Authority Rev.
(Escondido Charter High School), 7.5%, 2036 1,000,000 1,015,320
----------------------------------------------------------------------------------------------
Michigan Municipal Bond Authority Rev. (Detroit Academy of
Arts & Sciences), 8%, 2031 1,000,000 985,420
----------------------------------------------------------------------------------------------
Michigan Municipal Bond Authority Rev. (YMCA Service
Learning Academy), 7.625%, 2021 1,000,000 1,012,100
----------------------------------------------------------------------------------------------
Pima County, AZ, Industrial Development Authority Education
Rev. (Arizona Charter Schools), "C", 6.75%, 2031 500,000 515,165
----------------------------------------------------------------------------------------------
$4,121,213
----------------------------------------------------------------------------------------------
Utilities - Cogeneration - 3.6%
----------------------------------------------------------------------------------------------
Alaska Industrial Development Export Authority, Power Rev.,
Upper Lynn Canal Regional Power, 5.8%, 2018 $830,000 $767,974
----------------------------------------------------------------------------------------------
Carbon County, PA, Industrial Development Authority Rev.
(Panther Creek Partners), 6.65%, 2010 2,620,000 2,835,967
----------------------------------------------------------------------------------------------
Klamath Falls, OR, Electric Rev. (Klamath Cogeneration),
6%, 2025 2,260,000 2,256,429
----------------------------------------------------------------------------------------------
Mecklenburg County, VA, Industrial Development Authority
Rev. (UAE Mecklenburg, LP), 6.5%, 2017 800,000 824,496
----------------------------------------------------------------------------------------------
Pennsylvania Economic Development Financing Authority Rev.,
Resources Recovery Rev. (Northampton Generating),
6.4%, 2009 350,000 355,492
----------------------------------------------------------------------------------------------
Pennsylvania Economic Development Financing Authority Rev.,
Resources Recovery Rev. (Northampton Generating),
6.5%, 2013 1,000,000 1,014,970
----------------------------------------------------------------------------------------------
Pittsylvania County, VA, Industrial Development Authority
Rev. (Multi-trade of Pittsylvania), 7.5%, 2014 3,000,000 3,081,030
----------------------------------------------------------------------------------------------
$11,136,358
----------------------------------------------------------------------------------------------
Utilities - Investor Owned - 11.1%
----------------------------------------------------------------------------------------------
Brazos River Authority, TX, (Reliant Energy, Inc.), "A",
5.375%, 2019 $500,000 $504,260
----------------------------------------------------------------------------------------------
Brazos River Authority, TX, (Reliant Energy, Inc.), "B",
AMBAC, 5.125%, 2020 2,000,000 2,115,680
----------------------------------------------------------------------------------------------
Brazos River Authority, TX, Pollution Control Rev. (Texas
Utility Co.), 7.7%, 2033 575,000 672,601
----------------------------------------------------------------------------------------------
Brazos River Authority, TX, Pollution Control Rev. (Texas
Utility Co.), "B", 6.3%, 2032 500,000 530,685
----------------------------------------------------------------------------------------------
Brazos River Authority, TX, Pollution Control Rev. (Texas
Utility Co.), "C", 6.75%, 2038 715,000 761,875
----------------------------------------------------------------------------------------------
Calcasieu Parish, LA, Industrial Development Board,
Pollution Control Rev. (Energy Gulf States, Inc.),
5.45%, 2010 1,250,000 1,268,613
----------------------------------------------------------------------------------------------
California Pollution Control Financing Authority, Pollution
Control Rev. (Pacific Gas & Electric Co.), MBIA, 5.35%, 2016 1,000,000 1,093,840
----------------------------------------------------------------------------------------------
California Pollution Control Financing Authority, Pollution
Control Rev. (Southern California Edison Co.), 6.4%, 2024 1,000,000 1,003,940
----------------------------------------------------------------------------------------------
Connecticut Development Authority, Pollution Control Rev.
(Connecticut Light & Power Co.), 5.85%, 2028 2,000,000 2,115,300
----------------------------------------------------------------------------------------------
Connecticut Development Authority, Pollution Control Rev.
(Connecticut Light & Power Co.), 5.95%, 2028 2,270,000 2,392,194
----------------------------------------------------------------------------------------------
Farmington, NM, Pollution Control Rev. (New Mexico Public
Service), 5.8%, 2022 2,105,000 2,140,869
----------------------------------------------------------------------------------------------
Farmington, NM, Pollution Control Rev. (New Mexico Public
Service), "A", 6.3%, 2016 2,195,000 2,392,748
----------------------------------------------------------------------------------------------
Forsyth, MT, Pollution Control Rev. (Portland General),
5.2%, 2033 230,000 244,090
----------------------------------------------------------------------------------------------
Matagorda County, TX, (Centerpoint Energy), 5.6%, 2027 1,500,000 1,553,325
----------------------------------------------------------------------------------------------
Matagorda County, TX, Pollution Control Rev. (Central Power
& Light Co.), 4.55%, 2029 2,000,000 2,078,100
----------------------------------------------------------------------------------------------
Matagorda County, TX, Pollution Control Rev. (Reliant
Energy), 5.95%, 2030 1,655,000 1,656,142
----------------------------------------------------------------------------------------------
New Hampshire Business Finance Authority, Pollution Control
Rev. (Public Service of New Hampshire), 6%, 2021 1,000,000 1,050,500
----------------------------------------------------------------------------------------------
Ohio Air Quality Development Authority Rev., Pollution
Control, Rev. (Cleveland Electric) "B", 6%, 2020 3,000,000 3,123,990
----------------------------------------------------------------------------------------------
Pima County, AZ, Industrial Development Authority Rev.
(Tucson Electric Power Co.), 6.1%, 2025 650,000 650,013
----------------------------------------------------------------------------------------------
Pima County, AZ, Industrial Development Authority Rev.
(Tucson Electric Power Co.), 6%, 2029 2,905,000 2,906,017
----------------------------------------------------------------------------------------------
Port Morrow, OR, Pollution Control Rev. (Portland General
Electric), 5.2%, 2033 550,000 583,693
----------------------------------------------------------------------------------------------
Sullivan, IN, Pollution Control Rev. (Indiana-Michigan Power
Co.), "C", 5.95%, 2009 250,000 252,530
----------------------------------------------------------------------------------------------
Trinity River Authority, TX, Pollution Control Rev. (TXU
Electric Co.), 6.25%, 2028 500,000 539,810
----------------------------------------------------------------------------------------------
West Feliciana Parish, LA, Pollution Control Rev. (Gulf
States Utilities Co.), 7.7%, 2014 550,000 565,785
----------------------------------------------------------------------------------------------
West Feliciana Parish, LA, Pollution Control Rev. (Gulf
States Utilities Co.), 5.8%, 2015 1,500,000 1,518,855
----------------------------------------------------------------------------------------------
West Feliciana Parish, LA, Pollution Control Rev. (Gulf
States Utilities Co.), 5.8%, 2016 1,000,000 1,023,530
----------------------------------------------------------------------------------------------
$34,738,985
----------------------------------------------------------------------------------------------
Utilities - Municipal Owned - 3.0%
----------------------------------------------------------------------------------------------
California State Department Water Resources Power Supply
Rev. "A", 5.75%, 2017 $1,250,000 $1,418,163
----------------------------------------------------------------------------------------------
North Carolina Eastern Municipal Power Agency, Power Systems
Rev., "B", 5.55%, 2014 2,150,000 2,305,940
----------------------------------------------------------------------------------------------
North Carolina Municipal Power Agency (Catawba Electric
Rev.) "B", 6.5%, 2020 2,000,000 2,258,740
----------------------------------------------------------------------------------------------
Seattle, WA, Municipal Light & Power Rev., 5.625%, 2017 3,000,000 3,333,780
----------------------------------------------------------------------------------------------
Southern California Public Power Authority (Transmission
Project Rev.), RIBS, 9.84%, 2012(+) 100,000 100,882
----------------------------------------------------------------------------------------------
$9,417,505
----------------------------------------------------------------------------------------------
Water & Sewer Utility Revenue - 1.7%
----------------------------------------------------------------------------------------------
New York City, NY, Municipal Water & Sewer Finance Authority
Rev., 5.5%, 2033 $5,000,000 $5,383,950
----------------------------------------------------------------------------------------------
Total Municipal Bonds (Identified Cost, $426,766,206) $442,941,716
----------------------------------------------------------------------------------------------
Floating Rate Demand Notes - 1.2%
----------------------------------------------------------------------------------------------
Allegheny County, PA, Hospital Development Authority Rev.
(Presbyterian University Hospital), "A", 1.77%, due 11/04/04 $200,000 $200,000
----------------------------------------------------------------------------------------------
Allegheny County, PA, Hospital Development Authority Rev.
(Presbyterian University Hospital), "B", 1.77%, due 11/04/04 500,000 500,000
----------------------------------------------------------------------------------------------
Allegheny County, PA, Hospital Development Authority Rev.
(Presbyterian University Hospital), "D", 1.77%, due 11/04/04 1,300,000 1,300,000
----------------------------------------------------------------------------------------------
Bay Area Toll Authority, CA, Toll Bridge Rev. "A",
1.71%, due 11/04/04 400,000 400,000
----------------------------------------------------------------------------------------------
New Castle, PA, Area Hospital Authority (Jameson Memorial
Hospital), 1.82%, due 11/03/04 125,000 125,000
----------------------------------------------------------------------------------------------
Pinellas County, FL, Health Facilities Authority Rev.,
Pooled Hospital Loan Program, 1.76%, due 11/01/04 1,100,000 1,100,000
----------------------------------------------------------------------------------------------
San Francisco, CA, City & County Financial Corp. Lease Rev.,
Moscone Center Expansion, 1.73%, due 11/04/04 100,000 100,000
----------------------------------------------------------------------------------------------
Sevier County, TN, Public Building Authority,
1.77%, due 11/04/04 65,000 65,000
----------------------------------------------------------------------------------------------
State of California, Department of Water Resources, Power
Supply Rev., "C-2", 1.75%, due 11/04/04 100,000 100,000
----------------------------------------------------------------------------------------------
Total Floating Rate Demand Notes, at Identified Cost $3,890,000
----------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $430,656,206) $446,831,716
----------------------------------------------------------------------------------------------
$ VALUE
----------------------------------------------------------------------------------------------
Preferred Shares - (44.8)% $(140,024,056)
----------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 1.9% 6,017,287
----------------------------------------------------------------------------------------------
Net Assets - 100.0% $312,824,947
----------------------------------------------------------------------------------------------
* Non-income producing security.
** Interest received was less than stated coupon rate.
+ Restricted security.
(+) Inverse floating rate security.
(++) Refunded bond.
## SEC Rule 144A restriction.
The following abbreviations are used in the Portfolio of Investments and are defined:
ETM= Escrowed to maturity
INSURERS INVERSE FLOATERS
----------------------------------------------------------------------------------------------
AMBAC = AMBAC Indemnity Corp. INFLOS = Inverse Floating Security
ASST GTY = Asset Guaranty Insurance Co. RIBS = Residual Interest Bonds
FGIC = Financial Guaranty Insurance Co. RITES = Residual Interest Tax-Exempt Security
FSA = Financial Security Assurance Inc.
GNMA = Government National Mortgage Assn.
MBIA = Municipal Bond Investors Corp.
XLCA = XL Capital Insurance Co.
SEE NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------------------------
This statement represents your trust's balance sheet, which details the assets
and liabilities composing the total value of your trust.
AT 10/31/04
ASSETS
Investments, at value (identified cost, $430,656,206) $446,831,716
--------------------------------------------------------------------------------------------------
Cash 38,258
--------------------------------------------------------------------------------------------------
Receivable for investments sold 1,143,560
--------------------------------------------------------------------------------------------------
Interest receivable 8,508,095
--------------------------------------------------------------------------------------------------
Other assets 2,180
--------------------------------------------------------------------------------------------------
Total assets $456,523,809
--------------------------------------------------------------------------------------------------
LIABILITIES
Distributions payable on common shares $162,598
--------------------------------------------------------------------------------------------------
Payable for investments purchased 346,296
--------------------------------------------------------------------------------------------------
Unrealized depreciation on interest rate swap agreements 2,803,610
--------------------------------------------------------------------------------------------------
Payable to affiliates
--------------------------------------------------------------------------------------------------
Management fee 29,073
--------------------------------------------------------------------------------------------------
Transfer agent and dividend disbursing costs 6,500
--------------------------------------------------------------------------------------------------
Administrative fee 216
--------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 326,513
--------------------------------------------------------------------------------------------------
Series T and Series TH auction preferred shares (5,600
shares issued and outstanding at $25,000 per share) at
liquidation value plus cumulative unpaid dividends 140,024,056
--------------------------------------------------------------------------------------------------
Total liabilities $143,698,862
--------------------------------------------------------------------------------------------------
Net assets applicable to common shares $312,824,947
--------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital - common shares $328,326,469
--------------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) on investments 13,371,900
--------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (35,682,660)
--------------------------------------------------------------------------------------------------
Accumulated undistributed net investment income 6,809,238
--------------------------------------------------------------------------------------------------
Net assets applicable to common shares $312,824,947
--------------------------------------------------------------------------------------------------
Preferred shares, at value (5,600 shares issued and
outstanding at $25,000 per share) 140,000,000
--------------------------------------------------------------------------------------------------
Net assets including preferred shares $452,824,947
--------------------------------------------------------------------------------------------------
Common shares of beneficial interest outstanding
(39,832,578 shares issued less 55,500 treasury shares) 39,777,078
--------------------------------------------------------------------------------------------------
Net asset value per common share (312,824,947/39,777,078) $7.86
--------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------------------------
This statement describes how much your trust received in investment income and
paid in expenses. It also describes any gains and/or losses generated by trust
operations.
FOR YEAR ENDED 10/31/04
NET INVESTMENT INCOME
Interest income $28,266,778
--------------------------------------------------------------------------------------------------
Expenses
--------------------------------------------------------------------------------------------------
Management fee $3,571,178
--------------------------------------------------------------------------------------------------
Trustees' compensation 50,192
--------------------------------------------------------------------------------------------------
Administrative fee 41,070
--------------------------------------------------------------------------------------------------
Transfer agent and dividend disbursing costs 78,623
--------------------------------------------------------------------------------------------------
Preferred shares remarketing agent fee 351,304
--------------------------------------------------------------------------------------------------
Custodian fee 103,334
--------------------------------------------------------------------------------------------------
Printing 40,614
--------------------------------------------------------------------------------------------------
Postage 143,903
--------------------------------------------------------------------------------------------------
Auditing fees 63,415
--------------------------------------------------------------------------------------------------
Legal fees 5,206
--------------------------------------------------------------------------------------------------
Miscellaneous 49,431
--------------------------------------------------------------------------------------------------
Total expenses $4,498,270
--------------------------------------------------------------------------------------------------
Fees paid indirectly (3,309)
--------------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser (878)
--------------------------------------------------------------------------------------------------
Net expenses $4,494,083
--------------------------------------------------------------------------------------------------
Net investment income $23,772,695
--------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) (identified cost basis)
--------------------------------------------------------------------------------------------------
Investment transactions $(465,227)
--------------------------------------------------------------------------------------------------
Swap transactions (1,475,616)
--------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments $(1,940,843)
--------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
--------------------------------------------------------------------------------------------------
Investments $12,031,942
--------------------------------------------------------------------------------------------------
Swap transactions (3,718,628)
--------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments $8,313,314
--------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments $6,372,471
--------------------------------------------------------------------------------------------------
Distributions declared from preferred shares $(1,507,808)
--------------------------------------------------------------------------------------------------
Change in net assets from operations $28,637,358
--------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------------------------
This statement describes the increases and/or decreases in net assets
resulting from operations, any distributions, and any shareholder
transactions.
FOR YEARS ENDED 10/31 2004 2003
CHANGE IN NET ASSETS
OPERATIONS
Net investment income $23,772,695 $24,126,026
--------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (1,940,843) (10,546,642)
--------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments 8,313,314 12,101,897
--------------------------------------------------------------------------------------------------
Distributions declared from preferred shares (1,507,808) (1,449,560)
------------------------------------------------------------------------- -------
Change in net assets from operations $28,637,358 $24,231,721
-------------------------------------------------------- ------------ ------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(21,706,248) $(21,191,726)
-------------------------------------------------------- ------------ ------------
TRUST SHARE (PRINCIPAL) TRANSACTIONS
Net asset value of shares issued to common shareholders
in reinvestment of distributions $511,173 $332,939
-------------------------------------------------------- ------------ ------------
Total change in net assets $7,442,283 $3,372,934
-------------------------------------------------------- ------------ ------------
NET ASSETS
At beginning of period $305,382,664 $302,009,730
--------------------------------------------------------------------------------------------------
At end of period (including accumulated undistributed
net investment income of $6,809,238 and $6,215,604,
respectively) $312,824,947 $305,382,664
--------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
-----------------------------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the trust's financial performance for the past 5 years.
Certain information reflects financial results for a single trust share. The total returns in the table represent the rate by
which an investor would have earned (or lost) on an investment in the trust (assuming reinvestment of all distributions) held
for the entire period. This information has been audited by the trust's independent registered public accounting firm, whose
report, together with the trust's financial statements, are included in this report.
FOR YEARS ENDED 10/31 2004 2003 2002 2001 2000
Net asset value, beginning of period $7.69 $7.61 $7.93 $7.79 $7.96
------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)
Net investment income $0.60 $0.61 $0.64 $0.64 $0.53
------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 0.16 0.04 (0.38) 0.18 (0.17)
------------------------------------------------------------------------------------------------------------------------------
Distributions declared to shareholders on
preferred shares (0.04) (0.04) (0.05) (0.10) --
--------------------------------------------------------- --- --- --- ---
Total from investment operations $0.72 $0.61 $0.21 $0.72 $0.36
--------------------------------------------------------- --- --- --- ---
Distributions declared to shareholders from
net investment income, common shares $(0.55) $(0.53) $(0.53) $(0.53) $(0.53)
--------------------------------------------------------- --- --- --- ---
Preferred shares offering cost charged to
paid-in capital $-- $-- $-- $(0.05) $--
--------------------------------------------------------- --- --- --- ---
Net asset value, end of period $7.86 $7.69 $7.61 $7.93 $7.79
--------------------------------------------------------- --- --- --- ---
Common share market value, end of period $7.83 $7.49 $7.15 $7.83 $7.38
--------------------------------------------------------- --- --- --- ---
Total return at common market value (%)* 12.22 12.51 (2.23) 13.58 11.27
------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
FOR YEARS ENDED 10/31 2004 2003 2002 2001 2000
RATIOS (%) TO AVERAGE NET ASSETS
APPLICABLE TO COMMON SHARES AND
SUPPLEMENTAL DATA^:
Expenses##+ 1.46 1.51 1.56 1.49 1.11
------------------------------------------------------------------------------------------------------------------------------
Net investment income+(S) 7.70 7.98 8.26 8.12 6.76
------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 9 11 16 26 18
------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $312,825 $305,383 $302,010 $312,996 $305,789
------------------------------------------------------------------------------------------------------------------------------
^ Effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the trust for its proportional share of
Independent Chief Compliance Officer services paid to Tarantino LLC. If this fee had been incurred by the trust, the net
investment income per share would have been:
Net investment income $0.60** -- -- -- --
------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
APPLICABLE TO COMMON SHARES:
Expenses##+ 1.46** -- -- -- --
------------------------------------------------------------------------------------------------------------------------------
Net investment income+(S) 7.70** -- -- -- --
------------------------------------------------------------------------------------------------------------------------------
Supplemental Ratios (%)
------------------------------------------------------------------------------------------------------------------------------
Ratios of expenses to average net assets
including preferred shares+## 1.00 1.03 1.07 1.07 1.11
------------------------------------------------------------------------------------------------------------------------------
Preferred shares dividends 0.49 0.48 0.68 1.28 --
------------------------------------------------------------------------------------------------------------------------------
Net investment income available to common
shares(S) 7.22 7.50 7.58 6.84 6.76
------------------------------------------------------------------------------------------------------------------------------
Senior securities
------------------------------------------------------------------------------------------------------------------------------
Total preferred shares outstanding 5,600 5,600 5,600 5,600 --
------------------------------------------------------------------------------------------------------------------------------
Asset coverage per preferred share++ $80,862 $79,533 $79,090 $80,897 --
------------------------------------------------------------------------------------------------------------------------------
Involuntary liquidation preference per
preferred share $25,000 $25,000 $25,000 $25,000 --
------------------------------------------------------------------------------------------------------------------------------
Approximate market value per
preferred share $25,000 $25,000 $25,000 $25,000 --
------------------------------------------------------------------------------------------------------------------------------
(S) As required, effective November 1, 2001, the trust has adopted the provisions of the AICPA Audit and Accounting Guide for
Investment Companies and began accreting market discount on debt securities. The effect of this change for the year ended
October 31, 2002 was to increase net investment income per share by $0.01, decrease net realized and unrealized gains and
losses per share by $0.01, and to increase the ratio of net investment income to average net assets by 0.07%. Per share,
ratios, and supplemental data for periods prior to November 1, 2001 have not been restated to reflect this change in
presentation.
+ Ratio excludes dividend payment on auction preferred shares.
++ Calculated by substracting the trust's total liabilities (not including preferred shares) from the trust's total assets
and dividing this by the number of preferred shares outstanding.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
* As revised, to reflect transactions conducted prior to close, not included in closing activity on the NYSE at October 31,
2002. Such amount was previously reported as (2.64)%. Additionally, for the year ended October 31, 2000, the total return
previously reported was based on net asset value (5.20%).
** The reimbursement per share amount and ratios were less than $0.01 and 0.01%, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
(1) BUSINESS AND ORGANIZATION
MFS Municipal Income Trust (the trust) is a non-diversified trust that is
organized as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as a closed-end management
investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The trust
can invest up to 100% of its portfolio in high-yield securities rated below
investment grade. Investments in high-yield securities involve greater degrees
of credit and market risk than investments in higher-rated securities and tend
to be more sensitive to economic conditions. Municipal securities backed by
current or anticipated revenues from a specific project or specific assets can
be negatively affected by the discontinuance of the taxation supporting the
projects or assets or the inability to collect revenues for the project or from
the assets. If the Internal Revenue Service determines an issuer of a municipal
security has not complied with applicable tax requirements, interest from the
security could become taxable and the security could decline in value.
INVESTMENT VALUATIONS - Bonds and other fixed income securities (other than
short-term obligations) in the trust's portfolio are valued at an evaluated bid
price as reported by an independent pricing service, or to the extent a
valuation is not reported by a pricing service, such securities are valued on
the basis of quotes from brokers and dealers. Prices obtained from pricing
services utilize both dealer-supplied valuations and electronic data processing
techniques which take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data without exclusive reliance upon quoted prices or exchange or over-the-
counter prices, since such valuations are believed to reflect more accurately
the fair value of such securities. Short-term obligations with a remaining
maturity in excess of 60 days will be valued upon dealer-supplied valuations.
All other short-term obligations in the trust's portfolio are valued at
amortized cost, which constitutes market value as determined by the Board of
Trustees. When pricing service information or market quotations are not readily
available, securities are priced at fair value as determined under the
direction of the Board of Trustees.
SWAP AGREEMENTS - The trust may enter into swap agreements. A swap is an
exchange of cash payments between the trust and another party, which is based
on a specific financial index. Cash payments are exchanged at specified
intervals and the expected income or expense is recorded on the accrual basis.
The value of the swap is adjusted daily and the change in value is recorded as
unrealized appreciation or depreciation. Risks may arise upon entering into
these agreements from the potential inability of counterparties to meet the
terms of their contract and from unanticipated changes in the value of the
financial index on which the swap agreement is based. The trust uses swaps for
both hedging and non-hedging purposes. For hedging purposes, the trust may use
swaps to reduce its exposure to interest and foreign exchange rate
fluctuations. For non-hedging purposes, the trust may use swaps to take a
position on anticipated changes in the underlying financial index.
INTEREST RATE SWAP AGREEMENTS - Interest rate swap agreements are agreements to
exchange cash flows periodically based on a notional principal amount, for
example the exchange of fixed rate interest payments for floating rate interest
payments which are based on a specific financial index, or the exchange of two
distinct floating rate payments. The net receivable or payable associated with
these payments is accrued daily and is recorded as net interest income or
expense. For financial statement purposes, the net interest income or expense
periodically recognized for an interest rate swap is recorded in the same line
item as any unrealized and realized gains or losses recognized for that
instrument. The primary risk associated with interest rate swap agreements is
that unfavorable changes in the fluctuation of interest rates could adversely
impact the trust.
RATE LOCK SWAPS - The trust may enter into rate lock swaps, which are used to
reduce the interest rate risk of the portfolio. A rate lock swap is a payment
or receipt of cash on a specified future date, calculated as the difference
between the strike rate and a specific index yield on that date. The payment
received or made at the end of the measurement period is recorded as a realized
gain or loss in the Statement of Operations. The value of the swap is adjusted
daily and the change in value is recorded as unrealized appreciation or
depreciation.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized or accreted for financial statement purposes in
accordance with U.S. generally accepted accounting principles. All premium and
original issue discount is amortized or accreted for tax reporting purposes as
required by federal income tax regulations. Legal fees and other related
expenses incurred to preserve and protect the value of a security owned are
added to the cost of the security; other legal fees are expensed. Capital
infusions made directly to the security issuer, which are generally non-
recurring, incurred to protect or enhance the value of high-yield debt
securities, are reported as additions to the cost basis of the security. Costs
that are incurred to negotiate the terms or conditions of capital infusions or
that are expected to result in a plan of reorganization are reported as
realized losses. Ongoing costs incurred to protect or enhance an investment, or
costs incurred to pursue other claims or legal actions, are expensed.
FEES PAID INDIRECTLY - The trust custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by the
trust. This amount, for the year ended October 31, 2004, is shown as a
reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The trust's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net tax-
exempt and taxable net income, including any net realized gain on investments.
Accordingly, no provision for federal income or excise tax is provided.
Distributions paid by the trust from net interest received on tax-exempt
municipal bonds are not includable by shareholders as gross income for federal
income tax purposes because the trust intends to meet certain requirements of
the Code applicable to regulated investment companies, which will enable the
trust to pay exempt-interest dividends. The portion of such interest, if any,
earned on private activity bonds issued after August 7, 1986 may be considered
a tax-preference item to shareholders.
Distributions to shareholders are recorded on the ex-dividend date. The trust
distinguishes between distributions on a tax basis and a financial reporting
basis and only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. Common
types of book and tax differences that could occur include differences in
accounting for defaulted bonds, capital losses, and amortization and accretion
on debt securities.
The tax character of distributions declared for the years ended October 31,
2004 and October 31, 2003 was as follows:
10/31/04 10/31/03
Distributions declared from:
------------------------------------------------------------------------------
Tax-exempt income $23,043,028 $22,599,683
------------------------------------------------------------------------------
Ordinary income 171,028 41,603
------------------------------------------------------------------------------
Total distributions declared $23,214,056 $22,641,286
------------------------------------------------------------------------------
During the year ended October 31, 2004 accumulated undistributed net investment
income increased by $34,995, accumulated net realized loss on investments
decreased by $8,739,610, and paid-in capital decreased by $8,774,605 due to
differences between book and tax accounting for amortization and accretion on
debt securities, market discount, and capital losses. This change had no effect
on the net assets or net asset value per share.
As of October 31, 2004 the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Undistributed tax-exempt income $7,792,198
----------------------------------------------------------
Undistributed ordinary income 60,086
----------------------------------------------------------
Capital loss carryforward (36,437,335)
----------------------------------------------------------
Unrealized appreciation (depreciation) 14,002,173
----------------------------------------------------------
Other temporary differences (918,644)
----------------------------------------------------------
For federal income tax purposes, the capital loss carryforward may be applied
against any net taxable realized gains of each succeeding year until the
earlier of its utilization or expiration.
EXPIRATION DATE
October 31, 2005 $(16,518,819)
----------------------------------------------------------
October 31, 2006 (1,383,806)
----------------------------------------------------------
October 31, 2009 (2,847,429)
----------------------------------------------------------
October 31, 2010 (2,883,947)
----------------------------------------------------------
October 31, 2011 (10,944,821)
----------------------------------------------------------
October 31, 2012 (1,858,513)
----------------------------------------------------------
Total $(36,437,335)
----------------------------------------------------------
AUCTION PREFERRED SHARES - The trust issued 2,800 shares of Auction Preferred
Shares (APS), series T and 2,800 of Auction Preferred Shares (APS), series TH.
Dividends are cumulative at a rate that is reset every seven days for both
series through an auction process. During the year ended October 31, 2004 the
dividend rates ranged from 1.31% to 2.59%. The trust pays an annual fee
equivalent to 0.25% of the preferred share liquidation value for remarketing
efforts associated with the preferred auction. The APS are redeemable at the
option of the trust in whole or in part at the redemption price equal to
$25,000 per share, plus accumulated and unpaid dividends. The APS are also
subject to mandatory redemption if certain requirements relating to its asset
maintenance coverage are not satisfied. The trust is required to maintain
certain asset coverage with respect to the APS as defined in the trust's By-
Laws and the Investment Company Act of 1940.
In accordance with the provisions of FASB 150, "Accounting for certain
financial instruments with characteristics of both Liabilities and Equity",
effective for the current period, the trust has reclassified its Auction
Preferred Shares ("APS") outside of permanent equity in the Net Assets section
of the Statement of Assets and Liabilities. In addition, distributions to APS
shareholders are now classified as a component of the "Increase in net assets
from operations" on the Statement of Operations and Statement of Changes in Net
Assets and as a component of the "Total from investment operations" in the
Financial Highlights. Prior year amounts presented have been reclassified to
conform to this period's presentation. This change has no impact of the net
assets applicable to common shares of the trust.
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - The trust has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.40% of
the trust's average daily net assets and 6.32% of investment income. Management
fees incurred for the year ended October 31, 2004 were charged an effective
rate of 0.80% of average daily net assets, including preferred shares, on an
annualized basis.
The trust pays compensation to its Independent Trustees in the form of a
retainer, attendance fees, and additional compensation to Board and Committee
chairpersons, and pays no compensation directly to its Trustees who are
officers of the investment adviser, or to officers of the trust, all of whom
receive remuneration for their services to the trust from MFS. Certain officers
and Trustees of the trust are officers or directors of MFS and MFS Service
Center, Inc. (MFSC). The trust has an unfunded defined benefit plan for retired
Independent Trustees. Included in Trustees' compensation is a pension expense
of $10,611 for retired Independent Trustees for the year ended October 31,
2004.
This trust and certain other MFS funds (the "funds") have entered into a
services agreement (the "Agreement") which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an
Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an
officer of the funds and the sole member of Tarantino LLC. MFS has agreed to
reimburse each of the funds for a proportional share of substantially all of
the payments made by the funds to Tarantino LLC and also to provide office
space and other administrative support and supplies to the ICCO. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to certain funds
for which MFS acts as investment adviser. Under an administrative services
agreement between the funds and MFS, MFS is entitled to partial reimbursement
of the costs MFS incurs to provide these services, subject to review and
approval by the Board of Trustees. Each fund is allocated a portion of these
administrative costs based on its size and relative average net assets.
Prior to April 1, 2004, the trust paid MFS an administrative fee up to the
following annual percentage rates of the trust's average daily net assets:
First $2 billion 0.0175%
----------------------------------------------------------
Next $2.5 billion 0.0130%
----------------------------------------------------------
Next $2.5 billion 0.0005%
----------------------------------------------------------
In excess of $7 billion 0.0000%
----------------------------------------------------------
Effective April 1, 2004, the trust paid MFS an administrative fee up to the
following annual percentage rates of the trust's average daily net assets:
First $2 billion 0.01120%
----------------------------------------------------------
Next $2.5 billion 0.00832%
----------------------------------------------------------
Next $2.5 billion 0.00032%
----------------------------------------------------------
In excess of $7 billion 0.00000%
----------------------------------------------------------
For the year ended October 31, 2004, the trust paid MFS $41,070 equivalent to
0.00916% of average daily net assets including preferred shares, to partially
reimburse MFS for the costs of providing administrative services.
TRANSFER AGENT - Included in transfer agent and dividend disbursing costs is a
fee paid to MFSC, a wholly owned subsidiary of MFS, for its services as
registrar and dividend disbursing agent for the trust. The agreement provides
that the trust will pay MFSC an account maintenance fee of no more than $9.00
and a dividend services fee of $0.75 per reinvestment. These fees amounted to
$65,362 for the year ended October 31, 2004. Also included in transfer agent
and dividend disbursing costs are out-of-pocket expenses, paid to MFSC, which
amounted to $2,567 for the year ended October 31, 2004, as well as other
expenses paid to unaffiliated vendors.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$37,474,287 and $42,172,561, respectively.
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the trust, as computed on a federal income tax basis, are
as follows:
Aggregate cost $430,025,933
----------------------------------------------------------
Gross unrealized appreciation $31,325,653
----------------------------------------------------------
Gross unrealized depreciation (14,519,870)
----------------------------------------------------------
Net unrealized appreciation (depreciation) $16,805,783
----------------------------------------------------------
(5) SHARES OF BENEFICIAL INTEREST
The trust's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. The Trustees have
authorized the repurchase by the trust of up to 10% annually of its own shares
of beneficial interest. During the year ended October 31, 2004, the trust did
not repurchase any shares. Transactions in trust shares were as follows:
Year ended 10/31/04 Year ended 10/31/03
SHARES AMOUNT SHARES AMOUNT
Shares issued to shareholders in
reinvestment of distributions 64,891 $511,173 42,903 $332,939
------------------------------------------------------------------------------
(6) LINE OF CREDIT
The trust and other affiliated funds participate in an $800 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each fund, based on its borrowings, at a rate equal to the Federal
Reserve funds rate plus 0.50%. In addition, a commitment fee, based on the
average daily, unused portion of the line of credit, is allocated among the
participating funds at the end of each calendar quarter. The commitment fee
allocated to the trust for the year ended October 31, 2004 was $1,513, and is
included in miscellaneous expense. The trust had no significant borrowings
during the year ended October 31, 2004.
(7) FINANCIAL INSTRUMENTS
The trust trades financial instruments with off-balance-sheet risk in the
normal course of its investing activities in order to manage exposure to market
risks such as interest rates and foreign currency exchange rates. These
financial instruments include swap agreements. The notional or contractual
amounts of these instruments represent the investment the trust has in
particular classes of financial instruments and does not necessarily represent
the amounts potentially subject to risk. The measurement of the risks
associated with these instruments is meaningful only when all related and
offsetting transactions are considered.
Swap Agreements
Interest Rate Swaps
NOTIONAL
PRINCIPAL CASH FLOWS CASH FLOWS UNREALIZED
AMOUNT OF PAID BY RECEIVED BY APPRECIATION
EXPIRATION CONTRACT THE TRUST THE TRUST (DEPRECIATION)
11/16/16 USD 10,500,000 Fixed - 12 year BMA Floating - 7 day
swap index 4.371% BMA swap index $(745,921)
---------------------------------------------------------------------------------------------------------
4/6/17 USD 36,000,000 Fixed - 12 year BMA Floating - 7 day
swap index 3.884% BMA swap index (570,029)
---------------------------------------------------------------------------------------------------------
6/15/25 USD 20,000,000 Fixed - 20 year BMA Floating - 7 day
swap index 4.7264% BMA swap index (1,487,660)
---------------------------------------------------------------------------------------------------------
$(2,803,610)
---------------------------------------------------------------------------------------------------------
(8) RESTRICTED SECURITIES
At October 31, 2004 the trust owned the following restricted securities which
are subject to legal or contractual restrictions on resale, excluding
securities issued under Rule 144A, constituting 1.7% of net assets, including
preferred shares, which may not be publicly sold without registration under the
Securities Act of 1933. The trust does not have the right to demand that such
securities be registered. The value of these securities is determined by
valuations furnished by dealers or by a pricing service, or if not available,
in good faith at the direction of the Trustees.
DATE OF PAR
DESCRIPTION ACQUISITION AMOUNT COST VALUE
Chicago, IL, O'Hare International Airport
Rev., RITES, XLCA, 9.0787%, 2022 8/21/03 1,500,000 $1,599,510 $1,784,490
------------------------------------------------------------------------------------------------------------
Chicago, IL, Public Building Commission,
Building Rev., RITES, FGIC 8.7328%, 2016 3/11/99 1,300,000 1,403,610 1,683,604
------------------------------------------------------------------------------------------------------------
Chicago, IL, Public Building Commission,
Building Rev., RITES, FGIC 8.7328%, 2017 3/11/99 1,050,000 1,123,542 1,365,882
------------------------------------------------------------------------------------------------------------
New Jersey Economic Development Authority,
Economic Development Rev. (Holt Hauling &
Warehousing), 8.4%, 2015 1/30/97 1,000,000 1,049,280 565,000
------------------------------------------------------------------------------------------------------------
New Jersey Economic Development Authority,
Economic Development Rev. (Holt Hauling &
Warehousing), 8.6%, 2017 1/30/97 1,000,000 1,051,940 565,000
------------------------------------------------------------------------------------------------------------
Niagara Falls, NY, Bridge Commission, Toll
Rev., RITES, FGIC, 8.1705%, 2015 5/21/99 1,500,000 1,609,680 1,954,200
------------------------------------------------------------------------------------------------------------
$7,918,176
------------------------------------------------------------------------------------------------------------
(9) CONCENTRATION OF CREDIT RISK
At October 31, 2004 17% of securities in the portfolio of investments are
backed by letters of credit or bond insurance of various financial institutions
and financial guaranty assurance agencies. The percentage of investments
insured by or supported (backed) by a letter of credit from any one institution
or agency did not exceed 8.5% of total investments.
(10) LEGAL PROCEEDINGS
On March 31, 2004, MFS settled an administrative proceeding with the Securities
and Exchange Commission ("SEC") regarding disclosure of brokerage allocation
practices in connection with MFS fund sales (the term "MFS funds" means the
open-end registered management investment companies sponsored by MFS). Under
the terms of the settlement, in which MFS neither admitted nor denied any
wrongdoing, MFS agreed to pay (one dollar) $1.00 in disgorgement and $50
million in penalty to certain MFS funds, pursuant to a plan developed by an
independent distribution consultant. The brokerage allocation practices which
were the subject of this proceeding were discontinued by MFS in November 2003.
The agreement with the SEC is reflected in an order of the SEC. Pursuant to the
SEC order, on July 28, 2004, MFS transferred these settlement amounts to the
SEC, and those MFS funds entitled to these settlement amounts accrued an
estimate of their pro rata portion of these amounts. Once the final
distribution plan is approved by the SEC, these amounts will be distributed by
the SEC to the affected MFS funds. The SEC settlement order states that MFS
failed to adequately disclose to the Boards of Trustees and to shareholders of
the MFS funds the specifics of its preferred arrangements with certain
brokerage firms selling MFS fund shares. The SEC settlement order states that
MFS had in place policies designed to obtain best execution of all MFS fund
trades. As part of the settlement, MFS retained an independent compliance
consultant to review the completeness of its current policies and practices
regarding disclosure to MFS fund trustees and to MFS fund shareholders of
strategic alliances between MFS or its affiliates and broker-dealers and other
financial advisers who support the sale of MFS fund shares.
In addition, in February, 2004, MFS reached agreement with the SEC, the New
York Attorney General ("NYAG") and the Bureau of Securities Regulation of the
State of New Hampshire ("NH") to settle administrative proceedings alleging
false and misleading information in certain MFS open-end retail fund ("MFS
retail funds") prospectuses regarding market timing and related matters (the
"February Settlements"). These regulators alleged that prospectus language for
certain MFS retail funds was false and misleading because, although the
prospectuses for those funds in the regulators' view indicated that they
prohibited market timing, MFS did not limit trading activity in 11 domestic
large cap stock, high grade bond and money market retail funds. MFS' former
Chief Executive Officer, John W. Ballen, and former President, Kevin R. Parke,
also reached agreement with the SEC in which they agreed to, among other terms,
monetary fines and temporary suspensions from association with any investment
adviser or registered investment company. Messrs. Ballen and Parke have
resigned their positions with, and will not be returning to, MFS and the MFS
funds. Under the terms of the February Settlements, MFS and the executives
neither admit nor deny wrongdoing.
Under the terms of the February Settlements, a $225 million pool has been
established for distribution to shareholders in certain MFS retail funds, which
has been funded by MFS and of which $50 million is characterized as a penalty.
This pool will be distributed in accordance with a methodology developed by an
independent distribution consultant in consultation with MFS and the Board of
Trustees of the MFS retail funds, and acceptable to the SEC. MFS has further
agreed with NYAG to reduce its management fees in the aggregate amount of
approximately $25 million annually over the next five years, and not to
increase certain management fees during this period. MFS has also paid an
administrative fine to NH in the amount of $1 million, which will be used for
investor education purposes (NH retained $250,000 and $750,000 was contributed
to the North American Securities Administrators Association's Investor
Protection Trust). In addition, under the terms of the February Settlements,
MFS is in the process of adopting certain governance changes and reviewing its
policies and procedures.
Since December 2003, MFS, MFS Fund Distributors, Inc., MFS Service Center,
Inc., MFS Corporation Retirement Committee, Sun Life Financial Inc., various
MFS funds, certain current and/or former Trustees of these MFS funds, and
certain officers of MFS have been named as defendants in multiple lawsuits
filed in federal and state courts. The lawsuits variously have been commenced
as class actions or individual actions on behalf of investors who purchased,
held or redeemed shares of the MFS funds during specified periods, as class
actions on behalf of participants in certain retirement plan accounts, or as
derivative actions on behalf of the MFS funds. The lawsuits relating to market
timing and related matters have been transferred to, and consolidated before,
the United States District Court for the District of Maryland, as part of a
multi-district litigation of market timing and related claims involving several
other fund complexes (In re Mutual Funds Investment Litigation (Alger,
Columbia, Janus, MFS, One Group, Putnam, Allianz Dresdner), No. 1:04-md-15863
(transfer began March 19, 2004)). The plaintiffs in these consolidated lawsuits
generally seek injunctive relief including removal of the named Trustees,
adviser and distributor, rescission of contracts and 12b-1 Plans, disgorgement
of fees and profits, monetary damages, punitive damages, attorney's fees and
costs and other equitable and declaratory relief. Four lawsuits alleging
improper brokerage allocation practices and excessive compensation are pending
in the United States District Court for the District of Massachusetts (Forsythe
v. Sun Life Financial Inc., et al., No. 04cv10584 (GAO) (March 25, 2004);
Eddings v. Sun Life Financial Inc., et al., No. 04cv10764 (GAO) (April 15,
2004); Marcus Dumond, et al. v. Massachusetts Financial Servs. Co., et al., No.
04cv11458 (GAO) (May 4, 2004); and Koslow v. Sun Life Financial Inc., et al.,
No. 04cv11019 (GAO) (May 20, 2004)). The plaintiffs in these lawsuits generally
seek compensatory damages, punitive damages, recovery of fees, rescission of
contracts, an accounting, restitution, declaratory relief, equitable and/or
injunctive relief and attorney's fees and costs. The various lawsuits generally
allege that some or all of the defendants (i) permitted or acquiesced in market
timing and/or late trading in some of the MFS funds, inadequately disclosed
MFS' internal policies concerning market timing and such matters, and received
excessive compensation as fiduciaries to the MFS funds, or (ii) permitted or
acquiesced in the improper use of fund assets by MFS to support the
distribution of MFS fund shares and inadequately disclosed MFS' use of fund
assets in this manner. The actions assert that some or all of the defendants
violated the federal securities laws, including the Securities Act of 1933 and
the Securities Exchange Act of 1934, the Investment Company Act of 1940 and the
Investment Advisers Act of 1940, the Employee Retirement Income Security Act of
1974, as well as fiduciary duties and other violations of common law. Insofar
as any of the actions is appropriately brought derivatively on behalf of any of
the MFS funds, any recovery will inure to the benefit of the MFS funds. The
defendants are reviewing the allegations of the multiple complaints and will
respond appropriately. Additional lawsuits based on similar allegations may be
filed in the future.
Any potential resolution of these matters may include, but not be limited to,
judgments or settlements for damages against MFS, the MFS funds, or any other
named defendant. As noted above, as part of the regulatory settlements, MFS has
established a restitution pool in the amount of $225 million to compensate
certain shareholders of certain MFS retail funds for damages that they
allegedly sustained as a result of market timing or late trading in certain of
the MFS retail funds, and transferred $50 million for distribution to affected
MFS funds to compensate those funds based upon the amount of brokerage
commissions allocated in recognition of MFS fund sales. It is not clear whether
these amounts will be sufficient to compensate shareholders for all of the
damage they allegedly sustained, whether certain shareholders or putative class
members may have additional claims to compensation, or whether the damages that
may be awarded in any of the actions will exceed these amounts. In the event
the MFS funds incur any losses, costs or expenses in connection with such
lawsuits, the Boards of Trustees of the affected MFS funds may pursue claims on
behalf of such funds against any party that may have liability to the funds in
respect thereof.
Review of these matters by the independent Trustees of the MFS funds and their
counsel is continuing. There can be no assurance that these regulatory actions
and lawsuits, or the adverse publicity associated with these developments, will
not result in increased fund redemptions, reduced sales of fund shares, or
other adverse consequences to the MFS funds.
While these developments relate to MFS and the MFS' open-end funds, there can
be no assurance that these developments, or the adverse publicity associated
with these developments, will not result in an increase to the market discount
of the MFS closed-end fund shares or other adverse consequences.
-------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------------------------------
To the Trustees and Shareholders of MFS Municipal Income Trust:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the MFS Municipal Income Trust (the "Trust"),
as of October 31, 2004, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended. These financial statements are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of the
securities owned as of October 31, 2004 by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Municipal Income Trust as of October 31, 2004, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended and the financial highlights for each of the
five years in the period then ended in conformity with accounting principles
generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 20, 2004
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TRUSTEES AND OFFICERS -- IDENTIFICATION AND BACKGROUND
--------------------------------------------------------------------------------------------------------
The Trustees and officers of the trust, as of December 10, 2004, are listed below, together with their
principal occupations during the past five years. (Their titles may have varied during that period.) The
address of each Trustee and officer is 500 Boylston Street, Boston, Massachusetts 02116.
PRINCIPAL OCCUPATIONS & OTHER
POSITION(s) HELD TRUSTEE/OFFICER DIRECTORSHIPS(2) DURING
NAME, DATE OF BIRTH WITH FUND SINCE(1) THE PAST FIVE YEARS
------------------- ---------------- --------------- ----------------------------------
INTERESTED TRUSTEES
Robert J. Manning(3) Trustee and February 2004 Massachusetts Financial Services
(born 10/20/63) President Company, Chief Executive Officer,
President, Chief Investment
Officer and Director
Robert C. Pozen(3) Trustee February 2004 Massachusetts Financial Services
(born 08/08/46) Company, Chairman (since February
2004); Harvard Law School
(education), John Olin Visiting
Professor (since July 2002);
Secretary of Economic Affairs, The
Commonwealth of Massachusetts
(January 2002 to December 2002);
Fidelity Investments, Vice
Chairman (June 2000 to December
2001); Fidelity Management &
Research Company (investment
adviser), President (March 1997 to
July 2001); The Bank of New York
(financial services), Director;
Bell Canada Enterprises
(telecommunications), Director;
Medtronic, Inc. (medical
technology), Director; Telesat
(satellite communications),
Director
INDEPENDENT TRUSTEES
J. Atwood Ives Trustee and Chair February 1992 Private investor; Eastern
(born 05/01/36) of Trustees Enterprises (diversified services
company), Chairman, Trustee and
Chief Executive Officer (until
November 2000)
Lawrence H. Cohn, M.D. Trustee August 1993 Brigham and Women's Hospital,
(born 03/11/37) Chief of Cardiac Surgery; Harvard
Medical School, Professor of
Surgery
David H. Gunning Trustee January 2004 Cleveland-Cliffs Inc. (mining
(born 05/30/42) products and service provider),
Vice Chairman/Director (since
April 2001); Encinitos Ventures
(private investment company),
Principal (1997 to April 2001);
Lincoln Electric Holdings, Inc.
(welding equipment manufacturer),
Director; Southwest Gas
Corporation (natural gas
distribution company), Director
William R. Gutow Trustee December 1993 Private investor and real estate
(born 09/27/41) consultant; Capitol Entertainment
Management Company (video
franchise), Vice Chairman
Amy B. Lane Trustee January 2004 Retired; Merrill Lynch & Co.,
(born 02/08/53) Inc., Managing Director,
Investment Banking Group (1997 to
February 2001); Borders Group,
Inc. (book and music retailer),
Director; Federal Realty
Investment Trust (real estate
investment trust), Trustee
Lawrence T. Perera Trustee July 1981 Hemenway & Barnes (attorneys),
(born 06/23/35) Partner
William J. Poorvu Trustee August 1982 Private investor; Harvard
(born 04/10/35) University Graduate School of
Business Administration, Class of
1961 Adjunct Professor in
Entrepreneurship Emeritus
J. Dale Sherratt Trustee August 1993 Insight Resources, Inc.
(born 09/23/38) (acquisition planning
specialists), President;
Wellfleet Investments (investor
in health care companies),
Managing General Partner (since
1993); Cambridge Nutraceuticals
(professional nutritional
products), Chief Executive
Officer (until May 2001)
Elaine R. Smith Trustee February 1992 Independent health care industry
(born 04/25/46) consultant
OFFICERS
Robert J. Manning(3) President and February 2004 Massachusetts Financial Services
(born 10/20/63) Trustee Company, Chief Executive Officer,
President, Chief Investment
Officer and Director
James R. Bordewick, Jr.(3) Assistant September 1990 Massachusetts Financial Services
(born 03/06/59) Secretary and Company, Senior Vice President and
Assistant Clerk Associate General Counsel
Jeffrey N. Carp(3) Secretary and September 2004 Massachusetts Financial Services
(born 12/01/56) Clerk Company, Senior Vice President,
General Counsel and Secretary
(since April 2004); Hale and Door
LLP (law firm) (prior to April
2004)
Stephanie A. DeSisto(3) Assistant May 2003 Massachusetts Financial Services
(born 10/01/53) Treasurer Company, Vice President (since
April 2003); Brown Brothers
Harriman & Co., Senior Vice
President (November 2002 to April
2003); ING Groep N.V./Aeltus
Investment Management, Senior Vice
President (prior to November 2002)
James F. DesMarais(3) Assistant September 2004 Massachusetts Financial Services
(born 03/09/61) Secretary and Company, Assistant General Counsel
Assistant Clerk
Robert R. Flaherty(3) Assistant August 2000 Massachusetts Financial Services
(born 09/18/63) Treasurer Company, Vice President (since
August 2000); UAM Fund Services,
Senior Vice President (prior to
August 2000)
Richard M. Hisey(3) Treasurer August 2002 Massachusetts Financial Services
(born 08/29/58) Company, Senior Vice President
(since July 2002); The Bank of New
York, Senior Vice President
(September 2000 to July 2002);
Lexington Global Asset Managers,
Inc., Executive Vice President and
Chief Financial Officer (prior to
September 2000); Lexington Funds,
Chief Financial Officer (prior to
September 2000)
Brian T. Hourihan(3) Assistant September 2004 Massachusetts Financial Services
(born 11/11/64) Secretary and Company, Vice President, Senior
Assistant Clerk Counsel and Assistant Secretary
(since June 2004); Affiliated
Managers Group, Inc., Chief Legal
Officer/Centralized Compliance
Program (January to April 2004);
Fidelity Research & Management
Company, Assistant General Counsel
(prior to January 2004)
Ellen Moynihan(3) Assistant April 1997 Massachusetts Financial Services
(born 11/13/57) Treasurer Company, Vice President
Frank L. Tarantino Independent Chief June 2004 Tarantino LLC (provider of
(born 03/07/44) Compliance compliance services), Principal
Officer (since June 2004); CRA Business
Strategies Group (consulting
services), Executive Vice
President (April 2003 to June
2004); David L. Babson & Co.
(investment adviser), Managing
Director, Chief Administrative
Officer and Director (February
1997 to March 2003)
James O. Yost(3) Assistant September 1990 Massachusetts Financial Services
(born 06/12/60) Treasurer Company, Senior Vice President
------------------
(1) Date first appointed to serve as Trustee/officer of an MFS fund. Each Trustee has served
continuously since appointment unless indicated otherwise.
(2) Directorships or trusteeships of companies required to report to the Securities and Exchange
Commission (i.e., "public companies").
(3) "Interested person" of MFS within the meaning of the Investment Company Act of 1940 (referred to as
the 1940 Act), which is the principal federal law governing investment companies like the fund. The
address of MFS is 500 Boylston Street, Boston, Massachusetts 02116.
The trust holds annual shareholder meetings for the purpose of electing Trustees, and Trustees are
elected for fixed terms. The Board of Trustees is currently divided into three classes, each having a
term of three years. Each year the term of one class expires. Each Trustee's term of office expires on
the date of the third annual meeting following the election to office of the Trustee's class. Each
Trustee will serve until next elected or his or her earlier death, resignation, retirement or removal.
Messrs. Ives, Poorvu and Sherratt and Ms. Lane are members of the trust's Audit Committee.
Each of the trust's Trustees and officers holds comparable positions with certain other funds of which
MFS or a subsidiary is the investment adviser or distributor, and, in the case of the officers, with
certain affiliates of MFS. Each Trustee serves as a board member of 99 funds within the MFS Family of
Funds.
On October 29, 2004, Robert J. Manning, as Chief Executive Officer of the trust, certified to the New
York Stock Exchange that as of the date of his certification he was not aware of any violation by the
trust of the corporate governance listing standards of the New York Stock Exchange.
The trust filed with the Securities and Exchange Commission the certifications of its principal
executive officer and principal financial officer under Section 302 of the Sarbanes-Oxley Act of 2002 as
an exhibit to the trust's Form N-CSR for the period covered by this report.
-----------------------------------------------------------------------------------------------------------
INVESTMENT ADVISER CUSTODIAN
Massachusetts Financial Services Company State Street Bank and Trust Company
500 Boylston Street, Boston, MA 225 Franklin Street, Boston, MA 02110
02116-3741
INDEPENDENT REGISTERED PUBLIC
DISTRIBUTOR ACCOUNTING FIRM
MFS Fund Distributors, Inc. Deloitte & Touche LLP
500 Boylston Street, Boston, MA 200 Berkeley Street, Boston, MA 02116
02116-3741
PORTFOLIO MANAGER
Geoffrey Schechter
-------------------------------------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION
-------------------------------------------------------------------------------
A general description of the MFS funds' proxy voting policies and procedures is
available without charge, upon request, by calling 1-800-225-2606, by visiting
the About MFS section of mfs.com or by visiting the SEC's Web site at
http://www.sec. gov.
Information regarding how the trust voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is
available without charge by visiting the Proxy Voting section of mfs.com or by
visiting the SEC's Web site at http://www.sec.gov.
-------------------------------------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE
-------------------------------------------------------------------------------
The trust will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The trust's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-0102
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-800-SEC-0330. The trust's Form N-Q is available on
the EDGAR database on the Commission's Internet website at http://www.sec.gov,
and copies of this information may be obtained, upon payment of a duplicating
fee, by electronic request at the following e-mail address: publicinfo@sec.gov
or by writing the Public Reference Section at the above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (UNAUDITED)
In January 2005, shareholders will be mailed a Tax Form Summary or Form 1099-
DIV, if applicable, reporting the federal tax status of all distributions paid
during the calendar year 2004.
For federal income tax purposes, approximately 99.26% of the total dividends
paid by the trust from net investment income during the year ended October 31,
2004, is designated as an exempt-interest dividend.
--------------------------------------------------------------------------------
CONTACT INFORMATION AND NUMBER OF SHAREHOLDERS
INVESTOR INFORMATION
Transfer Agent, Registrar and Dividend Disbursing Agent
Call 1-800-637-2304 any business day from 8 a.m. to 8 p.m. Eastern
time
Write to: State Street Bank and Trust Company
c/o MFS Service Center, Inc.
P.O. Box 55024
Boston, MA 02205-5024
NUMBER OF SHAREHOLDERS
As of October 31, 2004, our records indicate that there are 3,483 registered
shareholders and approximately 13,643 shareholders owning trust shares in
"street" name, such as through brokers, banks, and other financial
intermediaries.
As of October 31, 2004, 2,800 shares of Auction Preferred Shares (APS), Series
T and 2,800 shares of Auction Preferred Shares, Series TH were issued and
outstanding.
If you are a "street" name shareholder and wish to directly receive our
reports, which contain important information about the trust, please write or
call:
State Street Bank and Trust Company
c/o MFS Service Center, Inc.
P.O. Box 55024
Boston, MA 02205-5024
1-800-637-2304
[logo] M F S(R)
INVESTMENT MANAGEMENT
(C) 2004 MFS Investment Management(R)
500 Boylston Street, Boston, MA 02116.
MFM-ANN-12/04 23M
ITEM 2. CODE OF ETHICS.
The Registrant has adopted a Code of Ethics pursuant to Section 406 of the
Sarbanes-Oxley Act and as defined in Form N-CSR that applies to the Registrant's
principal executive officer and principal financial and accounting officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Mr. J. Atwood Ives and Ms. Amy B. Lane, members of the Audit Committee, have
been determined by the Board of Trustees in their reasonable business judgment
to meet the definition of "audit committee financial expert" as such term is
defined in Form N-CSR. In addition, Mr. Ives and Ms. Lane are both "independent"
members of the Audit Committee as defined in Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
ITEMS 4(A) THROUGH 4(D) AND 4(G):
The Board of Trustees has appointed Deloitte & Touche LLP ("Deloitte") to serve
as independent accountants to the Registrant. The tables below set forth the
audit fees billed to the Registrant as well as fees for non-audit services
provided to the Registrant and/or to the Registrant's investment adviser,
Massachusetts Financial Services Company ("MFS") and to various entities either
controlling, controlled by, or under common control with MFS that provide
ongoing services to the Funds ("MFS Related Entities").
For the fiscal years ended October 31, 2004 and 2003, audit fees billed to the
Registrant by Deloitte were as follows:
Audit Fees
FEES BILLED BY DELOITTE: 2004 2003
------ ------
MFS Municipal Income Trust 37,115 34,910
------ ------
TOTAL 37,115 34,910
For the fiscal years ended October 31, 2004 and 2003, fees billed by Deloitte
for audit-related, tax and other services provided to the Registrant and for
audit-related, tax and other services provided to MFS and MFS Related Entities
were as follows:
Audit-Related Fees(1) Tax Fees(2) All Other Fees(3)
FEES BILLED BY DELOITTE: 2004 2003 2004 2003 2004 2003
---- ---- ---- ---- ---- ----
To MFS Municipal 18,000 18,000 10,600 5,800 0 0
Income Trust
To MFS and MFS Related 928,350 166,150 35,000 20,000 32,500 49,644
Entities relating directly to the
operations and financial
reporting of the
above Registrant*
To Registrant, MFS and MFS 946,350 184,150 45,600 43,429 68,500 121,644
Related Entities#
* This amount reflects the fees billed to MFS and MFS Related Entities for
non-audit services relating directly to the operations and financial
reporting of the Registrant (which services also related to the operations
and financial reporting of other funds within the MFS Funds complex).
# This amount reflects the aggregate fees billed by Deloitte for non-audit
services rendered to the Registrant and for non-audit services rendered to
MFS and the MFS Related Entities.
(1) The fees included under "Audit-Related Fees" are fees related to assurance
and related services that are reasonably related to the performance of the
audit or review of financial statements, but not reported under "Audit
Fees," including accounting consultations, agreed-upon procedure reports,
attestation reports and comfort letters.
(2) The fees included under "Tax Fees" are fees associated with tax compliance,
tax advice and tax planning, including services relating to the filing or
amendment of federal, state or local income tax returns, regulated
investment company qualification reviews and tax distribution and analysis.
(3) The fees included under "All Other Fees" are fees for products and services
provided by Deloitte other than those reported under "Audit Fees",
"Audit-Related Fees" and "Tax Fees."
For periods prior to May 6, 2003, the amounts shown above under "Audit-Related
Fees," "Tax Fees" and "All Other Fees" relate to permitted non-audit services
that would have been subject to pre-approval if the Securities and Exchange
Commission's rules relating to pre-approval of non-audit services had been in
effect.
ITEM 4(E)(1):
Set forth below are the policies and procedures established by the Audit
Committee of the Board of Trustees relating to the pre-approval of audit and
non-audit related services: To the extent required by applicable law,
pre-approval by the Audit Committee of the Board is needed for all audit and
permissible non-audit services rendered to the Funds and all permissible
non-audit services rendered to MFS or MFS Related Entities if the services
relate directly to the operations and financial reporting of the Registrant.
Pre-approval is currently on an engagement-by-engagement basis. In the event
pre-approval of such services is necessary between regular meetings of the Audit
Committee and it is not practical to wait to seek pre-approval at the next
regular meeting of the Audit Committee, pre-approval of such services may be
referred to the Chair of the Audit Committee for approval; provided that the
Chair may not pre-approve any individual engagement for such services exceeding
$50,000 or multiple engagements for such services in the aggregate exceeding
$100,000 between such regular meetings of the Audit Committee. Any engagement
pre-approved by the Chair between regular meetings of the Audit Committee shall
be presented for ratification by the entire Audit Committee at its next
regularly scheduled meeting.
ITEM 4(E)(2):
None, or 0%, of the services relating to the Audit-Related Fees, Tax Fees and
All Other Fees paid by the Registrant and MFS Related Entities relating directly
to the operations and financial reporting of the Registrant disclosed above were
approved by the audit committee pursuant to paragraphs (c)(7)(i)(C) of Rule 2-01
of Regulation S-X (which permits audit committee approval after the start of the
engagement with respect to services other than audit review or attest services,
if certain conditions are satisfied).
ITEM 4(F): Not applicable.
ITEM 4(H): The Registrant's Audit Committee has considered whether the provision
by a Registrant's independent registered public accounting firm of non-audit
services to MFS and MFS Related Entities that were not pre-approved by the
Committee (because such services were provided prior to the effectiveness of SEC
rules requiring pre-approval or because such services did not relate directly to
the operations and financial reporting of the Registrant) was compatible with
maintaining the independence of the independent registered public accounting
firm as the Registrant's principal auditors.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The Registrant has an Audit Committee established in accordance with Section
3(a)(58)(A) of the Securities Exchange Act of 1934. The members of the Audit
Committee are Messrs. J. Atwood Ives, William J. Poorvu and J. Dale Sherratt and
Ms. Amy B. Lane.
ITEM 6. SCHEDULE OF INVESTMENTS
A schedule of investments of the Registrant is included as part of the report to
shareholders of the Registrant under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The Board of Trustees and the Board of Managers of the investment companies (the
"MFS Funds") advised by Massachusetts Financial Services Company ("MFS") have
delegated to MFS the right and obligation to vote proxies for shares that are
owned by the MFS Funds, in accordance with MFS' proxy voting policies and
procedures (the "MFS Proxy Policies"). The MFS Proxy Policies are set forth
below:
MASSACHUSETTS FINANCIAL SERVICES COMPANY
PROXY VOTING POLICIES AND PROCEDURES
SEPTEMBER 17, 2003, AS REVISED ON SEPTEMBER 20, 2004
Massachusetts Financial Services Company, MFS Institutional
Advisors, Inc. and MFS' other investment adviser subsidiaries
(collectively, "MFS") have adopted proxy voting policies and
procedures, as set forth below, with respect to securities owned by the
clients for which MFS serves as investment adviser and has the power to
vote proxies, including the registered investment companies sponsored
by MFS, other than the MFS Union Standard Equity Fund (the "MFS
Funds").
These policies and procedures include:
A. Voting Guidelines;
B. Administrative Procedures;
C. Monitoring System;
D. Records Retention; and
E. Reports.
A. VOTING GUIDELINES
1. GENERAL POLICY; POTENTIAL CONFLICTS OF INTEREST
MFS' policy is that proxy voting decisions are made in what MFS
believes to be the best long-term economic interests of MFS' clients, and not in
the interests of any other party or in MFS' corporate interests, including
interests such as the distribution of MFS Fund shares, administration of 401(k)
plans, and institutional relationships.
MFS has carefully reviewed matters that in recent years have been
presented for shareholder vote by either management or shareholders of public
companies. Based on the guiding principle that all votes made by MFS on behalf
of its clients must be in what MFS believes to be the best long-term economic
interests of such clients, MFS has adopted proxy voting guidelines, which are
set forth below, that govern how MFS generally plans to vote on specific matters
presented for shareholder vote. In all cases, MFS will exercise its discretion
to vote these items in accordance with this guiding principle. These underlying
guidelines are simply that - guidelines. Each proxy item is considered on a
case-by-case basis, in light of all relevant facts and circumstances, and there
may be instances in which MFS may vote proxies in a manner different from these
guidelines.
As a general matter, MFS maintains a consistent voting position with
respect to similar proxy proposals made by various issuers. In addition, MFS
generally votes consistently on the same matter when securities of an issuer are
held by multiple client accounts. However, MFS recognizes that there are
gradations in certain types of proposals that might result in different voting
positions being taken with respect to the different proxy statements. There also
may be situations involving matters presented for shareholder vote that are not
clearly governed by the guidelines, such as proposed mergers and acquisitions.
Some items that otherwise would be acceptable will be voted against the
proponent when it is seeking extremely broad flexibility without offering a
valid explanation. MFS reserves the right to override the guidelines with
respect to a particular shareholder vote when such an override is, in MFS' best
judgment, consistent with the guiding principle of voting proxies in the best
long-term economic interests of MFS' clients.
From time to time, MFS receives comments on these guidelines and
regarding particular voting issues from its clients. Those comments are reviewed
and considered periodically, and these guidelines are reviewed each year with
MFS Equity Research Department management, the MFS Proxy Review Group and the
MFS Proxy Consultant and are revised as appropriate.
These policies and procedures are intended to address any potential
material conflicts of interest on the part of MFS or its affiliates that could
arise in connection with the voting of proxies on behalf of MFS' clients. MFS
shall be mindful of any and all potential material conflicts of interest that
could arise in the voting of these proxies, shall identify, analyze, document
and report on any such potential conflicts, and shall ultimately vote these
proxies in what MFS believes to be the best long-term economic interests of its
clients. The MFS Proxy Review Group is responsible for monitoring and reporting
on all potential conflicts of interest.
2. MFS' POLICY ON SPECIFIC ISSUES
NON-SALARY COMPENSATION PROGRAMS
Managements have become increasingly creative and generous with
compensation programs involving common stock. The original stock option plans,
which called for the optionee to pay the money to exercise the option, are now
embellished with no risk benefits such as stock appreciation rights, the use of
unexercised options to "buy" stock, and restricted stock at bargain prices.
Stock option plans are supposed to reward results rather than tenure,
so the use of restricted stock at bargain prices is not favored. In some cases,
restricted stock is granted to the recipient at deep discounts to fair market
value, sometimes at par value. The holder cannot sell for a period of years, but
in the meantime is able to vote and receive dividends. Eventually the
restrictions lapse and the stock can be sold.
MFS votes against option programs for officers, employees or
non-employee directors that do not require an investment by the optionee, that
give "free rides" on the stock price, or that permit grants of restricted stock
at deep discounts to fair market value. MFS generally votes against stock option
plans that involve stock appreciation rights or the use of unexercised options
to "buy" stock.
MFS opposes plans that provide unduly generous compensation for
officers, directors or employees, or could result in excessive dilution to other
shareholders. As a general guideline, MFS votes against stock option plans if
all such plans for a particular company involve potential dilution, in the
aggregate, of more than 15%.
MFS votes in favor of stock option plans for non-employee directors as
long as they satisfy the requirements set forth above with respect to stock
option plans for employees. Stock option plans that include options for
consultants and other third parties not involved in the management of the
company generally are opposed by MFS.
"GOLDEN PARACHUTES"
From time to time, shareholders of companies have submitted proxy
proposals that would require shareholder approval of any severance packages for
executive officers that exceed certain predetermined thresholds. MFS votes in
favor of such shareholder proposals when they would require shareholder approval
of any severance package for an executive officer that exceeds a certain
percentage of such officer's annual compensation. When put to a vote, MFS votes
against very large golden parachutes.
ANTI-TAKEOVER MEASURES
In general, MFS votes against any measure that inhibits capital
appreciation in a stock, including a possible takeover and any proposal that
protects management from action by shareholders. These types of proposals take
many forms, ranging from "poison pills" and "shark repellents" to board
classification and super-majority requirements.
REINCORPORATION AND REORGANIZATION PROPOSALS
When presented with a proposal to reincorporate a company under the
laws of a different state, or to effect some other type of corporate
reorganization, MFS considers the underlying purpose and ultimate effect of such
a proposal in determining whether or not to support such a measure. While MFS
generally votes in favor of management proposals that it believes are in the
best long-term economic interests of its clients, MFS may oppose such a measure
if, for example, the intent or effect would be to create additional
inappropriate impediments to possible acquisitions or takeovers.
DILUTION
There are many reasons for issuance of stock and most are legitimate.
As noted above under "Non-Salary Compensation Programs", when a stock option
plan (either individually or when aggregated with other plans of the same
company) would substantially dilute the existing equity (e.g., by approximately
15% or more), MFS generally votes against the plan. In addition, MFS votes
against proposals where management is asking for authorization to issue common
or preferred stock with no reason stated (a "blank check") because the
unexplained authorization could work as a potential anti-takeover device.
CONFIDENTIAL VOTING
MFS votes in favor of proposals to ensure that shareholder voting
results are kept confidential. For example, MFS supports proposals that would
prevent management from having access to shareholder voting information that is
compiled by an independent proxy tabulation firm.
INDEPENDENCE OF BOARDS OF DIRECTORS AND COMMITTEES THEREOF
While MFS acknowledges the potential benefits of a company's inclusion
of directors who are "independent" from management, MFS generally opposes
shareholder proposals that would require that a majority (or a "super-majority")
of a company's board be comprised of "independent" directors. Such proposals
could inappropriately reduce a company's ability to engage in certain types of
transactions, could result in the exclusion of talented directors who are not
deemed "independent", or could result in the unnecessary addition of additional
"independent" directors to a company's board. However, in view of the special
role and responsibilities of various committees of a board of directors, MFS
supports proposals that would require that the Audit, Nominating and
Compensation Committees be comprised entirely of directors who are deemed
"independent" of the company.
INDEPENDENT AUDITORS
Recently, some shareholder groups have submitted proposals to limit the
non-audit activities of a company's audit firm. Some proposals would prohibit
the provision of any non-audit services (unless approved in advance by the full
board) whereas other proposals would cap non-audit fees so that such fees do not
exceed a certain percentage of the audit fees. MFS supports such shareholder
proposals that would cap non-audit fees at an amount deemed to be not excessive.
BEST PRACTICES STANDARDS
Best practices standards are rapidly evolving in the corporate
governance areas as a result of recent corporate failures, the Sarbanes-Oxley
Act of 2002 and revised listing standards on major stock exchanges. MFS
generally support these changes. However, many issuers are not publicly
registered, are not subject to these enhanced listing standards or are not
operating in an environment that is comparable to that in the United States. In
reviewing proxy proposals under these circumstances, MFS votes for proposals
that enhance standards of corporate governance so long as we believe that --
within the circumstances of the environment within which the issuers operate -
the proposal is consistent with the best long-term economic interests of our
clients.
FOREIGN ISSUERS - SHARE BLOCKING
In accordance with local law or business practices, many foreign
companies prevent the sales of shares that have been voted for a certain period
beginning prior to the shareholder meeting and ending on the day following the
meeting ("share blocking"). Depending on the country in which a company is
domiciled, the blocking period may begin a stated number of days prior to the
meeting (e.g., one, three or five days) or on a date established by the company.
While practices vary, in many countries the block period can be continued for a
longer period if the shareholder meeting is adjourned and postponed to a later
date. Similarly, practices vary widely as to the ability of a shareholder to
have the "block" restriction lifted early (e.g., in some countries shares
generally can be "unblocked" up to two days prior to the meeting whereas in
other countries the removal of the block appears to be discretionary with the
issuer's transfer agent). Due to these restrictions, MFS must balance the
benefits to its clients of voting proxies against the potentially serious
portfolio management consequences of a reduced flexibility to sell the
underlying shares at the most advantageous time. For companies in countries with
potentially long block periods, the disadvantage of being unable to sell the
stock regardless of changing conditions generally outweighs the advantages of
voting at the shareholder meeting for routine items. Accordingly, MFS generally
will not vote those proxies in the absence of an unusual, significant vote.
Conversely, for companies domiciled in countries with very short block periods,
MFS generally will continue to cast votes in accordance with these policies and
procedures.
SOCIAL ISSUES
There are many groups advocating social change, and many have chosen
the publicly-held corporation as a vehicle for their agenda. Common among these
are resolutions requiring the corporation to refrain from investing or
conducting business in certain countries, to adhere to some list of goals or
principles (e.g., environmental standards) or to report on various activities.
MFS votes against such proposals unless their shareholder-oriented benefits will
outweigh any costs or disruptions to the business, including those that use
corporate resources to further a particular social objective outside the
business of the company or when no discernible shareholder economic advantage is
evident.
The laws of various states may regulate how the interests of certain
clients subject to those laws are voted. For example, the General Laws of The
Commonwealth of Massachusetts prohibit the investment of state funds, including
retirement system assets, in the following types of investments: (i) financial
institutions which directly or through any subsidiary have outstanding loans to
any individual or corporation engaged in manufacturing, distribution or sale of
firearms, munitions, rubber or plastic bullets, tear gas, armored vehicles or
military aircraft for use or deployment in any activity in Northern Ireland; or
(ii) any stocks, securities or obligations of any company so engaged.
Because of these statutory restrictions, it is necessary when voting
proxies for securities held in Massachusetts public pension accounts to support
the purpose of this legislation. Thus, on issues relating to these or similar
state law questions, it may be necessary to cast ballots differently for these
portfolios than MFS might normally do for other accounts.
B. ADMINISTRATIVE PROCEDURES
1. MFS PROXY REVIEW GROUP
The administration of these policies and procedures is overseen by the
MFS Proxy Review Group, which includes senior MFS Legal Department officers and
MFS' Proxy Consultant. The MFS Proxy Review Group:
a. Reviews these policies and procedures at least annually and
recommends any amendments considered to be necessary or advisable;
b. Determines whether any material conflicts of interest exist with
respect to instances in which (i) MFS seeks to override these
guidelines and (ii) votes not clearly governed by these guidelines;
and
c. Considers special proxy issues as they may arise from time to time.
The current MFS Proxy Consultant is an independent proxy consultant who
performs these services exclusively for MFS.
2. POTENTIAL CONFLICTS OF INTEREST
The MFS Proxy Review Group is responsible for monitoring potential
material conflicts of interest on the part of MFS or its affiliates that could
arise in connection with the voting of proxies on behalf of MFS' clients. Any
attempt to influence MFS' voting on a particular proxy matter should be reported
to the MFS Proxy Review Group. The MFS Proxy Consultant will assist the MFS
Proxy Review Group in carrying out these responsibilities.
In cases where proxies are voted in accordance with these policies and
guidelines, no conflict of interest will be deemed to exist. In cases where (i)
MFS is considering overriding these policies and guidelines, or (ii) matters
presented for vote are not clearly governed by these policies and guidelines,
the MFS Proxy Review Group and the MFS Proxy Consultant will follow these
procedures:
a. Compare the name of the issuer of such proxy against a list of
significant current and potential (i) distributors of MFS Fund
shares, (ii) retirement plans administered by MFS, and (iii) MFS
institutional clients (the "MFS Significant Client List");
b. If the name of the issuer does not appear on the MFS Significant
Client List, then no material conflict of interest will be deemed to
exist, and the proxy will be voted as otherwise determined by the
MFS Proxy Review Group;
c. If the name of the issuer appears on the MFS Significant Client
List, then the MFS Proxy Review Group will carefully evaluate the
proposed votes in order to ensure that the proxy ultimately is voted
in what MFS believes to be the best long-term economic interests of
MFS' clients, and not in MFS' corporate interests; and
d. For all potential material conflicts of interest identified under
clause (c) above, the MFS Proxy Review Group will document: the name
of the issuer, the issuer's relationship to MFS, the analysis of the
matters submitted for proxy vote, and the basis for the
determination that the votes ultimately were cast in what MFS
believes to be the best long-term economic interests of MFS'
clients, and not in MFS' corporate interests.
The MFS Proxy Review Group is responsible for creating and maintaining
the MFS Significant Client List, in consultation with MFS' distribution,
retirement plan administration and institutional business units. The MFS
Significant Client List will be reviewed and updated as necessary, but no less
frequently than quarterly.
3. GATHERING PROXIES
Nearly all proxies received by MFS originate at Automatic Data
Processing Corp. ("ADP"). ADP and issuers send proxies and related material
directly to the record holders of the shares beneficially owned by MFS' clients,
usually to the client's custodian or, less commonly, to the client itself. Each
client's custodian is responsible for forwarding all proxy solicitation
materials to MFS (except in the case of certain institutional clients for which
MFS does not vote proxies). This material will include proxy cards, reflecting
the proper shareholdings of Funds and of clients on the record dates for such
shareholder meetings, and proxy statements, the issuer's explanation of the
items to be voted upon.
MFS, on behalf of itself and the Funds, has entered into an agreement
with an independent proxy administration firm, Institutional Shareholder
Services, Inc. (the "Proxy Administrator"), pursuant to which the Proxy
Administrator performs various proxy vote processing and recordkeeping functions
for MFS' Fund and institutional client accounts. The Proxy Administrator does
not make recommendations to MFS as to how to vote any particular item. The Proxy
Administrator receives proxy statements and proxy cards directly from various
custodians, logs these materials into its database and matches upcoming meetings
with MFS Fund and client portfolio holdings, which are input into the Proxy
Administrator's system by an MFS holdings datafeed. Through the use of the Proxy
Administrator system, ballots and proxy material summaries for the upcoming
shareholders' meetings of over 10,000 corporations are available on-line to
certain MFS employees, the MFS Proxy Consultant and the MFS Proxy Review Group
and most proxies can be voted electronically. In addition to receiving the hard
copies of materials relating to meetings of shareholders of issuers whose
securities are held by the Funds and/or clients, the ballots and proxy
statements can be printed from the Proxy Administrator's system and forwarded
for review.
4. ANALYZING PROXIES
After input into the Proxy Administrator system, proxies which are
deemed to be completely routine (e.g., those involving only uncontested
elections of directors, appointments of auditors, and/or employee stock purchase
plans)(1) are automatically voted in favor by the Proxy Administrator without
being sent to either the MFS Proxy Consultant or the MFS Proxy Review Group for
further review. Proxies that pertain only to merger and acquisition proposals
are forwarded initially to an appropriate MFS portfolio manager or research
analyst for his or her recommendation. All proxies that are reviewed by either
the MFS Proxy Consultant or a portfolio manager or analyst are then forwarded
with the corresponding recommendation to the MFS Proxy Review Group.(2)
-------------------
(1) Proxies for foreign companies often contain significantly more voting items
than those of U.S. companies. Many of these items on foreign proxies involve
repetitive, non-controversial matters that are mandated by local law.
Accordingly, there is an expanded list of items that are deemed routine (and
therefore automatically voted in favor) for foreign issuers, including the
following: (i) receiving financial statements or other reports from the
board; (ii) approval of declarations of dividends; (iii) appointment of
shareholders to sign board meeting minutes; (iv) the discharge of management
and supervisory boards; and (v) approval of share repurchase programs.
(2) From time to time, due to travel schedules and other commitments, an
appropriate portfolio manager or research analyst is not available to
provide a recommendation on a merger or acquisition proposal. If such a
recommendation cannot be obtained within a few business days prior to the
shareholder meeting, the MFS Proxy Review Group will determine the vote in
what MFS believes to be the best long-term economic interests of its
clients.
Recommendations with respect to voting on non-routine issues are
generally made by the MFS Proxy Consultant in accordance with the policies
summarized under "Voting Guidelines," and all other relevant materials. His or
her recommendation as to how each proxy proposal should be voted is indicated on
copies of proxy cards, including his or her rationale on significant items.
These cards are then forwarded to the MFS Proxy Review Group.
As a general matter, portfolio managers and investment analysts are
consulted and involved in developing MFS' substantive proxy voting guidelines,
but have little or no involvement in or knowledge of proxy proposals or voting
positions taken by MFS. This is designed to promote consistency in the
application of MFS' voting guidelines, to promote consistency in voting on the
same or similar issues (for the same or for multiple issuers) across all client
accounts, and to minimize or remove the potential that proxy solicitors,
issuers, and third parties might attempt to exert influence on the vote or might
create a conflict of interest that is not in what MFS believes to be the best
long-term economic interests of our clients. In limited, specific instances
(e.g., mergers), the MFS Proxy Consultant or the MFS Proxy Review Group may
consult with or seek recommendations from portfolio managers or analysts. The
MFS Proxy Review Group would ultimately determine the manner in which all
proxies are voted.
As noted above, MFS reserves the right to override the guidelines when
such an override is, in MFS' best judgment, consistent with the guiding
principle of voting proxies in the best long-term economic interests of MFS'
clients. Any such override of the guidelines shall be examined, explained and
reported in accordance with the procedures set forth in these policies.
5. VOTING PROXIES
After the proxy card copies are reviewed, they are voted electronically
through the Proxy Administrator's system. In accordance with its contract with
MFS, the Proxy Administrator also generates a variety of reports for the MFS
Proxy Consultant and the MFS Proxy Review Group, and makes available on-line
various other types of information so that the MFS Proxy Review Group and the
MFS Proxy Consultant may monitor the votes cast by the Proxy Administrator on
behalf of MFS' clients.
C. MONITORING SYSTEM
It is the responsibility of the Proxy Administrator and MFS' Proxy
Consultant to monitor the proxy voting process. As noted above, when proxy
materials for clients are received, they are forwarded to the Proxy
Administrator and are input into the Proxy Administrator's system. Additionally,
through an interface with the portfolio holdings database of MFS, the Proxy
Administrator matches a list of all MFS Funds and clients who hold shares of a
company's stock and the number of shares held on the record date with the Proxy
Administrator's listing of any upcoming shareholder's meeting of that company.
When the Proxy Administrator's system "tickler" shows that the date of
a shareholders' meeting is approaching, a Proxy Administrator representative
checks that the vote for MFS Funds and clients holding that security has been
recorded in the computer system. If a proxy card has not been received from the
client's custodian, the Proxy Administrator calls the custodian requesting that
the materials be forward immediately. If it is not possible to receive the proxy
card from the custodian in time to be voted at the meeting, MFS may instruct the
custodian to cast the vote in the manner specified and to mail the proxy
directly to the issuer.
D. RECORDS RETENTION
MFS will retain copies of these policies and procedures in effect from
time to time and will retain all proxy voting reports submitted to the Board of
Trustees and Board of Managers of the MFS Funds for a period of six years. Proxy
solicitation materials, including electronic versions of the proxy cards
completed by the MFS Proxy Consultant and the MFS Proxy Review Group, together
with their respective notes and comments, are maintained in an electronic format
by the Proxy Administrator and are accessible on-line by the MFS Proxy
Consultant and the MFS Proxy Review Group. All proxy voting materials and
supporting documentation, including records generated by the Proxy
Administrator's system as to proxies processed, the dates when proxies were
received and returned, and the votes on each company's proxy issues, are
retained for six years.
E. REPORTS
MFS FUNDS
Periodically, MFS will report the results of its voting to the Board of
Trustees and Board of Managers of the MFS Funds. These reports will include: (i)
a listing of how votes were cast; (ii) a review of situations where MFS did not
vote in accordance with the guidelines and the rationale therefor; (iii) a
review of the procedures used by MFS to identify material conflicts of interest;
and (iv) a review of these policies and the guidelines and, as necessary or
appropriate, any proposed modifications thereto to reflect new developments in
corporate governance and other issues. Based on these reviews, the Trustees and
Managers of the MFS Funds will consider possible modifications to these policies
to the extent necessary or advisable.
ALL MFS ADVISORY CLIENTS
At any time, a report can be printed by MFS for each client who has
requested that MFS furnish a record of votes cast. The report specifies the
proxy issues which have been voted for the client during the year and the
position taken with respect to each issue.
Generally, MFS will not divulge actual voting practices to any party
other than the client or its representatives (unless required by applicable law)
because we consider that information to be confidential and proprietary to the
client.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable at this time.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
======================================================================================================================
MFS MUNICIPAL INCOME TRUST
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(D) MAXIMUM NUMBER (OR
(A) TOTAL (C) TOTAL NUMBER OF SHARES APPROXIMATE DOLLAR VALUE)
PRIOR NUMBER OF (B) AVERAGE PURCHASED AS PART OF OF SHARES THAT MAY YET BE
SHARES PRICE PAID PUBLICLY ANNOUNCED PURCHASED UNDER THE PLANS
PURCHASED PER SHARE PLANS OR PROGRAMS OR PROGRAMS
======================================================================================================================
11/01/03 - 11/30/03 0 0 0 3,966,928
----------------------------------------------------------------------------------------------------------------------
12/01/03 - 12/31/03 0 0 0 3,966,928
----------------------------------------------------------------------------------------------------------------------
01/01/04 - 01/31/04 0 0 0 3,966,928
----------------------------------------------------------------------------------------------------------------------
02/01/04 - 02/28/04 0 0 0 3,966,928
----------------------------------------------------------------------------------------------------------------------
03/01/04 - 03/31/04 0 0 0 3,966,928
----------------------------------------------------------------------------------------------------------------------
04/01/04 - 04/30/04 0 0 0 3,966,928
----------------------------------------------------------------------------------------------------------------------
05/01/04 - 05/31/04 0 0 0 3,966,928
----------------------------------------------------------------------------------------------------------------------
06/01/04 - 06/30/04 0 0 0 3,966,928
----------------------------------------------------------------------------------------------------------------------
07/01/04 - 07/31/04 0 0 0 3,966,928
----------------------------------------------------------------------------------------------------------------------
08/01/04 - 08/31/04 0 0 0 3,966,928
----------------------------------------------------------------------------------------------------------------------
09/01/04 - 09/30/04 0 0 0 3,966,928
----------------------------------------------------------------------------------------------------------------------
10/01/04 - 10/31/04 0 0 0 3,966,928
----------------------------------------------------------------------------------------------------------------------
TOTALS/YEAR 0 0 0
======================================================================================================================
Note: The Board of Trustees approves procedures to repurchase shares annually.
The notification to shareholders of the program is part of the semi-annual and
annual reports sent to shareholders. These annual programs begin on March 1st of
each year. The programs conform to the conditions of Rule 10b-18 of the
Securities Exchange Act of 1934 and limit the aggregate number of shares that
may be purchased in each annual period (March 1 through the following February
28) to 10% of the Registrant's outstanding shares as of the first day of the
plan year (March 1). The aggregate number of shares available for purchase for
the March 1, 2004 plan year are 3,966,928.
For the year ended October 31, 2004, no shares of the Registrant have been
repurchased pursuant to the plans described above.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Board of Trustees of the Registrant has adopted procedures by which
shareholders may send communications, including recommendations to the Board for
nominees to the Registrant's Board. Shareholders may mail written
recommendations to the Board to the attention of the Board of Trustees, MFS
Municipal Income Trust, Massachusetts Financial Services Company, 500 Boylston
Street, Boston, MA 02116, c/o , Jeffrey N. Carp, Secretary of the Trust.
Shareholder communications must be in writing and be signed by the shareholder
and identify the series of the Registrant to which they relate. Such
recommendations must be accompanied by the candidate's biographical and
occupational data (including whether the candidate would be an "interested
person" of the Registrant), a written consent of the candidate to be named as a
nominee and to serve as Trustee if elected, record and ownership information for
the recommending shareholder with respect to the series of the Registrant to
which the recommendation relates and a description of any arrangements or
understandings regarding recommendation of the candidate for consideration.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Act) as conducted within
90 days of the filing date of this Form N-CSR, the registrant's principal
financial officer and principal executive officer have concluded that those
disclosure controls and procedures provide reasonable assurance that the
material information required to be disclosed by the registrant on this
report is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and
forms.
(b) There were no changes in the registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during
the second fiscal quarter covered by the report that has materially
affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Code of
Ethics attached hereto.
(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Act (17 CFR 270.30a-2): Attached hereto.
(3)Any written solicitation to purchase securities under Rule 23c-1 under
the Act sent or given during the period covered by the report by or on
behalf of the Registrant to 10 or more persons. Not applicable.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the Act (17 CFR
270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR
240.13a-14(b) or 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished
pursuant to this paragraph will not be deemed "filed" for the purposes of
Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the
liability of that section. Such certification will not be deemed to be
incorporated by reference into any filing under the Securities Act of 1933 or
the Exchange Act, except to the extent that the registrant specifically
incorporates it by reference: Attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant MFS MUNICIPAL INCOME TRUST
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By (Signature and Title)* ROBERT J. MANNING
----------------------------------------------------
Robert J. Manning, President
Date: December 21, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* ROBERT J. MANNING
-----------------------------------------------------
Robert J. Manning, President
(Principal Executive Officer)
Date: December 21, 2004
By (Signature and Title)* RICHARD M. HISEY
----------------------------------------------------
Richard M. Hisey, Treasurer (Principal Financial
Officer and Accounting Officer)
Date: December 21, 2004
* Print name and title of each signing officer under his or her signature.