MFS MUNICIPAL INCOME TRUST N-CSRS
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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 811-04841

MFS MUNICIPAL INCOME TRUST

(Exact name of registrant as specified in charter)

500 Boylston Street, Boston, Massachusetts 02116

(Address of principal executive offices) (Zip code)

Susan S. Newton

Massachusetts Financial Services Company

500 Boylston Street

Boston, Massachusetts 02116

(Name and address of agents for service)

Registrant’s telephone number, including area code: (617) 954-5000

Date of fiscal year end: October 31

Date of reporting period: April 30, 2012


Table of Contents
ITEM 1. REPORTS TO STOCKHOLDERS.


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LOGO

 

MFS® Municipal Income Trust

 

LOGO

 

 

SEMIANNUAL REPORT

April 30, 2012

 

MFM-SEM


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MFS® MUNICIPAL INCOME TRUST

New York Stock Exchange Symbol: MFM

 

Letter from the Chairman and CEO     1   
Portfolio composition     2   
Portfolio managers’ profiles     4   
Other notes     4   
Portfolio of investments     5   
Statement of assets and liabilities     31   
Statement of operations     32   
Statements of changes in net assets     33   
Financial highlights     34   
Notes to financial statements     36   
Report of independent registered public accounting firm     49   
Board review of investment advisory agreement     50   
Proxy voting policies and information     50   
Quarterly portfolio disclosure     50   
Further information     50   
Contact information    back cover   

 

 

 

 

NOT FDIC INSURED Ÿ MAY LOSE VALUE Ÿ NO BANK GUARANTEE


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LOGO

 

LETTER FROM THE CHAIRMAN AND CEO

 

Dear Shareholders:

World financial markets remain a venue of uncertainty. The focus has shifted most recently to the eurozone, where elections in the 17-country region reflected a level of voter unwillingness to accept the austerity measures enacted in the midst of an economic slowdown. Volatility is likely to continue as investors watch how this voter backlash plays out in Europe and in other countries attempting to

resolve budget issues.

The U.S. economy is experiencing a period of growth. However, markets have been jittery in reaction to events in Europe and ahead of the U.S. presidential election. As in Europe, voters in the United States are watching the economy closely and waiting to see if Congress agrees to cut the budget and extend the Bush tax cuts. Failure to do so could ultimately send the U.S. economy back into recession.

Amid this global uncertainty, managing risk becomes a top priority for investors and their advisors. At MFS®, our global research platform is designed to ensure the smooth

functioning of our investment process in all business climates. Risk management is always foremost in our minds. Our research platform enables our analysts to uncover attractive global opportunities across asset classes. Additionally, we have a team of quantitative analysts that measures and assesses the risk profiles of our portfolios and securities on an ongoing basis. The chief investment risk officer, who oversees the team, reports directly to the firm’s president and chief investment officer so that the risk associated with each portfolio can be assessed objectively and independently of the portfolio management team.

We, like our investors, are mindful of the many economic challenges faced at the local, national, and international levels. It is in times such as these that we want to emphasize the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with investment advisors to research and identify appropriate investment opportunities.

Respectfully,

 

LOGO

Robert J. Manning

Chairman and Chief Executive Officer

MFS Investment Management®

June 18, 2012

The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed.

 

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PORTFOLIO COMPOSITION

 

Portfolio structure (i)

 

LOGO

 

Top five industries (i)  
Healthcare Revenue – Hospitals     24.0%   
Universities – Colleges     10.9%   
Healthcare Revenue – Long Term Care     9.8%   
Water & Sewer Utility Revenue     6.7%   
Tobacco     5.3%   
Composition including fixed
income credit quality (a)(i)
 
AAA     8.7%   
AA     13.7%   
A     15.7%   
BBB     30.2%   
BB     5.3%   
B     7.2%   
CCC     0.5%   
CC (o)     0.0%   
C     0.2%   
D     0.1%   
Not Rated     19.1%   
Cash & Other     (0.7)%   
Portfolio fact (i)  
Average Duration (d)     12.6   
Average Effective Maturity (m)     19.7 yrs.   
 
(a) For all securities other than those specifically described below, ratings are assigned to underlying securities utilizing ratings from Moody’s, Fitch, and Standard & Poor’s rating agencies and applying the following hierarchy: If all three agencies provide a rating, the middle rating (after dropping the highest and lowest ratings) is assigned; if two of the three agencies rate a security, the lower of the two is assigned. Ratings are shown in the S&P and Fitch scale (e.g., AAA). All ratings are subject to change. Not Rated includes fixed income securities, including fixed income futures, which have not been rated by any rating agency. Cash & Other includes cash, other assets less liabilities, offsets to derivative positions, and short-term securities. The fund may not hold all of these instruments. The fund is not rated by these agencies.

 

(d) Duration is a measure of how much a bond’s price is likely to fluctuate with general changes in interest rates, e.g., if rates rise 1.00%, a bond with a 5-year duration is likely to lose about 5.00% of its value due to the interest rate move.

 

(i)

For purposes of this presentation, the components include the market value of securities, and reflect the impact of the equivalent exposure of derivative positions, if any. These amounts may be negative from time to time. The bond component will include any accrued interest amounts. Equivalent exposure is a calculated amount that translates the derivative position into a reasonable approximation of the amount of the underlying asset that the portfolio would have to hold at a given point in time to have the same

 

2


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Portfolio Composition – continued

 

  price sensitivity that results from the portfolio’s ownership of the derivative contract. When dealing with derivatives, equivalent exposure is a more representative measure of the potential impact of a position on portfolio performance than market value. Where the fund holds convertible bonds, these are treated as part of the equity portion of the portfolio.

 

(m) In determining an instrument’s effective maturity for purposes of calculating the fund’s dollar-weighted average effective maturity, MFS uses the instrument’s stated maturity or, if applicable, an earlier date on which MFS believes it is probable that a maturity-shortening device (such as a put, pre-refunding or prepayment) will cause the instrument to be repaid. Such an earlier date can be substantially shorter than the instrument’s stated maturity.

 

(o) Less than 0.1%.

From time to time “Cash & Other Net Assets” may be negative due to timing of cash receipts and/or equivalent exposure from any derivative holdings.

Percentages are based on net assets, including the value of auction preferred shares, as of 4/30/12.

The portfolio is actively managed and current holdings may be different.

 

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PORTFOLIO MANAGERS’ PROFILES

 

Gary Lasman     Investment Officer of MFS; employed in the investment management area of MFS since 2002. Portfolio Manager of the Fund since April 2006.
Geoffrey Schechter     Investment Officer of MFS; employed in the investment management area of MFS since 1993. Portfolio Manager of the Fund since July 2004.

OTHER NOTES

The fund’s shares may trade at a discount or premium to net asset value. Shareholders do not have the right to cause the fund to repurchase their shares at net asset value. When fund shares trade at a premium, buyers pay more than the net asset value of underlying fund shares, and shares purchased at a premium would receive less than the amount paid for them in the event of the fund’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 fund’s monthly distributions may include a return of capital to shareholders to the extent that distributions are in excess of the fund’s net investment income and net capital gains, determined in accordance with federal income tax regulations. 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 fund’s assets and increasing the fund’s expense ratio.

 

In accordance with Section 23(c) of the Investment Company Act of 1940, the fund hereby gives notice that it may from time to time repurchase common and/or preferred shares of the fund 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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PORTFOLIO OF INVESTMENTS

4/30/12 (unaudited)

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 - 141.4%                 
Issuer    Shares/Par     Value ($)  
    
Airport Revenue - 2.6%                 
Chicago, IL, O’Hare International Airport Rev. (Third Lien Passenger Facility), “B”, AGM, 5.75%, 2022    $ 3,000,000      $ 3,188,885   
Houston, TX, Airport System Rev., “B”, 5%, 2026      265,000        299,683   
Houston, TX, Airport System Rev., Subordinate Lien, “A”, 5%, 2031      255,000        271,718   
Miami-Dade County, FL, Aviation Rev., “B”, AGM, 5%, 2035      1,365,000        1,459,622   
Port Authority NY & NJ, Special Obligation Rev. (JFK International Air Terminal LLC), 6%, 2036      485,000        546,944   
Port Authority NY & NJ, Special Obligation Rev. (JFK International Air Terminal LLC), 6%, 2042      550,000        619,405   
San Jose, CA, Airport Rev., “A-2”, 5.25%, 2034      1,215,000        1,312,868   
    

 

 

 
             $ 7,699,125   
General Obligations - General Purpose - 4.8%                 
Chicago, IL, Metropolitan Water Reclamation District-Greater Chicago, “C”, 5%, 2030    $ 1,260,000      $ 1,453,662   
Commonwealth of Puerto Rico, Public Improvement, “A”,
5.5%, 2039
     3,340,000        3,452,692   
Commonwealth of Puerto Rico, Public Improvement, “B”, 6.5%, 2037      495,000        556,929   
Luzerne County, PA, AGM, 6.75%, 2023      865,000        1,018,339   
Puerto Rico Public Buildings Authority Rev., Guaranteed (Government Facilities), “F”, 5.25%, 2024      2,500,000        2,686,125   
State of California, 5.25%, 2028      660,000        750,776   
State of California, 5.25%, 2030      1,560,000        1,754,438   
State of California, 5.25%, 2035      1,285,000        1,445,548   
State of California, 5%, 2041      455,000        484,134   
State of Hawaii, “DZ”, 5%, 2031      335,000        388,292   
    

 

 

 
             $ 13,990,935   
General Obligations - Improvement - 0.1%                 
Guam Government, “A”, 7%, 2039    $ 170,000      $ 185,880   
General Obligations - Schools - 0.5%                 
Beverly Hills, CA, Unified School District (Election of 2008), Capital Appreciation, 0%, 2031    $ 525,000      $ 223,382   
Chicago, IL, Board of Education, “A”, 5%, 2041      170,000        185,105   
Los Angeles, CA, Unified School District, “D”, 5%, 2034      180,000        194,477   
Merced, CA, Union High School District, Capital Appreciation, “A”, ASSD GTY, 0%, 2030      145,000        56,433   

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Municipal Bonds - continued                 
General Obligations - Schools - continued                 
Royse City, TX, Independent School District, School Building, Capital Appreciation, PSF, 0%, 2027    $ 955,000      $ 476,602   
Royse City, TX, Independent School District, School Building, Capital Appreciation, PSF, 0%, 2029      965,000        430,757   
    

 

 

 
             $ 1,566,756   
Healthcare Revenue - Hospitals - 32.8%                 
Alexander City, AL, Special Care Facilities Financing Authority Medical Facilities Rev., “A” (Russell Hospital Corp.), 5.75%, 2036    $ 600,000      $ 606,690   
Allegheny County, PA, Hospital Development Authority Rev. (West Penn Allegheny Health), “A”, 5%, 2028      1,905,000        1,619,726   
Allegheny County, PA, Hospital Development Authority Rev. (West Penn Allegheny Health), “A”, 5.375%, 2040      1,055,000        879,311   
Athens County, OH, Hospital Facilities Rev. (O’Bleness Memorial Hospital), “A”, 7.125%, 2033      1,500,000        1,513,425   
Burleigh County, ND, Health Care Rev. (St. Alexius Medical Center), “A”, 5%, 2038      380,000        396,914   
Butler County, OH, Hospital Facilities Rev. (UC Health), 5.75%, 2040      260,000        281,778   
California Health Facilities Financing Authority Rev. (St. Joseph Health System), “A”, 5.75%, 2039      650,000        722,319   
California Health Facilities Financing Authority Rev. (Sutter Health), “B”, 5.875%, 2031      1,295,000        1,539,017   
California Statewide Communities Development Authority Rev. (Kaiser Permanente), “A”, 5%, 2042      590,000        628,911   
Chautauqua County, NY, Capital Resource Corp., Rev. (Women’s Christian Assn.), “A”, 8%, 2030      1,060,000        1,141,726   
Citrus County, FL, Hospital Development Authority Rev. (Citrus Memorial Hospital), 6.25%, 2023      745,000        745,998   
Clinton County, MO, Industrial Development Agency, Health Facilities Rev. (Cameron Regional Medical Center), 5%, 2032      275,000        255,932   
Cullman County, AL, Health Care Authority (Cullman Regional Medical Center), “A”, 6.75%, 2029      865,000        886,011   
DeKalb County, GA, Hospital Authority Rev. (DeKalb Medical Center, Inc.), 6.125%, 2040      1,150,000        1,255,973   
Escambia County, FL, Health Facilities Authority (Baptist Hospital, Inc.), “A”, 6%, 2036      615,000        676,814   
Fruita, CO, Rev. (Family Health West Project), 7%, 2018      230,000        250,645   
Fruita, CO, Rev. (Family Health West Project), 8%, 2043      1,310,000        1,403,469   
Gallia County, OH, Hospital Facilities Rev. (Holzer Health Systems), “A”, 8%, 2042      1,860,000        1,926,346   
Garden City, MI, Hospital Finance Authority Rev. (Garden City Hospital), “A”, 4.875%, 2027      1,275,000        1,121,044   

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Municipal Bonds - continued                 
Healthcare Revenue - Hospitals - continued                 
Glasgow, KY, Healthcare Rev. (TJ Samson Community Hospital), 6.375%, 2035    $ 570,000      $ 613,406   
Glendale, AZ, Industrial Development Authority (John C. Lincoln Health), 5%, 2042      755,000        755,332   
Harris County, TX, Health Facilities Development Corp., Hospital Rev. (Memorial Hermann Healthcare Systems), “B”, 7.25%, 2035      610,000        753,027   
Illinois Finance Authority Rev. (Kewanee Hospital), 5.1%, 2031      375,000        354,296   
Illinois Finance Authority Rev. (Provena Health), “A”, 7.75%, 2034      945,000        1,199,772   
Illinois Finance Authority Rev. (Silver Cross Hospital & Medical Centers), 6.875%, 2038      940,000        1,061,683   
Indiana Health & Educational Facilities Authority, Hospital Rev. (Riverview Hospital), 6.125%, 2012 (c)      1,000,000        1,023,900   
Indiana Health & Educational Facilities Finance Authority, Hospital Rev. (Clarian Health), “A”, 5%, 2039      1,000,000        1,031,180   
Indiana Health & Educational Facilities Finance Authority, Hospital Rev. (Community Foundation of Northwest Indiana), 5.5%, 2037      1,860,000        1,949,652   
Jefferson Parish, LA, Hospital Service District No. 2 (East Jefferson General Hospital), 6.25%, 2031      595,000        671,951   
Jefferson Parish, LA, Hospital Service District No. 2 (East Jefferson General Hospital), 6.375%, 2041      375,000        423,975   
Johnson City, TN, Health & Educational Facilities Board Hospital Rev. (Mountain States Health Alliance), 6%, 2038      365,000        410,242   
Kentucky Economic Development Finance Authority, Hospital Facilities Rev. (Owensboro Medical Health System), “A”,
6.375%, 2040
     1,095,000        1,252,647   
Knox County, IN, Economic Development Rev. (Good Samaritan Hospital of Indiana), “A”, 5%, 2037      85,000        88,641   
Knox County, IN, Economic Development Rev. (Good Samaritan Hospital of Indiana), “A”, 5%, 2042      170,000        176,593   
Laramie County, WY, Hospital Rev. (Cheyenne Regional Medical Center Project), 5%, 2032      65,000        69,464   
Laramie County, WY, Hospital Rev. (Cheyenne Regional Medical Center Project), 5%, 2037      210,000        222,800   
Laramie County, WY, Hospital Rev. (Cheyenne Regional Medical Center Project), 5%, 2042      325,000        346,314   
Louisiana Public Facilities Authority Hospital Rev. (Lake Charles Memorial Hospital), 6.375%, 2034      1,615,000        1,663,272   
Lufkin, TX, Health Facilities Development Corp. Rev. (Memorial Health System), 5.5%, 2032      110,000        111,326   
Lufkin, TX, Health Facilities Development Corp. Rev. (Memorial Health System), 5.5%, 2037      110,000        110,219   
Macomb County, MI, Hospital Finance Authority Rev. (Mount Clemens General Hospital), 5.875%, 2013 (c)      435,000        472,001   

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Municipal Bonds - continued                 
Healthcare Revenue - Hospitals - continued                 
Martin County, FL, Health Facilities Authority Rev. (Martin Memorial Medical Center), 5.5%, 2042    $ 495,000      $ 510,924   
Massachusetts Health & Educational Facilities Authority Rev. (Berkshire Health Systems), “E”, 6.25%, 2031      1,020,000        1,030,883   
Massachusetts Health & Educational Facilities Authority Rev. (Saints Memorial Medical Center), “A”, 6%, 2023      505,000        485,310   
Miami Beach, FL, Health Facilities Authority Rev. (Mount Sinai Medical Center), 6.75%, 2014 (c)      110,000        127,498   
Miami Beach, FL, Health Facilities Authority Rev. (Mount Sinai Medical Center), 6.75%, 2029      700,000        744,541   
Miami Beach, FL, Health Facilities Authority Rev. (Mount Sinai Medical Center), “A”, 6.7%, 2019      995,000        1,008,005   
Michigan Hospital Finance Authority Rev. (Henry Ford Health System), 5.75%, 2039      2,000,000        2,198,400   
Monroe County, MI, Hospital Finance Authority, Hospital Rev. (Mercy Memorial Hospital Corp.), 5.5%, 2035      1,020,000        1,037,054   
Monroe County, PA, Hospital Authority Rev. (Pocono Medical Center), “A”, 5%, 2032      85,000        88,906   
Monroe County, PA, Hospital Authority Rev. (Pocono Medical Center), “A”, 5%, 2041      60,000        61,616   
Montgomery, AL, Medical Clinic Board Health Care Facility Rev. (Jackson Hospital & Clinic), 5.25%, 2031      225,000        228,409   
Montgomery, AL, Medical Clinic Board Health Care Facility Rev. (Jackson Hospital & Clinic), 5.25%, 2036      1,135,000        1,144,296   
Mount Lebanon, PA, Hospital Authority Rev. (St. Clair Memorial Hospital), 5.625%, 2032      435,000        436,227   
New Hampshire Business Finance Authority Rev. (Elliot Hospital Obligated Group), “A”, 6%, 2027      1,110,000        1,233,832   
New Hampshire Health & Education Facilities Authority Rev. (Catholic Medical Center), “A”, 6.125%, 2032      120,000        121,450   
New Hampshire Health & Education Facilities Authority Rev. (Covenant Health System), 6.5%, 2017      75,000        76,069   
New Mexico Hospital Equipment Loan Council, Hospital Rev. (Rehoboth McKinley Christian Hospital), “A”, 5%, 2017      100,000        100,546   
New Mexico Hospital Equipment Loan Council, Hospital Rev. (Rehoboth McKinley Christian Hospital), “A”, 5.25%, 2026      440,000        401,500   
Norman, OK, Regional Hospital Authority Rev., 5%, 2027      300,000        300,258   
Norman, OK, Regional Hospital Authority Rev., 5.375%, 2029      175,000        176,295   
Norman, OK, Regional Hospital Authority Rev., 5.375%, 2036      1,395,000        1,377,172   
Ohio Higher Educational Facility Commission Rev. (University Hospital Health System), 6.75%, 2039      1,610,000        1,750,086   

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Municipal Bonds - continued                 
Healthcare Revenue - Hospitals - continued                 
Oklahoma Development Finance Authority Rev. (Comanche County Hospital), “B”, 6.6%, 2031    $ 1,665,000      $ 1,701,547   
Olympia, WA, Healthcare Facilities Authority Rev. (Catholic Health Initiatives), “D”, 6.375%, 2036      1,500,000        1,817,565   
Palomar Pomerado Health Care District, CA, COP, 6.75%, 2039      1,735,000        1,892,295   
Philadelphia, PA, Hospitals & Higher Education Facilities Authority Rev. (Temple University Health System), “A”, 6.625%, 2023      725,000        726,370   
Rhode Island Health & Educational Building Corp. Rev., Hospital Financing (Lifespan Obligated Group), 6.375%, 2012 (c)      1,560,000        1,587,409   
Rhode Island Health & Educational Building Corp., Hospital Financing (Lifespan Obligated Group), 6.5%, 2012 (c)      505,000        514,050   
Royal Oak, MI, Hospital Finance Authority Rev. (William Beaumont Hospital), 8.25%, 2039      1,595,000        2,041,393   
Rutherford County, TN, Health & Educational Facilities Board Rev. (Ascension Health), 5%, 2040 (u)      12,500,000        13,723,375   
Salida, CO, Hospital District Rev., 5.25%, 2036      1,582,000        1,581,921   
Salt Lake City, UT, Hospital Authority Rev. (Intermountain Health Care), ETM, FRN, AMBAC, 12.946%, 2020 (c)(p)      600,000        603,648   
Shelby County, TN, Educational & Hospital Facilities Board Hospital Rev. (Methodist Healthcare), 6.375%, 2012 (c)      625,000        637,700   
Shelby County, TN, Educational & Housing Facilities Board Hospital Rev. (Methodist Healthcare), 6.25%, 2012 (c)      185,000        188,683   
Shelby County, TN, Educational & Housing Facilities Board Hospital Rev. (Methodist Healthcare), 6.25%, 2012 (c)      315,000        321,272   
Shelby County, TN, Educational & Housing Facilities Board Hospital Rev. (Methodist Healthcare), 6.375%, 2012 (c)      375,000        382,620   
Skagit County, WA, Public Hospital District No. 001 Rev. (Skagit Valley Hospital), 6%, 2023      205,000        212,761   
South Carolina Jobs & Economic Development Authority, Hospital Facilities Rev. (Palmetto Health Alliance), 6.25%, 2031      835,000        874,036   
South Dakota Health & Educational Facilities Authority Rev. (Avera Health), “A”, 5%, 2042      175,000        184,049   
South Dakota Health & Educational Facilities Authority Rev. (Prairie Lakes Health Care System), 5.625%, 2013 (c)      670,000        702,944   
South Lake County, FL, Hospital District Rev. (South Lake Hospital), “A”, 6%, 2029      255,000        279,554   
South Lake County, FL, Hospital District Rev. (South Lake Hospital), “A”, 6.25%, 2039      385,000        419,138   
Sullivan County, TN, Health, Educational & Housing Facilities Board Hospital Rev. (Wellmont Health Systems Project), “C”, 5.25%, 2036      1,115,000        1,147,034   
Sumner County, TN, Health, Educational & Housing Facilities Board Rev. (Sumner Regional Health Systems, Inc.), “A”, 5.5%, 2046 (a)(d)      735,000        9,188   

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Municipal Bonds - continued                 
Healthcare Revenue - Hospitals - continued                 
Tallahassee, FL, Health Facilities Rev. (Tallahassee Memorial Healthcare, Inc.), 6.25%, 2020    $ 3,085,000      $ 3,090,646   
Tyler, TX, Health Facilities Development Corp. (East Texas Medical Center), “A”, 5.25%, 2032      985,000        991,058   
Tyler, TX, Health Facilities Development Corp. (East Texas Medical Center), “A”, 5.375%, 2037      810,000        818,627   
Upland, CA, COP (San Antonio Community Hospital), 6.375%, 2032      1,750,000        2,060,013   
Upper Illinois River Valley Development, Health Facilities Rev. (Morris Hospital), 6.625%, 2031      600,000        606,666   
Wapello County, IA, Hospital Authority Rev. (Ottumwa Regional Health Center), 6.375%, 2012 (c)      1,500,000        1,536,960   
Washington Health Care Facilities Authority Rev. (Virginia Mason Medical Center), “A”, 6.25%, 2042      1,400,000        1,509,172   
Weirton, WV, Municipal Hospital Building, Commission Rev. (Weirton Hospital Medical Center), 6.375%, 2031      1,095,000        1,074,305   
West Contra Costa, CA, Healthcare District, AMBAC, 5.5%, 2029      195,000        200,661   
West Virginia Hospital Finance Authority, Hospital Rev. (Thomas Health System), 6.5%, 2038      905,000        916,738   
Wisconsin Health & Educational Facilities Authority Rev. (Aurora Health Care, Inc.), 6.875%, 2030      1,000,000        1,039,740   
Wisconsin Health & Educational Facilities Authority Rev. (Aurora Health Care, Inc.), “A”, 5%, 2026      320,000        351,386   
Wisconsin Health & Educational Facilities Authority Rev. (Aurora Health Care, Inc.), “A”, 5%, 2028      95,000        102,779   
Wisconsin Health & Educational Facilities Authority Rev. (Wheaton Franciscan Services), 5.25%, 2034      1,135,000        1,177,143   
Wisconsin Health & Educational Facilities Authority Rev. (Wheaton Franciscan Services), “A”, 5.25%, 2025      745,000        757,427   
Yonkers, NY, Industrial Development Agency, Civic Facilities Rev. (St. Joseph’s Hospital), “C”, 6.2%, 2020      750,000        739,890   
    

 

 

 
             $ 95,774,782   
Healthcare Revenue - Long Term Care - 13.3%                 
Abilene, TX, Health Facilities Development Corp., Retirement Facilities Rev. (Sears Methodist Retirement Systems, Inc.), “A”, 7%, 2033    $ 345,000      $ 316,748   
Arizona Health Facilities Authority Rev. (The Terraces Project),
7.75%, 2013 (c)
     750,000        842,130   
Bell County, TX, Health Facility Development Corp. (Advanced Living Technologies, Inc.), 8%, 2036      3,400,000        2,928,624   
Bucks County, PA, Industrial Development Authority Retirement Community Rev. (Ann’s Choice, Inc.), “A”, 6.125%, 2025      430,000        434,171   
Bucks County, PA, Industrial Development Authority Retirement Community Rev. (Ann’s Choice, Inc.), “A”, 6.25%, 2035      290,000        291,511   

 

10


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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Municipal Bonds - continued                 
Healthcare Revenue - Long Term Care - continued                 
Bucks County, PA, Industrial Development Authority Rev. (Lutheran Community Telford Center), 5.75%, 2027    $ 170,000      $ 167,504   
Bucks County, PA, Industrial Development Authority Rev. (Lutheran Community Telford Center), 5.75%, 2037      225,000        203,866   
Cambria County, PA, Industrial Development Authority Rev. (Beverly Enterprises, Inc.), ETM, 10%, 2012 (c)      80,000        80,950   
Chartiers Valley, PA, Industrial & Commercial Development Authority (Asbury Health Center Project), 5.75%, 2022      150,000        151,916   
Chester County, PA, Industrial Development Authority Rev. (RHA Nursing Home), 8.5%, 2032      540,000        540,556   
Colorado Health Facilities Authority Rev. (American Baptist Homes), “A”, 5.9%, 2037      755,000        683,532   
Colorado Health Facilities Authority Rev. (Christian Living Communities Project), “A”, 5.75%, 2037      375,000        377,400   
Colorado Health Facilities Authority Rev. (Covenant Retirement Communities, Inc.), “B”, 6.125%, 2033      1,000,000        1,018,980   
Colorado Health Facilities Authority Rev. (Evangelical Lutheran),
6.9%, 2025
     1,170,000        1,184,426   
Cumberland County, PA, Municipal Authority Rev. (Diakon Lutheran Social Ministries), 6.125%, 2029      1,360,000        1,491,621   
Cumberland County, PA, Municipal Authority Rev. (Wesley), “A”,
7.25%, 2013 (c)
     720,000        760,356   
Cumberland County, PA, Municipal Authority, Retirement Community Rev. (Wesley), “A”, 7.25%, 2013 (c)      280,000        295,694   
Fulton County, GA, Residential Care Facilities, Elderly Authority Rev. (Canterbury Court), “A”, 6.125%, 2034      330,000        318,325   
Georgia Medical Center Hospital Authority Rev. (Spring Harbor Green Island Project), 5.25%, 2027      1,000,000        955,620   
Georgia Medical Center Hospital Authority Rev. (Spring Harbor Green Island Project), 5.25%, 2037      215,000        193,666   
Hawaii Department of Budget & Finance, Special Purpose Rev. (15 Craigside Project), “A”, 8.75%, 2029      105,000        123,405   
Hawaii Department of Budget & Finance, Special Purpose Rev. (15 Craigside Project), “A”, 9%, 2044      275,000        324,588   
Hawaii Department of Budget & Finance, Special Purpose Rev. (Kahala Nui Senior Living Community), 8%, 2033      500,000        530,880   
Huntsville-Redstone Village, AL, Special Care Facilities Financing Authority (Redstone Village Project), 5.5%, 2028      410,000        400,718   
Huntsville-Redstone Village, AL, Special Care Facilities Financing Authority (Redstone Village Project), 5.5%, 2043      440,000        377,150   
Illinois Finance Authority Rev. (Christian Homes, Inc.), 6.125%, 2027      850,000        899,360   

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Municipal Bonds - continued                 
Healthcare Revenue - Long Term Care - continued                 
Illinois Finance Authority Rev. (Evangelical Retirement Homes of Greater Chicago, Inc.), 7.25%, 2045    $ 500,000      $ 526,920   
Illinois Finance Authority Rev. (Franciscan Communities, Inc.), “A”, 5.5%, 2037      800,000        670,688   
Illinois Finance Authority Rev. (Friendship Village), “A”, 5.375%, 2025      1,270,000        1,219,416   
Illinois Finance Authority Rev. (Landing at Plymouth Place), “A”,
6%, 2037
     490,000        386,865   
Illinois Finance Authority Rev. (Montgomery Place), “A”, 5.75%, 2038      520,000        491,863   
Illinois Finance Authority Rev. (The Clare at Water Tower), “A-6”,
6%, 2028 (a)(d)
     343,000        76,489   
Illinois Finance Authority Rev., Capital Appreciation, (The Clare at Water Tower), “B”, 0%, 2050 (a)      147,000        27,798   
Iowa Finance Authority, Health Care Facilities Rev. (Care Initiatives), “A”, 5.5%, 2025      800,000        805,248   
Iowa Finance Authority, Health Care Facilities Rev. (Care Initiatives), “B”, 5.75%, 2018      680,000        680,564   
James City County, VA, Economic Development (WindsorMeade Project), “A”, 5.4%, 2027      195,000        165,789   
James City County, VA, Economic Development (WindsorMeade Project), “A”, 5.5%, 2037      785,000        621,712   
Kentucky Economic Development Finance Authority Rev. (Masonic Home Independent Living II), 7.25%, 2041      250,000        267,050   
Kentucky Economic Development Finance Authority Rev. (Masonic Home Independent Living II), 7.375%, 2046      200,000        213,922   
Lenexa, KS, Health Care Facilities Rev. (Lakeview Village, Inc.),
5.375%, 2027
     315,000        296,563   
Lenexa, KS, Health Care Facilities Rev. (Lakeview Village, Inc.),
7.125%, 2029
     345,000        365,372   
Maryland Health & Higher Educational Facilities Authority Rev. (Charlestown Community), 6.25%, 2041      475,000        526,856   
Massachusetts Development Finance Agency Rev. (Adventcare), “A”, 6.75%, 2037      1,270,000        1,289,545   
Massachusetts Development Finance Agency Rev. (Linden Ponds, Inc.), “A-1”, 6.25%, 2031      239,410        194,911   
Massachusetts Development Finance Agency Rev. (Linden Ponds, Inc.), “A-1”, 6.25%, 2039      59,939        46,084   
Massachusetts Development Finance Agency Rev. (Linden Ponds, Inc.), “A-2”, 5.5%, 2046      15,996        10,706   
Massachusetts Development Finance Agency Rev. (Linden Ponds, Inc.), Capital Appreciation, “B”, 0%, 2056      79,566        909   

 

12


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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Municipal Bonds - continued                 
Healthcare Revenue - Long Term Care - continued                 
Massachusetts Development Finance Agency Rev. (The Groves in Lincoln), “A”, 7.75%, 2039    $ 150,000      $ 151,689   
Massachusetts Development Finance Agency Rev. (The Groves in Lincoln), “A”, 7.875%, 2044      225,000        228,440   
Montgomery County, PA, Higher Education & Health Authority Rev. (AHF/Montgomery), 6.875%, 2036      1,145,000        1,142,905   
Montgomery County, PA, Industrial Development Authority Rev. (Whitemarsh Continuing Care), 6.125%, 2028      250,000        248,848   
Montgomery County, PA, Industrial Development Authority Rev. (Whitemarsh Continuing Care), 6.25%, 2035      510,000        502,636   
New Jersey Economic Development Authority Rev. (Lions Gate), “A”, 5.875%, 2037      530,000        515,499   
New Jersey Economic Development Authority Rev. (Seabrook Village, Inc.), 5.25%, 2036      715,000        691,069   
Norfolk, VA, Redevelopment & Housing Authority Rev. (Fort Norfolk Retirement Community), “A”, 6%, 2025      215,000        215,348   
Norfolk, VA, Redevelopment & Housing Authority Rev. (Fort Norfolk Retirement Community), “A”, 6.125%, 2035      330,000        330,300   
Pell City, AL, Special Care Facilities, Financing Authority Rev. (Noland Health Services, Inc.), 5%, 2039      290,000        297,990   
Sarasota County, FL, Health Facility Authority Rev. (Sarasota Manatee), 5.75%, 2037      490,000        367,897   
Sarasota County, FL, Health Facility Authority Rev. (Sarasota Manatee), 5.75%, 2045      105,000        76,759   
Shelby County, TN, Health, Educational & Housing Facilities Board Rev. (Germantown Village), “A”, 7.25%, 2034      665,000        666,702   
South Carolina Jobs & Economic Development Authority Rev. (Woodlands at Furman), “A”, 6%, 2032      367,169        275,850   
South Carolina Jobs & Economic Development Authority Rev. (Woodlands at Furman), “A”, 6%, 2047      335,086        234,781   
South Carolina Jobs & Economic Development Authority Rev. (Woodlands at Furman), Capital Appreciation, “B”, 0%, 2047      157,358        4,993   
South Carolina Jobs & Economic Development Authority Rev. (Woodlands at Furman), Capital Appreciation, “B”, 0%, 2047      143,608        4,557   
St. John’s County, FL, Industrial Development Authority Rev. (Presbyterian Retirement), “A”, 6%, 2045      1,565,000        1,687,070   
Sterling, IL (Hoosier Care), 7.125%, 2034      650,000        649,942   
Suffolk County, NY, Industrial Development Agency (Medford Hamlet Assisted Living), 6.375%, 2039      475,000        436,634   
Tarrant County, TX, Cultural Education Facilities Finance Corp. Retirement Facility (Air Force Village), 6.125%, 2029      115,000        126,210   
Tarrant County, TX, Cultural Education Facilities Finance Corp. Retirement Facility (Air Force Village), 5.125%, 2037      365,000        355,207   

 

13


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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Municipal Bonds - continued                 
Healthcare Revenue - Long Term Care - continued                 
Tarrant County, TX, Cultural Education Facilities Finance Corp. Retirement Facility (Air Force Village), 6.375%, 2044    $ 780,000      $ 842,049   
Tarrant County, TX, Cultural Education Facilities Finance Corp. Retirement Facility (Stayton at Museum Way), 8.25%, 2044      1,500,000        1,613,715   
Tempe, AZ, Industrial Development Authority Rev. (Friendship Village), “A”, 6.25%, 2042      225,000        233,017   
Tempe, AZ, Industrial Development Authority Rev. (Friendship Village), “A”, 6.25%, 2046      170,000        175,804   
Travis County, TX, Health Facilities Development Corp. Rev. (Westminster Manor Health), 7%, 2030      245,000        278,031   
Travis County, TX, Health Facilities Development Corp. Rev. (Westminster Manor Health), 7.125%, 2040      370,000        415,436   
Travis County, TX, Health Facilities Development Corp., Retirement Facilities Rev. (Querencia Barton Creek), 5.5%, 2025      460,000        454,807   
Ulster County, NY, Industrial Development Agency (Woodland Pond), “A”, 6%, 2037      1,075,000        747,759   
    

 

 

 
             $ 38,750,911   
Healthcare Revenue - Other - 0.3%                 
Koyukuk, AK, Tanana Chiefs Conference, Healthcare Facilities Project, 7.75%, 2041    $ 705,000      $ 745,100   
Human Services - 2.4%                 
Alaska Industrial Development & Export Authority Community Provider Rev. (Boys & Girls Home of Alaska, Inc.), 5.875%, 2027 (a)    $ 210,000      $ 112,665   
Alaska Industrial Development & Export Authority Community Provider Rev. (Boys & Girls Home of Alaska, Inc.), 6%, 2036 (a)      325,000        174,363   
Greenville County, SC, Hospital Rev. (Chestnut Hill), “A”, 8%, 2015      1,055,000        1,067,090   
Louisiana Local Government, Environmental Facilities & Community Development Authority Rev. (CDF Healthcare), “A”, 7%, 2036      490,000        484,904   
Louisiana Local Government, Environmental Facilities & Community Development Authority Rev. (CDF Healthcare), “C”, 7%, 2036      375,000        371,100   
Louisiana Local Government, Environmental Facilities & Community Development Authority Rev. (Westside Rehab Center Project), “A”, 6.85%, 2036      1,100,000        1,102,728   
Louisiana Local Government, Environmental Facilities & Community Development Authority Rev. (Westside Rehab Center Project), “B”, 6.5%, 2013      115,000        115,551   
Massachusetts Development Finance Agency Rev. (Evergreen Center, Inc.), 5.5%, 2035      620,000        623,143   
New York, NY, Industrial Development Agency, Civic Facility Rev. (A Very Special Place), “A”, 5.75%, 2029      985,000        908,515   

 

14


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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Municipal Bonds - continued                 
Human Services - continued                 
New York, NY, Industrial Development Agency, Civic Facility Rev. (Special Needs Facilities), 6.5%, 2017    $ 1,030,000      $ 1,033,893   
Orange County, FL, Health Facilities Authority Rev. (GF/Orlando Healthcare Facilities), 9%, 2031      1,000,000        1,000,110   
Osceola County, FL, Industrial Development Authority Rev. (Community Provider), 7.75%, 2017      165,000        165,893   
    

 

 

 
             $ 7,159,955   
Industrial Revenue - Airlines - 7.0%                 
Clayton County, GA, Development Authority Special Facilities Rev. (Delta Airlines, Inc.), “A”, 8.75%, 2029    $ 555,000      $ 662,925   
Clayton County, GA, Development Authority Special Facilities Rev. (Delta Airlines, Inc.), “B”, 9%, 2035      285,000        308,598   
Denver, CO, City & County Airport Rev. (United Airlines), 5.25%, 2032      3,735,000        3,616,675   
Denver, CO, City & County Airport Rev. (United Airlines), 5.75%, 2032      1,600,000        1,618,416   
Houston, TX, Airport Systems Rev., Special Facilities (Continental Airlines, Inc.), 6.625%, 2038      470,000        503,520   
Houston, TX, Airport Systems Rev., Special Facilities (Continental Airlines, Inc.), “E”, 6.75%, 2029      2,940,000        2,969,135   
Houston, TX, Airport Systems Rev., Special Facilities (Continental Airlines, Inc.), “E”, 7%, 2029      385,000        388,831   
Los Angeles, CA, Regional Airport Lease Rev. (American Airlines, Inc.), “C”, 7.5%, 2024 (a)(d)      850,000        848,827   
New Jersey Economic Development Authority, Special Facilities Rev. (Continental Airlines, Inc.), 6.25%, 2029      1,300,000        1,305,785   
New Jersey Economic Development Authority, Special Facilities Rev. (Continental Airlines, Inc.), 7.2%, 2030      1,595,000        1,601,061   
New York, NY, City Industrial Development Agencies Rev. (American Airlines, Inc.), 7.625%, 2025 (d)(q)      5,485,000        5,628,707   
New York, NY, City Industrial Development Agencies Rev. (American Airlines, Inc.), 7.75%, 2031 (d)(q)      1,025,000        1,051,855   
    

 

 

 
             $ 20,504,335   
Industrial Revenue - Chemicals - 2.0%                 
Brazos River, TX, Harbor Navigation District (Dow Chemical Co.), “A”, 5.95%, 2033    $ 2,000,000      $ 2,156,900   
Brazos River, TX, Harbor Navigation District (Dow Chemical Co.), “B-2”, 4.95%, 2033      75,000        78,860   
Louisiana Environmental Facilities & Community Development Authority Rev. (Westlake Chemical), 6.75%, 2032      1,000,000        1,101,300   
Louisiana Environmental Facilities & Community Development Authority Rev. (Westlake Chemical), “A”, 6.5%, 2029      610,000        694,107   

 

15


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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Municipal Bonds - continued                 
Industrial Revenue - Chemicals - continued                 
Red River Authority, TX, Pollution Control Rev. (Celanese Project) “B”, 6.7%, 2030    $ 1,920,000      $ 1,941,101   
    

 

 

 
             $ 5,972,268   
Industrial Revenue - Environmental Services - 1.3%                 
California Pollution Control Financing Authority, Solid Waste Disposal Rev. (Waste Management, Inc.), “A”, 5%, 2022    $ 695,000      $ 752,254   
Gulf Coast Waste Disposal Authority (Waste Management, Inc.), 5.2%, 2028      440,000        461,406   
Henrico County, VA, Industrial Development Authority Rev. (Browning Ferris, Inc.), 5.45%, 2014      1,750,000        1,835,470   
Maine Finance Authority Solid Waste Disposal Rev. (Casella Waste Systems, Inc.), 6.25%, 2025 (b)      705,000        708,356   
    

 

 

 
             $ 3,757,486   
Industrial Revenue - Other - 3.3%                 
California Statewide Communities Development Authority Facilities (Microgy Holdings Project), 9%, 2038 (a)(d)    $ 12,624      $ 126   
Gulf Coast, TX, Industrial Development Authority Rev. (Microgy Holdings LLC Project), 7%, 2036 (a)(d)      224,775        2,248   
Gulf Coast, TX, Industrial Development Authority Rev. (Valero Energy Corp.), 5.6%, 2031      1,750,000        1,750,000   
Gulf Coast, TX, Waste Disposal Rev. (Valero Energy Corp.),
6.65%, 2032
     1,000,000        1,000,000   
Houston, TX, Industrial Development Corp. (United Parcel Service, Inc.), 6%, 2023      90,000        83,882   
New Jersey Economic Development Authority Rev. (GMT Realty LLC), “B”, 6.875%, 2037      430,000        422,681   
New Jersey Economic Development Authority Rev. (GMT Realty LLC), “C”, 6.5%, 2015      615,000        622,712   
New York, NY, City Industrial Development Agency Rev., Liberty Bonds (IAC/InterActiveCorp), 5%, 2035      620,000        627,911   
Park Creek Metropolitan District, CO, Rev. (Custodial Receipts), “CR-1”, 7.875%, 2032 (b)(n)      1,270,000        1,315,377   
Park Creek Metropolitan District, CO, Rev. (Custodial Receipts), “CR-2”, 7.875%, 2032 (b)(n)      580,000        600,723   
Philadelphia, PA, Industrial Development Authority Rev. (Host Marriott LP), 7.75%, 2017      3,255,000        3,262,194   
    

 

 

 
             $ 9,687,854   
Industrial Revenue - Paper - 2.2%                 
Butler, AL, Industrial Development Board, Solid Waste Disposal Rev. (Georgia-Pacific Corp.), 5.75%, 2028    $ 155,000      $ 157,888   

 

16


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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Municipal Bonds - continued                 
Industrial Revenue - Paper - continued                 
Cass County, TX, Industrial Development Corp. (International Paper Co.), “A”, 4.625%, 2027    $ 2,150,000      $ 2,157,719   
Escambia County, FL, Environmental Improvement Rev. (International Paper Co.), “A”, 4.75%, 2030      525,000        521,141   
Lowndes County, MS, Solid Waste Disposal & Pollution Control Rev. (Weyerhaeuser Co.), 6.8%, 2022      2,000,000        2,232,140   
Rockdale County, GA, Development Authority Project Rev. (Visy Paper Project), “A”, 6.125%, 2034      640,000        658,573   
Selma, AL, Industrial Development Board Rev., Gulf Opportunity Zone (International Paper Co.), “A”, 5.375%, 2035      565,000        596,798   
West Point, VA, Industrial Development Authority, Solid Waste Disposal Rev. (Chesapeake Corp.), 6.25%, 2019 (a)(d)      1,870,000        39,270   
West Point, VA, Industrial Development Authority, Solid Waste Disposal Rev. (Chesapeake Corp.), “A”, 6.375%, 2019 (a)(d)      700,000        14,700   
    

 

 

 
             $ 6,378,229   
Miscellaneous Revenue - Entertainment & Tourism - 0.9%           
Brooklyn, NY, Arena Local Development Corp. (Barclays Center Project), 6%, 2030    $ 230,000      $ 253,009   
Brooklyn, NY, Arena Local Development Corp. (Barclays Center Project), 6.25%, 2040      150,000        165,884   
Fort Sill Apache Tribe, OK, Economic Development Authority, Gaming Enterprise., “A”, 8.5%, 2026 (n)      520,000        544,383   
Harris County, Houston, TX, Sports Authority, Special Rev., “A”, NATL, 5%, 2025      885,000        871,309   
Seminole Tribe, FL, Special Obligation Rev., “A”, 5.25%, 2027 (n)      515,000        517,137   
Seneca Nation Indians, NY, Capital Improvements Authority, Special Obligation, 5%, 2023 (n)      275,000        272,844   
    

 

 

 
             $ 2,624,566   
Miscellaneous Revenue - Other - 4.5%                 
Austin, TX, Convention Center (Convention Enterprises, Inc.), “A”,
5.25%, 2015
   $ 500,000      $ 537,040   
Austin, TX, Convention Center (Convention Enterprises, Inc.), “A”, SYNCORA, 5.25%, 2017      215,000        237,265   
Austin, TX, Convention Center (Convention Enterprises, Inc.), “A”, SYNCORA, 5.25%, 2020      170,000        182,232   
Austin, TX, Convention Center (Convention Enterprises, Inc.), “A”, SYNCORA, 5.25%, 2024      330,000        345,081   
Austin, TX, Convention Center (Convention Enterprises, Inc.), “A”, SYNCORA, 5%, 2034      200,000        200,234   
Baker, FL, Correctional Development Corp. (Baker County Detention Center), 7.5%, 2030      440,000        401,460   

 

17


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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Municipal Bonds - continued                 
Miscellaneous Revenue - Other - continued                 
Citizens Property Insurance Corp., FL, “A-1”, 5%, 2019    $ 245,000      $ 276,865   
Citizens Property Insurance Corp., FL, “A-1”, 5%, 2020      1,285,000        1,450,418   
Cleveland-Cuyahoga County, OH, Port Authority Rev., 7%, 2040      235,000        249,704   
Cleveland-Cuyahoga County, OH, Port Authority Rev. (Cleveland City), “B”, 4.5%, 2030      210,000        176,146   
Cleveland-Cuyahoga County, OH, Port Authority Rev. (Fairmount), “B”, 5.125%, 2025      145,000        145,075   
Columbus, OH, Franklin County Finance Authority Development Rev., 6%, 2035      700,000        715,148   
Dayton Montgomery County, OH, Port Authority Rev. (Parking Garage), 6.125%, 2024      1,130,000        1,138,419   
District of Columbia Rev. (American Society Hematology), 5%, 2036      85,000        88,924   
District of Columbia Rev. (American Society Hematology), 5%, 2042      65,000        67,355   
Hardeman County, TN, Correctional Facilities Rev., 7.75%, 2017      1,350,000        1,353,213   
Houston, TX, Industrial Development Corp. Rev. (Aero Syracuse LLC), 6.375%, 2023      75,000        74,994   
Massachusetts Port Authority Facilities Rev. (Conrac Project), “A”, 5.125%, 2041      65,000        69,632   
New Orleans, LA, Aviation Board Gulf Opportunity Zone CFC Rev. (Consolidated Rental Car), “A”, 6.25%, 2030      455,000        501,183   
New York Liberty Development Corp., Liberty Rev. (One Bryant Park LLC), 6.375%, 2049      1,065,000        1,189,243   
New York Liberty Development Corp., Liberty Rev. (World Trade Center Project), 5%, 2044      895,000        955,833   
Riversouth, OH, Authority Rev. (Lazarus Building), “A”, 5.75%, 2027      1,125,000        1,124,944   
Southwestern Illinois Development Authority Rev., Solid Waste Disposal Rev., 5.9%, 2014      100,000        100,244   
Summit County, OH, Port Authority Building Rev. (Flats East Development Recovery Zone Facility Bonds), 6.875%, 2040      85,000        90,316   
Summit County, OH, Port Authority Building Rev. (Seville Project), “A”, 5.1%, 2025      160,000        150,914   
Summit County, OH, Port Authority Building Rev. (Twinsburg Township), “D”, 5.125%, 2025      145,000        141,684   
Summit County, OH, Port Authority Building Rev. (Workforce Policy Board), “F”, 4.875%, 2025      915,000        835,807   
Texas Midwest Public Facilities Corp. Rev. (Secure Treatment Facilities Project), 9%, 2030 (a)(d)      395,000        213,300   
    

 

 

 
             $ 13,012,673   
Multi-Family Housing Revenue - 2.2%                 
Bay County, FL, Housing Finance Authority, Multi-Family Rev. (Andrews Place II Apartments), AGM, 5%, 2035    $ 210,000      $ 211,195   

 

18


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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Municipal Bonds - continued                 
Multi-Family Housing Revenue - continued                 
Charter Mac Equity Issuer Trust, FHLMC, 6%, 2052 (n)    $ 2,000,000      $ 2,228,920   
Indianapolis, IN, Multi-Family Rev. (Cambridge Station Apartments II), FNMA, 5.25%, 2039 (b)      435,000        440,163   
Mississippi Home Corp., Rev. (Kirkwood Apartments),
6.8%, 2037 (d)(q)
     1,095,000        693,288   
MuniMae TE Bond Subsidiary LLC, 5.4%, 2049 (z)      1,000,000        660,130   
MuniMae TE Bond Subsidiary LLC, FRN, 7.5%, 2049 (n)      1,638,988        1,599,341   
North Charleston, SC, Housing Authority Rev. (Horizon Village), “A”, GNMA, 5.15%, 2048      445,000        451,550   
    

 

 

 
             $ 6,284,587   
Parking - 0.2%                 
Boston, MA, Metropolitan Transit Parking Corp., Systemwide Parking Rev., 5.25%, 2036    $ 460,000      $ 506,313   
Port Revenue - 0.2%                 
Maryland Economic Development Corp. Rev. (Port America Chesapeake Terminal Project), “B”, 5.375%, 2025    $ 195,000      $ 209,309   
Maryland Economic Development Corp. Rev. (Port America Chesapeake Terminal Project), “B”, 5.75%, 2035      375,000        398,606   
    

 

 

 
             $ 607,915   
Sales & Excise Tax Revenue - 3.8%                 
Chicago, IL, Transit Authority Sales Tax Receipts Rev., 5.25%, 2029    $ 275,000      $ 312,430   
Chicago, IL, Transit Authority Sales Tax Receipts Rev., 5.25%, 2030      550,000        622,001   
Chicago, IL, Transit Authority Sales Tax Receipts Rev., 5.25%, 2031      105,000        118,383   
Chicago, IL, Transit Authority Sales Tax Receipts Rev., 5.25%, 2040      990,000        1,090,940   
Colorado Regional Transportation District, Private Activity Rev. (Denver Transportation Partners), 6%, 2034      1,180,000        1,298,460   
Colorado Regional Transportation District, Private Activity Rev. (Denver Transportation Partners), 6%, 2041      590,000        647,112   
Massachusetts Bay Transportation Authority, Sales Tax Rev., “A”, 5%, 2024      2,150,000        2,700,293   
Puerto Rico Infrastructure Financing Authority, Special Tax Rev., “B”, 5%, 2037      1,000,000        1,014,810   
Puerto Rico Infrastructure Financing Authority, Special Tax Rev., “B”, 5%, 2041      1,000,000        1,010,410   
Puerto Rico Sales Tax Financing Corp., Sales Tax Rev., “A”,
5.375%, 2039
     395,000        426,201   
Puerto Rico Sales Tax Financing Corp., Sales Tax Rev., “A”,
5.5%, 2042
     350,000        378,350   

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Municipal Bonds - continued                 
Sales & Excise Tax Revenue - continued                 
Puerto Rico Sales Tax Financing Corp., Sales Tax Rev., “C”,
5.25%, 2041
   $ 180,000      $ 193,174   
Puerto Rico Sales Tax Financing Corp., Sales Tax Rev., Capital Appreciation, “A”, AMBAC, 0%, 2054      11,385,000        892,015   
Utah Transit Authority Sales Tax Rev., Capital Appreciation, “A”, NATL, 0%, 2028      950,000        431,861   
    

 

 

 
             $ 11,136,440   
Single Family Housing - Local - 0.2%                 
Nortex, TX, Housing Finance Corp., Single Family Mortgage Rev., “B”, 5.5%, 2038    $ 15,000      $ 13,605   
Sedgwick & Shawnee Counties, KS, Single Family Housing Rev., “A”, GNMA, 5.9%, 2035      140,000        147,080   
Sedgwick & Shawnee Counties, KS, Single Family Housing Rev., “A”, GNMA, 6.25%, 2035      50,000        52,831   
Sedgwick & Shawnee Counties, KS, Single Family Housing Rev., “A-1”, GNMA, 5.75%, 2037      40,000        41,930   
Sedgwick & Shawnee Counties, KS, Single Family Housing Rev., “A-2”, GNMA, 5.75%, 2037      125,000        129,899   
Sedgwick & Shawnee Counties, KS, Single Family Housing Rev., “A-5”, GNMA, 5.9%, 2037      75,000        77,615   
    

 

 

 
             $ 462,960   
Single Family Housing - State - 0.4%                 
Colorado Housing & Finance Authority Rev., “C-2”, 5.9%, 2023    $ 90,000      $ 94,585   
Colorado Housing & Finance Authority Rev., “C-2”, FHA, 6.6%, 2032      75,000        78,959   
Colorado Housing & Finance Authority Rev., “C-3”, FHA,
6.375%, 2033
     30,000        31,222   
Colorado Housing & Finance Authority Rev., “D-2”, 6.9%, 2029      130,000        134,705   
Texas Affordable Housing Corp. (Single Family Mortgage), “B”, GNMA, 5.25%, 2039      700,000        729,330   
    

 

 

 
             $ 1,068,801   
Solid Waste Revenue - 1.1%                 
Massachusetts Development Finance Agency, Resource Recovery Rev. (Ogden Haverhill Associates), “A”, 6.7%, 2014    $ 85,000      $ 85,078   
Massachusetts Development Finance Agency, Resource Recovery Rev. (Ogden Haverhill Associates), “A”, 5.6%, 2019      2,850,000        2,858,408   
Pennsylvania Economic Development Financing Authority, Sewer Sludge Disposal Rev. (Philadelphia Biosolids Facility), 6.25%, 2032      145,000        160,487   
    

 

 

 
             $ 3,103,973   

 

20


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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Municipal Bonds - continued                 
State & Agency - Other - 0.3%                 
Commonwealth of Puerto Rico (Mepsi Campus), “A”, 6.5%, 2037    $ 900,000      $ 909,720   
State & Local Agencies - 0.7%                 
Golden State, CA, Tobacco Securitization Corp., Tobacco Settlement Rev., Enhanced, “A”, FGIC, 5%, 2035    $ 220,000      $ 223,311   
Guam Government Department of Education (John F. Kennedy High School), “A”, COP, 6.875%, 2040      620,000        665,372   
Philadelphia, PA, Municipal Authority Rev., 6.5%, 2034      260,000        281,593   
Puerto Rico Public Finance Corp., Commonwealth Appropriations, “B”, 6%, 2026      370,000        424,534   
Puerto Rico Public Finance Corp., Commonwealth Appropriations, “B”, 5.5%, 2031      540,000        575,386   
    

 

 

 
             $ 2,170,196   
Student Loan Revenue - 1.1%                 
Access to Loans for Learning, CA, Student Loan Rev., 7.95%, 2030    $ 650,000      $ 650,299   
Iowa Student Loan Liquidity Corp., “A-2”, 5.5%, 2025      335,000        372,054   
Iowa Student Loan Liquidity Corp., “A-2”, 5.6%, 2026      335,000        371,203   
Iowa Student Loan Liquidity Corp., “A-2”, 5.7%, 2027      40,000        44,359   
Iowa Student Loan Liquidity Corp., “A-2”, 5.75%, 2028      675,000        746,557   
Massachusetts Educational Financing Authority, Education Loan Rev., “H”, ASSD GTY, 6.35%, 2030      810,000        890,036   
    

 

 

 
             $ 3,074,508   
Tax - Other - 1.4%                 
Hudson Yards, NY, Infrastructure Corp. Rev., “A”, 5%, 2047    $ 710,000      $ 734,026   
Hudson Yards, NY, Infrastructure Corp. Rev., “A”, 5.75%, 2047      620,000        701,617   
New Jersey Economic Development Authority Rev., 5%, 2025      220,000        240,253   
New Jersey Economic Development Authority Rev., 5%, 2026      110,000        118,789   
New Jersey Economic Development Authority Rev., 5%, 2028      45,000        48,634   
New Jersey Economic Development Authority Rev., 5%, 2029      45,000        48,209   
New York Dormitory Authority, State Personal Income Tax Rev.,”C”, 5%, 2034 (f)      1,670,000        1,892,127   
Virgin Islands Public Finance Authority Rev. (Diageo Project), “A”, 6.75%, 2037      395,000        445,426   
    

 

 

 
             $ 4,229,081   
Tax Assessment - 4.2%                 
Anne Arundel County, MD, Special Obligation (National Business Park-North Project), 6.1%, 2040    $ 265,000      $ 274,826   
Arborwood Community Development District, FL, Capital Improvement Rev. (Master Infrastructure Projects), “A”, 5.35%, 2036      580,000        415,216   

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Municipal Bonds - continued                 
Tax Assessment - continued                 
Arborwood Community Development District, FL, Special Assessment (Master Infrastructure Projects), “B”, 5.1%, 2014    $ 190,000      $ 153,505   
Atlanta, GA, Tax Allocation (Eastside Project), “B”, 5.6%, 2030      815,000        825,750   
Atlanta, GA, Tax Allocation (Princeton Lakes Project), 5.5%, 2031      470,000        466,710   
Baltimore, MD, Special Obligation, (East Baltimore Research Park Project), “A”, 7%, 2038      715,000        759,831   
Capital Region Community Development District, FL, Capital Improvement Rev., “A”, 7%, 2039      625,000        558,531   
Concord Station Community Development District, FL, Special Assessment, 5%, 2015      110,000        108,230   
Du Page County, IL, Special Service Area No. 31 Special Tax (Monarch Landing Project), 5.625%, 2036      305,000        270,834   
Fishhawk Community Development District, FL, 7.04%, 2014      30,000        30,116   
Heritage Harbour North Community Development District, FL, Capital Improvement Rev., 6.375%, 2038      560,000        515,234   
Homestead, Community Development District, FL, Special Assessment, “A”, 6%, 2037      660,000        420,156   
Homestead, Community Development District, FL, Special Assessment, “B”, 5.9%, 2013      250,000        151,358   
Killarney Community Development District, FL, Special Assessment, “B”, 5.125%, 2009 (a)(d)      170,000        76,500   
Lancaster County, SC, Assessment Rev. (Sun City Carolina Lakes), 5.45%, 2037      100,000        89,729   
Legends Bay Community Development District, FL, “A”, 5.5%, 2014      415,000        351,372   
Legends Bay Community Development District, FL, “A”, 5.875%, 2038      355,000        264,102   
Main Street Community Development District, FL, “A”, 6.8%, 2038      545,000        501,574   
Naturewalk Community Development District, FL, Capital Improvement Rev., “B”, 5.3%, 2016 (d)(q)      650,000        390,000   
New Port Tampa Bay Community Development District, FL, Special Assessment, “B”, 5.3%, 2012 (a)(d)      440,000        107,800   
Ohio County, WV, Commission Tax Increment Rev. (Fort Henry Centre), “A”, 5.85%, 2034      235,000        242,786   
Old Palm Community Development District, FL, Special Assessment (Palm Beach Gardens), “B”, 5.375%, 2014      210,000        205,752   
OTC Community Development District, FL, Special Assessment, “A”, 5.3%, 2038      930,000        882,291   
Overland Park, KS, Special Assessment (Tallgrass Creek), 4.85%, 2016      170,000        164,135   
Overland Park, KS, Special Assessment (Tallgrass Creek),
5.125%, 2028
     592,000        500,749   
Panther Trace II, Community Development District, FL, Special Assessment, 5.125%, 2013      215,000        191,750   

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Municipal Bonds - continued                 
Tax Assessment - continued                 
Parker Road Community Development District, FL, “A”, 5.6%, 2038    $ 320,000      $ 138,403   
Parkway Center Community Development District, FL, Special Assessment, “B”, 5.625%, 2014      745,000        670,284   
Paseo Community Development District, FL, “B”, 4.875%, 2010 (a)(d)      210,000        2   
Paseo Community Development District, FL, Capital Improvement Rev., Capital Appreciation, “A-2”, 0%, 2036      510,000        124,328   
Paseo Community Development District, FL, Special Assessment, “A-1”, 5.4%, 2036      40,000        40,142   
Prince George’s County, MD, Special Obligation (National Harbor Project), 5.2%, 2034      245,000        238,816   
Sterling Hill Community Development District, FL, Special Assessment, 5.5%, 2010 (d)      165,000        115,548   
Stone Ridge, CO, Metropolitan District No. 2, 7.25%, 2031      500,000        130,355   
Tolomato Community Development District, FL, Special Assessment, 6.65%, 2040 (d)(q)      1,070,000        462,261   
Tuscany Reserve Community Development District, FL, Special Assessment, “B”, 5.25%, 2016      785,000        709,876   
Villa Vizcaya Community Development District, FL, “A”,
5.55%, 2039 (a)(d)
     210,000        90,300   
Watergrass Community Development District, FL, “A”, 5.375%, 2039      420,000        237,258   
Watergrass Community Development District, FL, Special Assessment, “B”, 6.96%, 2017      460,000        436,466   
    

 

 

 
             $ 12,312,876   
Tobacco - 7.1%                 
Badger, WI, Tobacco Asset Securitization Corp., 6.125%, 2012 (c)    $ 1,530,000      $ 1,537,084   
Buckeye, OH, Tobacco Settlement Financing Authority, “A-2”, 5.125%, 2024      2,905,000        2,368,969   
Buckeye, OH, Tobacco Settlement Financing Authority, “A-2”, 5.875%, 2030      1,935,000        1,553,186   
Buckeye, OH, Tobacco Settlement Financing Authority, “A-2”, 5.875%, 2047      825,000        641,603   
California Statewide Financing Authority, Tobacco Settlement, 5.625%, 2029      1,430,000        1,429,986   
District of Columbia, Tobacco Settlement, 6.25%, 2024      735,000        738,374   
Golden State, CA, Tobacco Securitization Corp., Tobacco Settlement Rev., “A-1”, 5.75%, 2047      1,035,000        849,518   
Golden State, CA, Tobacco Securitization Corp., Tobacco Settlement Rev., “A-4”, 7.8%, 2013 (c)      1,000,000        1,080,520   
Illinois Railsplitter Tobacco Settlement Authority, 5.5%, 2023      880,000        1,001,889   
Illinois Railsplitter Tobacco Settlement Authority, 6%, 2028      2,645,000        3,003,318   
Iowa Tobacco Settlement Authority, Tobacco Settlement Rev., Asset Backed, “B”, 5.6%, 2034      1,635,000        1,460,153   

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Municipal Bonds - continued                 
Tobacco - continued                 
Louisiana Tobacco Settlement Authority Rev., “2001-B”, 5.5%, 2030    $ 1,080,000      $ 1,084,331   
New Jersey Tobacco Settlement Financing Corp., 5.75%, 2012 (c)      525,000        527,279   
New Jersey Tobacco Settlement Financing Corp., 7%, 2013 (c)      15,000        16,087   
New Jersey Tobacco Settlement Financing Corp., “1-A”, 5%, 2041      2,095,000        1,654,882   
Suffolk, NY, Tobacco Asset Securitization Corp., Tobacco Settlement, “B”, 5.25%, 2037      155,000        156,321   
Tobacco Securitization Authority, Minnesota Tobacco Settlement Rev., “B”, 5.25%, 2031      1,440,000        1,580,098   
Washington Tobacco Settlement Authority Rev., 6.5%, 2026      130,000        135,153   
    

 

 

 
             $ 20,818,751   
Toll Roads - 3.1%                 
E-470 Public Highway Authority, Colorado Rev., Capital Appreciation, “B”, NATL, 0%, 2027    $ 4,115,000      $ 1,799,531   
Mid-Bay Bridge Authority, FL, Springing Lien Rev., “A”, 7.25%, 2040      1,580,000        1,832,595   
North Texas Tollway Authority Rev., 6%, 2038      1,505,000        1,721,043   
North Texas Tollway Authority Rev. (Special Projects System), “D”, 5%, 2031      1,110,000        1,249,005   
Virginia Small Business Financing Authority Rev. (Elizabeth River Crossings Opco LLC Project), 5.25%, 2032      460,000        471,992   
Virginia Small Business Financing Authority Rev. (Elizabeth River Crossings Opco LLC Project), 6%, 2037      765,000        830,385   
Virginia Small Business Financing Authority Rev. (Elizabeth River Crossings Opco LLC Project), 5.5%, 2042      1,225,000        1,258,504   
    

 

 

 
             $ 9,163,055   
Transportation - Special Tax - 0.5%                 
Arizona Transportation Board Highway Rev., “A”, 5%, 2036    $ 1,290,000      $ 1,436,209   
Universities - Colleges - 14.9%                 
Allegheny County, PA, Higher Education Building Authority Rev. (Chatham University), “A”, 5%, 2030    $ 155,000      $ 163,697   
Allegheny County, PA, Higher Education Building Authority Rev. (Chatham University), “A”, 5%, 2035      30,000        30,901   
Brevard County, FL, Industrial Development Rev. (TUFF Florida Tech LLC Project), 6.75%, 2039      1,055,000        1,150,646   
California Educational Facilities Authority Rev. (Chapman University), 5%, 2031      240,000        258,206   
California Municipal Finance Authority Rev. (University of La Verne), “A”, 6.25%, 2040      530,000        583,541   
California State University Rev., “A”, 5%, 2037      1,950,000        2,120,450   
California Statewide Communities Development Authority Rev. (California Baptist University), “A”, 5.4%, 2027      370,000        382,658   

 

24


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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Municipal Bonds - continued                 
Universities - Colleges - continued                 
California Statewide Communities Development Authority Rev. (California Baptist University), “A”, 5.5%, 2038    $ 420,000      $ 422,045   
Florida Higher Educational Facilities, Financial Authority Rev. (University of Tampa Project), “A”, 5%, 2032      40,000        41,681   
Florida Higher Educational Facilities, Financial Authority Rev. (University of Tampa Project), “A”, 5.25%, 2042      355,000        376,378   
Harris County, TX, Cultural Education Facilities Rev. (Baylor College of Medicine), “D”, 5.625%, 2032      510,000        522,434   
Houston, TX, Community College Systems, COP, NATL,
7.875%, 2012 (c)
     2,500,000        2,530,175   
Illinois Finance Authority Rev. (Illinois Institute of Technology), “A”, 5%, 2031      795,000        680,886   
Illinois Finance Authority Rev. (Illinois Institute of Technology), “A”, 5%, 2036      1,380,000        1,142,047   
Illinois Finance Authority Rev. (Roosevelt University Project),
6.25%, 2029
     905,000        996,043   
Illinois Finance Authority Rev. (Roosevelt University Project),
6.5%, 2039
     300,000        329,904   
Illinois Finance Authority Rev. (University of Chicago), “A”, 5%, 2051      270,000        289,024   
Louisiana State University (Health Sciences Center Project), NATL, 6.375%, 2031      2,500,000        2,503,825   
Massachusetts Development Finance Agency Rev. (Simmons College), “H”, SYNCORA, 5.25%, 2033      110,000        120,142   
Massachusetts Health & Educational Facilities Authority Rev. (Massachusetts Institute of Technology), 5%, 2015 (u)      20,000,000        22,468,200   
Massachusetts Health & Educational Facilities Authority Rev. (Simmons College), “I”, 8%, 2029      535,000        635,644   
Massachusetts Health & Educational Facilities Authority Rev. (Suffolk University), “A”, 6.25%, 2030      1,370,000        1,573,075   
Massachusetts Health & Educational Facilities Authority Rev. (Suffolk University), “A”, 5.75%, 2039      885,000        968,456   
New Jersey Educational Facilities Authority Rev. (University of Medicine & Dentistry), “B”, 6%, 2017      590,000        715,700   
New Jersey Educational Facilities Authority Rev. (University of Medicine & Dentistry), “B”, 7.5%, 2032      1,065,000        1,290,556   
Oregon Facilities Authority, Student Housing Rev. (Southern Oregon University), N, 4.7%, 2033      85,000        88,196   
Oregon Facilities Authority, Student Housing Rev. (Southern Oregon University), N, 5%, 2044      105,000        109,411   
Pennsylvania Higher Educational Facilities Authority Rev. (Lasalle University), “A”, 5.25%, 2027      105,000        113,133   

 

25


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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Municipal Bonds - continued                 
Universities - Colleges - continued                 
Pennsylvania Higher Educational Facilities Authority Rev. (Saint Francis University Project), “JJ2”, 6.25%, 2041    $ 295,000      $ 314,337   
Washington Higher Education Facilities Authority Rev. (Whitworth University), 5.875%, 2034      540,000        588,816   
    

 

 

 
             $ 43,510,207   
Universities - Dormitories - 1.0%                 
Bowling Green, OH, Student Housing Rev. (State University Project), 5.75%, 2031    $ 350,000      $ 366,779   
California Statewide Communities Development Authority Rev. (Lancer Educational Student Housing Project), 5.625%, 2033      380,000        384,066   
Illinois Finance Authority Student Housing Rev. (Illinois State University), 6.75%, 2031      415,000        463,522   
Illinois Finance Authority Student Housing Rev. (Northern Illinois University Project), 6.625%, 2031      1,215,000        1,363,655   
Pennsylvania Higher Educational Facilities Authority Rev. (Edinboro University Foundation), 5.8%, 2030      155,000        166,980   
Pennsylvania Higher Educational Facilities Authority Rev. (Edinboro University Foundation), 6%, 2043      215,000        230,585   
    

 

 

 
             $ 2,975,587   
Universities - Secondary Schools - 3.5%                 
California Statewide Communities Development Authority Rev. (Aspire Public Schools), 6.375%, 2045    $ 1,000,000      $ 1,078,180   
Clifton, TX, Higher Education Finance Corp. Rev. (Idea Public Schools), 5.5%, 2031      160,000        172,778   
Clifton, TX, Higher Education Finance Corp. Rev. (Idea Public Schools), 5.75%, 2041      130,000        141,592   
Clifton, TX, Higher Education Finance Corp. Rev. (Uplift Education), “A”, 6.125%, 2040      570,000        628,887   
Clifton, TX, Higher Education Finance Corp. Rev. (Uplift Education), “A”, 6.25%, 2045      350,000        387,398   
Florida Development Finance Corp. Educational Facilities Rev. (Renaissance Charter School), ”A”, 6%, 2040      380,000        392,320   
Florida Development Finance Corp. Educational Facilities Rev. (Renaissance Charter School), ”A”, 7.625%, 2041      875,000        934,999   
La Vernia, TX, Higher Education Finance Corp. Rev. (KIPP, Inc.), “A”, 6.25%, 2039      365,000        403,310   
Lee County, FL, Industrial Development Authority Rev. (Lee Charter Foundation), “A”, 5.25%, 2027      430,000        417,315   
Lee County, FL, Industrial Development Authority Rev. (Lee Charter Foundation), “A”, 5.375%, 2037      945,000        848,525   

 

26


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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Municipal Bonds - continued                 
Universities - Secondary Schools - continued                 
Maryland Health & Higher Educational Facilities Authority Rev. (Washington Christian Academy), 5.5%, 2038 (a)(d)    $ 140,000      $ 56,000   
Maryland Industrial Development Financing Authority, Economic Development Authority Rev. (Our Lady of Good Council), “A”,
6%, 2035
     150,000        153,872   
North Texas Education Finance Corp., Education Rev. (Uplift Education), “A”, 4.875%, 2032      110,000        110,824   
North Texas Education Finance Corp., Education Rev. (Uplift Education), “A”, 5.125%, 2042      275,000        276,818   
St. Paul, MN, Housing & Redevelopment Authority Charter School Lease Rev. (Nova Classical Academy), “A”, 6.375%, 2031      120,000        126,052   
St. Paul, MN, Housing & Redevelopment Authority Charter School Lease Rev. (Nova Classical Academy), “A”, 6.625%, 2042      240,000        251,986   
Utah County, UT, Charter School Finance Authority, Charter School Rev. (Early Light Academy Project), 8.25%, 2035      770,000        815,869   
Utah County, UT, Charter School Finance Authority, Charter School Rev. (Hawthorne Academy Project), 8.25%, 2035      830,000        886,540   
Utah County, UT, Charter School Rev. (Lakeview Academy), “A”, 5.625%, 2037      500,000        421,140   
Utah County, UT, Charter School Rev. (Renaissance Academy), “A”, 5.625%, 2037      495,000        429,536   
Utah County, UT, Charter School Rev. (Ronald Wilson Reagan Academy), “A”, 6%, 2038      1,255,000        1,262,166   
    

 

 

 
             $ 10,196,107   
Utilities - Cogeneration - 0.4%                 
Alaska Industrial Development & Export Authority, Power Rev., Upper Lynn Canal Regional Power, 5.8%, 2018    $ 830,000      $ 830,706   
Pennsylvania Economic Development Financing Authority Rev., Resource Recovery Rev. (Colver), “G”, 5.125%, 2015      350,000        355,754   
    

 

 

 
             $ 1,186,460   
Utilities - Investor Owned - 4.6%                 
Apache County, AZ, Industrial Development Authority, Pollution Control Rev. (Tucson Electric Power Co.), ”A”, 5.85%, 2028    $ 155,000      $ 155,226   
Apache County, AZ, Industrial Development Authority, Pollution Control Rev. (Tucson Electric Power Co.), ”A”, 4.5%, 2030      1,055,000        1,061,615   
Brazos River Authority, TX, Pollution Control Rev. (TXU Energy Co. LLC), 5%, 2041      835,000        81,354   
Chula Vista, CA, Industrial Development Rev. (San Diego Gas), 5.875%, 2034      470,000        545,177   
Connecticut Development Authority, Pollution Control Rev. (Connecticut Light & Power Co.), 5.95%, 2028      2,270,000        2,291,315   

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Municipal Bonds - continued                 
Utilities - Investor Owned - continued                 
Farmington, NM, Pollution Control Rev. (Public Service New Mexico), “D”, 5.9%, 2040    $ 1,840,000      $ 1,986,906   
Hawaii Department of Budget & Finance Special Purpose Rev. (Hawaiian Electric Co. & Subsidiary), 6.5%, 2039      750,000        858,173   
Massachusetts Development Finance Agency, Solid Waste Disposal Rev. (Dominion Energy Brayton), 5.75%, 2042 (b)      165,000        194,692   
Matagorda County, TX (CenterPoint Energy), 5.6%, 2027      1,500,000        1,554,405   
Matagorda County, TX, Pollution Control Rev. (Central Power & Light Co.), “A”, 6.3%, 2029      525,000        601,393   
Mecklenburg County, VA, Industrial Development Authority Rev. (UAE Mecklenburg LP), 6.5%, 2017      800,000        804,120   
Owen County, KY, Waterworks System Rev. (American Water Co. Project), “A”, 6.25%, 2039      400,000        437,196   
Pennsylvania Economic Development Financing Authority (Allegheny Energy Supply Co. LLC), 7%, 2039      1,165,000        1,329,253   
Pima County, AZ, Industrial Development Authority Rev. (Tucson Electric Power Co.), 5.75%, 2029      1,315,000        1,394,124   
    

 

 

 
             $ 13,294,949   
Utilities - Municipal Owned - 0.6%                 
Long Island, NY, Power Authority, “A”, 5%, 2038    $ 1,155,000      $ 1,253,337   
Puerto Rico Electric Power Authority, Power Rev., “A”, 5%, 2042      600,000        599,034   
    

 

 

 
             $ 1,852,371   
Utilities - Other - 2.7%                 
California M-S-R Energy Authority Gas Rev., “A”, 7%, 2034    $ 210,000      $ 266,675   
California M-S-R Energy Authority Gas Rev., “A”, 6.5%, 2039      465,000        569,420   
Georgia Main Street Natural Gas, Inc., Gas Project Rev., “A”,
5%, 2022
     500,000        568,810   
Georgia Main Street Natural Gas, Inc., Gas Project Rev., “A”,
5.5%, 2026
     285,000        316,817   
Indiana Bond Bank Special Program, Gas Rev., “A”, 5.25%, 2018      440,000        500,421   
Public Authority for Colorado Energy Natural Gas Purchase Rev., 6.5%, 2038      50,000        61,893   
Salt Verde Financial Corp., AZ, Senior Gas Rev., 5%, 2037      2,395,000        2,429,608   
Tennessee Energy Acquisition Corp., Gas Rev., “A”, 5%, 2014      455,000        488,142   
Tennessee Energy Acquisition Corp., Gas Rev., “A”, 5.25%, 2022      510,000        568,502   
Tennessee Energy Acquisition Corp., Gas Rev., “A”, 5.25%, 2023      80,000        88,494   
Tennessee Energy Acquisition Corp., Gas Rev., “A”, 5.25%, 2024      560,000        614,964   
Tennessee Energy Acquisition Corp., Gas Rev., “A”, 5.25%, 2026      905,000        992,124   
Tennessee Energy Acquisition Corp., Gas Rev., “C”, 5%, 2025      450,000        476,546   
    

 

 

 
             $ 7,942,416   

 

28


Table of Contents

Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Municipal Bonds - continued                 
Water & Sewer Utility Revenue - 9.2%                 
Atlanta, GA, Water & Wastewater Rev., “A”, 6%, 2022    $ 710,000      $ 870,169   
California Department of Water Resources, Center Valley Project Rev., “AJ”, 5%, 2035      1,990,000        2,317,335   
Commonwealth of Puerto Rico Aqueduct & Sewer Authority Rev., “A”, 5.75%, 2037      485,000        512,082   
DeKalb County, GA, Water & Sewer Rev., “A”, 5.25%, 2028      1,100,000        1,270,357   
DeKalb County, GA, Water & Sewer Rev., “A”, 5.25%, 2029      270,000        309,933   
DeKalb County, GA, Water & Sewer Rev., “A”, 5.25%, 2030      910,000        1,039,866   
DeKalb County, GA, Water & Sewer Rev., “A”, 5.25%, 2031      40,000        45,502   
DeKalb County, GA, Water & Sewer Rev., “A”, 5.25%, 2041      1,965,000        2,165,705   
East Bay, CA, Municipal Utility District, Water System Rev., “A”,
5%, 2028
     3,200,000        3,817,952   
Houston, TX, Utility System Rev., “D”, 5%, 2036      855,000        958,925   
King County, WA, Sewer Rev., 5%, 2040      2,750,000        3,032,315   
Madera, CA, Irrigation Financing Authority Rev., 6.5%, 2040      1,280,000        1,403,405   
New York Environmental Facilities Corp., Clean Drinking Water Revolving Funds, 5%, 2024      335,000        401,380   
New York Environmental Facilities Corp., Clean Drinking Water Revolving Funds, 5%, 2041      1,345,000        1,484,678   
New York Environmental Facilities, “C”, 5%, 2041      1,860,000        2,066,851   
New York, NY, Municipal Water Finance Authority, Water & Sewer System Rev., “AA”, 5%, 2034      3,900,000        4,382,235   
Sacramento, CA, Municipal Utility District, “X”, 5%, 2028      565,000        645,123   
    

 

 

 
             $ 26,723,813   
Total Municipal Bonds (Identified Cost, $396,627,605)            $ 412,778,150   
Money Market Funds - 0.9%                 
MFS Institutional Money Market Portfolio, 0.12%,
at Cost and Net Asset Value (v)
     2,593,953      $ 2,593,953   
Total Investments (Identified Cost, $399,221,558)            $ 415,372,103   
Other Assets, Less Liabilities - (3.3)%              (9,768,443
Preferred shares (issued by the fund) - (39.0)%              (113,750,000
Net assets applicable to common shares - 100.0%            $ 291,853,660   

 

(a) Non-income producing security.
(b) Mandatory tender date is earlier than stated maturity date.
(c) Refunded bond.
(d) In default. Interest and/or scheduled principal payment(s) have been missed.
(f) All or a portion of the security has been segregated as collateral for open futures contracts.
(n) Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. At period end, the aggregate value of these securities was $7,078,725, representing 2.4% of net assets applicable to common shares.

 

29


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Portfolio of Investments (unaudited) – continued

 

(p) Primary inverse floater.
(q) Interest received was less than stated coupon rate.
(u) Underlying security deposited into special purpose trust (“the trust”) by investment banker upon creation of self-deposited inverse floaters.
(v) Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end.
(z) Restricted securities are not registered under the Securities Act of 1933 and are subject to legal restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are subsequently registered. Disposal of these securities may involve time-consuming negotiations and prompt sale at an acceptable price may be difficult. The fund holds the following restricted securities:

 

Restricted Securities    Acquisition
Date
     Cost      Value  
MuniMae TE Bond Subsidiary LLC, 5.4%, 2049      10/14/04         $1,000,000         $660,130   
% of Net assets applicable to common shares            0.2%   

The following abbreviations are used in this report and are defined:

 

COP   Certificate of Participation
ETM   Escrowed to Maturity
FRN   Floating Rate Note. Interest rate resets periodically and may not be the rate reported at period end.

 

Insurers
AGM    Assured Guaranty Municipal
AMBAC    AMBAC Indemnity Corp.
ASSD GTY    Assured Guaranty Insurance Co.
FGIC    Financial Guaranty Insurance Co.
FHA    Federal Housing Administration
FHLMC    Federal Home Loan Mortgage Corp.
FNMA    Federal National Mortgage Assn.
GNMA    Government National Mortgage Assn.
NATL    National Public Finance Guarantee Corp.
PSF    Permanent School Fund
SYNCORA    Syncora Guarantee Inc.

Derivative Contracts at 4/30/12

Futures Contracts Outstanding at 4/30/12

 

Description   Currency     Contracts     Value   Expiration Date     Unrealized
Appreciation
(Depreciation)
 
Liability Derivatives          
Interest Rate Futures          
U.S. Treasury Bond 30 yr (Short)     USD        80      $11,430,000     June - 2012        $(105,280

At April 30, 2012, the fund had sufficient cash and/or other liquid securities to cover any commitments under these derivative contracts.

See Notes to Financial Statements

 

30


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Financial Statements

 

STATEMENT OF ASSETS AND LIABILITIES

At 4/30/12 (unaudited)

This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.

 

Assets         

Investments-

  

Non-affiliated issuers, at value (identified cost, $396,627,605)

     $412,778,150   

Underlying affiliated funds, at cost and value

     2,593,953   

Total investments, at value (identified cost, $399,221,558)

     $415,372,103   

Cash

     199,068   

Receivables for

  

Investments sold

     537,319   

Interest

     7,280,202   

Other assets

     26,787   

Total assets

     $423,415,479   
Liabilities         

Payables for

  

Distributions on preferred shares

     $5,948   

Daily variation margin on open futures contracts

     12,500   

Investments purchased

     1,188,302   

Payable to the holder of the floating rate certificate from trust assets

     16,315,287   

Payable for interest expense and fees

     45,466   

Payable to affiliates

  

Investment adviser

     45,322   

Transfer agent and dividend disbursing costs

     8,584   

Payable for independent Trustees’ compensation

     51,016   

Accrued expenses and other liabilities

     139,394   

Total liabilities

     $17,811,819   
Preferred shares         

Series T and Series TH auction preferred shares (4,550 shares issued
and outstanding at $25,000 per share) at liquidation value

     $113,750,000   

Net assets applicable to common shares

     $291,853,660   
Net assets consist of         

Paid-in capital – common shares

     $305,956,685   

Unrealized appreciation (depreciation) on investments

     16,045,265   

Accumulated net realized gain (loss) on investments

     (33,336,849

Undistributed net investment income

     3,188,559   

Net assets applicable to common shares

     $291,853,660   

Preferred shares, at liquidation value (4,550 shares issued and outstanding at $25,000 per share)

     113,750,000   

Net assets including preferred shares

     $405,603,660   

Common shares of beneficial interest outstanding

     41,015,247   

Net asset value per common share (net assets of
$291,853,660 / 41,015,247 shares of beneficial interest outstanding)

     $7.12   

See Notes to Financial Statements

 

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Financial Statements

 

STATEMENT OF OPERATIONS

Six months ended 4/30/12 (unaudited)

This statement describes how much your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.

 

Net investment income         

Income

  

Interest

     $11,773,657   

Dividends from underlying affiliated funds

     2,520   

Total investment income

     $11,776,177   

Expenses

  

Management fee

     $1,511,804   

Transfer agent and dividend disbursing costs

     34,367   

Administrative services fee

     34,819   

Independent Trustees’ compensation

     21,881   

Stock exchange fee

     18,411   

Preferred shares service fee

     69,122   

Custodian fee

     20,080   

Shareholder communications

     21,159   

Audit and tax fees

     36,750   

Legal fees

     3,460   

Interest expense and fees

     54,877   

Miscellaneous

     42,214   

Total expenses

     $1,868,944   

Fees paid indirectly

     (28

Reduction of expenses by investment adviser

     (44,792

Net expenses

     $1,824,124   

Net investment income

     $9,952,053   
Realized and unrealized gain (loss) on investments         

Realized gain (loss) (identified cost basis)

  

Investment transactions

     $(287,354

Futures contracts

     (501,120

Net realized gain (loss) on investments

     $(788,474
Change in unrealized appreciation (depreciation)   

Investments

     $21,318,576   

Futures contracts

     63,125   

Net unrealized gain (loss) on investments

     $21,381,701   

Net realized and unrealized gain (loss) on investments

     $20,593,227   

Distributions declared to preferred shareholders

     $(124,381

Change in net assets from operations

     $30,420,899   

See Notes to Financial Statements

 

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Table of Contents

Financial Statements

 

STATEMENTS OF CHANGES IN NET ASSETS

These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.

 

     Six months ended
4/30/12
(unaudited)
    

Year ended
10/31/11

 
Change in net assets              
From operations                  

Net investment income

     $9,952,053         $21,015,051   

Net realized gain (loss) on investments

     (788,474      (4,797,091

Net unrealized gain (loss) on investments

     21,381,701         (5,864,051

Distributions declared to preferred shareholders

     (124,381      (371,300

Change in net assets from operations

     $30,420,899         $9,982,609   
Distributions declared to common shareholders                  

From net investment income

     $(10,320,806      $(20,560,484

Net asset value of shares issued to common shareholders in reinvestment of distributions

     $719,279         $1,401,642   

Total change in net assets

     $20,819,372         $(9,176,233
Net assets applicable to common shares                  

At beginning of period

     271,034,288         280,210,521   

At end of period (including undistributed net investment income of $3,188,559 and $3,681,693, respectively)

     $291,853,660         $271,034,288   

See Notes to Financial Statements

 

33


Table of Contents

Financial Statements

 

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.

 

   

Six months
ended
4/30/12

(unaudited)

    Years ended 10/31  
      2011     2010     2009     2008     2007  
                                 
Common Shares             

Net asset value, beginning of period

    $6.62        $6.89        $6.54        $5.71        $7.69        $8.06   
Income (loss) from investment operations                                           

Net investment income (d)

    $0.24        $0.52        $0.53        $0.53        $0.55        $ 0.57 (z) 

Net realized and unrealized gain
(loss) on investments

    0.51        (0.28     0.33        0.81        (1.94     (0.35 )(z) 

Distributions declared to preferred
shareholders

    (0.00 )(w)      (0.01     (0.01     (0.02     (0.13     (0.13

Total from investment operations

    $0.75        $0.23        $0.85        $1.32        $(1.52     $0.09   
Less distributions declared to common shareholders                                   

From net investment income

    $(0.25     $(0.50     $(0.50     $(0.49     $(0.46     $(0.46

Net asset value, end of period (x)

    $7.12        $6.62        $6.89        $6.54        $5.71        $7.69   

Market value, end of period

    $7.57        $6.88        $7.23        $6.44        $4.91        $7.31   

Total return at market value (%) (p)

    14.08 (n)      2.85        21.01        43.37        (28.13     (5.48

Total return at net asset
value (%) (j)(r)(s)(x)

    11.35 (n)      3.84        13.56        25.19        (20.55     1.17   
Ratios (%) (to average net assets
applicable to common shares)
and Supplemental data:
                                               

Expenses before expense
reductions (f)(p)

    1.34 (a)      1.44        1.43        1.66        1.57        1.47   

Expenses after expense
reductions (f)(p)

    1.30 (a)      1.42        1.43        1.66        1.57        1.47   

Net investment income (p)

    7.11 (a)      7.97        7.87        9.39        7.82        7.23 (z) 

Portfolio turnover

    12        22        13        10        25        24   

Net assets at end of period
(000 omitted)

    $291,854        $271,034        $280,211        $264,542        $230,444        $309,690   

 

34


Table of Contents

Financial Highlights – continued

 

 

   

Six months
ended
4/30/12

(unaudited)

    Years ended 10/31  
      2011     2010     2009     2008     2007  
                                 
Supplemental Ratios (%):                                                

Ratio of expenses to average net assets applicable to common shares after expense
reductions and excluding interest
expense and fees (f)(l)(p)

    1.26 (a)      1.38        1.39        1.61        1.49        1.40   

Ratio of expenses to average net assets applicable to common shares and preferred shares after expense reductions and excluding interest expense and fees (f)(l)(p)

    0.90 (a)      0.97        0.98        1.08        1.01        0.97   

Net investment income available to common shares

    7.02 (a)      7.83        7.70        8.99        6.01        5.60   
Senior Securities:                                                

Total preferred shares outstanding

    4,550        4,550        4,550        4,550        4,550        5,600   

Asset coverage per preferred share (k)

    $89,141        $84,568        $86,585        $83,141        $75,647        $80,302   

Involuntary liquidation preference per
preferred share (m)

    $25,000        $25,000        $25,000        $25,000        $25,000        $25,000   

Average market value per preferred
share (m)(u)

    $25,000        $25,000        $25,000        $25,000        $25,000        $25,000   
(a) Annualized.
(d) Per share data is based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly, if applicable.
(j) Total return at net asset value is calculated using the net asset value of the fund, not the publicly traded price and therefore may be different than the total return at market value.
(k) Calculated by subtracting the fund’s total liabilities (not including preferred shares) from the fund’s total assets and dividing this number by the number of preferred shares outstanding.
(l) Interest expense and fees relate to payments made to the holder of the floating rate certificate from trust assets.
(m) Amount excludes accrued unpaid distributions to auction preferred shareholders.
(n) Not annualized.
(p) Ratio excludes dividend payment on auction preferred shares.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
(u) Average market value represents the approximate fair value of the fund’s liability.
(w) Per share amount was less than $0.01.
(x) The net asset values per share and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes.
(z) The fund applied a change in estimate for amortization of premium on certain debt securities that resulted in an increase of $0.04 per share to net investment income, a decrease of $0.04 per share to net realized and unrealized gain (loss) on investments, and an increase of 0.49% to the net investment income ratio for the year ended October 31, 2007. The change in estimate had no impact on net assets, net asset value per share or total return.

See Notes to Financial Statements

 

35


Table of Contents

NOTES TO FINANCIAL STATEMENTS

(unaudited)

 

(1)   Business and Organization

MFS Municipal Income Trust (the fund) 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. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued. The fund invests primarily in municipal instruments. The value of municipal instruments can be affected by changes in their actual or perceived credit quality. The credit quality of municipal instruments can be affected by, among other things, the financial condition of the issuer or guarantor, the issuer’s future borrowing plans and sources of revenue, the economic feasibility of the revenue bond project or general borrowing purpose, political or economic developments in the region where the instrument is issued and the liquidity of the security. Municipal instruments generally trade in the over-the-counter market. Municipal instruments backed by current and 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 instrument has not complied with the applicable tax requirements, the security could decline in value, interest from the security could become taxable and the funds may be required to issue Forms 1099-DIV. The fund invests 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.

In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. Although still

 

36


Table of Contents

Notes to Financial Statements (unaudited) – continued

 

evaluating the potential impacts of ASU 2011-11 to the fund, management expects that the impact of the fund’s adoption will be limited to additional financial statement disclosures.

Investment Valuations – Debt instruments and floating rate loans (other than short-term instruments), including restricted debt instruments, are generally valued at an evaluated or composite bid as provided by a third-party pricing service. Short-term instruments with a maturity at issuance of 60 days or less generally are valued at amortized cost, which approximates market value. Futures contracts are generally valued at last posted settlement price as provided by a third-party pricing service on the market on which they are primarily traded. Futures contracts for which there were no trades that day for a particular position are generally valued at the closing bid quotation as provided by a third-party pricing service on the market on which such futures contracts are primarily traded. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data.

The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to

 

37


Table of Contents

Notes to Financial Statements (unaudited) – continued

 

fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.

Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. Other financial instruments are derivative instruments not reflected in total investments, such as futures. The following is a summary of the levels used as of April 30, 2012 in valuing the fund’s assets or liabilities:

 

Investments at Value    Level 1      Level 2      Level 3      Total  
Municipal Bonds      $—         $412,778,150         $—         $412,778,150   
Mutual Funds      2,593,953                         2,593,953   
Total Investments      $2,593,953         $412,778,150         $—         $415,372,103   
Other Financial Instruments                            
Futures      $(105,280      $—         $—         $(105,280

For further information regarding security characteristics, see the Portfolio of Investments.

 

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The following is a reconciliation of level 3 assets for which significant unobservable inputs were used to determine fair value. The fund’s policy is to recognize transfers between the levels as of the end of the period. The table presents the activity of level 3 securities held at the beginning and the end of the period.

 

     Municipal
Bonds
 
Balance as of 10/31/11      $178,062   

Accrued discounts/premiums

     24   

Realized gain (loss)

     (225,800

Change in unrealized appreciation (depreciation)

     213,453   

Liquidation proceeds

     (165,739
Balance as of 4/30/12      $—   

Derivatives – The fund uses derivatives for different purposes, primarily to increase or decrease exposure to a particular market or segment of the market, or security, to increase or decrease interest rate exposure, or as alternatives to direct investments. Derivatives are used for hedging or non-hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the fund uses derivatives as an investment to increase market exposure, or for hedging purposes, gains and losses from derivative instruments may be substantially greater than the derivative’s original cost.

The derivative instruments used by the fund were futures contracts. The fund’s period end derivatives, as presented in the Portfolio of Investments and the associated Derivative Contract Tables, generally are indicative of the volume of its derivative activity during the period.

The following table presents, by major type of derivative contract, the fair value, on a gross basis, of the asset and liability components of derivatives held by the fund at April 30, 2012 as reported in the Statement of Assets and Liabilities:

 

        Fair Value (a)  
Risk   Derivative Contracts   Liability Derivatives  

Interest Rate

  Interest Rate Futures     $(105,280)   

 

(a) The value of futures contracts outstanding includes cumulative appreciation (depreciation) as reported in the fund’s Portfolio of Investments. Only the current day variation margin for futures contracts is separately reported within the fund’s Statement of Assets and Liabilities.

The following table presents, by major type of derivative contract, the realized gain (loss) on derivatives held by the fund for the six months ended April 30, 2012 as reported in the Statement of Operations:

 

Risk    Futures Contracts  
Interest Rate      $(501,120

 

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Notes to Financial Statements (unaudited) – continued

 

The following table presents, by major type of derivative contract, the change in unrealized appreciation (depreciation) on derivatives held by the fund for the six months ended April 30, 2012 as reported in the Statement of Operations:

 

Risk    Futures Contracts  
Interest Rate      $63,125   

Derivative counterparty credit risk is managed through formal evaluation of the creditworthiness of all potential counterparties. On certain over-the-counter derivatives, the fund attempts to reduce its exposure to counterparty credit risk whenever possible by entering into an International Swaps and Derivatives Association (ISDA) Master Agreement on a bilateral basis with each of the counterparties with whom it undertakes a significant volume of transactions. The ISDA Master Agreement gives each party to the agreement the right to terminate all transactions traded under such agreement if there is a certain deterioration in the credit quality of the other party. The ISDA Master Agreement gives the fund the right, upon an event of default by the applicable counterparty or a termination of the agreement, to close out all transactions traded under such agreement and to net amounts owed under each transaction to one net amount payable by one party to the other. This right to close out and net payments across all transactions traded under the ISDA Master Agreement could result in a reduction of the fund’s credit risk to such counterparty equal to any amounts payable by the fund under the applicable transactions, if any. However, absent an event of default by the counterparty or a termination of the agreement, the ISDA Master Agreement does not result in an offset of reported amounts of assets and liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty.

Collateral requirements differ by type of derivative. Collateral or margin requirements are set by the broker or exchange clearing house for exchange traded derivatives (i.e., futures and exchange-traded options) while collateral terms are contract specific for over-the-counter traded derivatives (i.e., forward foreign currency exchange contracts, swaps and over-the-counter options). For derivatives traded under an ISDA Master Agreement, the collateral requirements are netted across all transactions traded under such agreement and one amount is posted from one party to the other to collateralize such obligations. Cash collateral that has been pledged to cover obligations of the fund under derivative contracts, if any, will be reported separately on the Statement of Assets and Liabilities as restricted cash. Securities collateral pledged for the same purpose, if any, is noted in the Portfolio of Investments.

Futures Contracts The fund entered into futures contracts which may be used to hedge against or obtain broad market exposure, interest rate exposure,

 

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Notes to Financial Statements (unaudited) – continued

 

or to manage duration. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date.

Upon entering into a futures contract, the fund is required to deposit with the broker, either in cash or securities, an initial margin in an amount equal to a certain percentage of the notional amount of the contract. Subsequent payments (variation margin) are made or received by the fund each day, depending on the daily fluctuations in the value of the contract, and are recorded for financial statement purposes as unrealized gain or loss by the fund until the contract is closed or expires at which point the gain or loss on futures is realized.

The fund bears the risk of interest rates or securities prices moving unexpectedly, in which case, the fund may not achieve the anticipated benefits of the futures contracts and may realize a loss. While futures may present less counterparty risk to the fund since the contracts are exchange traded and the exchange’s clearinghouse guarantees payments to the broker, there is still counterparty credit risk due to the insolvency of the broker. The fund’s maximum risk of loss due to counterparty credit risk is equal to the margin posted by the fund to the broker plus any gains or minus any losses on the outstanding futures contracts.

Inverse Floaters The fund invests in municipal inverse floating rate securities which are structured by the issuer (known as primary market inverse floating rate securities) or by an investment banker utilizing municipal bonds which have already been issued (known as secondary market inverse floating rate securities) to have variable rates of interest which typically move in the opposite direction of short term interest rates. A secondary market inverse floating rate security is created when an investment banker transfers a fixed rate municipal bond to a special purpose trust, and causes the trust to (a) issue floating rate certificates to third parties, in an amount equal to a fraction of the par amount of the deposited bonds (these certificates usually pay tax-exempt interest at short-term interest rates that typically reset weekly; and the certificate holders typically, on seven days notice, have the option to tender their certificates to the investment banker or another party for redemption at par plus accrued interest), and (b) issue inverse floating rate certificates (sometimes referred to as “inverse floaters”). If the holder of the inverse floater transfers the municipal bonds to an investment banker for the purpose of depositing the municipal bonds into the special purpose trust, the inverse floating rate certificates that are issued by the trust are referred to as “self-deposited inverse floaters.” If the bonds held by the trust are purchased by the investment banker for deposit into the trust from someone other than the purchasers of the inverse floaters, the inverse floating rate certificates that are issued by the trust are referred to as “externally deposited inverse floaters.”

 

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Notes to Financial Statements (unaudited) – continued

 

Such self-deposited inverse floaters held by the fund are accounted for as secured borrowings, with the municipal bonds reflected in the investments of the fund and amounts owed to the holder of the floating rate certificate under the provisions of the trust, which amounts are paid solely from the assets of the trust, reflected as liabilities of the fund in the Statement of Assets and Liabilities under the caption, “Payable to the holder of the floating rate certificate from trust assets”. The carrying value of the fund’s payable to the holder of the floating rate certificate from trust assets as reported on the fund’s Statement of Assets and Liabilities approximates its fair value. The payable to the holder of floating rate certificate from trust assets value as of reporting date is considered Level 2 under the fair value hierarchy. At April 30, 2012, the fund’s payable to the holder of the floating rate certificate from trust assets was $16,315,287 and the interest rate on these floating rate certificates issued by the trust was 0.31%. For the six months ended April 30, 2012, the average payable to the holder of the floating rate certificate from trust assets was $16,311,838 at a weighted average interest rate of 0.67%. Interest expense and fees relate to interest payments made to the holder of certain floating rate certificates and associated fees, both of which are made from trust assets. Interest expense and fees are recorded as incurred. For the six months ended April 30, 2012, interest expense and fees in connection with self-deposited inverse floaters was $54,877. Primary and externally deposited inverse floaters held by the fund are not accounted for as secured borrowings.

Indemnifications Under the fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.

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. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date. Debt obligations may be placed on non-accrual status or set to accrue at a rate of interest less than the contractual coupon when the collection of all or a portion of interest has become doubtful. Interest income for those debt obligations may be further reduced by the write-off of the related interest receivables when deemed uncollectible.

 

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Notes to Financial Statements (unaudited) – continued

 

The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.

Legal fees and other related expenses incurred to preserve and protect the value of a security owned are added to the cost of the security; other legal fees are expensed. Capital infusions made directly to the security issuer, which are generally non-recurring, incurred to protect or enhance the value of high-yield debt securities, are reported as additions to the cost basis of the security. Costs that are incurred to negotiate the terms or conditions of capital infusions or that are expected to result in a plan of reorganization are reported as realized losses. Ongoing costs incurred to protect or enhance an investment, or costs incurred to pursue other claims or legal actions, are expensed.

Fees Paid Indirectly The fund’s custody fee may be reduced according to an arrangement that measures the value of cash deposited with the custodian by the fund. This amount, for the six months ended April 30, 2012, is shown as a reduction of total expenses on the Statement of Operations.

Tax Matters and Distributions The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable and tax-exempt income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns, when filed, will remain subject to examination by the Internal Revenue Service for a three year period.

Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.

Book/tax differences primarily relate to expiration of capital loss carryforwards, amortization and accretion of debt securities, defaulted bonds and secured borrowings.

 

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Notes to Financial Statements (unaudited) – continued

 

The tax character of distributions made during the current period will be determined at fiscal year end. The tax character of distributions declared to shareholders for the last fiscal year is as follows:

 

     10/31/11  
Ordinary income (including any short-term capital gains)      $180,713   
Tax-exempt income      20,751,071   
Total distributions      $20,931,784   

The federal tax cost and the tax basis components of distributable earnings were as follows:

 

As of 4/30/12       
Cost of investments      $380,944,405   
Gross appreciation      29,166,184   
Gross depreciation      (11,053,773
Net unrealized appreciation (depreciation)      $18,112,411   
As of 10/31/11       
Undistributed ordinary income      139,516   
Undistributed tax-exempt income      3,945,376   
Capital loss carryforwards      (34,888,789
Other temporary differences      (403,199
Net unrealized appreciation (depreciation)      (2,996,022

The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized after October 31, 2011 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.

As of October 31, 2011 the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows:

 

Pre-enactment losses:   
10/31/12      $(1,858,513
10/31/13      (9,679,589
10/31/16      (3,401,503
10/31/17      (6,820,113
10/31/18      (7,829,561
10/31/19      (5,299,510
Total      $(34,888,789

 

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Notes to Financial Statements (unaudited) – continued

 

 

(3)   Transactions with Affiliates

Investment Adviser The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at an annual rate of 0.40% of the fund’s average weekly net assets (including the value of the auction preferred shares) and 6.32% of gross income. Gross income is calculated based on tax rules that generally include the amortization of premium and exclude the accretion of market discount, which may differ from investment income reported in the Statement of Operations. The management fee, from net assets and gross income, incurred for the six months ended April 30, 2012 was equivalent to an annual effective rate of 0.77% of the fund’s average daily net assets (including the value of the auction preferred shares.)

The investment adviser has agreed in writing to pay a portion of the fund’s total annual operating expenses, exclusive of interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses other than preferred shares service fee, such that the total annual fund operating expenses do not exceed 0.90% of the fund’s average daily net assets (including the value of auction preferred shares). This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue at least until October 31, 2012. For the six months ended April 30, 2012, this reduction amounted to $44,302 and is reflected as a reduction of total expenses in the Statement of Operations.

Transfer Agent The fund engages Computershare Trust Company, N.A. (“Computershare”) as the sole transfer agent for the fund’s common shares. MFS Service Center, Inc. (MFSC) monitors and supervises the activities of Computershare for an agreed upon fee approved by the Board of Trustees. For the six months ended April 30, 2012, these fees paid to MFSC amounted to $12,853.

Administrator MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund partially reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets (including the value of auction preferred shares). The administrative services fee incurred for the six months ended April 30, 2012 was equivalent to an annual effective rate of 0.0177% of the fund’s average daily net assets including the value of the auction preferred shares.

Trustees’ and Officers’ Compensation The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay

 

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Notes to Financial Statements (unaudited) – continued

 

compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS and MFSC.

Prior to December 31, 2001, the fund had an unfunded defined benefit plan (“DB plan”) for independent Trustees. As of December 31, 2001, the Board took action to terminate the DB plan with respect to then-current and any future independent Trustees, such that the DB plan covers only certain of those former independent Trustees who retired on or before December 31, 2001. The DB plan resulted in a pension expense of $1,362 and is included in independent Trustees’ compensation for the six months ended April 30, 2012. The liability for deferred retirement benefits payable to certain independent Trustees under the DB plan amounted to $45,980 at April 30, 2012, and is included in “Payable for independent Trustees’ compensation” on the Statement of Assets and Liabilities.

Other This fund and certain other funds managed by MFS (the funds) have entered into services agreements (the Agreements) which provide for payment of fees by the funds to Tarantino LLC and Griffin Compliance LLC in return for the provision of services of an Independent Chief Compliance Officer (ICCO) and Assistant ICCO, respectively, for the funds. The ICCO and Assistant ICCO are officers of the funds and the sole members of Tarantino LLC and Griffin Compliance LLC, respectively. The funds can terminate the Agreements with Tarantino LLC and Griffin Compliance LLC at any time under the terms of the Agreements. For the six months ended April 30, 2012, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $1,537 and are included in miscellaneous expense on the Statement of Operations. MFS has agreed to reimburse the fund for a portion of the payments made by the fund in the amount of $490, which is shown as a reduction of total expenses in the Statement of Operations. Additionally, MFS has agreed to bear all expenses associated with office space, other administrative support, and supplies provided to the ICCO and Assistant ICCO.

The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks a high level of current income consistent with preservation of capital and liquidity. Income earned on this investment is included in dividends from underlying affiliated funds on the Statement of Operations. This money market fund does not pay a management fee to MFS.

 

(4)   Portfolio Securities

Purchases and sales of investments, other than U.S. Government securities, purchased option transactions, and short-term obligations, aggregated $49,238,980 and $52,296,519, respectively.

 

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Notes to Financial Statements (unaudited) – continued

 

 

(5)   Shares of Beneficial Interest

The fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. The fund reserves the right to repurchase shares of beneficial interest of the fund subject to Trustee approval. During the six months ended April 30, 2012 and the year ended October 31, 2011, the fund did not repurchase any shares. Transactions in fund shares were as follows:

 

     Six months ended
4/30/12
     Year ended
10/31/11
 
     Shares      Amount      Shares      Amount  
Shares issued to shareholders in reinvestment of distributions      103,529         $719,279         216,751         $1,401,642   

 

(6)   Line of Credit

The fund and certain other funds managed by MFS participate in a $1.1 billion unsecured committed line of credit, subject to a $1 billion sublimit, provided by a syndication of banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the higher of the Federal Reserve funds rate or one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks 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 an agreed upon spread. For the six months ended April 30, 2012, the fund’s commitment fee and interest expense were $997 and $0, respectively, and are included in miscellaneous expense on the Statement of Operations.

 

(7)   Transactions in Underlying Affiliated Funds-Affiliated Issuers

An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the fund assumes the following to be an affiliated issuer:

 

Underlying Affiliated Fund    Beginning
Shares/Par
Amount
     Acquisitions
Shares/Par
Amount
     Dispositions
Shares/Par
Amount
     Ending
Shares/Par
Amount
 
MFS Institutional Money Market Portfolio      832,155         41,823,654         (40,061,856      2,593,953   
Underlying Affiliated Fund    Realized
Gain (Loss)
     Capital Gain
Distributions
     Dividend
Income
     Ending
Value
 
MFS Institutional Money Market Portfolio      $—         $—         $2,520         $2,593,953   

 

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Notes to Financial Statements (unaudited) – continued

 

 

(8)   Auction Preferred Shares

The fund has 2,275 shares issued and outstanding of Auction Preferred Shares (APS), series T, and 2,275 of APS, series TH. Dividends are cumulative at a rate that is reset every seven days for both series through an auction process. If the APS are unable to be remarketed on a remarketing date as part of the auction process, the fund would be required to pay the maximum applicable rate on APS to holders of such shares for successive dividend periods until such time when the shares are successfully remarketed. The maximum rate on APS rated aa3/AA- or better is equal to 110% of the higher of (i) the Taxable Equivalent of the Short-Term Municipal Bond Rate or (ii) the “AA” Composite Commercial Paper Rate.

Since February 2008, regularly scheduled auctions for APS issued by closed end funds, including this fund, have consistently failed because of insufficient demand (bids to buy shares) to meet the supply (shares offered for sale) at each auction. In a failed auction, APS holders cannot sell their shares tendered for sale. While repeated auction failures have affected the liquidity for APS, they do not constitute a default or automatically alter the credit quality of the APS, and APS holders have continued to receive dividends at the previously defined “maximum rate”. During the six months ended April 30, 2012, the APS dividend rates ranged from 0.11% to 0.38% for series T and from 0.11% to 0.40% for series TH. For the six months ended April 30, 2012, the average dividend rate was 0.22% for both series T and TH. These developments with respect to APS do not affect the management or investment policies of the fund. However, one implication of these auction failures for Common shareholders is that the fund’s cost of leverage will be higher than it otherwise would have been had the auctions continued to be successful. As a result, the fund’s future Common share earnings may be lower than they otherwise would have been. To the extent that investments are purchased with the issuance of preferred shares, the fund’s net asset value will increase or decrease at a greater rate than a comparable unleveraged fund.

The fund pays an annual service fee to broker-dealers with customers who are beneficial owners of the preferred shares. The service fee is equivalent to 0.25% of the applicable preferred share liquidation value while the preferred share auctions are successful or to 0.15% or less, varying by broker-dealer, while the auctions are failing. The APS are redeemable at the option of the fund 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 fund is required to maintain certain asset coverage with respect to the APS as defined in the fund’s By-Laws and the Investment Company Act of 1940 and, as such is not permitted to declare common share dividends unless the fund’s APS have a minimum asset coverage ratio of 200% after declaration of the common share dividends.

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees and Shareholders of MFS Municipal Income Trust:

We have reviewed the accompanying statement of assets and liabilities of MFS Municipal Income Trust (the “Trust”), including the portfolio of investments, as of April 30, 2012, and the related statement of operations, changes in net assets, and financial highlights for the six-month period ended April 30, 2012. These interim financial statements and financial highlights are the responsibility of the Trust’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial statements and financial highlights referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the statement of changes in net assets for the year ended October 31, 2011, and the financial highlights for each of the five years in the period ended October 31, 2011, and in our report dated December 16, 2011, we expressed an unqualified opinion on such statement of changes in net assets and financial highlights.

DELOITTE & TOUCHE LLP

Boston, Massachusetts

June 18, 2012

 

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BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT

A discussion regarding the Board’s most recent review and renewal of the fund’s Investment Advisory Agreement with MFS is available by clicking on the fund’s name under “Closed End Funds” in the “Products and Performance” section of the MFS Web site (mfs.com).

PROXY VOTING POLICIES AND INFORMATION

A general description of the MFS funds’ proxy voting policies and procedures is available without charge, upon request, by calling 1-800-225-2606, by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.

Information regarding how the fund voted proxies relating to portfolio securities during the twelve-month period ended June 30, 2011 is available without charge by visiting the Proxy Voting section of mfs.com or by visiting the SEC’s Web site at http://www.sec.gov.

QUARTERLY PORTFOLIO DISCLOSURE

The fund will file a complete schedule of portfolio holdings with the Securities and Exchange Commission (the Commission) for the first and third quarters of each fiscal year on Form N-Q. A shareholder can obtain the quarterly portfolio holdings report at mfs.com. The fund’s Form N-Q is also available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and may be reviewed and copied at the:

Public Reference Room

Securities and Exchange Commission

100 F Street, NE, Room 1580

Washington, D.C. 20549

Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330. Copies of the fund’s Form N-Q also 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.

FURTHER INFORMATION

From time to time, MFS may post important information about the fund or the MFS funds on the MFS web site (mfs.com). This information is available by visiting the “News & Commentary” section of mfs.com or by clicking on the fund’s name under “Closed End Funds” in the “Products and Performance” section of mfs.com.

 

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CONTACT US

Transfer agent, Registrar, and

Dividend Disbursing Agent

Call

1-800-637-2304

9 a.m. to 5 p.m. Eastern time

Write

Computershare Trust Company, N.A.

P.O. Box 43078

Providence, RI 02940-3078

 

New York Stock Exchange Symbol: MFM

 

LOGO


Table of Contents
ITEM 2. CODE OF ETHICS.

During the period covered by this report, the Registrant has not amended any provision in its Code of Ethics (the “Code”) that relates to an element of the Code’s definitions enumerated in paragraph (b) of Item 2 of this Form N-CSR. During the period covered by this report, the Registrant did not grant a waiver, including an implicit waiver, from any provision of the Code.

 

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

Not applicable for semi-annual reports.

 

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Not applicable for semi-annual reports.

 

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not applicable for semi-annual reports.

 

ITEM 6. SCHEDULE OF INVESTMENTS

A schedule of investments for each series of the Registrant is included as part of the report to shareholders of such series under Item 1 of this Form N-CSR.

 

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable for semi-annual reports.

 

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

There were no changes during this period.


Table of Contents
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

 

MFS Municipal Income Trust   

Period

   (a) Total number
of Shares
Purchased
     (b) Average
Price

Paid per
Share
     (c) Total
Number of
Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
     (d) Maximum
Number (or
Approximate
Dollar Value) of
Shares that May
Yet Be Purchased
under the Plans
or Programs
 

11/01/11-11/30/11

     0         N/A         0         4,074,913   

12/01/11-12/31/11

     0         N/A         0         4,074,913   

1/01/12-1/31/12

     0         N/A         0         4,074,913   

2/01/12-2/28/12

     0         N/A         0         4,074,913   

3/01/12-3/31/12

     0         N/A         0         4,096,445   

4/01/12-4/30/12

     0         N/A         0         4,096,445   
  

 

 

       

 

 

    

Total

     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, 2012 plan year is 4,096,445.

 

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

There were no material changes to the procedures by which shareholders may send recommendations to the Board for nominees to the Registrant’s Board since the Registrant last provided disclosure as to such procedures in response to the requirements of Item 407 (c)(2)(iv) of Regulation S-K or this Item.

 

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 Investment Company Act of 1940 (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.


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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.

 

  (2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2): Attached hereto.

 

(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.


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Notice

A copy of the Amended and Restated Declaration of Trust of the Registrant is on file with the Secretary of State of the Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of the Registrant by an officer of the Registrant as an officer and not individually and the obligations of or arising out of this instrument are not binding upon any of the Trustees or shareholders individually, but are binding only upon the assets and property of the respective constituent series of the Registrant.


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Registrant MFS MUNICIPAL INCOME TRUST

 

By (Signature and Title)*    JOHN M. CORCORAN
  John M. Corcoran, President

Date: June 18, 2012

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)*    JOHN M. CORCORAN
  John M. Corcoran, President (Principal Executive Officer)

Date: June 18, 2012

 

By (Signature and Title)*    DAVID L. DILORENZO
  David L. DiLorenzo, Treasurer (Principal Financial Officer and Accounting Officer)

Date: June 18, 2012

 

* Print name and title of each signing officer under his or her signature.