MFS HIGH YIELD MUNICIPAL 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 811-4992

MFS HIGH YIELD MUNICIPAL 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: November 30

Date of reporting period: May 31, 2009


Table of Contents
ITEM 1. REPORTS TO STOCKHOLDERS.


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LOGO

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Semiannual report

MFS® High Yield Municipal Trust

5/31/09

CMU-SEM


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MFS® High Yield Municipal Trust

 

New York Stock Exchange Symbol: CMU

 

LETTER FROM THE CEO   1
PORTFOLIO COMPOSITION   2
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND RISKS OF THE FUND   4
PORTFOLIO MANAGERS’ PROFILES   6
OTHER NOTES   6
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN   7
PORTFOLIO OF INVESTMENTS   9
STATEMENT OF ASSETS AND LIABILITIES   28
STATEMENT OF OPERATIONS   29
STATEMENTS OF CHANGES IN NET ASSETS   30
FINANCIAL HIGHLIGHTS   31
NOTES TO FINANCIAL STATEMENTS   33
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   45
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT   46
PROXY VOTING POLICIES AND
INFORMATION
  46
QUARTERLY PORTFOLIO DISCLOSURE   46
CONTACT INFORMATION   BACK COVER

 

NOT FDIC INSURED Ÿ MAY LOSE VALUE Ÿ NO BANK GUARANTEE

 


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LETTER FROM THE CEO

Dear Shareholders:

The market downturns and economic setbacks of late probably rank among the worst financial declines most of us have experienced. Inevitably, people may be questioning their commitment to investing. Still, it is important to remember that downturns are an inescapable part of the business cycle. Such troughs have been seen before, and if we can use history as a guide, market recoveries typically have followed.

Recent market events have shown the value of certain types of investments. In down markets especially, the benefits that funds offer — diversification, professional management, and transparency of operations — become even more important for investors.

This year, MFS celebrates the 85th anniversary of its flagship fund, Massachusetts Investors Trust. Founded in 1924, Massachusetts Investors Trust was America’s first mutual fund. Over the years, MFS has managed money through wars, recessions, and countless boom and bust market cycles. As dire as today’s economic climate may seem, experience has taught us the benefits of maintaining a long-term view. No one can predict when the market will fully recover. Still, we remain fully confident that the hallmarks of funds — diversification, professional management, and transparency — can serve long-term investors well through any type of market climate.

Respectfully,

LOGO

Robert J. Manning

Chief Executive Officer and Chief Investment Officer

MFS Investment Management®

July 15, 2009

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

Before investing, consider the fund’s investment objectives, risks, charges, and expenses. For a prospectus containing this and other information, contact MFS or view online. Read it carefully.

MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116

 

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PORTFOLIO COMPOSITION

 

Portfolio structure

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Top five industries reflecting equivalent exposure of derivative positions (i)  
Healthcare Revenue — Hospitals   22.9%
Healthcare Revenue — Long Term Care   15.7%
Tax Assessment   5.9%
Tobacco   5.1%
Multi-Family Housing Revenue   5.1%
Credit quality of bonds (r)  
AAA   11.3%
AA   18.1%
A   10.0%
BBB   23.8%
BB   5.1%
B   2.1%
CCC   1.7%
Not Rated   27.9%

 

Portfolio structure reflecting equivalent exposure of derivative positions (i)(j)

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Portfolio facts  
Average Duration (d)(i)   13.4
Average Effective Maturity (i)(m)   17.2 yrs.
Average Credit Quality of Rated Securities (long-term) (a)   A-
Average Credit Quality of Rated Securities (short-term) (a)   A-1

 

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Portfolio Composition – continued

 

(a) The average credit quality of rated securities is based upon a market weighted average of portfolio holdings that are rated by public rating 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.

 

(i) For purposes of this presentation, the bond component includes accrued interest amounts and may be positively or negatively impacted by the equivalent exposure from any derivative holdings, if applicable.

 

(j) For the purpose of managing the fund’s duration, the fund holds short treasury futures with a bond equivalent exposure of (18.0)%, which reduce the fund’s interest exposure, but not its credit exposure.

 

(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.

 

(r) Each security is assigned a rating from Moody’s Investors Service. If not rated by Moody’s, the rating will be that assigned by Standard & Poor’s. Likewise, if not assigned a rating by Standard & Poor’s, it will be based on the rating assigned by Fitch, Inc. For those portfolios that hold a security which is not rated by any of the three agencies, the security is considered Not Rated. Holdings in U.S. Treasuries and government agency mortgage-backed securities, if any, are included in the “AAA”-rating category. Percentages are based on the total market value of investments as of 5/31/09.

Percentages are based on net assets, including the value of auction preferred shares, as of 5/31/09, unless otherwise noted.

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

 

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INVESTMENT OBJECTIVE, PRINCIPAL

INVESTMENT STRATEGIES AND RISKS

OF THE FUND

Investment Objective

The fund’s investment objective is to seek high current income exempt from federal income tax, but may also consider capital appreciation. The fund’s objective may be changed without shareholder approval.

Principal Investment Strategies

The fund invests, under normal market conditions, at least 80% of its net assets, including assets attributable to preferred shares and borrowings for investment purposes, in tax-exempt bonds and tax-exempt notes. This policy may not be changed without shareholder approval. Tax-exempt bonds and tax-exempt notes are municipal instruments, the interest of which is exempt from federal income tax. Interest from the fund’s investments may be subject to the federal alternative minimum tax. MFS may also invest in taxable instruments.

MFS may invest 25% or more of the fund’s total assets in municipal instruments that finance similar projects, such as those relating to education, healthcare, housing, utilities, water, or sewers.

MFS may invest up to 100% of the fund’s assets in lower quality debt instruments.

MFS may invest a relatively high percentage of the fund’s assets in the debt instruments of a single issuer or a small number of issuers.

MFS may use derivatives for different purposes, including to earn income and enhance returns, to increase or decrease exposure to a particular market, to manage or adjust the risk profile of the fund, or as alternatives to direct investments.

MFS uses a bottom-up investment approach in buying and selling investments for the fund. Investments are selected primarily based on fundamental analysis of instruments and their issuers in light of current market, economic, political, and regulatory conditions. Factors considered may include the instrument’s credit quality, collateral characteristics, and indenture provisions, and the issuer’s management ability, capital structure, leverage, and ability to meet its current obligations. Quantitative analysis of the structure of the instrument and its features may also be considered.

The fund uses leverage through the issuance of preferred shares and/or the creation of tender option bonds, and then investing the proceeds pursuant to its investment strategies. If approved by the fund’s Board of Trustees, the fund may use leverage by other methods.

MFS may engage in active and frequent trading in pursuing the fund’s principal investment strategies.

 

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Investment Objective, Principal Investment Strategies and Risks of the Fund – continued

 

In response to market, economic, political, or other conditions, MFS may depart from the fund’s principal investment strategies by temporarily investing for defensive purposes.

Principal Risks

The portfolio’s yield and share prices change daily based on the credit quality of its investments and changes in interest rates. In general, the value of debt securities will decline when interest rates rise and will increase when interest rates fall. Debt securities with longer maturity dates will generally be subject to greater price fluctuations than those with shorter maturities. Municipal instruments can be volatile and significantly affected by adverse tax or court rulings, legislative or political changes and the financial condition of the issuers and/or insurers of municipal instruments. If the Internal Revenue Service determines an issuer of a municipal security has not complied with applicable tax requirements, interest from the security could become taxable and the security could decline significantly in value. Derivatives can be highly volatile and involve risks in addition to those of the underlying indicators upon whose value the derivative is based. Gains or losses from derivatives can be substantially greater than the derivatives’ original cost. Lower quality debt securities involve substantially greater risk of default and their value can decline significantly over time. To the extent that investments are purchased with the proceeds from the issuance of preferred shares, the fund’s net asset value will increase or decrease at a greater rate than a comparable unleveraged fund. To the extent that the fund participates in the creation of tender option bonds, it will hold more concentrated positions in individual securities and so its performance may be more volatile than the performance of more diversified funds. A tender option bond issue may terminate upon the occurrence of certain enumerated events, which would result in a reduction in the fund’s leverage. In connection with the creation of tender option bonds and for other investment purposes, the fund may invest in inverse floating rate investments, whose potential income return is inversely related to changes in a floating interest rate. Inverse floating rate investments may provide investment leverage and be more volatile than other debt instruments. When you sell your shares, they may be worth more or less than the amount you paid for them. Please see the fund’s registration statement for further information regarding these and other risk considerations. A copy of the fund’s registration statement on Form N-2 is available on the EDGAR database on the Securities and Exchange Commission’s Internet Web site at http://sec.gov and on the MFS Web site at mfs.com.

 

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 MANAGERS’ PROFILES

 

Gary Lasman     Investment Officer of MFS; employed in the investment area of MFS since 2002. Portfolio manager of the fund since June 2007.
Geoffrey Schechter     Investment Officer of MFS; employed in the investment area of MFS since 1993. Portfolio manager of the fund since June 2007.

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 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.

 

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DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN

The fund offers a Dividend Reinvestment and Cash Purchase Plan (the “Plan”) that allows common shareholders to reinvest either all of the distributions paid by the fund or only the long-term capital gains. Generally, purchases are made at the market price unless that price exceeds the net asset value (the shares are trading at a premium). If the shares are trading at a premium, purchases will be made at a price of either the net asset value or 95% of the market price, whichever is greater. You can also buy shares on a quarterly basis in any amount $100 and over. The Plan Agent will purchase shares under the Cash Purchase Plan on the 15th of January, April, July, and October or shortly thereafter.

If shares are registered in your own name, new shareholders will automatically participate in the Plan, unless you have indicated that you do not wish to participate. If your shares are in the name of a brokerage firm, bank, or other nominee, you can ask the firm or nominee to participate in the Plan on your behalf. If the nominee does not offer the Plan, you may wish to request that your shares be re-registered in your own name so that you can participate. There is no service charge to reinvest distributions, nor are there brokerage charges for shares issued directly by the fund. However, when shares are bought on the New York Stock Exchange or otherwise on the open market, each participant pays a pro rata share of the transaction expenses, including commissions. Dividends and capital gains distributions are taxable whether received in cash or reinvested in additional shares – the automatic reinvestment of distributions does not relieve you of any income tax that may be payable (or required to be withheld) on the distributions.

You may withdraw from the Plan at any time by going to the Plan Agent’s website at www.computershare.com, by calling
1-800-637-2304 any business day from 9 a.m. to 5 p.m. Eastern time or by writing to the Plan Agent at P.O. Box 43078, Providence, RI 02940-3078. Please have available the name of the fund and your account number. For certain types of registrations, such as corporate accounts, instructions must be submitted in writing. Please call for additional details. When you withdraw from the Plan, you can receive the value of the reinvested shares in one of three ways: your full shares will be held in your account, the Plan Agent will sell your shares and send the proceeds to you, or you may transfer your full shares to your investment professional who can hold or sell them. Additionally, the Plan Agent will sell your fractional shares and send the proceeds to you.

If you have any questions or for further information or a copy of the Plan, contact the Plan Agent Computershare Trust Company, N.A. (the Transfer Agent for the fund) at 1-800-637-2304, at the Plan Agent’s website at

 

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Dividend Reinvestment and Cash Purchase Plan – continued

 

www.computershare.com, or by writing to the Plan Agent at P.O. Box 43078, Providence, RI 02940-3078.

The following changes in the Plan will take effect on September 1, 2009:

 

  Ÿ  

When dividend reinvestment is being made through purchases in the open market, such purchases will be made on or shortly after the payment date for such distribution (except where temporary limits on purchases are legally required) and in no event more than 15 days thereafter (instead of 45 days as previously specified).

 

  Ÿ  

In an instance where the Plan Agent either cannot invest the full amount of the distribution through open market purchases or the fund’s shares are no longer selling at a discount to the current net asset value per share, the fund will supplementally issue additional shares at the greater of net asset value per share or 95% of the current market value price per share calculated on the date that such request is made (instead of the distribution date net asset value as previously specified). This price may be greater or lesser than the fund’s net asset value per share on the distribution payment date.

 

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PORTFOLIO OF INVESTMENTS

5/31/09 (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 - 163.9%             
Issuer    Shares/Par   Value ($)
    
Airport & Port Revenue - 4.7%             
Branson, MO, Regional Airport Transportation Development District Airport Rev., “B”, 6%, 2037    $ 460,000   $ 294,021
Dallas Fort Worth, TX, International Airport Rev. Improvement, “B”, FSA, 5%, 2025      3,000,000     2,823,630
New York, NY, City Industrial Development Authority Rev. (Terminal One Group Assn.), 5.5%, 2021      500,000     453,080
Port Authority NY & NJ, Cons Thirty Seventh, FSA, 5.125%, 2030      1,450,000     1,403,586
        
           $ 4,974,317
General Obligations - General Purpose - 0.8%             
Commonwealth of Puerto Rico Government Development Bank, “B”, 5%, 2015    $ 400,000   $ 395,852
Luzerne County, PA, FSA, 6.75%, 2023      455,000     455,637
        
           $ 851,489
General Obligations - Schools - 2.3%             
Beverly Hills, CA, Unified School District (Election of 2008), 0%, 2029    $ 2,195,000   $ 743,842
Beverly Hills, CA, Unified School District (Election of 2008), 0%, 2031      275,000     81,392
Beverly Hills, CA, Unified School District (Election of 2008), 0%, 2032      280,000     76,868
Beverly Hills, CA, Unified School District (Election of 2008), 0%, 2033      560,000     143,354
Irving, TX, Independent School District, “A”, 0%, 2016      1,000,000     809,460
Los Angeles, CA, Unified School District, “D”, 5%, 2034      165,000     159,776
San Jacinto, TX, Community College District, 5.125%, 2038      430,000     433,724
        
           $ 2,448,416
Healthcare Revenue - Hospitals - 38.3%             
Allegheny County, PA, Hospital Development Authority Rev.
(University of Pittsburgh Medical Center), “A”, 5.375%, 2029
   $ 440,000   $ 430,681
Allegheny County, PA, Hospital Development Authority Rev. (West Penn Allegheny Health), “A”, 5%, 2028      435,000     275,172
Allegheny County, PA, Hospital Development Authority Rev. (West Penn Allegheny Health), “A”, 5.375%, 2040      625,000     373,450
Atchison, KS, Hospital Rev. (Atchison Hospital Assn.), “A”, 6.75%, 2030      320,000     271,926
Brunswick, GA, Hospital Authority Rev. (Glynn-Brunswick Memorial Hospital), 5.625%, 2034      170,000     161,760
California Health Facilities Financing Authority Rev. (Sutter Health), “A”, 5%, 2042      500,000     442,840

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par   Value ($)
    
Municipal Bonds - continued             
Healthcare Revenue - Hospitals - continued             
California Statewide Communities Development Authority Rev. (Catholic Healthcare West) “K”, ASSD GTY, 5.5%, 2041    $ 625,000   $ 622,169
California Statewide Communities Development Authority Rev. (Catholic Healthcare West) “L”, ASSD GTY, 5.25%, 2041      870,000     833,564
California Statewide Communities Development Authority Rev. (Children’s Hospital), 5%, 2047      290,000     186,650
California Statewide Communities Development Authority Rev. (St. Joseph Health System), FGIC, 5.75%, 2047      635,000     610,038
Conway, AR, Hospital Rev. (Conway Regional Medical Center), “A”, 6.4%, 2029      350,000     322,501
Conway, AR, Hospital Rev. (Conway Regional Medical Center), “B”, 6.4%, 2029      850,000     783,216
Delaware County, PA, Authority Rev. (Mercy Health Corp.), ETM, 6%, 2016 (c)      965,000     1,012,642
Delaware County, PA, Authority Rev. (Mercy Health Corp.), ETM, 6%, 2026 (c)      500,000     567,475
Dickinson County, MI, Healthcare System Hospital Rev., 5.7%, 2018      770,000     706,752
Garden City, MI, Hospital Finance Authority Rev. (Garden City Hospital), 5%, 2038      500,000     304,280
Genesee County, NY, Industrial Development Agency Civic Facility Rev. (United Memorial Medical Center), 5%, 2027      90,000     57,436
Harris County, TX, Health Facilities Development Corp., Hospital Rev. (Memorial Hermann Healthcare Systems), “B”, 7.25%, 2035      205,000     219,211
Idaho Health Facilities Authority Rev. (IHC Hospitals, Inc.), ETM, 6.65%, 2021 (c)(f)      2,750,000     3,496,075
Illinois Finance Authority Rev. (Children’s Memorial Hospital), “A”, ASSD GTY, 5.25%, 2047      870,000     824,760
Illinois Finance Authority Rev. (Edward Hospital), “A”, AMBAC, 5.5%, 2040      1,090,000     932,277
Illinois Finance Authority Rev. (Kewanee Hospital), 5.1%, 2031      425,000     282,349
Illinois Health Facilities Authority Rev. (Swedish American Hospital), 6.875%, 2010 (c)      500,000     526,520
Indiana Health & Educational Facilities Authority, Hospital Rev. (Community Foundation of Northwest Indiana), 5.5%, 2037      1,125,000     936,169
Indiana Health & Educational Facilities Finance Authority, Hospital Rev. (Clarian Health), “A”, 5%, 2039      1,745,000     1,396,262
Indiana Health & Educational Facilities Financing Authority Rev. (Sisters of St. Francis Health Services, Inc.), “E”, FSA, 5.25%, 2041      660,000     628,617
Indiana Health Facilities Financing Authority Rev. (Community Foundation of Northwest Indiana ), “A”, 6%, 2034      425,000     383,104
Johnson City, TN, Health & Educational Facilities Board Hospital Rev. (Mountain States Health), “A”, 5.5%, 2031      1,120,000     1,008,952

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par   Value ($)
    
Municipal Bonds - continued             
Healthcare Revenue - Hospitals - continued             
Johnson City, TN, Health & Educational Facilities Board Hospital Rev. (Mountain States Health), “A”, 5.5%, 2036    $ 410,000   $ 363,272
Kentucky Economic Development Finance Authority, Hospital Facilities Rev. (Baptist Healthcare System), “A”, 5.375%, 2024      300,000     315,246
Kentucky Economic Development Finance Authority, Hospital Facilities Rev. (Baptist Healthcare System), “A”, 5.625%, 2027      100,000     103,563
Knox County, TN, Health, Educational, Hospital & Housing Facilities Board Rev. (University Health Systems, Inc.), 5.25%, 2036      415,000     348,123
Lake County, OH, Hospital Facilities Rev. (Lake Hospital Systems, Inc.), 5.625%, 2029      435,000     392,031
Louisiana Public Facilities Authority Hospital Rev. (Lake Charles Memorial Hospital), 6.375%, 2034      830,000     670,565
Louisville & Jefferson County, KY, Metro Government Health Facilities Rev. (Jewish Hospital & St. Mary’s Healthcare), 6.125%, 2037      1,315,000     1,310,805
Louisville & Jefferson County, KY, Metropolitan Government Healthcare Systems Rev. (Norton Healthcare, Inc.), 5.25%, 2036      1,265,000     1,102,890
Lufkin, TX, Health Facilities Development Corp. Rev. (Memorial Health System), 5.5%, 2032      60,000     45,415
Lufkin, TX, Health Facilities Development Corp. Rev. (Memorial Health System), 5.5%, 2037      60,000     44,159
Maryland Health & Higher Educational Facilities Authority Rev. (Anne Arundel Health System), “A”, 6.75%, 2039      735,000     805,913
Maryland Health & Higher Educational Facilities Authority Rev. (Medstar Health), BHAC, 5.25%, 2046      440,000     435,732
Maryland Health & Higher Educational Facilities Authority Rev. (Washington County Hospital), 6%, 2043      120,000     104,002
Massachusetts Health & Educational Facilities Authority Rev. (Boston Medical Center), 5.25%, 2038      1,000,000     827,880
Massachusetts Health & Educational Facilities Authority Rev. (Jordan Hospital), “E”, 6.75%, 2033      250,000     185,525
Massachusetts Health & Educational Facilities Authority Rev. (Milford-Whitinsville Hospital), “C”, 5.25%, 2018      500,000     430,780
Massachusetts Health & Educational Facilities Authority Rev. (Quincy Medical Center), “A”, 6.5%, 2038      340,000     247,778
Montgomery, AL, Medical Clinic Board Health Care Facility Rev. (Jackson Hospital & Clinic), 5.25%, 2031      125,000     98,403
Montgomery, AL, Medical Clinic Board Health Care Facility Rev. (Jackson Hospital & Clinic), 5.25%, 2036      620,000     474,356
New Hampshire Health & Educational Facilities Authority Rev. (Catholic Medical Center), “A”, 6.125%, 2012 (c)      175,000     201,038
New Hampshire Health & Educational Facilities Authority Rev. (Catholic Medical Center), “A”, 6.125%, 2032      25,000     21,644

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par   Value ($)
    
Municipal Bonds - continued             
Healthcare Revenue - Hospitals - continued             
New Hampshire Health & Educational Facilities Authority Rev. (Memorial Hospital at Conway), 5.25%, 2021    $ 530,000   $ 466,533
New Hanover County, N.C., Hospital Rev., FSA, 5.125%, 2031      895,000     879,167
New Jersey Health Care Facilities, Financing Authority Rev. (St. Peter’s University Hospital), 5.75%, 2037      545,000     445,805
New Mexico State Hospital Equipment Loan Council, Hospital Rev. (Rehoboth McKinley Christian Hospital), “A”, 5%, 2017      285,000     234,415
New York Dormitory Authority Rev., Non-State Supported Debt (Bronx-Lebanon Hospital Center), LOC, 6.5%, 2030      190,000     200,028
New York Dormitory Authority Rev., Non-State Supported Debt (Bronx-Lebanon Hospital Center), LOC, 6.25%, 2035      115,000     118,786
Norman, OK, Regional Hospital Authority Rev., 5.375%, 2036      235,000     162,503
Olympia, WA, Healthcare Facilities Authority Rev. (Catholic Health Initiatives), “D”, 6.375%, 2036      1,095,000     1,169,022
Orange County, FL, Health Facilities Authority Hospital Rev. (Orlando Regional Healthcare), 5.75%, 2012 (c)      150,000     171,239
Philadelphia, PA, Hospitals & Higher Education Facilities Authority Rev. (Temple University Health System), “A”, 5.5%, 2030      480,000     370,310
Philadelphia, PA, Hospitals & Higher Educational Facilities Rev. (Temple University Health System), “A”, 6.625%, 2023      375,000     355,166
Rhode Island Health & Educational Building Corp. Rev. (Rhode Island Hospital Foundation), “A”, ASSD GTY, 7%, 2039      660,000     707,348
Royal Oak, MI, Hospital Finance Authority Rev. (William Beaumont Hospital), 8.25%, 2039      485,000     542,497
Salida, CO, Hospital District Rev., 5.25%, 2036      735,000     487,246
Saline County, MO, Industrial Development Authority Rev. (John Fitzgibbon Memorial Hospital, Inc.), 5.625%, 2035      985,000     733,441
Skagit County, WA, Public Hospital District No. 001 Rev. (Skagit Valley Hospital), 5.75%, 2032      90,000     73,571
South Lake County, FL, Hospital District Rev. (South Lake Hospital, Inc.), 6.375%, 2034      250,000     223,443
Southwestern, IL, Development Authority Rev. (Anderson Hospital), 5.375%, 2015      500,000     476,020
Southwestern, IL, Development Authority Rev. (Anderson Hospital), 5.5%, 2020      550,000     495,314
Southwestern, IL, Development Authority Rev. (Anderson Hospital), 5.125%, 2026      500,000     409,195
Sullivan County, TN, Health, Educational & Housing Facilities Board Hospital Rev. (Wellmont Health Systems Project), “C”, 5.25%, 2036      1,085,000     718,715
Tyler, TX, Health Facilities Development Corp. (East Texas Medical Center), “A”, 5.25%, 2032      230,000     175,978

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par   Value ($)
    
Municipal Bonds - continued             
Healthcare Revenue - Hospitals - continued             
Tyler, TX, Health Facilities Development Corp. (East Texas Medical Center), “A”, 5.375%, 2037    $ 190,000   $ 144,501
Virginia Small Business Financing Authority Hospital Rev., (Wellmont Health Project), “A”, 5.25%, 2037      470,000     309,133
Washington Health Care Facilities Authority Rev. (Multicare Health Systems), “B”, ASSD GTY, 6%, 2039      440,000     446,323
West Contra Costa, CA, Healthcare District, AMBAC, 5.5%, 2029      105,000     102,014
West Virginia Hospital Finance Authority Rev. (Charleston Medical Center), 6.75%, 2010 (c)      605,000     654,435
Wisconsin Health & Educational Facilities Authority Rev. (Aurora Health Care, Inc.), 6.4%, 2033      350,000     338,755
Wisconsin Health & Educational Facilities Authority Rev. (Fort Healthcare, Inc.), 6.1%, 2034      750,000     673,313
Wisconsin Health & Educational Facilities Authority Rev. (Wheaton Franciscan Healthcare), 5.75%, 2012 (c)      450,000     506,268
Wisconsin Health & Educational Facilities Authority Rev. (Wheaton Franciscan Healthcare), 5.25%, 2034      935,000     671,274
Wisconsin Health & Educational Facilities Authority Rev. (Wheaton Franciscan Services), “A”, 5.25%, 2025      390,000     310,311
        
           $ 40,898,037
Healthcare Revenue - Long Term Care - 26.1%             
Abilene, TX, Health Facilities Development Corp., Retirement Facilities Rev. (Sears Methodist Retirement), “A”, 5.9%, 2025    $ 750,000   $ 535,260
Abilene, TX, Health Facilities Development Corp., Retirement Facilities Rev. (Sears Methodist Retirement), “A”, 7%, 2033      200,000     149,514
Boston, MA, Industrial Development Financing Authority Rev. (Springhouse, Inc.), 5.875%, 2020      235,000     199,508
Bucks County, PA, Industrial Development Authority Retirement Community Rev. (Ann’s Choice, Inc.), “A”, 6.125%, 2025      500,000     386,300
Bucks County, PA, Industrial Development Authority Retirement Community Rev. (Ann’s Choice, Inc.), “A”, 6.25%, 2035      250,000     181,260
Bucks County, PA, Industrial Development Authority Rev. (Lutheran Community Telford Center), 5.75%, 2027      90,000     66,371
Bucks County, PA, Industrial Development Authority Rev. (Lutheran Community Telford Center), 5.75%, 2037      120,000     81,815
California Statewide Communities Development Authority Rev. (Eskaton Properties, Inc.), 8.25%, 2010 (c)      695,000     770,275
Capital Projects Finance Authority, FL (Glenridge on Palmer Ranch), “A”, 8%, 2012 (c)      500,000     601,490
Chartiers Valley, PA, Industrial & Commercial Development Authority (Friendship Village), “A”, 5.75%, 2020      1,000,000     845,950

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par   Value ($)
    
Municipal Bonds - continued             
Healthcare Revenue - Long Term Care - continued             
Chartiers Valley, PA, Industrial & Commercial Development Authority Rev. (Asbury Health Center), 6.375%, 2024    $ 1,000,000   $ 849,260
Colorado Health Facilities Authority Rev. (American Housing Foundation, Inc.), 8.5%, 2011 (c)      530,000     615,812
Colorado Health Facilities Authority Rev. (Christian Living Communities Project), “A”, 5.75%, 2037      500,000     339,395
Colorado Health Facilities Authority Rev. (Covenant Retirement Communities, Inc.), 5%, 2035      1,100,000     782,551
Colorado Health Facilities Authority Rev. (Evangelical Lutheran), “A”, 6.125%, 2038      120,000     118,955
Columbus, GA, Housing Authority Rev. (Calvary Community, Inc.), 7%, 2019      425,000     353,562
Fulton County, GA, Residential Care Facilities (Canterbury Court), “A”, 6.125%, 2026      500,000     395,385
Fulton County, GA, Residential Care Facilities, First Mortgage (Lenbrook Square Foundation, Inc.), “A”, 5%, 2029      1,500,000     979,440
HFDC of Central Texas, Inc., Retirement Facilities Rev. (Legacy at Willow Bend), “A”, 5.75%, 2036      600,000     391,116
Houston, TX, Health Facilities Development Corp., (Buckingham Senior Living Community), “A”, 7%, 2014 (c)      500,000     602,870
Howard County, MD, Retirement Facilities Rev. (Vantage House Corp.), “A”, 5.25%, 2033      200,000     124,174
Huntington, NY, Housing Authority Rev. (Gurwin Senior Jewish Residences), “A”, 5.875%, 2019      420,000     342,220
Huntington, NY, Housing Authority Rev. (Gurwin Senior Jewish Residences), “A”, 6%, 2029      650,000     468,475
Illinois Finance Authority Rev. (Smith Village), “A”, 6.25%, 2035      1,000,000     770,460
Illinois Health Facilities Authority Rev. (Smith Crossing), “A”, 7%, 2032      525,000     428,306
Indiana Health Facilities Financing Authority Rev. (Hoosier Care, Inc.), 7.125%, 2034      1,005,000     774,584
Iowa Finance Authority, Health Care Facilities Rev. (Care Initiatives), 9.25%, 2011 (c)      915,000     1,079,572
Iowa Finance Authority, Health Care Facilities Rev. (Care Initiatives), “B”, 5.75%, 2018      550,000     462,985
Iowa Finance Authority, Health Care Facilities Rev. (Care Initiatives), “B”, 5.75%, 2028      1,475,000     1,040,524
James City County, VA, Economic Development (WindsorMeade Project), “A”, 5.5%, 2037      520,000     307,975
Johnson City, TN, Health & Educational Facilities Board (Appalachian Christian Village), “A”, 6.25%, 2032      250,000     181,583
Juneau, AK, City & Borough Non-Recourse Rev. (St. Ann’s Care Project), 6.875%, 2025      900,000     695,259

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par   Value ($)
    
Municipal Bonds - continued             
Healthcare Revenue - Long Term Care - continued             
Kent County, DE, Assisted Living (Heritage at Dover LLC), 7.625%, 2030    $ 1,120,000   $ 823,368
Kentucky Economic Development Finance Authority Health Facilities Rev. (AHF/Kentucky-IOWA, Inc.), 8%, 2029      395,000     315,301
La Verne, CA, COP (Brethren Hillcrest Homes), “B”, 6.625%, 2025      525,000     444,056
Lancaster, PA, Industrial Development Authority Rev. (Garden Spot Village), “A”, 7.625%, 2010 (c)      325,000     349,164
Massachusetts Development Finance Agency Rev. (Adventcare), “A”, 6.75%, 2037      695,000     517,177
Massachusetts Development Finance Agency Rev. (Alliance Health of Brockton, Inc.), “A”, 7.1%, 2032      1,065,000     840,541
Massachusetts Development Finance Agency Rev. (Linden Ponds, Inc.), “A”, 5.5%, 2027      185,000     117,821
Massachusetts Development Finance Agency Rev. (Linden Ponds, Inc.), “A”, 5.75%, 2035      45,000     27,183
Massachusetts Development Finance Agency Rev. (Loomis Communities, Inc.), “A”, 5.625%, 2015      250,000     230,758
Massachusetts Development Finance Agency Rev. (Loomis Communities, Inc.), “A”, 6.9%, 2032      125,000     110,560
Massachusetts Industrial Finance Agency Rev. (GF/Massachusetts, Inc.), 8.3%, 2023      755,000     434,578
Metropolitan Government of Nashville & Davidson County, TN, Health & Educational Facilities Board Rev. (Blakeford at Green Hills), 5.65%, 2024      575,000     440,743
Montgomery County, PA, Industrial Development Authority Rev. (Whitemarsh Continuing Care), 6.125%, 2028      150,000     93,746
Montgomery County, PA, Industrial Development Authority Rev. (Whitemarsh Continuing Care), 6.25%, 2035      600,000     356,082
New Jersey Economic Development Authority Rev. (Lions Gate), “A”, 5.75%, 2025      400,000     325,832
New Jersey Economic Development Authority Rev. (Lions Gate), “A”, 5.875%, 2037      300,000     223,083
New Jersey Economic Development Authority Rev. (Seabrook Village, Inc.), 5.25%, 2026      500,000     342,475
New Jersey Economic Development Authority Rev. (Seabrook Village, Inc.), 5.25%, 2036      500,000     304,805
New Jersey Economic Development Authority Rev. (Seabrook Village, Inc.), “A”, 8.25%, 2010 (c)      700,000     773,822
Roseville, MN, Elder Care Facilities (Care Institute, Inc.), 7.75%, 2023      1,630,000     1,234,888
Sartell, MN, Health Care & Housing Authority Rev. (The Foundation for Health Care), “A”, 6.625%, 2029      1,025,000     869,313
Savannah, GA, Economic Development Authority, First Mortgage (Marshes of Skidway), “A”, 7.4%, 2034      350,000     288,701

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par   Value ($)
    
Municipal Bonds - continued             
Healthcare Revenue - Long Term Care - continued             
Shelby County, TN, Health, Educational & Housing Facilities Board Rev. (Germantown Village), “A”, 7.25%, 2034    $ 300,000   $ 241,113
South Carolina Jobs & Economic Development Authority Rev. (Woodlands at Furman), “A”, 6%, 2027      280,000     190,350
South Carolina Jobs & Economic Development Authority Rev. (Woodlands at Furman), “A”, 6%, 2042      260,000     158,187
South Carolina Jobs & Economic Development Authority, Health Facilities Rev. (Wesley Commons), 5.3%, 2036      200,000     120,472
St. Johns County, FL, Industrial Development Authority (Glenmoor Project), “A”, 5.25%, 2026      500,000     343,320
Westmoreland County, PA, Industrial Development Authority Rev. (Redstone Retirement Community), “A”, 5.875%, 2032      600,000     428,148
Westmoreland County, PA, Industrial Development Retirement Authority Rev. (Redstone Retirement Community), “A”, 5.75%, 2026      1,250,000     931,463
Wisconsin Health & Educational Facilities Board Rev. (All Saints Assisted Living Project), 6%, 2037      180,000     120,965
        
           $ 27,920,221
Healthcare Revenue - Other - 0.7%             
Massachusetts Health & Educational Facilities Authority Rev. (Civic Investments, Inc.), “A”, 9%, 2012 (c)    $ 650,000   $ 773,110
Industrial Revenue - Airlines - 4.5%             
Alliance Airport Authority, TX (American Airlines, Inc.), 5.25%, 2029    $ 1,560,000   $ 734,604
Chicago, IL, O’Hare International Airport Special Facilities Rev. (American Airlines, Inc.), 5.5%, 2030      1,745,000     932,807
Cleveland, OH, Airport Special Rev. (Continental Airlines, Inc.), 5.7%, 2019      875,000     587,554
Dallas Fort Worth, TX, International Airport Facility Improvement Corp. (American Airlines, Inc.), 5.5%, 2030      750,000     381,473
New Jersey Economic Development Authority, Special Facilities Rev. (Continental Airlines, Inc.), 9%, 2033 (b)      1,250,000     1,271,288
New York, NY, City Industrial Development Agencies Rev. (American Airlines, Inc.), 7.625%, 2025      40,000     36,459
New York, NY, City Industrial Development Agencies Rev. (American Airlines, Inc.), 7.75%, 2031      385,000     359,586
New York, NY, City Industrial Development Agency Special Facility Rev. (American Airlines, Inc.), “B”, 8.5%, 2028      500,000     492,940
        
           $ 4,796,711

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par   Value ($)
    
Municipal Bonds - continued             
Industrial Revenue - Chemicals - 0.9%             
Brazos River, TX, Harbor Navigation District (Dow Chemical Co.), “B-2”, 4.95%, 2033    $ 400,000   $ 295,776
State of Michigan Strategic Fund Limited Obligation Rev. (Dow Chemical Co.), 6.25%, 2014      655,000     661,131
        
           $ 956,907
Industrial Revenue - Environmental Services - 2.2%             
California Pollution Control Financing Authority, Solid Waste Disposal Rev. (Republic Services, Inc.), “B”, 5.25%, 2023 (b)    $ 135,000   $ 128,338
California Pollution Control Financing Authority, Solid Waste Disposal Rev. (Waste Management, Inc.), “C”, 5.125%, 2023      655,000     592,559
Carbon County, UT, Solid Waste Disposal Rev. (Allied Waste Industries), “A”, 7.5%, 2010      250,000     250,748
Carbon County, UT, Solid Waste Disposal Rev. (Laidlaw Environmental), “A”, 7.45%, 2017      500,000     509,530
Gulf Coast Waste Disposal Authority, TX (Waste Management, Inc.), “A”, 5.2%, 2028      360,000     305,636
New Hampshire Business Finance Authority, Solid Waste Disposal Rev. (Waste Management, Inc.), 5.2%, 2027      660,000     570,563
        
           $ 2,357,374
Industrial Revenue - Metals - 0.5%             
Director of Nevada Department of Business & Industry
(Wheeling/Pittsburgh Steel), “A”, 8%, 2014
   $ 150,000   $ 144,528
Greensville County, VA, Industrial Development Authority Rev. (Wheeling/Pittsburgh Steel), “A”, 7%, 2014      375,000     351,915
        
           $ 496,443
Industrial Revenue - Other - 4.3%             
Annawan, IL, Tax Increment Rev. (Patriot Renewable Fuels LLC), 5.625%, 2018    $ 350,000   $ 266,490
California Statewide Communities Development Authority Facilities (Microgy Holdings Project), 9%, 2038      400,000     332,128
Gulf Coast, TX, Industrial Development Authority Rev. (CITGO Petroleum Corp.), 8%, 2028      375,000     367,099
Houston, TX, Industrial Development Corp. (United Parcel Service, Inc.), 6%, 2023      455,000     355,387
Indianapolis, IN, Airport Authority Rev., Special Facilities (FedEx Corp.), 5.1%, 2017      500,000     447,330
Michigan Strategic Fund Rev. (Michigan Sugar Co.), “A”, 6.25%, 2015      1,000,000     939,620
New Jersey Economic Development Authority Rev. (GMT Realty LLC), “B”, 6.875%, 2037      1,000,000     767,530
Virgin Islands Government Refinery Facilities Rev. (Hovensa Coker Project), 6.5%, 2021      250,000     240,710

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par   Value ($)
    
Municipal Bonds - continued             
Industrial Revenue - Other - continued             
Virgin Islands Public Finance Authority, Refinery Facilities Rev. (Hovensa Coker Project), 5.875%, 2022    $ 400,000   $ 362,084
Will-Kankakee, IL, Regional Development Authority Rev. (Flanders Corp.), 6.5%, 2017      605,000     533,586
        
           $ 4,611,964
Industrial Revenue - Paper - 3.0%             
Beauregard Parish, LA (Boise Cascade Corp.), 6.8%, 2027    $ 1,000,000   $ 527,910
Bedford County, VA, Industrial Development Authority Rev. (Nekooska Packaging Corp.), 5.6%, 2025      400,000     275,364
Camden, AL, Industrial Development Board Exempt Facilities Rev., “B” (Weyerhaeuser Co.), 6.375%, 2013 (c)      400,000     457,816
Courtland AL, Industrial Development Board Solid Waste Disposal Rev. (Champion International Corp.), 6%, 2029      1,000,000     752,160
Escambia County, FL, Environmental Improvement Rev. (International Paper Co.), “A”, 4.75%, 2030      290,000     176,042
Escambia County, FL, Environmental Improvement Rev. (International Paper Co.), “A”, 5%, 2026      980,000     669,154
Phenix City, AL, Industrial Development Board Environmental Improvement Rev., “A” (MeadWestvaco Coated Board Project), 6.35%, 2035      400,000     318,804
        
           $ 3,177,250
Miscellaneous Revenue - Entertainment & Tourism - 2.4%             
Agua Caliente Band of Cahuilla Indians, CA, 5.6%, 2013 (z)    $ 775,000   $ 736,769
Cabazon Band Mission Indians, CA, 8.375%, 2015 (z)      150,000     99,054
Cabazon Band Mission Indians, CA, 8.75%, 2019 (z)      720,000     474,322
Cow Creek Band of Umpqua Tribe of Indians, OR, “C”, 5.625%, 2026 (n)      650,000     444,945
Mashantucket Western Pequot Tribe, CT, “B”, 0%, 2018 (n)      1,100,000     356,730
New York Liberty Development Corp. Rev. (National Sports Museum), “A”, 6.125%, 2019 (d)      351,999     1,408
New York, NY, City Industrial Development Agency Rev. (Queens Baseball Stadium), ASSD GTY, 6.125%, 2029      30,000     32,662
New York, NY, City Industrial Development Agency Rev. (Queens Baseball Stadium), ASSD GTY, 6.375%, 2039      25,000     26,880
New York, NY, City Industrial Development Agency Rev. (Queens Baseball Stadium), ASSD GTY, 6.5%, 2046      100,000     107,672
Seminole Tribe, FL, Special Obligation, “A”, 5.25%, 2027 (n)      280,000     232,582
        
           $ 2,513,024

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par   Value ($)
    
Municipal Bonds - continued             
Miscellaneous Revenue - Other - 3.2%             
Austin, TX, Convention Center (Convention Enterprises, Inc.), “A”, SYNCORA, 5.25%, 2024    $ 115,000   $ 91,853
Capital Trust Agency, FL (Aero Syracuse LLC), 6.75%, 2032      350,000     266,588
Citizens Property Insurance Corp., “A-1”, ASSD GTY, 5.5%, 2016      960,000     994,906
Dallas, TX, Civic Center Convention Complex Rev., ASSD GTY, 5.25%, 2034      845,000     841,417
Massachusetts Development Finance Agency (Boston Biomedical Research), 5.65%, 2019      620,000     541,700
Summit County, OH, Port Authority Building Rev. (Twinsburg Township), “D”, 5.125%, 2025      630,000     458,199
V Lakes Utility District Ranking Water Systems Rev., 7%, 2037      300,000     240,681
        
           $ 3,435,344
Multi-Family Housing Revenue - 8.5%             
Broward County, FL, Housing Finance Authority Rev. (Chaves Lakes Apartments Ltd.), “A”, 7.5%, 2040    $ 500,000   $ 445,070
Capital Trust Agency, FL, Housing Rev. (Atlantic Housing Foundation), “B”, 7%, 2032      645,000     537,698
Charter Mac Equity Issuer Trust, FHLMC, 6%, 2019 (n)      1,000,000     1,016,360
Charter Mac Equity Issuer Trust, “B”, FHLMC, 7.6%, 2010 (b)(n)      500,000     511,035
Clay County, FL, Housing Finance Authority Rev. (Madison Commons Apartments), “A”, 7.45%, 2040      495,000     424,235
District of Columbia Housing Finance Agency (Henson Ridge), “E”, FHA, 5.1%, 2037      655,000     604,631
Durham, NC, Durham Housing Authority Rev. (Magnolia Pointe Apartments), 5.65%, 2038 (b)      934,066     707,415
El Paso County, TX, Housing Finance Corp. (American Housing Foundation), “D”, 10%, 2032      290,000     254,005
El Paso County, TX, Housing Finance Corp. (American Housing Foundation, Inc.), “C”, 8%, 2032      285,000     243,461
Massachusetts Housing Finance Agency Rev., “B”, 5%, 2030      500,000     485,450
Massachusetts Housing Finance Agency Rev., “E”, 5%, 2028      500,000     472,030
Minneapolis, MN, Student Housing Rev. (Riverton Community Housing Project), “A”, 5.7%, 2040      500,000     352,830
Mississippi Home Corp., Rev. (Kirkwood Apartments), 6.8%, 2037      605,000     407,643
MuniMae TE Bond Subsidiary LLC, 5.8%, 2049 (z)      1,000,000     598,330
New Mexico Mortgage Finance Authority, Multi-Family Housing Rev. (Sun Pointe Apartments), “E”, FHA, 4.8%, 2040      500,000     433,985
Resolution Trust Corp., Pass-Through Certificates, “1993”, 8.5%, 2016 (z)      455,481     420,350
Seattle, WA, Housing Authority Rev., Capped Fund Program (High Rise Rehab), “I”, FSA, 5%, 2025      500,000     483,665

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par   Value ($)
    
Municipal Bonds - continued             
Multi-Family Housing Revenue - continued             
Wilmington, DE, Multi-Family Housing Rev. (Electra Arms Senior Associates), 6.25%, 2028    $ 830,000   $ 631,364
        
           $ 9,029,557
Sales & Excise Tax Revenue - 4.1%             
Bolingbrook, IL, Sales Tax Rev., 6.25%, 2024    $ 500,000   $ 302,920
Massachusetts School Building Authority, Dedicated Sales Tax Rev., AMBAC, 4.75%, 2032      840,000     832,944
Metropolitan Pier & Exposition Authority, State Tax Rev., NATL, 0%, 2015      3,000,000     2,379,180
Metropolitan Pier & Exposition Authority, State Tax Rev., ETM, FGIC, 0%, 2014 (c)      1,010,000     889,941
        
           $ 4,404,985
Single Family Housing - Local - 1.5%             
Minneapolis & St. Paul Housing Authority Rev. (City Living), “A-2”, GNMA, 5%, 2038    $ 673,018   $ 619,587
Pittsburgh, PA, Urban Redevelopment Authority Rev., “C”, GNMA, 4.8%, 2028      1,000,000     982,180
        
           $ 1,601,767
Single Family Housing - State - 5.0%             
California Housing Finance Agency Rev., “G”, 5.5%, 2042    $ 520,000   $ 501,769
California Housing Finance Agency Rev., “J”, 5.75%, 2047      1,500,000     1,493,910
Colorado Housing & Finance Authority, “A”, 5.5%, 2029      1,315,000     1,345,903
Iowa Finance Authority, Single Family Mortgage Rev., “E”, 5.4%, 2032      920,000     930,028
Kentucky Counties Single Family Mortgage Rev., “A”, NATL, 9%, 2016      5,000     5,001
North Dakota Housing Finance Agency Rev., “A”, 4.85%, 2021      475,000     469,424
Virginia Housing Development Authority, Commonwealth Mortgage, “A-5”, 4.4%, 2015      210,000     210,405
Virginia Housing Development Authority, Commonwealth Mortgage, “A-5”, 4.4%, 2015      340,000     340,707
        
           $ 5,297,147
State & Agency - Other - 0.5%             
Commonwealth of Puerto Rico (Mepsi Campus), “A”, 6.25%, 2024    $ 100,000   $ 86,185
Commonwealth of Puerto Rico (Mepsi Campus), “A”, 6.5%, 2037      500,000     405,985
        
           $ 492,170
State & Local Agencies - 5.5%             
Chesterfield County, VA, Economic Development Authority Pollution Control Rev., “A”, 5%, 2023    $ 880,000   $ 915,552
Dorchester County, SC, School District No. 2, Growth Remedy Opportunity Tax Hike, 5.25%, 2029      500,000     505,940

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par   Value ($)
    
Municipal Bonds - continued             
State & Local Agencies - continued             
Laurens County, SC, School District No. 55, Installment Purchase Rev., 5.25%, 2030    $ 700,000   $ 612,710
Michigan Building Authority Rev., Facilities Program, “I”, 5%, 2024      1,000,000     987,280
New York Metropolitan Transportation Authority, “A”, 5.125%, 2029      800,000     798,496
Newberry, SC, Investing in Children’s Education (Newberry County School District Program), 5%, 2030      400,000     337,116
Puerto Rico Public Finance Corp., “E”, ETM, 6%, 2026 (c)      80,000     96,056
Puerto Rico Public Finance Corp., Unrefunded, “E”, 6%, 2026      820,000     984,574
State of Wisconsin General Fund Annual Appropriation Rev., “A”, 5.75%, 2033      660,000     686,248
        
           $ 5,923,972
Student Loan Revenue - 0.6%             
Massachusetts Educational Financing Authority, Education Loan Rev., “H”, ASSD GTY, 6.35%, 2030    $ 625,000   $ 621,200
Tax - Other - 1.1%             
Dallas County, TX, Flood Control District, 7.25%, 2032    $ 750,000   $ 741,653
New York, NY, City Transitional Finance Authority Building Aid Rev., “S-3”, 5.25%, 2039      440,000     433,470
        
           $ 1,175,123
Tax Assessment - 9.9%             
Atlanta, GA, Tax Allocation (Eastside Project), “B”, 5.4%, 2020    $ 500,000   $ 416,820
Ave Maria Stewardship Community District, FL, “A”, 5.125%, 2038      150,000     75,819
Capital Region Community Development District, FL, Capital Improvement Rev., “A”, 7%, 2039      235,000     166,300
Celebration Community Development District, FL, “A”, 6.4%, 2034      700,000     622,272
Channing Park Community Development District, FL, 5.3%, 2038      400,000     203,032
Chicago, IL, Tax Increment Allocation (Pilsen Redevelopment), “B”, 6.75%, 2022      310,000     268,029
Du Page County, IL, Special Service Area No. 31 Special Tax (Monarch Landing Project), 5.625%, 2036      250,000     156,178
Durbin Crossing Community Development District, FL, Special Assessment, “B-1”, 4.875%, 2010      150,000     99,803
Grand Bay at Doral Community Development District, FL, “A”, 6%, 2039      90,000     50,459
Grand Bay at Doral Community Development District, FL, “B”, 6%, 2017      545,000     400,831
Heritage Harbour North Community Development District, FL, Capital Improvement Rev., 6.375%, 2038      315,000     197,445
Homestead 50 Community Development District, FL, “A”, 6%, 2037      370,000     214,041
Homestead 50 Community Development District, FL, “B”, 5.9%, 2013      170,000     139,596
Huntington Beach, CA, Community Facilities District, Special Tax (Grand Coast Resort), “2000-1”, 6.45%, 2031      500,000     428,855

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par   Value ($)
    
Municipal Bonds - continued             
Tax Assessment - continued             
Lincoln, CA, Special Tax (Community Facilities District ), “2003-1”, 5.55%, 2013 (c)    $ 440,000   $ 514,483
Lincolnshire, IL, Special Service Area No. 1 (Sedgebrook Project), 6.25%, 2034      250,000     162,978
Magnolia Park Community Development District, FL, Special Assessment, “A”, 6.15%, 2039      615,000     371,718
Main Street Community Development District, FL, “A”, 6.8%, 2038      290,000     187,862
Main Street Community Development District, FL, “B”, 6.9%, 2017      225,000     186,059
Northwest Metropolitan District No. 3, CO, 6.25%, 2035      500,000     287,045
Oakmont Grove Community Development District, CA, “A”, 5.4%, 2038 (a)      300,000     133,350
Ohio County, WV, Commission Tax Increment Rev. (Fort Henry Centre), “A”, 5.85%, 2034      125,000     91,196
Orlando, FL, Special Assessment Rev. (Conroy Road Interchange Project), “A”, 5.5%, 2010      25,000     24,611
Orlando, FL, Special Assessment Rev. (Conroy Road Interchange Project), “A”, 5.8%, 2026      300,000     255,378
Plano, IL, Special Service Area No. 4 (Lakewood Springs Project Unit 5-B), 6%, 2035      1,490,000     983,996
Portage, IN, Economic Development Rev. (Ameriplex Project), 5%, 2027      260,000     203,603
San Diego, CA, Redevelopment Agency, Tax Allocation, FSA, 0%, 2018      1,015,000     666,622
Sarasota National Community Development District, FL, Special Assessment Rev., 5.3%, 2039      800,000     411,232
Sweetwater Creek Community Development District, FL, Capital Improvement Rev., 5.5%, 2038      195,000     109,089
Tolomato Community Development District, FL, Special Assessment, 6.65%, 2040      585,000     390,727
Tuscany Reserve Community Development District, FL, Special Assessment, “B”, 5.25%, 2016      185,000     120,368
Volo Village, IL, Special Service Area No. 3, Special Tax (Symphony Meadows Project), “1”, 6%, 2036      484,000     273,131
West Villages Improvement District, FL, Special Assessment Rev. (Unit of Development No. 3), 5.5%, 2037      490,000     230,535
Westchester, FL, Community Development District No. 1 (Community Infrastructure), 6.125%, 2035      275,000     178,151
Westridge, FL, Community Development District, Capital Improvement Rev., 5.8%, 2037 (d)      960,000     383,453
Wyandotte County-Kansas City, KS, Unified Government Transportation Development District (Legends Village West Project), 4.875%, 2028      580,000     367,511
Yorba Linda, CA, Redevelopment Agency, Tax Allocation Rev., “A”, NATL, 0%, 2024      1,325,000     585,478
        
           $ 10,558,056

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par   Value ($)
    
Municipal Bonds - continued             
Tobacco - 8.4%             
Buckeye, OH, Tobacco Settlement Financing Authority, “A-2”, 5.875%, 2030    $ 1,610,000   $ 1,264,542
Buckeye, OH, Tobacco Settlement Financing Authority, “A-2”, 5.875%, 2047      2,810,000     1,844,119
Buckeye, OH, Tobacco Settlement Financing Authority, “A-2”, 6.5%, 2047      785,000     561,652
California County, CA, Tobacco Securitization Agency, Tobacco Settlement Rev. (Los Angeles County), 0%, 2046      3,500,000     74,025
Golden State, CA, Tobacco Securitization Corp., Tobacco Settlement Rev., “A-1”, 6.25%, 2013 (c)      1,350,000     1,493,694
Inland Empire, CA, Tobacco Securitization Corp., Tobacco Settlement Rev., Asset Backed, “C-1”, 0%, 2036      1,815,000     140,245
Michigan Tobacco Settlement Finance Authority Rev., Asset Backed, “A”, 6%, 2048      1,710,000     1,176,976
Rhode Island Tobacco Settlement Authority, 6%, 2023      1,695,000     1,533,738
Tobacco Settlement Authority of Washington Rev., Asset Backed, 6.625%, 2032      500,000     401,010
Virginia Tobacco Settlement Financing Corp., “B-1”, 5%, 2047      830,000     488,214
        
           $ 8,978,215
Toll Roads - 5.2%             
Bay Area Toll Authority, CA, Toll Bridge Rev. (San Francisco Bay Area), “F1”, 5%, 2034    $ 1,445,000   $ 1,418,687
E-470 Public Highway Authority, CO, “B”, 0%, 2010 (c)      8,750,000     1,311,888
E-470 Public Highway Authority, CO, “B”, NATL, 0%, 2018      1,500,000     805,965
San Joaquin Hills, CA, Transportation Corridor Agency Toll Road Rev., “A”, NATL, 0%, 2015      3,000,000     2,056,500
        
           $ 5,593,040
Universities - Colleges - 6.7%             
California Educational Facilities Authority Rev. (University of Southern California), “A”, 5.25%, 2038    $ 1,270,000   $ 1,317,320
California Municipal Finance Authority Rev. (Biola University), 5.8%, 2028      100,000     90,616
Florida State University Board of Governors, System Improvement Rev., 6.25%, 2030      1,000,000     1,088,260
Grand Valley, MI, State University Rev., 5.5%, 2027      135,000     137,907
Grand Valley, MI, State University Rev., 5.625%, 2029      65,000     66,413
Harris County, TX, Cultural Education Facilities Rev. (Baylor College of Medicine), “D”, 5.625%, 2032      280,000     281,109
Massachusetts Health & Educational Facilities Authority Rev. (Simmons College), “I”, 8%, 2029      255,000     278,552
Savannah, GA, Economic Development Authority Rev. (AASU Student Union LLC), ASSD GTY, 5.125%, 2039      1,320,000     1,338,559

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par   Value ($)
    
Municipal Bonds - continued             
Universities - Colleges - continued             
University of Illinois Rev. (Auxiliary Facilities Systems), “A”, 5.125%, 2029    $ 1,880,000   $ 1,934,727
University of Southern Indiana Rev., Student Fee, “J”, ASSD GTY, 5.75%, 2028      300,000     323,481
University of Southern Mississippi Educational Building Corp. (Campus Facilities Project), 5.25%, 2032      265,000     273,027
University of Southern Mississippi, Educational Building Corp. Rev. (Campus Facilities Project), 5.375%, 2036      80,000     82,311
        
           $ 7,212,282
Universities - Dormitories - 0.4%             
California Statewide Communities Development Authority Rev. (Lancer Educational Student Housing Project), 5.625%, 2033    $ 735,000   $ 462,741
Universities - Secondary Schools - 1.2%             
California Statewide Communities Development Authority Rev., COP, (Crossroads Schools for the Arts & Sciences), 6%, 2028    $ 1,010,000   $ 896,749
Colorado Housing Finance Development Rev. (Evergreen Country Day School), 5.875%, 2037      175,000     111,433
Lee County, FL, Industrial Development Authority Rev. (Lee Charter Foundation), “A”, 5.375%, 2037      535,000     313,200
        
           $ 1,321,382
Utilities - Cogeneration - 0.7%             
Puerto Rico Industrial, Tourist, Educational, Medical & Environmental Central Facilities (Cogeneration Facilities - AES Puerto Rico Project), 6.625%, 2026    $ 320,000   $ 320,653
Suffolk County, NY, Industrial Development Agency Rev. (Nissequoque Cogeneration Partners Facilities), 5.5%, 2023      550,000     443,190
        
           $ 763,843
Utilities - Investor Owned - 4.9%             
Brazos River Authority, TX, Pollution Control Rev. (TXU Electric Co. LLC), “C”, 5.75%, 2036 (b)    $ 220,000   $ 168,755
Brazos River Authority, TX, Pollution Control Rev. (TXU Electric Co. LLC), “C”, 6.75%, 2038      555,000     289,083
Brazos River Authority, TX, Pollution Control Rev. (TXU Electric Co. LLC), “D”, 5.4%, 2029 (b)      45,000     26,996
Bryant, IL, Pollution Control Rev. (Central Illinois Light Co.), 5.9%, 2023      975,000     918,704
Clark County, NV, Industrial Development Rev. (Nevada Power Co. Project), “A”, 5.9%, 2032      1,500,000     1,298,925

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par   Value ($)
    
Municipal Bonds - continued             
Utilities - Investor Owned - continued             
Massachusetts St. Development Finance Agency, Solid Waste Disposal Rev., 5.75%, 2042 (b)    $ 85,000   $ 88,247
Mississippi Business Finance Corp., Pollution Control Rev. (Systems Energy Resources Project), 5.875%, 2022      1,500,000     1,383,525
New Hampshire Business Finance Authority, Pollution Control Rev. (Public Service of New Hampshire), “B”, NATL, 4.75%, 2021      250,000     226,633
Red River Authority, TX, Pollution Control Rev. (AEP Texas Central Co.), NATL, 4.45%, 2020      410,000     358,176
Sabine River Authority, TX, Pollution Control Rev. (TXU Electric Co. LLC), 5.2%, 2028      185,000     98,165
Sabine River Authority, TX, Pollution Control Rev. (TXU Electric Co. LLC), 5.75%, 2030 (b)      155,000     118,896
West Feliciana Parish, LA, Pollution Control Rev. (Entergy Gulf States), 6.6%, 2028      270,000     269,981
        
           $ 5,246,086
Utilities - Other - 3.4%             
Indiana Bond Bank Special Program, Gas Revenue, “A”, 5.25%, 2018    $ 230,000   $ 227,974
Main Street Natural Gas, Inc., GA, Gas Project Rev., “A”, 5.5%, 2028      335,000     297,282
Main Street Natural Gas, Inc., GA, Gas Project Rev., “B”, 5%, 2019      325,000     291,866
Public Authority for Colorado Energy Natural Gas Purchase Rev., 6.5%, 2038      25,000     24,581
Salt Verde Financial Corp., AZ, Senior Gas Rev., 5%, 2037      705,000     562,689
Tennessee Energy Acquisition Corp., Gas Rev., “A”, 5.25%, 2021      1,710,000     1,584,144
Tennessee Energy Acquisition Corp., Gas Rev., “A”, 5.25%, 2022      270,000     246,569
Tennessee Energy Acquisition Corp., Gas Rev., “A”, 5.25%, 2026      165,000     144,121
Tennessee Energy Acquisition Corp., Gas Rev., “C”, 5%, 2025      240,000     206,719
        
           $ 3,585,945
Water & Sewer Utility Revenue - 2.4%             
Birmingham, AL, Waterworks Board Water Rev., “A”, ASSD GTY, 5.125%, 2034    $ 595,000   $ 588,009
Commonwealth of Puerto Rico Aqueduct & Sewer Authority Rev., “A”, 6%, 2038      655,000     650,507
Commonwealth of Puerto Rico Aqueduct & Sewer Authority Rev., “A”, 6%, 2044      135,000     131,903
New York, NY, City Municipal Water Finance Authority, Water & Sewer Systems Rev. “DD”, 4.75%, 2035      790,000     756,970
Surprise, AZ, Municipal Property Corp., 4.9%, 2032      700,000     486,304
        
           $ 2,613,693
Total Municipal Bonds (Identified Cost, $197,791,882)          $ 175,091,811

 

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Portfolio of Investments (unaudited) – continued

 

Floating Rate Demand Notes - 4.2%               
Issuer    Shares/Par   Value ($)  
    
Lincoln County, WY, Pollution Control Rev. (Exxon Mobil Corp.), 0.08%, due 6/01/09    $ 100,000   $ 100,000   
Lincoln County, WY, Pollution Control Rev. (Exxon Mobil Corp.), “A”, 0.13%, due 6/01/09      1,200,000     1,200,000   
Lincoln County, WY, Pollution Control Rev. (Exxon Mobil Corp.), “C”, 0.13%, due 6/01/09      3,200,000     3,200,000   
Total Floating Rate Demand Notes, at Identified Cost and Value          $ 4,500,000   
Total Investments (Identified Cost, $202,291,882)          $ 179,591,811   
Other Assets, Less Liabilities - 2.1%            2,262,235   
Preferred Shares (Issued by the Fund) - (70.2)%            (75,000,000
Net Assets applicable to common shares - 100.0%          $ 106,854,046   

 

(a) Non-income producing security.

 

(b) Mandatory tender date is earlier than stated maturity date.

 

(c) Refunded bond.

 

(d) Non-income producing security – in default.

 

(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 $2,561,652, representing 2.4% of net assets applicable to common shares.

 

(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    Current
Market
Value
Agua Caliente Band of Cahuilla Indians, CA, 5.6%, 2013    7/22/03    $775,926    $736,769
Cabazon Band Mission Indians, CA, 8.375%, 2015    10/04/04    150,000    99,054
Cabazon Band Mission Indians, CA, 8.75%, 2019    10/04/04    720,000    474,322
MuniMae TE Bond Subsidiary LLC, 5.8%, 2049    10/14/04    1,000,000    598,330
Resolution Trust Corp., Pass-Through Certificates, “1993”, 8.5%, 2016    10/17/01-1/14/02    455,481    420,350
Total Restricted Securities          $2,328,825
% of Net Assets Applicable to Common Shares          2.2%

 

26


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Portfolio of Investments (unaudited) – continued

 

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

 

COP   Certificate of Participation
ETM   Escrowed to Maturity
LOC   Letter of Credit

 

Insurers      
AMBAC    AMBAC Indemnity Corp.
ASSD GTY    Assured Guaranty Insurance Co.
BHAC    Berkshire Hathaway Assurance Corp.
FGIC    Financial Guaranty Insurance Co.
FHA    Federal Housing Administration
FHLMC    Federal Home Loan Mortgage Corp.
FSA    Financial Security Assurance Inc.
GNMA    Government National Mortgage Assn.
NATL    National Public Finance Guarantee Corp.
SYNCORA    Syncora Guarantee Inc.

Derivative Contracts at 5/31/09

Futures contracts outstanding at 5/31/09

 

Description   Currency   Contracts   Value   Expiration
Date
  Unrealized
Appreciation
(Depreciation)
 
Asset Derivatives          
Interest Rate Futures          
U.S. Treasury Note 10 yr (Short)   USD   238   $27,846,000   Sep-09   $45,651   
Liability Derivatives          
Interest Rate Futures          
U.S. Treasury Bond 30 yr (Short)   USD   41   $4,823,906   Sep-09   $(16,159
          $29,492   
             

At May 31, 2009, the fund had sufficient cash and/or other liquid securities to cover any commitments under these derivative contracts.

See Notes to Financial Statements

 

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Financial Statements

 

STATEMENT OF ASSETS AND LIABILITIES

At 5/31/09 (unaudited)

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

 

Assets            

Investments, at value (identified cost, $202,291,882)

   $179,591,811      

Cash

   550,147      

Receivables for

     

Investments sold

   685,916      

Interest

   3,382,734      

Receivable from investment adviser

   10,576      

Other assets

   25,255        

Total assets

          $184,246,439
Liabilities            

Payables for

     

Distributions on common shares

   $21      

Distributions on preferred shares

   7,140      

Daily variation margin on open futures contracts

   332,953      

Investments purchased

   1,978,828      

Payable to affiliates

     

Management fee

   12,974      

Transfer agent and dividend disbursing costs

   7,929      

Administrative services fee

   475      

Payable for independent trustees’ compensation

   9,779      

Accrued expenses and other liabilities

   42,294        

Total liabilities

          $2,392,393
Preferred shares            

Auction preferred shares (3,000 shares issued and outstanding at $25,000 per share) at liquidation value

          $75,000,000

Net assets applicable to common shares

          $106,854,046
Net assets consist of            

Paid-in capital – common shares

   $186,834,064      

Unrealized appreciation (depreciation) on investments

   (22,670,579   

Accumulated net realized gain (loss) on investments

   (57,773,595   

Undistributed net investment income

   464,156        

Net assets applicable to common shares

          $106,854,046

Preferred shares, at liquidation value (3,000 shares issued and outstanding at $25,000 per share)

          $75,000,000

Net assets including preferred shares

          $181,854,046

Common shares of beneficial interest outstanding

          27,908,723

Net asset value per common share (net assets of
$106,854,046 / 27,908,723 shares of beneficial
interest outstanding)

          $3.83

See Notes to Financial Statements

 

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Financial Statements

 

STATEMENT OF OPERATIONS

Six months ended 5/31/09 (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              

Interest income

          $5,916,635   

Expenses

     

Management fee

   $549,082      

Transfer agent and dividend disbursing costs

   27,479      

Administrative services fee

   21,123      

Independent trustees’ compensation

   11,343      

Stock exchange fee

   13,159      

Preferred shares remarketing agent fee

   86,400      

Custodian fee

   13,220      

Shareholder communications

   22,241      

Auditing fees

   38,211      

Legal fees

   15,985      

Miscellaneous

   21,457          

Total expenses

          $819,700   

Fees paid indirectly

   (4,898   

Reduction of expenses by investment adviser

   (85,210       

Net expenses

          $729,592   

Net investment income

          $5,187,043   
Realized and unrealized gain (loss) on investments              

Realized gain (loss) (identified cost basis)

     

Investment transactions

   $(2,123,805   

Futures contracts

   (2,234,895       

Net realized gain (loss) on investments

          $(4,358,700

Change in unrealized appreciation (depreciation)

     

Investments

   $11,938,917      

Futures contracts

   1,837,312          

Net unrealized gain (loss) on investments

          $13,776,229   

Net realized and unrealized gain (loss) on investments

          $9,417,529   

Distributions declared to preferred shareholders

          $(336,630

Change in net assets from operations

          $14,267,942   

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
5/31/09
     Year ended
11/30/08
 
Change in net assets    (unaudited)         
From operations              

Net investment income

   $5,187,043       $11,898,131   

Net realized gain (loss) on investments

   (4,358,700    (12,459,753

Net unrealized gain (loss) on investments

   13,776,229       (39,031,181

Distributions declared to preferred shareholders

   (336,630    (3,117,160

Change in net assets from operations

   $14,267,942       $(42,709,963
Distributions declared to common shareholders              

From net investment income

   $(4,516,528    $(9,047,476

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

   $147,606       $273,134   

Total change in net assets

   $9,899,020       $(51,484,305
Net assets applicable to common shares              

At beginning of period

   96,955,026       148,439,331   

At end of period (including undistributed net investment income of $464,156 and $130,271, respectively)

   $106,854,046       $96,955,026   

See Notes to Financial Statements

 

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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
5/31/09

(unaudited)

    Years ended 11/30  
      2008     2007     2006     2005     2004  
                                 

Net asset value, beginning of period

  $3.48      $5.34      $5.98      $5.76      $5.69      $5.85   
Income (loss) from investment operations                           

Net investment income (d)

  $0.19      $0.43      $0.45 (z)    $0.45      $0.45      $0.45   

Net realized and unrealized gain
(loss) on investments

  0.33      (1.85   (0.66 )(z)    0.23      0.08      (0.15

Distributions declared to
preferred shareholders

  (0.01   (0.11   (0.12   (0.11   (0.08   (0.04

Total from investment operations

  $0.51      $(1.53   $(0.33   $0.57      $0.45      $0.26   
Less distributions declared to common shareholders                           

From net investment income,
common shares

  $(0.16   $(0.33   $(0.31   $(0.35   $(0.38   $(0.42

Net asset value, end of period

  $3.83      $3.48      $5.34      $5.98      $5.76      $5.69   

Common share market value,
end of period

  $3.87      $3.04      $4.90      $5.96      $5.36      $5.66   

Total return at common share
market value (%) (p)

  33.66 (n)    (33.26   (13.21   17.99      1.36      7.86   

Total return at net asset
value (%) (p)(r)(s)(t)

  15.52 (n)    (29.90   (5.73   10.17      8.35      4.72   
Ratios (%) (to average net assets
applicable to common shares)
and Supplemental data:
                                   

Expenses before expense
reductions (f)(p)

  1.74 (a)    1.57      1.39      1.39      1.40      1.42   

Expenses after expense
reductions (f)(p)

  1.56 (a)    1.48      1.39      N/A      N/A      N/A   

Expenses after expense reductions
and excluding interest expense
and fees (f)(l)(p)

  N/A      1.44      N/A      N/A      N/A      N/A   

Net investment income (p)

  11.00 (a)    9.02      7.87 (z)    7.62      7.73      7.79   

Portfolio turnover

  11      34      29      33      18      16   

Net assets at end of period
(000 Omitted)

  $106,854      $96,955      $148,439      $165,936      $159,792      $157,757   

 

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Financial Highlights – continued

 

   

Six months
ended
5/31/09

(unaudited)

  Years ended 11/30
      2008   2007   2006   2005   2004
                       
Supplemental Ratios (%):                        

Net investment income available to
common shares

  10.29   6.66   5.78   5.74   6.46   7.15
Senior Securities:                        

Total preferred shares outstanding

  3,000   3,000   3,600   3,600   3,600   3,600

Asset coverage per preferred share (k)

  $60,618   $57,318   $66,233   $71,093   $69,387   $68,821

Involuntary liquidation preference per
preferred share (o)

  $25,000   $25,000   $25,000   $25,015   $25,010   $25,004

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

  $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.
(k) Calculated by subtracting the fund’s total liabilities (not including auction 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.
(o) Effective November 30, 2007, amount excludes accrued unpaid distributions to Auction Preferred Shareholders.
(p) 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 have been lower.
(t) Prior to November 30, 2007, total return at net asset value is unaudited.
(x) Average market value represents the approximate fair value of the fund’s liability.
(z) The fund applied a change in estimate for amortization of premium on certain debt securities in the year ended November 30, 2007 that resulted in an increase of $0.01 per share to net investment income, a decrease of $0.01 per share to net realized and unrealized gain (loss) on investments, and an increase of 0.15% to the net investment income ratio. The change in estimate had no impact on net assets, net asset value per share or total return.

See Notes to Financial Statements

 

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Table of Contents

 

NOTES TO FINANCIAL STATEMENTS

(unaudited)

 

(1)   Business and Organization

MFS High Yield Municipal 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. 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 can invest in high-yield securities rated below investment grade. Investments in high-yield securities involve greater degrees of credit and market risk than investments in higher-rated securities and tend to be more sensitive to economic conditions.

Investment Valuations – Debt 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

 

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contracts are primarily traded. 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 pricing services can utilize both dealer-supplied valuations and electronic data processing techniques, which take into account factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data.

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 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 carried at market value. 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

 

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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, forwards, swap contracts, and written options. The following is a summary of the levels used as of May 31, 2009 in valuing the fund’s assets or liabilities carried at market value:

 

     Level 1    Level 2    Level 3    Total
Investments in Securities    $—    $179,591,811    $—    $179,591,811
Other Financial Instruments    $29,492    $—    $—    $29,492

In April 2009, FASB Staff Position (FSP) 157-4 was issued and is effective for financial statements issued for fiscal years and interim periods ending after June 15, 2009. FSP 157-4 clarifies FASB Statement No. 157, Fair Value Measurements and requires an entity to evaluate certain factors to determine whether there has been a significant decrease in volume and level of activity for the asset or liability such that recent transactions and quoted prices may not be determinative of fair value and further analysis and adjustment may be necessary to estimate fair value. The FSP also requires enhanced disclosure regarding the inputs and valuation techniques used to measure fair value in those instances as well as expanded disclosure of valuation levels for major security types. Management is evaluating the application of the FSP to the fund, and believes the impact resulting from the adoption of this FSP will be limited to expanded disclosure in the fund’s financial statements.

Derivatives – The fund may use derivatives for different purposes, including to earn income and enhance returns, to increase or decrease exposure to a particular market, to manage or adjust the risk profile of the fund, or as alternatives to direct investments. Derivatives may be 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.

In this reporting period the fund adopted FASB Statement No. 161, Disclosure about Derivative Instruments and Hedging Activities (“FAS 161”), and FASB Staff Position FAS No. 133-1 and FIN 45-4, Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FAS 161 (“FSP FAS 133-1”).

 

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FAS 161 amends FASB Statement No. 133, Accounting for Derivatives and Hedging Activities (“FAS 133”). FAS 161 provides enhanced disclosures about the fund’s use of and accounting for derivative instruments and the effect of derivative instruments on the fund’s results of operations and financial position. Under FAS 161, tabular disclosure regarding derivative fair value and gain/loss by contract type (e.g., interest rate contracts, foreign exchange contracts, credit contracts, etc.) is required and derivatives accounted for as hedging instruments under FAS 133 must be disclosed separately from derivatives that do not qualify for hedge accounting under FAS 133. Because investment companies account for their derivatives at fair value and record any changes in fair value in current period earnings, the fund’s derivatives are not accounted for as hedging instruments under FAS 133. As such, even though the fund may use derivatives in an attempt to achieve an economic hedge, the fund’s derivatives are not considered to be hedging instruments under FAS 133.

FSP FAS 133-1 amends FAS 133 to require sellers of credit derivatives to make disclosures that will enable financial statement users to assess the potential effects of those credit derivatives on an entity’s financial position, financial performance and cash flows. As defined by FSP FAS 133-1, a credit derivative is a derivative instrument (a) in which one or more of the derivative’s underlyings are related to the credit risk of a specified entity (or group of entities) or an index based on the credit risk of a group of entities and (b) that exposes the seller to potential loss from credit-risk-related events specified in the derivative contract. The seller (or writer) is the party that provides the credit protection and assumes the credit risk on a credit derivatives contract, such as a credit default swap. There was no impact from implementing FSP 133-1 as the fund did not hold any of these credit derivatives at period end.

As defined under FAS 133, derivative instruments include written options, purchased options, futures contracts, forward foreign currency exchange contracts, and swap agreements.

 

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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 May 31, 2009:

 

        Asset Derivatives     Liability Derivatives  
        Location on Statement of Assets and Liabilities   Fair
Value
  
  
  Location on Statement of Assets and Liabilities   Fair
Value
  
  
Interest Rate Contracts   Interest
Rate
Futures
  Unrealized appreciation on investments   $45,651(a   Unrealized depreciation on investments   $(16,159 )(a) 

 

(a) Includes cumulative appreciation/depreciation of futures contracts as reported in the fund’s Portfolio of Investments. Only the current day’s variation margin for futures contracts is 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 May 31, 2009 as reported in the Statement of Operations:

 

     Futures
Contracts
 
Interest Rate Contracts   $(2,234,895

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 May 31, 2009 as reported in the Statement of Operations:

 

     Futures
Contracts
Interest Rate Contracts   $1,837,312

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 by entering into an 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

 

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a termination of the agreement, the ISDA Master Agreement does not result in an offset of reported balance sheet 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., forwards, 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 will be reported separately on the Statement of Assets and Liabilities as restricted cash. Securities collateral pledged for the same purpose is noted in the Portfolio of Investments.

Futures Contracts – The fund may use futures contracts to gain or to hedge against broad market, interest rate or currency exposure. 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, exchange 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.

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

 

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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. 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 May 31, 2009, 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 taxes is required. The fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service.

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

 

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Notes to Financial Statements (unaudited) – continued

 

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, distressed securities, and derivative transactions.

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:

 

     11/30/08
Ordinary income (including any short-term capital gains)    $3,208
Tax-exempt income    12,161,428
Total distributions    $12,164,636

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

 

As of 5/31/09       
Cost of investments    $202,019,849   
Gross appreciation    6,125,832   
Gross depreciation    (28,553,870
Net unrealized appreciation (depreciation)    $(22,428,038
As of 11/30/08       
Undistributed ordinary income    105,243   
Undistributed tax-exempt income    212,546   
Capital loss carryforwards    (49,149,878
Post-October capital loss deferral    (6,271,624
Other temporary differences    (187,518
Net unrealized appreciation (depreciation)    (34,440,201

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

As of November 30, 2008, the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows:

 

11/30/09    $(3,114,307
11/30/10    (7,684,792
11/30/11    (4,393,912
11/30/12    (4,060,511
11/30/14    (7,119,782
11/30/15    (11,048,097
11/30/16    (11,728,477
   $(49,149,878

 

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(3)   Transactions with Affiliates

Investment Adviser – The fund has an investment advisory agreement with Massachusetts Financial Services Company (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 0.65% 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 remarketing fees, such that total annual fund operating expenses do not exceed 0.87% annually of the fund’s average daily net assets (including the value of the 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 November 30, 2009. For the six months ended May 31, 2009, this reduction amounted to $84,865 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 May 31, 2009, these fees paid to MFSC amounted to $9,739. MFSC also receives payment from the fund for out-of-pocket expenses paid by MFSC on behalf of the fund. For the six months ended May 31, 2009, the fund did not pay any out-of-pocket expenses to MFSC.

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. The administrative services fee incurred for the six months ended May 31, 2009 was equivalent to an annual effective rate of 0.0250% 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 compensation directly to trustees or to 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.

 

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Deferred Trustee Compensation – The fund’s former independent trustees participated in a Deferred Compensation Plan (the Plan). The fund’s current independent trustees are not allowed to defer compensation under the Plan. Deferred amounts represent an unsecured obligation of the fund until distributed in accordance with the Plan. Included in other assets and payable for independent trustees’ compensation is $9,729 of deferred trustees’ compensation.

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 May 31, 2009, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $719 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 $345, 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.

 

(4)   Portfolio Securities

Purchases and sales of investments, other than U.S. Government securities, purchased option transactions, and short-term obligations, aggregated $25,161,452 and $16,962,040, respectively.

 

(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 May 31, 2009 and the year ended November 30, 2008, the fund did not repurchase any shares. Transactions in fund shares were as follows:

 

     Six months ended
5/31/09
   Year ended
11/30/08
     Shares    Amount    Shares    Amount
Shares issued to shareholders in reinvestment of distributions    41,801    $147,606    56,638    $273,134

 

(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

 

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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 1.25%. 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 spread. For the six months ended May 31, 2009, the fund’s commitment fee and interest expense were $363 and $0, respectively, and are included in miscellaneous expense on the Statement of Operations.

 

(7)   Auction Preferred Shares

The fund has 3,000 shares issued and outstanding of Auction Preferred Shares (APS), series F. Dividends are cumulative at a rate that is reset every seven days 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 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 MFS High Yield Municipal Trust, 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 May 31, 2009, the APS dividend rates ranged from 0.47% to 2.11%. For the six months ended May 31, 2009, the average dividend rate was 0.86%. 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.

 

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The fund pays an annual fee equivalent to 0.25% of the preferred share liquidation value for remarketing efforts associated with the preferred auction. Effective May 1, 2009, this fee will be reduced to 0.15% when auctions fail. 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 Trustees and Shareholders of the MFS High Yield Municipal Trust

We have reviewed the accompanying statement of assets and liabilities of the MFS High Yield Municipal Trust (the Fund), including the portfolio of investments, as of May 31, 2009, and the related statements of operations, changes in net assets, and financial highlights for the six-month period ended May 31, 2009. These interim financial statements and financial highlights are the responsibility of the Fund’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 for them to be in conformity with U.S. generally accepted accounting principles.

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 November 30, 2008, and the financial highlights for each of the two years in the period ended November 30, 2008, and in our report dated January 20, 2009, we expressed an unqualified opinion on such statement of changes in net assets and financial highlights. The financial highlights for each of the three years in the period ended November 30, 2006 were audited by another independent registered accounting firm whose report, dated January 25, 2007, expressed an unqualified opinion on those financial highlights.

LOGO

Boston, Massachusetts

July 17, 2009

 

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BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT

A discussion regarding the Board’s two most recent reviews and renewals 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 most recent twelve-month period ended June 30, 2008 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. The fund’s Form N-Q 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. The fund’s Form N-Q is available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the Public Reference Section at the above address.

A shareholder can also obtain the quarterly portfolio holdings report at mfs.com.

 

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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

LOGO

 

500 Boylston Street, Boston, MA 02116   New York Stock Exchange Symbol: CMU


Table of Contents
ITEM 2. CODE OF ETHICS.

The Registrant has not amended any provision in its Code of Ethics (the “Code”) that relates to any element of the Code’s definition enumerated in paragraph (b) of Item 2 of this Form N-CSR.

 

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.


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

MFS High Yield Municipal 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
12/01/08-12/31/08    0    N/A    0    2,781,028
1/01/09-1/31/09    0    N/A    0    2,781,028
2/01/09-2/28/09    0    N/A    0    2,781,028
3/01/09-3/31/09    0    N/A    0    2,787,762
4/01/09-4/30/09    0    N/A    0    2,787,762

5/01/09-5/31/09

   0    N/A    0    2,787,762
               

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, 2009 plan year is 2,787,762.

 

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 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 Agreement and Declaration of Trust, as amended, 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 HIGH YIELD MUNICIPAL TRUST

 

By (Signature and Title)*    MARIA F. DWYER
  Maria F. Dwyer, President

Date: July 17, 2009

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)*    MARIA F. DWYER
  Maria F. Dwyer, President (Principal Executive Officer)

Date: July 17, 2009

 

By (Signature and Title)*    JOHN M. CORCORAN
  John M. Corcoran, Treasurer (Principal Financial Officer and Accounting Officer)

Date: July 17, 2009

 

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