OREANDA-NEWS. Fitch Ratings affirms the 'AAA' long-term ratings assigned to the following Municipal Auction Rate Cumulative Preferred shares (ARPS) and Variable Rate MuniFund Term Preferred Shares (VMTP shares) issued by five closed-end funds managed by MFS Investment Management:

MFS California Municipal Fund (CCA)
--\$24,425,000 of VMTP shares, series 2016/9, due Sept. 30, 2016.

MFS High Income Municipal Trust (CXE)
--\$5,625,000 of ARPS, series T and W;
--\$91,875,000 of VMTP shares, series 2016/9, due Sept. 30, 2016.

MFS Municipal Income Trust (MFM)
--\$7,275,000 of ARPS, series T and TH;
--\$106,475,000 of VMTP shares, series 2016/9, due Sept. 30, 2016.

MFS High Yield Municipal Trust (CMU)
--\$3,900,000 of ARPS, series F;
--\$71,100,000 of VMTP shares, series 2016/9, due Sept. 30, 2016.

MFS Investment Grade Municipal Trust (CXH)
--\$825,000 of ARPS, series M;
--\$47,925,000 of VMTP shares, series 2016/9, due Sept. 30, 2016.

KEY RATING DRIVERS
The 'AAA' long-term ratings primarily reflect:
--Sufficient asset coverage provided to the preferred shares as calculated per the funds' over-collateralization (OC) tests;
--The structural protections afforded by mandatory de-leveraging provisions in the event of asset coverage declines;
--The legal and regulatory parameters that govern the funds' operations;
--The capabilities of MFS Investment Management as investment advisor.

Fitch's ratings assigned to the ARPS speak only to timely repayment of interest and principal in accordance with the governing documents and not to potential liquidity in the secondary market.

THE FUNDS
The funds are closed-end management investment companies regulated by the Investment Company Act of 1940. The funds' primary investment strategies are as follows:

CCA Seeks high current income exempt from federal income tax and California state personal income tax, but may also consider capital appreciation

CXE seeks high current income exempt from federal income tax, but may also consider capital appreciation.

MFM seeks high current income exempt from federal income tax, but may also consider capital appreciation.

CMU seeks high current income exempt from federal income tax, but may also consider capital appreciation.

CXH seeks high current income exempt from federal income tax, but may also consider capital appreciation.

FUND ASSETS AND LEVERAGE
The funds had the following assets and leverage as of April 30, 2015:

CCA had total assets included in the Fitch OC Tests of approximately \$60 million. Leverage of approximately \$24.4 million comprised solely of VMTP shares. The leverage ratio was approximately 40%.

CXE had total assets included in the Fitch OC Tests of approximately \$267.3 million. Leverage of \$97.5 million comprised solely of preferred shares. The leverage ratio was approximately 36%.

MFM had total assets included in the Fitch OC Tests of approximately \$428 million. Leverage of approximately \$123.8 million comprised of preferred shares and tender option bonds (TOBs). The leverage ratio was approximately 29%.

CMU had total assets included in the Fitch OC Tests of approximately \$212.2 million. Leverage of approximately \$75 million comprised solely of preferred shares. The leverage ratio was approximately 35%.

CXH had total assets included in the Fitch OC Tests of approximately \$178.5 million. Leverage of approximately \$55.4 million comprised of preferred shares and TOBs. The leverage ratio was approximately 31%.

ASSET COVERAGE
As of April 30, 2015, the funds' asset coverage ratios for the preferred shares, as calculated in accordance with the Investment Company Act of 1940, was in excess of the minimum threshold - 225% for CXE MFM, CMU and CXH, and 210% for CCA - required by the VMTP governing documents (Preferred Shares Asset Coverage Test).

As of the same date, the funds' effective leverage ratios were below the maximum - 45% for CXE, MFM, CMU and CXH, and 47% for CCA - allowed by the VMTP governing documents (Effective Leverage Test).

As of the same date, the funds' asset coverage ratios, as calculated in accordance with the Fitch total and net OC tests per the 'AAA' rating guidelines outlined in Fitch's criteria, were in excess of 100%, which is the minimum threshold required by the ARPS governing documents.

Should the funds' asset coverage tests decline below their minimum threshold amounts, the governing documents' mandatory redemption provisions will require the fund to cure the tests or redeem the affected liabilities in a sufficient amount to restore compliance with the applicable test(s).

STRESS TESTS
Fitch performed various stress tests on the funds to assess the strength of the structural protections available to the VMTP shares compared to the rating stresses outlined in Fitch's closed-end fund rating criteria. These tests included determining various 'worst case' scenarios where the funds' leverage and portfolio composition migrated to the outer limits of the funds' operating and investment guidelines.

Only under remote circumstances did the asset coverage available to the VMTP Shares fall below the 'AAA' threshold, and instead passed at an 'AA' rating level.

Given the highly unlikely nature of the stress scenarios, and the minimal rating impact, Fitch views the funds' permitted investments, municipal issuer diversification framework, and mandatory deleveraging mechanisms as consistent with an 'AAA' rating.

THE FUND ADVISOR
MFS Investment Management, an indirect subsidiary of Sun Life Financial Inc., is the funds' investment advisor, responsible for the funds' overall investment strategies and their implementation. MFS Investment Management had approximately \$450 billion of assets under management as of May 31, 2015.

RATING SENSITIVITIES
The ratings assigned to the ARPS and VMTP shares may be sensitive to material changes in the leverage composition, portfolio credit quality, portfolio diversification, or market risk of the funds. A material adverse deviation from Fitch guidelines for any key rating driver could cause ratings to be lowered by Fitch.

The funds have the ability to assume economic leverage through derivative transactions which may not be captured by the funds' Preferred Shares Asset Coverage tests or Effective Leverage Ratios. Material derivative exposure on a speculative basis in the future could have potential negative rating implications if it adversely affects asset coverage available to rated preferred shares.