UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4975
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MFS MULTIMARKET INCOME TRUST
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(Exact name of registrant as specified in charter)
500 Boylston Street, Boston, Massachusetts 02116
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(Address of principal executive offices) (Zip code)
Stephen E. Cavan
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
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(Name and address of agents for service)
Registrant's telephone number, including area code: (617) 954-5000
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Date of fiscal year end: October 31, 2002
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Date of reporting period: April 30, 2003
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ITEM 1. REPORTS TO STOCKHOLDERS.
[MFS LOGO]
INVESTMENT MANAGEMENT
MFS(R) MULTIMARKET
INCOME TRUST
SEMIANNUAL REPORT o APRIL 30, 2003
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review ......................................................... 4
Performance Summary ....................................................... 8
Portfolio of Investments .................................................. 11
Financial Statements ...................................................... 26
Notes to Financial Statements ............................................. 30
Trustees and Officers ..................................................... 39
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
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LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
Our firm was built on the philosophy that bottom- up fundamental research is the
best means of achieving superior long term investment performance. When you're
managing billions of dollars for investors, we think you have an obligation to
have in-depth, firsthand knowledge of every company you own whether it is in the
U.S. or anywhere across the globe.
We have structured our equity and fixed-income investment teams to capitalize on
the strength of our investment process and the global reach of our analysts
based around the world. Our global research team is composed of 45 equity
analysts, 27 based in the U.S. and 18 based abroad, and 26 credit research
analysts. Each analyst is assigned one or more specific industries and then
charged with identifying the most attractive investment ideas within these
industries. Our U.S. and non-U.S. equity research analysts are unified into one
team that emphasizes a collaborative process in analyzing securities across the
globe. Credit analysts also share their expertise in each segment of the
fixed-income market and work as part of the same team ensuring that every member
has access to information that may have a material effect on their investment
decisions. As MFS continues to grow and as markets become more complex, we
believe our structure will enable us to maintain a consistent investment process
with the goal of providing strong, long-term investment performance across
market capitalizations, investment disciplines, and country borders for our fund
shareholders.
THINKING GLOBALLY
More companies than ever compete globally and, therefore, we must make
investment decisions knowing what is occurring outside of a company's local
market. This trend plays to the strength of our environment of collaboration
between our analysts and portfolio managers across the globe. The analysts know
the most details about individual companies in specific industries and
geographic regions. The portfolio managers have broader, cross-industry insights
and a wider perspective on companies and industries. Our goal is to make sure
those two sets of perspectives coordinate and work well together. As markets
across the globe become more interdependent, we believe our collaborative
environment allows us to produce solid investment ideas for our portfolios.
BUILDING A NETWORK
Simply put, we believe our structure assures that our analysts maintain their
peripheral vision rather than becoming too immersed in a specific segment of the
market. We do not believe that analysts and portfolio managers -- no matter how
talented they may be -- can succeed by working in a vacuum. Through the latest
technology available, our entire research team meets frequently via video and
telephone teleconferences, email, and PDAs (Personal Digital Assistants). When
we hire new analysts, we require them to spend an average of one year in Boston
to learn MFS" culture and to build relationships with their peers. We believe
the interaction among our analysts is the key to making our collaborative
process work towards delivering superior long term investment performance for
our fund shareholders. Our analysts work out of four research offices in Boston,
London, Singapore, and Tokyo and are assigned to specific regions and
industries. They meet regularly with their colleagues to discuss the trends
around the world affecting the companies they cover.
In addition, our equity and fixed-income analysts often visit company
managements as a team. This collaboration is vital because of the different
perspective they bring to their analysis. Because a company's stock price has
tended to follow its earnings over time, our equity research analysts tend to
focus on gauging earnings potential, a company's position within its industry
and its ability to grow its market share. Conversely, our fixed income analysts
will look at stability of a company's cash flow, the value of its assets, and
its capital structure to gauge whether the company can generate enough free cash
flow to pay off its debt. As a result of their collaboration, we believe we're
able to see a more complete view of a company.
WORKING TOGETHER
Our portfolio managers also work closely with the analysts to select the most
appropriate securities for their portfolios from the various recommendations
made by the analysts. Opinions are exchanged and ideas are challenged so that
each member of our team is involved in our investment process. In fact, our
portfolio managers will be the first ones to tell you that many of their best
ideas start with the research analysts. We believe our collaborative approach
also provides us with an effective way to assess risk. Our portfolio managers
are not discouraged from taking on an appropriate level of risk; however, we
have rigorous guidelines to assure that the level of risk is measured and
monitored and consistent with the investment philosophies of each of our
portfolios. All told, we believe our culture empowers the members of our
investment team to continue to do their best work and allows them to make better
investment decisions.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman
MFS Investment Management(R)
May 30, 2003
The opinions expressed in this letter are those of MFS, and no forecasts can
be guaranteed.
MANAGEMENT REVIEW
[Photo of Peter C. Vaream]
Peter C. Vaream
Dear Shareholders,
For the six months ended April 30, 2003, the trust provided a total return of
13.21% based on its beginning and ending stock market prices and assuming the
reinvestment of any distributions paid during the period.
The trust's total return based on its net asset value (NAV) was 9.78%. The
trust's results compare with returns over the same period for the following
benchmarks: 11.71% for the J.P. Morgan Non-Dollar Government Bond Index (the
Morgan Index); 3.10% for the Lehman Brothers Government Bond Index; and 22.95%
for the Lehman Brothers High Yield Bond Index.
The J.P. Morgan Non-Dollar Government Bond Index measures the performance of
international government bonds. The Lehman Brothers Government Bond Index
measures the performance of the U.S. government bond market. The Lehman Brothers
High Yield Bond Index measures the performance of the high-yield bond market.
WAR CONCERNS DISCOUNTED LONG TERM
During the fourth quarter of 2002, economic growth worldwide continued to be
anemic, increasing at a rate that was slightly below expectations. This year
began the same way as war concerns over Iraq clouded most economic news,
reducing short-term optimism.
But despite the geopolitical unrest in the Middle East, investor sentiment
appeared to us to change during the period, as many on Wall Street decided to
look ahead and discount the weak growth during the period. Instead of focusing
on risk avoidance, many investors appeared to us to adopt a risk-seeking
behavior.
As a result, certain parts of the bond market offered strong rates of return
based on expectations of growth in future periods. Many of the higher-risk
markets traded higher, notably high yield and emerging markets. Also,
investment-grade corporate bonds bounced back sharply from the lows that we saw
in October.
POSITIVE PERFORMERS
Generally, the trust's overall diversification and specific sector exposure to
some of these rebounding areas, like high yield, emerging markets and high-
grade corporate bonds, helped.
The top-performing issues in the trust during the period were German government
bonds. What occurred in the United States was also going on internationally, as
interest rates remained in a narrow channel, and the incremental yield that
Germany offered when compared to the United States proved to be more attractive
to investors.
A number of the best performers in the portfolio for the period were lower-
quality debt issuers. The trust still focused on higher-quality bonds, but we
did begin to add exposure to select lower-quality debt issuers because many of
these issues were trading at depressed prices at the end of last year.
Focusing on lower-quality debt proved beneficial to the fund as many previously
struggling sectors bounced back. One area in particular that did well during the
period was the telecommunications sector, where an overexposure to
communications companies TCI Communications and Paxson Communications helped the
trust.
Additionally, our exposure to the finance sector helped the trust's performance,
given the firming of company balance sheets and the increased profitability of
financial intermediaries. On a risk adjusted basis, the mortgage sector
continued to be a very strong performer for the fixed-income sector. A strong
housing market translated into increased mortgage lending that improved business
profitability for many banks. The banks we held were well-capitalized, had a
strong consumer base, and had fewer credit problems than many investors
expected.
NEGATIVE CONTRIBUTORS
The trust's exposure to Fleming Companies was the major detractor to performance
during the period. A food distributor in the high-yield market, Fleming
Companies suffered from allegations of accounting improprieties and ultimately
filed for bankruptcy.
Also, being underweight versus our benchmark in "supranational" debt (from the
World Bank, for example) hurt performance.
Respectfully,
/s/ Peter C. Vaream
Peter C. Vaream
Portfolio Manager
The opinions expressed in this report are those of MFS and are current only
through the end of the period of the report as stated on the cover. These
views are subject to change at any time based on market and other conditions,
and no forecasts can be guaranteed.
It is not possible to invest directly in an index.
The portfolio is actively managed, and current holdings may be different.
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PORTFOLIO MANAGER'S PROFILE
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PETER C. VAREAM IS SENIOR VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R)
(MFS(R)) AND MANAGES THE INVESTMENT-GRADE BOND, GOVERNMENT SECURITIES
AND GLOBAL GOVERNMENTS PORTFOLIOS OF OUR MUTUAL FUNDS, VARIABLE
ANNUITIES AND INSTITUTIONAL ACCOUNTS. HE IS A MEMBER OF THE MFS FIXED
INCOME STRATEGY GROUP.
PETER JOINED MFS IN 1992 AND BECAME A PORTFOLIO MANAGER IN 1993.
PREVIOUSLY, HE WAS VICE PRESIDENT IN THE FIXED INCOME DEPARTMENT AT THE
FIRST BOSTON CORP. FROM 1986 TO 1992. PRIOR TO THAT, HE SERVED AS A
CORPORATE FINANCIAL ANALYST.
PETER EARNED A BACHELOR'S DEGREE IN FINANCE FROM NEW YORK UNIVERSITY. HE
IS A MEMBER OF THE LEHMAN BROTHERS INDEX ADVISORY COUNCIL.
ALL PORTFOLIO MANAGERS AT MFS ARE SUPPORTED BY AN INVESTMENT STAFF OF
OVER 160 PROFESSIONALS UTILIZING MFS ORIGINAL RESEARCH(R), A GLOBAL,
COMPANY-ORIENTED, BOTTOM-UP PROCESS OF SELECTING SECURITIES.
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In accordance with Section 23(c) of the Investment Company Act of 1940, the
trust hereby gives notice that it may from time to time repurchase shares of
the trust in the open market at the option of the Board of Trustees and on
such terms as the Trustees shall determine.
OBJECTIVE: To provide a high level of current income through investments in
fixed-income securities.
NEW YORK STOCK EXCHANGE SYMBOL: MMT
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PERFORMANCE SUMMARY,BMARK,TITLE="PERFORMANCE SUMMARY":
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(For the six months ended April 30, 2003)
NET ASSET VALUE PER SHARE
October 31, 2002 $6.32
April 30, 2003 $6.72
NEW YORK STOCK EXCHANGE PRICE
October 31, 2002 $5.69
April 30, 2003 (high)* $6.25
November 15, 2002 (low)* $5.69
April 30, 2003 $6.25
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*For the period from November 1, 2002 through, April 30, 2003
NOTES TO PERFORMANCE SUMMARY
ALL RESULTS ARE HISTORICAL. INVESTMENT RETURN AND PRINCIPAL VALUE WILL
FLUCTUATE, AND SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. MORE RECENT RETURNS MAY BE DIFFERENT FROM THOSE SHOWN. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
KEY RISK CONSIDERATIONS
Investing in foreign and/or emerging markets securities involves risks
relating to interest rates, currency exchange rates, economic, and
political conditions.
Investments in high yield or lower-rated securities may provide greater
returns but are subject to greater-than-average risk.
The portfolio may invest in derivative securities, which may include futures
and options. These types of instruments can increase price fluctuation.
Because the portfolio invests in a limited number of companies a change
in one security's value may have a more significant effect on the
portfolio's value.
Government guarantees apply to the underlying securities only and not to the
prices and yields of the portfolio.
These risks may increase share price volatility. See the prospectus for
details.
NUMBER OF SHAREHOLDERS
As of April 30, 2003, our records indicate that there are 9,680 registered
shareholders and approximately 38,500 shareholders owning trust shares in
"street" name, such as through brokers, banks, and other financial
intermediaries.
If you are a "street" name shareholder and wish to directly receive our
reports, which contain important information about the trust, please write or
call:
State Street Bank and Trust Company
c/o MFS Service Center, Inc.
P.O. Box 55024
Boston, MA 02205-5024
1-800-637-2304
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
MFS offers a Dividend Reinvestment and Cash Purchase Plan that allows you to
reinvest either all of the distributions paid by the trust or only the long
term capital gains. Purchases are made at the market price unless that price
exceeds the net asset value (the shares are trading at a premium). If the
shares are trading at a premium, purchases will be made at a discounted price
of either the net asset value or 95% of the market price, whichever is
greater. Twice each year you can also buy shares. Investments in any amount
over $100 can be made in January and July on the 15th of the month or
shortly thereafter.
If your shares are in the name of a brokerage firm, bank, or other nominee,
you can ask the firm or nominee to participate in the plan on your behalf. If
the nominee does not offer the plan, you may wish to request that your shares
be re-registered in your own name so that you can participate.
There is no service charge to reinvest distributions, nor are there brokerage
charges for shares issued directly by the trust. However, when shares are
bought on the New York Stock Exchange or otherwise on the open market, each
participant pays a pro rata share of the commissions. The automatic
reinvestment of distributions does not relieve you of any income tax that may
be payable (or required to be withheld) on the distributions.
To enroll in or withdraw from the plan, or if you have any questions, call
1-800-637-2304 any business day from 8 a.m. to 8 p.m. Eastern time. Please
have available the name of the trust and your account and Social Security
numbers. For certain types of registrations, such as corporate accounts,
instructions must be submitted in writing. Please call for additional details.
When you withdraw, you can receive the value of the reinvested shares in one
of two ways: a check for the value of the full and fractional shares, or a
certificate for the full shares and a check for the fractional shares.
PORTFOLIO OF INVESTMENTS (Unaudited) -- April 30, 2003
Bonds - 97.3%
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PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
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U.S. Bonds - 65.5%
Advertising & Broadcasting - 3.5%
Allbritton Communications Co., 7.75s, 2012 $ 1,000 $ 1,040,000
Clear Channel Communications, Inc., 6.5s, 2005 275 320,811
Dex Media East LLC, 9.875s, 2009## 1,500 1,717,500
DirecTV Holdings LLC, 8.375s, 2013## 600 672,000
Echostar DBS Corp., 9.375s, 2009 2,425 2,615,969
Granite Broadcasting Corp., 10.375s, 2005 1,221 1,214,895
LIN Television Corp., 8s, 2008 1,000 1,080,000
PanAmSat Corp., 8.5s, 2012 2,315 2,505,988
Paxson Communications Corp., 0s to 2006, 12.25s to 2009 2,275 1,911,000
Radio One, Inc., 8.875s, 2011 1,425 1,567,500
Reed Elsevier Capital, Inc., 6.125s, 2006 230 251,237
Spanish Broadcasting Systems, Inc., 9.625s, 2009 1,400 1,480,500
XM Satellite Radio, Inc., 0s to 2005, 14s to 2009 380 267,900
Young Broadcasting, Inc., 8.5s, 2008 2,750 2,945,937
------------
$ 19,591,237
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Aerospace - 1.2%
Argo-Tech Corp., 8.625s, 2007 $ 165 $ 145,200
BAE Systems Holdings, Inc., 6.4s, 2011## 1,922 2,027,116
Boeing Capital Corp., 5.75s, 2007 1,153 1,222,521
Hexcel Corp., 9.875s, 2008## 1,215 1,300,050
K & F Industries, Inc., 9.25s, 2007 200 208,500
K & F Industries, Inc., 9.625s, 2010 1,500 1,620,000
------------
$ 6,523,387
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Airlines - 0.4%
Continental Airlines, Inc., 6.545s, 2019 $ 2,395 $ 2,082,120
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Apparel & Textiles
Westpoint Stevens, Inc., 7.875s, 2008 $ 1,225 $ 226,625
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Automotive - 2.2%
Collins & Aikman Corp., 10.75s, 2011 $ 1,443 $ 1,479,075
DaimlerChrysler AG, 7.45s, 2097 1,288 1,374,382
Ford Motor Credit Co., 5.625s, 2004 255 288,293
Ford Motor Credit Co., 7.5s, 2005 2,141 2,239,452
GMAC, 6s, 2006 375 431,905
GMAC, 7s, 2012 2,610 2,674,170
GMAC, 8s, 2031 1,367 1,423,782
Navistar International Corp., 9.375s, 2006 1,100 1,174,250
TRW, Inc., 9.375s, 2013## 635 693,738
TRW, Inc., 11s, 2013## 200 219,000
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$ 11,998,047
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Banks & Credit Cos. - 2.0%
Abbey National Capital, 8.963s, 2049 $ 2,109 $ 2,825,103
Bank of America Corp., 7.4s, 2011 2,355 2,827,152
Credit Suisse First Boston Corp., 4.625s, 2008 722 752,439
Credit Suisse First Boston Corp., 6.125s, 2011 881 956,697
Credit Suisse First Boston Corp., 6.5s, 2012 2,146 2,390,537
Popular, Inc., 4.25s, 2008 1,525 1,542,568
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$ 11,294,496
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Broadcast & Cable TV - 5.7%
Charter Communications Holdings LLC, 8.625s, 2009 $ 3,300 $ 2,169,750
Comcast Corp., 6.5s, 2015 2,239 2,432,438
Continental Cablevision, Inc., 9.5s, 2013 7,341 8,666,329
Cox Communications, Inc., 7.125s, 2012 2,420 2,825,737
CSC Holdings, Inc., 8.125s, 2009 3,469 3,677,140
Jones Intercable, Inc., 8.875s, 2007 1,500 1,609,910
Lenfest Communications, Inc., 10.5s, 2006 500 577,500
Mediacom Communications Corp., 11s, 2013 2,600 2,957,500
TCI Communications Financing III, 9.65s, 2027 5,000 5,563,305
Tele Communications, Inc., 9.8s, 2012 1,135 1,464,366
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$ 31,943,975
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Building - 1.4%
American Standard, Inc., 7.375s, 2008 $ 2,415 $ 2,608,200
CRH America, Inc., 6.95s, 2012 1,208 1,372,093
Nortek, Inc., 9.25s, 2007 125 128,906
Nortek, Inc., 8.875s, 2008 1,215 1,257,525
Williams Scotsman, Inc., 9.875s, 2007 2,725 2,711,375
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$ 8,078,099
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Business Services - 0.5%
Iron Mountain, Inc., 8.625s, 2013 $ 985 $ 1,073,650
Iron Mountain, Inc., 7.75s, 2015 1,630 1,752,250
------------
$ 2,825,900
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Chemicals - 0.5%
Huntsman ICI Holdings LLC, 10.125s, 2009 $ 1,900 $ 1,957,000
Lyondell Chemical Co., 9.875s, 2007 1,060 1,091,800
------------
$ 3,048,800
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Consumer Goods & Services - 0.4%
KinderCare Learning Centers, Inc., 9.5s, 2009 $ 350 $ 344,750
Samsonite Corp., 10.75s, 2008 740 699,300
Sealy Mattress Co., 9.875s, 2007## 900 927,000
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$ 1,971,050
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Containers - 1.0%
Ball Corp., 7.75s, 2006 $ 500 $ 533,750
Owens-Brockway Glass Container, Inc., 8.875s, 2009 515 552,337
Owens-Brockway Glass Container, Inc., 8.25s, 2013## 2,090 2,152,700
Pliant Corp., 13s, 2010 1,000 925,000
Silgan Holdings, Inc., 9s, 2009 1,500 1,560,000
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$ 5,723,787
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Corporate Asset-Backed - 7.5%
Airplane Pass-Through Trust, 10.875s, 2019 $ 247 $ 4,938
Amresco Commercial Mortgage Funding Corp., 7s, 2029 3,570 3,553,421
Commercial Mortgage Acceptance Corp., 5.44s, 2030 8,000 6,724,598
Commercial Mortgage Pass-Through Certificate, 7.146s,
2018 (Interest Only) 41,943 1,285,806
CPS Auto Receivables Trust, 2.89s, 2009 1,387 1,392,368
DLJ Mortgage Acceptance Corp., 8s, 2003 67 66,987
Falcon Auto Dealership LLC, 4.198s, 2023 (Interest Only) 9,604 1,836,857
First Union Lehman Brothers Bank, 7.243s, 2028 (Interest Only) 85,584 2,304,971
GMAC Commercial Mortgage Securities, Inc., 6.02s, 2033 5,800 5,089,500
LB Commercial Mortgage Trust, 7.603s, 2028 (Interest Only) 26,195 988,652
Morgan Stanley Capital I, Inc., 7.642s, 2039 5,560 5,363,465
Mortgage Capital Funding, Inc., 7.214s, 2007 2,250 2,154,560
Mortgage Capital Funding, Inc., 7.51s, 2031 (Interest Only) 25,950 902,312
Nationslink Funding Corp., 5s, 2031 4,560 4,060,270
TIAA Retail Commercial Mortgage Trust, 7.17s, 2032## 5,888 6,503,243
------------
$ 42,231,948
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Defense Electronics - 0.3%
L-3 Communications Corp., 7.625s, 2012 $ 1,455 $ 1,604,138
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Energy - 0.9%
Ocean Energy, Inc., 4.375s, 2007 $ 908 $ 939,617
Triton Energy Ltd., 9.25s, 2005 3,500 3,959,575
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$ 4,899,192
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Entertainment - 2.3%
AMC Entertainment, Inc., 9.5s, 2011 $ 1,700 $ 1,776,500
Disney (Walt) Co., 6.75s, 2006 2,140 2,347,270
News America Holdings, Inc., 7.7s, 2025 517 584,161
News America, Inc., 6.55s, 2033## 529 537,308
Regal Cinemas Corp., 9.375s, 2012 2,425 2,667,500
Time Warner, Inc., 6.95s, 2028 1,342 1,377,457
Turner Broadcasting Systems, Inc., 8.375s, 2013 419 485,560
Turner Broadcasting Systems, Inc., 8.4s, 2024 3,000 3,322,503
------------
$ 13,098,259
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Food & Beverage Products - 0.6%
Burns Philp Capital Property Ltd., 9.75s, 2012## $ 3,480 $ 3,480,000
---------------------------------------------------------------------------------------------------
Forest & Paper Products - 1.3%
Buckeye Cellulose Corp., 9.25s, 2008 $ 2,150 $ 2,107,000
Georgia Pacific Corp., 9.375s, 2013## 565 621,500
International Paper Co., 5.375s, 2006 140 162,200
MeadWestvaco Corp., 6.8s, 2032 2,678 2,834,028
Weyerhaeuser Co., 6.75s, 2012 1,456 1,631,094
------------
$ 7,355,822
---------------------------------------------------------------------------------------------------
Gaming & Lodging - 2.6%
Aztar Corp., 8.875s, 2007 $ 1,550 $ 1,619,750
Coast Hotels & Casinos, Inc., 9.5s, 2009 1,295 1,392,125
HMH Properties, Inc., 8.45s, 2008 2,635 2,700,875
Hollywood Park, Inc., 9.5s, 2007 1,350 1,323,000
MGM Mirage, Inc., 8.375s, 2011 1,550 1,693,375
Park Place Entertainment Corp., 8.875s, 2008 1,540 1,663,200
Starwood Hotels & Resorts, 7.875s, 2012 2,600 2,720,250
Venetian Casino Resort LLC, 11s, 2010 1,525 1,673,687
------------
$ 14,786,262
---------------------------------------------------------------------------------------------------
Home Construction - 0.5%
D. R. Horton, Inc., 8s, 2009 $ 2,665 $ 2,891,525
---------------------------------------------------------------------------------------------------
Industrial - 0.1%
Timken Co., 5.75s, 2010 $ 482 $ 491,225
---------------------------------------------------------------------------------------------------
Insurance - 0.5%
MetLife, Inc., 6.5s, 2032 $ 2,597 $ 2,880,707
---------------------------------------------------------------------------------------------------
Insurance - Property & Casualty - 1.3%
Allstate Corp., 7.2s, 2009 $ 1,703 $ 1,985,700
Safeco Corp., 4.2s, 2008 1,980 1,997,659
Travelers Property Casualty Corp., 5s, 2013## 2,306 2,348,313
Willis Corroon Corp., 9s, 2009# 685 732,950
------------
$ 7,064,622
---------------------------------------------------------------------------------------------------
Machinery & Tools - 1.6%
AGCO Corp., 9.5s, 2008 $ 2,000 $ 2,180,000
Manitowoc Co., Inc., 10.5s, 2012 1,180 1,286,200
Terex Corp., 8.875s, 2008 960 998,400
Terex Corp., 9.25s, 2011 1,380 1,476,600
Terex Corp., 10.375s, 2011 1,140 1,265,400
Thermadyne Manufacturing Corp., 9.875s, 2008 230 9,487
United Rentals, Inc., 10.75s, 2008 1,600 1,728,000
------------
$ 8,944,087
---------------------------------------------------------------------------------------------------
Manufacturing
Day International Group, Inc., 11.125s, 2005 $ 105 $ 106,050
---------------------------------------------------------------------------------------------------
Medical & Health Technology Services - 0.5%
Alliance Imaging, Inc., 10.375s, 2011 $ 1,600 $ 1,504,000
Fisher Scientific International, Inc., 8.125s, 2012 1,305 1,402,875
------------
$ 2,906,875
---------------------------------------------------------------------------------------------------
Metals & Mining - 0.4%
P&L Coal Holdings Corp., 9.625s, 2008 $ 1,411 $ 1,481,550
Peabody Energy Corp., 6.875s, 2013## 340 353,600
Phelps Dodge Corp., 8.75s, 2011 501 565,529
------------
$ 2,400,679
---------------------------------------------------------------------------------------------------
Municipals - 3.1%
Austin, TX Electric Utility Systems Revenue, 5.5s, 2013 $ 2,250 $ 2,593,418
Florida Board of Education Capital Outlay, 5s, 2030 3,000 3,073,140
Metropolitan Transportation Authority, NY, 5s, 2031 3,000 3,073,950
New Jersey Economic Development Authority, 5.5s, 2012 1,500 1,729,110
Philadelphia, PA Water & Wastewater Revenue, 5s, 2031 2,700 2,766,366
State of Massachusetts, 5.5s, 2013 3,620 4,194,747
------------
$ 17,430,731
---------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 1.6%
ANR Pipeline Co., 8.875s, 2010## $ 440 $ 486,200
Dynegy, Inc., 6.875s, 2011 1,600 1,360,000
Kinder Morgan Energy Partners LP, 7.3s, 2033 2,578 3,010,581
Southern Natural Gas Co., 8.875s, 2010## 1,540 1,701,700
Williams Cos., Inc., 7.125s, 2011 2,100 1,984,500
Williams Cos., Inc., 7.75s, 2031 499 449,100
------------
$ 8,992,081
---------------------------------------------------------------------------------------------------
Oils - 0.6%
Valero Energy Corp., 6.875s, 2012 $ 1,331 $ 1,480,981
XTO Energy, Inc., 6.25s, 2013## 1,594 1,661,745
------------
$ 3,142,726
---------------------------------------------------------------------------------------------------
Pollution Control - 0.5%
Allied Waste North America, Inc., 10s, 2009 $ 2,375 $ 2,538,281
---------------------------------------------------------------------------------------------------
Printing & Publishing - 1.0%
American Media Operations, Inc., 8.875s, 2011## $ 1,600 $ 1,732,000
Hollinger International Publishing, Inc., 9s, 2010## 800 856,000
Houghton Mifflin Co., 8.25s, 2011## 960 1,020,000
Houghton Mifflin Co., 9.875s, 2013## 610 658,800
Mail-Well, Inc., 9.625s, 2012 1,050 1,065,750
------------
$ 5,332,550
---------------------------------------------------------------------------------------------------
Real Estate - 1.2%
Equity Office Properties Trust, 5.875s, 2013 $ 2,201 $ 2,326,310
Kimco Realty Corp., 6s, 2012 1,399 1,506,128
Vornado Realty Trust, 5.625s, 2007 2,811 2,894,307
------------
$ 6,726,745
---------------------------------------------------------------------------------------------------
Residential Mortgage-Backed - 0.4%
Residential Accredit Loans, Inc., 7.75s, 2027 $ 1,968 $ 1,965,259
---------------------------------------------------------------------------------------------------
Retail - 0.8%
J. Crew Corp., 10.375s, 2007 $ 725 $ 652,500
Penney (J.C.) Co., Inc., 8s, 2010 722 767,125
Rite Aid Corp., 9.5s, 2011## 1,760 1,874,400
Sears Roebuck Corp., 7s, 2032 1,411 1,441,033
------------
$ 4,735,058
---------------------------------------------------------------------------------------------------
Small Business Administration - 0.4%
Small Business Administration, 5.34s, 2021 $ 1,922 $ 1,987,036
---------------------------------------------------------------------------------------------------
Steel - 0.3%
AK Steel Corp., 7.75s, 2012 $ 1,600 $ 1,398,000
WCI Steel, Inc., 10s, 2004 565 175,150
------------
$ 1,573,150
---------------------------------------------------------------------------------------------------
Supermarkets - 0.3%
Fleming Cos., Inc., 9.25s, 2010 $ 1,695 $ 241,537
Roundy's, Inc., 8.875s, 2012 1,650 1,699,500
------------
$ 1,941,037
---------------------------------------------------------------------------------------------------
Technology - 0.6%
Unisys Corp., 7.875s, 2008 $ 3,250 $ 3,388,125
---------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 0.9%
AT&T Wireless Services, Inc., 8.75s, 2031 $ 540 $ 672,427
Centennial Cellular Operating Co., 10.75s, 2008 500 417,500
Rural Cellular Corp., 9.75s, 2010 1,125 978,750
Triton PCS, Inc., 0s to 2003, 11s to 2008 1,460 1,463,650
Verizon Wireless Capital LLC, 5.375s, 2006 1,221 1,315,773
------------
$ 4,848,100
---------------------------------------------------------------------------------------------------
Telecommunications - Wireline - 0.7%
Citizens Communications Co., 8.5s, 2006 $ 791 $ 916,381
Qwest Services Corp., 13.5s, 2010## 1,600 1,776,000
Sprint Capital Corp., 6.875s, 2028 1,501 1,388,425
------------
$ 4,080,806
---------------------------------------------------------------------------------------------------
Tobacco - 0.1%
Philip Morris, Inc., 6.8s, 2003 $ 593 $ 595,988
---------------------------------------------------------------------------------------------------
U.S. Government Agencies - 4.9%
FNMA, 6s, 2016 $ 1,537 $ 1,611,001
FNMA, 6s, 2017 4,775 5,005,397
FNMA, 6.5s, 2031 885 924,615
FNMA, 5.5s, 2032 8,201 8,357,327
FNMA, 6.5s, 2032 11,271 11,776,528
------------
$ 27,674,868
---------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 3.3%
U.S. Treasury Bonds, 5.375s, 2031 $ 3,841 $ 4,191,192
U.S. Treasury Bonds, 3.375s, 2032 1,150 1,318,778
U.S. Treasury Notes, 3.375s, 2007 2,253 2,454,001
U.S. Treasury Notes, 4.25s, 2010 4,809 5,544,308
U.S. Treasury Notes, 3s, 2012 4,684 5,031,156
------------
$ 18,539,435
---------------------------------------------------------------------------------------------------
Utilities - Electrical Power - 4.6%
AES Corp., 8.875s, 2011 $ 1,600 $ 1,528,000
Beaver Valley Funding Corp. II, 9s, 2017 1,491 1,723,325
BVPS II Funding Corp., 8.68s, 2017 928 1,085,250
Entergy Corp., 8.09s, 2017 2,132 2,293,590
FirstEnergy Corp., 5.5s, 2006 2,278 2,407,169
MidAmerican Energy Holdings Co., 5.875s, 2012 3,552 3,712,302
Niagara Mohawk Power Corp., 8.77s, 2018 2,354 2,451,771
Progress Energy, Inc., 5.85s, 2008 2,501 2,738,735
PSEG Energy Holdings LLC, 7.75s, 2007## 777 813,907
PSEG Power LLC, 7.75s, 2011 2,511 2,977,531
TXU Corp., 6.375s, 2006 3,943 4,199,295
------------
$ 25,930,875
---------------------------------------------------------------------------------------------------
Utilities - Gas - 0.3%
AmeriGas Partners LP, 8.875s, 2011 $ 1,635 $ 1,765,800
---------------------------------------------------------------------------------------------------
Utilities - Telephone - 0.7%
Verizon New York, Inc., 6.875s, 2012 $ 3,473 $ 4,001,483
---------------------------------------------------------------------------------------------------
TOTAL U.S. BONDS $367,639,048
---------------------------------------------------------------------------------------------------
Foreign Bonds - 31.8%
Algeria - 0.1%
Republic of Algeria, 2.188s, 2010 $ 638 $ 593,543
---------------------------------------------------------------------------------------------------
Australia - 0.5%
Government of Australia, 5.75s, 2011 AUD 2,293 $ 1,485,096
Government of Australia, 6.25s, 2015 1,530 1,020,487
------------
$ 2,505,583
---------------------------------------------------------------------------------------------------
Austria - 1.0%
Republic of Austria, 5.5s, 2007 EUR 3,264 $ 3,992,955
Republic of Austria, 5s, 2012 1,210 1,448,699
------------
$ 5,441,654
---------------------------------------------------------------------------------------------------
Belgium - 0.3%
Kingdom of Belgium, 5s, 2012 EUR 1,201 $ 1,437,117
---------------------------------------------------------------------------------------------------
Brazil - 1.5%
Banco Nacional de Desenvolvi, 20.369s, 2008
(Banks & Credit Cos.)## $ 475 $ 472,625
Federal Republic of Brazil, 2.125s, 2006 1,691 1,585,221
Federal Republic of Brazil, 2.188s, 2009 1,191 988,384
Federal Republic of Brazil, 2.625s, 2012 358 264,025
Federal Republic of Brazil, 8s, 2014 3,321 2,905,974
Federal Republic of Brazil, 8.875s, 2024 1,695 1,271,250
Federal Republic of Brazil, 10.125s, 2027 1,055 860,247
Federal Republic of Brazil, 12.25s, 2030 113 108,480
------------
$ 8,456,206
---------------------------------------------------------------------------------------------------
Bulgaria - 0.3%
Republic of Bulgaria, 8.25s, 2015## $ 1,260 $ 1,417,599
---------------------------------------------------------------------------------------------------
Canada - 2.3%
Abitibi Consolidated, Inc., 6.95s, 2006 (Forest &
Paper Products) $ 2,500 $ 2,594,888
Abitibi Consolidated, Inc., 8.55s, 2010 (Forest &
Paper Products) 1,384 1,566,181
Abitibi Consolidated, Inc., 8.85s, 2030 (Forest &
Paper Products) 1,262 1,398,460
Government of Canada, 5.75s, 2006 CAD 1,659 1,219,420
Government of Canada, 5.5s, 2009 2,163 1,583,252
Government of Canada, 5.25s, 2012 3,046 2,174,166
Government of Canada, 8s, 2023 1,159 1,062,351
Tembec, Inc., 7.75s, 2012 (Forest & Paper Products) $ 1,500 1,522,500
------------
$ 13,121,218
---------------------------------------------------------------------------------------------------
Chile - 0.1%
HQI Transelec Chile S.A., 7.875s, 2011 (Utilities - Electric) $ 700 $ 783,780
---------------------------------------------------------------------------------------------------
Colombia - 0.4%
Republic of Colombia, 9.75s, 2009 $ 1,325 $ 1,457,500
Republic of Colombia, 10s, 2012 102 112,302
Republic of Colombia, 10.75s, 2013 448 515,200
Republic of Colombia, 11.75s, 2020 30 36,413
------------
$ 2,121,415
---------------------------------------------------------------------------------------------------
Denmark - 1.0%
Kingdom of Denmark, 7s, 2007 DKK 24,092 $ 4,167,804
Kingdom of Denmark, 6s, 2009 4,071 688,371
Unikredit Realkredit, 5s, 2035 (Banks & Credit Cos.) 4,605 667,677
------------
$ 5,523,852
---------------------------------------------------------------------------------------------------
Dominican Republic - 0.4%
Dominican Republic, 9.5s, 2006## $ 952 $ 1,006,740
Dominican Republic, 9.04s, 2013## 940 945,875
------------
$ 1,952,615
---------------------------------------------------------------------------------------------------
Ecuador
Republic of Ecuador, 12s, 2012 $ 58 $ 48,140
Republic of Ecuador, 6s, 2030 87 52,200
------------
$ 100,340
---------------------------------------------------------------------------------------------------
Finland - 0.9%
Republic of Finland, 2.75s, 2006 EUR 304 $ 339,252
Republic of Finland, 5.375s, 2013 3,857 4,748,522
------------
$ 5,087,774
---------------------------------------------------------------------------------------------------
France - 2.0%
Crown Cork & Seal Co., Inc., 9.5s, 2011 (Containers)## $ 880 $ 937,200
Crown Cork & Seal Co., Inc., 10.25s, 2011 (Containers)## EUR 520 604,561
Crown Cork & Seal Co., Inc., 10.875s, 2013 (Containers)## $ 195 210,112
France Telecom S.A., 8.7s, 2006 (Telecommunications - Wireline) 105 119,246
France Telecom S.A., 10s, 2031 (Telecommunications - Wireline) 2,141 2,847,778
Groupe Danone, 5.625s, 2003 (Food & Beverage Products) EUR 50 56,245
Republic of France, 4.75s, 2007 1,182 1,401,697
Republic of France, 3s, 2009 1,264 1,504,023
Republic of France, 4.75s, 2012 1,307 1,536,050
Republic of France, 5s, 2012 400 477,949
SNCF, 7.5s, 2008 (Railroads) 750 988,393
Societe Generale Capital Trust I, 7.875s, 2049 (Banks
& Credit Cos.) 300 392,014
Vivendi Environnement, 5.875s, 2008 (Pollution Control) 250 300,741
------------
$ 11,376,009
---------------------------------------------------------------------------------------------------
Germany - 4.7%
Coca Cola Erfrischungsgetranke, 5.875s, 2005 (Food &
Beverage Products) EUR 600 $ 709,854
DePfa Deutsche Pfandbriefbank AG, 5.5s, 2010
(Corporate Asset-Backed) 960 1,178,915
Federal Republic of Germany, 4s, 2009 1,653 1,888,534
Federal Republic of Germany, 4.5s, 2009 18,320 21,498,937
Kreditanstalt fur Wiederaufbau, 4.75s, 2006 (Banks &
Credit Cos.) 750 883,850
------------
$ 26,160,090
---------------------------------------------------------------------------------------------------
Greece - 0.5%
FAGE Dairy Industry S.A., 9s, 2007 (Food & Beverage Products) $ 2,770 $ 2,690,363
Republic of Greece, 6.5s, 2014 EUR 260 343,639
------------
$ 3,034,002
---------------------------------------------------------------------------------------------------
Ireland - 1.2%
MDP Acquisitions PLC, 9.625s, 2012 (Forest & Paper Products)## $ 940 $ 1,019,900
Republic of Ireland, 4.25s, 2007 EUR 2,239 2,611,946
Republic of Ireland, 5s, 2013 2,479 2,963,602
------------
$ 6,595,448
---------------------------------------------------------------------------------------------------
Italy - 1.5%
Republic of Italy, 4.5s, 2005 EUR 4,745 $ 5,508,128
Republic of Italy, 4.5s, 2007 1,829 2,153,004
Republic of Italy, 4.75s, 2013 591 690,674
------------
$ 8,351,806
---------------------------------------------------------------------------------------------------
Kazakhstan - 0.5%
Kazkommerts International B.V., 10.125s, 2007 (Banks
& Credit Cos.) $ 415 $ 454,136
Kazkommerts International B.V., 8.5s, 2013 (Banks &
Credit Cos.)## 1,171 1,160,754
KazTransOil Co., 8.5s, 2006 (Oils)## 1,137 1,193,850
------------
$ 2,808,740
---------------------------------------------------------------------------------------------------
Luxembourg - 0.3%
Tyco International Group S.A., 7s, 2028
(Conglomerates) $ 1,800 $ 1,692,000
---------------------------------------------------------------------------------------------------
Malaysia - 0.4%
Petroliam Nasional, 7.75s, 2015 (Oil Services) $ 999 $ 1,151,348
Petronas Capital Ltd., 7.875s, 2022 (Oil Services)## 1,087 1,197,117
------------
$ 2,348,465
---------------------------------------------------------------------------------------------------
Mexico - 1.8%
BBVA Bancomer S.A. de C.V., 10.5s, 2011 (Banks & Credit Cos.)## $ 1,314 $ 1,498,057
Grupo Televisa S.A., 8.5s, 2032 (Broadcast & Cable TV) 1,516 1,516,000
Pemex Finance Ltd., 9.69s, 2009 (Energy - Integrated) 905 1,098,561
Pemex Project Funding Master Trust, 9.125s, 2010 (Finance) 1,104 1,324,800
Pemex Project Funding Master Trust, 8.625s, 2022 (Finance) 145 160,950
United Mexican States, 11.375s, 2016 386 551,980
United Mexican States, 8.125s, 2019 243 274,226
United Mexican States, 11.5s, 2026 2,622 3,794,536
------------
$ 10,219,110
---------------------------------------------------------------------------------------------------
Netherlands - 1.1%
Deutsche Telekom International Finance B.V., 8.125s,
2012 (Telecommunications - Wireline) EUR 130 $ 173,556
Deutsche Telekom International Finance B.V., 8.75s,
2030 (Telecommunications - Wireline) $ 1,414 1,747,370
Kingdom of Netherlands, 5s, 2012 EUR 3,528 4,230,284
------------
$ 6,151,210
---------------------------------------------------------------------------------------------------
New Zealand - 0.7%
Government of New Zealand, 7s, 2009 NZD 4,605 $ 2,749,603
Government of New Zealand, 6.5s, 2013 2,276 1,329,317
------------
$ 4,078,920
---------------------------------------------------------------------------------------------------
Norway - 0.1%
Kingdom of Norway, 5.5s, 2009 NOK 5,378 $ 786,892
---------------------------------------------------------------------------------------------------
Panama - 0.2%
Republic of Panama, 9.375s, 2023 $ 73 $ 78,840
Republic of Panama, 9.375s, 2029 1,100 1,223,750
------------
$ 1,302,590
---------------------------------------------------------------------------------------------------
Peru
Republic of Peru, 9.875s, 2015 $ 125 $ 140,313
---------------------------------------------------------------------------------------------------
Philippines
Philippines Republic, 9s, 2013 $ 25 $ 25,938
Philippines Republic, 10.625s, 2025 60 64,800
------------
$ 90,738
---------------------------------------------------------------------------------------------------
Poland - 0.2%
PTC International Finance B.V., 10.75s, 2007
(Telecommunications - Wireless) $ 266 $ 279,300
PTC International Finance B.V., 11.25s, 2009
(Telecommunications - Wireless) 857 955,555
------------
$ 1,234,855
---------------------------------------------------------------------------------------------------
Qatar
State of Qatar, 9.75s, 2030## $ 187 $ 246,385
---------------------------------------------------------------------------------------------------
Russia - 1.8%
Gazprom, 9.625s, 2013 (Utilities - Gas)## $ 200 $ 213,000
Ministry of Finance, 12.75s, 2028 868 1,341,060
Mobile TeleSystems, 9.75s, 2008 (Telecommunications - Wireless)## 1,430 1,522,950
Russian Federation, 3s, 2008 2,799 2,463,120
Russian Federation, 5s, 2030## 1,780 1,603,401
Siberian Oil Co., 10.75s, 2009 (Energy) 1,006 1,163,841
Tyumen Oil Co., 11s, 2007 (Oil Services) 328 379,660
Vimplecom B.V., 10.45s, 2005 (Telecommunications - Wireless)## 1,551 1,651,815
------------
$ 10,338,847
---------------------------------------------------------------------------------------------------
Singapore - 0.9%
DBS Capital Funding Corp., 7.657s, 2049 (Banks & Credit Cos.)## $ 2,303 $ 2,623,336
Flextronics International Ltd., 9.875s, 2010 (Electronics) 1,890 2,116,800
------------
$ 4,740,136
---------------------------------------------------------------------------------------------------
Spain - 2.0%
Kingdom of Spain, 7s, 2005 $ 4,988 $ 5,511,755
Kingdom of Spain, 5.35s, 2011 EUR 3,850 4,728,576
Kingdom of Spain, 5.5s, 2017 998 1,235,168
------------
$ 11,475,499
---------------------------------------------------------------------------------------------------
Supra-National - 0.7%
Central American Bank, 6.75s, 2013 (Banks & Credit Cos.)## $ 35 $ 36,523
Corporacion Andina de Fomento, 6.875s, 2012 (Banks & Credit Cos.) 2,800 2,984,044
European Investment Bank, 5.375s, 2012 (Banks & Credit Cos.) EUR 750 919,849
------------
$ 3,940,416
---------------------------------------------------------------------------------------------------
Sweden - 0.5%
Assa Abloy AB, 5.125s, 2006 (Metals & Mining) EUR 130 $ 152,280
Kingdom of Sweden, 8s, 2007 SEK 3,690 521,569
Kingdom of Sweden, 5.25s, 2011 6,500 831,801
Kingdom of Sweden, 5.5s, 2012 7,845 1,017,650
------------
$ 2,523,300
---------------------------------------------------------------------------------------------------
Switzerland - 0.1%
Credit Suisse Group, 7.974s, 2010 (Banks & Credit Cos.) EUR 265 $ 333,953
---------------------------------------------------------------------------------------------------
Tunisia
Banque Centrale de Tunisie, 8.25s, 2027 $ 59 $ 63,130
---------------------------------------------------------------------------------------------------
Turkey
Republic of Turkey, 11.5s, 2012 $ 23 $ 22,770
Republic of Turkey, 11.875s, 2030 95 96,663
------------
$ 119,433
---------------------------------------------------------------------------------------------------
United Kingdom - 1.8%
Bank of Ireland UK Holdings, 7.4s, 2049 (Banks & Credit Cos.) EUR 500 $ 643,431
Barclays Bank PLC, 8.55s, 2049 (Banks & Credit Cos.)## $ 2,259 2,833,337
Europa Two Ltd., 2.865s, 2027 (Corporate Asset-Backed) EUR 392 436,390
Global Tele Systems Ltd., 10.875s, 2008
(Telecommunications - Wireline) (In default) $ 165 17
Granite Mortgages PLC, 5.15s, 2042 (Residential
Mortgage-Backed) EUR 350 415,872
National Westminster Bank PLC, 6.625s, 2049 (Banks & Credit Cos.) 330 405,704
NGG Finance PLC, 5.25s, 2006 (Utilities - Electric) 200 234,260
OTE Telecommunications PLC, 6.125s, 2007
(Telecommunications - Wireline) 195 233,878
Pearson PLC, 6.125s, 2007 (Printing & Publishing) 135 161,601
Rolls Royce PLC, 6.375s, 2007 (Aerospace) 300 355,459
Telewest Communications PLC, 9.625s, 2006 (Broadcast & Cable TV) $ 350 80,500
United Kingdom Treasury, 7.25s, 2007 GBP 2,106 3,829,556
Vodafone Airtouch PLC, 5.75s, 2006
(Telecommunications - Wireless) EUR 140 168,291
------------
$ 9,798,296
---------------------------------------------------------------------------------------------------
Venezuela
Republic of Venezuela, 2.313s, 2007 $ 119 $ 88,095
---------------------------------------------------------------------------------------------------
Vietnam
Republic of Vietnam, 3.5s, 2028 $ 207 $ 133,826
---------------------------------------------------------------------------------------------------
Ukraine
Republic of Ukraine, 11s, 2007 $ 71 $ 79,268
---------------------------------------------------------------------------------------------------
TOTAL FOREIGN BONDS $178,794,468
---------------------------------------------------------------------------------------------------
TOTAL BONDS (IDENTIFIED COST, $509,704,319) $546,433,516
---------------------------------------------------------------------------------------------------
Stocks - 0.2%
---------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
---------------------------------------------------------------------------------------------------
U.S. Stocks - 0.2%
Apparel & Manufacturers - 0.1%
Sind Holdings, Inc. 5,720 $ 371,800
---------------------------------------------------------------------------------------------------
Metals & Mining - 0.1%
Metal Management, Inc. 67,037 $ 576,518
---------------------------------------------------------------------------------------------------
Tobacco
Reynolds (R.J) Tobacco Holdings, Inc. 2,302 $ 64,847
---------------------------------------------------------------------------------------------------
Utilities - Telephone
ITC Deltacom, Inc. 112,647 $ 202,765
---------------------------------------------------------------------------------------------------
TOTAL U.S. STOCKS $ 1,215,930
---------------------------------------------------------------------------------------------------
Foreign Stocks
United Kingdom
Colt Telecom Group PLC, ADR (Telecommunications - Wireline)*
(Identified Cost $5,250) 1,440 $ 4,232
---------------------------------------------------------------------------------------------------
TOTAL STOCKS (IDENTIFIED COST, $3,823,827) $ 1,220,162
---------------------------------------------------------------------------------------------------
Convertible Bonds - 0.1%
---------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
---------------------------------------------------------------------------------------------------
Foreign Bonds - 0.1%
Italy - 0.1%
Telecom Italia S.p.A., 6.25s, 2012
(Telecomminucations - Wireline) EUR 290 $ 341,215
---------------------------------------------------------------------------------------------------
United Kingdom
Fortis Capital Co., 6.25s, 2049 (Banks & Credit Cos.) EUR 155 $ 179,721
---------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS (IDENTIFIED COST, $387,299) $ 520,936
---------------------------------------------------------------------------------------------------
Rights
---------------------------------------------------------------------------------------------------
SHARES
---------------------------------------------------------------------------------------------------
United Mexican States* (Identified Cost, $0) 501,000 $ 2,204
---------------------------------------------------------------------------------------------------
Warrants
---------------------------------------------------------------------------------------------------
U.S. Warrants
Loral Orion Network Systems, Inc., Expire 1/15/07
(Business Services) 1,625 $ 249
Loral Orion Network Systems, Inc., Expire 1/15/07
(Business Services) 700 83
---------------------------------------------------------------------------------------------------
TOTAL U.S. WARRANTS $ 332
---------------------------------------------------------------------------------------------------
Foreign Warrants
Ono Finance PLC, Expire 3/16/2011 (Broadcast & Cable TV) 1,000 $ 10
---------------------------------------------------------------------------------------------------
TOTAL WARRANTS (IDENTIFIED COST, $166,689) $ 342
---------------------------------------------------------------------------------------------------
Repurchase Agreement - 2.6%
---------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
---------------------------------------------------------------------------------------------------
Goldman Sachs Group, LP dated 4/30/03 due 5/01/03,
total to be received $14,547,533 (secured by
various U.S. Treasury and Federal Agency
obligations in a jointly traded account), at Cost $ 14,547 $ 14,547,000
---------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $528,629,134) $562,724,160
Other Assets, Less Liabilities - (0.2)% (1,253,092)
---------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $561,471,068
---------------------------------------------------------------------------------------------------
*Non-income producing security.
##SEC Rule 144A restriction.
Abbreviations have been used throughout this report to indicate amounts shown
in currencies other than the U.S. Dollar. A list of abbreviations is shown
below.
AUD = Australian Dollar GBP = British Pound
CAD = Canadian Dollar NOK = Norwegian Krone
DKK = Danish Krone NZD = New Zealand Dollar
EUR = Euro SEK = Swedish Krona
See notes to financial statements.
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
--------------------------------------------------------------------------
APRIL 30, 2003
--------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $528,629,134) $562,724,160
Cash 137,904
Receivable for forward foreign currency exchange
contracts 331,491
Receivable for investments sold 8,067,980
Interest and dividends receivable 10,757,612
Other assets 73,050
------------
Total assets $582,092,197
------------
Liabilities:
Payable to dividend disbursing agent 227,377
Payable for forward foreign currency exchange contracts 1,706,759
Payable for investments purchased 17,901,733
Payable for trust shares reacquired 83,870
Payable for daily variation margin on open future
contracts 169,219
Payable to affiliates -
Management fee 11,294
Transfer and dividend disbursing agent fee 14,600
Accrued expenses and other liabilities 506,277
------------
Total liabilities $ 20,621,129
------------
Net assets $561,471,068
------------
Net assets consist of:
Paid-in capital $633,857,380
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 32,739,626
Accumulated net realized loss on investments and foreign
currency transactions (104,229,904)
Accumulated distributions in excess of net investment
gain (896,034)
------------
Total $561,471,068
------------
Shares of beneficial interest outstanding
(89,934,854 issued, less 6,388,302 treasury shares) 83,546,552
----------
Net asset value per share (net assets of $561,471,068 /
83,546,552 shares of beneficial interest outstanding) $6.72
-----
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Statement of Operations (Unaudited)
---------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2003
---------------------------------------------------------------------------
Net investment income:
Income -
Interest $ 18,572,836
Dividends 9,207
-------------
Total investment income $ 18,582,043
-------------
Expenses -
Management fee $ 1,951,840
Trustees" compensation 48,045
Custodian fee 170,513
Transfer and dividend disbursing agent fee 97,055
Administrative fee 31,434
Auditing fees 28,920
Legal fees 422
Postage 27,090
Printing 41,286
Miscellaneous 250,389
-------------
Total expenses $ 2,646,994
Fees paid indirectly (5,370)
-------------
Net expenses $ 2,641,624
-------------
Net investment income $ 15,940,419
-------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 10,977,755
Written option transactions 2,257
Futures transactions 148,221
Foreign currency transactions (10,252,884)
-------------
Net realized gain on investments and foreign currency
transactions $ 875,349
-------------
Change in unrealized appreciation (depreciation) -
Investments $ 33,206,494
Futures contracts (133,832)
Translation of assets and liabilities in foreign
currencies 133,265
-------------
Net unrealized gain on investments and foreign
currency translation $ 33,205,927
-------------
Net realized and unrealized gain on investments
and foreign currency $ 34,081,276
-------------
Increase in net assets from operations $ 50,021,695
-------------
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
--------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2003 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2002
--------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 15,940,419 $ 34,676,335
Net realized gain (loss) on investments and foreign
currency transactions 875,349 (34,318,848)
Net unrealized gain on investments and foreign currency
translation 33,205,927 11,488,644
------------- -------------
Increase in net assets from operations $ 50,021,695 $ 11,846,131
------------- -------------
Distributions declared to shareholders -
From net investment income $ (16,301,542) $ (35,951,308)
Trust share (principal) transactions -
Cost of shares reacquired $ (1,193,600) $ (1,717,045)
------------- -------------
Total increase (decrease) in net assets $ 32,526,553 $ (25,822,222)
------------- -------------
Net assets:
At beginning of period 528,944,515 554,766,737
------------- -------------
At end of period (including accumulated distributions in
excess of net investment gain of $896,034 and $534,911,
respectively) $ 561,471,068 $ 528,944,515
------------- -------------
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Financial Highlights
------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
SIX MONTHS ENDED -------------------------------------------------------------------------
APRIL 30, 2003 2002 2001 2000 1999 1998
(UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding
throughout each year):
Net asset value - beginning of
period $ 6.32 $ 6.60 $ 6.69 $ 7.03 $ 7.17 $ 7.79
------- ------- ------- ------- ------- -------
Income from investment operations#(S) -
Net investment income $ 0.19 $ 0.41 $ 0.51 $ 0.58 $ 0.56 $ 0.59
Net realized and unrealized
gain (loss) on investments
and foreign currency 0.41 (0.26) (0.06) (0.40) (0.14) (0.63)
------- ------- ------- ------- ------- -------
Total from investment
operations $ 0.60 $ 0.15 $ 0.45 $ 0.18 $ 0.42 $ (0.04)
------- ------- ------- ------- ------- -------
Less distributions declared to
shareholders -
From net investment income $ (0.20) $ (0.43) $ (0.49) $ (0.41) $ (0.57) $ (0.58)
From paid-in capital
-- -- (0.05) (0.17) -- --
------- ------- ------- ------- ------- -------
Total distributions
declared to
shareholders $ (0.20) $ (0.43) $ (0.54) $ (0.58) $ (0.57) $ (0.58)
------- ------- ------- ------- ------- -------
Net increase from repurchase of
capital shares $ 0.00+ $ 0.00+ $ 0.00+ $ 0.06 $ 0.01 $ --
------- ------- ------- ------- ------- -------
Net asset value - end of period $ 6.72 $ 6.32 $ 6.60 $ 6.69 $ 7.03 $ 7.17
------- ------- ------- ------- ------- -------
Per share market value - end of
period $ 6.25 $ 5.69 $ 6.06 $ 6.00 $ 6.06 $ 6.44
------- ------- ------- ------- ------- -------
Total return at market value 13.21%+++ 0.90% 9.83% 8.84% 2.81% (1.89)%
Ratios (to average net assets)/
Supplemental data:
Total expense 0.98%++ 0.96% 1.06% 1.06% 1.05% 1.05%
Net investment income(S) 5.93%++ 6.49% 7.65% 8.23% 7.80% 7.70%
Portfolio turnover 73% 152% 103% 82% 98% 155%
Net assets at end of period
(000 Omitted) $561,471 $528,945 $554,767 $567,191 $641,213 $665,881
#Per share data are based on average shares outstanding.
+Per share data is less than $0.01.
++Annualized.
+++Not annualized.
(S)As required, effective November 1, 2001, the trust has adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium
accreting market discount on debt securities. The effect of this change for the year
ended October 31, 2002 was to decrease net investment income per share and increase net
realized and unrealized gains and losses per share. The impact of this change calculates
to less than $0.01 per share. In addition, the ratio of net investment income to average
net assets decreased by 0.01%. Per share, ratios, and supplemental data for years prior
to October 31, 2002 have not been restated to reflect this change in presentation.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Multimarket Income Trust (the trust) is a non-diversified trust that is
organized as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as a closed-end management
investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates. The trust can invest in foreign securities.
Investments in foreign securities are vulnerable to the effects of changes in
the relative values of the local currency and the U.S. dollar
and to the effects of changes in each country's legal, political, and
economic environment.
Investment Valuations - Equity securities in the fund's portfolio for which
market quotations are available are valued at the last sale or official
closing price on the primary market or exchange on which they are primarily
traded or at the last quoted bid price for securities in which there were no
sales during the day. If no sales are reported, as is the case for most
securities traded over the counter, securities are valued on the basis of
quotations obtained from brokers and dealers or on the basis of valuations
furnished by a pricing service. Bonds and other fixed income securities (other
than short-term obligations) of U.S. issuers in the fund's portfolio are
valued at an evaluated bid price on the basis of quotes from brokers and
dealers or on the basis of valuations furnished by a pricing service. Prices
obtained from pricing services utilize both dealer-supplied valuations and
electronic data processing techniques which take into account appropriate
factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading characteristics
and other market data without exclusive reliance upon quoted prices or
exchange or over-the-counter prices, since such valuations are believed to
reflect more accurately the fair value of such securities. Forward contracts
and currency options will be valued using a pricing model taking into
consideration market data from an external pricing source. Use of the pricing
services has been approved by the Board of Trustees. All other securities
(other than short-term obligations), futures contracts and options in the
fund's portfolio for which the principal market is one or more securities or
commodities exchanges (whether domestic or foreign) will be valued at the last
reported sale price or at the settlement price prior to the determination (or
if there has been no current sale, at the closing bid price) on the primary
exchange on which such securities, futures contracts or options are traded;
but if a securities exchange is not the principal market for securities, such
securities will, if market quotations are readily available, be valued at
current bid prices. Short-term obligations in the fund's portfolio are valued
at amortized cost, which constitutes fair value as determined by the Board of
Trustees. Short-term obligations with a remaining maturity in excess of 60
days will be valued upon dealer-supplied valuations. Portfolio investments for
which market quotations are not readily available, or whose values have been
materially affected by events occurring after the close of their primary
markets, are valued at fair value as determined in good faith by or at the
direction of the Board of Trustees.
Repurchase Agreements - The trust may enter into repurchase agreements with
institutions that the trust's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The trust
requires that the securities collateral in a repurchase transaction be
transferred to the custodian in a manner sufficient to enable the trust to
obtain those securities in the event of a default under the repurchase
agreement. The trust monitors, on a daily basis, the value of the collateral
to ensure that its value, including accrued interest, is greater than amounts
owed to the trust under each such repurchase agreement. The trust, along with
other affiliated entities of Massachusetts Financial Services Company (MFS),
may utilize a joint trading account for the purpose of entering into one or
more repurchase agreements.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and
losses on investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
Deferred Trustee Compensation - Under a Deferred Compensation Plan (the Plan)
independent Trustees may elect to defer receipt of all or a portion of their
annual compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the trust or other MFS trust selected
by the Trustee. Deferred amounts represent an unsecured obligation of the
trust until distributed in accordance with the Plan. Included in other assets
and accrued expenses and other liabilities is $68,050 of Deferred Trustee
Compensation.
Written Options - The trust may write call or put options in exchange for a
premium. The premium is initially recorded as a liability, which is
subsequently adjusted to the current value of the option contract. When a
written option expires, the trust realizes a gain equal to the amount of the
premium received. When a written call option is exercised or closed, the
premium received is offset against the proceeds to determine the realized gain
or loss. When a written put option is exercised, the premium reduces the cost
basis of the security purchased by the trust. The trust, as writer of an
option, may have no control over whether the underlying securities may be sold
(call) or purchased (put) and, as a result, bears the market risk of an
unfavorable change in the price of the securities underlying the written
option. In general, written call options may serve as a partial hedge against
decreases in value in the underlying securities to the extent of the premium
received. Written options may also be used as part of an income producing
strategy reflecting the view of the trust's management on the direction of
interest rates.
Futures Contracts - The trust may enter into futures contracts for the delayed
delivery of securities or currency, or contracts based on financial indices at
a fixed price on a future date. In entering such contracts, the trust is
required to deposit with the broker either in cash or securities an amount
equal to a certain percentage of the contract amount. Subsequent payments are
made or received by the trust each day, depending on the daily fluctuations in
the value of the contract, and are recorded for financial statement purposes
as unrealized gains or losses by the trust. The trust's investment in futures
contracts is designed to hedge against anticipated future changes in interest
or exchange rates or securities prices. Investments in interest rate futures
for purposes other than hedging may be made to modify the duration of the
portfolio without incurring the additional transaction costs involved in
buying and selling the underlying securities. Investments in currency futures
for purposes other than hedging may be made to change the trust's relative
position in one or more currencies without buying and selling portfolio
assets. Investments in equity index contracts or contracts on related options
for purposes other than hedging, may be made when the trust has cash on hand
and wishes to participate in anticipated market appreciation while the cash is
being invested. Should interest or exchange rates or securities prices move
unexpectedly, the trust may not achieve the anticipated benefits of the
futures contracts and may realize a loss.
Forward Foreign Currency Exchange Contracts - The trust may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties
to meet the terms of their contracts and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar. The trust may enter
into forward foreign currency exchange contracts for hedging purposes as well
as for non-hedging purposes. For hedging purposes, the trust may enter into
contracts to deliver or receive foreign currency it will receive from or
require for its normal investment activities. The trust may also use contracts
in a manner intended to protect foreign currency-denominated securities from
declines in value due to unfavorable exchange rate movements. For non-hedging
purposes, the trust may enter into contracts with the intent of changing the
relative exposure of the trust's portfolio of securities to different
currencies to take advantage of anticipated changes. The forward foreign
currency exchange contracts are adjusted by the daily exchange rate of the
underlying currency and any gains or losses are recorded as unrealized until
the contract settlement date. On contract settlement date, the gains or losses
are recorded as realized gains or losses on foreign currency transactions.
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 generally accepted accounting principles. All discount is
accreted for tax reporting purposes as required by federal income tax
regulations. Dividends received in cash are recorded on the ex-dividend date.
Dividend and interest payments received in additional securities are recorded
on the ex-dividend or ex-interest date in an amount equal to the value of the
security on such date. Some securities may be purchased on a "when-issued" or
"forward delivery" basis, which means that the securities will be delivered to
the trust at a future date, usually beyond customary settlement time.
Fees Paid Indirectly - The trust's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the trust. This amount is shown as a reduction of total expenses on the
Statement of Operations.
Tax Matters and Distributions - The trust's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The trust
distinguishes between distributions on a tax basis and a financial reporting
basis and only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. Common
types of book and tax differences that could occur include differences in
accounting for currency transactions, mortgage-backed securities, derivatives,
defaulted bonds, capital losses, and amortization and accretion on debt
securities.
The tax character of distributions declared for the years ended October 31,
2002 and October 31, 2001 was as follows:
OCTOBER 31, 2002 OCTOBER 31, 2001
----------------------------------------------------------------------------
Distributions declared from:
Ordinary income $35,951,308 $41,366,841
Long-term capital gain -- --
----------- -----------
$35,951,308 $41,366,841
Tax return of capital -- 4,152,826
----------- -----------
Total distributions declared $35,951,308 $45,519,667
----------- -----------
As of October 31, 2002, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Undistributed ordinary income $ 837,504
Undistributed long-term capital gain --
Capital loss carryforward (101,470,328)
Unrealized depreciation (3,046,347)
Other temporary differences (2,428,990)
For federal income tax purposes, the capital loss carryforward may be applied
against any net taxable realized gains of each succeeding year until the
earlier of its utilization or expiration.
EXPIRATION DATE
-----------------------------------------------------
October 31, 2003 $ (3,003,441)
October 31, 2007 (18,400,020)
October 31, 2008 (19,415,923)
October 31, 2009 (22,359,865)
October 31, 2010 (38,291,079)
-------------
Total $(101,470,328)
-------------
(3) Transactions with Affiliates
Investment Adviser - The trust has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities.
The management fee is computed daily and paid monthly at an annual rate of
0.34% of the trust's average daily net assets and 5.40% of investment income.
The trust pays compensation to the Independent Trustees ("Trustees") in the
form of both a retainer and attendance fees, and pays no compensation directly
to its Trustees who are officers of the investment adviser, or to officers of
the trust, all of whom receive remuneration for their services to the trust
from MFS. Certain officers and Trustees of the trust are officers or directors
of MFS and MFS Service Center, Inc. (MFSC). On January 1, 2002, the Trustees
terminated the Independent Trustee unfunded defined benefit plan for active
Trustees and converted it to an unfunded retirement benefit deferral plan for
active Trustees. Under the new plan, the unfunded pension liability was
converted into an equivalent value of notional shares of the trust that will
fluctuate with the performance (at NAV) of the trust. Included in Trustees"
compensation is a net increase of $10,410 as a result of the change in the
trust's pension liability under this plan and a pension expense of $8,874 for
inactive trustees for the six months ended April 30, 2003.
Administrator - The trust has an administrative services agreement with MFS to
provide the trust with certain financial, legal, shareholder communications,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the trust pays MFS an administrative fee
at the following annual percentages of the trust's average daily net assets:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
Transfer Agent - MFSC acts as registrar and dividend disbursing agent for the
Trust. The agreement provides that the Trust will pay MFSC an account
maintenance fee of no more than $9.00 and a dividend services fee of $0.75 per
reinvestment and will reimburse MFSC for reasonable out-of-pocket expenses.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
PURCHASES SALES
---------------------------------------------------------------------------
U.S. government securities $ 76,147,725 $169,721,978
------------- ------------
Investments (non-U.S. government securities) $ 312,054,137 $233,096,434
------------- ------------
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the trust, as computed on a federal income tax basis, are
as follows:
Aggregate cost $ 532,585,079
-------------
Gross unrealized appreciation $ 37,907,916
Gross unrealized depreciation (7,768,835)
-------------
Net unrealized appreciation $ 30,139,081
-------------
(5) Shares of Beneficial Interest
The trust's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. The Trustees have
authorized 89,934,854 full and fractional shares of beneficial interest and
have authorized the repurchase by the trust of up to 10% of its own shares of
beneficial interest. 205,600 shares of beneficial interest were purchased by
the trust during the six months ended April 30, 2003 at an average price per
share of $5.81 and a weighted average discount of 9.29% per share. The trust
repurchased 294,300 shares of beneficial interest during the year ended
October 31, 2002 at an average price per share of $5.83 and a weighted average
discount of 9.43% per share. Transactions in trust shares were as follows:
SIX MONTHS ENDED APRIL 30, 2003 YEAR ENDED OCTOBER 31, 2002
------------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------
Treasury shares reacquired (205,600) $(1,193,600) (294,300) $(1,717,045)
------- ----------- ------- -----------
Net decrease (205,600) $(1,193,600) (294,300) $(1,717,045)
------- ----------- ------- -----------
(6) Line of Credit
The trust, and other affiliated funds participate in an $800 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each fund, based on its borrowings, at a rate equal to the bank's
base rate. In addition, a commitment fee, based on the average daily unused
portion of the line of credit, is allocated among the participating funds at
the end of each quarter. The commitment fee allocated to the trust for the six
months ended April 30, 2003 was $2,393. The trust had no borrowings during the
period.
(7) Financial Instruments
The trust trades financial instruments with off-balance-sheet risk in the
normal course of its investing activities in order to manage exposure to
market risks such as interest rates and foreign currency exchange rates. These
financial instruments include forward foreign currency exchange contracts and
futures contracts. The notional or contractual amounts of these instruments
represent the investment the trust has in particular classes of financial
instruments and does not necessarily represent the amounts potentially subject
to risk. The measurement of the risks associated with these instruments is
meaningful only when all related and offsetting transactions are considered.
There were no outstanding financial instruments with off-balance-sheet risk at
the end of the period.
Written Option Transactions
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
---------------------------------------------------------------------------------------------------------
Outstanding, beginning of period -- $ --
Options written 2 4,659
Options terminated in closing transactions -- --
Options exercised (1) (2,401)
Options expired (1) (2,258)
-- ------
Outstanding, end of period -- $ --
-- ------
At April 30, 2003 the trust had sufficient cash and/or securities at least
equal to the value of the written options.
Forward Foreign Currency Exchange Contracts
NET
UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
-----------------------------------------------------------------------------------------------------------
Sales
5/5/03 - 5/15/03 ARS 555,000 $ 190,099 $ 195,624 $ (5,525)
6/16/2003 AUD 4,058,000 2,498,164 2,528,995 (30,831)
6/16/2003 CAD 5,879,838 4,035,509 4,090,658 (55,149)
6/16/2003 DKK 33,101,797 4,882,271 4,976,541 (94,270)
5/5/03 - 6/30/03 EUR 60,527,305 66,172,521 67,555,325 (1,382,800)
6/16/2003 GBP 2,639,078 4,143,352 4,208,460 (65,108)
6/16/2003 NOK 5,681,278 789,220 808,886 (19,666)
6/16/03 - 6/18/03 NZD 7,378,036 4,094,567 4,106,637 (12,070)
6/16/2003 SEK 16,970,485 2,032,150 2,070,816 (38,666)
5/1/2003 TRL 168,870,000,000 106,543 107,989 (1,446)
5/9/2003 ZAR 2,082,410 285,192 286,420 (1,228)
----------- ----------- -----------
$89,229,588 $90,936,351 $(1,706,759)
----------- ----------- -----------
Purchases
5/5/03 - 5/15/03 ARS 1,139,000 $ 390,599 $ 401,077 $ 10,478
5/7/03 - 5/9/03 COP 422,258,000 144,016 147,260 3,244
5/5/03 - 6/30/03 EUR 10,378,340 11,333,526 11,587,690 254,164
5/19/2003 HUF 55,000,000 241,535 249,668 8,133
5/27/03 - 5/29/03 MXN 3,804,350 361,068 367,474 6,406
5/5/27/03 - 9/15/03 PLN 1,144,827 290,819 298,296 7,477
5/19/2003 RUB 3,155,000 100,895 101,332 437
5/14/2003 SGD 351,980 197,448 198,478 1,030
5/19/03 - 5/27/03 THB 18,191,200 423,923 424,782 859
5/1/03 - 6/2/03 TRL 337,740,000,000 203,341 212,260 8,919
5/9/2003 ZAR 2,082,410 256,076 286,420 30,344
----------- ----------- -----------
$13,943,246 $14,274,737 $ 331,491
----------- ----------- -----------
At April 30, 2003, the trust had sufficient cash and/or securities to cover
any commitments under these contracts.
Futures Contracts
UNREALIZED
DESCRIPTION EXPIRATION CONTRACTS POSITION DEPRECIATION
--------------------------------------------------------------------------------------------------------------------
U.S. Treasury Notes June, 2003 285 Short $(133,832)
---------
$(133,832)
---------
At April 30, 2003, trust had sufficient cash and/or securities to cover any
margin requirements under these contracts.
(8) Change in Accounting Principle
As required, effective November 1, 2001, the fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium and accreting market discount on debt securities. The
cumulative effect of this accounting change had no impact on total net assets
of the fund, but resulted in a $3,979,555 reduction in cost of securities and
a corresponding $3,979,555 decrease in net unrealized depreciation, based on
securities held by the fund on November 1, 2001.
The effect of this change for the year ended October 31, 2002 was to increase
net investment income by $42,664, increase net unrealized depreciation by
$522,757, and decrease net realized losses by $565,421. The Statement of
Changes in Net Assets and Financial Highlights for prior periods has not been
restated to reflect this change in presentation.
MFS(R) MULTIMARKET INCOME TRUST
The following tables present certain information regarding the Trustees and
officers of the Trust, including their principal occupations, which, unless
specific dates are shown, are of more than five years" duration, although the
titles may not have been the same throughout.
NAME, AGE, POSITION WITH THE TRUST,
PRINCIPAL OCCUPATION, AND OTHER DIRECTORSHIPS(1)
INTERESTED TRUSTEES
JEFFREY L. SHAMES* (born 06/02/55) ABBY M. O'NEILL (born 04/27/28)
Chairman Trustee
Massachusetts Financial Services Private investor; Rockefeller
Company, Chairman Financial Services, Inc.
(investment advisers), Chairman
JOHN W. BALLEN* (born 09/12/59) and Chief Executive Officer
Trustee and President
Massachusetts Financial Services LAWRENCE T. PERERA (born 06/23/35)
Company, Chief Executive Officer and Trustee
Director Hemenway & Barnes (attorneys),
Partner
KEVIN R. PARKE* (born 12/14/59)
Trustee WILLIAM J. POORVU (born 04/10/35)
Massachusetts Financial Services Trustee
Company, President, Chief Investment Private investor; Harvard
Officer and Director University Graduate School of
Business Administration, Class
INDEPENDENT TRUSTEES of 1961 Adjunct Professor in
Entrepreneurship Emeritus; CBL
LAWRENCE H. COHN, M.D. (born 03/11/37) & Associates Properties, Inc.
Trustee (real estate investment trust),
Brigham and Women's Hospital, Chief of Director
Cardiac Surgery; Harvard Medical
School, Professor of Surgery J. DALE SHERRATT (born 09/23/38)
Trustee
WILLIAM R. GUTOW (born 09/27/41) Insight Resources, Inc.
Trustee (acquisition planning
Private investor and real estate specialists), President;
consultant; Capitol Entertainment Wellfleet Investments (investor
Management Company (video franchise), in health care companies),
Vice Chairman Managing General Partner (since
1993); Cambridge Nutraceuticals
J. ATWOOD IVES (born 05/01/36) Trustee (professional nutritional
Private investor; KeySpan Corporation products), Chief Executive
(energy related services), Director; Officer (until
Eastern Enterprises (diversified May 2001)
services company), Chairman, Trustee
and Chief Executive Officer (until ELAINE R. SMITH (born 04/25/46)
November 2000) Trustee
Independent health care
industry consultant
WARD SMITH (born 09/13/30)
Trustee
Private investor
(1) Directorships or trusteeships of companies required to report to the
Securities and Exchange Commission (i.e., "public companies").
* "Interested person" of MFS within the meaning of the Investment Company Act
of 1940 (referred to as the 1940 Act) which is the principal federal law
governing investment companies like the Trust. The address of MFS is 500
Boylston Street, Boston, Massachusetts 02116.
OFFICERS
ROBERT R. FLAHERTY (born 09/18/63)
JEFFREY L. SHAMES (born 06/02/55) Assistant Treasurer
Chairman Massachusetts Financial
Massachusetts Financial Services Services Company, Vice
Company, Chairman President (since August 2000);
UAM Fund Services, Senior Vice
JOHN W. BALLEN (born 09/12/59) President (prior to
Trustee and President August 2000)
Massachusetts Financial Services
Company, Chief Executive Officer and RICHARD M. HISEY (born 08/29/58)
Director Treasurer
Massachusetts Financial
JAMES R. BORDEWICK, JR. (born Services Company, Senior Vice
03/06/59) Assistant Secretary and President (since July 2002);
Assistant Clerk The Bank of New York, Senior
Massachusetts Financial Services Vice President (September 2000
Company, Senior Vice President and to July 2002); Lexington Global
Associate General Counsel Asset Managers, Inc., Executive
Vice President and Chief
STEPHEN E. CAVAN (born 11/06/53) Financial Officer, General
Secretary and Clerk Manager, Mutual Funds (prior to
Massachusetts Financial Services September 2000)
Company, Senior Vice President,
General Counsel and Secretary ELLEN MOYNIHAN (born 11/13/57)
Assistant Treasurer
STEPHANIE A. DESISTO (born 10/01/53) Massachusetts Financial
Assistant Treasurer Services Company,
Massachusetts Financial Services Vice President
Company, Vice President (since April
2003); Brown Brothers Harriman & Co., JAMES O. YOST (born 06/12/60)
Senior Vice President (November 2002 Assistant Treasurer
to April 2003); ING Groep N.V./Aeltus Massachusetts Financial
Investment Management, Senior Vice Services Company, Senior Vice
President (prior to November 2002) President
The Trust holds annual shareholder meetings for the purpose of electing
Trustees, and Trustees are elected for fixed terms. The Board of Trustees
currently is divided into three classes, each having a term of three years.
Each year the term of one class expires. Each Trustee's term of office expires
on the date of the third annual meeting following the election to office of
the Trustee's class. Each Trustee will serve until next elected or his or her
earlier death, resignation, retirement or removal.
Messrs. Shames, Ives, Perera and Poorvu, and Ms. Smith have served in their
capacity as Trustee of the Trust continuously since originally elected or
appointed. Messrs. Ballen and Gutow have each served as a Trustee of the Trust
since August 1, 2001. Messrs. Cohn, Sherratt and Smith, and Ms. O'Neill, were
elected by shareholders and have served as Trustees of the Trust since January
1, 2002. Mr. Parke has served as a Trustee of the Trust since January 1, 2002.
Each of the Trust's Trustees and officers holds comparable positions with
certain other funds of which MFS or a subsidiary is the investment adviser or
distributor and, in the case of the officers, with certain affiliates of MFS.
Each Trustee serves as a board member of 112 funds within the MFS Family of
Funds.
The Statement of Additional Information contains further information about the
Trustees and is available without charge upon request, by calling
1-800-225-2606.
INVESTMENT ADVISER TRANSFER AGENT, REGISTRAR AND
DIVIDEND DISBURSING AGENT
Massachusetts Financial Services Company
500 Boylston Street State Street Bank and Trust
Boston, MA 02116-3741 Company
c/o MFS Service Center, Inc.
PORTFOLIO MANAGER P.O. Box 55024
Boston, MA 02205-5024
Peter C. Vaream+ 1-800-637-2304
CUSTODIANS
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
JP Morgan Chase Manhattan Bank
One Chase Manhattan Plaza
New York, NY 10081
+MFS Investment Management
MFS(R) MULTIMARKET INCOME TRUST
[MFS LOGO]
INVESTMENT MANAGEMENT
500 Boylston Street
Boston, MA 02116-3741
(C)2003 MFS Investment Management(R).
500 Boylston Street, Boston, MA 02116. MMTCE-SEM-6/03 85.4M
ITEM 2. CODE OF ETHICS.
Not applicable at this time. Applicable for annual reports filed for fiscal
years ending on or after July 15, 2003.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time. Applicable for annual reports filed for fiscal
years ending on or after July 15, 2003.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time. Applicable for annual reports filed for the first
fiscal year ending after December 15, 2003.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
If applicable, not applicable at this time. Applicable for annual reports
covering periods ending on or after the compliance date for the listing
standards applicable to the particular issuer. Listed issuers must be in
compliance with the new listing rules by the earlier of the registrant's first
annual shareholders meeting after January 15, 2004 or October 31, 2004.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
If applicable, not applicable at this time. Applicable for annual reports filed
on or after July 1, 2003.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures 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 requir ed 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 significant changes in the registrant's internal controls or
in other factors that could significantly affect these controls subsequent
to the date of their evaluation.
ITEM 10. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a) 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: Not applicable.
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule
30a-2(a) under the Act (17 CFR 270.30a-2): Attached hereto.
[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)) 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.][The submission of Section
906 certifications has been proposed by the SEC, but has not yet been
finalized. The SEC has encouraged issuers to submit Section 906
certifications as an exhibit to Form N-CSR until the final rule has been
adopted. Please see Proposed Rule: Certification of Disclosure in Certain
Exchange Act Reports, Release No. 33-8212 (March 21, 2003)].
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 MULTIMARKET INCOME TRUST
-------------------------------------------------------------------
By (Signature and Title)* /s/ JOHN W. BALLEN
-----------------------------------------------------
John W. Ballen, President
Date: July 14, 2003
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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)* /s/ JOHN W. BALLEN
------------------------------------------------------
John W. Ballen, President
(Principal Executive Officer)
Date: July 14, 2003
-------------
By (Signature and Title)* /s/ RICHARD M. HISEY
------------------------------------------------------
Richard M. Hisey, Treasurer
(Principal Financial Officer and Accounting Officer)
Date: July 14, 2003
-------------
* Print name and title of each signing officer under his or her signature.