[logo] M F S(R)
INVESTMENT MANAGEMENT
MFS(R) MULTIMARKET
INCOME TRUST
SEMIANNUAL REPORT o APRIL 30, 2002
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 4
Performance Summary ....................................................... 8
Portfolio of Investments .................................................. 10
Financial Statements ...................................................... 22
Notes to Financial Statements ............................................. 26
Trustees and Officers ..................................................... 33
-------------------------------------------------------------------------------
MFS(R) PRIVACY POLICY
At MFS(R), we are committed to protecting your privacy.
On behalf of the MFS Family of Funds(R), the MFS(R) Institutional Trusts, the
Vertex(SM) Funds, Massachusetts Financial Services Company, and certain
affiliates(1) (collectively, "MFS," "we," "us" or "our"), this privacy policy
outlines certain of our policies designed to maintain the privacy of your
nonpublic personal information.
Nonpublic personal information includes much of the information you provide to
us and the related information about you and your transactions involving your
MFS investment product or service. Examples of nonpublic personal information
include the information you provide on new account applications for MFS
investment products or services, your share balance or transactional history,
and the fact that you are a customer of MFS.
We may collect nonpublic personal information about you from the following
sources:
o information we receive from you on applications or other forms
o information about your transactions with us, our affiliates, or others, and
o information we receive from a consumer reporting agency
We do not disclose any nonpublic personal information about our customers or
former customers to anyone except as permitted by law. We may disclose all of
the information we collect, as described above, to companies that perform
marketing services on our behalf or to other financial institutions with whom
we have joint marketing arrangements.
We restrict access to nonpublic personal information about you to personnel
who are necessary or appropriate to provide products or services to you. We
maintain physical, electronic, and procedural safeguards that comply with
federal regulations to guard your nonpublic personal information.
Our privacy policy applies only to individual MFS investors who have a direct
relationship with us. If you own MFS products or receive MFS investment
services in the name of a third-party broker-dealer, bank, investment adviser
or other financial service provider, that third-party's privacy policies may
apply to you and our privacy policy may not.
If you have any questions with respect to MFS' privacy policy, please call
1-800-225-2606 any business day between 8 a.m. and 8 p.m. Eastern time.
(1) MFS Institutional Advisors, Inc., Vertex Investment Management, Inc., MFS
Original Research Advisors, LLC, MFS Original Research Partners, LLC, and
MFS(R) Heritage Trust Company(SM).
--------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
--------------------------------------------------------------------------------
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
Despite a fourth-quarter rally in 2001, the market volatility we witnessed
over the past two years has continued into 2002. As I write this in mid-May,
many U.S. equity indices have retreated since December; bond performance has
been decidedly mixed year to date; and many international equity indices have
outperformed the U.S. market this year. Federal Reserve Board (Fed) Chairman
Alan Greenspan has declared that, in fact, the recession is over, and many
financial experts have agreed with him. We think the questions on many
investors' minds are:
o Is the recession genuinely over?
o If it is, should I change my portfolio to prepare for a recovery?
THE WORST SEEMS TO BE OVER
According to many economists, the recession is technically over. We are
beginning to see growth again in the U.S. economy and in economies around the
globe. But we would qualify that with a caution that the exciting growth rates
of the 1990s are not coming back any time soon.
Our view of the situation is that corporate profits still look weak, despite
the recession being over. We think the markets may be bumping along the bottom
for a bit longer before a recovery gathers steam. Firms in many industries are
still dogged by excess capacity built up in the 1990s, and we think that may
slow the growth of corporate profits for a while longer. Our analysts and fund
managers talk frequently with corporate managements; a common theme they have
seen lately is a wait-and-see attitude. Corporations are postponing spending
decisions until their own business improves.
SHOULD I CHANGE MY PORTFOLIO?
Should you be adjusting your portfolio to anticipate an eventual recovery?
This is a question best discussed with your investment professional. However,
we would contend that changing one's portfolio in response to short-term
events, known as market timing, is a strategy that few investors have been
able to execute successfully over the long term. Our experience has been that
a long-term financial plan, developed with the help of an investment
professional, may offer a better chance of riding out economic cycles and
working toward your long-term investment goals.
Recent events, we think, offer evidence to support that view. For example, two
traditional elements of a long-term financial plan are setting reasonable
expectations and diversifying among asset classes -- such as growth stocks,
value stocks, and bonds.
In the late 1990s, it was tempting to raise our long-term expectations as we
experienced several years of over-20% growth in equity markets. News stories
often suggested this was the new norm, declaring that a "new economy" had
vanquished the "old economy" -- and its historical average annual returns that
had been closer to 10% for stocks.
Adjusting one's financial plan to agree with that view, however, could have
proven disastrous over the past few years. Yes, the Standard & Poor's 500 Stock
Index (the S&P 500), a commonly used measure of the broad stock market,
returned an average of 28.6% per year for the years 1995 through 1999. But the
same index returned -10.5% annually for the years 2000 through 2001.(1) A look
at history might have prepared an investor for more realistic long-term
returns. For example, for the 50-year period ended March 31, 2002, which
includes the up and down periods just mentioned, the average annual return for
the S&P 500 was 11.9%.(2)
In addition to unrealistic expectations, another investment trap of the 1990s
was believing that growth stocks would always reign supreme. A financial plan
that included a range of asset classes, however -- recognizing that individual
asset classes frequently go in and out of favor -- could have helped an
investor over the past two difficult years, when both bonds and value stocks
significantly outperformed growth stocks.(3)
We should, however, note that if your personal situation or financial goals
change, your financial plan may need to change as well. For that reason, we
suggest that you and your investment professional revisit your long-term plan
regularly to assess your progress and make course corrections as necessary.
DEJA VU
The points we've just made, of course, are familiar to most investors.
As baseball great Yogi Berra said, "This is like deja vu all over again."
What's new, however, is the historical context that validates the old
familiar strategies.
This spring marks the second anniversary of the start of a severe market
downturn that generally is recognized as the worst time for investors since
the 1970s. But the downturn also demonstrated, in our opinion, that short-term
events are significantly less important for investors than tried-and-true
strategies, including sticking to a long-term plan, setting realistic
expectations, and diversifying among asset classes.
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 and Chief Executive Officer
MFS Investment Management(R)
May 15, 2002
(1) Source: Lipper Inc.
(2) Source: Weisenberger.
(3) For the two-year period ended March 31, 2002, bonds, as represented by the
Lehman Brothers Aggregate Bond Index, delivered an average annual return of
8.88%; value stocks, as represented by the Russell 1000 Value Index,
delivered an average annual return of 2.31%; and growth stocks, as
represented by the Russell 1000 Growth Index, delivered an average annual
return of -25.08%. Source: Lipper Inc.
The Lehman Brothers Aggregate Bond Index is unmanaged and is composed of
all publicly issued obligations of the U.S. Treasury and government
agencies, all corporate debt guaranteed by the U.S. government, all fixed-
rate nonconvertible investment-grade domestic corporate debt, and all
fixed-rate securities backed by mortgage pools of the Government National
Mortgage Association (GNMA), the Federal Home Loan Mortgage Corporation
(FHLMC), and the Federal National Mortgage Association (FNMA). The Russell
1000 Value Index measures the performance of large-cap U.S. value stocks.
The Russell 1000 Growth Index measures the performance of large-cap U.S.
growth stocks.
The opinions expressed in this letter are those of MFS, and no forecasts can
be guaranteed. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
It is not possible to invest directly in an index.
MANAGEMENT REVIEW AND OUTLOOK
[Photo of Peter C. Vaream]
Peter C. Vaream
Dear Shareholders,
For the six months ended April 30, 2002, the trust provided a total return of
4.45% 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 0.46%. The trust's results compare
to returns over the same period for the following benchmarks: -2.19% for the
J.P. Morgan Non-Dollar Government Bond Index (the Morgan Index), -4.09% for the
Lehman Brothers Government Bond Index, and -6.64% for the Lehman Brothers High
Yield Bond Index. The Morgan Index is an unmanaged aggregate of actively traded
government bonds issued by 12 countries (excluding the United States) with
remaining maturities of at least one year. The Lehman Brothers Government Bond
Index is unmanaged and is composed of all publicly issued debt obligations of
the U.S. Treasury, U.S. government agencies, quasi-federal corporations, and
corporate debt guaranteed by the U.S. government. The Lehman Brothers High Yield
Bond Index includes all fixed- income securities having a maximum quality rating
from Moody's Investors Service of "Ba1," a minimum amount outstanding of $150
million, and at least one year to maturity.
At the beginning of the period, we saw short-term interest rates fall to
40-year lows. This followed the Federal Reserve Board's (the Fed's) series of
interest rate cuts designed to avoid recession. After the tragic events of
September 11, the Fed stepped in again to steady the global financial markets
and moderate the severity of the downturn. With interest rates so low, bond
yields initially moved lower and their prices higher. However, toward the end
of the year, interest rates and bond yields grew more volatile, based on
changing sentiment regarding the strength of the economy and the future
direction of interest rates. Although the last six months have been
challenging for the fixed-income markets, the trust performed well against its
benchmarks.
Mortgages and government agency securities contributed positively to
performance over the period. We believe that mortgages will continue to
perform well, now that there has been upward pressure on interest rates and
homeowner refinancings and prepayments were less prevalent. Prepayments occur
when homeowners refinance their mortgages, causing the mortgage pools that
make up the securities to prepay. Investors generally dislike prepayments
because they potentially force them to reinvest at lower interest rates. In
our opinion, we have been experiencing an environment in which investors were
more risk averse and were seeking higher-quality investment options. Both
mortgages and the agency market benefited from this trend.
Our high-grade and high-yield corporate exposure was a plus for performance.
During the period, we selectively increased our allocation of high-grade
corporate bonds, favoring companies with very positive fundamentals,
particularly those that were paying down debt and had the chance for an
upgrade. On the high-yield side, our investments in the manufacturing sector
helped performance, while some of our high-yield securities in the cable
industry underperformed. There has been a heightened awareness of the need for
corporate governance and this trend has impacted those companies who have not
been as diligent as others.
Abroad, we continued to favor bonds offered by the dollar-bloc countries, due
to their more stable economies. These holdings contributed positively to
performance and included the United States and Canada. Emerging market bonds
also were strong performers over the period, particularly those from Russia,
Mexico and Panama. Emerging market countries such as these have shown greater
fiscal discipline and their economies have not shown as significant a decline
as the U.S.
Over the past six months, we primarily owned shorter-maturity securities which
performed well, given how steep the yield curve -- a representation of the
difference between short- and long-term rates -- had become and the better
performance of shorter maturities. Going forward, we expect the opposite to
occur. As anticipation of a Fed interest rate hike begins to be a factor, we
see longer maturities outperforming. We will adjust the portfolio accordingly,
repositioning our holdings to longer maturities to try to take advantage of
this shift.
In our opinion, the economic recovery will be sluggish and therefore we
anticipate that our strategy will be to remain well diversified in this
environment. We plan to grow our mortgage-backed and agency holdings, on an
opportunistic basis as valuations become attractive. We also plan to continue
to invest in a good balance of high-grade and high-yield corporate bonds. We
think large manufacturing companies will perform well, now that the U.S.
economy has begun to show signs of strengthening. In an uncertain corporate
environment, we will continue to remain focused on bottom-up security
selection. In addition, we expect to trim our emerging market exposure a bit,
favoring European over U.S. Treasuries. (Principal value and interest on
Treasury securities are guaranteed by the U.S. government if held to
maturity.) We would argue that investor expectation of a rate hike has already
been factored into the bond market. Therefore, while rates in general remain
difficult to predict and could drift higher, we do not foresee a Fed rate hike
having a big negative effect on the bond market, particularly in such a low
inflation environment.
Respectfully,
/s/ Peter C. Vaream
Peter C. Vaream
Portfolio Manager
Note to Shareholders: Effective March 18, 2002, Peter C. Vaream became
portfolio manager of the trust.
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.
ADDRESS CHANGE
Please use our new mailing address, effective immediately.
State Street Bank and Trust Company
c/o MFS Service Center, Inc.
P.O. Box 55024
Boston, MA 02205-5024
-------------------------------------------------------------------------------
PORTFOLIO MANAGER'S PROFILE
-------------------------------------------------------------------------------
PETER C. VAREAM IS 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.
-------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------
PERFORMANCE SUMMARY
-------------------------------------------------------------------------------
(For the six months ended April 30, 2002)
NET ASSET VALUE PER SHARE
October 31, 2001 $6.60
April 30, 2002 $6.39
NEW YORK STOCK EXCHANGE PRICE
October 31, 2001 $6.06
April 24, 2002 (high)* $6.21
December 17, 2001 (low)* $5.66
April 30, 2002 $6.10
*For the six months ended November 1, 2001, through April 30, 2002
-------------------------------------------------------------------------------
RISK CONSIDERATIONS
Government guarantees apply to underlying securities only and not to prices
and yields of the portfolio.
As a nondiversified portfolio, the portfolio invests in a limited number of
companies and may have more risk because a change in one security's value may
have a more significant effect on the portfolio's net asset value. An
investment in the portfolio is not a complete investment program.
Investments in foreign securities may be unfavorably affected by interest-rate
and currency-exchange-rate changes, as well as by market, economic, and
political conditions of the countries where investments are made. There may be
greater returns but also greater risk than with U.S. investments.
Investments in lower-rated securities may provide greater returns but may have
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.
These risks may increase share price volatility. See the prospectus for
details.
NUMBER OF SHAREHOLDERS
As of April 30, 2002, our records indicate that there are 10,473 registered
shareholders and approximately 44,500 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
P.O. Box 8200
Boston, MA 02266-8200
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 from $100 to
$2,500 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, 2002
Bonds - 89.6%
---------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
---------------------------------------------------------------------------------------------------------------
U.S. Bonds - 64.9%
Advertising & Broadcasting - 3.4%
Allbritton Communications Co., 9.75s, 2007 $ 1,005 $ 1,057,763
Chancellor Media Corp., 8.125s, 2007 3,625 3,756,406
Chancellor Media Corp., 8.75s, 2007 1,000 1,043,750
Clear Channel Communications, 6.5s, 2005 275 242,629
Echostar DBS Corp., 9.375s, 2009 2,425 2,528,062
Fox/Liberty Networks LLC, Inc., 8.875s, 2007 2,450 2,523,500
Granite Broadcasting Corp., 10.375s, 2005 1,221 1,166,055
LIN Holdings Corp., 0s to 2003, 10s, 2008 1,500 1,387,500
Paxson Communications Corp., 0s to 2006, 12.25s, 2009## 2,275 1,689,187
Young Broadcasting, Inc., 8.5s, 2008## 2,750 2,860,000
------------
$ 18,254,852
---------------------------------------------------------------------------------------------------------------
Aerospace - 0.1%
Argo-Tech Corp., 8.625s, 2007 $ 165 $ 153,450
K & F Industries, Inc., 9.25s, 2007 200 206,000
------------
$ 359,450
---------------------------------------------------------------------------------------------------------------
Apparel & Textiles - 0.1%
Westpoint Stevens, Inc., 7.875s, 2008 $ 1,225 $ 747,250
---------------------------------------------------------------------------------------------------------------
Automotive
Hayes Wheels International, Inc., 9.125s, 2007 (In default) $ 2,100 $ 170,625
---------------------------------------------------------------------------------------------------------------
Banks & Credit Cos. - 2.9%
Bank of America Corp., 7.4s, 2011 $ 4,932 $ 5,305,155
Credit Suisse First Boston Corp., 6.5s, 2012 1,882 1,851,399
DBS Capital Funding Corp., 7.657s, 2049## 2,303 2,372,249
GS Escrow Corp., 7s, 2003 5,210 5,282,669
Kindercare Learning Centers, Inc., 9.5s, 2009 350 346,500
SG Capital Trust I, 7.875s, 2049 300 296,040
------------
$ 15,454,012
---------------------------------------------------------------------------------------------------------------
Building - 1.2%
AAF-McQuay, Inc., 8.875s, 2003 $ 1,925 $ 1,925,000
American Standard, Inc., 7.375s, 2008 1,050 1,067,062
Building Materials Corp., 8s, 2007 1,100 914,375
CRH America Inc., 6.95s, 2012 1,208 1,244,639
Nortek, Inc., 8.875s, 2008 1,215 1,233,225
Nortek, Inc., 9.25s, 2007 125 127,969
------------
$ 6,512,270
---------------------------------------------------------------------------------------------------------------
Business Services - 0.8%
Iron Mountain, Inc., 8.75s, 2009 $ 1,600 $ 1,648,000
Williams Scotsman, Inc., 9.875s, 2007 2,725 2,772,687
------------
$ 4,420,687
---------------------------------------------------------------------------------------------------------------
Chemicals - 0.5%
Huntsman ICI Holdings LLC, 10.125s, 2009 $ 1,025 $ 921,219
Lyondell Chemical Co., 9.875s, 2007 1,060 1,049,400
Lyondell Chemical Co., 10.875s, 2009 525 496,125
------------
$ 2,466,744
---------------------------------------------------------------------------------------------------------------
Construction Services - 0.5%
DR Horton, Inc., 8s, 2009 $ 2,665 $ 2,638,350
---------------------------------------------------------------------------------------------------------------
Consumer Goods & Services - 0.1%
Samsonite Corp., 10.75s, 2008 $ 740 $ 592,000
---------------------------------------------------------------------------------------------------------------
Containers - 0.4%
Ball Corp., 7.75s, 2006 $ 500 $ 517,500
Silgan Holdings, Inc., 9s, 2009 1,500 1,558,125
------------
$ 2,075,625
---------------------------------------------------------------------------------------------------------------
Corporate Asset-Backed - 6.4%
Airplane Pass-Through Trust, 10.875s, 2019 $ 247 $ 99,506
Commercial Mortgage Acceptance Corp., 5.44s, 2030 8,000 5,843,122
Commercial Mortgage Asset Trust, 6.25s, 2013## 3,500 2,494,980
Continental Airlines Pass-Through Trust, Inc., 6.545s, 2020 2,472 2,367,248
DLJ Mortgage Acceptance Corp., 8s, 2003 5,750 5,787,086
GMAC Commercial Mortgage Security, Inc., 6.02s, 2033 5,800 4,435,188
Morgan Stanley Capital, Inc., 7.666s, 2039 5,560 4,823,560
Mortgage Capital Funding, Inc., 7.214s, 2007 2,250 1,975,669
TIAA Retail Commercial Mortgage Trust, 7.17s, 2032## 6,284 6,614,229
------------
$ 34,440,588
---------------------------------------------------------------------------------------------------------------
Energy - 1.0%
P&L Coal Holdings Corp., 9.625s, 2008 $ 1,411 $ 1,499,187
Triton Energy Ltd., 9.25s, 2005 3,500 3,811,185
------------
$ 5,310,372
---------------------------------------------------------------------------------------------------------------
Energy - Independent - 0.9%
Chesapeake Energy Corp., 8.125s, 2011## $ 1,620 $ 1,620,000
Devon Financing Corp., 6.875s, 2011 3,004 3,042,355
------------
$ 4,662,355
---------------------------------------------------------------------------------------------------------------
Entertainment - 1.5%
Time Warner Entertainment Co., LP, 8.875s, 2012 $ 4,389 $ 4,788,891
Turner Broadcasting Systems, Inc., 8.4s, 2024 3,000 3,011,880
------------
$ 7,800,771
---------------------------------------------------------------------------------------------------------------
Financial Institutions - 3.5%
Ford Motor Credit Co., 5.625s, 2004 $ 375 $ 337,305
Ford Motor Credit Co., 7.375s, 2011 2,859 2,878,212
General Motors Accident Corp., 6s, 2006 375 339,554
General Mtrs Acceptance Corp., 7s, 2012 4,549 4,592,761
Nationslink Funding Corp., 5s, 2009 $ 5,460 $ 3,999,450
Nationslink Funding Corp., 6.476s, 2030 4,000 4,191,422
Residential Accredit Loans Inc., 7.75s, 2027 2,473 2,436,514
------------
$ 18,775,218
---------------------------------------------------------------------------------------------------------------
Forest & Paper Products - 1.3%
Buckeye Cellulose Corp., 9.25s, 2008 $ 2,150 $ 1,935,000
Meadwestvaco Corp., 6.85s, 2012 1,000 1,016,520
Riverwood International Corp., 10.25s, 2006 1,250 1,292,713
U.S. Timberlands, 9.625s, 2007 1,700 1,173,000
Weyerhaeuser Co., 6.75s, 2012## 1,456 1,468,856
------------
$ 6,886,089
---------------------------------------------------------------------------------------------------------------
Gaming - 2.0%
HMH Properties, Inc., 8.45s, 2008 $ 2,635 $ 2,661,350
MGM Mirage, 8.375s, 2011 2,700 2,814,750
Park Place Entertainment, Corp., 8.875s, 2008 5,040 5,329,800
------------
$ 10,805,900
---------------------------------------------------------------------------------------------------------------
Insurance - 0.5%
Americo Life, Inc., 9.25s, 2005 $ 2,650 $ 2,650,000
---------------------------------------------------------------------------------------------------------------
Machinery - 0.9%
Agco Corp., 9.5s, 2008 $ 2,000 $ 2,165,000
New Terex Corp., 8.875s, 2008 960 1,000,800
Terex Corp., 9.25s, 2011 1,380 1,452,450
Thermadyne Manufacturing/Capital Corp., 9.875s, 2008 (In default) 230 86,250
------------
$ 4,704,500
---------------------------------------------------------------------------------------------------------------
Media - Cable - 5.3%
Adelphia Communications Corp., 9.875s, 2007 $ 1,725 $ 1,433,906
Adelphia Communications Corp., 9.375s, 2009 455 370,825
Charter Communications Holdings, 8.625s, 2009 2,845 2,539,163
Charter Communications Holdings, 0s to 2004, 9.92s, 2011 4,000 2,790,000
Comcast Cable Communications, 6.75s, 2011 836 798,915
Continental Cablevision, Inc., 9.5s, 2013 5,000 5,454,500
CSC Holdings, Inc., 8.125s, 2009 1,969 1,932,006
FrontierVision Holdings LP, 11s, 2006 2,000 1,940,000
FrontierVision Holdings LP, 11.875s, 2007 500 478,750
Jones Intercable, Inc., 8.875s, 2007 1,500 1,585,605
Lenfest Communications, Inc., 10.5s, 2006 500 562,930
NTL Communications Corp., 0s to 2003, 12.375s, 2008 (In default) $ 1,025 $ 328,000
NTL, Inc., 0s to 2003, 9.75s, 2008 (In default) 1,860 641,700
Panamsat Corp., 8.5s, 2012## 2,315 2,315,000
TCI Communications Financing III, 9.65s, 2027 5,000 5,304,750
------------
$ 28,476,050
---------------------------------------------------------------------------------------------------------------
Medical & Health Technology Services - 0.2%
Fisher Scientific International Inc., 8.125s, 2012## $ 1,305 $ 1,314,788
---------------------------------------------------------------------------------------------------------------
Oil Services - 0.3%
AmeriGas Partners LP, 10.125s, 2007 $ 510 $ 522,750
Kaztransoil Co., 8.5s, 2006## 1,152 1,131,840
------------
$ 1,654,590
---------------------------------------------------------------------------------------------------------------
Oils - 0.5%
Hurricane Hydrocarbons Ltd., 12s, 2006 $ 80 $ 81,200
Valero Energy Corp., 6.875s, 2012 2,662 2,680,900
------------
$ 2,762,100
---------------------------------------------------------------------------------------------------------------
Pollution Control - 1.2%
Allied Waste North America, Inc., 10s, 2009 $ 2,375 $ 2,440,313
Waste Management Inc., 6.5s, 2008 4,150 4,130,254
------------
$ 6,570,567
---------------------------------------------------------------------------------------------------------------
Printing & Publishing - 0.2%
Hollinger International Publishing, 9.25s, 2007 $ 1,250 $ 1,284,375
---------------------------------------------------------------------------------------------------------------
Restaurants & Lodging - 0.3%
Coast Hotels & Casinos, Inc., 9.5s, 2009## $ 1,295 $ 1,371,081
---------------------------------------------------------------------------------------------------------------
Retail - 0.3%
J.Crew Operating Corp., 10.375s, 2007 $ 1,680 $ 1,461,600
---------------------------------------------------------------------------------------------------------------
Special Products & Services - 0.1%
Haynes International, Inc., 11.625s, 2004 $ 700 $ 490,000
---------------------------------------------------------------------------------------------------------------
Steel - 1.0%
AK Steel Corp., 9.125s, 2006 $ 2,804 $ 2,916,160
Commonwealth Aluminum Corp., 10.75s, 2006 1,000 1,000,000
Kaiser Aluminum & Chemical Corp., 10.875s, 2006 (In default) 175 135,625
Kaiser Aluminum & Chemical Corp., 9.875s, 2049 (In default) 1,015 791,700
WCI Steel, Inc., 10s, 2004 565 265,550
------------
$ 5,109,035
---------------------------------------------------------------------------------------------------------------
Technology - 0.6%
Unisystem Corp., 7.875s, 2008 $ 3,250 $ 3,233,750
---------------------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 0.9%
Centennial Cellular Operating Co., 10.75s, 2008 $ 500 $ 266,250
Crown Castle International Corp., 10.75s, 2011 2,000 1,840,000
ICG Holdings, Inc., 12.5s, 2006 (In default) 460 23,000
Nextel Communications, Inc., 0s to 2002, 9.75s, 2007 300 201,750
Rural Cellular Corp., 9.75s, 2010## 1,125 922,500
Triton PCS, Inc., 0s to 2003, 11s, 2008 1,460 1,284,800
------------
$ 4,538,300
---------------------------------------------------------------------------------------------------------------
Telecommunications - Wireline - 1.2%
Allegiance Telecommunications, Inc., 12.875s, 2008## $ 505 $ 126,250
Exodus Communications, Inc., 11.625s, 2010 (In default) 950 166,250
ITC Deltacom, Inc., 9.75s, 2008 2,330 605,800
Nextlink Communications, Inc., 10.75s, 2009 (In default) 570 79,800
Sprint Capital Corp., 6s, 2007 4,206 3,884,115
Time Warner Telecommunications LLC, 9.75s, 2008 510 249,900
WorldCom, Inc., 7.75s, 2027 2,009 944,230
WorldCom, Inc., 6.95s, 2028 1,405 576,050
Worldwide Fiber, Inc., 12s, 2009 (In default) 500 1,250
------------
$ 6,633,645
---------------------------------------------------------------------------------------------------------------
Tire & Rubber
Day International Group, Inc., 11.125s, 2005 $ 105 $ 105,000
---------------------------------------------------------------------------------------------------------------
U.S. Government Agencies - 13.4%
Financing Corp., 9.4s, 2018 $ 12,000 $ 15,937,680
FNMA, 6s, 2016 - 2016 4,732 4,802,479
FNMA, 6.5s, 2014 - 2099 15,497 15,774,121
GNMA, 6.5s, 2028 14,703 14,976,420
GNMA, 7s, 2031 - 2031 17,792 18,362,117
SBA, 5.34s, 2021 2,000 1,924,002
------------
$ 71,776,819
---------------------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 4.2%
U.S. Treasury Bonds, 12s, 2005 $ 2,000 $ 2,464,680
U.S. Treasury Bonds, 12s, 2013 4,000 5,519,360
U.S. Treasury Bonds, 6.875s, 2025 8,000 9,143,760
U.S. Treasury Bonds, 5.375s, 2031 2,600 2,516,306
U.S. Treasury Notes, 4.625s, 2006 2,742 2,777,975
------------
$ 22,422,081
---------------------------------------------------------------------------------------------------------------
Utilities - Electric - 5.5%
Allegheny Energy Supply Co., LLC, 8.25s, 2012## $ 1,044 $ 1,079,694
Beaver Valley Funding Corp. II, 9s, 2017 1,491 1,608,789
BVPS II Funding Corp., 8.68s, 2017 952 1,004,512
Firstenergy Corp., 5.5s, 2006 4,560 4,345,680
Midland Cogeneration Venture Corp., 10.33s, 2002 1,092 1,099,551
Niagara Mohawk Power Corp., 7.25s, 2002 1,437 1,460,792
Niagara Mohawk Power Corp., 8.77s, 2018 2,395 2,475,712
Northwestern Corp., 7.875s, 2007## 3,032 3,057,608
Progress Energy Inc., 5.85s, 2008 5,818 5,690,179
PSEG Power LLC, 7.75s, 2011 2,511 2,644,264
Toledo Edison Co., 8.7s, 2002 2,192 2,222,864
Waterford 3 Funding Entergy Corp., 8.09s, 2017 2,511 2,502,724
------------
$ 29,192,369
---------------------------------------------------------------------------------------------------------------
Utilities - Gas - 1.0%
Consolidated Natural Gas Co., 6.25s, 2011 $ 5,456 $ 5,340,769
---------------------------------------------------------------------------------------------------------------
Utilities - Telephone - 0.7%
Verizon New York Inc., 6.875s, 2012 $ 3,875 $ 3,909,488
---------------------------------------------------------------------------------------------------------------
Total U.S. Bonds $347,374,065
---------------------------------------------------------------------------------------------------------------
Foreign Bonds - 24.7%
Algeria - 0.2%
Republic of Algeria, 2.875s, 2004 $ 68 $ 63,787
Republic of Algeria, 2.875s, 2010 1,312 1,203,814
------------
$ 1,267,601
---------------------------------------------------------------------------------------------------------------
Brazil - 2.1%
Banco Nacional de Desenvolvi, 12.262s, 2008 (Banks &
Credit Cos.)## $ 1,488 $ 1,416,341
Federal Republic of Brazil, 3.125s, 2009 65 53,348
Federal Republic of Brazil, 11s, 2012 395 351,550
Federal Republic of Brazil, 8s, 2014 2,314 1,825,025
Federal Republic of Brazil, 3.063s, 2024 1,300 933,331
Federal Republic of Brazil, 8.875s, 2024 2,399 1,583,340
Federal Republic of Brazil, 12.25s, 2030 3,052 2,670,500
Federal Republic of Brazil, 11s, 2040 3,212 2,527,844
------------
$ 11,361,279
---------------------------------------------------------------------------------------------------------------
Bulgaria - 0.7%
Republic of Bulgaria, 2.813s, 2012 $ 20 $ 18,300
Republic of Bulgaria, 7.5s, 2013 EUR 4,341 3,736,804
Republic of Bulgaria, 8.25s, 2015## $ 45 43,200
------------
$ 3,798,304
---------------------------------------------------------------------------------------------------------------
Canada - 2.6%
Abitibi Consolidated Inc., 8.55s, 2010 (Forest &
Paper Products) $ 1,384 $ 1,437,727
Government of Canada, 5.75s, 2006 CAD 2,591 1,696,862
Government of Canada, 5.5s, 2009 8,702 5,562,418
Government of Canada, 5.5s, 2010 8,484 5,385,180
------------
$ 14,082,187
---------------------------------------------------------------------------------------------------------------
Dominican Republic - 0.4%
Dominican Republic, 9.5s, 2006## $ 1,927 $ 2,042,620
---------------------------------------------------------------------------------------------------------------
Ecuador - 0.2%
Republic of Ecuador, 12s, 2012## $ 1,312 $ 1,096,875
Republic of Ecuador, 5s, 2030 173 100,167
------------
$ 1,197,042
---------------------------------------------------------------------------------------------------------------
El Salvador
Republic of El Salvador, 8.25s, 2032## $ 70 $ 70,700
---------------------------------------------------------------------------------------------------------------
France - 0.3%
Danone Groupe, 5.625s, 2003 (Food & Beverage Products) EUR 50 $ 45,403
France Telecom S.A., 7.7s, 2006 (Telecommunications -
Wireline) $ 350 356,142
Government of France, 7.5s, 2008 EUR 750 755,494
Vivendi Enviroment, 5.875s, 2008 (Pollution Control) 250 223,582
------------
$ 1,380,621
---------------------------------------------------------------------------------------------------------------
Germany - 7.3%
BBVA Bancomer Capital Trust, 10.5s, 2011 (Banks &
Credit Cos.)## $ 2,240 $ 2,475,200
Coca Cola Erfrischungsgetranke AG, 5.875s, 2005 (Beverages) EUR 600 550,723
Depfa Deutsche Pfandbriefbk, 5.5s, 2010 (Corporate
Asset-Backed) 960 874,015
Europa Two Ltd., 3.694s, 2027 (Corporate Asset-Backed) 392 353,242
Federal Republic of Germany, 6.75s, 2004 6,221 5,896,444
Federal Republic of Germany, 4.75s, 2008 26,487 23,641,671
Federal Republic of Germany, 5.25s, 2010 5,000 4,541,650
Kreditanstalt Fuer Wiederaufbau, 4.75s, 2006 (Banks & Credit Cos.) 750 676,779
------------
$ 39,009,724
---------------------------------------------------------------------------------------------------------------
Grand Cayman Islands - 0.2%
Enersis S.A., 7.4s, 2016 (Utilities - Electric) $ 89 $ 81,436
Pemex Finance Ltd., 9.69s, 2009 (Finance) 905 1,033,302
------------
$ 1,114,738
---------------------------------------------------------------------------------------------------------------
Greece - 0.5%
Fage Dairy Industries S.A., 9s, 2007 (Food & Beverage
Products) $ 2,770 $ 2,631,500
---------------------------------------------------------------------------------------------------------------
Hungary - 0.1%
Government of Hungary, 10s, 2003 HUF 82,000 $ 308,545
---------------------------------------------------------------------------------------------------------------
Italy - 0.9%
Republic of Italy, 3.25s, 2004 EUR 5,000 $ 4,427,081
Telecom Italia S.p.A., 6.25s, 2012
(Telecommunications - Wireline) 290 251,308
------------
$ 4,678,389
---------------------------------------------------------------------------------------------------------------
Luxembourg - 0.5%
Millicom International Cellular Communications Corp.,
13.5s, 2006 (Telecommunications - Wireless) $ 93 $ 53,940
Mobile Telesystems Finance S.A., 10.95s, 2004
(Telecommunications - Wireline)## 2,500 2,587,750
------------
$ 2,641,690
---------------------------------------------------------------------------------------------------------------
Malaysia - 0.2%
Petroliam Nasional Berhad, 7.75s, 2015 (Oils) $ 999 $ 1,064,742
---------------------------------------------------------------------------------------------------------------
Mexico - 0.7%
Azteca Holdings S.A., 10.5s, 2003 (Media - Cable)## $ 56 $ 56,770
Durango Corp., 13.125s, 2006 (Forest & Paper Products) 1,795 1,810,706
Grupo Elektra S.A. de CV, 12s, 2008 (Utilities - Other) 45 46,800
Pemex Project Funding Master Trust, 9.125s, 2010 42 46,075
Pemex Project Funding Master Trust, 8.625s, 2022## 60 61,800
Petroleos Mexicanos, 9.5s, 2027 (Oil Services) 530 593,200
TFM S.A. De C V, 0s to 2002, 11.75s, 2009
(Telecommunications - Wireline) 35 31,850
United Mexican States, 11.375s, 2016 25 32,188
United Mexican States, 11.5s, 2026 669 892,111
Vicap S.A., 11.375s, 2007 (Containers) 67 61,975
------------
$ 3,633,475
---------------------------------------------------------------------------------------------------------------
Netherlands - 1.6%
Kazkommerts International BV, 10.125s, 2007 (Banks &
Credit Cos.)## $ 50 $ 49,650
PTC International Finance BV, 0s to 2002, 10.75s,
2007 (Telecommunications - Wireless) 1,034 1,034,000
Tenet Healthcare Corp., 0s, 2002 (Medical Health &
Technology Services) 2,468 2,455,660
Tenet Healthcare Corp., 6.375s, 2011 (Medical &
Health Technology Services) 4,964 4,902,769
United Pan Europe, 10.875s, 2009 (Media - Cable) (In default) 210 27,300
Versatel Telecom BV, 13.25s, 2008 (Telecommunications - Wireline) 1,125 303,750
------------
$ 8,773,129
---------------------------------------------------------------------------------------------------------------
New Zealand - 0.2%
Government of New Zealand, 8s, 2006 NZD 2,270 $ 1,070,287
---------------------------------------------------------------------------------------------------------------
Panama - 0.4%
Republic of Panama, 9.625s, 2011 $ 1,512 $ 1,576,260
Republic of Panama, 10.75s, 2020 576 650,880
Republic of Panama, 9.375s, 2029 45 47,588
------------
$ 2,274,728
---------------------------------------------------------------------------------------------------------------
Peru - 0.1%
Republic of Peru, 4s, 2017 $ 508 $ 375,920
---------------------------------------------------------------------------------------------------------------
Philippines - 0.4%
Philippine Long Distance Telephone Co., 11.375s, 2012
(Telecommunications - Wireline)## $ 55 $ 56,100
Philippines Republic, 9.375s, 2017 10 10,425
Philippines Republic, 10.625s, 2025 1,897 2,058,245
------------
$ 2,124,770
---------------------------------------------------------------------------------------------------------------
Russia - 2.3%
Russian Federation, 3s, 2006 $ 1,010 $ 813,050
Russian Federation, 3s, 2008 3,554 2,471,807
Russian Federation, 12.75s, 2028 4,312 5,260,640
Russian Federation, 5s, 2030## 5,174 3,603,378
Vimpelcom BV, 10.45s, 2005 (Telecommunications - Wireless)## 40 40,100
------------
$ 12,188,975
---------------------------------------------------------------------------------------------------------------
Singapore - 0.1%
Singapore Telecommunications Ltd., 6s, 2011
(Telecommunications - Wireless) EUR 350 $ 313,447
---------------------------------------------------------------------------------------------------------------
South Africa
Republic of South Africa, 7.375s, 2012 $ 50 $ 49,700
---------------------------------------------------------------------------------------------------------------
South Korea - 0.5%
Hanvit Bank, 12.75s, 2010 (Banks & Credit Cos.)## $ 2,311 $ 2,721,202
---------------------------------------------------------------------------------------------------------------
Spain - 1.2%
Kingdom of Spain, 7s, 2005 $ 6,102 $ 6,592,985
---------------------------------------------------------------------------------------------------------------
Tunisia
Banque Centrale de Tunisie, 7.375s, 2012 (Banks & Credit Cos.) $ 25 $ 24,688
---------------------------------------------------------------------------------------------------------------
Turkey - 0.4%
Republic of Turkey, 11.875s, 2030 $ 2,099 $ 2,182,960
---------------------------------------------------------------------------------------------------------------
United Kingdom - 0.5%
Bank of Ireland, 7.4s, 2049 (Banks & Credit Cos.) EUR 500 $ 480,296
Colt Telecom Group PLC, 12s, 2006 (Telecommunications
- Wireline) $ 500 260,000
Dolphin Telecom PLC, 0s to 2003, 11.5s, 2008
(Telecommunications - Wireless) (In default) 2,515 251
Global Tele-Systems Ltd., 10.875s, 2008
(Telecommunications) (In default) 165 619
Granites Mortgages PLC, 5.15s, 2042 (Financial Institutions) EUR 350 314,503
National Westminster Bank PLC, 6.625s, 2049 (Banks & Credit Cos.) 330 308,236
Ono Finance PLC, 13s, 2009 (Media - Cable) $ 750 315,000
Ono Finance PLC, 14s, 2011 (Media - Cable) 1,000 440,000
Rolls-Royce PLC, 6.375s, 2007 (Aerospace) EUR 300 271,980
Telewest Communications PLC, 9.625s, 2006 (Media - Cable) $ 350 189,000
------------
$2,579,885
---------------------------------------------------------------------------------------------------------------
Venezuela
Republic of Venezuela, 9.25s, 2027 $ 70 $ 49,805
---------------------------------------------------------------------------------------------------------------
Uruguay - 0.1%
Republic of Uruguay, 7.625s, 2012 $ 982 $ 677,580
---------------------------------------------------------------------------------------------------------------
Ukraine
Ukraine Republic, 11s, 2007## $ 185 $ 189,748
---------------------------------------------------------------------------------------------------------------
Total Foreign Bonds $132,472,966
---------------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $486,028,189) $479,847,031
---------------------------------------------------------------------------------------------------------------
Convertible Bond - 1.0%
---------------------------------------------------------------------------------------------------------------
Colt Telecom Group PLC, 2s, 2006 (United Kingdom -
Telecommunications - Wireline) $ 3,450 $ 1,211,219
Fortis Capital Co., 6.25s, 2049 (United Kingdom -
Banks & Credit Cos.) 155 137,438
Tenet Healthcare Corp., 6s, 2005 (Netherlands -
Medical & Health Technology Services) 4,250 4,122,500
---------------------------------------------------------------------------------------------------------------
Total Convertible Bond (Identified Cost, $5,837,458) $ 5,471,157
---------------------------------------------------------------------------------------------------------------
Stocks - 0.2%
---------------------------------------------------------------------------------------------------------------
SHARES
---------------------------------------------------------------------------------------------------------------
Colt Telecom Group PLC, ADR (United Kingdom -
Telecommunications - Wireline)* 1,440 $ 2,909
Golden Books Family Entertainment, Inc. (Printing &
Publishing)* 19,975 399
Metal Management Inc. (Metals & Minerals)* 62,567 203,343
RJR Nabisco Inc. (Beverages) 2,302 159,298
Sind Holdings Inc. (Apparel & Textiles)* 5,720 371,800
---------------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $3,538,773) $ 737,749
---------------------------------------------------------------------------------------------------------------
Preferred Stock - 0.7%
---------------------------------------------------------------------------------------------------------------
CSC Holdings, Inc., 11.125% (Media - Cable)* 27,885 $ 2,621,190
Primedia, Inc., 10% (Printing & Publishing) 1,360 68,000
Primedia, Inc., 8.625% (Printing & Publishing) 20,000 900,000
---------------------------------------------------------------------------------------------------------------
Total Preferred Stock (Identified Cost, $3,784,452) $ 3,589,190
---------------------------------------------------------------------------------------------------------------
Warrants*
---------------------------------------------------------------------------------------------------------------
Loral Orion Network Systems, Inc., Expire 1/15/07
(Telecommunications) 1,625 $ 4,875
Loral Orion Network Systems, Inc., Expire 1/15/07
(Telecommunications) 700 3,500
Ono Finance PLC (Media - Cable) Expire 2/15/11 1,000 125
---------------------------------------------------------------------------------------------------------------
Total Warrants (Identified Cost, $166,689) $ 8,500
---------------------------------------------------------------------------------------------------------------
Rights*
---------------------------------------------------------------------------------------------------------------
United Mexican States (Identified Cost, $--) 501,000 $ 753
---------------------------------------------------------------------------------------------------------------
Short-Term Obligations - 1.4%
---------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
---------------------------------------------------------------------------------------------------------------
FNMA, due 5/08/02, at Amortized Cost $ 7,300 $ 7,297,516
---------------------------------------------------------------------------------------------------------------
Call Options Purchased
---------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OF CONTRACTS
ISSUER/EXPIRATION MONTH/STRIKE PRICE (000 OMITTED)
---------------------------------------------------------------------------------------------------------------
U.S. Treasury Notes/May/96.8593 (Premiums Paid, $38,672) $ 5,625 $ 80,421
---------------------------------------------------------------------------------------------------------------
Put Options Purchased
---------------------------------------------------------------------------------------------------------------
Brazil Government Bonds/June/79.5 (Premiums Paid, $6,128) $ 185 $ 6,128
---------------------------------------------------------------------------------------------------------------
Repurchase Agreement - 6.6%
---------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
---------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, LP dated 4/30/02, due 5/01/02,
total to be received $35,529,905 (secured by
various U.S. Treasury and Federal Agency
obligations in a jointly traded account), at Cost $ 35,528 $ 35,528,000
---------------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $542,225,877) $532,566,445
---------------------------------------------------------------------------------------------------------------
Call Options Written
---------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OF CONTRACTS
DESCRIPTION/EXPIRATION MONTH/STRIKE PRICE (000 OMITTED)
---------------------------------------------------------------------------------------------------------------
FNMA/May/99.8632 $ 10,000 $ (134,070)
Russia Government Bonds/May/70 RUS 225 (1,080)
---------------------------------------------------------------------------------------------------------------
Total Call Options Written (Premiums Received, $39,684) $ (135,150)
---------------------------------------------------------------------------------------------------------------
Put Options Written
---------------------------------------------------------------------------------------------------------------
Brazil Government Bonds/June/76.5
(Premiums Received, $3,258) BRL 185 $ (3,258)
---------------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.5% 2,997,302
---------------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $535,425,339
---------------------------------------------------------------------------------------------------------------
* 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 Dollars KRW = South Korean Won
BRL = Brazilian Real MXN = Mexican Peso
CAD = Canadian Dollars NZD = New Zealand Dollar
CZK = Czech Koruna PHP = Philippines Peso
DKK = Danish Krone RUS = Russian Ruble
EUR = Euro THB = Thai Baht
GBP = British Pounds TRL = Turkish Lira
HUF = Hungarian Forint ZAR = South African Rand
See notes to financial statements.
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
-------------------------------------------------------------------------------
APRIL 30, 2002
-------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $542,225,877) $532,566,445
Cash 1,132,115
Receivable for forward foreign currency exchange
contracts 331,599
Receivable for forward foreign currency exchange
contracts subject to master netting agreements 94,757
Receivable for investments sold 9,320,720
Interest and dividends receivable 9,214,151
Other assets 3,434
------------
Total assets $552,663,221
------------
Liabilities:
Distributions payable 266,265
Payable for forward foreign currency exchange contracts 463,317
Payable for forward foreign currency exchange contracts
subject to master netting agreements 1,027,748
Payable for investments purchased 14,664,868
Payable for trust shares reacquired 84,000
Written options outstanding, at value (premiums
received, $42,942) 138,408
Payable to affiliates -
Management fee 2,107
Transfer and dividend disbursing agent fee 17,295
Administrative fee 257
Accrued expenses and other liabilities 573,617
------------
Total liabilities $ 17,237,882
------------
Net assets $535,425,339
============
Net assets consist of:
Paid-in capital $635,050,976
Unrealized depreciation on investments and translation
of assets and liabilities in foreign currencies (10,789,292)
Accumulated net realized loss on investments and foreign
currency transactions (85,472,558)
Accumulated net investment loss (3,363,787)
------------
Total $535,425,339
============
Shares of beneficial interest outstanding
(90,140,454 issued, less 6,388,302 treasury shares) 83,752,152
==========
Net asset value per share (net assets of $535,425,339 /
83,752,152 shares of beneficial interest outstanding) $6.39
=====
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Statement of Operations (Unaudited)
-------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2002
-------------------------------------------------------------------------------
Net investment income:
Income -
Interest $ 20,662,693
Dividends 463,935
-------------
Total investment income $ 21,126,628
-------------
Expenses -
Management fee $ 2,058,236
Trustees' compensation 56,560
Custodian fee 185,059
Transfer and dividend disbursing agent fee 102,431
Administrative fee 30,982
Auditing fees 18,800
Legal fees 1,498
Postage 28,423
Printing 100,381
Investor communication expense 108,691
Stock exchange fee 72,634
Miscellaneous 35,632
-------------
Total expenses $ 2,799,327
Fees paid indirectly (27,196)
-------------
Net expenses $ 2,772,131
-------------
Net investment income $ 18,354,497
-------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ (23,224,399)
Written option transactions 2,844,885
Foreign currency transactions 2,352,321
-------------
Net realized loss on investments and foreign currency
transactions $ (18,027,193)
-------------
Change in unrealized appreciation (depreciation) -
Investments $ 4,045,318
Written options (836,257)
Translation of assets and liabilities in foreign
currencies (2,043,408)
-------------
Net unrealized gain on investments and foreign
currency translation $ 1,165,653
-------------
Net realized and unrealized loss on investments
and foreign currency $ (16,861,540)
-------------
Increase in net assets from operations $ 1,492,957
=============
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
--------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2002 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2001
--------------------------------------------------------------------------------------------------------
Decrease in net assets:
From operations -
Net investment income $ 18,354,497 $ 42,870,856
Net realized loss on investments and foreign currency
transactions (18,027,193) (27,808,738)
Net unrealized gain on investments and foreign currency
translation 1,165,653 22,818,366
------------ ------------
Increase in net assets from operations $ 1,492,957 $ 37,880,484
------------ ------------
Distributions declared to shareholders -
From net investment income $(19,117,310) $(41,366,841)
From paid-in capital
-- (4,152,826)
------------ ------------
Total distributions declared to shareholders $(19,117,310) $(45,519,667)
------------ ------------
Trust share (principal) transactions -
Cost of shares reacquired $ (1,717,045) $ (4,785,254)
------------ ------------
Total decrease in net assets $(19,341,398) $(12,424,437)
------------ ------------
Net assets:
At beginning of period 554,766,737 567,191,174
------------ ------------
At end of period (including accumulated net investment
loss of $3,363,787 and $2,600,974, respectively) $535,425,339 $554,766,737
============ ============
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Financial Highlights
------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
SIX MONTHS ENDED --------------------------------------------------------------------------
APRIL 30, 2002 2001 2000 1999 1998 1997
(UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of
period $ 6.60 $ 6.69 $ 7.03 $ 7.17 $ 7.79 $ 7.71
------- ------- ------- ------- ------- -------
Income from investment operations#(S) -
Net investment income $ 0.22 $ 0.51 $ 0.58 $ 0.56 $ 0.59 $ 0.59
Net realized and unrealized
gain (loss) on investments
and foreign currency (0.20) (0.06) (0.40) (0.14) (0.63) 0.09
------- ------- ------- ------- ------- -------
Total from investment
operations $ 0.02 $ 0.45 $ 0.18 $ 0.42 $ (0.04) $ 0.68
------- ------- ------- ------- ------- -------
Less distributions declared to
shareholders -
From net investment income $ (0.23) $ (0.49) $ (0.41) $ (0.57) $ (0.58) $ (0.62)
From paid-in capital
-- (0.05) (0.17) -- -- --
------- ------- ------- ------- ------- -------
Total distributions declared
to shareholders $ (0.23) $ (0.54) $ (0.58) $ (0.57) $ (0.58) $ (0.62)
------- ------- ------- ------- ------- -------
Net increase from repurchase of
capital shares $ 0.00+++ $ 0.00+++ $ 0.06 $ 0.01 $ -- $ 0.02
------- ------- ------- ------- ------- -------
Net asset value - end of period $ 6.39 $ 6.60 $ 6.69 $ 7.03 $ 7.17 $ 7.79
------- ------- ------- ------- ------- -------
Per share market value - end of
period $ 6.10 $ 6.06 $ 6.00 $ 6.06 $ 6.44 $ 7.13
======= ======= ======= ======= ======= =======
Total return at market value 4.45%++ 9.83% 8.84% 2.81% (1.89)% 8.93%
Ratios (to average net assets)/Supplemental data:
Interest expense -- % -- % -- % -- % -- % 0.18%
Other expenses## 1.04%+ 1.06% 1.06% 1.05% 1.05% 0.93%
Total expense 1.04%+ 1.06% 1.06% 1.05% 1.05% 1.11%
Net investment income(S) 6.84% 7.65% 8.23% 7.80% 7.70% 7.64%
Portfolio turnover 68% 103% 82% 98% 155% 172%
Net assets at end of period
(000 Omitted) $535,425 $554,767 $567,191 $641,213 $665,881 $723,649
Leverage analysis:
Debt outstanding at end of
year (000 Omitted) $ -- $ -- $ -- $ -- $ -- $ --
Average daily balance of debt
outstanding (000 Omitted) $ -- $ -- $ -- $ -- $ -- $18,854
Average daily number of
shares outstanding (000
Omitted) 83,836 84,137 87,811 92,464 92,880 93,951
Average debt per share $ -- $ -- $ -- $ -- $ -- $ 0.20
+ Annualized.
++ Not annualized.
+++ Per share data is less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(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 six months ended April 30, 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 0.06%. Per share, ratios, and supplemental data for
periods prior to November 1, 2001 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 generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The trust
can invest 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 - Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues, forward foreign
currency exchange contracts, and swap agreements, are valued on the basis of
valuations furnished by dealers or by a pricing service with consideration to
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 exchange or over-the-
counter prices. Equity securities listed on securities exchanges or reported
through the NASDAQ system are reported at market value using last sale prices.
Unlisted equity securities or listed equity securities for which last sale
prices are not available are reported at market value using last quoted bid
prices. Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates market value. Options listed on commodities
exchanges are reported at market value using closing settlement prices. Over-
the-counter options on securities are valued by brokers. Over-the-counter
currency options are valued through the use of a pricing model which takes
into account foreign currency exchange spot and forward rates, implied
volatility, and short-term repurchase rates. Securities for which there are no
such quotations or valuations are valued in good faith at the direction of the
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 trusts selected
by the Trustee. Deferred amounts represent an unsecured obligation of the
trust until distributed in accordance with the Plan.
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.
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 fund 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. 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,
2001 and October 31, 2000 was as follows:
OCTOBER 31, 2001 OCTOBER 31, 2000
-------------------------------------------------------------------------------
Distributions declared from:
Ordinary income $41,366,841 $35,553,670
Long-term capital gain -- --
----------- -----------
$41,366,841 $35,553,670
Tax return of capital 4,152,826 15,231,841
----------- -----------
Total distributions declared $45,519,667 $50,785,511
=========== ===========
As of October 31, 2001, the components of distributable earnings on a tax
basis were as follows:
Undistributed ordinary income $ --
Undistributed long-term capital gain --
Capital loss carryforward (63,179,249)
Unrealized loss (17,236,847)
Other temporary differences (1,585,190)
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 on:
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
-----------
Total $63,179,249
===========
(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 the compensation of the Independent 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 of the trust.
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 $ 86,854,948 $168,591,339
------------ ------------
Investments (non-U.S. government securities) $266,619,876 $217,905,415
------------ ------------
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 $542,529,388
------------
Gross unrealized appreciation $ 16,932,891
Gross unrealized depreciation (26,895,834)
------------
Net unrealized depreciation $ (9,962,943)
============
(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 124,846,052 full and fractional shares of beneficial interest.
Transactions in trust shares were as follows:
SIX MONTHS ENDED APRIL 30, 2002 YEAR ENDED OCTOBER 31, 2001
------------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------
Treasury shares reacquired (294,300) $(1,717,045) (771,000) $(4,785,254)
-------- ----------- -------- -----------
Net decrease (294,300) $(1,717,045) (771,000) $(4,785,254)
======== =========== ======== ===========
In accordance with the provisions of the trust's prospectus, 294,300 shares of
beneficial interest were purchased by the trust during the six months ended
April 30, 2002 at an average price per share of $5.83 and a weighted average
discount of 9.43% per share. The trust repurchased 771,000 shares of
beneficial interest during the year ended October 31, 2001 at an average price
per share of $6.10 and a weighted average discount of 8.73% per share.
(6) Line of Credit
The trust and other affiliated funds participate in a $1.225 billion 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, 2002, was $2,917. 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 written options, and forward foreign currency
exchange 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.
Written Option Transactions
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
------------------------------------------------------------------------------
Outstanding, beginning of period 4 $2,826,419
Options written 10 59,630
Options exercised (9) (1,195,992)
Options expired (2) (1,647,115)
--- ----------
Outstanding, end of period 3 $ 42,942
=== ==========
At April 30, 2002, 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
06/18/02 AUD 10,311,250 $ 5,336,163 $ 5,516,307 $(180,144)
06/18/02 CAD 54,432,724 34,491,312 34,702,929 (211,617)
07/08/02 CZK 3,501,900 103,056 102,974 82
06/18/02 DKK 954,663 112,148 115,369 (3,221)
07/02/02 - 07/24/02 MXN 2,081,000 221,693 220,005 1,688
06/18/00 NZD 2,560,125 1,094,530 1,139,028 (44,498)
----------- ----------- ---------
$41,358,902 $41,796,612 $(437,710)
=========== =========== =========
Purchases
06/01/02 AUD 10,575,408 $ 5,671,168 $ 5,657,626 $(13,542)
06/18/02 CAD 34,192,559 21,503,046 21,799,055 296,009
07/08/02 CZK 3,501,900 100,000 102,974 2,974
06/18/02 GBP 413,420 584,989 600,344 15,355
06/11/02 KRW 132,150,000 100,000 103,212 3,212
07/02/02 - 7/24/02 MXN 7,329,406 779,994 773,944 (6,050)
07/22/02 PHP 13,163,224 255,994 258,003 2,009
06/11/02 THB 10,857,500 250,000 250,991 991
05/03/02 - 05/28/02 TRL 437,489,600,000 317,476 316,706 (770)
05/28/02 ZAR 1,870,144 169,597 175,401 5,804
----------- ----------- ---------
$29,732,264 $30,038,256 $ 305,992
=========== =========== =========
At April 30, 2002, forward foreign currency purchases and sales under master
netting agreements excluded above amounted to a a net payable of $1,027,748
with Duetsche Bank and net receivables of $93,060 with Merrill Lynch and
$1,697 with C.S. First Boston.
At April 30, 2002, the trust had sufficient cash and/or securities to cover
any commitments 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. Prior to November 1,
2001, the fund did not amortize premium nor accrete 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 increase in net unrealized
depreciation, based on securities held by the fund on April 30, 2002.
The effect of this change for the six months ended April 30, 2002 was to
decrease net investment income by $151,180, increase net unrealized
depreciation by $137,370, and decrease net realized losses by $288,550. 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, POSITION WITH THE TRUST, AGE, PRINCIPAL OCCUPATION, AND OTHER DIRECTORSHIPS(1)
TRUSTEES
JEFFREY L. SHAMES* (born 06/02/55) Trustee, ABBY M. O'NEILL (born 04/27/28) Trustee
Chairman and President Private investor; Rockefeller Financial Services,
Massachusetts Financial Services Company, Chairman Inc. (investment advisers), Chairman and Chief
and Chief Executive Officer Executive Officer
JOHN W. BALLEN* (born 09/12/59) Trustee LAWRENCE T. PERERA (born 06/23/35) Trustee
Massachusetts Financial Services Company, Hemenway & Barnes (attorneys), Partner
President and Director
WILLIAM J. POORVU (born 04/10/35) Trustee
KEVIN J. PARKE* (born 12/14/59) Trustee Harvard University Graduate School of Business
Massachusetts Financial Services Company, Chief Administration, Adjunct Professor; CBL &
Investment Officer, Executive Vice President and Associates Properties, Inc. (real estate
Director investment trust), Director; The Baupost Fund (a
mutual fund), Vice Chairman and Trustee
LAWRENCE H. COHN, M.D. (born 03/11/37) Trustee
Brigham and Women's Hospital, Chief of Cardiac J. DALE SHERRATT (born 09/23/38) Trustee
Surgery; Harvard Medical School, Professor of Insight Resources, Inc. (acquisition planning
Surgery specialists), President; Wellfleet Investments
(investor in health care companies), Managing
THE HON. SIR J. DAVID GIBBONS, KBE (born 06/15/27) General Partner (since 1993); Paragon Trade
Trustee Brands, Inc. (disposable consumer products),
Edmund Gibbons Limited (diversified holding Director; Cambridge Nutraceuticals (professional
company), Chief Executive Officer; Colonial nutritional products), Chief Executive Officer
Insurance Company Ltd., Director and Chairman; (until May 2001)
Bank of Butterfield, Chairman (until 1997)
ELAINE R. SMITH (born 04/25/46) Trustee
WILLIAM R. GUTOW (born 09/27/41) Trustee Independent health care industry consultant
Private investor and real estate consultant;
Capitol Entertainment Management Company (video WARD SMITH (born 09/13/30) Trustee
franchise), Vice Chairman Private investor; Sundstrand Corporation
(manufacturer of highly engineered products for
J. ATWOOD IVES (born 05/01/36) Trustee industrial and aerospace applications), Director
Private investor; KeySpan Corporation (energy (until June 1999)
related services), Director; Eastern Enterprises
(diversified services company), Chairman, Trustee
and Chief Executive Officer (until November 2000)
(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
JEFFREY L. SHAMES (born 06/02/55) Trustee, ROBERT R. FLAHERTY (born 09/18/63) Assistant
Chairman and President Treasurer
Massachusetts Financial Services Company, Chairman Massachusetts Financial Services Company, Vice
and Chief Executive Officer President (since August 2000); UAM Fund Services,
Senior Vice President (prior to August 2000)
JAMES R. BORDEWICK, JR. (born 03/06/59) Assistant
Secretary and Assistant Clerk ELLEN MOYNIHAN (born 11/13/57) Assistant Treasurer
Massachusetts Financial Services Company, Senior Massachusetts Financial Services Company, Vice
Vice President and Associate General Counsel President (since September 1996)
MARK E. BRADLEY (born 11/23/59) Assistant JAMES O. YOST (born 06/12/60) Assistant Treasurer
Treasurer Massachusetts Financial Services Company, Senior
Massachusetts Financial Services Company, Vice Vice President
President (since March 1997)
STEPHEN E. CAVAN (born 11/06/53) Secretary and
Clerk
Massachusetts Financial Services Company, Senior
Vice President, General Counsel and Secretary
The Trust holds annual shareholder meetings for the purpose of electing Trustees. Trustees are not elected for
fixed terms. This means that each Trustee will be elected to hold office until his or her successor is chosen
and qualified or until his or her earlier death, resignation, retirement or removal. Each officer will hold
office until his or her successor is chosen and qualified, or until he or she retires, resigns or is removed
from office.
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, Gibbons, 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 117 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
Massachusetts Financial Services Company AGENT
500 Boylston Street State Street Bank and Trust Company c/o MFS
Boston, MA 02116-3741 Service Center, Inc. P.O. Box 55024 Boston, MA
02205-5024 1-800-637-2304
PORTFOLIO MANAGER
Peter C. Vaream+
CUSTODIAN
State Street Bank and Trust Company
+ MFS Investment Management
MFS(R) MULTIMARKET INCOME TRUST -------------
PRSRT STD
U.S. POSTAGE
[logo] M F S(R) PAID
INVESTMENT MANAGEMENT MFS
-------------
500 Boylston Street
Boston, MA 02116-3741
(C)2002 MFS Investment Management(R).
500 Boylston Street, Boston, MA 02116.
MMTCE-3 6/02 68M