UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4975
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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)
James R. Bordewick, Jr.
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, 2003
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Date of reporting period: April 30, 2004
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ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) Mutual Funds
SEMIANNUAL REPORT 4/30/04
MFS(R) MULTIMARKET INCOME TRUST
A path for pursuing opportunity
[graphic omitted]
[logo] M F S(R)
INVESTMENT MANAGEMENT
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MFS(R) PRIVACY POLICY: A COMMITMENT TO YOU
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Privacy is a concern for every investor today. At MFS Investment Management(R)
and the MFS funds, we take this concern very seriously. We want you to
understand our policies about every MFS investment product and service that we
offer and how we protect the nonpublic personal information of investors who
have a direct relationship with us and our wholly owned subsidiaries.
Throughout our business relationship, you provide us with personal information;
we maintain information and records about you, your investments, and the
services you use. Examples of the nonpublic personal information we maintain
include
o data from investment applications and other forms
o share balances and transactional history with us, our affiliates, or others
o facts 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 share information
with companies or financial institutions that perform marketing services on our
behalf or to other financial institutions with which we have joint marketing
arrangements.
Access to your nonpublic personal information is limited to appropriate
personnel who provide products, services, or information to you. We maintain
physical, electronic, and procedural safeguards that comply with applicable
federal regulations.
If you have any questions about MFS' privacy policy, please call 1-800-225-2606
any business day between 8 a.m. and 8 p.m. Eastern time.
Note: If you own MFS products or receive MFS services in the name of a third
party such as a bank or broker-dealer, their privacy policy may apply to you
instead of ours.
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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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MFS(R) MULTIMARKET INCOME TRUST
The trust seeks to provide a high level of current income through investments
in fixed-income securities.
New York Stock Exchange Symbol: MMT
TABLE OF CONTENTS
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MFS PRIVACY POLICY
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LETTER FROM THE CEO 1
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MFS ORIGINAL RESEARCH(R) 5
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MANAGEMENT REVIEW 6
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PORTFOLIO MANAGER'S PROFILE 9
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PERFORMANCE SUMMARY 10
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DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN 12
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PORTFOLIO OF INVESTMENTS 13
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FINANCIAL STATEMENTS 33
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NOTES TO FINANCIAL STATEMENTS 40
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TRUSTEES AND OFFICERS 53
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CONTACT INFORMATION 57
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LETTER FROM THE CEO
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Dear Shareholders,
[Photo of Robert J. Manning]
Our firm was built on the strength of MFS Original Research(R), our in-depth
analysis of every security we consider for our portfolios. We've been honing
this process since 1932, when we created one of the mutual fund industry's
first research departments. And we continue to fine-tune this process so that
we can provide strong and consistent long-term investment performance to help
you achieve your financial goals.
While we have achieved strong investment performance in many of our portfolios,
our goal is to achieve the same strong results across all asset classes. To
ensure that our portfolio teams are doing the best possible job for our firm's
clients and shareholders, I am focusing the vast majority of my time on the
three key elements that I believe truly differentiate MFS from its competitors:
people, process, and culture.
PEOPLE
Our people have always been our most valuable resource. Our philosophy is to
deliver consistent, repeatable investment results by hiring the most talented
investors in our industry. We recruit from the nation's top business schools
and hire experienced analysts, both domestically and around the globe.
Our analysts are the engine that powers our entire investment team because
their recommendations have a direct impact on the investment performance of our
portfolios. To demonstrate our ongoing commitment in this area, we increased
the number of equity analysts at MFS from less than 40 at the end of 2000 to
over 50 in April 2004. During that same period, we doubled the average
investment experience of our new domestic equity analysts, from 2.6 years to
5.3 years, by recruiting more seasoned analysts to the firm. Moreover, our
international network of investment personnel now spans key regions of the
world with offices in London, Mexico City, Singapore, and Tokyo, as well as
Boston.
One of the major advantages that MFS has over many of its competitors is that
the position of research analyst is a long-term career for many members of our
team, not simply a steppingstone toward becoming a portfolio manager. We have
worked to elevate the stature of the analyst position to be on par with that of
a portfolio manager. In fact, an exceptional research analyst has the
opportunity to earn more at MFS than some portfolio managers.
At the same time, we look within the firm to promote talented analysts who
choose a path toward becoming a portfolio manager. We rarely hire portfolio
managers from our competitors because we believe the best investors are those
steeped in the MFS process and culture. In the past few months, we have
identified four senior research analysts who will assume roles on the
management teams of several of our larger portfolios. MFS is fortunate to have
a deep bench of talented investment personnel, and we welcome the opportunity
to put their skills to work for our clients.
PROCESS
MFS was built on the strength of its bottom-up approach to researching
securities. We have enhanced the mentoring process for our research analysts by
calling on several of our most seasoned portfolio managers to supplement the
work of Director of Global Equity Research David A. Antonelli. These portfolio
managers will be taking a special interest in developing the careers of our
research analysts and strengthening our investment process. Kenneth J. Enright
of our value equity group will work with a team of domestic analysts; David E.
Sette-Ducati of our small- and mid-cap equity team will work with analysts
concentrating on small- and mid-cap companies; and Barnaby Wiener of our
international equity team in London heads the European equity research team.
We have combined the bottom-up approach of our research process with a top-
down approach to risk controls on portfolio composition. We have a very strong
quantitative team under the leadership of industry veteran Deborah H. Miller,
who represents the equity management department on the Management Committee of
the firm. Quantitative analysis helps us generate investment ideas and, more
importantly, assess the appropriate level of risk for each portfolio. The risk
assessment is designed to assure that each portfolio operates within its
investment objectives.
Additionally, we have increased the peripheral vision of our investment
personnel across asset classes through the collaboration of our Equity, Fixed
Income, Quantitative Analysis, and Risk Management teams. We recently codified
this key aspect of our culture by forming an Investment Management Committee,
composed of key members of these teams. This Committee will work to ensure that
all teams are sharing information, actively debating investment ideas, and
creating a unified investment team.
CULTURE
Teamwork is at the heart of our ability to deliver consistent and competitive
investment performance over time. At MFS, each member of our team is involved
in our success; we have no superstars. The collaborative nature of our process
works to assure a consistent investment approach across all of our products and
provides a high level of continuity in portfolio management because our
investment performance never depends on the contributions of just a single
individual. Our culture is based on an environment of teamwork that allows our
investment personnel to be successful. In turn, we demand superior investment
results from every member of our team.
We have created a meritocracy at our firm based on investment results. We hold
all of our portfolio managers accountable for the performance of their
portfolios and their contributions to the team. We also track the equity and
fixed-income ratings of our analysts so we can evaluate them based on the
performance of their recommendations. We align bonus compensation to investment
performance by weighting rewards to those who have created the greatest
long-term benefit for our shareholders and who contribute most successfully to
the Original Research(SM) process.
The strength of our culture has resulted in a tremendous amount of stability,
both in terms of people and assets under management. Although we have dismissed
members of our team whose performance did not meet MFS' high standards, only
one member of our investment team has voluntarily left the firm over the past
six months, based on a decision to retire from the industry. Similarly, our
firm's assets under management have remained quite steady in the midst of a
challenging enveronment.
In short, we can help you achieve your financial goals by hiring talented
people, following a disciplined process, and maintaining our firm's unique
culture. The recent enhancements described in this letter reflect the
collaborative spirit and the depth of resources in our investment teams.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
CEO, President, and Chief Investment Officer
MFS Investment Management(R)
May 19, 2004
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
The opinions expressed in this letter are those of MFS, and no forecasts can be
guaranteed.
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MFS ORIGINAL RESEARCH(R)
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THE MFS(R) DIFFERENCE
For 80 years MFS has been offering investors clear paths to pursuing specific
investment objectives. Today, millions of individuals and thousands of
institutions all over the world look to MFS to manage their assets with insight
and care.
Our success, we believe, has to do with the fact that we see investors as
people with plans, not just dollars to invest.
When you invest with MFS, you invest with a company dedicated to helping you
realize your long-term financial goals.
INVESTORS CHOOSE MFS FOR OUR
o global asset management expertise across all asset classes
o time-tested money management process for pursuing consistent results
o full spectrum of investment products backed by MFS Original Research(R)
o resources and services that match real-life needs
TURNING INFORMATION INTO OPPORTUNITY
Sound investments begin with sound information. MFS has been doing its own
research and analyzing findings in-house for decades. The process we use to
uncover opportunity is called MFS Original Research(R).
MFS ORIGINAL RESEARCH INVOLVES:
o meeting with the management of 3,000 companies each year to assess their
business plans and the managers' ability to execute those plans
o making onsite visits to more than 2,000 companies annually to gain first-hand
knowledge of their operations and products
o analyzing financial statements and balance sheets
o talking extensively with companies' customers and competitors
o developing our own proprietary estimates of companies' earnings
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MANAGEMENT REVIEW
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TRUST POSITIONING
MFS Multimarket Income Trust, a closed-end fund, maintains a highly
diversified portfolio that includes investments in investment-grade and high-
yield domestic corporate bonds, U.S. government securities, and international
investment-grade and emerging market debt.
We based our strategy during the six-month period ended April 30, 2004 on our
expectation that a sustained economic recovery in the United States would
stimulate greater corporate profitability while increasing the likelihood of a
tightening of domestic monetary policy and higher interest rates. At the start
of the period, we held large positions in both domestic high-yield and
investment-grade corporate debt to capture the benefits of improving credit
quality in a strengthening economy. We maintained that emphasis throughout the
six months, although we took some profits among high-yield positions that had
appreciated. As a result of this profit-taking, the overall credit quality of
the portfolio rose somewhat.
We also held a short futures position, which is an investment that provides
increased price protection when interest rates climb. In addition, we
maintained investments in international, high-grade debt both to take
advantage of overseas bond market opportunities and to mute the impact of
rising interest rates in the United States. The non-U.S. investments were
largely hedged back into the U.S. dollar.
CONTRIBUTORS TO PERFORMANCE
The trust's focus on domestic debt obligations, both high-yield and
investment-grade, was the most influential positive factor in performance. By
rating quality, "BB"-rated bonds were the most significant contributors,
followed by "B"- and "BBB"-rated securities. Among the top-performing domestic
corporate investments were three commercial mortgage-backed securities whose
credit ratings were upgraded to investment grade during the six months. One, a
security issued by Morgan Stanley Capital in 1997, was upgraded all the way
from "BB" to "AA" by the Fitch credit rating service. The others were
securities issued by AMRESCO Commercial Finance, which Fitch upgraded from
"BB+" to "BBB-", and by First Union-Lehman Brothers, which Fitch raised from
"BB" to "BBB."
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TOP 5 PORTFOLIO ALLOCATIONS
AS OF 4/30/04
HIGH-YIELD CORPORATES 30.5%
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HIGH-GRADE CORPORATES 24.0%
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INTERNATIONAL SOVEREIGNS 16.9%
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EMERGING MARKET DEBT 9.8%
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COMMERCIAL MORTGAGE-BACKED 9.3%
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The portfolio is actively managed, and current
holdings may be different.
Percentages based on assets on 4/30/04.
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Investments in both foreign high-grade and emerging market debt also added to
returns. Falling long-term interest rates in Europe led to price gains by
several positions, including debt issued by the governments of Germany and
Finland. Among the better-performing emerging market investments were Brazilian
and Mexican sovereign debt.
Our yield curve strategy, which employed a short futures position, also
contributed to performance as U.S. interest rates rose during the six months,
most dramatically in the final month. (As mentioned above, short futures are
investments that provide increased price protection when interest rates climb.)
Over the six months, the yield on the 10-year Treasury note increased from
4.29% to 4.50%.
To gauge performance of this diversified portfolio, we use a variety of
benchmarks reflecting the varying results of the different markets in which we
invest. During the period, the portfolio's performance at net asset value
surpassed three of the four benchmarks, trailing only a pure domestic high-
yield benchmark.
DETRACTORS FROM PERFORMANCE
While the portfolio's performance at net asset value was positive, the discount
deepened from 5% to 12% on the market price of publicly traded trust shares.
This resulted in a negative return at the trust's market price despite positive
performance by the underlying investment portfolio.
Disappointments among individual portfolio investments during the period
included two bonds issued by domestic telecommunications companies. The bond
prices of Citizens Communications, which provides communication services
throughout the United States, and Centennial Communication Corp., which
delivers wireless service both in the United States and in the Caribbean,
declined as each company's financial outlook deteriorated.
Among our emerging market holdings, bonds issued by Enersis, a Chilean-based
utility providing electric service in several South American countries,
detracted from performance.
Respectfully,
/s/ Peter C. Vaream
Peter C. Vaream
Portfolio Manager
The views expressed in this report are those of the portfolio manager only
through the end of the period of the report as stated on the cover and do not
necessarily reflect the views of MFS or any other person in the MFS
organization. These views are subject to change at any time based on market and
other conditions, and MFS disclaims any responsibility to update such views.
These views may not be relied upon as investment advice or as an indication of
trading intent on behalf of any MFS Fund. References to specific securities are
not recommendations of such securities, and may not be representative of any
MFS Fund's current or future investments.
It is not possible to invest directly in an index.
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Visit mfs.com for our latest economic and investment outlook.
o Under Updates & Announcements, click Week in Review for a summary of recent
investment-related news.
o From Week in Review, link to MFS Global Perspective for our current view of
the world.
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PORTFOLIO MANAGER'S PROFILE
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Peter C. Vaream is a 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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PERFORMANCE SUMMARY THROUGH 4/30/04
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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.
PRICE SUMMARY
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Year ended 4/30/04
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Date Price
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Net asset value 10/31/2003 $6.76
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4/30/2004 $6.79
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New York Stock Exchange Price 10/31/2003 $6.41
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2/13/2004(high)* $6.48
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4/30/2004(low)* $5.95
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* For the period from November 1, 2003, through April 30, 2004.
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Year ended 4/30/04
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TOTAL RETURN VS BENCHMARKS
New York Stock Exchange price** (4.28)%
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Net asset value** 3.58 %
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Citigroup World Government Bond Non-Dollar Hedged Index# 1.84 %
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Lehman Brothers Aggregate Bond Index# 1.25 %
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Lehman Brothers High Yield Index# 5.52 %
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J.P. Morgan EMBI Index Global# 1.88 %
** Includes reinvestment of dividend and capital distributions.
# Source: Standard and Poor's Micropal.
INDEX DEFINITIONS
CITIGROUP WORLD GOVERNMENT BOND NON-DOLLAR HEDGED INDEX - measures the
government bond markets around the world, ex-U.S.
LEHMAN BROTHERS AGGREGATE BOND INDEX - a measure of the U.S. bond market.
LEHMAN BROTHERS HIGH YIELD INDEX - measures the performance of the high-yield
bond market.
J.P. MORGAN EMERGING MARKETS BOND INDEX GLOBAL (THE EMBI GLOBAL) - tracks debt
instruments in the emerging markets (includes a broader array of countries than
the EMBI Plus).
It is not possible to invest directly in an index.
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. Please see the prospectus for
further information regarding these and other risk considerations.
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.
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DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
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The Trust 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 may be made in any amount
over $100 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 from the plan, 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.
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PORTFOLIO OF INVESTMENTS (unaudited) - 4/30/04
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The Portfolio of Investments is a complete list of all securities owned by your fund. It is
categorized by broad-based asset classes.
Bonds - 93.8%
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PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
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U.S. Bonds - 59.7%
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Advertising & Broadcasting - 2.3%
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Allbritton Communications Co., 7.75%, 2012 $1,000 $1,020,000
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Clear Channel Communications, Inc., 6.5%, 2005 EUR 275 343,090
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Lamar Media Corp., 7.25%, 2013 $1,370 1,472,750
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Muzak LLC, 10%, 2009 435 445,875
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Paxson Communications Corp., 0% to 2006, 12.25% to 2009 2,275 1,973,563
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Radio One, Inc., 8.875%, 2011 1,425 1,578,188
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Spanish Broadcasting System, Inc., 9.625%, 2009 1,400 1,480,500
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XM Satellite Radio Holdings, Inc., 12%, 2010 1,058 1,223,313
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XM Satellite Radio Holdings, Inc., 0% to 2005, 14% to 2009 380 365,750
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Young Broadcasting, Inc., 8.5%, 2008 2,750 2,949,375
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$12,852,404
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Aerospace - 1.3%
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BAE Systems Holdings, Inc., 6.4%, 2011## $1,922 $2,048,071
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Boeing Capital Corp., 5.75%, 2007 1,153 1,225,666
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Hexcel Corp., 9.875%, 2008 1,215 1,339,538
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Hexcel Corp., 9.75%, 2009 800 840,000
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K&F Industries, Inc., 9.25%, 2007 157 162,495
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K&F Industries, Inc., 9.625%, 2010 1,500 1,680,000
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$7,295,770
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Airlines - 0.6%
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Continental Airlines, Inc., 7.568%, 2006 $580 $487,951
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Continental Airlines, Inc., 6.545%, 2019 2,322 2,261,397
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Continental Airlines, Inc., 7.566%, 2020 1,077 900,776
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$3,650,124
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Apparel Manufacturers - 0%
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WestPoint Stevens, Inc., 7.875%, 2005 - 2008 $3,375 $109,688
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Asset Backed & Securitized - 8.9%
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Airplane Pass-Through Trust, 10.875%, 2019** $247 $1,235
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Amresco Commercial Mortgage Funding I, 7%, 2029 3,570 3,881,120
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Commercial Mortgage Acceptance Corp., 5.44%, 2013 3,500 3,098,903
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CPS Auto Receivables Trust, 2.89%, 2009 1,023 1,021,896
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Deutsche Mortgage & Asset Receiving Corp., 7.5%, 2031 1,847 1,478,319
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Falcon Auto Dealership LLC, 4.1743%, 2023^^ 9,296 1,723,520
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First Union National Bank Commercial Mortgage Trust,
1.2186%, 2043##^^ 31,505 1,654,375
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First Union-Lehman Brothers Bank of America, 0.7503%, 2028^^ 81,165 1,958,922
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First Union-Lehman Brothers Commercial Mortgage Trust,
7%, 2014 1,847 1,916,245
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First Union-Lehman Brothers Commercial Mortgage Trust,
7.5%, 2029 1,847 1,852,168
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GE Capital Commercial Mortgage Corp., 6.496%, 2033 2,385 2,611,282
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GMAC Commercial Mortgage Securities, Inc., 6.02%, 2033 2,542 2,286,883
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GMAC Commercial Mortgage Securities, Inc., 7.8984%, 2034## 1,853 1,957,901
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LB Commercial Conduit Mortgage Trust, 1.1603%, 2028^^ 23,882 774,368
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Morgan Stanley Capital I, Inc., 6.86%, 2010 2,215 2,360,318
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Morgan Stanley Capital I, Inc., 7.7384%, 2010 5,560 5,847,283
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Mortgage Capital Funding, Inc., 7.214%, 2007 2,250 2,262,051
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Mortgage Capital Funding, Inc., 1.074%, 2031^^ 24,684 722,896
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Mortgage Capital Funding, Inc., 6.337%, 2031 2,385 2,587,989
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Multi-Family Capital Access One, Inc., 6.65%, 2024 152 168,401
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Nationslink Funding Corp., 5%, 2009 4,560 4,121,244
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Residential Accredit Loans, Inc., 7.75%, 2027 1,513 1,511,619
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TIAA Real Estate CDO, Ltd., 7.17%, 2032## 4,191 4,510,292
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$50,309,230
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Automotive - 3.9%
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Collins & Aikman Products Co., 10.75%, 2011 $1,173 $1,214,055
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DaimlerChrysler North America Holdings, 8.5%, 2031 1,251 1,445,796
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Dana Corp., 9%, 2011 1,210 1,427,800
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Ford Motor Credit Co., 7.875%, 2010 3,058 3,359,574
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Ford Motor Credit Co., 7%, 2013 1,000 1,028,430
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General Motors Acceptance Corp., 6%, 2006 EUR 375 472,709
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General Motors Acceptance Corp., 7%, 2012 $2,610 2,746,649
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General Motors Acceptance Corp., 8%, 2031 1,367 1,442,765
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Lear Corp., 8.11%, 2009 4,725 5,427,844
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Metaldyne Corp., 11%, 2012 600 510,000
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Tenneco Automotive, Inc., 10.25%, 2013 1,705 1,965,013
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TRW Automotive Acquisition Corp., 9.375%, 2013 567 649,215
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TRW Automotive, Inc., 11%, 2013 130 154,700
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$21,844,550
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Banks & Credit Companies - 2.6%
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Abbey National Capital Trust I, 8.963%, 2049 $2,109 $2,693,277
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Credit Suisse First Boston Corp., 6.38%, 2035 2,385 2,599,217
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Credit Suisse First Boston USA, Inc., 6.5%, 2012 3,033 3,312,852
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Popular North America, Inc., 4.25%, 2008 1,525 1,537,976
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RBS Capital Trust II, 6.425%, 2049 833 822,378
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Wachovia Corp., 4.875%, 2014 3,796 3,668,139
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$14,633,839
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Basic Industry - 0.2%
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Trimas Corp., 9.875%, 2012 $1,085 $1,171,800
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Broadcast & Cable TV - 4.6%
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Charter Communications, Inc., 8.625%, 2009 $3,300 $2,739,000
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Continental Cablevision, Inc., 9.5%, 2013 7,341 8,262,780
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CSC Holdings, Inc., 8.125%, 2009 3,469 3,703,158
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DIRECTV Holdings LLC, 8.375%, 2013 600 670,500
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Lenfest Communications, Inc., 10.5%, 2006 500 574,570
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Mediacom Broadband LLC, 11%, 2013 2,600 2,782,000
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TCI Communication Financing III, 9.65%, 2027 5,000 5,907,680
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TCI Communications, Inc., 9.8%, 2012 1,135 1,448,949
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$26,088,637
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Building - 0.9%
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American Standard Cos., Inc., 7.375%, 2008 $1,015 $1,111,425
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D.R. Horton, Inc., 8%, 2009 1,565 1,729,325
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Jacuzzi Brands, Inc., 9.625%, 2010 500 560,000
----------------------------------------------------------------------------------------------
Williams Scotsman, Inc., 9.875%, 2007 1,455 1,447,725
----------------------------------------------------------------------------------------------
Williams Scotsman, Inc., 10%, 2008 205 224,475
----------------------------------------------------------------------------------------------
$5,072,950
----------------------------------------------------------------------------------------------
Business Services - 1.6%
----------------------------------------------------------------------------------------------
Iron Mountain, Inc., 8.625%, 2013 $985 $1,053,950
----------------------------------------------------------------------------------------------
Iron Mountain, Inc., 7.75%, 2015 1,630 1,670,750
----------------------------------------------------------------------------------------------
Lucent Technologies, Inc., 5.5%, 2008 2,050 1,947,500
----------------------------------------------------------------------------------------------
Unisys Corp., 7.875%, 2008 2,655 2,721,375
----------------------------------------------------------------------------------------------
Xerox Corp., 7.625%, 2013 1,415 1,443,300
----------------------------------------------------------------------------------------------
$8,836,875
----------------------------------------------------------------------------------------------
Chemicals - 1.2%
----------------------------------------------------------------------------------------------
Equistar Chemicals LP, 10.625%, 2011 $1,225 $1,365,875
----------------------------------------------------------------------------------------------
Huntsman International LLC, 10.125%, 2009 1,900 1,990,250
----------------------------------------------------------------------------------------------
JohnsonDiversey Holdings, Inc., 0% to 2007, 10.67% to 2013 1,465 1,113,400
----------------------------------------------------------------------------------------------
Lyondell Chemical Co., 11.125%, 2012 1,500 1,665,000
----------------------------------------------------------------------------------------------
Nalco Co., 7.75%, 2011## 695 731,488
----------------------------------------------------------------------------------------------
$6,866,013
----------------------------------------------------------------------------------------------
Consumer Goods & Services - 0.4%
----------------------------------------------------------------------------------------------
Kindercare Learning Centers, Inc., 9.5%, 2009 $1,113 $1,130,619
----------------------------------------------------------------------------------------------
Remington Arms Co., Inc., 10.5%, 2011 500 497,500
----------------------------------------------------------------------------------------------
Samsonite Corp., 10.75%, 2008 740 769,600
----------------------------------------------------------------------------------------------
$2,397,719
----------------------------------------------------------------------------------------------
Containers - 0.7%
----------------------------------------------------------------------------------------------
Owens-Brockway Glass Container, Inc., 8.875%, 2009 $515 $559,419
----------------------------------------------------------------------------------------------
Owens-Brockway Glass Container, Inc., 8.25%, 2013 2,090 2,157,925
----------------------------------------------------------------------------------------------
Pliant Corp., 13%, 2010 1,190 1,076,950
----------------------------------------------------------------------------------------------
$3,794,294
----------------------------------------------------------------------------------------------
Defense Electronics - 0.3%
----------------------------------------------------------------------------------------------
L-3 Communications Holdings, Inc., 7.625%, 2012 $1,455 $1,567,763
----------------------------------------------------------------------------------------------
Energy - Independent - 0.2%
----------------------------------------------------------------------------------------------
Ocean Energy, Inc., 4.375%, 2007 $908 $927,666
----------------------------------------------------------------------------------------------
Entertainment - 1.7%
----------------------------------------------------------------------------------------------
AMC Entertainment, Inc., 9.5%, 2011 $1,224 $1,279,080
----------------------------------------------------------------------------------------------
News Media Holdings, Inc., 7.7%, 2025 517 589,594
----------------------------------------------------------------------------------------------
News Media Holdings, Inc., 6.55%, 2033 529 537,228
----------------------------------------------------------------------------------------------
Regal Cinemas, Inc., 9.375%, 2012 2,425 2,873,625
----------------------------------------------------------------------------------------------
Six Flags, Inc., 9.75%, 2013 1,500 1,580,625
----------------------------------------------------------------------------------------------
Turner Broadcasting System, Inc., 8.375%, 2013 419 498,339
----------------------------------------------------------------------------------------------
Walt Disney Co., 6.75%, 2006 2,140 2,284,283
----------------------------------------------------------------------------------------------
$9,642,774
----------------------------------------------------------------------------------------------
Financial Institutions - 1.0%
----------------------------------------------------------------------------------------------
Capital One Bank, 4.25%, 2008 $1,296 $1,284,282
----------------------------------------------------------------------------------------------
SLM Corp., 1.34%, 2007 4,120 4,127,573
----------------------------------------------------------------------------------------------
$5,411,855
----------------------------------------------------------------------------------------------
Food & Non-Alcoholic Beverages - 0.1%
----------------------------------------------------------------------------------------------
Seminis Vegetable Seeds, Inc., 10.25%, 2013## $360 $399,600
----------------------------------------------------------------------------------------------
Forest & Paper Products - 1.2%
----------------------------------------------------------------------------------------------
Buckeye Technologies, Inc., 9.25%, 2008 $2,150 $2,128,500
----------------------------------------------------------------------------------------------
Buckeye Technologies, Inc., 8.5%, 2013 1,675 1,783,875
----------------------------------------------------------------------------------------------
Georgia Pacific Corp., 9.375%, 2013 1,220 1,418,250
----------------------------------------------------------------------------------------------
International Paper Co., 5.375%, 2006 EUR 140 175,409
----------------------------------------------------------------------------------------------
MeadWestvaco Corp., 6.8%, 2032 $1,345 1,349,104
----------------------------------------------------------------------------------------------
$6,855,138
----------------------------------------------------------------------------------------------
Gaming & Lodging - 2.5%
----------------------------------------------------------------------------------------------
Aztar Corp., 8.875%, 2007 $1,550 $1,600,375
----------------------------------------------------------------------------------------------
GEO Group, Inc., 8.25%, 2013 1,110 1,154,400
----------------------------------------------------------------------------------------------
Hilton Hotels Corp., 7.625%, 2012 1,100 1,229,250
----------------------------------------------------------------------------------------------
MGM Mirage, Inc., 8.375%, 2011 1,550 1,712,750
----------------------------------------------------------------------------------------------
Park Place Entertainment Corp., 8.875%, 2008 1,540 1,717,100
----------------------------------------------------------------------------------------------
Pinnacle Entertainment, Inc., 8.75%, 2013 650 656,500
----------------------------------------------------------------------------------------------
Royal Caribbean Cruises Ltd., 8%, 2010 1,210 1,318,900
----------------------------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc., 7.875%, 2012 2,600 2,843,750
----------------------------------------------------------------------------------------------
Venetian Casino Resort LLC, 11%, 2010 1,525 1,784,250
----------------------------------------------------------------------------------------------
$14,017,275
----------------------------------------------------------------------------------------------
Industrial - 0.3%
----------------------------------------------------------------------------------------------
Blount, Inc., 7%, 2005 $700 $728,000
----------------------------------------------------------------------------------------------
MSW Energy Holdings II LLC, 7.375%, 2010## 1,045 1,081,575
----------------------------------------------------------------------------------------------
$1,809,575
----------------------------------------------------------------------------------------------
Insurance - 0.2%
----------------------------------------------------------------------------------------------
Prudential Funding Corp., 6.6%, 2008## $1,230 $1,346,330
----------------------------------------------------------------------------------------------
Insurance - Property & Casualty - 0.6%
----------------------------------------------------------------------------------------------
Allstate Corp., 7.2%, 2009 $1,668 $1,918,250
----------------------------------------------------------------------------------------------
Fund American Cos., Inc., 5.875%, 2013 1,364 1,371,880
----------------------------------------------------------------------------------------------
$3,290,130
----------------------------------------------------------------------------------------------
Machinery & Tools - 1.9%
----------------------------------------------------------------------------------------------
AGCO Corp., 9.5%, 2008 $2,000 $2,190,000
----------------------------------------------------------------------------------------------
AMSTED Industries, Inc., 10.25%, 2011## 1,845 2,084,850
----------------------------------------------------------------------------------------------
Manitowoc Co., Inc., 10.5%, 2012 1,180 1,345,200
----------------------------------------------------------------------------------------------
Terex Corp., 9.25%, 2011 1,380 1,538,700
----------------------------------------------------------------------------------------------
Terex Corp., 10.375%, 2011 1,140 1,296,750
----------------------------------------------------------------------------------------------
United Rentals, Inc., 6.5%, 2012## 2,450 2,364,250
----------------------------------------------------------------------------------------------
$10,819,750
----------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 0.5%
----------------------------------------------------------------------------------------------
Alliance Imaging, Inc., 10.375%, 2011 $1,600 $1,600,000
----------------------------------------------------------------------------------------------
Fisher Scientific International, Inc., 8.125%, 2012 1,133 1,229,305
----------------------------------------------------------------------------------------------
Mariner Health Care, Inc., 8.25%, 2013 255 257,550
----------------------------------------------------------------------------------------------
$3,086,855
----------------------------------------------------------------------------------------------
Metals & Mining - 0.5%
----------------------------------------------------------------------------------------------
Arch Western Finance, 6.75%, 2013## $735 $757,050
----------------------------------------------------------------------------------------------
Peabody Energy Corp., 6.875%, 2013 340 353,600
----------------------------------------------------------------------------------------------
Phelps Dodge Corp., 8.75%, 2011 501 604,215
----------------------------------------------------------------------------------------------
U.S. Steel Corp., 9.75%, 2010 850 962,625
----------------------------------------------------------------------------------------------
$2,677,490
----------------------------------------------------------------------------------------------
Mortgage Backed - 1.2%
----------------------------------------------------------------------------------------------
Fannie Mae, 6%, 2012 - 2016 $2,273 $2,372,014
----------------------------------------------------------------------------------------------
Fannie Mae, 6.5%, 2031 - 2032 4,134 4,303,320
----------------------------------------------------------------------------------------------
$6,675,334
----------------------------------------------------------------------------------------------
Natural Gas - Distribution - 0.8%
----------------------------------------------------------------------------------------------
AmeriGas Partners LP, 8.875%, 2011 $1,635 $1,794,413
----------------------------------------------------------------------------------------------
CenterPoint Energy Resources, Corp., 7.875%, 2013 2,433 2,743,813
----------------------------------------------------------------------------------------------
$4,538,226
----------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 1.3%
----------------------------------------------------------------------------------------------
ANR Pipeline Co., 8.875%, 2010 $440 $486,200
----------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners LP, 7.3%, 2033 2,578 2,799,548
----------------------------------------------------------------------------------------------
Southern Natural Gas Co., Inc., 8.875%, 2010 1,540 1,701,700
----------------------------------------------------------------------------------------------
Williams Cos., Inc., 7.125%, 2011 2,100 2,194,500
----------------------------------------------------------------------------------------------
$7,181,948
----------------------------------------------------------------------------------------------
Oils - 0.3%
----------------------------------------------------------------------------------------------
Valero Energy Corp., 6.875%, 2012 $1,331 $1,471,806
----------------------------------------------------------------------------------------------
Personal Computers & Peripherals - 0.2%
----------------------------------------------------------------------------------------------
Jabil Circuit, Inc., 5.875%, 2010 $1,033 $1,072,891
----------------------------------------------------------------------------------------------
Pharmaceuticals - 0.2%
----------------------------------------------------------------------------------------------
Schering-Plough Corp., 6.5%, 2033 $1,002 $1,016,232
----------------------------------------------------------------------------------------------
Pollution Control - 0.5%
----------------------------------------------------------------------------------------------
Allied Waste North America, Inc., 7.875%, 2013 $2,375 $2,553,125
----------------------------------------------------------------------------------------------
Printing & Publishing - 1.3%
----------------------------------------------------------------------------------------------
Dex Media East LLC, 9.875%, 2009 $1,500 $1,681,875
----------------------------------------------------------------------------------------------
Dex Media West LLC, 9.875%, 2013## 1,490 1,631,550
----------------------------------------------------------------------------------------------
Hollinger International, Inc., 9%, 2010 800 888,000
----------------------------------------------------------------------------------------------
Mail-Well Corp., 9.625%, 2012 1,050 1,155,000
----------------------------------------------------------------------------------------------
MediaNews Group, Inc., 6.875%, 2013## 1,710 1,692,900
----------------------------------------------------------------------------------------------
Reed Elsevier Capital, Inc., 5.75%, 2008 EUR 125 161,784
----------------------------------------------------------------------------------------------
$7,211,109
----------------------------------------------------------------------------------------------
Real Estate - 0.8%
----------------------------------------------------------------------------------------------
Boston Properties, Inc., 5%, 2015 $2,949 $2,772,585
----------------------------------------------------------------------------------------------
Kimco Realty Corp., 6%, 2012 1,399 1,470,264
----------------------------------------------------------------------------------------------
$4,242,849
----------------------------------------------------------------------------------------------
Retailers - 0.9%
----------------------------------------------------------------------------------------------
Gap, Inc., 10.55%, 2008 $1,080 $1,328,400
----------------------------------------------------------------------------------------------
J. Crew Operating Corp., 10.375%, 2007 1,100 1,101,375
----------------------------------------------------------------------------------------------
Rite Aid Corp., 9.5%, 2011 1,760 1,975,600
----------------------------------------------------------------------------------------------
Rite Aid Corp., 9.25%, 2013 815 863,900
----------------------------------------------------------------------------------------------
$5,269,275
----------------------------------------------------------------------------------------------
Supermarkets - 0.3%
----------------------------------------------------------------------------------------------
Roundy's, Inc., 8.875%, 2012 $1,650 $1,790,250
----------------------------------------------------------------------------------------------
Supranational - 0.2%
----------------------------------------------------------------------------------------------
European Investment Bank, 5.375%, 2012 EUR 750 $976,811
----------------------------------------------------------------------------------------------
Telecommunications - Wireline - 0.7%
----------------------------------------------------------------------------------------------
Citizens Communications Co., 9%, 2031 $851 $835,377
----------------------------------------------------------------------------------------------
Qwest Corp., 13.5%, 2010## 1,600 1,856,000
----------------------------------------------------------------------------------------------
Sprint Capital Corp., 6.875%, 2028 1,501 1,473,593
----------------------------------------------------------------------------------------------
$4,164,970
----------------------------------------------------------------------------------------------
U.S. Government Agencies - 0.3%
----------------------------------------------------------------------------------------------
Small Business Administration, 5.34%, 2021 $1,728 $1,772,531
----------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 2.9%
----------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 5.375%, 2031 $1,169 $1,184,343
----------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3.375%, 2007 6,353 6,850,737
----------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3.125%, 2008 1,209 1,190,912
----------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3.625%, 2008 6,204 6,826,312
----------------------------------------------------------------------------------------------
U.S. Treasury Notes, 5%, 2011 393 414,569
----------------------------------------------------------------------------------------------
$16,466,873
----------------------------------------------------------------------------------------------
Utilities - Electric Power - 6.0%
----------------------------------------------------------------------------------------------
BVPS II Funding Corp., 8.68%, 2017 $846 $937,799
----------------------------------------------------------------------------------------------
Beaver Valley Funding Corp., 9%, 2017 4,362 4,968,000
----------------------------------------------------------------------------------------------
CMS Energy Corp., 8.5%, 2011 1,300 1,361,750
----------------------------------------------------------------------------------------------
Calpine Corp., 8.5%, 2011 750 525,000
----------------------------------------------------------------------------------------------
Calpine Corp., 8.75%, 2013## 1,255 1,110,675
----------------------------------------------------------------------------------------------
DPL, Inc., 6.875%, 2011 1,692 1,666,620
----------------------------------------------------------------------------------------------
Dynegy Holdings, Inc., 6.875%, 2011 1,600 1,368,000
----------------------------------------------------------------------------------------------
MidAmerican Energy Holdings Co., 3.5%, 2008 2,437 2,375,775
----------------------------------------------------------------------------------------------
MidAmerican Energy Holdings Co., 5.875%, 2012 3,552 3,671,614
----------------------------------------------------------------------------------------------
PG&E Corp., 6.875%, 2008## 400 426,000
----------------------------------------------------------------------------------------------
PSE&G Energy Holdings LLC, 7.75%, 2007 3,120 3,260,400
----------------------------------------------------------------------------------------------
Pacific Gas & Electric Co., 6.05%, 2034 1,865 1,763,732
----------------------------------------------------------------------------------------------
Reliant Resources, Inc., 9.25%, 2010 490 524,300
----------------------------------------------------------------------------------------------
Reliant Resources, Inc., 9.5%, 2013 575 623,875
----------------------------------------------------------------------------------------------
System Energy Resources, Inc., 5.129%, 2014 2,898 2,862,500
----------------------------------------------------------------------------------------------
System Energy Resources, Inc., 8.09%, 2017 1,945 2,133,442
----------------------------------------------------------------------------------------------
TXU Corp., 6.375%, 2006 3,943 4,191,409
----------------------------------------------------------------------------------------------
$33,770,891
----------------------------------------------------------------------------------------------
Wireless Communications - 1.6%
----------------------------------------------------------------------------------------------
Alamosa Holdings, Inc., 11%, 2010 $1,251 $1,357,335
----------------------------------------------------------------------------------------------
Alamosa Holdings, Inc., 8.5%, 2012## 390 377,325
----------------------------------------------------------------------------------------------
Centennial Communications Corp., 10.125%, 2013 2,220 2,286,600
----------------------------------------------------------------------------------------------
Crown Castle International Corp., 7.5%, 2013 1,755 1,750,613
----------------------------------------------------------------------------------------------
Dobson Communications Corp., 8.875%, 2013 495 387,338
----------------------------------------------------------------------------------------------
Rural Cellular Corp., 9.75%, 2010 169 158,015
----------------------------------------------------------------------------------------------
Triton PCS Holdings, Inc., 8.5%, 2013 1,055 1,097,200
----------------------------------------------------------------------------------------------
Western Wireless Corp., 9.25%, 2013 1,715 1,762,163
----------------------------------------------------------------------------------------------
$9,176,589
----------------------------------------------------------------------------------------------
Total U.S. Bonds $336,127,804
----------------------------------------------------------------------------------------------
Foreign Bonds - 34.1%
----------------------------------------------------------------------------------------------
Argentina - 0%
----------------------------------------------------------------------------------------------
Central Bank of Argentina, 2%, 2018 (Emerging Market
Sovereign) ARS 164 $35,413
----------------------------------------------------------------------------------------------
Republic of Argentina, 1.234%, 2012 (Emerging Market
Sovereign) $265 173,840
----------------------------------------------------------------------------------------------
$209,253
----------------------------------------------------------------------------------------------
Australia - 0.9%
----------------------------------------------------------------------------------------------
Burns Philp Capital Property Ltd., 9.75%, 2012 (Food &
Non-Alcoholic Beverages)## $3,480 $3,671,400
----------------------------------------------------------------------------------------------
Government of Australia, 6.25%, 2015 (International
Market Sovereign) AUD 1,820 1,339,372
----------------------------------------------------------------------------------------------
$5,010,772
----------------------------------------------------------------------------------------------
Austria - 0.9%
----------------------------------------------------------------------------------------------
Republic of Austria, 5.5%, 2007 (International Market
Sovereign) EUR 2,841 $3,675,051
----------------------------------------------------------------------------------------------
Republic of Austria, 5%, 2012 (International Market
Sovereign) 953 1,214,957
----------------------------------------------------------------------------------------------
Republic of Austria, 4.65%, 2018 (International Market
Sovereign) 287 348,498
----------------------------------------------------------------------------------------------
$5,238,506
----------------------------------------------------------------------------------------------
Belgium - 0.5%
----------------------------------------------------------------------------------------------
Kingdom of Belgium, 3.75%, 2009 (International Market
Sovereign) EUR 1,209 $1,467,553
----------------------------------------------------------------------------------------------
Kingdom of Belgium, 5%, 2012 (International Market
Sovereign) 1,078 1,372,196
----------------------------------------------------------------------------------------------
$2,839,749
----------------------------------------------------------------------------------------------
Brazil - 1.5%
----------------------------------------------------------------------------------------------
Federal Republic of Brazil, 2.0625%, 2009 - 2024
(Emerging Market Sovereign) $416 $318,240
----------------------------------------------------------------------------------------------
Federal Republic of Brazil, 2.125%, 2012 (Emerging Market
Sovereign) 908 753,835
----------------------------------------------------------------------------------------------
Federal Republic of Brazil, 8%, 2014 (Emerging Market
Sovereign) 6,365 5,842,724
----------------------------------------------------------------------------------------------
Federal Republic of Brazil, 11%, 2040 (Emerging Market
Sovereign) 1,771 1,647,030
----------------------------------------------------------------------------------------------
Telemig Celular Participacoes S.A., 8.75%, 2009 (Special
Products & Services)## 28 25,760
----------------------------------------------------------------------------------------------
$8,587,589
----------------------------------------------------------------------------------------------
Bulgaria - 0.3%
----------------------------------------------------------------------------------------------
Republic of Bulgaria, 8.25%, 2015 (Emerging Market
Sovereign) $47 $53,815
----------------------------------------------------------------------------------------------
Republic of Bulgaria, 8.25%, 2015 (Emerging Market
Sovereign)## 1,220 1,396,900
----------------------------------------------------------------------------------------------
$1,450,715
----------------------------------------------------------------------------------------------
Canada - 1.7%
----------------------------------------------------------------------------------------------
Abitibi-Consolidated, Inc., 8.3%, 2005 (Forest & Paper
Products) $2,608 $2,723,422
----------------------------------------------------------------------------------------------
Abitibi-Consolidated, Inc., 6.95%, 2006 (Forest & Paper
Products) 2,500 2,592,758
----------------------------------------------------------------------------------------------
Government of Canada, 5.5%, 2009 (International Market
Sovereign) CAD 3,094 2,420,609
----------------------------------------------------------------------------------------------
Government of Canada, 5.25%, 2012 (International Market
Sovereign) 1,606 1,229,802
----------------------------------------------------------------------------------------------
Government of Canada, 8%, 2023 (International Market
Sovereign) 690 675,430
----------------------------------------------------------------------------------------------
$9,642,021
----------------------------------------------------------------------------------------------
Cayman Islands - 0.7%
----------------------------------------------------------------------------------------------
Mizuho Financial Group, Inc., 4.75%, 2014 (Banks & Credit
Companies)## EUR 127 $154,469
----------------------------------------------------------------------------------------------
Triton Energy Ltd., 9.25%, 2005 (Energy - Integrated) $3,500 3,690,785
----------------------------------------------------------------------------------------------
$3,845,254
----------------------------------------------------------------------------------------------
Chile - 1.0%
----------------------------------------------------------------------------------------------
AES Gener S.A., 7.5%, 2014 (Utilities - Electric Power)## $1,640 $1,570,300
----------------------------------------------------------------------------------------------
Empresa Nacional de Electricidad S.A., 8.35%, 2013
(Utilities - Electric Power) 1,214 1,302,573
----------------------------------------------------------------------------------------------
Enersis S.A., 7.375%, 2014 (Utilities - Electric Power) 22 21,661
----------------------------------------------------------------------------------------------
Enersis S.A., 7.375%, 2014 (Utilities - Electric Power)## 1,951 1,920,949
----------------------------------------------------------------------------------------------
HQI Transelec Chile S.A., 7.875%, 2011 (Utilities -
Electric Power) 700 794,858
----------------------------------------------------------------------------------------------
$5,610,341
----------------------------------------------------------------------------------------------
Colombia - 0.3%
----------------------------------------------------------------------------------------------
Republic of Colombia, 10.75%, 2013 (Emerging Market
Sovereign) $1,317 $1,448,700
----------------------------------------------------------------------------------------------
Republic of Colombia, 11.75%, 2020 (Emerging Market
Sovereign) 35 41,125
----------------------------------------------------------------------------------------------
$1,489,825
----------------------------------------------------------------------------------------------
Denmark - 0.6%
----------------------------------------------------------------------------------------------
Allianz AG, 5.5%, 2049 (Insurance - Property & Casualty) EUR 140 $170,499
----------------------------------------------------------------------------------------------
Kingdom of Denmark, 7%, 2007 (International Market
Sovereign) DKK 6,600 1,197,946
----------------------------------------------------------------------------------------------
Kingdom of Denmark, 6%, 2009 (International Market
Sovereign) 8,242 1,475,476
----------------------------------------------------------------------------------------------
Kingdom of Denmark, 5%, 2013 (International Market
Sovereign) 3,993 674,002
----------------------------------------------------------------------------------------------
$3,517,923
----------------------------------------------------------------------------------------------
Dominican Republic - 0%
----------------------------------------------------------------------------------------------
Dominican Republic, 9.04%, 2013 (Emerging Market
Sovereign) $190 $136,800
----------------------------------------------------------------------------------------------
Dominican Republic, 9.04%, 2013 (Emerging Market
Sovereign)## 51 36,720
----------------------------------------------------------------------------------------------
$173,520
----------------------------------------------------------------------------------------------
El Salvador - 0%
----------------------------------------------------------------------------------------------
Republic of El Salvador, 8.25%, 2032 (Emerging Market
Sovereign) $23 $22,885
----------------------------------------------------------------------------------------------
Finland - 1.1%
----------------------------------------------------------------------------------------------
Republic of Finland, 2.75%, 2006 (International Market
Sovereign) EUR 1,638 $1,969,599
----------------------------------------------------------------------------------------------
Republic of Finland, 3%, 2008 (International Market
Sovereign) 2,718 3,226,725
----------------------------------------------------------------------------------------------
Republic of Finland, 5.375%, 2013 (International Market
Sovereign) 775 1,013,519
----------------------------------------------------------------------------------------------
$6,209,843
----------------------------------------------------------------------------------------------
France - 2.2%
----------------------------------------------------------------------------------------------
Crown European Holdings S.A., 9.5%, 2011 (Containers) $1,580 $1,771,575
----------------------------------------------------------------------------------------------
France Telecom S.A., 8.2%, 2006 (Telecommunications -
Wireline) 105 114,203
----------------------------------------------------------------------------------------------
Republic of France, 4.75%, 2007 - 2012 (International
Market Sovereign) EUR 2,662 3,357,504
----------------------------------------------------------------------------------------------
Republic of France, 4%, 2009 (International Market
Sovereign) 1,578 1,932,413
----------------------------------------------------------------------------------------------
Republic of France, 5%, 2012 - 2016 (International Market
Sovereign) 607 773,712
----------------------------------------------------------------------------------------------
Rhodia S.A., 8.875%, 2011 (Chemicals)## $2,090 1,724,250
----------------------------------------------------------------------------------------------
SG Capital Trust I, 7.875%, 2049 (Banks & Credit
Companies) EUR 300 425,014
----------------------------------------------------------------------------------------------
Societe Nationale des Chemins de Fer Francais, 7.5%, 2008
(Railroad & Shipping) 750 1,034,586
----------------------------------------------------------------------------------------------
Veolia Environnement, 5.875%, 2008 (Pollution Control) 250 324,226
----------------------------------------------------------------------------------------------
Vivendi Universal S.A., 6.25%, 2008 (Advertising &
Broadcasting) $905 944,594
----------------------------------------------------------------------------------------------
$12,402,077
----------------------------------------------------------------------------------------------
Germany - 7.1%
----------------------------------------------------------------------------------------------
Coca-Cola Erfrischungsgetranke, 5.875%, 2005 (Food & Non-
Alcoholic Beverages) EUR 600 $739,986
----------------------------------------------------------------------------------------------
Continental AG, 6.875%, 2008 (Automotive) 100 134,095
----------------------------------------------------------------------------------------------
DePfa Bank, 5.5%, 2010 (Asset Backed & Securitized) 960 1,254,470
----------------------------------------------------------------------------------------------
Deutsche Telekom International Finance B.V., 8.125%, 2012
(Telecommunications - Wireline) 130 191,317
----------------------------------------------------------------------------------------------
Deutsche Telekom International Finance B.V., 8.75%, 2030
(Telecommunications - Wireline) $3,313 4,115,024
----------------------------------------------------------------------------------------------
Federal Republic of Germany, 4%, 2007 - 2009
(International Market Sovereign) EUR 2,312 2,850,078
----------------------------------------------------------------------------------------------
Federal Republic of Germany, 4.5%, 2009 (International
Market Sovereign) 20,188 25,340,006
----------------------------------------------------------------------------------------------
Federal Republic of Germany, 5.25%, 2010 (International
Market Sovereign) 1,731 2,251,643
----------------------------------------------------------------------------------------------
Kreditanstalt fur Wiederaufbau, 4.75%, 2006
(International Market Agencies) 750 939,066
----------------------------------------------------------------------------------------------
Kreditanstalt fur Wiederaufbau, 3.25%, 2008
(International Market Agencies) 1,705 2,046,007
----------------------------------------------------------------------------------------------
Kronos International, Inc., 8.875%, 2009 (Chemicals) 95 121,741
----------------------------------------------------------------------------------------------
$39,983,433
----------------------------------------------------------------------------------------------
Guatemala - 0%
----------------------------------------------------------------------------------------------
Republic of Guatemala, 10.25%, 2011 (Emerging Market
Sovereign)# $42 $48,300
----------------------------------------------------------------------------------------------
Ireland - 1.4%
----------------------------------------------------------------------------------------------
Chalet Finance 1 PLC, 2.275%, 2013 (Asset Backed &
Securitized) EUR 300 $359,482
----------------------------------------------------------------------------------------------
MDP Acquisitions PLC, 9.625%, 2012 (Forest & Paper
Products) $940 1,057,500
----------------------------------------------------------------------------------------------
Republic of Ireland, 4.25%, 2007 (International Market
Sovereign) EUR 2,836 3,531,186
----------------------------------------------------------------------------------------------
Republic of Ireland, 3.25%, 2009 (International Market
Sovereign) 1,891 2,243,326
----------------------------------------------------------------------------------------------
Republic of Ireland, 5%, 2013 (International Market
Sovereign) 434 553,185
----------------------------------------------------------------------------------------------
$7,744,679
----------------------------------------------------------------------------------------------
Italy - 1.1%
----------------------------------------------------------------------------------------------
Republic of Italy, 4.5%, 2005 (International Market
Sovereign) EUR 4,745 $5,816,939
----------------------------------------------------------------------------------------------
Telecom Italia S.p.A, 5.625%, 2007 (Telecommunications -
Wireline) 300 379,982
----------------------------------------------------------------------------------------------
$6,196,921
----------------------------------------------------------------------------------------------
Japan - 1.2%
----------------------------------------------------------------------------------------------
Mizuho Financial Group, Inc., 5.79%, 2014 (Banks & Credit
Companies)## $1,633 $1,619,315
----------------------------------------------------------------------------------------------
UFJ Finance Aruba AEC, 6.75%, 2013 (Banks & Credit
Companies) 4,612 4,869,866
----------------------------------------------------------------------------------------------
$6,489,181
----------------------------------------------------------------------------------------------
Kazakhstan - 0.6%
----------------------------------------------------------------------------------------------
Hurricane Finance B.V., 9.625%, 2010 (Oils) $46 $48,530
----------------------------------------------------------------------------------------------
Kazkommerts International B.V., 10.125%, 2007 (Banks &
Credit Companies)# 128 136,980
----------------------------------------------------------------------------------------------
Kazkommerts International B.V., 10.125%, 2007 (Banks &
Credit Companies)## 122 130,559
----------------------------------------------------------------------------------------------
Kazkommerts International B.V., 8.5%, 2013 (Banks &
Credit Companies) 200 193,000
----------------------------------------------------------------------------------------------
Kazkommerts International B.V., 8.5%, 2013 (Banks &
Credit Companies)## 1,171 1,130,015
----------------------------------------------------------------------------------------------
Turanalem Finance B.V., 7.875%, 2010 (Banks & Credit
Companies) $10 $9,600
----------------------------------------------------------------------------------------------
Turanalem Finance B.V., 7.875%, 2010 (Banks & Credit
Companies)## 39 37,440
----------------------------------------------------------------------------------------------
Turanalem Finance B.V., 8%, 2014 (Banks & Credit
Companies)## 2,031 1,848,210
----------------------------------------------------------------------------------------------
$3,534,334
----------------------------------------------------------------------------------------------
Luxembourg - 0.5%
----------------------------------------------------------------------------------------------
Millicom International Cellular S.A., 10%, 2013 (Wireless
Communications)## $1,130 $1,158,250
----------------------------------------------------------------------------------------------
Telecom Italia S.p.A., 5.25%, 2013 (Telecommunications -
Wireline)## 1,425 1,404,945
----------------------------------------------------------------------------------------------
$2,563,195
----------------------------------------------------------------------------------------------
Malaysia - 0.4%
----------------------------------------------------------------------------------------------
Petroliam Nasional Berhad, 7.75%, 2015 (Emerging Market
Agencies) $999 $1,149,830
----------------------------------------------------------------------------------------------
Petroliam Nasional Berhad, 7.875%, 2022 (Emerging Market
Agencies)## 987 1,106,234
----------------------------------------------------------------------------------------------
$2,256,064
----------------------------------------------------------------------------------------------
Mexico - 2.3%
----------------------------------------------------------------------------------------------
Axtel S.A. de C.V., 11%, 2013 (Telecommunications -
Wireline)## $45 $44,775
----------------------------------------------------------------------------------------------
BBVA Bancomer, 10.5%, 2011 (Banks & Credit Companies)## 1,240 1,382,600
----------------------------------------------------------------------------------------------
Banco Mercantil S.A., 5.875%, 2014 (Banks & Credit
Companies)## 2,837 2,766,075
----------------------------------------------------------------------------------------------
Grupo Televisa S.A., 8.5%, 2032 (Broadcast & Cable TV) 458 483,190
----------------------------------------------------------------------------------------------
Innova S. de R.L., 9.375%, 2013 (Wireless Communications) 484 525,745
----------------------------------------------------------------------------------------------
Pemex Finance Ltd., 9.69%, 2009 (Emerging Market
Agencies) 905 1,058,850
----------------------------------------------------------------------------------------------
Pemex Project Funding Master Trust, 8.625%, 2022
(Emerging Market Agencies) 2,578 2,758,460
----------------------------------------------------------------------------------------------
Petroleos Mexicanos, 9.5%, 2027 (Emerging Market
Agencies) 962 1,101,490
----------------------------------------------------------------------------------------------
TFM S.A. de C.V., 10.25%, 2007 (Transportation -
Services) 15 15,600
----------------------------------------------------------------------------------------------
TFM S.A. de C.V., 11.75%, 2009 (Transportation -
Services) 16 15,880
----------------------------------------------------------------------------------------------
TFM S.A. de C.V., 12.5%, 2012 (Transportation - Services) 344 383,560
----------------------------------------------------------------------------------------------
United Mexican States, 8%, 2022 (Emerging Market
Sovereign) 317 334,435
----------------------------------------------------------------------------------------------
United Mexican States, 7.5%, 2033 (Emerging Market
Sovereign) 2,065 2,044,350
----------------------------------------------------------------------------------------------
$12,915,010
----------------------------------------------------------------------------------------------
Netherlands - 1.4%
----------------------------------------------------------------------------------------------
Kingdom of Netherlands, 5.75%, 2007 (International Market
Sovereign) EUR 1,226 $1,582,971
----------------------------------------------------------------------------------------------
Kingdom of Netherlands, 3.75%, 2009 (International Market
Sovereign) 2,700 3,276,050
----------------------------------------------------------------------------------------------
Kingdom of Netherlands, 5%, 2012 (International Market
Sovereign) 2,085 2,660,267
----------------------------------------------------------------------------------------------
RWE Finance B.V., 5.375%, 2008 (Utilities - Electric
Power) 150 192,227
----------------------------------------------------------------------------------------------
$7,711,515
----------------------------------------------------------------------------------------------
New Zealand - 0.5%
----------------------------------------------------------------------------------------------
Government of New Zealand, 7%, 2009 (International Market
Sovereign) NZD 1,341 $872,614
----------------------------------------------------------------------------------------------
Government of New Zealand, 6.5%, 2013 (International
Market Sovereign) 3,205 2,041,074
----------------------------------------------------------------------------------------------
$2,913,688
----------------------------------------------------------------------------------------------
Panama - 0.4%
----------------------------------------------------------------------------------------------
Republic of Panama, 2.1925%, 2016 (Emerging Market
Sovereign) $52 $44,844
----------------------------------------------------------------------------------------------
Republic of Panama, 9.375%, 2023 - 2029 (Emerging Market
Sovereign) 1,920 2,067,113
----------------------------------------------------------------------------------------------
$2,111,957
----------------------------------------------------------------------------------------------
Peru - 0%
----------------------------------------------------------------------------------------------
Republic of Peru, 8.375%, 2016 (Emerging Market
Sovereign) $36 $34,272
----------------------------------------------------------------------------------------------
Republic of Peru, 4.5%, 2017 (Emerging Market Sovereign) 53 45,050
----------------------------------------------------------------------------------------------
Republic of Peru, 5%, 2017 (Emerging Market Sovereign) 73 63,882
----------------------------------------------------------------------------------------------
Republic of Peru, 8.75%, 2033 (Emerging Market Sovereign) 24 21,360
----------------------------------------------------------------------------------------------
$164,564
----------------------------------------------------------------------------------------------
Philippines - 0%
----------------------------------------------------------------------------------------------
Republic of Philippines, 9.375%, 2017 (Emerging Market
Sovereign) $57 $59,138
----------------------------------------------------------------------------------------------
Poland - 0.3%
----------------------------------------------------------------------------------------------
PTC International Finance II S.A., 11.25%, 2009
(Wireless Communications) $1,326 $1,425,450
----------------------------------------------------------------------------------------------
Portugal - 0.2%
----------------------------------------------------------------------------------------------
Republic of Portugal, 5.45%, 2013 (International Market
Sovereign) EUR 1,067 $1,397,741
----------------------------------------------------------------------------------------------
Qatar - 0.2%
----------------------------------------------------------------------------------------------
State of Qatar, 9.75%, 2030 (Emerging Market Sovereign)# $735 $995,925
----------------------------------------------------------------------------------------------
State of Qatar, 9.75%, 2030 (Emerging Market Sovereign)## 20 27,100
----------------------------------------------------------------------------------------------
$1,023,025
----------------------------------------------------------------------------------------------
Russia - 1.7%
----------------------------------------------------------------------------------------------
Gaz Capital S.A., 8.625%, 2034 (Utilities - Gas) $1,425 $1,382,250
----------------------------------------------------------------------------------------------
Gazprom, 9.625%, 2013 (Utilities - Gas)## 100 103,250
----------------------------------------------------------------------------------------------
Mobile TeleSystems OJSC, 9.75%, 2008 (Wireless
Communications)## 19 19,713
----------------------------------------------------------------------------------------------
Mobile TeleSystems OJSC, 8.375%, 2010 (Wireless
Communications)## 1,344 1,296,960
----------------------------------------------------------------------------------------------
Russian Federation, 3%, 2008 - 2011 (Emerging Market
Sovereign) 1,375 1,079,500
----------------------------------------------------------------------------------------------
Russian Federation, 11%, 2018 (Emerging Market Sovereign) 1,302 1,677,627
----------------------------------------------------------------------------------------------
Russian Ministry of Finance, 12.75%, 2028 (Emerging
Market Sovereign) 30 44,325
----------------------------------------------------------------------------------------------
Siberian Oil Co. (SIBNEFT), 10.75%, 2009 (Energy -
Integrated) 617 653,403
----------------------------------------------------------------------------------------------
Tyumen Oil Co., 11%, 2007 (Energy - Integrated) 1,560 1,755,000
----------------------------------------------------------------------------------------------
Vimpel-Communications, 10.45%, 2005 (Wireless
Communications)## 1,551 1,632,428
----------------------------------------------------------------------------------------------
$9,644,456
----------------------------------------------------------------------------------------------
Singapore - 0.2%
----------------------------------------------------------------------------------------------
Flextronics International Ltd., 6.5%, 2013 (Electronics) $1,130 $1,144,125
----------------------------------------------------------------------------------------------
South Africa - 0%
----------------------------------------------------------------------------------------------
Republic of South Africa, 8.5%, 2017 (Emerging Market
Sovereign) $43 $49,665
----------------------------------------------------------------------------------------------
South Korea - 0.3%
----------------------------------------------------------------------------------------------
Sun Sage B.V., 8.25%, 2006 (Machinery & Tools)## $100 $99,000
----------------------------------------------------------------------------------------------
Woori Bank, 5.75%, 2014 (Banks & Credit Companies)## 1,677 1,685,385
----------------------------------------------------------------------------------------------
$1,784,385
----------------------------------------------------------------------------------------------
Spain - 0.7%
----------------------------------------------------------------------------------------------
Kingdom of Spain, 6%, 2008 (International Market
Sovereign) EUR 522 $689,954
----------------------------------------------------------------------------------------------
Kingdom of Spain, 5.35%, 2011 (International Market
Sovereign) 2,425 3,165,661
----------------------------------------------------------------------------------------------
$3,855,615
----------------------------------------------------------------------------------------------
Sweden - 0.2%
----------------------------------------------------------------------------------------------
ASSA ABLOY AB, 5.125%, 2006 (Consumer Goods & Services) EUR 130 $163,099
----------------------------------------------------------------------------------------------
Kingdom of Sweden, 6.75%, 2014 (International Market
Sovereign) SEK 1,060 162,052
----------------------------------------------------------------------------------------------
Spintab AB, 5%, 2008 (Banks & Credit Companies) 7,600 1,030,585
----------------------------------------------------------------------------------------------
$1,355,736
----------------------------------------------------------------------------------------------
Switzerland - 0.1%
----------------------------------------------------------------------------------------------
Credit Suisse Group, 7.974%, 2010 (Banks & Credit
Companies) EUR 265 $376,092
----------------------------------------------------------------------------------------------
Turkey - 0%
----------------------------------------------------------------------------------------------
Republic of Turkey, 11%, 2013 (Emerging Market Sovereign) $64 $74,240
----------------------------------------------------------------------------------------------
Ukraine - 0.2%
----------------------------------------------------------------------------------------------
Republic of Ukraine, 7.65%, 2013 (Emerging Market
Sovereign) $100 $96,000
----------------------------------------------------------------------------------------------
Ukraine Cabinet of Ministers, 6.875%, 2011 (Emerging
Market Sovereign)## 998 958,080
----------------------------------------------------------------------------------------------
$1,054,080
----------------------------------------------------------------------------------------------
United Kingdom - 1.4%
----------------------------------------------------------------------------------------------
Bank of Ireland, 7.4%, 2049 (Banks & Credit Companies) EUR 500 $699,967
----------------------------------------------------------------------------------------------
Barclays Bank PLC, 8.55%, 2049 (Banks & Credit
Companies)## $2,141 2,588,163
----------------------------------------------------------------------------------------------
Espirit Telecom Group PLC, 10.875%, 2008
(Telecommunications - Wireline)** 165 17
----------------------------------------------------------------------------------------------
Europa Ltd., 2.47%, 2027 (Asset Backed & Securitized) EUR 376 451,752
----------------------------------------------------------------------------------------------
Granite Mortgages, 5.15%, 2042 (Asset Backed &
Securitized) 350 441,291
----------------------------------------------------------------------------------------------
MBNA Europe Funding PLC, 6.5%, 2007 (Financial
Institutions) 150 194,785
----------------------------------------------------------------------------------------------
National Grid Group Finance PLC, 5.25%, 2006 (Utilities -
Electric Power) 200 250,958
----------------------------------------------------------------------------------------------
National Westminster Bank PLC, 6.625%, 2049 (Banks &
Credit Companies) 330 442,479
----------------------------------------------------------------------------------------------
OTE Telecommunications PLC, 6.125%, 2007
(Telecommunications - Wireline) 195 250,242
----------------------------------------------------------------------------------------------
Pearson PLC, 6.125%, 2007 (Printing & Publishing) 135 173,793
----------------------------------------------------------------------------------------------
RMAC PLC, 2.246%, 2036 (Asset Backed & Securitized)## 230 275,589
----------------------------------------------------------------------------------------------
Rolls-Royce PLC, 6.375%, 2007 (Aerospace) 300 390,148
----------------------------------------------------------------------------------------------
Telewest Communications PLC, 9.625%, 2006 (Broadcast &
Cable TV) $350 214,375
----------------------------------------------------------------------------------------------
United Kingdom Treasury, 7.25%, 2007 (International
Market Sovereign) GBP 499 956,064
----------------------------------------------------------------------------------------------
United Kingdom Treasury, 5%, 2012 (International Market
Sovereign) 180 320,027
----------------------------------------------------------------------------------------------
Vodafone Group PLC, 5.75%, 2006 (Wireless Communications) EUR 140 178,343
----------------------------------------------------------------------------------------------
$7,827,993
----------------------------------------------------------------------------------------------
Uruguay - 0%
----------------------------------------------------------------------------------------------
Banco de La Republica Oriental del Uruguay, 10.5%, 2006
(Emerging Market Sovereign) UYU 3,030 $106,580
----------------------------------------------------------------------------------------------
Republic of Uruguay, 7.5%, 2015 (Emerging Market
Sovereign) $15 11,550
----------------------------------------------------------------------------------------------
$118,130
----------------------------------------------------------------------------------------------
Venezuela - 0%
----------------------------------------------------------------------------------------------
Republic of Venezuela, 2.125%, 2007 (Emerging Market
Sovereign) $95 $89,045
----------------------------------------------------------------------------------------------
Republic of Venezuela, 9.25%, 2027 (Emerging Market
Sovereign) 98 81,340
----------------------------------------------------------------------------------------------
$170,385
----------------------------------------------------------------------------------------------
Vietnam - 0%
----------------------------------------------------------------------------------------------
Republic of Vietnam, 3.75%, 2028 (Emerging Market
Sovereign) $166 $116,200
----------------------------------------------------------------------------------------------
Total Foreign Bonds $192,359,570
----------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $504,412,471) $528,487,374
----------------------------------------------------------------------------------------------
Stocks - 0.1%
----------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
----------------------------------------------------------------------------------------------
Apparel Manufacturers - 0.1%
----------------------------------------------------------------------------------------------
Sind Holdings, Inc.* 5,720 $446,160
----------------------------------------------------------------------------------------------
Machinery & Tools - 0%
----------------------------------------------------------------------------------------------
Thermadyne Holdings Corp.* 121 $1,803
----------------------------------------------------------------------------------------------
Telephone Services - 0%
----------------------------------------------------------------------------------------------
ITC DeltaCom, Inc.* 15,798 $93,681
----------------------------------------------------------------------------------------------
Tobacco - 0%
----------------------------------------------------------------------------------------------
R.J. Reynolds Tobacco Holdings, Inc. 2,302 $149,102
----------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $2,212,721) $690,746
----------------------------------------------------------------------------------------------
Warrants - 0%
----------------------------------------------------------------------------------------------
Foreign Warrants - 0%
----------------------------------------------------------------------------------------------
South Korea - 0%
----------------------------------------------------------------------------------------------
DWC Construction Co., Inc. (Utilities - Other)* 112,911 $1,842
----------------------------------------------------------------------------------------------
DWC Trading (Utilities - Other)* 44,711 7,007
----------------------------------------------------------------------------------------------
$8,849
----------------------------------------------------------------------------------------------
Uruguay - 0%
----------------------------------------------------------------------------------------------
Banco Central del Uruguay (Emerging Market Sovereign) 1,250,000 $0
----------------------------------------------------------------------------------------------
Total Foreign Warrants $8,849
----------------------------------------------------------------------------------------------
U.S. Warrants - 0%
----------------------------------------------------------------------------------------------
Basic Industry - 0%
----------------------------------------------------------------------------------------------
Thermadyne Holdings Corp. (Basic Industry)* 1,285 $1,735
----------------------------------------------------------------------------------------------
Thermadyne Holdings Corp. (Basic Industry)* 777 1,399
----------------------------------------------------------------------------------------------
$3,134
----------------------------------------------------------------------------------------------
Broadcast & Cable TV - 0%
----------------------------------------------------------------------------------------------
ONO Finance PLC* 1,000 $10
----------------------------------------------------------------------------------------------
Business Services - 0%
----------------------------------------------------------------------------------------------
Loral Space & Communications Ltd.* 1,625 $35
----------------------------------------------------------------------------------------------
Loral Space & Communications Ltd.* 700 12
----------------------------------------------------------------------------------------------
$47
----------------------------------------------------------------------------------------------
Total U.S. Warrants $3,191
----------------------------------------------------------------------------------------------
Total Warrants (Identified Cost, $185,913) $12,040
----------------------------------------------------------------------------------------------
Convertible Bonds - 0.2%
----------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
----------------------------------------------------------------------------------------------
U.S. Bonds - 0.2%
----------------------------------------------------------------------------------------------
Wireless Communications - 0.2%
----------------------------------------------------------------------------------------------
Nextel Communications, Inc., 5.25%, 2010 $1,300 $1,309,750
----------------------------------------------------------------------------------------------
Foreign Bonds - 0%
----------------------------------------------------------------------------------------------
United Kingdom - 0%
----------------------------------------------------------------------------------------------
Fortis Capital Co., 6.25%, 2049 (Banks & Credit
Companies) EUR 155 $196,774
----------------------------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost, $1,372,108) $1,506,524
----------------------------------------------------------------------------------------------
Repurchase Agreements - 4.8%
----------------------------------------------------------------------------------------------
Goldman Sachs & Co., dated 4/30/04, due 5/03/04, total to
be received $2,000,173 (secured by various U.S. Treasury
and Federal Agency obligations in a jointly traded
account) $2,000 $2,000,000
----------------------------------------------------------------------------------------------
Morgan Stanley, dated 4/30/04, due 5/03/04, total to be
received $24,898,158 (secured by various U.S. Treasury
and Federal Agency obligations in a jointly traded
account) 24,896 24,896,000
----------------------------------------------------------------------------------------------
Total Repurchase Agreements, at Cost $26,896,000
----------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $535,079,213) $557,592,684
----------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 1.1% 5,993,531
----------------------------------------------------------------------------------------------
Net Assets - 100.0% $563,586,215
----------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
^^ Interest only security.
# Restricted security.
** Non-income producing security - in default.
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.
ARS = Argentine Peso JPY = Japanese Yen
AUD = Australian Dollar KRW = Korean Won
BRL = Brazilian Real MXN = Mexican Peso
CAD = Canadian Dollar NZD = New Zealand Dollar
CLP = Chilean Peso PLN = Polish Zloty
CNY = Chinese Yuan Renminbi RUB = Russian Ruble
COP = Colombian Peso SEK = Swedish Krona
CZK = Czech Koruna SGD = Singapore Dollar
DKK = Danish Krone SKK = Slovakian Koruna
EUR = Euro THB = Thailand Baht
GBP = British Pound TRL = Turkish Lira
HUF = Hungarian Forint TWD = Taiwan Dollar
IDR = Indonesian Rupiah UYU = Uruguayan Peso
ILS = Israeli Sheqel ZAR = South African Rand
INR = Indian Rupee
SEE NOTES TO FINANCIAL STATEMENTS
---------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES (unaudited)
---------------------------------------------------------------------------------------------------
This statement represents your fund's balance sheet, which details the assets and liabilities
composing the total value of your fund.
AT 4/30/04
ASSETS
Investments, at value (identified cost, $535,079,213) $557,592,684
---------------------------------------------------------------------------------------------------
Cash 40,497
---------------------------------------------------------------------------------------------------
Receivable for forward foreign exchange contracts 2,042,904
---------------------------------------------------------------------------------------------------
Receivable for forward foreign exchange contracts
subject to master netting agreements 83,666
---------------------------------------------------------------------------------------------------
Receivable for investments sold 1,297,585
---------------------------------------------------------------------------------------------------
Interest receivable 10,335,857
---------------------------------------------------------------------------------------------------
Other assets 80,203
---------------------------------------------------------------------------------------------------
Total assets $571,473,396
---------------------------------------------------------------------------------------------------
LIABILITIES
Payable to dividend disbursing agent $211,990
---------------------------------------------------------------------------------------------------
Payable for forward foreign currency exchange
contracts 304,322
---------------------------------------------------------------------------------------------------
Payable for daily variation margin on open futures
contracts 95,156
---------------------------------------------------------------------------------------------------
Payable for investments purchased 6,140,773
---------------------------------------------------------------------------------------------------
Payable for treasury shares reacquired 504,703
---------------------------------------------------------------------------------------------------
Payable to affiliates
---------------------------------------------------------------------------------------------------
Management fee 10,992
---------------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent costs 15,536
---------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 603,709
---------------------------------------------------------------------------------------------------
Total liabilities $7,887,181
---------------------------------------------------------------------------------------------------
Net assets $563,586,215
---------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
NET ASSETS CONSIST OF
Paid-in capital $630,661,391
---------------------------------------------------------------------------------------------------
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 25,083,777
---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and
foreign currency transactions (83,139,144)
---------------------------------------------------------------------------------------------------
Accumulated distributions in excess of net investment
income (9,019,809)
---------------------------------------------------------------------------------------------------
Net assets $563,586,215
---------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding
(89,411,254 issued, less 6,388,302 treasury shares) 83,022,952
---------------------------------------------------------------------------------------------------
Net asset value per share (net assets of $563,586,215
/ 83,022,952 shares of beneficial interest
outstanding) $6.79
---------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
---------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF OPERATIONS (unaudited)
---------------------------------------------------------------------------------------------------
This statement describes how much your fund received in investment income and paid in expenses. It
also describes any gains and/or losses generated by fund operations.
FOR THE SIX MONTHS ENDED 4/30/04
NET INVESTMENT INCOME (LOSS)
Income
--------------------------------------------------------------------------------------------------
Interest $18,386,377
--------------------------------------------------------------------------------------------------
Dividends 6,369
--------------------------------------------------------------------------------------------------
Total investment income $18,392,746
--------------------------------------------------------------------------------------------------
Expenses
--------------------------------------------------------------------------------------------------
Management fee $2,000,181
--------------------------------------------------------------------------------------------------
Trustees' compensation 41,559
--------------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent costs 98,442
--------------------------------------------------------------------------------------------------
Administrative fee 30,485
--------------------------------------------------------------------------------------------------
Investor communication expense 210,917
--------------------------------------------------------------------------------------------------
Custodian fee 165,884
--------------------------------------------------------------------------------------------------
Printing 29,707
--------------------------------------------------------------------------------------------------
Postage 19,510
--------------------------------------------------------------------------------------------------
Auditing fees 22,650
--------------------------------------------------------------------------------------------------
Legal fees 1,434
--------------------------------------------------------------------------------------------------
Miscellaneous 84,915
--------------------------------------------------------------------------------------------------
Total expenses $2,705,684
--------------------------------------------------------------------------------------------------
Fees paid indirectly (6,131)
--------------------------------------------------------------------------------------------------
Net expenses $2,699,553
--------------------------------------------------------------------------------------------------
Net investment income $15,693,193
--------------------------------------------------------------------------------------------------
Statement of Operations (unaudited) - continued
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
--------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
--------------------------------------------------------------------------------------------------
Investment transactions $12,923,552
--------------------------------------------------------------------------------------------------
Written option transactions 17,020
--------------------------------------------------------------------------------------------------
Futures contracts (1,059,023)
--------------------------------------------------------------------------------------------------
Foreign currency transactions (4,459,788)
--------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency
transactions $7,421,761
--------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
--------------------------------------------------------------------------------------------------
Investments $(7,022,523)
--------------------------------------------------------------------------------------------------
Written options (16,072)
--------------------------------------------------------------------------------------------------
Futures contracts 756,332
--------------------------------------------------------------------------------------------------
Translation of assets and liabilities in foreign
currencies 1,411,147
--------------------------------------------------------------------------------------------------
Net unrealized loss on investments and foreign currency
translation $(4,871,116)
--------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign
currency $2,550,645
--------------------------------------------------------------------------------------------------
Increase in net assets from operations $18,243,838
--------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
---------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF CHANGES IN NET ASSETS
---------------------------------------------------------------------------------------------------
This statement describes the increases and/or decreases in net assets resulting from operations,
any distributions, and any shareholder transactions.
SIX MONTHS ENDED YEAR ENDED
4/30/04 10/31/03
(UNAUDITED)
INCREASE IN NET ASSETS
FROM OPERATIONS
Net investment income $15,693,193 $31,821,641
--------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign
currency transactions 7,421,761 8,088,573
--------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and
foreign currency translation (4,871,116) 30,421,194
------------------------------------------------------ ------------- -------------
Increase in net assets from operations $18,243,838 $70,331,408
------------------------------------------------------ ------------- -------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(16,296,844) $(33,246,025)
--------------------------------------------------------------------------------------------------
TRUST SHARE (PRINCIPAL) TRANSACTIONS
Cost of shares reacquired (2,121,124) (2,269,553)
------------------------------------------------------ ------------- -------------
Total increase (decrease) in net assets $(174,130) $34,815,830
------------------------------------------------------ ------------- -------------
NET ASSETS
At beginning of period 563,760,345 528,944,515
--------------------------------------------------------------------------------------------------
At end of period (including accumulated
distributions in excess of net investment income of
$9,019,809 and $8,416,158, respectively) $563,586,215 $563,760,345
--------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
---------------------------------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
---------------------------------------------------------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the trust's financial performance for the semiannual period and
the past 5 fiscal years. Certain information reflects financial results for a single trust share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an investment in the trust (assuming reinvestment of all
distributions) held for the entire period.
PERIOD YEAR ENDED 10/31
ENDED -----------------------------------------------------------------------
4/30/04 2003 2002 2001 2000 1999
(UNAUDITED)
Net asset value, beginning of
period $6.76 $6.32 $6.60 $6.69 $7.03 $7.17
--------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS#(S)
Net investment income $0.19 $0.38 $0.41 $0.51 $0.58 $0.56
--------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments
and foreign currency 0.04 0.46 (0.26) (0.06) (0.40) (0.14)
---------------------------------- ------ ------ ------ ------ ------ ------
Total from investment
operations $0.23 $0.84 $0.15 $0.45 $0.18 $0.42
---------------------------------- ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net investment income $(0.20) $(0.40) $(0.43) $(0.49) $(0.41) $(0.57)
--------------------------------------------------------------------------------------------------------------------------------
From paid-in capital -- -- -- (0.05) (0.17) --
---------------------------------- ------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.20) $(0.40) $(0.43) $(0.54) $(0.58) $(0.57)
---------------------------------- ------ ------ ------ ------ ------ ------
Net increase from repurchase of
capital shares $0.00+ $0.00+ $0.00+ $0.00+ $0.06 $0.01
---------------------------------- ------ ------ ------ ------ ------ ------
Net asset value, end of period $6.79 $6.76 $6.32 $6.60 $6.69 $7.03
---------------------------------- ------ ------ ------ ------ ------ ------
Per share market value, end of
period $5.95 $6.41 $5.69 $6.06 $6.00 $6.06
---------------------------------- ------ ------ ------ ------ ------ ------
Total return at market value
(%) (4.28)+++ 20.11 0.72* 9.83 8.84 2.81
--------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
PERIOD YEAR ENDED 10/31
ENDED ----------------------------------------------------------------------
4/30/04 2003 2002 2001 2000 1999
(UNAUDITED)
RATIOS (%) TO AVERAGE NET
ASSETS AND SUPPLEMENTAL DATA:
Total expenses## 0.95++ 0.94 0.96 1.06 1.06 1.05
------------------------------------------------------------------------------------------------------------------------------
Net investment income(S) 5.51++ 5.76 6.49 7.65 8.23 7.80
------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 27 126 152 103 82 98
------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $563,586 $563,760 $528,945 $554,767 $567,191 $641,213
------------------------------------------------------------------------------------------------------------------------------
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
+ 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 30, 2002 have not been restated to reflect this change in presentation.
* As revised, to reflect transactions conducted prior to close, not included in closing activity on the NYSE at October 31,
2002. Such amount was previously reported as 0.90%.
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 - The trust uses independent pricing services approved by
the Board of Trustees wherever possible to value its portfolio securities.
Portfolio securities are valued at current market quotations where current
market quotations are readily available, or the trust may fair value portfolio
securities under the direction of the Board of Trustees when a determination is
made that current market quotations are not readily available. Bonds and other
fixed income securities (other than short-term obligations) in the trust's
portfolio are valued at an evaluated bid price as reported by an independent
pricing service, or to the extent a valuation is not reported by a pricing
service, such securities are valued on the basis of quotes from brokers and
dealers. 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. Bonds
and other fixed income securities for which it is determined that current
market quotations are not readily available will be fair valued under the
direction of the Board of Trustees. Equity securities in the trust's portfolio
for which market quotations are available are valued at the last sale or
official closing price as reported by an independent pricing service 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.
Equity securities traded over the counter are valued at the last sales price
traded each day as reported by an independent pricing service, or to the extent
there are no sales reported, such securities are valued on the basis of
quotations obtained from brokers and dealers. Equity securities for which it is
determined that current market quotations are not readily available will be
fair valued under the direction of the Board of Trustees. The trust may also
fair value foreign equity securities in cases where closing market quotations
are not readily available or are deemed not reflective of readily available
market quotations. For example, significant events (such as movement in the
U.S. securities market, or other regional and local developments) may occur
between the time that foreign markets close (where the security is principally
traded) and the time that the trust calculates its net asset value (generally,
the close of the NYSE) that may impact the value of securities traded in these
foreign markets. In these cases, the trust may utilize information from an
external vendor or other sources to adjust closing market prices of foreign
equity securities to reflect what it believes to be the fair value of the
securities as of the trust's valuation time. Because the frequency of
significant events is not predictable, fair valuation of foreign equity
securities may occur on a frequent basis. Foreign currency options are valued
by MFS using an external pricing model approved by the Board of Trustees that
uses market data from an independent pricing source. Futures contracts are
valued at the settlement price as reported by an independent pricing service on
the primary exchange on which they are traded. Forward foreign currency
contracts are valued using spot rates and forward points as reported by an
independent pricing source. Short-term obligations with a remaining maturity in
excess of 60 days will be valued upon dealer-supplied valuations. All other
short-term obligations in the trust's portfolio are valued at amortized cost,
which constitutes market value as determined by the Board of Trustees.
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.
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 - 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 funds 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 $75,203 of Deferred Trustees'
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 fund'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 accounting principles generally accepted in the United Sates of
America. 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. 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, for the six months ended April 30, 2004, 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,
2003 and October 31, 2002 was as follows:
10/31/03 10/31/02
Distributions declared from:
-------------------------------------------------------------------------------
Ordinary income $33,246,025 $35,951,308
-------------------------------------------------------------------------------
As of October 31, 2003, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Undistributed ordinary income $249,409
------------------------------------------------------------------
Capital loss carryforward (86,321,808)
------------------------------------------------------------------
Unrealized appreciation 25,352,988
------------------------------------------------------------------
Other temporary differences (8,302,759)
------------------------------------------------------------------
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 as follows:
EXPIRATION DATE
October 31, 2007 $(6,254,941)
------------------------------------------------------------------
October 31, 2008 (19,415,923)
------------------------------------------------------------------
October 31, 2009 (22,359,865)
------------------------------------------------------------------
October 31, 2010 (38,291,079)
------------------------------------------------------------------
Total $(86,321,808)
------------------------------------------------------------------
(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.
Management fees incurred for the six months ended April 30, 2004 were 0.70% of
average daily net assets on an annualized basis.
The trust pays compensation to its Independent Trustees in the form of a
retainer, attendance fees, and additional compensation to Board and Committee
chairpersons, 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). The trust has an unfunded defined benefit plan for retired
Independent Trustees and an unfunded retirement benefit deferral plan for
certain current Independent Trustees. Included in Trustees' compensation is
$4,132 as a result of the change in the trust's unfunded retirement benefit
deferral plan for certain current Independent Trustees and a pension expense of
$6,628 for retired Independent Trustees for the six months ended April 30,
2004.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to certain funds
for which MFS acts as investment adviser. Under an administrative services
agreement between the funds and MFS, MFS is entitled to partial reimbursement
of the costs MFS incurs to provide these services, subject to review and
approval by the Board of Trustees. Each fund is allocated a portion of these
administrative costs based on its size and relative average net assets. Prior
to April 1, 2004, the trust paid MFS an administrative fee up to the following
annual percentage rates 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%
------------------------------------------------------------------
Effective April 1, 2004, the trust paid MFS an administrative fee up to the
following annual percentage rates of the trust's average daily net assets:
First $2 billion 0.01120%
------------------------------------------------------------------
Next $2.5 billion 0.00832%
------------------------------------------------------------------
Next $2.5 billion 0.00032%
------------------------------------------------------------------
In excess of $7 billion 0.00000%
------------------------------------------------------------------
For the six months ended April 30, 2004, the trust paid MFS $30,485, equivalent
to 0.0107% of average daily net assets, to partially reimburse MFS for the
costs of providing administrative services.
TRANSFER AGENT - Included in transfer agent and dividend disbursing costs is a
fee paid to MFSC, a wholly owned subsidiary of MFS, for its services 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. These fees amounted to
$81,997 for the six months ended April 30, 2004. Also included in transfer
agent and dividend disbursing costs are out-of-pocket expenses, paid to MFSC,
which amounted to 3,343 for the six months ended April 30, 2004, as well as
other expenses paid to unaffiliated vendors.
(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 $20,409,352 $28,314,175
-------------------------------------------------------------------------------
Investments (non-U.S. government securities) $125,299,557 $139,781,537
-------------------------------------------------------------------------------
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 $535,979,163
------------------------------------------------------------------
Gross unrealized appreciation $30,310,735
------------------------------------------------------------------
Gross unrealized depreciation (8,697,214)
------------------------------------------------------------------
Net unrealized appreciation $21,613,521
------------------------------------------------------------------
(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 the repurchase by the trust of up to 10% annually of its own shares
of beneficial interest. The trust repurchased and retired 347,600 shares of
beneficial interest during the six months ended April 30, 2004 at an average
price per share of $6.10 and a weighted average discount of 10.63% per share.
The trust repurchased and retired 381,600 shares of beneficial interest during
the year ended October 31, 2003, at an average price per share of $5.95 and a
weighted average discount of 8.90% per share.
Transactions in trust shares were as follows:
Six Months ended 4/30/04 Year ended 10/31/03
SHARES AMOUNT SHARES AMOUNT
Treasury shares reacquired (347,600) $(2,121,124) (381,600) $(2,269,553)
--------------------------------------------------------------------------------
Net decrease (347,600) $(2,121,124) (381,600) $(2,269,553)
--------------------------------------------------------------------------------
(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 plus 0.50%. 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 calendar quarter. The commitment fee allocated to the
trust for the six months ended April 30, 2004 was $940 and is included in
miscellaneous expense. The trust had no significant borrowings during the six
months ended April 30, 2004.
(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, 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.
Written Option Transactions
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
Outstanding, beginning of period 2 $17,020
-----------------------------------------------------------------------------
Options expired (2) (17,020)
-----------------------------------------------------------------------------
Outstanding, end of period -- $--
-----------------------------------------------------------------------------
Forward Foreign Currency Exchange Contracts
------------
SALES
------------
CONTRACTS TO NET UNREALIZED
DELIVER/ IN EXCHANGE CONTRACTS APPRECIATION
SETTLEMENT DATE RECEIVE FOR AT VALUE (DEPRECIATION)
-------------------------------------------------------------------------------
6/16/04 AUD 1,660,000 $1,199,558 $1,190,455 $9,100
5/03/04-5/24/04 BRL 367,650 125,393 124,962 431
5/05/04 CLP 168,915,000 274,804 270,710 4,094
5/17/04-6/16/04 DKK 20,792,857 3,383,440 3,343,645 39,795
6/16/04 EUR 76,046,413 92,733,021 90,958,967 1,774,054
5/17/04 GBP 2,290,277 4,052,965 4,056,948 (3,983)
5/04/04 IDR 860,000,000 99,537 97,867 1,670
5/07/04-5/14/04 KRW 297,083,500 255,051 252,937 2,114
5/06/04 MXN 10,450,011 917,847 915,716 2,131
6/15/04 NZD 4,775,329 3,140,987 2,963,999 176,988
5/04/04 PLN 232,488 57,977 57,960 17
6/16/04 SEK 10,047,181 1,326,747 1,313,743 13,004
5/21/04 THB 7,946,000 200,000 198,500 1,500
5/14/04 TRL 286,857,000,000 200,000 200,453 (453)
5/05/04 ZAR 2,570,160 378,891 370,501 8,390
------------ ------------ ----------
$108,346,218 $106,317,363 $2,028,852
============ ============ ==========
------------
PURCHASES
------------
5/20/04-5/27/04 ARS 501,015 $176,688 $176,096 $(592)
6/16/04 AUD 1,456,300 1,106,788 1,044,373 (62,415)
5/03/04-5/24/04 BRL 583,750 198,323 198,408 85
5/05/04 CLP 168,915,000 280,000 270,710 (9,290)
7/12/04 CNY 1,830,988 224,763 221,943 (2,820)
5/17/04 COP 407,550,000 154,991 153,309 (1,682)
5/26/04 CZK 9,383,850 345,617 344,925 (692)
6/16/04 EUR 3,025,021 3,669,727 3,618,222 (51,505)
5/17/04 GBP 2,149,818 3,856,158 3,808,142 (48,016)
5/28/04 HUF 65,915,300 310,000 312,214 2,214
5/04/04-5/28/04 IDR 1,720,000,000 199,193 195,373 (3,820)
5/28/04 ILS 916,320 200,000 199,567 (433)
5/27/04 INR 4,398,000 100,000 99,019 (981)
6/15/04 JPY 304,223,342 2,753,152 2,760,469 7,317
5/07/04-5/14/04 KRW 1,971,814,750 1,716,832 1,679,336 (37,496)
5/06/04-6/04/04 MXN 16,954,342 1,494,959 1,483,074 (11,885)
5/04/04-6/04/04 PLN 2,414,823 606,886 600,671 (6,215)
5/26/04 RUB 2,901,000 100,000 99,674 (326)
6/16/04 SEK 4,340,164 573,019 567,509 (5,510)
5/17/04 SGD 896,225 536,668 526,857 (9,811)
5/17/04 SKK 6,564,369 195,984 194,055 (1,929)
5/21/04 THB 12,015,000 305,492 300,147 (5,345)
5/14/04 TRL 791,948,540,000 570,320 553,407 (16,913)
5/21/04 TWD 3,316,000 100,944 99,885 (1,059)
5/05/04-6/04/04 ZAR 3,618,195 541,800 520,649 (21,151)
----------- ----------- ---------
$20,318,304 $20,028,034 $(290,270)
=========== =========== =========
At April 30, 2004, forward foreign currency purchases and sales under master
netting agreements excluded above amounted to a net receivable of $83,666 with
Merrill Lynch International.
At April 30, 2004, the trust had sufficient cash and/or securities to cover
any commitments under these contracts.
Futures Contracts
UNREALIZED
DESCRIPTION EXPIRATION CONTRACTS POSITION APPRECIATION
U.S. Treasury Notes
10 Year Futures June 2004 290 Short $758,703
-------------------------------------------------------------------------------
At April 30, 2004, the trust had sufficient cash and/or securities to cover
any margin requirements under these contracts.
(8) RESTRICTED SECURITIES
The trust may invest not more than 10% of its total assets in securities which
are subject to legal or contractual restrictions on resale. At April 30, 2004
the trust owned the following restricted securities, excluding securities
issued under Rule 144A, constituting 0.2% of net assets which may not be
publicly sold without registration under the Securities Act of 1933. The trust
does not have the right to demand that such securities be registered. The
value of these securities is determined by valuations furnished by dealers or
by a pricing service, or if not available, in good faith at the direction of
the Trustees.
DATE OF
DESCRIPTION ACQUISITION SHARES COST VALUE
Kazkommerts International B.V. 4/13/03 128,000 $139,853 $136,980
--------------------------------------------------------------------------------
Republic of Guatemala 1/05/04 42,000 50,121 48,300
--------------------------------------------------------------------------------
State of Qatar 10/08/03 735,000 1,004,195 995,925
--------------------------------------------------------------------------------
$1,181,205
--------------------------------------------------------------------------------
(9) LEGAL PROCEEDINGS
On March 31, 2004, MFS settled an administrative proceeding with the Securities
and Exchange Commission ("SEC") regarding disclosure of brokerage allocation
practices in connection with fund sales. Under the terms of the settlement, in
which MFS neither admitted nor denied any wrongdoing, MFS agreed to pay (one
dollar) $1.00 in disgorgement and $50 million in penalty to certain MFS funds,
pursuant to a plan administered by an independent distribution consultant. The
agreement with the SEC is reflected in an order of the SEC. The settlement
order states that MFS failed to adequately disclose to the Boards and Trustees
and to shareholders of the MFS funds the specifics of its preferred
arrangements with certain brokerage firms selling MFS fund shares. The
settlement order states that MFS had in place policies designed to obtain best
execution of all fund trades. As part of the settlement, MFS has retained an
independent compliance consultant to review the completeness of its disclosure
to fund trustees and to fund shareholders of strategic alliances between MFS or
its affiliates and broker-dealers and other financial advisers who support the
sale of fund shares. The brokerage allocation practices which were the subject
of this proceeding were discontinued by MFS in November 2003.
In addition, in February, 2004, MFS reached agreement with the SEC, the New
York Attorney General ("NYAG") and the Bureau of Securities Regulation of the
State of New Hampshire ("NH") to settle administrative proceedings alleging
false and misleading information in certain MFS fund prospectuses regarding
market timing and related matters (the "February Settlements"). These
regulators alleged that prospectus language for certain MFS funds was false and
misleading because, although the prospectuses for those funds in the
regulators' view indicated that the funds prohibited market timing, MFS did not
limit trading activity in 11 domestic large cap stock, high grade bond and
money market funds. MFS' former Chief Executive Officer, John W. Ballen, and
former President, Kevin R. Parke, also reached agreement with the SEC in which
they agreed to, among other terms, monetary fines and temporary suspensions
from association with any investment adviser or registered investment company.
Messrs. Ballen and Parke have resigned their positions with, and will not be
returning to, MFS and the MFS funds. Under the terms of the February
Settlements, MFS and the executives neither admit nor deny wrongdoing.
Under the terms of the February Settlements, a $225 million pool has been
established for distribution to shareholders in certain of the MFS funds
offered to retail investors ("Retail Funds"), which has been funded by MFS and
of which $50 million is characterized as a penalty. This pool will be
distributed in accordance with a methodology developed by an independent
distribution consultant in consultation with MFS and the Board of Trustees of
the Retail Funds, and acceptable to the SEC. MFS has further agreed with NYAG
to reduce its management fees in the aggregate amount of approximately $25
million annually over the next five years, and not to increase certain
management fees during this period. MFS has also paid an administrative fine to
NH in the amount of $1 million, which will be used for investor education
purposes (NH retained $250,000 and $750,000 was contributed to the North
American Securities Administrators Association's Investor Protection Trust). In
addition, under the terms of the February Settlements, MFS is in the process of
adopting certain governance changes and reviewing its policies and procedures.
Since December 2003, MFS, Sun Life Financial Inc., various MFS funds, the
Trustees of these MFS funds, and certain officers of MFS have been named as
defendants in multiple lawsuits filed in federal and state courts. The lawsuits
variously have been commenced as class actions or individual actions on behalf
of investors who purchased, held or redeemed shares of the funds during
specified periods, as class actions on behalf of participants in certain
retirement plan accounts, or as derivative actions on behalf of the MFS funds.
The lawsuits generally allege that some or all of the defendants (i) permitted
or acquiesced in market timing and/or late trading in some of the MFS funds,
inadequately disclosed MFS' internal policies concerning market timing and such
matters, and received excessive compensation as fiduciaries to the MFS funds,
or (ii) permitted or acquiesced in the improper use of fund assets by MFS to
support the distribution of fund shares and inadequately disclosed MFS' use of
fund assets in this manner. The actions assert that some or all of the
defendants violated the federal securities laws, including the Securities Act
of 1933 and the Securities Exchange Act of 1934, the Investment Company Act of
1940 and the Investment Advisers Act of 1940, the Employee Retirement Income
Security Act of 1974, as well as fiduciary duties and other violations of
common law. The lawsuits seek unspecified compensatory damages. Insofar as any
of the actions is appropriately brought derivatively on behalf of any of the
MFS funds, any recovery will inure to the benefit of the funds. The defendants
are reviewing the allegations of the multiple complaints and will respond
appropriately. Additional lawsuits based on similar allegations may be filed in
the future.
Any potential resolution of these matters may include, but not be limited to,
judgments or settlements for damages against MFS, the MFS funds, or any other
named defendant. As noted above, as part of the regulatory settlements, MFS has
established a restitution pool in the amount of $225 million to compensate
certain shareholders of the Retail Funds for damages that they allegedly
sustained as a result of market timing or late trading in certain of the funds,
and will pay $50 million to compensate certain MFS funds based upon the amount
of brokerage commissions allocated in recognition of fund sales. It is not
clear whether these amounts will be sufficient to compensate shareholders for
all of the damage they allegedly sustained, whether certain shareholders or
putative class members may have additional claims to compensation, or whether
the damages that may be awarded in any of the actions will exceed these
amounts. In the event the MFS funds incur any losses, costs or expenses in
connection with such lawsuits, the Boards of Trustees of the affected funds may
pursue claims on behalf of such funds against any party that may have liability
to the funds in respect thereof.
While these developments primarily relate to MFS' open-end funds, there can be
no assurance that these developments, or the adverse publicity associated with
these developments, will not result in an increase to the market discount of
the Trust's shares or other adverse consequences.
---------------------------------------------------------------------------------------------------------------------
TRUSTEES AND OFFICERS -- IDENTIFICATION AND BACKGROUND
---------------------------------------------------------------------------------------------------------------------
The Trustees and officers of the Trust are listed below, together with their
principal occupations during the past five years. (Their titles may have
varied during that period.) The business address of each Trustee and officer
is 500 Boylston Street, Boston, Massachusetts 02116.
PRINCIPAL OCCUPATIONS & OTHER
POSITION(s) HELD TRUSTEE/OFFICER DIRECTORSHIPS(2) DURING
NAME, DATE OF BIRTH WITH FUND SINCE(1) THE PAST FIVE YEARS
------------------- ---------------- ---------------- ------------------------------
INTERESTED TRUSTEES
John W. Ballen(3) Trustee and President August 2001 until Massachusetts Financial Services
(born 09/12/59) February 2004 Company, Chief Executive Officer and
Director (until February 2004)
Robert J. Manning(3) Trustee and President February 2004 Massachusetts Financial Services
(born 10/20/63) Company, Chief Executive Officer,
President, Chief Investment Officer
and Director
Kevin R. Parke(3) Trustee January 2002 until Massachusetts Financial Services
(born 12/14/59) February 2004 Company, President, Chief Investment
Officer and Director (until February
2004)
Robert C. Pozen(3) Trustee February 2004 Massachusetts Financial Services
(born 08/08/46) Company, Chairman (since February
2004); Harvard Law School (education),
John Olin Visiting Professor (since
July 2002); Secretary of Economic
Affairs, The Commonwealth of
Massachusetts (January 2002 to
December 2002); Fidelity Investments,
Vice Chairman (June 2000 to December
2001); Fidelity Management & Research
Company (investment adviser),
President (March 1997 to July 2001);
The Bank of New York (financial
services), Director; Bell Canada
Enterprises (telecommunications),
Director; Telesat (satellite
communications), Director
Jeffrey L. Shames(3) Trustee October 1993 until Massachusetts Financial Services
(born 06/02/55) February 2004 Company, Chairman (until February
2004)
INDEPENDENT TRUSTEES
J. Atwood Ives Chairman February 1992 Private investor; KeySpan Corporation
(born 05/01/36) (energy related services), Director;
Eastern Enterprises (diversified
services company), Chairman, Trustee
and Chief Executive Officer (until
November 2000)
Lawrence H. Cohn, M.D. Trustee August 1993 Brigham and Women's Hospital, Chief of
(born 03/11/37) Cardiac Surgery; Harvard Medical
School, Professor of Surgery
David H. Gunning Trustee January 2004 Cleveland-Cliffs, Inc. (mining
(born 05/30/42) products and service provider), Vice
Chairman/Director (since April 2001);
Encinitos Ventures (private investment
company), Principal (1997 to April
2001); Lincoln Electric Holdings, Inc.
(welding equipment manufacturer),
Director; Southwest Gas Corporation
(natural gas distribution company),
Director
William R. Gutow Trustee December 1993 Private investor and real estate
(born 09/27/41) consultant; Capitol Entertainment
Management Company (video franchise),
Vice Chairman
Amy B. Lane Trustee January 2004 Retired; Merrill Lynch & Co., Inc.,
(born 02/08/53) Managing Director, Investment Banking
Group (1997 to February 2001); Borders
Group, Inc. (book and music retailer),
Director; Federal Realty Investment
Trust (real estate investment trust),
Trustee
Lawrence T. Perera Trustee July 1981 Hemenway & Barnes (attorneys), Partner
(born 06/23/35)
William J. Poorvu Trustee August 1982 Private investor; Harvard University
(born 04/10/35) Graduate School of Business
Administration, Class of 1961 Adjunct
Professor in Entrepreneurship
Emeritus; CBL & Associates Properties,
Inc. (real estate investment trust),
Director
J. Dale Sherratt Trustee August 1993 Insight Resources, Inc. (acquisition
(born 09/23/38) planning specialists), President;
Wellfleet Investments (investor in
health care companies), Managing
General Partner (since 1993);
Cambridge Nutraceuticals (professional
nutritional products), Chief Executive
Officer (until May 2001)
Elaine R. Smith Trustee February 1992 Independent health care industry
(born 04/25/46) consultant
Ward Smith Trustee October 1992 Private investor
(born 09/13/30)
OFFICERS
Robert J. Manning(3) President and Trustee February 2004 Massachusetts Financial Services
(born 10/20/63) Company, Chief Executive Officer,
President, Chief Investment Officer
and Director.
John W. Ballen(3) President and Trustee August 2001 until Massachusetts Financial Services
(born 09/12/59) February 2004 Company, Chief Executive Officer and
Director (until February 2004)
James R. Bordewick, Jr.(3) Assistant Secretary September 1990 Massachusetts Financial Services
(born 03/06/59) and Assistant Clerk Company, Senior Vice President and
Associate General Counsel
Stephen E. Cavan(3) Secretary and Clerk December 1989 Massachusetts Financial Services
(born 11/06/53) until March 2004 Company, Senior Vice President,
General Counsel and Secretary (until
March 2004)
Stephanie A. DeSisto(3) Assistant Treasurer May 2003 Massachusetts Financial Services
(born 10/01/53) Company, Vice President (since April
2003); Brown Brothers Harriman & Co.,
Senior Vice President (November 2002
to April 2003); ING Groep N.V./Aeltus
Investment Management, Senior Vice
President (prior to November 2002)
Robert R. Flaherty(3) Assistant Treasurer August 2000 Massachusetts Financial Services
(born 09/18/63) Company, Vice President (since August
2000); UAM Fund Services, Senior Vice
President (prior to August 2000)
Richard M. Hisey(3) Treasurer August 2002 Massachusetts Financial Services
(born 08/29/58) Company, Senior Vice President (since
July 2002); The Bank of New York,
Senior Vice President (September 2000
to July 2002); Lexington Global Asset
Managers, Inc., Executive Vice
President and Chief Financial Officer
(prior to September 2000); Lexington
Funds, Chief Financial Officer (prior
to September 2000)
Ellen Moynihan(3) Assistant Treasurer April 1997 Massachusetts Financial Services
(born 11/13/57) Company, Vice President
James O. Yost(3) Assistant Treasurer September 1990 Massachusetts Financial Services
(born 06/12/60) Company, Senior Vice President
------------------
(1) Date first appointed to serve as Trustee/Officer of an MFS fund. Each Trustee has served continuously since
appointment unless indicated otherwise.
(2) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e.,
"public companies").
(3) "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 series/the fund. The address of MFS is
500 Boylston Street, Boston, Massachusetts 02116.
The Trust holds annual shareholder meetings for the purpose of electing Trustees, and Trustees are elected for fixed
terms. The Board of Trustees is currently 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.
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 109 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 CUSTODIANS
Massachusetts Financial Services State Street Bank and Trust Company
Company 225 Franklin Street, Boston, MA 02110
500 Boylston Street, Boston, MA
02116-3741 JP Morgan Chase Bank
One Chase Manhattan Plaza
New York, NY 10081
PORTFOLIO MANAGER
Peter C. Vaream
-------------------------------------------------------------------------------
CONTACT INFORMATION AND NUMBER OF SHAREHOLDERS
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INVESTOR INFORMATION
Transfer Agent, Registrar and Dividend Disbursing Agent
Call 1-800-637-2304 any business day from 8 a.m. to 8 p.m. Eastern
time
Write to: State Street Bank and Trust Company
c/o MFS Service Center, Inc.
P.O. Box 55024
Boston, MA 02205-5024
A general description of the MFS Funds proxy voting policies is available
without charge, upon request, by calling 1-800-225-2606, by visiting the About
MFS section of mfs.com or by visiting the SEC's website at http://www.sec.gov.
NUMBER OF SHAREHOLDERS
As of April 30, 2004, our records indicate that there are 8,913 registered
shareholders and approximately 42,843 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
[logo] M F S(R)
INVESTMENT MANAGEMENT
500 Boylston Street
Boston, MA 02116-3741
(C) 2004 MFS Investment Management(R)
500 Boylston Street, Boston, MA 02116
MMT-SEM-6/04 85M
ITEM 2. CODE OF ETHICS.
Applicable for semi-annual reports if the registrant has amended the code of
ethics during the period covered by the report or has granted a waiver,
including an implicit waiver, from a provision of the code of ethics.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not Applicable for semi-annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not Applicable for semi-annual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not Applicable for semi-annual reports.
ITEM 6. SCHEDULE OF INVESTMENTS
Not applicable at this time. [Applicable for periods ending on or after July 9,
2004 (beginning with Form N-CSRs filed at the end of September, 2004 for July
31, 2004 reporting period.)]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not Applicable for semi-annual reports.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable at this time. [Required for closed-end funds for periods ending
on or after June 15, 2004 (beginning with N-CSR's filed at the end of August,
2004 for June 30, 2004 reporting period.)]
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
ITEM 10. 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 required to be
disclosed by the registrant on this report is recorded, processed,
summarized and reported within the time periods specified in the Securities
and Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during
the registrant's last fiscal half-year (the registrant's second fiscal
half-year in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrant's internal
control over financial reporting.
ITEM 11. EXHIBITS.
(a) File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(1) [**An amendment to the code of ethics, 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: The amendment is attached hereto.**][**APPLICABLE IF THE
REGISTRANT HAS AMENDED ITS CODE OF ETHICS DURING THE PERIOD COVERED BY
REPORT**]
(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Act (17 CFR 270.30a-2): Attached hereto.
(3) Any written solicitation to purchase securities under 23c-1 under the
Act (17 C.F.R. 270.23c-1) sent or given during the period covered by
the report by or on behalf of the registrant to 10 or more persons. Not
applicable at this time. [For closed-end funds for periods ending on or
after June 15, 2004 (beginning with N-CSR's filed at the end of August
2004 for June 30, 2004 reporting period.)]
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the Act (17 CFR
270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17
CFR 240.13a-14(b) or 240.15d-14(b)) and Section 1350 of Chapter 63 of Title
18 of the United States Code (18 U.S.C. 1350) as an exhibit. A
certification furnished pursuant to this paragraph will not be deemed
"filed" for the purposes of Section 18 of the Exchange Act (15 U.S.C. 78r),
or otherwise subject to the liability of that section. Such certification
will not be deemed to be incorporated by reference into any filing under
the Securities Act of 1933 or the Exchange Act, except to the extent that
the registrant specifically incorporates it by reference: Attached hereto.
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)* ROBERT J. MANNING
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Robert J. Manning, President
Date: June 23, 2004
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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)* ROBERT J. MANNING
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Robert J. Manning, President (Principal Executive
Officer)
Date: June 23, 2004
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By (Signature and Title)* RICHARD M. HISEY
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Richard M. Hisey, Treasurer (Principal Financial
Officer and Accounting Officer)
Date: June 23, 2004
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* Print name and title of each signing officer under his or her signature.