MFS(R)
INVESTMENT MANAGEMENT
MFS(R) MULTIMARKET
INCOME TRUST
ANNUAL REPORT o OCTOBER 31, 2002
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 3
Performance Summary ....................................................... 7
Results of Shareholder Meetings ........................................... 9
Portfolio of Investments .................................................. 10
Financial Statements ..................................................... 22
Notes to Financial Statements ............................................ 26
Independent Auditors' Report .............................................. 33
Trustees and Officers ..................................................... 35
MFS(R) PRIVACY POLICY
At MFS(R), we are committed to protecting your privacy.
On behalf of the MFS Family of Funds(R), the MFS(R) Institutional Trusts, the
Vertex(SM) Funds, Massachusetts Financial Services Company, and certain
affiliates(1) (collectively, "MFS," "we," "us" or "our"), this privacy policy
outlines certain of our policies designed to maintain the privacy of your
nonpublic personal information.
Nonpublic personal information includes much of the information you provide to
us and the related information about you and your transactions involving your
MFS investment product or service. Examples of nonpublic personal information
include the information you provide on new account applications for MFS
investment products or services, your share balance or transactional history,
and the fact that you are a customer of MFS.
We may collect nonpublic personal information about you from the following
sources:
o information we receive from you on applications or other forms
o information about your transactions with us, our affiliates, or others,
and
o information we receive from a consumer reporting agency
We do not disclose any nonpublic personal information about our customers or
former customers to anyone except as permitted by law. We may disclose all of
the information we collect, as described above, to companies that perform
marketing services on our behalf or to other financial institutions with whom we
have joint marketing arrangements.
We restrict access to nonpublic personal information about you to personnel who
are necessary or appropriate to provide products or services to you. We maintain
physical, electronic, and procedural safeguards that comply with federal
regulations to guard your nonpublic personal information.
Our privacy policy applies only to individual MFS investors who have a direct
relationship with us. If you own MFS products or receive MFS investment services
in the name of a third-party broker-dealer, bank, investment adviser or other
financial service provider, that third-party's privacy policies may apply to you
and our privacy policy may not.
If you have any questions with respect to MFS' privacy policy, please call
1-800-225-2606 any business day between 8 a.m. and 8 p.m. Eastern time.
(1) MFS Institutional Advisors, Inc., Vertex Investment Management, Inc., MFS
Original Research Advisors, LLC, MFS Original Research Partners, LLC,
MFS(R) Heritage Trust Company(SM), and MFS Fund Distributors, Inc.
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
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LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
As I write this in mid-November, the Dow Jones Industrial Average has just
recorded its second-best October ever(1) -- a hopeful sign in what has been a
bad year for investors in stocks and corporate bonds. Other types of bonds
that have had a great run so far in 2002 have demonstrated the value of
diversification. In our view, signals on the future direction of the economy
and the market remain decidedly mixed.
A RELAY RACE
In mid-November, we could describe the state of the U.S. economy as a relay
race against time involving two runners: the consumer, whose spending has
fueled the beginning of a recovery, and corporate spending, which has yet to
contribute much to the recovery. The hope is that corporate spending kicks in
so that the consumer can pass the baton before running out of steam. But at
this point, the near-term direction of consumer spending or corporate spending
and profits is difficult to predict. The result is that the economy seems to
us to be in a holding pattern as we wait for clear signs that things are
improving.
REASONS FOR OPTIMISM
Optimists would point out that wages, according to the U.S. Labor Department,
have been rising over the past year. This, in combination with historically
low interest rates and inflation, may enable the consumer to keep spending.
Perhaps the next good signal of consumer sentiment will be the level of retail
sales over the holiday season -- which should become clear about the time this
letter reaches your mailbox.
In the corporate arena, our research indicates that business spending overall
has at least stopped falling and that corporate earnings and spending could
trend upward in 2003. A hopeful sign is that business spending in the third
quarter of 2002 eked out its first increase in two years, according to a
preliminary report from the U.S. Commerce Department.
Pessimists, however, would counter that the outlook for corporate profits
remains very murky, that corporations could resort to further layoffs if
profits languish, and that the situation with Iraq adds to market uncertainty.
They would also point out that consumer confidence dropped to a nine-year low
in October, according to the Conference Board. (Optimists, however, would
question the value of confidence readings that have dropped while consumer
spending has remained strong.)
STAYING THE COURSE
With the economy in a holding pattern and markets extremely volatile, we think
it's important to remember the familiar investment strategies that we believe
apply in any market: Think long term. Be diversified. See crises as
opportunities. That's how we'd describe our approach to this volatile
environment -- which we think plays to our strength as research-based, bottom-
up, long-term investors. We would also point out that history has shown that
the market and the economy have been cyclical; downturns have usually been
followed by upturns.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman
MFS Investment Management(R)
November 15, 2002
(1) Source: The Wall St. Journal, November 1, 2002. The Dow Jones Industrial
Average (DJIA) is a price-weighted average of 30 blue-chip stocks that are
generally the leaders in their industry. It is not possible to invest
directly in an index.
The opinions expressed in this letter are those of MFS, and no forecasts can
be guaranteed.
MANAGEMENT REVIEW AND OUTLOOK
[Photo of Peter C. Vaream]
Peter C. Vaream
Dear Shareholders,
For the 12 months ended October 31, 2002, the trust provided a total return of
0.90% based on its beginning and ending stock market prices and assuming the
reinvestment of any distributions paid during the period. The trust's total
return based on its net asset value (NAV) was 2.33%. The trust's results
compare with returns over the same period for the following benchmarks: 10.18%
for the J.P. Morgan Non-Dollar Government Bond Index (the Morgan Index), 6.41%
for the Lehman Brothers Government Bond Index, and -5.49% for the Lehman
Brothers High Yield Bond Index. The Morgan Index is an unmanaged aggregate of
actively traded government bonds issued from 12 countries (excluding the
United States) with remaining maturities of at least one year. The Lehman
Brothers Government Bond Index is unmanaged and is comprised of all publicly
issued debt obligations of the U.S. Treasury, U.S. government agencies, quasi-
federal corporations, and corporate debt guaranteed by the U.S. government.
The Lehman Brothers High Yield Bond Index includes all fixed-income securities
having a maximum quality rating from Moody's Investors Service of "Ba1," a
minimum amount outstanding of $150 million, and at least one year to maturity.
Defaulted bonds are excluded from this index.
During the past 12 months, the U.S. Federal Reserve Board (the Fed) cut short-
term interest rates to 1.25% in an effort to stimulate a sagging economy. At
the same time, accounting scandals and fraud in some of this country's largest
companies were front-page news. Stocks plunged across all industries, and
corporate bonds mirrored stock performance. Investment-grade bonds, even those
issued by companies with clean balance sheets, became much less attractive to
potential buyers. In July of 2002, the high-yield market declined severely
when the number of companies that were unable to make timely principal and/or
interest payments rose to new levels. There was a flight to quality as
investors sold their corporate bonds in favor of the safety offered by U.S.
government securities. International bond markets performed much better than
their U.S. counterparts because they were not as severely affected by
accounting scandals. Also, technology and telecommunications, two of the worst
performing industries for the period, represented a much smaller proportion of
the international market and consequently had much less impact on overall
market performance.
BRIGHT SPOTS IN QUALITY, INTERNATIONAL, AND BANKING
Generally, the fund's focus on high-quality bonds helped its performance
throughout the past 12 months. For example, our holdings in U.S. Treasury and
government agency bonds generated positive returns for the fund even though we
were underweighted in those areas relative to the Lehman Government Bond
Index. U.S. Treasury bills and U.S. government bonds fluctuate in value, but
they are guaranteed as to the timely payment of interest and, if held to
maturity, provide a guaranteed return of principal.
International investments in Germany, the United Kingdom, and "dollar bloc"
countries such as Canada also performed well for the fund. These issues
offered higher yields than U.S. Treasury securities and boosted fund
performance because of currency gains made when the value of many
international currencies rose in comparison to the U.S. dollar.
The fund had a relatively large portion of its portfolio invested in U.S.
banks, one of the few groups in the corporate sector that did well. A hot
housing market translated into increased mortgage lending that improved
business profitability for banks. The banks we held were well-capitalized, had
a strong consumer base, and fewer credit problems than many
investors expected.
WEAKNESS IN HIGH-YIELD SECTOR AND SELECTED CORPORATE BONDS
Although the fund avoided most of the bonds with significant accounting and
corporate governance problems such as Enron and Tyco, it did not escape from
the general declines experienced in the high-yield market. Throughout the
period, the fund's position in high-yield bonds ranged from 17.5% to 20%. Our
high-yield holdings dampened performance when corporate issuers were unable to
fulfill their obligations. As the year progressed, our high-yield strategy was
to try and increase the fund's diversification across industries, to focus on
more liquid issues where there was a ready market for buyers, and to improve
the credit quality of our holdings.
OPPORTUNITIES IN MORTGAGE HOLDINGS AND INTERNATIONAL BONDS
The fund's mortgage-backed bonds have done well towards the end of the period,
and we think they could continue to be attractive assets to us. We're
interested in 15-year mortgage issues for two reasons. First, if the Fed makes
further interest rate cuts, as many believe it will, there may be another wave
of refinancing, but we think that wave would be the last for the near future.
Second, if the Fed does not take action or were to raise interest rates, we
believe that maturity range has tended to be less volatile in a potentially
rising interest rate market.
We gradually increased the fund's holdings in international bonds over the
period. A year ago, the fund held 13.5% of its assets in international issues.
At the end of the period, that position was more than 26%. Yields on
international bonds such as those from Germany, France, Denmark, and Sweden
were higher than the yields on U.S. Treasury securities. We believe that these
non-U.S. bonds may offer investors solid income opportunities as well as
appreciation potential.
The fund's holdings in emerging market bonds stand at nearly 8% of the
portfolio, as of October 31, 2002. We have invested in what we believe is a
well diversified group that includes Mexico, Russia, and Bulgaria. All three
countries have made solid progress in reforming social, political, and
economic policies. As a result, their credit quality has improved and we feel
all are much better able to possibly attract investment capital. We believe
that Mexico and Russia have been highly successful at reform and see Bulgaria
moving in the right direction.
POTENTIAL FOR CHANGE IN CORPORATE BOND MARKETS
Going forward, we expect to see companies continue to clean up and strengthen
their balance sheets to improve their credit quality. We would also anticipate
less volatility in the bond markets as investors' faith in the corporate bond
market is restored. That may have been already happening. In our view, the
corporate bond investor's aversion to risk, real or perceived, has begun to
shift over the last quarter. Buyers have been starting to come back. If
business spending were also to pick up, in our view long-term investors may be
well-positioned to see both income and capital appreciation potential.
Respectfully,
/s/ Peter C. Vaream
Peter C. Vaream
Portfolio Manager
Note to Shareholders: Effective March 18, 2002, Peter C. Vaream became
portfolio manager of the trust.
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. These views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
It is not possible to invest directly in an index.
The portfolio is actively managed, and current holdings may be different.
--------------------------------------------------------------------------------
PORTFOLIO MANAGER'S PROFILE
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PETER C. VAREAM IS VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R)
(MFS(R)) AND MANAGES THE INVESTMENT-GRADE BOND, GOVERNMENT SECURITIES
AND GLOBAL GOVERNMENTS PORTFOLIOS OF OUR MUTUAL FUNDS, VARIABLE
ANNUITIES AND INSTITUTIONAL ACCOUNTS. HE IS A MEMBER OF THE MFS FIXED
INCOME STRATEGY GROUP.
PETER JOINED MFS IN 1992 AND BECAME A PORTFOLIO MANAGER IN 1993.
PREVIOUSLY, HE WAS VICE PRESIDENT OF 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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ADDRESS CHANGE
Please use our new mailing address, effective immediately.
State Street Bank and Trust Company
c/o MFS Service Center, Inc.
P.O. Box 55024
Boston, MA 02205-5024
In accordance with Section 23(c) of the Investment Company Act of 1940, the
trust hereby gives notice that it may from time to time repurchase shares of
the trust in the open market at the option of the Board of Trustees and on
such terms as the Trustees shall determine.
OBJECTIVE: To provide a high level of current income through investments in
fixed-income securities.
NEW YORK STOCK EXCHANGE SYMBOL: MMT
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PERFORMANCE SUMMARY
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(For the year ended October 31, 2002)
NET ASSET VALUE PER SHARE
October 31, 2001 $6.60
October 31, 2002 $6.32
NEW YORK STOCK EXCHANGE PRICE
October 31, 2001 $6.06
June 6, 2002 (high)* $6.23
October 23, 2002 (low)* $5.53
October 31, 2002 $5.69
*For the period November 1, 2001, through October 31, 2002.
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RISK CONSIDERATIONS
Government guarantees apply to underlying securities only and not to prices
and yields of the portfolio.
As a nondiversified portfolio, the portfolio invests in a limited number of
companies and may have more risk because a change in one security's value may
have a more significant effect on the portfolio's net asset value. An
investment in the portfolio is not a complete investment program.
Investments in foreign and/or emerging market securities may be unfavorably
affected by interest-rate and currency-exchange-rate changes, as well as by
market, economic, and political conditions of the countries where investments
are made. There may be greater returns but also greater risk than with U.S.
investments.
Investments in lower-rated securities may provide greater returns but may have
greater-than-average risk.
The portfolio may invest in derivative securities, which may include futures
and options. These types of instruments can increase price fluctuation.
These risks may increase share price volatility. Please see the prospectus
for details.
NUMBER OF SHAREHOLDERS
As of October 31, 2002, our records indicate that there are 10,084 registered
shareholders and approximately 41,000 shareholders owning trust shares in
"street" name, such as through brokers, banks, and other financial
intermediaries.
If you are a "street" name shareholder and wish to directly receive our
reports, which contain important information about the trust, please write or
call:
State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
1-800-637-2304
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
MFS offers a Dividend Reinvestment and Cash Purchase Plan that allows you to
reinvest either all of the distributions paid by the trust or only the long-
term capital gains. Purchases are made at the market price unless that price
exceeds the net asset value (the shares are trading at a premium). If the shares
are trading at a premium, purchases will be made at a discounted price of either
the net asset value or 95% of the market price, whichever is greater. Twice each
year you can also buy shares. Investments over $100 can be made in January and
July on the 15th of the month or shortly thereafter.
If your shares are in the name of a brokerage firm, bank, or other nominee, you
can ask the firm or nominee to participate in the plan on your behalf. If the
nominee does not offer the plan, you may wish to request that your shares be
re-registered in your own name so that you can participate.
There is no service charge to reinvest distributions, nor are there brokerage
charges for shares issued directly by the trust. However, when shares are bought
on the New York Stock Exchange or otherwise on the open market, each participant
pays a pro rata share of the commissions. The automatic reinvestment of
distributions does not relieve you of any income tax that may be payable (or
required to be withheld) on the distributions.
To enroll in or withdraw from the plan, or if you have any questions, call
1-800-637-2304 any business day from 8 a.m. to 8 p.m. Eastern time. Please have
available the name of the trust and your account and Social Security numbers.
For certain types of registrations, such as corporate accounts, instructions
must be submitted in writing. Please call for additional details. When you
withdraw, you can receive the value of the reinvested shares in one of two ways:
a check for the value of the full and fractional shares, or a certificate for
the full shares and a check for the fractional shares.
RESULTS OF SHAREHOLDER MEETINGS (Unaudited)
At the annual meeting of shareholders of MFS Multimarket Income Trust, which was
held on October 1, 2002, the following actions were taken:
ITEM 1. Trustees of the trust were elected as follows:
NUMBER OF SHARES
-------------------------------------
WITHHOLD
NOMINEE FOR AUTHORITY
--------------------------------------------------------------------
William R. Gutow 75,155,336.035 1,816,252.449
J. Atwood Ives 75,223,214.831 1,748,373.653
Abby M. O'Neill 75,060,585.252 1,911,033.232
Jeffrey L. Shames 75,135,124.123 1,836,464.361
ITEM 2. The ratification of the election of Ernst & Young LLP as the
independent public accountants to be employed by the trust for the
fiscal year ending October 31, 2002.
NUMBER OF SHARES
-------------------------------------------------
Affirmative 75,617,177.463
Against 642,594.563
Abstain 711,816.458
PORTFOLIO OF INVESTMENTS -- October 31, 2002
Bonds - 97.7%
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PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
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U.S. Bonds - 71.2%
Advertising & Broadcasting - 4.5%
Allbritton Communications Co., 9.75s, 2007 $ 1,005 $ 1,042,687
Chancellor Media Corp., 8.125s, 2007 1,375 1,430,000
Chancellor Media Corp., 8.75s, 2007 1,000 1,042,500
Clear Channel Commerce, 6.5s, 2005 275 259,847
Cox Communications Inc., 7.125s, 2012 3,805 3,931,277
Echostar DBS Corp., 9.375s, 2009 2,425 2,425,000
Granite Broadcasting Corp., 10.375s, 2005 1,221 940,170
LIN Holdings Corp., 0s to 2003, 10s, 2008 1,500 1,500,000
LIN Television Corp., 8s, 2008 1,000 1,050,000
Panamsat Corp., 8.5s, 2012## 2,315 2,083,500
Paxson Communications Corp., 0s to 2006, 12.25s, 2009 2,275 1,114,750
Radio One, Inc., 8.875s, 2011 1,425 1,521,187
Reed Elsevier Capital Inc., 6.125s, 2006 230 248,371
Spanish Broadcasting Systems, Inc., 9.625s, 2009 1,400 1,417,500
Tele Communications, Inc., 9.8s, 2012 1,075 1,171,750
Young Broadcasting, Inc., 8.5s, 2008 2,750 2,784,375
------------
$ 23,962,914
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Aerospace - 0.1%
Argo-Tech Corp., 8.625s, 2007 $ 165 $ 107,250
K & F Industries, Inc., 9.25s, 2007 200 204,000
------------
$ 311,250
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Airlines
Airplane Pass-Through Trust, 10.875s, 2019 $ 247 $ 4,939
-------------------------------------------------------------------------------------------------------------
Apparel & Textiles
Westpoint Stevens, Inc., 7.875s, 2008 $ 1,225 $330,750
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Banks & Credit Cos. - 1.2%
Bank America Corp., 7.4s, 2011 $ 2,355 $ 2,745,749
Beaver Valley Funding Corp. II, 9s, 2017 1,491 1,595,131
Credit Suisse First Boston USA, 6.5s, 2012 1,882 1,959,708
------------
$ 6,300,588
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Building - 1.0%
American Standard, Inc., 7.375s, 2008 $ 2,415 $ 2,511,600
CRH America Inc., 6.95s, 2012 1,208 1,333,787
Nortek, Inc., 9.25s, 2007 125 123,750
Nortek, Inc., 8.875s, 2008 1,215 1,178,550
------------
$ 5,147,687
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Business Services - 0.9%
Iron Mountain, Inc., 8.625s, 2013 $ 985 $ 1,026,862
Iron Mountain, Inc., 8.75s, 2009 1,600 1,672,000
Williams Scotsman, Inc., 9.875s, 2007 2,725 2,193,625
------------
$ 4,892,487
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Chemicals - 0.4%
Huntsman ICI Holdings, 10.125s, 2009 $ 1,550 $ 1,209,000
Lyondell Chemical Co., 9.875s, 2007 1,060 1,012,300
------------
$ 2,221,300
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Construction Services - 0.5%
D.R. Horton, Inc., 8s, 2009 $ 2,665 $ 2,625,025
-------------------------------------------------------------------------------------------------------------
Consumer Goods & Services - 0.2%
Kindercare Learning Centers, Inc., 9.5s, 2009 $ 350 $ 329,437
Samsonite Corp., 10.75s, 2008 740 555,000
------------
$ 884,437
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Containers - 0.8%
Ball Corp., 7.75s, 2006 $ 500 $ 517,500
Owens-Brockway, 8.875s, 2009 2,000 2,055,000
Silgan Holdings, Inc., 9s, 2009 1,500 1,560,000
------------
$ 4,132,500
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Corporate Asset-Backed - 9.5%
Amresco Commercial Mortgage Funding I Corp., 7s, 2029 $ 3,570 $ 3,547,827
Commercial Mortgage Acceptance Corp., 5.44s, 2030 8,000 6,813,841
Continental Airlines Pass-Through Trust, Inc., 6.545s, 2020 2,466 1,961,869
DLJ Mortgage Acceptance Corp., 8s, 2003 5,097 5,116,063
First Union Lehman Brothers Bank, 0s, 2028 87,875 2,490,723
GMAC Commercial Mortgage Security, Inc., 6.02s, 2033 5,800 5,129,375
Morgan Stanley Capital I, Inc., 7.723s, 2039 5,560 5,246,699
Mortgage Capital Funding, Inc., 7.214s, 2007 2,250 2,136,051
Nationslink Funding Corp., 5s, 2009 5,460 4,578,756
Nationslink Funding Corp., 6.476s, 2030 4,000 4,470,432
Residential Accredit Loans Inc., 7.75s, 2027 2,215 2,250,602
TIAA Retail Commercial Mortgage Trust, 7.17s, 2032## 6,159 6,787,089
------------
$ 50,529,327
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Defense Electronics - 0.3%
L3 Communications Corp., 7.625s, 2012 $ 1,455 $ 1,505,925
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Energy - 1.2%
Ocean Energy Inc., 4.375s, 2007 $ 908 $ 917,770
P&L Coal Holdings Corp., 9.625s, 2008 1,411 1,481,550
Triton Energy Ltd., 9.25s, 2005 3,500 3,937,500
------------
$ 6,336,820
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Energy - Independent - 1.0%
Chesapeake Energy Corp., 8.125s, 2011## $ 2,520 $ 2,570,400
Devon Financing Corp., 6.875s, 2011 2,504 2,778,827
------------
$ 5,349,227
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Entertainment - 0.6%
Regal Cinemas Corp., 9.375s, 2012 $ 2,425 $ 2,534,125
Time Warner Entertainment Co. LP, 8.875s, 2012 419 460,197
------------
$ 2,994,322
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Financial Institutions - 1.7%
Boeing Capital Corp., 5.75s, 2007 $ 1,153 $ 1,190,312
Ford Motor Credit Co., 5.625s, 2004 255 248,777
Ford Motor Credit Co., 7.375s, 2011 2,431 2,172,595
General Electric Capital Corp., 6s, 2012 2,422 2,572,828
GMAC, 6s, 2006 375 352,718
GMAC, 7s, 2012 2,610 2,405,402
------------
$ 8,942,632
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Financial Services - 0.2%
Sprint Capital Corp., 6.875s, 2028 $ 1,501 $ 995,321
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Food & Beverage Products - 0.6%
Burns Philp Capital Property Ltd., 9.75s, 2012## $ 3,480 $ 3,410,400
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Forest & Paper Products - 1.0%
Buckeye Cellulose Corp., 9.25s, 2008 $ 2,150 $ 1,634,000
MDP Acquisitions PLC, 9.625s, 2012## 940 963,500
Meadwestvaco Corp., 6.85s, 2012 1,000 1,062,570
Weyerhaeuser Company, 6.75s, 2012 1,456 1,526,044
------------
$ 5,186,114
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Gaming - 1.3%
Coast Hotels & Casinos, Inc., 9.5s, 2009 $ 1,295 $ 1,359,750
MGM Mirage, Inc., 8.375s, 2011 2,700 2,828,250
Park Place Entertainment Corp., 8.875s, 2008 2,540 2,641,600
------------
$ 6,829,600
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Insurance - 0.4%
Americo Life, Inc., 9.25s, 2005 $ 2,225 $ 2,180,500
-------------------------------------------------------------------------------------------------------------
Insurance - Property & Casualty - 0.5%
Allstate Corp., 7.2s, 2009 $ 1,703 $ 1,922,724
Willis Corroon Corp., 9s, 2009 685 719,250
------------
$ 2,641,974
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Lodging - 0.5%
HMH Properties, Inc., 8.45s, 2008 $ 2,635 $ 2,529,600
-------------------------------------------------------------------------------------------------------------
Machinery - 0.8%
Agco Corp., 9.5s, 2008 $ 2,000 $ 2,100,000
New Terex Corp., 8.875s, 2008 960 820,800
Terex Corp., 9.25s, 2011 1,380 1,186,800
Thermadyne Manufacturing/Capital Corp., 9.875s, 2008
(In default) 230 62,100
------------
$ 4,169,700
-------------------------------------------------------------------------------------------------------------
Media - 0.8%
CSC Holdings, Inc., 8.125s, 2009 $ 3,469 $ 2,879,270
Jones Intercable, Inc., 8.875s, 2007 1,500 1,462,500
------------
$ 4,341,770
-------------------------------------------------------------------------------------------------------------
Media - Cable - 0.5%
Lenfest Communications, Inc., 10.5s, 2006 $ 500 $ 502,500
Mediacom Broadband LLC, 11s, 2013 2,600 2,249,000
NTL Communications Corp., 0s to 2003, 12.375s, 2008
(In default) 1,025 56,375
NTL, Inc., 0s to 2003, 9.75s, 2008 (In default)## 1,860 116,250
------------
$ 2,924,125
-------------------------------------------------------------------------------------------------------------
Media Satellite - 1.5%
Grupo Elektra S.A. de C.V., 12s, 2008 $ 45 $ 40,050
GS Escrow Corp., 7s, 2003 5,210 5,349,591
Kinder Morgan Energy Partners, 7.4s, 2031 2,282 2,350,613
------------
$ 7,740,254
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Medical & Health Technology Services - 0.5%
Fisher Scientific International Inc., 8.125s, 2012 $ 1,305 $ 1,324,575
Tenet Healthcare Corp., 6.375s, 2011 1,212 1,283,342
------------
$ 2,607,917
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Metals & Minerals
Kaiser Aluminum & Chemical Corp., 10.875s, 2006 $ 175 $ 107,625
-------------------------------------------------------------------------------------------------------------
Municipals - 1.1%
New Jersey Economic Development Authority, 5.5s, 2012 $ 1,500 $ 1,709,775
State of Massachusetts, 5.5s, 2013 3,620 4,150,040
------------
$ 5,859,815
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Oil Services - 0.1%
AmeriGas Partners LP, 10.125s, 2007 $ 510 $ 517,650
-------------------------------------------------------------------------------------------------------------
Oils - 0.2%
Valero Energy Corp., 6.875s, 2012 $ 1,331 $ 1,283,385
-------------------------------------------------------------------------------------------------------------
Pollution Control - 0.4%
Allied Waste North America, Inc., 10s, 2009 $ 2,375 $ 2,280,000
-------------------------------------------------------------------------------------------------------------
Printing & Publishing - 0.2%
Hollinger International Publishing, 9.25s, 2007 $ 1,250 $ 1,256,250
-------------------------------------------------------------------------------------------------------------
Real Estate - 0.2%
Vornado Reality Trust, 5.625s, 2007 $ 1,266 $ 1,295,845
-------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts - 0.5%
Starwood Hotels & Resorts, 7.875s, 2012## $ 2,600 $ 2,489,500
-------------------------------------------------------------------------------------------------------------
Small Business Administration - 0.4%
Small Business Administration, 5.34s, 2021 $ 1,968 $ 2,017,133
-------------------------------------------------------------------------------------------------------------
Steel - 0.1%
Kaiser Aluminum & Chemical Corp., 9.875s, 2049 (In default) $ 1,015 $ 624,225
WCI Steel, Inc., 10s, 2004 565 135,600
------------
$ 759,825
-------------------------------------------------------------------------------------------------------------
Stores - 0.3%
Gap, Inc., 10.55s, 2008 $ 1,330 $ 1,349,950
-------------------------------------------------------------------------------------------------------------
Supermarkets - 0.3%
Fleming Cos., Inc., 9.25s, 2010 $ 1,695 $ 1,389,900
-------------------------------------------------------------------------------------------------------------
Technology - 0.6%
Unisystem Corp., 7.875s, 2008 $ 3,250 $ 3,250,000
-------------------------------------------------------------------------------------------------------------
Telecommunications - 2.6%
Continental Cablevision, Inc., 9.5s, 2013 $ 5,000 $ 4,997,950
TCI Communications Financing III, 9.65s, 2027 5,000 4,000,000
Time Warner Inc., 6.95s, 2028 1,342 1,144,798
Triton PCS, Inc., 0s to 2003, 11s, 2008 1,460 1,065,800
Turner Broadcasting Systems, Inc., 8.4s, 2024 3,000 2,828,793
------------
$ 14,037,341
-------------------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 0.4%
Centennial Cellular Operating Co., 10.75s, 2008 $ 500 $ 225,000
Rural Cellular Corp., 9.75s, 2010 1,125 466,875
Verizon Wireless Capital LLC, 5.375s, 2006## 1,221 1,205,554
------------
$ 1,897,429
-------------------------------------------------------------------------------------------------------------
Telecommunications - Wireline
ICG Holdings, Inc., 0s to 2001, 12.5s, 2006 (In default) $ 460 $ 1,725
Worldwide Fiber, Inc., 12s, 2009 (In default) 500 50
------------
$ 1,775
-------------------------------------------------------------------------------------------------------------
Tire & Rubber
Day International Group, Inc., 11.125s, 2005 $ 105 $105,000
-------------------------------------------------------------------------------------------------------------
U.S. Government Agencies - 15.0%
Financing Corp., 9.4s, 2018 $ 12,000 $ 17,142,888
FNMA, 6s, 2016 9,100 9,483,568
FNMA, 5.5s, 2017 8,549 8,975,853
FNMA, 6.5s, 2031 17,003 17,623,285
GNMA, 6.5s, 2028 12,585 13,142,152
GNMA, 7s, 2031 12,185 12,762,100
------------
$ 79,129,846
-------------------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 11.5%
U.S. Treasury Bonds, 0s, 2023 $ 3,867 $ 1,268,504
U.S. Treasury Bonds, 6.875s, 2025 8,000 9,885,624
U.S. Treasury Bonds, 6.25s, 2030 2,276 2,643,626
U.S. Treasury Notes, 4.625s, 2006 13,202 14,223,095
U.S. Treasury Notes, 3.25s, 2007 15,000 15,345,120
U.S. Treasury Notes, 3.375s, 2007 2,409 2,588,057
U.S. Treasury Notes, 5s, 2011 6,220 6,783,265
U.S. Treasury Notes, 4.375s, 2012 7,828 8,126,443
------------
$ 60,863,734
-------------------------------------------------------------------------------------------------------------
Utilities - Electric - 3.4%
BVPS II Funding Corp., 8.68s, 2017 $ 928 $ 953,613
Firstenegy Corp., 5.5s, 2006 2,278 2,199,682
Midamerican Energy Holdings Co., 5.875s, 2012 3,973 3,904,724
Niagara Mohawk Power Corp., 8.77s, 2018 2,354 2,466,733
Northwestern Corp., 7.875s, 2007## 1,388 1,030,289
Progress Energy Inc., 5.85s, 2008 2,501 2,461,409
PSEG Power LLC, 7.75s, 2011 2,511 2,259,900
Waterford 3 Funding Entergy Corp., 8.09s, 2017 2,511 2,519,976
------------
$ 17,796,326
-------------------------------------------------------------------------------------------------------------
Utilities - Telephone - 1.4%
AT&T Corp., 6.5s, 2029 $ 2,000 $ 1,720,000
Verizon Global Funding Corp., 7.375s, 2012 4,953 5,451,574
------------
$ 7,171,574
-------------------------------------------------------------------------------------------------------------
Total U.S. Bonds $376,889,308
-------------------------------------------------------------------------------------------------------------
Foreign Bonds - 26.5%
Algeria - 0.1%
Republic of Algeria, 2.875s, 2004 $ 93 $ 86,025
Republic of Algeria, 2.625s, 2010 484 426,958
------------
$ 512,983
-------------------------------------------------------------------------------------------------------------
Austria - 0.2%
Republic of Austria, 5.5s, 2007 EUR 1,208 $ 1,276,633
-------------------------------------------------------------------------------------------------------------
Brazil - 0.3%
Federal Republic of Brazil, 8s, 2014 $ 581 $ 337,837
Federal Republic of Brazil, 8.875s, 2024 882 412,335
Federal Republic of Brazil, 10.125s, 2027 875 441,875
Federal Republic of Brazil, 12.25s, 2030 302 175,160
Federal Republic of Brazil, 11s, 2040 30 16,125
------------
$ 1,383,332
-------------------------------------------------------------------------------------------------------------
Bulgaria - 1.1%
Republic of Bulgaria, 7.5s, 2013## EUR 4,341 $ 4,336,279
Republic of Bulgaria, 8.25s, 2015 $ 66 70,125
Republic of Bulgaria, 8.25s, 2015## 1,278 1,364,265
------------
$ 5,770,669
-------------------------------------------------------------------------------------------------------------
Canada - 3.0%
Abitibi Consolidated Inc., 8.55s, 2010 (Forest &
Paper Products) $ 1,384 $ 1,430,869
Abitibi Consolidated Inc., 8.85s, 2030 (Forest &
Paper Products) 1,425 1,360,553
Government of Canada, 5.75s, 2006 CAD 2,591 1,766,535
Government of Canada, 5.5s, 2009 8,702 5,846,008
Government of Canada, 5.25s, 2012 8,683 5,650,965
------------
$ 16,054,930
-------------------------------------------------------------------------------------------------------------
Colombia
Republic of Colombia, 10s, 2012 $ 217 $ 195,843
Republic of Colombia, 11.75s, 2020 35 32,935
------------
$ 228,778
-------------------------------------------------------------------------------------------------------------
Denmark - 0.6%
Kingdom of Denmark, 7s, 2007 DKK 20,088 $ 3,012,014
-------------------------------------------------------------------------------------------------------------
Dominican Republic - 0.2%
Dominican Republic, 9.5s, 2006## $ 987 $ 1,036,350
-------------------------------------------------------------------------------------------------------------
Ecuador
Republic of Ecuador, 12s, 2012 $ 150 $ 77,625
-------------------------------------------------------------------------------------------------------------
France - 1.1%
Danone Groupe, 5.625s, 2003 (Food & Beverage) EUR 50 $ 49,925
France Telecom S.A., 8.7s, 2006 (Telecommunications - Wireline) $ 105 112,488
Republic of France, 4.75s, 2012 EUR 3,882 3,880,938
Republic of France, 5s, 2012 400 408,317
SNCF, 7.5s, 2008 (Railroad & Shipping) 750 857,681
Vivendi Enviroment, 5.875s, 2008 (Pollution Control) 250 251,106
------------
$ 5,560,455
-------------------------------------------------------------------------------------------------------------
Germany - 7.3%
Coca Cola Erfrischungsgetranke AG, 5.875s, 2005 (Beverages) $ 600 $ 621,382
Depfa Deutsche Pfandbriefbk, 5.5s, 2010 EUR 960 998,964
Europa Two Ltd, 3.635s, 2027 392 387,733
Federal Republic of Germany, 4s, 2009 5,360 5,230,917
Federal Republic of Germany, 4.5s, 2009 30,188 30,445,374
Kreditanstalt Fur Wiederaufbau, 4.75s, 2006 (Banks &
Credit Cos.) 750 769,504
Societe Generale Capital Trust I, 7.875s, 2049 (Banks &
Credit Cos.) 300 326,655
------------
$ 38,780,529
-------------------------------------------------------------------------------------------------------------
Grand Cayman Islands - 0.2%
Pemex Finance Ltd., 9.69s, 2009 (Finance) $ 905 $ 1,067,402
-------------------------------------------------------------------------------------------------------------
Greece - 0.5%
Fage Dairy Industries S.A., 9s, 2007 (Food & Beverage Products) $ 2,770 $ 2,645,350
-------------------------------------------------------------------------------------------------------------
Hungary
Government of Hungary, 10s, 2003 HUF 55,000 $ 225,772
-------------------------------------------------------------------------------------------------------------
Ireland - 0.6%
Bank Of Ireland UK Holdings, 1s, 2049 EUR 500 $ 537,291
Republic of Ireland, 5s, 2013 2,479 2,505,077
------------
$ 3,042,368
-------------------------------------------------------------------------------------------------------------
Italy - 0.9%
Republic of Italy, 4.5s, 2005 EUR 4,745 $ 4,824,442
-------------------------------------------------------------------------------------------------------------
Kazakhstan - 0.2%
Hurricane Hydrocarbons Ltd. (Oils), 12s, 2006 $ 30 $ 30,450
Kazkommerts International B.V., 10.125s, 2007 (Banks &
Credit Cos.)## 50 53,125
Kaztransoil Co., 8.5s, 2006 (Oil Services)## 1,127 1,157,992
------------
$ 1,241,567
-------------------------------------------------------------------------------------------------------------
Malaysia - 0.2%
Petroliam Nasional Berhad, 7.75s, 2015 (Oils) $ 999 $ 1,115,383
Petronas Capital Ltd., 7.875s, 2022 (Oil Services)## 100 103,516
------------
$ 1,218,899
-------------------------------------------------------------------------------------------------------------
Mexico - 1.4%
BBVA Bancomer, 10.5s, 2011 (Banks & Credit Cos.)## $ 1,280 $ 1,395,200
Durango Corp., 13.125s, 2006 (Forest & Paper Products) 1,315 841,600
Durango Corp. S.A. de C.V., 13.75s, 2009 (Forest & Paper
Products)## 25 15,250
Pemex Project Funding Master Trust, 9.125s, 2010 (Finance) 83 89,972
Pemex Project Funding Master Trust 144A, 8.625s, 2022
(Finance)## 115 113,563
Petroleos Mexicanos, 9.5s, 2027 (Oils) 649 683,072
TFM S.A. de C.V., 11.75s, 2009 35 32,900
TFM S.A. de C.V., 12.5s, 2012## 30 29,325
United Mexican States, 11.375s, 2016 45 56,925
United Mexican States, 8.125s, 2019 56 55,860
United Mexican States, 11.5s, 2026 3,191 4,105,305
United Mexican States, 8.3s, 2031 72 71,460
------------
$ 7,490,432
-------------------------------------------------------------------------------------------------------------
Netherlands - 0.4%
Kingdom Of Netherlands, 5s, 2012 EUR 1,812 $ 1,844,843
-------------------------------------------------------------------------------------------------------------
New Zealand - 0.2%
Government of New Zealand, 8s, 2006 NZD 2,270 $ 1,180,136
-------------------------------------------------------------------------------------------------------------
Norway - 0.3%
Kingdom of Norway, 5.5s, 2009 NOK 11,842 $ 1,540,264
-------------------------------------------------------------------------------------------------------------
Panama - 0.5%
Republic of Panama, 9.375s, 2012 $ 1,189 $ 1,260,072
Republic of Panama, 10.75s, 2020 1,101 1,178,070
------------
$ 2,438,142
-------------------------------------------------------------------------------------------------------------
Peru
Republic of Peru, 4s, 2017 $ 169 $ 108,583
-------------------------------------------------------------------------------------------------------------
Philippines
Philippines Republic, 10.625s, 2025 $ 48 $ 49,440
-------------------------------------------------------------------------------------------------------------
Poland - 0.1%
PTC International Finance B.V., 0s to 2002, 10.75s, 2007
(Telecommunications) $ 532 $ 542,640
-------------------------------------------------------------------------------------------------------------
Romania
Republic of Romania, 8.5s, 2012 EUR 27 $ 27,884
-------------------------------------------------------------------------------------------------------------
Russia - 1.9%
Mobile Telesystems Fin S.A., 10.95s, 2004 (Telecommunications -
Wireline) $ 2,500 $2,575,000
Russian Federation, 3s, 2006 4,880 3,770,875
Russian Federation, 12.75s, 2028 1,332 1,718,280
Russian Federation, 5s, 2030## 2,203 1,679,445
Tyumen Oil, 11s, 2007 (Oil Services)## 43 43,720
------------
$ 9,787,320
-------------------------------------------------------------------------------------------------------------
Singapore - 0.9%
DBS Capital Funding Corp., 7.657s, 2049 (Banks &
Credit Cos.)## $ 2,348 $ 2,536,615
Flextronics International Ltd., 9.875s, 2010 (Electronics) 1,890 1,965,600
------------
$ 4,502,215
-------------------------------------------------------------------------------------------------------------
South Africa
Republic of South Africa, 7.375s, 2012 $ 167 $ 175,768
-------------------------------------------------------------------------------------------------------------
South Korea - 0.5%
Hanvit Bank, 12.75s, 2010 (Banks & Credit Cos.)## $ 2,255 $ 2,655,080
-------------------------------------------------------------------------------------------------------------
Spain - 1.8%
Kingdom of Spain, 7s, 2005 $ 4,988 $5,568,089
Kingdom of Spain, 5.35s, 2011 EUR 3,847 4,013,629
------------
$ 9,581,718
-------------------------------------------------------------------------------------------------------------
Supra-National - 0.2%
European Investment Bank, 5.375s, 2012 EUR 750 $ 778,451
-------------------------------------------------------------------------------------------------------------
Sweden - 0.3%
Kingdom of Sweden, 5.5s, 2012 SEK 11,745 $ 1,318,262
-------------------------------------------------------------------------------------------------------------
Tunisia
Banque Centrale De Tunisie, 7.375s, 2012 $ 25 $ 25,750
-------------------------------------------------------------------------------------------------------------
United Kingdom - 1.5%
Barclays Bank PLC, 8.55s, 2049 (Banks & Credit Cos.)## $ 2,259 $ 2,709,009
Dolphin Telecom PLC, 0s to 2003, 11.50s, 2008
(Telecommunications - Wireless) (In default) 2,515 252
Global Tele-Systems Ltd., 10.875s, 2008 (Telecommunications -
Wireline) 165 17
Granites Mortgages PLC, 5.15s, 2042 (Real Estate) EUR 350 359,525
Hoteloc PLC, 4.386s, 2007 (Commercial Mortgages) GBP 450 703,395
National Westminster Bank PLC, 6.625s, 2049 (Banks &
Credit Cos.) EUR 330 348,212
Ono Finance PLC, 13s, 2009 (Media - Cable) $ 750 165,000
Ono Finance PLC, 14s, 2011 (Media - Cable) 1,000 220,000
Rolls Royce PLC, 6.375s, 2007 (Aerospace) EUR 300 297,579
Telewest Communications PLC, 9.625s, 2006 (Media - Cable) $ 350 40,250
United Kingdom Treasury, 7.25s, 2007 GBP 1,756 3,105,615
Vodafone Airtouch PLC, 5.75s, 2006 (Telecommunications) EUR 140 143,761
------------
$ 8,092,615
-------------------------------------------------------------------------------------------------------------
Venezuela
Republic of Venezuela, 9.25s, 2027 $ 49 $ 33,688
-------------------------------------------------------------------------------------------------------------
Vietnam
Republic of Vietnam, 3.5s, 2028 $ 110 $ 68,200
-------------------------------------------------------------------------------------------------------------
Ukraine
Ukraine Republic, 11s, 2007 $ 67 $ 68,880
-------------------------------------------------------------------------------------------------------------
Total Foreign Bonds $140,270,409
-------------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $515,392,531) $517,159,717
-------------------------------------------------------------------------------------------------------------
Stocks - 0.2%
-------------------------------------------------------------------------------------------------------------
SHARES
-------------------------------------------------------------------------------------------------------------
U.S. Stocks - 0.2%
Apparel & Textiles - 0.1%
Sind Holdings, Inc. 6 $ 371,800
-------------------------------------------------------------------------------------------------------------
Consumer Goods & Services
RJ Reynolds Tobacco Holdings, Inc. 2,302 $ 93,346
-------------------------------------------------------------------------------------------------------------
Metals & Minerals
Metal Management, Inc.* 62,567 $ 250,268
-------------------------------------------------------------------------------------------------------------
Printing & Publishing
Golden Books Family Entertainment, Inc.* 19,975 $ 400
-------------------------------------------------------------------------------------------------------------
Utilities - Telephone
ITC Deltacom Inc.* 112,647 $ 251,315
-------------------------------------------------------------------------------------------------------------
Total U.S. Stocks $ 967,129
-------------------------------------------------------------------------------------------------------------
Foreign Stocks
United Kingdom
Colt Telecom Group PLC, ADR (Telecommunications - Wireline)* 1,440 $ 2,851
-------------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $1,736,111) $ 969,980
-------------------------------------------------------------------------------------------------------------
Convertible Bonds - 0.1%
-------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
-------------------------------------------------------------------------------------------------------------
Foreign Bonds - 0.1%
Italy - 0.1%
Telecom Italia S.p.A., 6.25s, 2012 (Telecommunications -
Wireline) EUR 290 $ 284,647
-------------------------------------------------------------------------------------------------------------
United Kingdom
Fortis Capital Co., 6.25s, 2049 (Banks & Credit Cos.) EUR 155 $ 150,430
-------------------------------------------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost, $387,299) $ 435,077
-------------------------------------------------------------------------------------------------------------
Warrants
-------------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
-------------------------------------------------------------------------------------------------------------
Ono Finance PLC, Expire 2/15/11 (Media - Cable)* 1,000 $10
Loral Orion Network Systems, Inc., (Senior Note),
Expire 1/15/07 (Telecommunications - Wireline)* 1,625 1,625
Loral Orion Network Systems, Inc., (Senior Note with Discount),
Expire 1/15/07 (Telecommunications - Wireline)* 700 3,500
-------------------------------------------------------------------------------------------------------------
Total Warrants (Identified Cost, $166,689) $ 5,135
-------------------------------------------------------------------------------------------------------------
Rights
-------------------------------------------------------------------------------------------------------------
United Mexican States* 501,000 $ 1,253
-------------------------------------------------------------------------------------------------------------
Total Rights (Identified Cost, $0) $ 1,253
-------------------------------------------------------------------------------------------------------------
Repurchase Agreement - 1.7%
-------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
-------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, LP dated 10/31/02 due 11/01/02, total to
be received $8,822,466 (secured by various U.S. Treasury and
Federal Agency obligations in a jointly traded account), at
Cost $ 8,822 $ 8,822,000
-------------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $526,504,630) $527,393,162
Other Assets, Less Liabilities - 0.3% 1,551,353
-------------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $528,944,515
-------------------------------------------------------------------------------------------------------------
*Non-income producing security.
##SEC Rule 144A restriction.
Abbreviations have been used throughout this report to indicate amounts shown
in currencies other than the U.S. Dollar. A list of abbreviations is shown
below.
CAD = Canadian Dollars NOK = Norwegian Krone
DKK = Danish Krone NZD = New Zealand Dollar
EUR = Euro SEK = Swedish Kronor
GBP = British Pounds THB = Thai Baht
HUF = Hungarian Forint TRL = Turkish Lira
MXN = Mexican Peso ZAR = South African Rand
See notes to financial statements.
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
-------------------------------------------------------------------------------
OCTOBER 31, 2002
-------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $526,504,630) $527,393,162
Cash 238,794
Receivable for forward foreign currency exchange
contracts 111,701
Receivable for investments sold 14,981,789
Interest and dividends receivable 8,604,907
Other assets 3,434
------------
Total assets $551,333,787
------------
Liabilities:
Distributions payable $ 227,782
Payable for forward foreign currency exchange contracts 67,815
Payable for forward foreign currency exchange contracts
subject to
master netting agreements 1,415,702
Payable for investments purchased 20,174,653
Payable for trust shares reacquired 84,000
Payable to affiliates -
Management fee 1,494
Transfer and dividend disbursing agent fee 5,000
Accrued expenses and other liabilities 412,826
------------
Total liabilities $ 22,389,272
------------
Net assets $528,944,515
============
Net assets consist of:
Paid-in capital $635,050,980
Unrealized depreciation on investments and translation of
assets and liabilities in foreign currencies (466,301)
Accumulated net realized loss on investments and foreign
currency transactions (105,105,253)
Accumulated net investment loss (534,911)
------------
Total $528,944,515
============
Shares of beneficial interest outstanding (90,140,454
issued, less 6,388,302 treasury shares) 83,752,152
==========
Net asset value per share (net assets of $528,944,515 /
83,752,152 shares of beneficial interest outstanding) $6.32
=====
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Statement of Operations
-------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 2002
------------------------------------------------------------------------------
Net investment income:
Income -
Interest $ 39,133,781
Dividends 638,904
-------------
Total investment income $ 39,772,685
-------------
Expenses -
Management fee $ 3,970,566
Trustees" compensation 59,945
Custodian fee 254,246
Transfer and dividend disbursing agent fee 191,262
Administrative fee 50,318
Auditing fees 30,280
Legal fees 389
Postage 50,758
Printing 38,445
Stock exchange fee 73,666
Miscellaneous 417,062
-------------
Total expenses $ 5,136,937
Fees paid indirectly (40,587)
-------------
Net expenses $ 5,096,350
-------------
Net investment income $ 34,676,335
-------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions (35,600,323)
Written option transactions 2,762,059
Foreign currency transactions (1,480,584)
-------------
Net realized loss on investments and foreign
currency transactions $ (34,318,848)
-------------
Change in unrealized appreciation (depreciation) -
Investments $ 14,593,282
Written options (740,791)
Translation of assets and liabilities in
foreign currencies (2,363,847)
-------------
Net unrealized gain on investments and foreign
currency translation $ 11,488,644
-------------
Net realized and unrealized loss on
investments and foreign currency $ (22,830,204)
-------------
Increase in net assets from operations $ 11,846,131
=============
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
-----------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 2002 2001
-----------------------------------------------------------------------------------------------------------
Decrease in net assets:
From operations -
Net investment income $ 34,676,335 $ 42,870,856
Net realized loss on investments and foreign currency
transactions (34,318,848) (27,808,738)
Net unrealized gain on investments and foreign currency
translation 11,488,644 22,818,366
------------- --------------
Increase in net assets from operations $ 11,846,131 $ 37,880,484
------------- --------------
Distributions declared to shareholders -
From net investment income $ (35,951,308) $ (41,366,841)
From paid-in capital -- (4,152,826)
------------- --------------
Total distributions declared to shareholders $ (35,951,308) $ (45,519,667)
------------- --------------
Trust share (principal) transactions -
Cost of shares reacquired $ (1,717,045) $ (4,785,254)
------------- --------------
Total decrease in net assets $ (25,822,222) $ (12,424,437)
Net assets:
At beginning of year 554,766,737 567,191,174
------------- --------------
At end of year (including accumulated net investment
loss of $534,911 and $2,600,974, respectively) $ 528,944,515 $ 554,766,737
============= ==============
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Financial Highlights
------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 2002 2001 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding
throughout each year):
Net asset value - beginning of year $ 6.60 $ 6.69 $ 7.03 $ 7.17 $ 7.79
------ ------- ------- ------- -------
Income from investment operations#(S) -
Net investment income $ 0.41 $ 0.51 $ 0.58 $ 0.56 $ 0.59
Net realized and unrealized gain (loss)
on investments and foreign currency (0.26) (0.06) (0.40) (0.14) (0.63)
------- ------- ------- ------- -------
Total from investment operations $ 0.15 $ 0.45 $ 0.18 $ 0.42 $ (0.04)
------- ------- ------- ------- -------
Less distributions declared to
shareholders -
From net investment income $ (0.43) $ (0.49) $ (0.41) $ (0.57) $ (0.58)
From paid-in capital -- (0.05) (0.17) -- --
------- ------- ------- ------- -------
Total distributions declared to
shareholders $ (0.43) $ (0.54) $ (0.58) $ (0.57) $ (0.58)
------- ------- ------- ------- ------
Net increase from repurchase of capital shares $ 0.00+ $ 0.00+ $ 0.06 $ 0.01 --
------- ------- ------- ------- -------
Net asset value - end of year $ 6.32 $ 6.60 $ 6.69 $ 7.03 $ 7.17
======= ======= ======= ======= =======
Per share market value - end of year $ 5.69 $ 6.06 $ 6.00 $ 6.06 $ 6.44
------- ------- ------- ------- -------
Total return at market value 0.90% 9.83% 8.84% 2.81% (1.89)%
Ratios (to average net assets)/Supplemental data:
Total expense 0.96% 1.06% 1.06% 1.05% 1.05%
Net investment income(S) 6.49% 7.65% 8.23% 7.80% 7.70%
Portfolio turnover 152% 103% 82% 98% 155%
Net assets at end of year (000 Omitted) $528,945 $554,767 $567,191 $641,213 $665,881
#Per share data are based on average shares outstanding.
##Ratios do not reflect expense reductions from certain expense offset arrangements.
+Per share data was less than $0.01.
(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
and accreting market discount on debt securities. The effect of this change for the year
ended October 31, 2002 was to increase net investment income per share and decrease 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 increased by 0.01%. Per share, ratios, and supplemental data for years prior
to October 31, 2002 have not been restated to reflect this change in presentation.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Multimarket Income Trust (the trust) is a non-diversified trust that is
organized as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as a closed-end management
investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The trust
can invest in foreign securities. Investments in foreign securities are
vulnerable to the effects of changes in the relative values of the local
currency and the U.S. dollar and to the effects of changes in each country's
legal, political, and economic environment.
Investment Valuations - Debt securities (other than short-term obligations which
mature in 60 days or less), including listed issues, forward foreign currency
exchange contracts, and swap agreements, are valued on the basis of valuations
furnished by dealers or by a pricing service with consideration to factors such
as institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other market
data, without exclusive reliance upon exchange or over-the- counter prices.
Equity securities listed on securities exchanges or reported through the NASDAQ
system are reported at market value using last sale prices. Unlisted equity
securities or listed equity securities for which last sale prices are not
available are reported at market value using last quoted bid prices. Short-term
obligations, which mature in 60 days or less, are valued at amortized cost,
which approximates market value. Securities for which there are no such
quotations or valuations are valued in good faith at the direction of the
Trustees.
Repurchase Agreements - The trust may enter into repurchase agreements with
institutions that the trust's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The trust requires
that the securities collateral in a repurchase transaction be transferred to the
custodian in a manner sufficient to enable the trust to obtain those securities
in the event of a default under the repurchase agreement. The trust monitors, on
a daily basis, the value of the collateral to ensure that its value, including
accrued interest, is greater than amounts owed to the trust under each such
repurchase agreement. The trust, along with other affiliated entities of
Massachusetts Financial Services Company (MFS), may utilize a joint trading
account for the purpose of entering into one or more repurchase agreements.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
Deferred Trustee Compensation - Under a Deferred Compensation Plan (the Plan)
independent Trustees may elect to defer receipt of all or a portion of their
annual compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the trust or other MFS trusts selected by
the Trustee. Deferred amounts represent an unsecured obligation of the trust
until distributed in accordance with the Plan.
Written Options - The trust may write call or put options in exchange for a
premium. The premium is initially recorded as a liability, which is subsequently
adjusted to the current value of the option contract. When a written option
expires, the trust realizes a gain equal to the amount of the premium received.
When a written call option is exercised or closed, the premium received is
offset against the proceeds to determine the realized gain or loss. When a
written put option is exercised, the premium reduces the cost basis of the
security purchased by the trust. The trust, as writer of an option, may have no
control over whether the underlying securities may be sold (call) or purchased
(put) and, as a result, bears the market risk of an unfavorable change in the
price of the securities underlying the written option. In general, written call
options may serve as a partial hedge against decreases in value in the
underlying securities to the extent of the premium received. Written options may
also be used as part of an income producing strategy reflecting the view of the
trust's management on the direction of interest rates.
Forward Foreign Currency Exchange Contracts - The trust may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar. The trust may enter into
forward foreign currency exchange contracts for hedging purposes as well as for
non-hedging purposes. For hedging purposes, the trust may enter into contracts
to deliver or receive foreign currency it will receive from or require for its
normal investment activities. The trust may also use contracts in a manner
intended to protect foreign currency-denominated securities from declines in
value due to unfavorable exchange rate movements. For non-hedging purposes, the
trust may enter into contracts with the intent of changing the relative exposure
of the trust's portfolio of securities to different currencies to take advantage
of anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains or
losses on foreign currency transactions.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
discount is amortized or accreted for financial statement purposes in accordance
with generally accepted accounting principles. Dividends received in cash are
recorded on the ex-dividend date. Dividend and interest payments received in
additional securities are recorded on the ex-dividend or ex- interest date in an
amount equal to the value of the security on such date. Some securities may be
purchased on a "when-issued" or "forward delivery" basis, which means that the
securities will be delivered to the trust at a future date, usually beyond
customary settlement time.
Legal fees and other related expenses incurred to preserve and protect the value
of a security owned are added to the cost of the security; other legal fees are
expensed. Capital infusions made directly to the security issuer, which are
generally non-recurring, incurred to protect or enhance the value of high-yield
debt securities, are reported as additions to the cost basis of the security.
Costs that are incurred to negotiate the terms or conditions of capital
infusions or that are expected to result in a plan of reorganization are
reported as realized losses. Ongoing costs incurred to protect or enhance an
investment, or costs incurred to pursue other claims or legal actions, are
expensed.
Fees Paid Indirectly - The trust's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by the
trust. This amount is shown as a reduction of total expenses on the Statement of
Operations.
Tax Matters and Distributions - The trust's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The trust
distinguishes between distributions on a tax basis and a financial reporting
basis and only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in capital.
Differences in the recognition or classification of income between the financial
statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. Common
types of book and tax differences that could occur include differences in
accounting for currency transactions, mortgage-backed securities, derivatives,
defaulted bonds, capital losses, and amortization and accretion on debt
securities.
The tax character of distributions declared for the years ended October 31, 2002
and October 31, 2001 was as follows:
OCTOBER 31, 2002 OCTOBER 31, 2001
--------------------------------------------------------------------------------
Distributions declared from:
Ordinary income $35,951,308 $41,366,841
Long-term capital gain -- --
----------- -----------
$35,951,308 $41,366,841
Tax return of capital -- 4,152,826
----------- -----------
Total distributions declared $35,951,308 $45,519,667
=========== ===========
During the year ended October 31, 2002, accumulated net investment loss
decreased by $3,341,036, accumulated net realized loss on investments and
foreign currency transactions increased by $3,341,040, and paid-in capital
increased by $4, primarily due to differences between book and tax accounting
for currency transactions, amortization and accretion on debt securities, and
capital losses. This change had no effect on the net assets or net asset value
per share.
As of October 31, 2002, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Undistributed ordinary income $ 799,075
Undistributed long-term capital gain --
Capital loss carryforward (101,149,308)
Unrealized loss (3,045,499)
Other temporary differences (2,710,733)
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.
October 31, 2003 $ 3,003,441
October 31, 2007 18,400,020
October 31, 2008 19,415,923
October 31, 2009 22,359,865
October 31, 2010 37,970,059
------------
Total $101,149,308
============
(3) Transactions with Affiliates
Investment Adviser - The trust has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities.
The management fee is computed daily and paid monthly at an annual rate of
0.34% of the trust's average daily net assets and 5.40% of investment income.
The trust pays the compensation of the Independent Trustees in the form of
both a retainer and attendance fees and pays no compensation directly to its
Trustees who are officers of the investment adviser, or to officers of the
trust, all of whom receive remuneration for their services to the trust from
MFS. Certain officers and Trustees of the trust are officers or directors of
MFS and MFS Service Center, Inc. (MFSC). On January 1, 2002, the Trustees
terminated the Independent Trustee unfunded defined benefit plan for active
Trustees and converted it to an unfunded retirement benefit deferral plan for
active Trustees. Under the new plan, the unfunded pension liability was
converted into an equivalent value of notional shares of the trust that will
fluctuate with the performance of the trust. Included in Trustees"
compensation is a one-time plan transition expense of $11,375 and a net
increase of $488 as a result of the change in the trust's pension liability
under this plan for the year ended October 31, 2002.
Aministrator - The trust has an administrative services agreement with MFS to
provide the trust with certain financial, legal, shareholder communications,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the trust pays MFS an administrative fee
at the following annual percentages of the trust's average daily net assets:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
Transfer Agent - MFSC acts as registrar and dividend disbursing agent for the
Trust. The agreement provides that the Trust will pay MFSC an account
maintenance fee of no more than $9.00 and a dividend services fee of $0.75 per
reinvestment and will reimburse MFSC for reasonable out-of-pocket expenses.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
PURCHASES SALES
-------------------------------------------------------------------------------------------------
U.S. government securities $262,881,127 $301,369,300
------------ ------------
Investments (non-U.S. government securities) $507,400,701 $472,368,250
------------ ------------
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 $530,460,575
------------
Gross unrealized appreciation $ 19,613,600
Gross unrealized depreciation (22,681,013)
------------
Net unrealized depreciation $ (3,067,413)
============
(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 90,140,454 full and fractional shares of beneficial interest.
Transactions in trust shares were as follows:
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
2002 2001
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------
Treasury shares reacquired (294,300) $(1,717,045) (771,000) $(4,785,254)
-------- ----------- -------- -----------
Net decrease (294,300) $(1,717,045) (771,000) $(4,785,254)
======== =========== ======== ===========
In accordance with the provisions of the trust's prospectus, 294,300 shares of
beneficial interest were purchased by the trust during year ended October 31,
2002 at an average price per share of $5.83 and a weighted average discount of
9.43% per share. The trust repurchased 771,000 shares of beneficial interest
during the year ended October 31, 2001, at an average price per shares of
$6.10 and a weighted average discount of 8.73% per share.
(6) Line of Credit
The trust and other affiliated funds participate in an $800 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each fund, based on its borrowings, at a rate equal to the bank's
base rate. In addition, a commitment fee, based on the average daily unused
portion of the line of credit, is allocated among the participating funds at
the end of each quarter. The commitment fee allocated to the trust for the
year ended October 31, 2002, was $4,320. The trust had no borrowings during
the year.
(7) Financial Instruments
The trust trades financial instruments with off-balance-sheet risk in the
normal course of its investing activities in order to manage exposure to
market risks such as interest rates and foreign currency exchange rates. These
financial instruments include written options and forward foreign currency
exchange contracts. The notional or contractual amounts of these instruments
represent the investment the trust has in particular classes of financial
instruments and does not necessarily represent the amounts potentially subject
to risk. The measurement of the risks associated with these instruments is
meaningful only when all related and offsetting transactions are considered.
There were no outstanding financial instruments with off-balance-sheet risk at
the end of the year.
Written Option Transactions
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
---------------------------------------------------------------------------
Outstanding, beginning of year 4 $2,826,419
Options written 10 59,630
Options exercised (9) (1,195,992)
Options expired (5) (1,690,057)
---- ----------
Outstanding, end of year -- $ --
==== ==========
Forward Foreign Currency Exchange Contracts
NET
UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
----------------------------------------------------------------------------------------------------------
Sales
12/16/02 DKK 24,912,080 $ 3,289,822 $ 3,304,083 $(14,261)
12/16/02 EUR 7,097,764 6,968,709 6,996,428 (27,719)
12/16/02 GBP 1,874,819 2,902,401 2,922,000 (19,599)
11/08/02 MXN 1,026,100 101,796 100,978 818
11/12/02 ZAR 523,500 50,875 52,296 (1,421)
----------- ----------- --------
$13,313,603 $13,375,785 $(62,182)
=========== =========== ========
Purchases
12/16/02 DKK 954,663 $ 126,469 $ 126,617 $ 148
12/16/02 EUR 3,230,861 3,148,959 3,184,734 35,775
12/16/02 GBP 413,420 638,320 644,336 6,016
11/08/02-11/29/02 MXN 3,865,431 384,071 379,339 (4,732)
12/16/02 NZD 3,239,875 1,506,024 1,564,751 58,727
11/15/02-11/29/02 THB 13,104,000 299,724 302,581 2,857
11/18/02 TRL 433,084,000,000 252,941 252,858 (83)
11/12/02-11/29/02 ZAR 2,581,788 249,879 257,239 7,360
----------- ----------- --------
$ 6,606,387 $ 6,712,455 $106,068
=========== =========== ========
At October 31, 2002, forward foreign currency purchases and sales under master
netting agreements excluded above amounted to a net payable of $100,077 with
Merrill Lynch, $1,275,388 with Deutsche Bank, and $40,237 with CS First Boston.
At October 31, 2002, the trust had sufficient cash and/or securities to cover
any commitments under these contracts.
(8) Change in Accounting Principle
As required, effective November 1, 2001, the fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium and accreting market discount on debt securities. Prior to
November 1, 2001, the fund did not amortize premium nor accrete market
discount on debt securities. The cumulative effect of this accounting change
had no impact on total net assets of the fund, but resulted in a $3,979,555
reduction in cost of securities and a corresponding $3,979,555 decrease in net
unrealized depreciation, based on securities held by the fund on November 1,
2001.
The effect of this change for the year ended October 31, 2002 was to increase
net investment income by $42,664, increase net unrealized depreciation by
$522,757, and decrease net realized losses by $565,421. The Statement of
Changes in Net Assets and Financial Highlights for prior periods has not been
restated to reflect this change in presentation.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees and Shareholders of MFS Multimarket Income Trust:
We have audited the accompanying statement of assets and liabilities of MFS
Multimarket Income Trust (the Trust), including the portfolio of investments, as
of October 31, 2002, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of October 31, 2002, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
MFS Multimarket Income Trust at October 31, 2002, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and its financial highlights for each of the five years
in the period then ended, in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
December 6, 2002
--------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (Unaudited)
--------------------------------------------------------------------------------
IN JANUARY 2003, SHAREHOLDERS WILL BE MAILED A FORM 1099-DIV REPORTING
THE FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR
YEAR 2002.
FOR THE YEAR ENDED OCTOBER 31, 2002, THE AMOUNT OF DISTRIBUTIONS FROM
INCOME ELIGIBLE FOR THE 70% DIVIDENDS RECEIVED DEDUCTION FOR
CORPORATIONS IS 1.73%.
--------------------------------------------------------------------------------
MFS(R) MULTIMARKET INCOME TRUST
The following tables present certain information regarding the Trustees and
officers of the Trust, including their principal occupations, which, unless
specific dates are shown, are of more than five years" duration, although the
titles may not have been the same throughout.
NAME, AGE, POSITION WITH THE TRUST, PRINCIPAL OCCUPATION, AND OTHER DIRECTORSHIPS(1)
TRUSTEES
JEFFREY L. SHAMES* (born 06/02/55) Trustee, ABBY M. O'NEILL (born 04/27/28) Trustee
Chairman Private investor; Rockefeller Financial Services,
Massachusetts Financial Services Company, Chairman Inc. (investment advisers), Chairman and Chief
Executive Officer
JOHN W. BALLEN* (born 09/12/59) Trustee and
President LAWRENCE T. PERERA (born 06/23/35) Trustee
Massachusetts Financial Services Company, Chief Hemenway & Barnes (attorneys), Partner
Executive Officer and Director
WILLIAM J. POORVU (born 04/10/35) Trustee
KEVIN J. PARKE* (born 12/14/59) Trustee Private investor; Harvard University Graduate
Massachusetts Financial Services Company, Chief School of Business Administration, Class of 1961,
Investment Officer, President and Director Adjunct Professor in Entrepreneurship Emeritus;
CBL & Associates Properties, Inc. (real estate
LAWRENCE H. COHN, M.D. (born 03/11/37) Trustee investment trust), Director
Brigham and Women's Hospital, Chief of Cardiac
Surgery; Harvard Medical School, Professor of J. DALE SHERRATT (born 09/23/38) Trustee
Surgery Insight Resources, Inc. (acquisition planning
specialists), President; Wellfleet Investments
THE HON. SIR J. DAVID GIBBONS, KBE (born 06/15/27) (investor in health care companies), Managing
Trustee General Partner (since 1993); Cambridge
Edmund Gibbons Limited (diversified holding Nutraceuticals (professional nutritional
company), Chief Executive Officer; Colonial products), Chief Executive Officer (until May
Insurance Company Ltd., Director and Chairman; 2001); Paragon Trade Brands, Inc. (disposable
Bank of Butterfield, Chairman (until 1997) consumer products), Director
WILLIAM R. GUTOW (born 09/27/41) Trustee ELAINE R. SMITH (born 04/25/46) Trustee
Private investor and real estate consultant; Independent health care industry consultant
Capitol Entertainment Management Company (video
franchise), Vice Chairman WARD SMITH (born 09/13/30) Trustee
Private investor; Sundstrand Corporation
J. ATWOOD IVES (born 05/01/36) Trustee (manufacturer of highly engineered products for
Private investor; KeySpan Corporation (energy industrial and aerospace applications), Director
related services), Director; Eastern Enterprises (until June 1999)
(diversified services company), Chairman, Trustee
and Chief Executive Officer (until November 2000)
(1) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission
(i.e., "public companies").
* "Interested person" of MFS within the meaning of the Investment Company Act of 1940 (referred to as the 1940
Act) which is the principal federal law governing investment companies like the Trust. The address of MFS is
500 Boylston Street, Boston, Massachusetts 02116.
OFFICERS
JEFFREY L. SHAMES (born 06/02/55) Trustee, RICHARD M. HISEY (born 08/29/58) Treasurer
Chairman Massachusetts Financial Services Company, Senior
Massachusetts Financial Services Company, Chairman Vice President (since July 2002); The Bank of New
York, Senior Vice President (September 2000 to
JOHN W. BALLEN (born 9/12/59) Trustee and July 2002); Lexington Global Asset Managers, Inc.,
President Executive Vice President and General Manager
Massachusetts Financial Services Company, Chief (prior to September 2000)
Executive Officer and Director
ELLEN MOYNIHAN (born 11/13/57) Assistant Treasurer
JAMES R. BORDEWICK, JR. (born 03/06/59) Assistant Massachusetts Financial Services Company, Vice
Secretary and Assistant Clerk President
Massachusetts Financial Services Company, Senior
Vice President and Associate General Counsel JAMES O. YOST (born 06/12/60) Assistant Treasurer
Massachusetts Financial Services Company, Senior
STEPHEN E. CAVAN (born 11/06/53) Secretary and Vice President
Clerk
Massachusetts Financial Services Company, Senior
Vice President, General Counsel and Secretary
ROBERT R. FLAHERTY (born 09/18/63) Assistant
Treasurer
Massachusetts Financial Services Company, Vice
President (since August 2000); UAM Fund Services,
Senior Vice President (prior to August 2000)
The Trust holds annual shareholder meetings for the purpose of electing Trustees, and Trustees are elected for
fixed terms. The Board of Trustees currently is divided into three classes, each having a term of three years.
Each year the term of one class expires. Each Trustee's term of office expires on the date of the third annual
meeting following the election to office of the Trustee's class. Each Trustee will serve until next elected or
his or her earlier death, resignation, retirement or removal.
Messrs. Shames, Ives, Perera and Poorvu, and Ms. Smith have served in their capacity as Trustee of the Trust
continuously since originally elected or appointed. Messrs. Ballen and Gutow have each served as a Trustee of
the Trust since August 1, 2001. Messrs. Cohn, Gibbons, Sherratt and Smith, and Ms. O'Neill were elected by
shareholders and have served as Trustees of the Trust since January 1, 2002. Mr. Parke has served as Trustee
of the Trust since January 1, 2002.
Each of the Trust's Trustees and officers holds comparable positions with certain other funds of which MFS or
a subsidiary is the investment adviser or distributor and, in the case of the officers, with certain
affiliates of MFS. Each Trustee serves as a board member of 117 funds within the MFS Family of Funds.
The Statement of Additional Information contains further information about the Trustees and is available
without charge upon request, by calling 1-800-225-2606.
INVESTMENT ADVISER TRANSFER AGENT, REGISTRAR AND DIVIDEND DISBURSING
Massachusetts Financial Services Company AGENT
500 Boylston Street State Street Bank and Trust Company c/o MFS
Boston, MA 02116-3741 Service Center, Inc. P.O. Box 55024 Boston, MA
02205-8016 1-800-637-2304
PORTFOLIO MANAGER
Peter C. Vaream+
CUSTODIANS
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, NY 10081
AUDITORS
Ernst & Young LLP
+ MFS Investment Management
MFS(R) MULTIMARKET INCOME TRUST ---------------
PRSRT STD
MFS(R) U.S. POSTAGE
INVESTMENT MANAGEMENT PAID
MFS
500 Boylston Street ---------------
Boston, MA 02116-3741
(C)2002 MFS Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
MMTCE-2 12/02 65M