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)
Susan S. Newton
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
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Date of reporting period: October 31, 2006
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ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) MULTIMARKET INCOME TRUST
M F S(R)
INVESTMENT MANAGEMENT
[graphic omitted]
ANNUAL REPORT
10/31/06
MMT-ANN
MFS(R) MULTIMARKET
INCOME TRUST
LETTER FROM THE CEO 1
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PORTFOLIO COMPOSITION 2
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MANAGEMENT REVIEW 4
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PORTFOLIO MANAGERS' PROFILES 5
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PERFORMANCE SUMMARY 7
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DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN 10
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PORTFOLIO OF INVESTMENTS 12
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FINANCIAL STATEMENTS 30
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NOTES TO FINANCIAL STATEMENTS 36
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 47
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RESULTS OF SHAREHOLDER MEETING 48
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TRUSTEES AND OFFICERS 49
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BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 55
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PROXY VOTING POLICIES AND INFORMATION 59
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QUARTERLY PORTFOLIO DISCLOSURE 59
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FEDERAL TAX INFORMATION 59
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MFS(R) PRIVACY NOTICE 60
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CONTACT INFORMATION BACK COVER
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TRUST OBJECTIVE: The Trust seeks to provide a high level of
current income through investment in fixed-income securities.
New York Stock Exchange Symbol: MMT
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NOT FDIC INSURED o MAY LOSE VALUE o
NO BANK OR CREDIT UNION GUARANTEE o NOT A DEPOSIT o
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR
NCUA/NCUSIF
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LETTER FROM THE CEO
[Photo of Robert J. Manning]
Dear Shareholders:
What a difference a year can make. By the end of 2005, the Dow Jones
Industrial Average had lost value over the course of the year, as stocks were
beaten back by a myriad of investor worries, including a spike in oil prices,
a rise in interest rates, and political uncertainty in the Middle East.
Fast forward to 2006, and we have seen a dramatically different picture.
While there were some fluctuations in the global markets in the first half of
the year, the second half of 2006 has, so far, been good to many investors.
Oil prices retreated, boosting consumer confidence, and interest rates have
held steady. U.S. stock markets responded favorably to this news, as the Dow
reached a record high in October, passing the 12,000 mark.
What does all of this mean for you? If you're focused on a long-term
investment strategy, the high points in the road -- and the bumps -- should
not necessarily dictate portfolio action on your part. Markets are inherently
cyclical, and we firmly believe that investors who remain committed to a long-
term investment strategy are more likely to achieve their goals than those who
consistently chase short-term performance.
At MFS(R), our unique teamwork approach to managing money and our global
research platform support an unwavering focus on helping you realize your
long-term financial goals. We believe in a three-pronged investment strategy
of allocating your holdings across major asset classes, diversifying within
each class, and rebalancing regularly. Of course, these strategies cannot
guarantee a profit or protect against a loss. Investing and planning for the
long term require diligence and patience -- two traits that are essential to
capitalizing on the many opportunities the financial markets can offer.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
December 15, 2006
The opinions expressed in this letter are subject to change, may not be relied
upon for investment advice, and no forecasts can be guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE (i)
Bonds 106.4%
Cash & Other Net Assets -6.4%
FIXED INCOME SECTORS (i)
High Yield Corporates 26.4%
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High Grade Corporates 22.6%
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U.S. Treasury Securities 17.2%
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Non-U.S. Government Bonds 12.3%
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Mortgage-Backed Securities 9.7%
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Commercial Mortgage-Backed Securities 9.5%
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Emerging Market Bonds 4.8%
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Asset-Backed Securities 1.9%
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U.S. Government Agencies 0.8%
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Collateralized Debt Obligations 0.6%
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Residential Mortgage-Backed
Securities 0.6%
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CREDIT QUALITY OF BONDS (r)
AAA 40.3%
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AA 2.8%
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A 6.5%
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BBB 19.5%
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BB 17.9%
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B 11.8%
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CCC 1.0%
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Not Rated 0.2%
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PORTFOLIO FACTS
Average Duration (d) 5.3
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Average Life (m) 7.9 yrs.
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Average Maturity (m) 13.8 yrs.
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Average Credit Quality of Rated
Securities (long-term) (a) A-
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Average Credit Quality of Rated
Securities (short-term) (a) A-1
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COUNTRY WEIGHTINGS (i)
United States 72.6%
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United Kingdom 6.1%
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Germany 3.4%
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Netherlands 2.1%
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France 1.9%
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Canada 1.8%
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Spain 1.6%
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Ireland 1.6%
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Russia 1.4%
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Other 7.5%
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(a) The average credit quality of rated securities is based upon a market
weighted average of portfolio holdings that are rated by public rating
agencies.
(d) Duration is a measure of how much a bond's price is likely to fluctuate
with general changes in interest rates, e.g., if rates rise 1.00%, a bond
with a 5-year duration is likely to lose about 5.00% of its value.
(i) For purposes of this graphical presentation, the bond component includes
both accrued interest amounts and the equivalent exposure from any
derivative holdings, if applicable.
(m) The average maturity shown is calculated using the final stated maturity on
the portfolio's holdings without taking into account any holdings which
have been pre- refunded or pre-paid to an earlier date or which have a
mandatory put date prior to the stated maturity. The average life shown
takes into account these earlier dates.
(r) Each security is assigned a rating from Moody's Investors Service. If not
rated by Moody's, the rating will be that assigned by Standard & Poor's.
Likewise, if not assigned a rating by Standard & Poor's, it will be based
on the rating assigned by Fitch, Inc. For those portfolios that hold a
security which is not rated by any of the three agencies, the security is
considered Not Rated. Holdings in U.S. Treasuries and government agency
mortgage-backed securities, if any, are included in the "AAA"-rating
category. Percentages are based on the total market value of investments as
of 10/31/06.
From time to time "Cash & Other Assets" may be negative due to timing of cash
receipts and/or equivalent exposure from any derivative holdings.
Percentages are based on net assets as of 10/31/06, unless otherwise noted.
The portfolio is actively managed and current holdings may be different.
MANAGEMENT REVIEW
SUMMARY OF RESULTS
MFS Multimarket Income Trust is a closed-end fund and maintains a portfolio
that includes investments in investment-grade and high-yield corporate bonds,
U.S. government securities, and international investment-grade and emerging
markets debt.
In our review of the performance of this portfolio, we look to a number of
benchmarks, each reflecting the results of the various markets in which we
invest. The benchmarks are the Citigroup World Government Bond Non-Dollar
Hedged Index, JPMorgan Emerging Markets Bond Index Global (EMBI Global),
Lehman Brothers U.S. Credit Bond Index, Lehman Brothers U.S. Government/
Mortgage Bond Index, and the Lehman Brothers U.S. High-Yield Corporate Bond
Index (U.S. High-Yield).
For the twelve months ended October 31, 2006, shares of the MFS Multimarket
Income Trust provided a total return of 6.42%, at net asset value, surpassing
the performance of three of the five benchmarks. The trust trailed the
performance of the U.S. High-Yield and EMBI Global indices.
DETRACTORS FROM PERFORMANCE
Our underweighted positions in "B" and "CCC" rated(s) bonds held back relative
results as spreads narrowed over the period. Our holdings in government
agencies and corporate bonds in the industrial sector were also areas of
weakness.
CONTRIBUTORS TO PERFORMANCE
On the upside, the trust generated a high level of income, which positively
impacted performance. Our shorter duration(d) stance contributed to results as
interest rates generally rose over the reporting period. Other factors that
boosted relative returns included our positioning in investment-grade finance
and telecommunications bonds, mortgage-backed bonds, and emerging markets debt.
Respectfully,
Richard O. Hawkins John F. Addeo James J. Calmas
Portfolio Manager Portfolio Manager Portfolio Manager
David P. Cole Matthew W. Ryan
Portfolio Manager Portfolio Manager
Note to Shareholders: Effective April 1, 2006, Richard Hawkins became a
manager of the portfolio replacing Peter Vaream. Effective October 9, 2006,
David Cole became a co-manager of the portfolio, replacing Scott Richards,
with John Addeo, James Calmas, Richard Hawkins and Matthew Ryan.
(d) Duration is a measure of how much a bond's price is likely to fluctuate
with general changes in interest rates, e.g., if rates rise 1.00%, a bond
with a 5-year duration is likely to lose about 5.00% of its value.
(s) Bonds rated "BBB", "Baa", or higher are considered investment grade; bonds
rated "BB", "Ba", or below are considered non-investment grade. The
primary source for bond quality ratings is Moody's Investors Service. If
not available, ratings by Standard & Poor's are used, else ratings by
Fitch, Inc. For securities which are not rated by any of the three
agencies, the security is considered Not Rated.
The views expressed in this report are those of the portfolio managers 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 an indication of
trading intent on behalf of any MFS portfolio. References to specific
securities are not recommendations of such securities, and may not be
representative of any MFS portfolio's current or future investments.
PORTFOLIO MANAGERS' PROFILES
Richard O. Hawkins, CFA, is Senior Vice President of MFS Investment
Management(R) an investment grade fixed income portfolio manager; and a
portfolio manager of several bond portfolios. Prior to joining the firm in
1988, he spent two years as an International Bond Analyst for Fidelity
Management & Research Company; and five years as an International Lending
Officer for Manufacturers Hanover Trust Company. He was named portfolio
manager at MFS in 2004. He has been a portfolio manager of the fund since
April 2006. Richard earned a bachelor's degree from Brown University and a
Master's of Business Administration from the University of Pennsylvania. He is
a member of the Association for Investment Management and Research (AIMR) and
the Boston Security Analysts Society, Inc. He holds the Chartered Financial
Analyst (CFA) designation.
John F. Addeo, CFA, is Vice President of MFS Investment Management(R) (MFS(R))
and portfolio manager of the high-yield bond portfolios of our mutual funds,
variable annuities, offshore accounts and closed-end funds. John joined MFS as
a research analyst in 1998. He became Vice President in 1999, associate
portfolio manager in 2000, and portfolio manager in 2001. He has been a
portfolio manager of the fund since February 2005. John was named Associate
Director of Fixed Income Research in 2004. Previously, he was a quantitative
analyst and a vice president in the high-yield groups of several major
investment companies. He received a Bachelor of Science degree
from Siena College in 1984. He holds the Chartered Financial Analyst
(CFA) designation.
James J. Calmas is Senior Vice President of MFS Investment Management(R)
(MFS(R)) and portfolio manager of the firm's strategic income and limited
maturity portfolios. He is a member of the MFS Fixed Income Strategy Group. He
has been a portfolio manager of the fund since September 2004. Jim joined MFS
in 1988 and was named Assistant Vice President in 1991, Vice President in
1993, portfolio manager in 1998, and Senior Vice President in 2002. He is a
graduate of Dartmouth College and holds an M.B.A. degree from the Amos Tuck
School of Business Administration of Dartmouth College.
David P. Cole, CFA, is Vice President of MFS Investment Management(R)
(MFS(R)). He is also a co-portfolio manager on the firm's high-yield
portfolios and the high-yield segment of the MFS Diversified Income Fund.
David joined MFS in 2004 after working for five years as a High Yield Analyst
for Franklin Templeton Investments. Prior to this, he served as a Financial
Economist/Treasury Market Analyst for Thomson Financial Services and three
years as an Economist for Standard and Poor's. David has a bachelor's degree
from Cornell University and an M.B.A from University of California, Berkeley.
He holds the Chartered Financial Analyst (CFA) designation.
Matthew W. Ryan, CFA, is Senior Vice President of MFS Investment Management(R)
(MFS(R)) and portfolio manager of strategic income and high yield portfolios,
as well as the firm's emerging market debt portfolios. Before joining the firm
in 1997, Matt worked for four years as an economist at the International
Monetary Fund and for five years as an international economist with the U.S.
Treasury Department. He was named a portfolio manager of MFS in 1998; Vice
President in 1999; and Senior Vice President in 2005. He has been a portfolio
manager of the fund since September 2001. Matt is a graduate of Williams
College and earned a master's degree in international economics and foreign
policy from Johns Hopkins University. Matt also holds the Chartered Financial
Analyst (CFA) designation.
PERFORMANCE SUMMARY THROUGH 10/31/06
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 more or less than those shown. Past
performance is no guarantee of future results.
PRICE SUMMARY
Year ended 10/31/06
Date Price
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Net Asset Value per share 10/31/06 $6.74
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10/31/05 $6.74
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New York Stock Exchange Price 10/31/06 $6.00
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2/22/06 (high) (t) $6.17
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4/13/06 (low) (t) $5.74
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10/31/05 $6.15
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TOTAL RETURNS VS BENCHMARKS
Year ended 10/31/06
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New York Stock Exchange Price (r) 3.82%
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Net Asset Value (r) 6.42%
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Citigroup World Government Bond Non-Dollar Hedged Index (f) 4.29%
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JPMorgan Emerging Markets Bond Index Global (f) 11.45%
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Lehman Brothers U.S. Credit Bond Index (f) 5.36%
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Lehman Brothers U.S. Government/Mortgage Bond Index (f) 5.12%
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Lehman Brothers U.S. High-Yield Corporate Bond Index (f) 10.33%
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(f) Source: FactSet Research Systems Inc.
(r) Includes reinvestment of dividends and capital gain distributions.
(t) For the period November 1, 2005 through October 31, 2006.
INDEX DEFINITIONS
Citigroup World Government Bond Non-Dollar Hedged Index - a market
capitalization-weighted index that tracks the currency-hedged performance of
the major government bond markets, excluding the United States. Country
eligibility is determined based upon market capitalization and investability
criteria.
JPMorgan Emerging Markets Bond Index Global (EMBI Global) - tracks total
returns for U.S.-dollar-denominated debt instruments issued by emerging market
sovereign and quasi-sovereign entities: Brady bonds, loans, Eurobonds.
Lehman Brothers U.S. Credit Bond Index - measures publicly issued, SEC-
registered, U.S. corporate and specified foreign debentures and secured notes
that meet specified maturity, liquidity, and quality requirements.
Lehman Brothers U.S. Government/Mortgage Bond Index - measures debt issued by
the U.S. Government as well as mortgage-backed pass-through securities of
Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC).
Lehman Brothers U.S. High-Yield Corporate Bond Index - measures the universe
of non-investment grade, fixed rate debt. Eurobonds, and debt issues from
countries designated as emerging markets (e.g., Argentina, Brazil, Venezuela,
etc.) are excluded.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
The trust's shares may trade at a discount to net asset value. Shareholders do
not have the right to cause the trust to repurchase their shares at net asset
value. When trust shares trade at a premium, buyers pay more than the net
asset value underlying trust shares, and shares purchased at a premium would
receive less than the amount paid for them in the event of the trust's
liquidation. As a result, the total returns that are calculated based on the
net asset value and New York Stock Exchange prices can be different. The
trust's monthly distributions may include a return of capital to shareholders.
Distributions that are treated for federal income tax purposes as a return of
capital will reduce each shareholder's basis in his or her shares and, to the
extent the return of capital exceeds such basis, will be treated as gain to
the shareholder from a sale of shares. Returns of shareholder capital have the
effect of reducing the trust's assets and may increase the trust's expense
ratio.
From time to time the trust may receive proceeds from litigation settlements,
without which performance would be lower.
KEY RISK CONSIDERATIONS
The portfolio's yield and share prices change daily based on the credit
quality of its investments and changes in interest rates. In general, the
value of debt securities will decline when interest rates rise and will
increase when interest rates fall. Debt securities with longer maturity dates
will be subject to greater price fluctuations than those with shorter
maturities. Mortgage securities are subject to prepayment risk which can offer
less potential for gains in a declining interest rate environment and greater
potential for loss in a rising interest rate environment. Derivatives involve
risks different from, and greater than, those of the underlying indicator(s)
in whose value the derivative is based. The value of the derivative can move
in unexpected ways and result in unanticipated losses and increased volatility
if the value of the underlying indicator(s) does not move in the direction or
the extent anticipated. Interest payments on inflation adjusted debt
instruments can be unpredictable and vary based on the level of inflation. The
value of floating rate loans depends on the credit quality and adequacy of the
collateral securing the loan. Enforcing rights against the collateral may be
difficult or insufficient if the borrower of the floating rate loan defaults.
Lower quality debt securities involve substantially greater risk of default
and their value can decline significantly over time. Foreign investments can
be more volatile than U.S. investments. Changes in currency exchange rates may
affect the portfolio's net asset value, the value of dividends and interest
earned and gains and losses realized on the sale of securities. Investing in
emerging markets can involve risks in addition to those generally associated
with investing in more developed foreign markets. When you sell your shares,
they may be worth more or less than the amount you paid for them.
These risks may increase share price volatility.
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.
DIVIDEND REINVESTMENT AND
CASH PURCHASE PLAN
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.
The trust has amended the plan to appoint Computershare Trust Company, N.A.
(the Transfer Agent for the trust as of December 18, 2006) as agent for the
plan. The effective date for the amendment is May 1, 2007. Under the terms of
the plan, if you do not withdraw from the plan prior to May 1, 2007, you will
be deemed to accept the appointment of Computershare Trust Company, N.A. as
your agent under the plan.
PORTFOLIO OF INVESTMENTS
10/31/06
The Portfolio of Investments is a complete list of all securities owned by
your trust. It is categorized by broad-based asset classes.
Bonds - 97.5%
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ISSUER SHARES/PAR VALUE ($)
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Aerospace - 0.3%
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DRS Technologies, Inc., 7.625%, 2018 $ 945,000 $ 966,262
Rolls-Royce PLC, 6.375%, 2007 EUR 300,000 388,649
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$ 1,354,911
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Airlines - 0.2%
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Continental Airlines, Inc., 7.566%, 2020 $ 1,011,390 $ 1,012,654
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Asset Backed & Securitized - 12.4%
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Amresco Commercial Mortgage Funding I, 7%, 2029 $ 3,570,000 $ 3,583,092
ARCap REIT, Inc., "H", 6.1%, 2045 (n) 2,000,000 1,795,390
Asset Securitization Corp., FRN, 8.0099%, 2029 1,877,956 1,961,440
Banc of America Commercial Mortgage, Inc., FRN, 4.857%, 2043 1,375,626 1,336,065
Banc of America Commercial Mortgage, Inc., FRN, 5.1815%, 2047 1,375,626 1,371,113
Bayview Financial Acquisition Trust, FRN, 5.483%, 2041 1,130,000 1,110,225
Bayview Financial Revolving Mortgage Loan Trust, FRN,
6.12%, 2040 (z) 4,000,000 4,005,659
Chalet Finance 1 PLC, 3.721%, 2013 EUR 300,000 383,130
Countrywide Asset-Backed Certificates, FRN, 4.575%, 2035 $ 611,780 606,509
CPS Auto Receivables Trust, 2.89%, 2009 (z) 176,237 173,538
Crest Ltd., 7%, 2040 (n) 2,000,000 1,886,200
DEPFA Bank, 5.5%, 2010 EUR 960,000 1,287,956
Deutsche Mortgage & Asset Receiving Corp., 7.5%, 2031 $ 1,847,000 2,035,873
DLJ Commercial Mortgage Corp., 6.04%, 2031 2,000,000 2,038,821
Falcon Franchise Loan LLC, FRN, 3.8455%, 2025 (i)(z) 7,395,877 1,160,857
First Union National Bank Commercial Mortgage Trust, FRN,
0.9471%, 2043 (i)(n) 28,687,676 962,710
First Union-Lehman Brothers Bank of America, FRN,
0.4894%, 2035 (i) 64,436,068 1,026,241
First Union-Lehman Brothers Commercial Mortgage Trust,
7%, 2029 (n) 1,847,000 2,002,362
First Union-Lehman Brothers Commercial Mortgage Trust, FRN,
7.5%, 2029 1,846,973 2,093,373
GMAC Commercial Mortgage Securities, Inc., 6.02%, 2033 2,542,000 2,596,520
GMAC Commercial Mortgage Securities, Inc., FRN,
7.6614%, 2034 (n) 1,853,000 2,012,068
Granite Mortgages PLC, FRN, 5.15%, 2042 EUR 350,000 449,448
JPMorgan Chase Commercial Mortgage Securities Corp.,
5.552%, 2045 $ 1,590,000 1,618,552
JPMorgan Chase Commercial Mortgage Securities Corp., FRN,
5.2943%, 2043 1,375,626 1,381,177
JPMorgan Chase Commercial Mortgage Securities Corp., FRN,
5.475%, 2043 1,590,000 1,609,515
JPMorgan Chase Commercial Mortgage Securities Corp., FRN,
5.8755%, 2045 1,590,000 1,667,170
Lehman Brothers Commercial Conduit Mortgage Trust, FRN,
0.9578%, 2030 (i) 17,160,702 344,141
Morgan Stanley Capital I, Inc., 6.86%, 2029 1,965,271 1,963,612
Morgan Stanley Capital I, Inc., FRN, 1.4471%, 2039 (i)(n) 14,915,475 925,326
Mortgage Capital Funding, Inc., FRN, 0.708%, 2031 (i) 16,172,726 140,562
Multi-Family Capital Access One, Inc., 6.65%, 2024 100,517 102,371
Preferred Term Securities IV Ltd., CDO, FRN, 7.64%, 2031 (z) 3,000,000 3,015,000
Prudential Securities Secured Financing Corp., FRN,
7.3813%, 2013 (z) 2,581,000 2,746,549
RMAC PLC, FRN, 3.501%, 2036 (n) EUR 161,969 206,745
Structured Asset Securities Corp., FRN, 4.67%, 2035 $ 4,570,839 4,517,979
TIAA Real Estate CDO Ltd., 7.17%, 2032 (n) 1,923,280 1,934,316
Wachovia Bank Commercial Mortgage Trust, 4.935%, 2042 2,000,000 1,951,813
Wachovia Bank Commercial Mortgage Trust, FRN, 5.083%, 2042 2,000,000 1,969,585
Wachovia Bank Commercial Mortgage Trust, FRN, 5.118%, 2042 1,375,626 1,357,474
Wachovia Bank Commercial Mortgage Trust, FRN, 5.3161%, 2044 2,777,000 2,783,391
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$ 66,113,868
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Automotive - 2.9%
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Continental AG, 6.875%, 2008 EUR 100,000 $ 135,134
DaimlerChrysler N.A. Holdings Corp., 8.5%, 2031 $ 1,251,000 1,503,268
DaimlerChrysler Note, 5.625%, 2007 EUR 100,000 128,110
Ford Motor Credit Co., 6.625%, 2008 $ 422,000 414,033
Ford Motor Credit Co., 5.8%, 2009 410,000 391,616
Ford Motor Credit Co., 7.375%, 2009 2,115,000 2,058,682
Ford Motor Credit Co., 7%, 2013 2,069,000 1,923,390
General Motors Acceptance Corp., 5.85%, 2009 962,000 948,494
General Motors Acceptance Corp., 6.875%, 2011 990,000 996,795
General Motors Acceptance Corp., 6.75%, 2014 3,643,000 3,611,801
General Motors Corp., 8.375%, 2033 1,740,000 1,548,600
GMAC LLC, 6.125%, 2008 503,000 500,532
Johnson Controls, Inc., 5.25%, 2011 1,180,000 1,172,455
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$ 15,332,910
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Broadcasting - 2.4%
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Allbritton Communications Co., 7.75%, 2012 $ 795,000 $ 798,975
CBS Corp., 6.625%, 2011 621,000 646,662
EchoStar DBS Corp., 6.375%, 2011 4,205,000 4,162,950
Intelsat Subsidiary Holding Co. Ltd., 8.625%, 2015 580,000 601,750
Lamar Media Corp., 7.25%, 2013 1,460,000 1,467,300
Liberty Media Corp., 5.7%, 2013 2,799,000 2,636,546
News America Holdings, 7.7%, 2025 2,217,000 2,491,740
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$ 12,805,923
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Brokerage & Asset Managers - 1.0%
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Goldman Sachs Group, Inc., 5.7%, 2012 $ 2,665,000 $ 2,715,171
Morgan Stanley Dean Witter, Inc., 6.6%, 2012 2,538,000 2,687,838
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$ 5,403,009
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Building - 0.5%
---------------------------------------------------------------------------------------------------
American Standard Cos., Inc., 7.375%, 2008 $ 2,500,000 $ 2,541,467
Owens Corning, Inc., 7%, 2036 (z) 140,000 141,570
------------
$ 2,683,037
---------------------------------------------------------------------------------------------------
Business Services - 0.5%
---------------------------------------------------------------------------------------------------
Iron Mountain, Inc., 7.75%, 2015 $ 375,000 $ 380,625
Xerox Corp., 7.625%, 2013 2,010,000 2,100,450
------------
$ 2,481,075
---------------------------------------------------------------------------------------------------
Cable TV - 2.8%
---------------------------------------------------------------------------------------------------
CCH II Holdings LLC, 10.25%, 2010 $ 1,430,000 $ 1,476,475
Cox Communications, Inc., 4.625%, 2013 1,744,000 1,627,970
CSC Holdings, Inc., 8.125%, 2009 1,939,000 1,999,594
Grupo Televisa S.A., 8.5%, 2032 463,000 567,877
Mediacom LLC, 9.5%, 2013 490,000 502,863
Rogers Cable, Inc., 5.5%, 2014 1,975,000 1,856,500
TCI Communications Financing III, 9.65%, 2027 5,000,000 5,297,775
TCI Communications, Inc., 9.8%, 2012 1,135,000 1,342,082
------------
$ 14,671,136
---------------------------------------------------------------------------------------------------
Chemicals - 0.9%
---------------------------------------------------------------------------------------------------
Akzo Nobel N.V., 5.625%, 2009 EUR 100,000 $ 132,267
BCP Crystal Holdings Corp., 9.625%, 2014 $ 413,000 453,267
Equistar Chemicals LP, 10.125%, 2008 800,000 848,000
Equistar Chemicals LP, 10.625%, 2011 1,225,000 1,310,750
Huntsman International LLC, 10.125%, 2009 575,000 583,625
Linde Finance B.V., 6% to 2013, FRN to 2049 EUR 101,000 131,495
Lyondell Chemical Co., 11.125%, 2012 $ 1,330,000 1,439,725
Nalco Co., 8.875%, 2013 150,000 157,875
------------
$ 5,057,004
---------------------------------------------------------------------------------------------------
Conglomerates - 0.0%
---------------------------------------------------------------------------------------------------
Thyssenkrupp Finance B.V., 7%, 2009 EUR 100,000 $ 135,593
---------------------------------------------------------------------------------------------------
Construction - 0.2%
---------------------------------------------------------------------------------------------------
Beazer Homes USA, Inc., 6.875%, 2015 $ 1,015,000 $ 954,100
Urbi Desarrollos Urbanos S.A. de C.V., 8.5%, 2016 (n) 28,000 29,680
------------
$ 983,780
---------------------------------------------------------------------------------------------------
Consumer Goods & Services - 0.6%
---------------------------------------------------------------------------------------------------
ASSA ABLOY AB, 5.125%, 2006 EUR 30,000 $ 38,339
Church & Dwight Co., Inc., 6%, 2012 $ 805,000 769,781
Fortune Brands, Inc., 5.125%, 2011 1,212,000 1,189,727
Service Corp. International, 8%, 2017 (n) 985,000 950,525
Service Corp. International, 7.625%, 2018 (z) 250,000 256,875
Sodexho Alliance S.A., 5.875%, 2009 EUR 100,000 132,883
------------
$ 3,338,130
---------------------------------------------------------------------------------------------------
Containers - 0.9%
---------------------------------------------------------------------------------------------------
Ball Corp., 6.625%, 2018 $ 1,025,000 $ 1,005,781
Crown Americas LLC, 7.75%, 2015 1,215,000 1,246,894
Owens-Brockway Glass Container, Inc., 8.875%, 2009 453,000 464,325
Owens-Brockway Glass Container, Inc., 8.25%, 2013 1,815,000 1,869,450
------------
$ 4,586,450
---------------------------------------------------------------------------------------------------
Defense Electronics - 0.3%
---------------------------------------------------------------------------------------------------
L-3 Communications Corp., 5.875%, 2015 $ 1,630,000 $ 1,577,025
---------------------------------------------------------------------------------------------------
Electronics - 0.2%
---------------------------------------------------------------------------------------------------
NXP B.V./NXP Funding LLC, 7.875%, 2014 (z) $ 615,000 $ 624,225
Sensata Technologies B.V., 8%, 2014 (n) 620,000 598,300
------------
$ 1,222,525
---------------------------------------------------------------------------------------------------
Emerging Market Quasi-Sovereign - 0.6%
---------------------------------------------------------------------------------------------------
Gaz Capital S.A., 8.625%, 2034 $ 144,000 $ 182,074
Gazprom International S.A., 7.201%, 2020 90,000 94,500
Gazprom OAO, 9.625%, 2013 550,000 653,125
Gazprom OAO, 8.625%, 2034 (n) 713,000 907,292
National Power Corp., FRN, 9.6481%, 2011 19,000 21,379
Pemex Project Funding Master Trust, 8.625%, 2022 428,000 522,160
Pemex Project Funding Master Trust, 9.5%, 2027 84,000 111,090
Pemex Project Funding Master Trust, 6.625%, 2035 26,000 26,234
Petronas Capital Ltd., 7.875%, 2022 602,000 739,375
------------
$ 3,257,229
---------------------------------------------------------------------------------------------------
Emerging Market Sovereign - 1.8%
---------------------------------------------------------------------------------------------------
Federative Republic of Brazil, 8%, 2018 $ 115,000 $ 127,132
Federative Republic of Brazil, 8.875%, 2019 124,000 149,916
Federative Republic of Brazil, 8.875%, 2024 89,000 108,669
Federative Republic of Brazil, 8.25%, 2034 156,000 182,364
Federative Republic of Brazil, 11%, 2040 84,000 110,628
Federative Republic of Brazil, CLN, 10%, 2012 BRL 100,000 40,554
Federative Republic of Brazil, CLN, 10%, 2012 BRL 100,000 40,554
Federative Republic of Brazil, CLN, 10%, 2012 BRL 100,000 40,554
Federative Republic of Brazil, CLN, 10%, 2012 BRL 100,000 40,554
Government of Jamaica, 10.625%, 2017 $ 15,000 17,775
Lebanese Republic, 8.5%, 2016 102,000 103,530
Republic of Argentina, 7%, 2013 176,499 166,154
Republic of Argentina, 7%, 2015 24,000 21,796
Republic of Argentina, 8.28%, 2033 105,687 106,427
Republic of Argentina, FRN, 11.9167%, 2008 ARS 53,000 17,313
Republic of Argentina, FRN, 5.59%, 2012 $ 792,750 742,473
Republic of Bulgaria, 8.25%, 2015 242,000 284,398
Republic of Colombia, 11.75%, 2010 COP 29,000,000 13,563
Republic of Colombia, 12%, 2015 COP 31,000,000 15,641
Republic of Colombia, 8.125%, 2024 $ 46,000 51,773
Republic of Colombia, FRN, 7.2163%, 2015 563,000 581,297
Republic of Costa Rica, 9.995%, 2020 17,000 21,786
Republic of Ecuador, 10%, 2030 73,000 72,891
Republic of Egypt, 0%, 2006 EGP 225,000 38,764
Republic of Egypt, 0%, 2006 EGP 50,000 8,614
Republic of El Salvador, 7.65%, 2035 (n) $ 20,000 21,910
Republic of El Salvador, 7.65%, 2035 42,000 46,011
Republic of Guatemala, 8.125%, 2034 23,000 26,174
Republic of Indonesia, 7.25%, 2015 36,000 38,070
Republic of Indonesia, CLN, FRN, 12.8%, 2021 25,543 27,818
Republic of Panama, 9.375%, 2029 761,000 987,398
Republic of Panama, 6.7%, 2036 9,000 9,077
Republic of Peru, 5%, 2017 45,600 45,144
Republic of Peru, 5% to 2007, FRN to 2017 33,600 33,264
Republic of Philippines, 9.375%, 2017 597,000 721,624
Republic of Philippines, 7.5%, 2024 100,000 107,000
Republic of Philippines, 9.5%, 2030 32,000 41,320
Republic of Turkey, 0%, 2008 TRY 140,000 68,793
Republic of Turkey, 0%, 2008 TRY 250,000 121,450
Republic of Turkey, 11.5%, 2012 $ 57,000 69,215
Republic of Turkey, 11%, 2013 20,000 24,100
Republic of Turkey, 9.5%, 2014 30,000 34,538
Republic of Turkey, 7.25%, 2015 69,000 70,725
Republic of Turkey, 7.375%, 2025 80,000 80,600
Republic of Turkey, 8%, 2034 37,000 39,405
Republic of Uruguay, 7.5%, 2015 87,000 92,873
Republic of Venezuela, 7%, 2018 192,000 192,960
Republic of Venezuela, 9.25%, 2027 51,000 63,189
Republic of Venezuela, 9.375%, 2034 26,000 32,539
Republica Oriental del Uruguay, 5%, 2018 UYU 120,000 5,287
Russian Federation, 3%, 2008 $ 1,843,000 1,770,386
United Mexican States, 6.375%, 2013 448,000 470,848
United Mexican States, 8.125%, 2019 739,000 897,885
United Mexican States, 8%, 2022 39,000 47,288
United Mexican States, 10%, 2024 MXN 470,000 51,254
United Mexican States, 8.3%, 2031 $ 60,000 76,290
------------
$ 9,419,555
---------------------------------------------------------------------------------------------------
Energy - Independent - 1.4%
---------------------------------------------------------------------------------------------------
Anadarko Petroleum Corp., 5.95%, 2016 $ 610,000 $ 619,507
Chesapeake Energy Corp., 6.875%, 2016 2,550,000 2,530,875
Forest Oil Corp., 7.75%, 2014 950,000 954,750
Newfield Exploration Co., 6.625%, 2014 1,605,000 1,578,919
Ocean Energy, Inc., 4.375%, 2007 908,000 899,320
Pan American Energy LLC, 7.75%, 2012 (n) 100,000 100,500
Quicksilver Resources, Inc., 7.125%, 2016 1,060,000 1,001,700
------------
$ 7,685,571
---------------------------------------------------------------------------------------------------
Energy - Integrated - 0.2%
---------------------------------------------------------------------------------------------------
TNK-BP Finance S.A., 7.5%, 2016 (n) $ 1,083,000 $ 1,133,097
---------------------------------------------------------------------------------------------------
Entertainment - 0.3%
---------------------------------------------------------------------------------------------------
AMC Entertainment, Inc., 9.5%, 2011 $ 484,000 $ 485,815
AMC Entertainment, Inc., 11%, 2016 435,000 481,219
Turner Broadcasting System, Inc., 8.375%, 2013 419,000 473,224
------------
$ 1,440,258
---------------------------------------------------------------------------------------------------
Financial Institutions - 0.9%
---------------------------------------------------------------------------------------------------
Capital One Bank, 4.25%, 2008 $ 1,296,000 $ 1,270,050
Countrywide Financial Corp., 6.25%, 2016 2,250,000 2,291,834
International Lease Finance Corp., 5.625%, 2013 1,248,000 1,257,390
------------
$ 4,819,274
---------------------------------------------------------------------------------------------------
Food & Beverages - 0.2%
---------------------------------------------------------------------------------------------------
Allied Domecq Financial Services PLC, 5.875%, 2009 EUR 125,000 $ 166,076
B&G Foods Holding Corp., 8%, 2011 $ 375,000 381,562
Chaoda Modern Agriculture Holdings, 7.75%, 2010 (n) 28,000 27,580
Michael Foods, Inc., 8%, 2013 685,000 707,263
------------
$ 1,282,481
---------------------------------------------------------------------------------------------------
Forest & Paper Products - 1.5%
---------------------------------------------------------------------------------------------------
Buckeye Technologies, Inc., 8.5%, 2013 $ 795,000 $ 808,912
MDP Acquisitions PLC, 9.625%, 2012 640,000 677,600
MeadWestvaco Corp., 6.8%, 2032 679,000 653,362
Norske Skog Canada Ltd., 7.375%, 2014 1,210,000 1,122,275
Packaging Corp. of America, 5.75%, 2013 2,500,000 2,455,645
Stora Enso Oyj, 6.404%, 2016 (n) 1,580,000 1,618,832
UPM Kymmene Corp., 6.125%, 2012 EUR 100,000 137,465
Verso Paper Holdings LLC, 9.125%, 2014 (n) $ 340,000 345,100
------------
$ 7,819,191
---------------------------------------------------------------------------------------------------
Gaming & Lodging - 2.8%
---------------------------------------------------------------------------------------------------
Boyd Gaming Corp., 6.75%, 2014 $ 460,000 $ 450,225
Caesars Entertainment, Inc., 8.125%, 2011 1,520,000 1,552,300
Caesars Entertainment, Inc., 7%, 2013 2,020,000 2,044,517
Grupo Posadas S.A. de C.V., 8.75%, 2011 13,000 13,585
Harrah's Entertainment, Inc., 5.75%, 2017 675,000 556,333
Host Marriott LP, 7.125%, 2013 950,000 960,688
Mandalay Resort Group, 9.375%, 2010 950,000 1,009,375
MGM Mirage, Inc., 8.375%, 2011 2,530,000 2,628,038
MGM Mirage, Inc., 6.75%, 2013 500,000 485,000
MGM Mirage, Inc., 6.875%, 2016 420,000 399,000
NCL Corp. Ltd., 10.625%, 2014 1,000,000 975,000
Scientific Games Corp., 6.25%, 2012 825,000 792,000
Starwood Hotels & Resorts Worldwide, Inc., 7.875%, 2012 735,000 770,831
Station Casinos, Inc., 6.5%, 2014 1,595,000 1,455,438
Wynn Las Vegas LLC, 6.625%, 2014 1,020,000 999,600
------------
$ 15,091,930
---------------------------------------------------------------------------------------------------
Industrial - 0.4%
---------------------------------------------------------------------------------------------------
Amsted Industries, Inc., 10.25%, 2011 (z) $ 1,510,000 $ 1,623,250
JohnsonDiversey Holdings, Inc., "B", 9.625%, 2012 690,000 704,663
------------
$ 2,327,913
---------------------------------------------------------------------------------------------------
Insurance - 1.4%
---------------------------------------------------------------------------------------------------
Allianz AG, 5.5% to 2014, FRN to 2049 EUR 140,000 $ 186,766
ING Groep N.V., 5.775% to 2015, FRN to 2049 $ 2,500,000 2,488,845
Prudential Financial, Inc., 5.1%, 2014 1,985,000 1,944,028
UnumProvident Corp., 6.85%, 2015 (n) 2,509,000 2,627,851
------------
$ 7,247,490
---------------------------------------------------------------------------------------------------
Insurance - Property & Casualty - 1.6%
---------------------------------------------------------------------------------------------------
AIG SunAmerica Global Financing X, 6.9%, 2032 (n) $ 2,384,000 $ 2,726,407
Berkshire Hathaway Finance Corp., 5.1%, 2014 4,500,000 4,460,341
Fund American Cos., Inc., 5.875%, 2013 1,464,000 1,463,633
------------
$ 8,650,381
---------------------------------------------------------------------------------------------------
International Market Quasi-Sovereign - 1.3%
---------------------------------------------------------------------------------------------------
Canada Housing Trust, 4.6%, 2011 CAD 1,378,000 $ 1,257,869
Japan Finance Corp. Ltd., 2%, 2016 JPY 290,000,000 2,544,314
KfW Bankengruppe, FRN, 3.164%, 2007 EUR 1,678,000 2,140,841
Societe Nationale des Chemins de Fer Francais, 7.5%, 2008 EUR 750,000 1,005,213
Vattenfall Treasury AB, 6%, 2010 EUR 125,000 169,508
------------
$ 7,117,745
---------------------------------------------------------------------------------------------------
International Market Sovereign - 11.0%
---------------------------------------------------------------------------------------------------
Commonwealth of Australia, 6%, 2017 AUD 465,000 $ 369,427
Federal Republic of Germany, 3.5%, 2008 EUR 2,097,000 2,669,586
Federal Republic of Germany, 5.25%, 2010 EUR 1,634,000 2,804,884
Federal Republic of Germany, 3.75%, 2015 EUR 3,028,000 3,875,863
Federal Republic of Germany, 6.25%, 2030 EUR 1,696,000 2,940,664
Government of Canada, 5.5%, 2009 CAD 1,296,000 1,198,706
Government of Canada, 4.5%, 2015 CAD 1,047,000 966,607
Government of Canada, 8%, 2023 CAD 483,000 629,801
Government of Canada, 5.75%, 2033 CAD 120,000 120,901
Kingdom of Denmark, 4%, 2015 DKK 14,269,000 2,491,335
Kingdom of Netherlands, 3.75%, 2009 EUR 3,339,000 4,274,854
Kingdom of Netherlands, 3.75%, 2014 EUR 2,359,000 3,018,333
Kingdom of Norway, 5%, 2015 NOK 989,000 159,808
Kingdom of Spain, 6%, 2008 EUR 1,173,000 1,538,662
Kingdom of Spain, 5.35%, 2011 EUR 3,910,000 5,359,890
Republic of Austria, 4.65%, 2018 EUR 3,055,000 4,204,652
Republic of Finland, 5.375%, 2013 EUR 1,795,000 2,514,902
Republic of France, 4%, 2009 EUR 215,000 277,134
Republic of France, 5%, 2012 EUR 400,000 543,531
Republic of France, 4.75%, 2012 EUR 612,000 824,602
Republic of France, 5%, 2016 EUR 2,043,000 2,872,328
Republic of France, 6%, 2025 EUR 442,000 726,053
Republic of France, 4.75%, 2035 EUR 386,000 721,999
Republic of Ireland, 4.25%, 2007 EUR 3,274,000 4,200,024
Republic of Ireland, 4.6%, 2016 EUR 1,853,000 2,523,822
United Kingdom Treasury, 5.75%, 2009 GBP 950,000 1,856,039
United Kingdom Treasury, 5%, 2012 GBP 1,231,000 2,378,029
United Kingdom Treasury, 8%, 2015 GBP 813,000 1,946,328
United Kingdom Treasury, 8%, 2021 GBP 187,000 491,989
------------
$ 58,500,753
---------------------------------------------------------------------------------------------------
Machinery & Tools - 0.7%
---------------------------------------------------------------------------------------------------
Case New Holland, Inc., 6%, 2009 $ 1,200,000 $ 1,191,000
Case New Holland, Inc., 9.25%, 2011 340,000 360,825
Case New Holland, Inc., 7.125%, 2014 820,000 826,150
Manitowoc Co., Inc., 10.5%, 2012 767,000 828,360
Terex Corp., 9.25%, 2011 570,000 598,500
------------
$ 3,804,835
---------------------------------------------------------------------------------------------------
Major Banks - 2.6%
---------------------------------------------------------------------------------------------------
Bank of Ireland, 7.4%, 2049 EUR 500,000 $ 716,584
BNP Paribas Capital Trust III, 6.625% to 2011, FRN to 2049 EUR 100,000 141,223
BNP Paribas, 5.186% to 2015, FRN to 2049 (n) $ 2,099,000 2,001,795
Credit Suisse Group, 7.974%, 2010 EUR 265,000 380,737
HBOS Capital Funding LP, 6.071% to 2014, FRN to 2049 (n) $ 1,543,000 1,572,431
JPMorgan Chase & Co., 5.125%, 2014 2,755,000 2,706,137
MUFG Capital Finance 1 Ltd., 6.346% to 2016, FRN to 2049 1,568,000 1,583,514
National Westminster Bank PLC, 6.625% to 2009, FRN to 2049 EUR 330,000 450,289
SG Capital Trust I, 7.875% to 2010, FRN to 2049 EUR 300,000 425,776
Wachovia Capital Trust III, 5.8% to 2011, FRN to 2042 $ 4,068,000 4,103,827
------------
$ 14,082,313
---------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 2.0%
---------------------------------------------------------------------------------------------------
Baxter International, Inc., 9.5%, 2008 $ 2,331,000 $ 2,470,028
DaVita, Inc., 6.625%, 2013 300,000 295,500
DaVita, Inc., 7.25%, 2015 1,150,000 1,144,250
HCA, Inc., 8.75%, 2010 1,385,000 1,398,850
HCA, Inc., 6.375%, 2015 2,305,000 1,844,000
Omnicare, Inc., 6.875%, 2015 1,585,000 1,553,300
Owens & Minor, Inc., 6.35%, 2016 1,420,000 1,433,990
Triad Hospitals, Inc., 7%, 2013 385,000 374,413
------------
$ 10,514,331
---------------------------------------------------------------------------------------------------
Metals & Mining - 1.4%
---------------------------------------------------------------------------------------------------
Arch Western Finance LLC, 6.75%, 2013 $ 1,310,000 $ 1,264,150
Foundation PA Coal Co., 7.25%, 2014 1,545,000 1,533,412
International Steel Group, Inc., 6.5%, 2014 1,300,000 1,300,000
Massey Energy Co., 6.875%, 2013 1,315,000 1,232,813
Peabody Energy Corp., 5.875%, 2016 1,220,000 1,146,800
Peabody Energy Corp., 7.375%, 2016 45,000 46,800
Peabody Energy Corp., "B", 6.875%, 2013 340,000 345,100
U.S. Steel Corp., 9.75%, 2010 795,000 845,681
------------
$ 7,714,756
---------------------------------------------------------------------------------------------------
Mortgage Backed - 9.7%
---------------------------------------------------------------------------------------------------
Fannie Mae, 6%, 2017 - 2036 $ 3,123,387 $ 3,150,637
Fannie Mae, 5.5%, 2021 - 2035 11,509,059 11,437,047
Fannie Mae, 5%, 2027 - 2035 7,654,460 7,486,020
Fannie Mae, 6.5%, 2031 - 2032 1,585,174 1,623,934
Freddie Mac, 6%, 2021 319,423 324,021
Freddie Mac, 5%, 2024 390,223 388,549
Freddie Mac TBA, 5.5%, 2036 16,132,609 15,951,117
Freddie Mac TBA, 6%, 2036 11,066,970 11,139,591
------------
$ 51,500,916
---------------------------------------------------------------------------------------------------
Natural Gas - Distribution - 0.3%
---------------------------------------------------------------------------------------------------
AmeriGas Partners LP, 7.25%, 2015 $ 1,030,000 $ 1,027,425
AmeriGas Partners LP, 7.125%, 2016 365,000 360,437
------------
$ 1,387,862
---------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 1.8%
---------------------------------------------------------------------------------------------------
Atlas Pipeline Partners, 8.125%, 2015 $ 810,000 $ 826,200
CenterPoint Energy Resources Corp., 7.875%, 2013 1,250,000 1,395,769
Colorado Interstate Gas Co., 5.95%, 2015 365,000 350,849
El Paso Performance-Linked Trust, 7.75%, 2011 (n) 1,555,000 1,609,425
Kinder Morgan Energy Partners LP, 5.125%, 2014 1,147,000 1,094,980
Kinder Morgan Energy Partners LP, 7.4%, 2031 1,626,000 1,790,823
Magellan Midstream Partners LP, 5.65%, 2016 1,123,000 1,101,228
Williams Cos., Inc., 8.75%, 2032 1,500,000 1,665,000
------------
$ 9,834,274
---------------------------------------------------------------------------------------------------
Network & Telecom - 2.5%
---------------------------------------------------------------------------------------------------
BellSouth Corp., 6.55%, 2034 $ 3,213,000 $ 3,321,506
Citizens Communications Co., 9.25%, 2011 1,785,000 1,979,119
Citizens Communications Co., 9%, 2031 870,000 945,037
Deutsche Telekom International Finance B.V., 8.125%, 2012 EUR 130,000 196,474
Nordic Telephone Co. Holdings, 8.875%, 2016 (n) $ 640,000 670,400
OTE Telecommunications PLC, 6.125%, 2007 EUR 195,000 250,379
Qwest Corp., 7.875%, 2011 $ 1,890,000 2,001,038
Qwest Corp., 8.875%, 2012 950,000 1,045,000
Telefonica Europe B.V., 7.75%, 2010 1,500,000 1,623,128
Windstream Corp., 8.625%, 2016 (n) 1,040,000 1,121,900
------------
$ 13,153,981
---------------------------------------------------------------------------------------------------
Oil Services - 0.2%
---------------------------------------------------------------------------------------------------
Basic Energy Services, Inc., 7.125%, 2016 $ 445,000 $ 423,862
GulfMark Offshore, Inc., 7.75%, 2014 760,000 763,800
------------
$ 1,187,662
---------------------------------------------------------------------------------------------------
Oils - 0.5%
---------------------------------------------------------------------------------------------------
Premcor Refining Group, Inc., 7.5%, 2015 $ 2,575,000 $ 2,695,937
---------------------------------------------------------------------------------------------------
Other Banks & Diversified Financials - 2.3%
---------------------------------------------------------------------------------------------------
Banco BMG S.A., 9.15%, 2016 (n) $ 714,000 $ 717,570
Banco de Credito del Peru, FRN, 6.95%, 2021 (z) 562,000 562,000
Banco do Estado de Sao Paulo S.A., 8.7%, 2010 15,000 15,787
Banco do Estado de Sao Paulo S.A., 8.7%, 2049 (n) 577,000 607,292
Banco Mercantil del Norte S.A., 5.875% to 2009, FRN to 2014 (n) 655,000 659,912
Chuo Mitsui Trust & Banking Co., 5.506% to 2015, FRN to 2049 (n) 642,000 616,764
Credit Suisse (USA), Inc., 4.875%, 2010 1,023,000 1,012,580
HSBK Europe B.V., 7.75%, 2013 (n) 597,000 617,149
Kazkommerts International B.V., 8%, 2015 588,000 604,640
Mizuho Capital Investment 1 Ltd., 6.686% to 2016, FRN to 2049 (n) 1,220,000 1,232,642
Mizuho Financial Group, Inc., 5.79%, 2014 (n) 1,633,000 1,653,339
RBS Capital Trust II, 6.425% to 2034, FRN to 2049 833,000 852,958
Resona Bank Ltd., 5.85% to 2016, FRN to 2049 (n) 626,000 613,195
Russian Standard Finance S.A., 7.5%, 2010 (n) 257,000 248,326
Russian Standard Finance S.A., 8.625%, 2011 (n) 769,000 765,155
Turanalem Finance B.V., 7.875%, 2010 15,000 15,420
Woori Bank, 6.125% to 2011, FRN to 2016 (n) 1,510,000 1,552,342
------------
$ 12,347,071
---------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.2%
---------------------------------------------------------------------------------------------------
Schering-Plough Corp., 6.75%, 2033 $ 1,002,000 $ 1,116,392
---------------------------------------------------------------------------------------------------
Pollution Control - 0.1%
---------------------------------------------------------------------------------------------------
Veolia Environnement, 5.875%, 2008 EUR 250,000 $ 328,894
---------------------------------------------------------------------------------------------------
Precious Metals & Minerals - 0.2%
---------------------------------------------------------------------------------------------------
Alrosa Finance S.A., 8.875%, 2014 $ 716,000 $ 820,894
---------------------------------------------------------------------------------------------------
Printing & Publishing - 0.6%
---------------------------------------------------------------------------------------------------
Bertelsmann U.S. Finance, Inc., 4.625%, 2010 EUR 148,000 $ 191,611
Dex Media East LLC, 9.875%, 2009 $ 1,235,000 1,298,294
Dex Media West LLC, 9.875%, 2013 567,000 615,904
MediaNews Group, Inc., 6.875%, 2013 1,060,000 984,475
Pearson PLC, 6.125%, 2007 EUR 135,000 173,270
Reed Elsevier Capital, Inc., 5.75%, 2008 EUR 125,000 164,004
------------
$ 3,427,558
---------------------------------------------------------------------------------------------------
Railroad & Shipping - 0.1%
---------------------------------------------------------------------------------------------------
TFM S.A. de C.V., 9.375%, 2012 $ 717,000 $ 765,398
---------------------------------------------------------------------------------------------------
Real Estate - 0.3%
---------------------------------------------------------------------------------------------------
Simon Property Group LP, REIT, 4.6%, 2010 $ 1,375,000 $ 1,346,362
---------------------------------------------------------------------------------------------------
Restaurants - 0.3%
---------------------------------------------------------------------------------------------------
YUM! Brands, Inc., 8.875%, 2011 $ 1,590,000 $ 1,798,536
---------------------------------------------------------------------------------------------------
Retailers - 1.4%
---------------------------------------------------------------------------------------------------
Couche-Tard, Inc., 7.5%, 2013 $ 905,000 $ 927,625
Dollar General Corp., 8.625%, 2010 685,000 730,381
Gap, Inc., 9.55%, 2008 2,710,000 2,915,949
Limited Brands, Inc., 5.25%, 2014 2,294,000 2,181,800
Steinway Musical Instruments, Inc., 7%, 2014 (n) 655,000 641,900
------------
$ 7,397,655
---------------------------------------------------------------------------------------------------
Specialty Stores - 0.2%
---------------------------------------------------------------------------------------------------
GSC Holdings Corp., 8%, 2012 $ 655,000 $ 679,562
LVMH Moet Hennessy Louis Vuitton S.A., 4.625%, 2011 EUR 125,000 162,184
------------
$ 841,746
---------------------------------------------------------------------------------------------------
Steel - 0.4%
---------------------------------------------------------------------------------------------------
Chaparral Steel Co., 10%, 2013 $ 1,090,000 $ 1,220,800
FMG Finance Ltd., 10.625%, 2016 (n) 670,000 659,950
------------
$ 1,880,750
---------------------------------------------------------------------------------------------------
Supermarkets - 0.5%
---------------------------------------------------------------------------------------------------
Safeway, Inc., 6.5%, 2008 $ 2,500,000 $ 2,553,908
---------------------------------------------------------------------------------------------------
Supranational - 0.3%
---------------------------------------------------------------------------------------------------
Central American Bank, 4.875%, 2012 (n) $ 521,000 $ 504,621
European Investment Bank, 5.375%, 2012 EUR 750,000 1,039,428
------------
$ 1,544,049
---------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 0.6%
---------------------------------------------------------------------------------------------------
Centennial Communications Corp., 10.125%, 2013 $ 520,000 $ 557,700
Mobile TeleSystems Finance S.A., 8.375%, 2010 19,000 19,880
OJSC Vimpel Communications, 8.25%, 2016 770,000 797,913
Rogers Wireless, Inc., 6.375%, 2014 950,000 950,000
Rogers Wireless, Inc., 7.5%, 2015 980,000 1,046,150
------------
$ 3,371,643
---------------------------------------------------------------------------------------------------
Tobacco - 0.5%
---------------------------------------------------------------------------------------------------
Altria Group, Inc., 5.625%, 2008 EUR 75,000 $ 97,961
Reynolds American, Inc., 7.25%, 2012 (n) $ 2,508,000 2,605,551
------------
$ 2,703,512
---------------------------------------------------------------------------------------------------
Transportation - Services - 0.4%
---------------------------------------------------------------------------------------------------
Hertz Corp., 8.875%, 2014 (n) $ 685,000 $ 715,825
Stena AB, 7%, 2016 812,000 772,415
Westinghouse Air Brake Technologies Corp., 6.875%, 2013 795,000 781,088
------------
$ 2,269,328
---------------------------------------------------------------------------------------------------
U.S. Government Agencies - 0.7%
---------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 4.625%, 2008 $ 2,730,000 $ 2,716,140
Small Business Administration, 5.34%, 2021 1,259,737 1,273,053
------------
$ 3,989,193
---------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 9.6%
---------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 6.5%, 2010 (f) $ 24,686,000 $ 26,097,743
U.S. Treasury Bonds, 5.375%, 2031 3,386,000 3,676,190
U.S. Treasury Bonds, 4.5%, 2036 6,128,000 5,914,476
U.S. Treasury Bonds, TIPS, 3.875%, 2009 3,927,300 4,010,909
U.S. Treasury Notes, 4.25%, 2013 8,745,000 8,571,123
U.S. Treasury Notes, 4.5%, 2016 2,718,000 2,696,552
------------
$ 50,966,993
---------------------------------------------------------------------------------------------------
Utilities - Electric Power - 5.6%
---------------------------------------------------------------------------------------------------
Allegheny Energy Supply Co. LLC, 8.25%, 2012 (n) $ 805,000 $ 875,437
Beaver Valley Funding Corp., 9%, 2017 4,599,000 5,194,984
BVPS II Funding Corp., 8.68%, 2017 731,000 830,284
Duke Capital Corp., 8%, 2019 691,000 811,624
Edison Mission Energy, 7.75%, 2016 (n) 1,585,000 1,636,512
Enersis S.A., 7.375%, 2014 783,000 840,939
HQI Transelec Chile S.A., 7.875%, 2011 383,000 407,934
Majapahit Holding B.V., 7.75%, 2016 (z) 105,000 107,625
MidAmerican Energy Holdings Co., 6.125%, 2036 2,000,000 2,056,674
Midwest Generation LLC, 8.75%, 2034 685,000 740,656
Mirant North American LLC, 7.375%, 2013 1,500,000 1,516,875
MSW Energy Holdings LLC, 7.375%, 2010 1,045,000 1,060,675
NorthWestern Corp., 5.875%, 2014 1,695,000 1,686,147
NRG Energy, Inc., 7.375%, 2016 2,405,000 2,432,056
Reliant Resources, Inc., 9.25%, 2010 895,000 926,325
Reliant Resources, Inc., 9.5%, 2013 20,000 20,950
RWE Finance B.V., 5.375%, 2008 EUR 6,000 7,806
System Energy Resources, Inc., 5.129%, 2014 (n) $ 2,371,044 2,319,569
TXU Corp., 5.55%, 2014 1,574,000 1,499,662
TXU Energy Co., 7%, 2013 2,670,000 2,812,479
Waterford 3 Funding Corp., 8.09%, 2017 1,907,493 1,968,686
------------
$ 29,753,899
---------------------------------------------------------------------------------------------------
TOTAL BONDS (IDENTIFIED COST, $513,563,156) $519,652,546
---------------------------------------------------------------------------------------------------
Common Stocks - 0.0%
---------------------------------------------------------------------------------------------------
Printing & Publishing - 0.0%
---------------------------------------------------------------------------------------------------
Golden Books Family Entertainment, Inc. (a) 19,975 $ 0
---------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $--) $ 0
---------------------------------------------------------------------------------------------------
Warrants - 0.0%
---------------------------------------------------------------------------------------------------
STRIKE FIRST
PRICE EXERCISE
---------------------------------------------------------------------------------------------------
Business Services - 0.0%
---------------------------------------------------------------------------------------------------
Loral Space & Communications Ltd. (a) $0.14 1/28/97 1,625 $ 0
Loral Space & Communications Ltd. (a) 0.14 1/28/97 700 0
------------
$ 0
---------------------------------------------------------------------------------------------------
Emerging Market Sovereign - 0.0%
---------------------------------------------------------------------------------------------------
Republic of Argentina, GDP-Linked Security,
expires 2035 N/A N/A $345,731 $ 38,549
Republic of Venezuela, Oil-Indexed Payment
Obligation, expires 2020 N/A N/A 1,250 40,313
---------------------------------------------------------------------------------------------------
TOTAL WARRANTS (IDENTIFIED COST, $109,629) $ 78,862
---------------------------------------------------------------------------------------------------
Preferred Stocks - 0.0%
---------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
---------------------------------------------------------------------------------------------------
Real Estate - 0.0%
---------------------------------------------------------------------------------------------------
HRPT Properties Trust, REIT, "B", 8.75% 5,100 $ 130,305
---------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST, $139,485) $ 130,305
---------------------------------------------------------------------------------------------------
Convertible Bonds - 0.1%
---------------------------------------------------------------------------------------------------
Other Banks & Diversified Financials - 0.1%
---------------------------------------------------------------------------------------------------
Fortis Capital Co., 6.25% to 2009, FRN to 2049 EUR 155,000 $ 207,426
---------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS (IDENTIFIED COST, $135,348) $ 207,426
---------------------------------------------------------------------------------------------------
Put Options Purchased - 0.0%
---------------------------------------------------------------------------------------------------
PAR AMOUNT
ISSUE/EXPIRATION DATE/STRIKE PRICE OF CONTRACTS VALUE ($)
---------------------------------------------------------------------------------------------------
Federative Republic of Brazil - January 2007 @ $129.30 $ 80,000 $ 504
KRW Currency - January 2007 @ $1.02367 KRW 96,200,000 96
---------------------------------------------------------------------------------------------------
TOTAL PUT OPTIONS PURCHASED (PREMIUMS PAID, $925) $ 600
---------------------------------------------------------------------------------------------------
Rights - 0.0%
---------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
---------------------------------------------------------------------------------------------------
Emerging Market Sovereign - 0.0%
---------------------------------------------------------------------------------------------------
Banco Central del Uruguay, Value Recovery Rights,
Expiring January 2021 (a) 1,250,000 $ 0
---------------------------------------------------------------------------------------------------
TOTAL RIGHTS (IDENTIFIED COST, $--) $ 0
---------------------------------------------------------------------------------------------------
Short-term Obligations - 6.3% (y)
---------------------------------------------------------------------------------------------------
Abbey National North America LLC, 5.3%, due 11/01/06 $ 21,246,000 $ 21,246,000
General Electric Co., 5.3%, due 11/01/06 12,463,000 12,463,000
---------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS, AT AMORTIZED COST AND VALUE $ 33,709,000
---------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $547,657,543) (k) $553,778,739
---------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (3.9)% (20,633,221)
---------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $533,145,518
---------------------------------------------------------------------------------------------------
(a) Non-income producing security.
(f) All or a portion of the security has been segregated as collateral for an open futures contract.
(i) Interest only security for which the trust receives interest on notional principal (Par amount).
Par amount shown is the notional principal and does not reflect the cost of the security.
(k) As of October 31, 2006, the trust held securities fair valued in accordance with the policies
adopted by the Board of Trustees, aggregating $503,918,954 and 96.89% of market value. An
independent pricing service provided an evaluated bid for 96.23% of the market value.
(n) Securities exempt from registration under Rule 144A of the Securities Act of 1933. These
securities may be sold in the ordinary course of business in transactions exempt from
registration, normally to qualified institutional buyers. At period end, the aggregate value of
these securities was $49,031,193, representing 9.2% of net assets.
(y) The rate shown represents an annualized yield at time of purchase.
(z) Restricted securities are not registered under the Securities Act of 1933 and are subject to
legal restrictions on resale. These securities generally may be resold in transactions exempt
from registration or to the public if the securities are subsequently registered. Disposal of
these securities may involve time-consuming negotiations and prompt sale at an acceptable price
may be difficult. The trust holds the following restricted securities:
CURRENT
ACQUISITION ACQUISITION MARKET TOTAL % OF
RESTRICTED SECURITIES DATE COST VALUE NET ASSETS
-------------------------------------------------------------------------------------------------------
Amsted Industries, Inc., 10.25%, 2011 8/08/03 $1,597,626 $1,623,250
Banco de Credito del Peru, FRN,
6.95%, 2021 10/31/06 562,000 562,000
Bayview Financial Revolving Mortgage Loan
Trust, FRN, 6.12%, 2040 3/01/06 4,000,000 4,005,659
CPS Auto Receivables Trust, 2.89%, 2009 3/27/03 176,237 173,538
Falcon Franchise Loan LLC, FRN,
3.8455%, 2025 1/29/03 1,404,943 1,160,857
Majapahit Holding B.V., 7.75%, 2016 10/11/06 103,925 107,625
NXP B.V./NXP Funding LLC, 7.875%, 2014 10/05/06 615,000 624,225
Owens Corning, Inc., 7%, 2036 10/26/06 137,232 141,570
Preferred Term Securities IV Ltd., CDO, FRN,
7.64%, 2031 9/13/05 3,051,930 3,015,000
Prudential Securities Secured Financing Corp.,
FRN, 7.3813%, 2013 12/06/04 2,865,414 2,746,549
Service Corp. International, 7.625%, 2018 9/27/06 250,000 256,875
---------------------------------------------------------------------------------------------------------
Total Restricted Securities $14,417,148 2.7%
The following abbreviations are used in this report and are defined:
CDO Collateralized Debt Obligation
CLN Credit-Linked Note
FRN Floating Rate Note. Interest rate resets periodically and may not be the rate reported
at period end.
REIT Real Estate Investment Trust
TBA To Be Announced
TIPS Treasury Inflation Protected Security
Abbreviations indicate amounts shown in currencies other than the U.S. dollar.
All amounts are stated in U.S. dollars unless otherwise indicated. A list of
abbreviations is shown below:
ARS Argentine Peso KRW Korean Won
AUD Australian Dollar MXN Mexican Peso
BRL Brazilian Real MYR Malaysian Ringgit
CAD Canadian Dollar NOK Norwegian Krone
CNY Chinese Yuan Renminbi NZD New Zealand Dollar
COP Colombian Peso PEN Peru Nuevo Sol
CZK Czech Koruna PHP Philippine Peso
DKK Danish Krone PLN Polish Zloty
EGP Egyptian Pound RUB Russian Ruble
EUR Euro SGD Singapore Dollar
GBP British Pound SKK Slovakian Koruna
HUF Hungarian Forint TRY Turkish Lira
ILS Israeli Sheqel UYU Uruguayan Peso
JPY Japanese Yen ZAR South African Rand
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Sales and Purchases in the table below are reported by currency.
NET
UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
DELIVER/RECEIVE SETTLEMENT DATE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
---------------------------------------------------------------------------------------------------
SALES
AUD 312,697 12/06/06 $ 240,065 $ 241,976 $ (1,911)
BRL 53,950 12/04/06 25,000 25,000 0
CAD 3,358,416 12/04/06 2,985,472 2,996,615 (11,143)
DKK 14,940,978 12/18/06 - 12/27/06 2,521,138 2,565,290 (44,152)
EUR 50,607,789 12/18/06 63,716,929 64,772,524 (1,055,595)
GBP 4,532,749 11/27/06 8,557,105 8,649,460 (92,355)
JPY 297,477,432 11/20/06 2,504,019 2,551,406 (47,387)
KRW 9,595,000 1/08/07 10,198 10,200 (2)
NOK 3,271,250 11/08/06 508,346 500,759 7,587
NZD 33,574 12/06/06 22,147 22,457 (310)
TRY 3,546 11/27/06 2,384 2,409 (25)
ZAR 1,665,825 11/03/06 225,875 225,543 332
---------------------------------------------------------------------------------------------------
$81,318,678 $82,563,639 $(1,244,961)
---------------------------------------------------------------------------------------------------
PURCHASES
AUD 110,602 12/06/06 $ 83,372 $ 85,588 $ 2,216
BRL 348,629 11/13/06 - 11/30/06 161,440 162,059 619
CNY 43,212,375 11/10/06 - 11/21/06 5,489,424 5,489,114 (310)
COP 197,285,000 11/17/06 82,563 85,477 2,914
CZK 9,495,980 11/13/06 422,761 432,398 9,637
EUR 5,195,901 11/30/06 - 12/18/06 6,573,637 6,648,640 75,003
GBP 645,419 11/27/06 1,223,217 1,231,598 8,381
HUF 56,508,804 11/13/06 261,026 276,433 15,407
ILS 654,865 11/06/06 152,259 153,186 927
KRW 131,133,162 11/10/06 - 1/08/07 136,681 139,213 2,532
MXN 18,066,781 11/10/06 1,637,670 1,676,794 39,124
MYR 4,734,536 11/24/06 1,292,530 1,297,851 5,321
PEN 165,514 11/07/06 50,927 51,452 525
PHP 4,245,500 11/20/06 85,080 85,078 (2)
PLN 1,464,952 12/04/06 468,552 484,243 15,691
RUB 3,554,500 11/13/06 132,384 133,128 744
SGD 40,321 11/30/06 25,477 25,914 437
SKK 3,544,216 11/06/06 121,323 124,604 3,281
ZAR 3,331,650 11/03/06 - 12/04/06 440,101 450,443 10,342
---------------------------------------------------------------------------------------------------
$18,840,424 $19,033,213 $ 192,789
---------------------------------------------------------------------------------------------------
At October 31, 2006, forward foreign currency purchases and sales under master netting agreements
excluded above amounted to a net payable of $10,556 with Goldman Sachs & Co. and a net
receivable of $4,358 with Merrill Lynch International Bank.
FUTURES CONTRACTS OUTSTANDING AT OCTOBER 31, 2006:
UNREALIZED
EXPIRATION APPRECIATION
DESCRIPTION CONTRACTS VALUE DATE (DEPRECIATION)
---------------------------------------------------------------------------------------------------
U.S. Treasury Bond (Long) 50 $ 5,632,813 Dec-06 $ 92,013
U.S. Treasury Note 10 yr (Long) 318 34,413,563 Dec-06 299,574
--------
$391,587
--------
At October 31, 2006, the trust had sufficient cash and/or securities to cover any commitments under
these derivative contracts.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 10/31/06
This statement represents your trust's balance sheet, which details the assets and liabilities
comprising the total value of the trust.
ASSETS
------------------------------------------------------------------------------------------------------
Investments, at value (identified cost, $547,657,543) $553,778,739
Cash 1,174,484
Receivable for forward foreign currency exchange contracts 203,497
Receivable for forward foreign currency exchange contracts
subject to master netting agreements 4,358
Receivable for daily variation margin on open futures contracts 186,563
Receivable for investments sold 13,089,335
Interest and dividends receivable 8,075,781
Other assets 96,392
------------------------------------------------------------------------------------------------------
Total assets $576,609,149
------------------------------------------------------------------------------------------------------
LIABILITIES
------------------------------------------------------------------------------------------------------
Payable to custodian $1,130,834
Distributions payable 190,995
Payable for forward foreign currency exchange contracts 1,255,669
Payable for forward foreign currency exchange contracts subject
to master netting agreements 10,556
Payable for investments purchased 13,307,823
Payable for TBA purchase commitments 26,877,469
Payable to affiliates
Management fee 24,736
Transfer agent and dividend disbursing costs 43,096
Administrative services fee 558
Payable for independent trustees' compensation 374,579
Accrued expenses and other liabilities 247,316
------------------------------------------------------------------------------------------------------
Total liabilities $43,463,631
------------------------------------------------------------------------------------------------------
Net assets $533,145,518
------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities - continued
NET ASSETS CONSIST OF
------------------------------------------------------------------------------------------------------
Paid-in capital $607,838,262
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies 5,472,665
Accumulated net realized gain (loss) on investments and foreign
currency transactions (79,421,711)
Accumulated distributions in excess of net investment income (743,698)
------------------------------------------------------------------------------------------------------
Net assets $533,145,518
------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding (85,465,754 issued,
less 6,388,302 treasury shares) 79,077,452
------------------------------------------------------------------------------------------------------
Net asset value per share (net assets of $533,145,518/
79,077,452 shares of beneficial interest outstanding) $6.74
------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF OPERATIONS
Year ended 10/31/06
This statement describes how much your trust earned in investment income and accrued in expenses.
It also describes any gains and/or losses generated by trust operations.
NET INVESTMENT INCOME
------------------------------------------------------------------------------------------------------
Income
Interest $30,833,536
Dividends 102,875
Foreign taxes withheld (143)
------------------------------------------------------------------------------------------------------
Total investment income $30,936,268
------------------------------------------------------------------------------------------------------
Expenses
Management fee $3,654,118
Transfer agent and dividend disbursing costs 217,762
Administrative services fee 85,698
Independent trustees' compensation 86,157
Custodian fee 293,047
Shareholder communications 190,862
Auditing fees 87,192
Legal fees 12,858
Miscellaneous 87,267
------------------------------------------------------------------------------------------------------
Total expenses $4,714,961
------------------------------------------------------------------------------------------------------
Fees paid indirectly (62,111)
Reduction of expenses by investment adviser (2,977)
------------------------------------------------------------------------------------------------------
Net expenses $4,649,873
------------------------------------------------------------------------------------------------------
Net investment income $26,286,395
------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
------------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $(2,598,973)
Written options transactions 9,735
Futures contracts 244,814
Swap transactions 751
Foreign currency transactions (1,051,928)
------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $(3,395,601)
------------------------------------------------------------------------------------------------------
Statement of Operations - continued
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS - CONTINUED
------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $7,122,177
Futures contracts 391,587
Translation of assets and liabilities in foreign currencies (1,459,315)
------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $6,054,449
------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $2,658,848
------------------------------------------------------------------------------------------------------
Change in net assets from operations $28,945,243
------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations,
any distributions, and any shareholder transactions.
YEARS ENDED 10/31
------------------------------------
2006 2005
CHANGE IN NET ASSETS
FROM OPERATIONS
------------------------------------------------------------------------------------------------------
Net investment income $26,286,395 $27,896,846
Net realized gain (loss) on investments and foreign
currency transactions (3,395,601) 19,709,683
Net unrealized gain (loss) on investments and foreign
currency translation 6,054,449 (33,557,272)
------------------------------------------------------------------------------------------------------
Change in net assets from operations $28,945,243 $14,049,257
------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
------------------------------------------------------------------------------------------------------
From net investment income $(29,991,840) $(31,635,467)
------------------------------------------------------------------------------------------------------
Change in net assets from trust share transactions $(11,453,243) $(5,859,433)
------------------------------------------------------------------------------------------------------
Total change in net assets $(12,499,840) $(23,445,643)
------------------------------------------------------------------------------------------------------
NET ASSETS
------------------------------------------------------------------------------------------------------
At beginning of period 545,645,358 569,091,001
At end of period (including accumulated distributions in
excess of net investment income of $743,698 and
$429,988, respectively) $533,145,518 $545,645,358
------------------------------------------------------------------------------------------------------
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 past 5 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 share class (assuming reinvestment of all
distributions) held for the entire period. This information has been audited by the trust's independent registered public
accounting firm, whose report, together with the trust's financial statements, are included in this report.
YEARS ENDED 10/31
-------------------------------------------------------------------------------
2006 2005 2004 2003 2002
Net asset value, beginning of period $6.74 $6.94 $6.76 $6.32 $6.60
-----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
-----------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.33 $0.34 $0.38 $0.38 $0.41
Net realized and unrealized gain (loss) on
investments and foreign currency 0.03 (0.16) 0.17 0.46 (0.26)
-----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.36 $0.18 $0.55 $0.84 $0.15
-----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
-----------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.38) $(0.39) $(0.39) $(0.40) $(0.43)
-----------------------------------------------------------------------------------------------------------------------------
Net increase from repurchase of
capital shares $0.02 $0.01 $0.02 $0.00(w) $0.00(w)
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.74 $6.74 $6.94 $6.76 $6.32
-----------------------------------------------------------------------------------------------------------------------------
Per share market value, end of period $6.00 $6.15 $6.30 $6.41 $5.69
-----------------------------------------------------------------------------------------------------------------------------
Total return at market value (%) (r)(s) 3.82 3.78 4.62 20.11 0.72
-----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
-----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 0.88 0.93 0.94 0.94 0.96
Expenses after expense reductions (f) 0.88 0.93 0.94 N/A N/A
Net investment income 4.93 4.97 5.51 5.76 6.49
Portfolio turnover 70 67 59 126 152
Net assets at end of period (000 Omitted) $533,146 $545,645 $569,091 $563,760 $528,945
-----------------------------------------------------------------------------------------------------------------------------
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the trust may receive proceeds from litigation settlements, without which performance would be lower.
(w) Per share amount was less than $0.01.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
(1) BUSINESS AND ORGANIZATION
MFS Multimarket Income Trust (the trust) is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as a closed-end diversified management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The preparation of financial statements in conformity with U.S.
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, including securities of emerging
market issuers. 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. The markets of emerging markets countries are generally
more volatile than the markets of developed countries with more mature
economies. All of the risks of investing in foreign securities previously
described are heightened when investing in emerging markets countries.
INVESTMENT VALUATIONS - Equity securities, including restricted equity
securities, are generally valued at the last sale or official closing price as
reported by an independent pricing service on the market or exchange on which
they are primarily traded. For securities for which there were no sales
reported that day, equity securities are generally valued at the last quoted
daily bid quotation as reported by an independent pricing service on the
market or exchange on which they are primarily traded. Debt instruments (other
than short-term instruments), including restricted debt instruments, are
generally valued at an evaluated or composite bid as reported by an
independent pricing service. Values of debt instruments obtained from pricing
services can utilize both dealer-supplied valuations and electronic data
processing techniques, which take into account 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. Short-
term instruments with a maturity at issuance of 60 days or less may be valued
at amortized cost, which approximates market value. Exchange-traded options
are generally valued at the last sale or official closing price as reported by
an independent pricing service on the exchange on which they are primarily
traded. Exchange-traded options for which there were no sales reported that
day are generally valued at the last daily bid quotation as reported by an
independent pricing service on the exchange on which they are primarily
traded. Options not traded on an exchange are generally valued at broker-
dealer bid quotation. Foreign currency options are generally valued using an
external pricing model that uses market data from an independent source.
Futures contracts are generally valued at last posted settlement price as
reported by an independent pricing service on the market on which they are
primarily traded. Futures contracts for which there were no trades that day
for a particular position are generally valued at the closing bid quotation as
reported by an independent pricing service on the market on which they are
primarily traded. Forward foreign currency contracts are generally valued at
the mean of bid and asked prices for the time period interpolated from rates
reported by an independent pricing service for proximate time periods. Swaps
are generally valued at a broker-dealer bid quotation. Securities and other
assets generally valued on the basis of information from an independent
pricing service may also be valued at a broker-dealer bid quotation. The
values of foreign securities and other assets and liabilities expressed in
foreign currencies are converted to U.S. dollars using the mean of bid and
asked prices for rates reported by an independent pricing service. The Board
of Trustees has delegated primary responsibility for determining or causing to
be determined the value of the trust's investments (including any fair
valuation) to the adviser pursuant to valuation policies and procedures
approved by the Board. If the adviser determines that reliable market
quotations are not readily available, investments are valued at fair value as
determined in good faith by the adviser in accordance with such procedures
under the oversight of the Board of Trustees. Under the trust's valuation
policies and procedures, market quotations are not considered to be readily
available for many types of debt instruments. These investments are generally
valued at fair value based on information from independent pricing services.
The adviser may rely on independent pricing services or other information
(such as the correlation with price movements of similar securities in the
same or other markets; the type, cost and investment characteristics of the
security; the business and financial condition of the issuer; and trading and
other market data) to assist in determining whether to fair value and at what
value to fair value an investment. The value of an investment for purposes of
calculating the trust's net asset value can differ depending on the source and
method used to determine value. When fair valuation is used, the value of
investments used to determine the trust's net asset value may differ from
quoted or published prices for the same investments. In addition, investments
may be valued at fair value if the adviser determines that an investment's
value has been materially affected by events occurring after the close of the
exchange or market on which the investment is principally traded (such as
foreign exchange or market) and prior to the determination of the trust's net
asset value, or after the halting of trading of a specific security where
trading does not resume prior to the close of the exchange or market on which
the security is principally traded. Events that occur on a frequent basis
after foreign markets close (such as developments in foreign markets and
significant movements in the U.S. markets) and prior to the determination of
the trust's net asset value may be deemed to have a material affect on the
value of securities traded in foreign markets. Accordingly, the trust's
foreign equity securities may often be valued at fair value. In September
2006, FASB Statement No. 157, Fair Value Measurements (the "Statement") was
issued, and is effective for fiscal years beginning after November 15, 2007
and for all interim periods within those fiscal years. This Statement provides
a single definition of fair value, a hierarchy for measuring fair value and
expanded disclosures about fair value measurements. Management is evaluating
the application of the Statement to the trust, and believes the impact will be
limited to expanded disclosures resulting from the adoption of this Statement
in the trust's financial statements.
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.
INFLATION-ADJUSTED DEBT SECURITIES - The trust invests in inflation-adjusted
debt securities issued by the U.S. Treasury. The trust may also invest in
inflation-adjusted debt securities issued by U.S. Government agencies and
instrumentalities other than the U.S. Treasury and by other entities such as
U.S. and foreign corporations and foreign governments. The principal value of
these debt securities is adjusted by references to changes in the Consumer
Price Index or another general price or wage index. These debt securities
typically pay a fixed rate of interest, but this fixed rate is applied to the
inflation-adjusted principal amount. The principal paid at maturity of the
debt security is typically equal to the inflation-adjusted principal amount,
or the security's original par value, whichever is greater. Other types of
inflation-adjusted securities may use other methods to adjust for other
measures of inflation.
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.
DERIVATIVE RISK - The trust may invest in derivatives for hedging or non-
hedging purposes. While hedging can reduce or eliminate losses, it can also
reduce or eliminate gains. When the trust uses derivatives as an investment to
gain market exposure, or for hedging purposes, gains and losses from
derivative instruments may be substantially greater than the derivative's
original cost. Derivative instruments include, written options, purchased
options, futures contracts, forward foreign currency exchange contracts, and
swap agreements.
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. The difference between the premium and the amount paid on
effecting a closing transaction is considered a realized gain or loss. When a
written call option is exercised, 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 Option Transactions
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
Outstanding, beginning of period -- $--
Call Options written 4 9,735
Call Options closed (2) (9,146)
Call Options expired (2) (589)
Outstanding, end of period -- $--
PURCHASED OPTIONS - The trust may purchase call or put options for a premium.
Purchasing call options may be a hedge against an anticipated increase in the
dollar cost of securities to be acquired or to increase the trust's exposure
to the underlying instrument. Purchasing put options may hedge against a
decline in the value of portfolio securities. The premium paid is included as
an investment in the Statement of Assets and Liabilities and is subsequently
adjusted to the current value of the option. Premiums paid for purchased
options which have expired are treated as realized losses on investments in
the Statement of Operations. Premiums paid for purchased options which are
exercised or closed are added to the amount paid or offset against the
proceeds on the underlying security or financial instrument to determine the
realized gain or loss. The risk of loss associated with purchased options is
limited to the premium paid.
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. Upon entering into such contracts,
the trust bears the risk of interest or exchange rates or securities prices
moving unexpectedly, in which case, 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 the contract. 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.
SWAP AGREEMENTS - The trust may enter into swap agreements. A swap is an
exchange of cash payments between the trust and another party. Net cash
payments are exchanged at specified intervals and are recorded as a realized
gain or loss in the Statement of Operations. The value of the swap is adjusted
daily and the change in value, including accruals of periodic amounts of
interest to be paid or received, is recorded as unrealized appreciation or
depreciation in the Statement of Operations. A liquidation payment received or
made upon early termination is recorded as a realized gain or loss in the
Statement of Operations. Collateral, in the form of cash or securities, may be
required to be held in segregated accounts with the trust's custodian in
connection with these agreements. Risk of loss may exceed amounts recognized
on the Statement of Assets and Liabilities. These risks include the possible
lack of a liquid market, failure of the counterparty to perform under the
terms of the agreements, and unfavorable market movement of the underlying
instrument. All swap agreements entered into by the trust with the same
counterparty are generally governed by a single master agreement, which
provides for the netting of all amounts owed by the parties under the
agreement upon the occurrence of an event of default, thereby reducing the
credit risk to which such party is exposed.
INTEREST RATE SWAP AGREEMENTS - Interest rate swap agreements involve the
periodic exchange of cash flows, such as the exchange of fixed rate interest
payments for floating rate interest payments based on a notional principal
amount. The interest rates may be based on a specific financial index or the
exchange of two distinct floating rate payments. The trust may enter into an
interest rate swap in order to manage its exposure to interest and foreign
exchange fluctuations.
HYBRID INSTRUMENTS - The trust may invest in indexed or hybrid securities on
which any combination of interest payments, the principal or stated amount
payable at maturity is determined by reference to prices of other securities,
currencies, indexes, economic factors or other measures, including interest
rates, currency exchange rates, or securities indices. The risks of investing
in hybrid instruments reflect a combination of the risks of investing in
securities, swaps, options, futures and currencies. Hybrid instruments are
potentially more volatile and carry greater market risks than traditional debt
instruments. Depending on the structure of the particular hybrid instrument,
changes in a benchmark, underlying assets or economic indicator may be
magnified by the terms of the hybrid instrument and have an even more dramatic
and substantial effect upon the value of the hybrid instrument. Also, the
prices of the hybrid instrument and the benchmark, underlying asset or
economic indicator may not move in the same direction or at the same time.
INDEMNIFICATIONS - Under the trust's organizational documents, its officers
and trustees may be indemnified against certain liabilities and expenses
arising out of the performance of their duties to the trust. Additionally, in
the normal course of business, the trust enters into agreements with service
providers that may contain indemnification clauses. The trust's maximum
exposure under these agreements is unknown as this would involve future claims
that may be made against the trust that have not yet occurred.
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 U.S. generally accepted accounting principles. All discount is
accreted for tax reporting purposes as required by federal income tax
regulations. Dividends received in cash are recorded on the ex-dividend date.
Certain dividends from foreign securities will be recorded when the trust is
informed of the dividend if such information is obtained subsequent to 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. The trust may receive
proceeds from litigation settlements involving its portfolio holdings. Any
proceeds received are reflected in realized gain/loss in the Statement of
Operations, or in unrealized gain/loss if the security is still held by the
trust.
The trust may enter into "TBA" (to be announced) purchase commitments to
purchase securities for a fixed unit price at a future date. Although the unit
price has been established, the principal value has not been finalized.
However, the principal amount of the commitments will not fluctuate more than
0.01%. The trust holds, and maintains until settlement date, cash or high-
grade debt obligations in an amount sufficient to meet the purchase price, or
the trust may enter into offsetting contracts for the forward sale of other
securities it owns. Income on the securities will not be earned until
settlement date. TBA purchase commitments may be considered securities in
themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to settlement date, which is in addition to the risk
of decline in the value of the trust's other assets. Unsettled TBA purchase
commitments are valued at the current market value of the underlying
securities.
The trust may enter into "TBA" (to be announced) sale commitments to hedge its
portfolio positions or to sell mortgage-backed securities it owns under
delayed delivery arrangements. Proceeds of TBA sale commitments are not
received until the contractual settlement date. During the time a TBA sale
commitment is outstanding, equivalent deliverable securities, or an offsetting
TBA purchase commitment deliverable on or before the sale commitment date, are
held as "cover" for the transaction.
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 year ended October 31, 2006, is shown as a
reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The trust intends to qualify as a regulated
investment company, as defined under Subchapter M of the Internal Revenue
Code, and to distribute all of its taxable income, including realized capital
gains. Accordingly, no provision for federal income tax is required in the
financial statements. Foreign taxes, if any, have been accrued by the trust in
the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from U.S. generally accepted accounting
principles. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These adjustments have no impact on net assets or net asset value
per share. Temporary differences which arise from recognizing certain items of
income, expense, gain or loss in different periods for financial statement and
tax purposes will reverse at some time in the future. Distributions in excess
of net investment income or net realized gains are temporary overdistributions
for financial statement purposes resulting from differences in the recognition
or classification of income or distributions for financial statement and tax
purposes.
Book/tax differences primarily relate to amortization and accretion of debt
securities, defaulted bonds, straddle loss deferrals, foreign currency
transactions, and derivative transactions.
The tax character of distributions declared to shareholders is as follows:
10/31/06 10/31/05
Ordinary income (including any short-term
capital gains) $29,991,840 $31,635,467
The federal tax cost and the tax basis components of distributable earnings
were as follows:
AS OF 10/31/06
Cost of investments $551,096,600
----------------------------------------------------------
Gross appreciation $10,961,982
Gross depreciation (8,279,843)
----------------------------------------------------------
Net unrealized appreciation (depreciation) $2,682,139
Undistributed ordinary income 2,007,686
Capital loss carryforwards (75,413,701)
Other temporary differences (3,968,868)
As of October 31, 2006, the trust had capital loss carryforwards available to
offset future realized gains. Such losses expire as follows:
10/31/08 $(6,883,833)
10/31/09 (22,359,865)
10/31/10 (38,291,079)
10/31/14 (7,878,924)
------------------------------------------------------
$(75,413,701)
In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (the "Interpretation") was issued, and is effective for fiscal years
beginning after December 15, 2006 and is to be applied to all open tax years
as of the effective date. This Interpretation prescribes a minimum threshold
for financial statement recognition of the benefit of a tax position taken or
expected to be taken in a tax return, and requires certain expanded
disclosures. Management is evaluating the application of the Interpretation to
the trust, and has not at this time determined the impact, if any, resulting
from the adoption of this Interpretation on the trust's financial statements.
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - The trust has an investment advisory agreement with MFS
to provide overall investment management and related administrative services
and facilities to the trust. 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 gross income. Gross income is calculated based on tax elections that
generally include the accretion of discount and exclude the amortization of
premium, which may differ from investment income reported in the Statement of
Operations. The management fee, from net assets and gross income, incurred for
the year ended October 31, 2006 was equivalent to an annual effective rate of
0.69% of the trust's average daily net assets.
TRANSFER AGENT - MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of
MFS, receives a fee from the trust for its services as registrar and dividend-
disbursing agent. Pursuant to a written agreement, the trust pays MFSC an
account maintenance fee of no more than $9.00 and a dividend services fee of
$0.75 per reinvestment. For the year ended October 31, 2006, these fees
amounted to $144,204. MFSC also receives payment from the trust for out-of-
pocket expenses paid by MFSC on behalf of the trust. For the year ended
October 31, 2006, these costs amounted to $46,624.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to the trust.
Under an administrative services agreement, the trust partially reimburses MFS
the costs incurred to provide these services. The trust is charged a fixed
amount plus a fee based on calendar year average net assets. From July 1, 2005
through March 31, 2006, the trust's annual fixed amount was $10,000. Effective
April 1, 2006, the trust's annual fixed amount is $17,500.
The administrative services fee incurred for the year ended October 31, 2006
was equivalent to an annual effective rate of 0.0161% of the trust average
daily net assets.
TRUSTEES' AND OFFICERS' COMPENSATION - The trust pays compensation to
independent trustees in the form of a retainer, attendance fees, and
additional compensation to Board and Committee chairpersons. The trust does
not pay compensation directly to trustees or to officers of the trust who are
also officers of the investment adviser, 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 MFSC. The trust has an unfunded,
defined benefit plan for certain retired independent trustees which resulted
in a pension expense of $8,103. The trust also has an unfunded retirement
benefit deferral plan for certain independent trustees which resulted in an
expense of $6,148. Both amounts are included in independent trustees'
compensation for the year ended October 31, 2006. The deferred liability for
retirement benefits payable to certain independent trustees under both plans
amounted to $288,535 at October 31, 2006, and is included in payable for
independent trustees' compensation.
DEFERRED TRUSTEE COMPENSATION - Under a Deferred Compensation Plan (the Plan)
independent trustees previously were allowed to elect to defer receipt of all
or a portion of their annual compensation. Trustees are no longer allowed to
defer compensation under the Plan. Amounts previously deferred 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 payable for independent trustees'
compensation is $78,040 of deferred trustees' compensation.
OTHER - This trust and certain other MFS funds (the funds) have entered into a
services agreement (the Agreement) which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an
Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an
officer of the funds and the sole member of Tarantino LLC. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement. For the year ended October 31, 2006, the fee paid to Tarantino LLC
was $3,365. MFS has agreed to reimburse the trust for a portion of the
payments made by the funds to Tarantino LLC in the amount of $2,977, which is
shown as a reduction of total expenses in the Statement of Operations.
Additionally, MFS has agreed to bear all expenses associated with office
space, other administrative support, and supplies provided to the ICCO.
The investment adviser reimbursed the trust $164,664 for a trade correction.
This amount is included in the realized gain on foreign currency transactions
on the Statement of Operation.
(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 $69,876,349 $91,197,048
-------------------------------------------------------------------------------
Investments (non-U.S. government securities) $291,849,962 $269,763,396
-------------------------------------------------------------------------------
(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 1,918,600 shares of
beneficial interest during the year ended October 31, 2006 at an average price
per share of $5.97 and a weighted average discount of 10.48% per share. The
trust repurchased and retired 959,100 shares of beneficial interest during the
year ended October 31, 2005 at an average price per share of $6.11 and a
weighted average discount of 11.01% per share. Transactions in trust shares
were as follows:
YEAR ENDED YEAR ENDED
10/31/06 10/31/05
SHARES AMOUNT SHARES AMOUNT
Treasury shares reacquired (1,918,600) $(11,453,243) (959,100) $(5,859,433)
(6) LINE OF CREDIT
The trust and other affiliated funds participate in a $1 billion unsecured
committed line of credit provided by a syndication of banks under a credit
agreement. In addition, the trust and other affiliated funds have established
uncommitted borrowing arrangements with certain banks. Borrowings may be made
for temporary financing needs. Interest is charged to each fund, based on its
borrowings, generally at a rate equal to the Federal Reserve funds rate plus
0.35%. In addition, a commitment fee, based on the average daily, unused
portion of the committed line of credit, is allocated among the participating
funds at the end of each calendar quarter. For the year ended October 31, 2006,
the trust's commitment fee and interest expense were $3,077 and $0,
respectively, and are included in miscellaneous expense on the Statement of
Operations.
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
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 Fund), including the portfolio of investments, as
of October 31, 2006, and the related statement of operations for the year then
ended, the statements 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 Fund'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 the standards of the Public Company
Accounting Oversight Board (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. We were not engaged to perform an audit of the Fund's internal
control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Fund's internal control
over financial reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of October 31, 2006, by
correspondence with the Fund's custodian and brokers or by other appropriate
auditing procedures where replies from brokers were not received. 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 MFS
Multimarket Income Trust at October 31, 2006, 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 U.S. generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
December 21, 2006
RESULTS OF SHAREHOLDER MEETING
10/31/06 (unaudited)
At the annual meeting of shareholders of MFS Multimarket Income Trust, which
was held on October 6, 2006, the following action was taken:
ITEM 1. To elect the following individuals as Trustees:
NUMBER OF SHARES
----------------
NOMINEE AFFIRMATIVE WITHHOLD AUTHORITY
------- ----------- ------------------
Robert E. Butler 69,841,378.77 2,641,767.60
David H. Gunning 69,902,227.25 2,580,919.12
Robert C. Pozen 69,874,021.76 2,609,124.61
J. Dale Sherratt 69,850,193.10 2,632,953.27
TRUSTEES AND OFFICERS --
IDENTIFICATION AND BACKGROUND
The Trustees and officers of the Trust, as of December 1, 2006, are listed below, together with their
principal occupations during the past five years. (Their titles may have varied during that period.) The
address of each Trustee and officer is 500 Boylston Street, Boston, Massachusetts 02116.
PRINCIPAL OCCUPATIONS DURING
POSITION(S) HELD TRUSTEE/OFFICER THE PAST FIVE YEARS &
NAME, DATE OF BIRTH WITH FUND SINCE(h) OTHER DIRECTORSHIPS(j)
------------------- ---------------- --------------- ----------------------------------
INTERESTED TRUSTEES
Robert J. Manning(k) Trustee February 2004 Massachusetts Financial Services
(born 10/20/63) Company, Chief Executive Officer,
President, Chief Investment
Officer and Director
Robert C. Pozen(k) Trustee February 2004 Massachusetts Financial Services
(born 8/08/46) Company, Chairman (since February
2004); 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); Bell
Canada Enterprises
(telecommunications), Director;
Medtronic, Inc. (medical
technology), Director; Telesat
(satellite communications),
Director
INDEPENDENT TRUSTEES
J. Atwood Ives Trustee and Chair February 1992 Private investor; Eastern
(born 5/01/36) of Trustees Enterprises (diversified services
company), Chairman, Trustee and
Chief Executive Officer (until
November 2000)
Robert E. Butler(n) Trustee January 2006 Consultant - regulatory and
(born 11/29/41) compliance matters (since July
2002); PricewaterhouseCoopers LLP
(professional services firm),
Partner (November 2000 until June
2002)
Lawrence H. Cohn, M.D. Trustee August 1993 Brigham and Women's Hospital,
(born 3/11/37) Senior Cardiac Surgeon, Chief of
Cardiac Surgery (until 2005);
Harvard Medical School, Professor
of Surgery; Brigham and Women's
Hospital Physicians' Organization,
Chair (2000 to 2004)
David H. Gunning Trustee January 2004 Cleveland-Cliffs Inc. (mining
(born 5/30/42) 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
William R. Gutow Trustee December 1993 Private investor and real estate
(born 9/27/41) consultant; Capitol Entertainment
Management Company (video
franchise), Vice Chairman
Michael Hegarty Trustee December 2004 Retired; AXA Financial (financial
(born 12/21/44) services and insurance), Vice
Chairman and Chief Operating
Officer (until May 2001); The
Equitable Life Assurance Society
(insurance), President and Chief
Operating Officer (until May 2001)
Lawrence T. Perera Trustee July 1981 Hemenway & Barnes (attorneys),
(born 6/23/35) Partner
J. Dale Sherratt Trustee August 1993 Insight Resources, Inc.
(born 9/23/38) (acquisition 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)
Laurie J. Thomsen Trustee March 2005 Private investor; Prism Venture
(born 8/05/57) Partners (venture capital), Co-
founder and General Partner (until
June 2004); St. Paul Travelers
Companies (commercial property
liability insurance), Director
Robert W. Uek Trustee January 2006 Retired (since 1999);
(born 5/18/41) PricewaterhouseCoopers LLP
(professional services firm),
Partner (until 1999); Consultant
to investment company industry
(since 2000); TT International
Funds (mutual fund complex),
Trustee (2000 until 2005);
Hillview Investment Trust II Funds
(mutual fund complex), Trustee
(2000 until 2005)
OFFICERS
Maria F. Dwyer(k) President November 2005 Massachusetts Financial Services
(born 12/01/58) Company, Executive Vice President
and Chief Regulatory Officer
(since March 2004); Fidelity
Management & Research Company,
Vice President (prior to March
2004); Fidelity Group of Funds,
President and Treasurer (prior to
March 2004)
Tracy Atkinson(k) Treasurer September 2005 Massachusetts Financial Services
(born 12/30/64) Company, Senior Vice President
(since September 2004);
PricewaterhouseCoopers LLP,
Partner (prior to September 2004)
Christopher R. Bohane(k) Assistant Secretary July 2005 Massachusetts Financial Services
(born 1/18/74) and Assistant Clerk Company, Vice President and Senior
Counsel (since April 2003);
Kirkpatrick & Lockhart LLP (law
firm), Associate (prior to April
2003)
Ethan D. Corey(k) Assistant Secretary July 2005 Massachusetts Financial Services
(born 11/21/63) and Assistant Clerk Company, Special Counsel (since
December 2004); Dechert LLP (law
firm), Counsel (prior to December
2004)
David L. DiLorenzo(k) Assistant Treasurer July 2005 Massachusetts Financial Services
(born 8/10/68) Company, Vice President (since
June 2005); JP Morgan Investor
Services, Vice President (prior to
June 2005)
Timothy M. Fagan(k) Assistant Secretary September 2005 Massachusetts Financial Services
(born 7/10/68) and Assistant Clerk Company, Vice President and Senior
Counsel (since September 2005);
John Hancock Advisers, LLC, Vice
President and Chief Compliance
Officer (September 2004 to August
2005), Senior Attorney (prior to
September 2004); John Hancock
Group of Funds, Vice President and
Chief Compliance Officer
(September 2004 to December 2004)
Mark D. Fischer(k) Assistant Treasurer July 2005 Massachusetts Financial Services
(born 10/27/70) Company, Vice President (since May
2005); JP Morgan Investment
Management Company, Vice President
(prior to May 2005)
Brian E. Langenfeld(k) Assistant Secretary June 2006 Massachusetts Financial Services
(born 3/07/73) and Assistant Clerk Company, Assistant Vice President
and Counsel (since May 2006); John
Hancock Advisers, LLC, Assistant
Vice President and Counsel (May
2005 to April 2006); John Hancock
Advisers, LLC, Attorney and
Assistant Secretary (prior to May
2005)
Ellen Moynihan(k) Assistant Treasurer April 1997 Massachusetts Financial Services
(born 11/13/57) Company, Senior Vice President
Susan S. Newton(k) Assistant Secretary May 2005 Massachusetts Financial Services
(born 3/07/50) and Assistant Clerk Company, Senior Vice President and
Associate General Counsel (since
April 2005); John Hancock
Advisers, LLC, Senior Vice
President, Secretary and Chief
Legal Officer (prior to April
2005); John Hancock Group of
Funds, Senior Vice President,
Secretary and Chief Legal Officer
(prior to April 2005)
Susan A. Pereira(k) Assistant Secretary July 2005 Massachusetts Financial Services
(born 11/05/70) and Assistant Clerk Company, Vice President and Senior
Counsel (since June 2004); Bingham
McCutchen LLP (law firm),
Associate (prior to June 2004)
Mark N. Polebaum(k) Secretary and Clerk January 2006 Massachusetts Financial Services
(born 5/01/52) Company, Executive Vice President,
General Counsel and Secretary
(since January 2006); Wilmer
Cutler Pickering Hale and Dorr LLP
(law firm), Partner (prior to
January 2006)
Frank L. Tarantino Independent Chief June 2004 Tarantino LLC (provider of
(born 3/07/44) Compliance Officer compliance services), Principal
(since June 2004); CRA Business
Strategies Group (consulting
services), Executive Vice
President (April 2003 to June
2004); David L. Babson & Co.
(investment adviser), Managing
Director, Chief Administrative
Officer and Director (prior to
March 2003)
James O. Yost(k) Assistant Treasurer September 1990 Massachusetts Financial Services
(born 6/12/60) Company, Senior Vice President
------------
(h) Date first appointed to serve as Trustee/officer of an MFS fund. Each Trustee has served continuously
since appointment unless indicated otherwise.
(j) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission
(i.e., "public companies").
(k) "Interested person" of the Trust 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 fund, as a
result of position with MFS. The address of MFS is 500 Boylston Street, Boston, Massachusetts 02116.
(n) In 2004 and 2005, Mr. Butler provided consulting services to the independent compliance consultant
retained by MFS pursuant to its settlement with the SEC concerning market timing and related matters.
The terms of that settlement required that compensation and expenses related to the independent
compliance consultant be borne exclusively by MFS and, therefore, MFS paid Mr. Butler for the services
he rendered to the independent compliance consultant. In 2004 and 2005, MFS paid Mr. Butler a total of
$351,119.29.
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 and officer will serve
until next elected or his or her earlier death, resignation, retirement or removal.
Messrs. Butler, Sherratt and Uek and Ms. Thomsen are members of the Trust's Audit Committee.
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. As of January 1, 2006, the Trustees served as board members of 98 funds within the MFS
Family of Funds.
The Statement of Additional Information for the Trust and further information about the Trustees are
available without charge upon request by calling 1-800-225-2606.
On October 9, 2006, Maria F. Dwyer, as Chief Executive Officer of the Trust, certified to the New York
Stock Exchange that as of the date of her certification she was not aware of any violation by the Trust of
the corporate governance listing standards of the New York Stock Exchange.
The Trust filed with the Securities and Exchange Commission the certifications of its principal executive
officer and principal financial officer under Section 302 of the Sarbanes-Oxley Act of 2003 as an exhibit
to the Trust's Form N-CSR for the period covered by this report.
---------------------------------------------------------------------------------------------------------
INVESTMENT ADVISER CUSTODIAN
Massachusetts Financial Services Company State Street Bank and Trust Company
500 Boylston Street, Boston, MA 02116-3741 225 Franklin Street, Boston, MA 02110
INDEPENDENT REGISTERED PUBLIC
PORTFOLIO MANAGERS ACCOUNTING FIRM
Richard O. Hawkins Ernst & Young LLP
John F. Addeo 200 Clarendon Street, Boston, MA 02116
James J. Calmas
David P. Cole
Matthew W. Ryan
BOARD REVIEW OF INVESTMENT
ADVISORY AGREEMENT
The Investment Company Act of 1940 requires that both the full Board of
Trustees and a majority of the non-interested ("independent") Trustees, voting
separately, annually approve the continuation of the Fund's investment
advisory agreement with MFS. The Trustees consider matters bearing on the Fund
and its advisory arrangements at their meetings throughout the year, including
a review of performance data at each regular meeting. In addition, the
independent Trustees met several times over the course of three months
beginning in May and ending in July, 2006 ("contract review meetings") for the
specific purpose of considering whether to approve the continuation of the
investment advisory agreement for the Fund and the other investment companies
that the Board oversees (the "MFS Funds"). The independent Trustees were
assisted in their evaluation of the Fund's investment advisory agreement by
independent legal counsel, from whom they received separate legal advice and
with whom they met separately from MFS during various contract review
meetings. The independent Trustees were also assisted in this process by the
MFS Funds' Independent Chief Compliance Officer, a full-time senior officer
appointed by and reporting to the independent Trustees.
In connection with their deliberations regarding the continuation of the
investment advisory agreement, the Trustees, including the independent
Trustees, considered such information and factors as they believed, in light
of the legal advice furnished to them and their own business judgment, to be
relevant. The investment advisory agreement for the Fund was considered
separately, although the Trustees also took into account the common interests
of all MFS Funds in their review. As described below, the Trustees considered
the nature, quality, and extent of the various investment advisory,
administrative, and shareholder services performed by MFS under the existing
investment advisory agreement and other arrangements with the Fund.
In connection with their contract review meetings, the Trustees received and
relied upon materials which included, among other items: (i) information
provided by Lipper Inc. on the investment performance (based on net asset
value) of the Fund for various time periods ended December 31, 2005 and the
investment performance (based on net asset value) of a group of funds with
substantially similar investment classifications/objectives (the "Lipper
performance universe"), as well as the investment performance (based on net
asset value) of a group of funds identified by objective criteria suggested by
MFS ("MFS peer funds"), (ii) information provided by Lipper Inc. on the Fund's
advisory fees and other expenses and the advisory fees and other expenses of
comparable funds identified by Lipper (the "Lipper expense group"), as well as
the advisory fees and other expenses of MFS peer funds, (iii) information
provided by MFS on the advisory fees of comparable portfolios of other clients
of MFS, including institutional separate accounts and other clients, (iv)
information as to whether and to what extent applicable expense waivers,
reimbursements or fee "breakpoints" are observed for the Fund, (v) information
regarding MFS' financial results and financial condition, including MFS' and
certain of its affiliates' estimated profitability from services performed for
the Fund and the MFS Funds as a whole, (vi) MFS' views regarding the outlook
for the mutual fund industry and the strategic business plans of MFS, (vii)
descriptions of various functions performed by MFS for the Funds, such as
compliance monitoring and portfolio trading practices, and (viii) information
regarding the overall organization of MFS, including information about MFS'
senior management and other personnel providing investment advisory,
administrative and other services to the Fund and the other MFS Funds. The
comparative performance, fee and expense information prepared and provided by
Lipper Inc. was not independently verified and the independent Trustees did
not independently verify any information provided to them by MFS.
The Trustees' conclusion as to the continuation of the investment advisory
agreement was based on a comprehensive consideration of all information
provided to the Trustees and not the result of any single factor. Some of the
factors that figured particularly in the Trustees' deliberations are described
below, although individual Trustees may have evaluated the information
presented differently from one another, giving different weights to various
factors. It is also important to recognize that the fee arrangements for the
Fund and other MFS Funds are the result of years of review and discussion
between the independent Trustees and MFS, that certain aspects of such
arrangements may receive greater scrutiny in some years than others, and that
the Trustees' conclusions may be based, in part, on their consideration of
these same arrangements during the course of the year and in prior years.
Based on information provided by Lipper Inc. and MFS, the Trustees reviewed
the Fund's total return investment performance as well as the performance of
peer groups of funds over various time periods. The Trustees placed particular
emphasis on the total return performance of the Fund's common shares in
comparison to the performance of funds in its Lipper performance universe over
the three-year period ended December 31, 2005, which the Trustees believed was
a long enough period to reflect differing market conditions. The Fund ranked
2nd out of a total of 5 funds in the Lipper performance universe for this
three-year period (a ranking of first place out of the total number of funds
in the performance universe indicating the best performer and a ranking of
last place out of the total number of funds in the performance universe
indicating the worst performer). The total return performance of the Fund's
common shares ranked 1st out of a total of 5 funds for the one-year period and
2nd out of a total of 5 funds for the five-year period ended December 31,
2005. Given the size of the Lipper performance universe and information
previously provided by MFS regarding differences between the Fund and other
funds in its Lipper performance universe, the Trustees also reviewed the
Fund's performance in comparison to a custom benchmark developed by MFS. The
Fund under-performed its custom benchmark for each of the one- and five-year
periods ended December 31, 2005, and out-performed its custom benchmark for
the three-year period ended December 31, 2005. Because of the passage of time,
these performance results are likely to differ from the performance results
for more recent periods, including those shown elsewhere in this report.
In the course of their deliberations, the Trustees took into account
information provided by MFS in connection with the contract review meetings,
as well as during investment review meetings conducted with portfolio
management personnel during the course of the year regarding the Fund's
performance. After reviewing these and related factors, the Trustees
concluded, within the context of their overall conclusions regarding the
investment advisory agreement, that they were satisfied with MFS' responses
and efforts relating to investment performance.
In assessing the reasonableness of the Fund's advisory fee, the Trustees
considered, among other information, the Fund's advisory fee and the total
expense ratio of the Fund's common shares as a percentage of average net
assets and the advisory fee and total expense ratios of peer groups of funds
based on information provided by Lipper Inc. and MFS. The Trustees considered
that, according to the Lipper data, the Fund's effective advisory fee rate was
approximately at the Lipper expense group median, and the Fund's total expense
ratio was at the Lipper expense group median.
The Trustees also considered the advisory fees charged by MFS to institutional
accounts. In comparing these fees, the Trustees considered information
provided by MFS as to the generally broader scope of services provided by MFS
to the Fund in comparison to institutional accounts and the impact on MFS and
expenses associated with the more extensive regulatory regime to which the
Fund is subject in comparison to institutional accounts.
The Trustees considered that, as a closed-end fund, the Fund is unlikely to
experience meaningful asset growth. As a result, the Trustees did not view the
potential for realization of economies of scale as the Fund's assets grow to
be a material factor in their deliberations. The Trustees noted that they
would consider economies of scale in the future in the event the Fund
experiences significant asset growth, such as through an offering of preferred
shares (which is not currently contemplated) or a material increase in the
market value of the Fund's portfolio securities.
The Trustees also considered information prepared by MFS relating to MFS'
costs and profits with respect to the Fund, the MFS Funds considered as a
group, and other investment companies and accounts advised by MFS, as
well as MFS' methodologies used to determine and allocate its costs to the MFS
Funds, the Fund and other accounts and products for purposes of estimating
profitability.
After reviewing these and other factors described herein, the Trustees
concluded, within the context of their overall conclusions regarding the
investment advisory agreement, that the advisory fees charged to the Fund
represent reasonable compensation in light of the services being provided by
MFS to the Fund.
In addition, the Trustees considered MFS' resources and related efforts to
continue to retain, attract and motivate capable personnel to serve the Fund.
The Trustees also considered current and developing conditions in the
financial services industry, including the entry into the industry of large
and well-capitalized companies which are spending, and appear to be prepared
to continue to spend, substantial sums to engage personnel and to provide
services to competing investment companies. In this regard, the Trustees also
considered the financial resources of MFS and its ultimate parent, Sun Life
Financial Inc. The Trustees also considered the advantages and possible
disadvantages to the Fund of having an adviser which also serves other
investment companies as well as other accounts.
The Trustees also considered the nature, quality, cost, and extent of
administrative services provided to the Fund by MFS under agreements other
than the investment advisory agreement. The Trustees also considered the
nature, extent and quality of certain other services MFS performs or arranges
for on the Fund's behalf, which may include securities lending programs,
directed expense payment programs, class action recovery programs, and MFS'
interaction with third-party service providers, principally custodians and
sub-custodians. The Trustees concluded that the various non-advisory services
provided by MFS and its affiliates on behalf of the Funds were satisfactory.
The Trustees also considered benefits to MFS from the use of the Fund's
portfolio brokerage commissions, if applicable, to pay for investment research
(excluding third-party research, for which MFS pays directly) and various
other factors. Additionally, the Trustees considered so-called "fall-out
benefits" to MFS such as reputational value derived from serving as investment
manager to the Fund.
Based on their evaluation of factors that they deemed to be material,
including those factors described above, the Board of Trustees, including a
majority of the independent Trustees, concluded that the Fund's investment
advisory agreement with MFS should be continued for an additional one-year
period, commencing August 1, 2006.
A discussion regarding the Board's most recent review and renewal of the
Fund's investment advisory agreement is available by visiting the Closed-End
section of the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds' proxy voting policies and procedures is
available without charge, upon request, by calling 1-800-225-2606, by visiting
the Proxy Voting section of mfs.com or by visiting the SEC's Web site at
http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is
available without charge by visiting the Proxy Voting section of mfs.com or by
visiting the SEC's Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The trust will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The trust's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-551-5850. The trust's Form N-Q is
available on the EDGAR database on the Commission's Internet Web site at
http://www.sec.gov, and copies of this information may be obtained, upon
payment of a duplicating fee, by electronic request at the following e-mail
address: publicinfo@sec.gov or by writing the Public Reference Section at the
above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
FEDERAL TAX INFORMATION (unaudited)
The trust will notify shareholders of amounts for use in preparing 2006 income
tax forms in January 2007.
MFS(R) PRIVACY NOTICE
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 the investment products and services 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 nonpublic
personal information with third parties or certain of our affiliates in
connection with servicing your account or processing your transactions. We may
share information with companies or financial institutions that perform
marketing services on our behalf or with other financial institutions with
which we have joint marketing arrangements, subject to any legal requirements.
Authorization to access your nonpublic personal information is limited to
appropriate personnel who provide products, services, or information to you.
We maintain physical, electronic, and procedural safeguards to help protect
the personal information we collect about you.
If you have any questions about the 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.
CONTACT INFORMATION AND NUMBER OF SHAREHOLDERS
INVESTOR INFORMATION
Transfer Agent, Registrar and Dividend Disbursing Agent
Call 1-800-637-2304 any business day from 9 a.m. to 5 p.m. Eastern time
Write to: Computershare Trust Company, N.A.
P.O. Box 43078
Providence, RI 02940-3078
Effective December 18, 2006, Computershare Trust Company, N.A. became the
Transfer Agent and Registrar and Computershare Shareholder Services, Inc.
became the Dividend Disbursing Agent, succeeding MFS Service Center, Inc.
NUMBER OF SHAREHOLDERS
As of October 31, 2006, our records indicate that there are 7,180 registered
shareholders and approximately 37,488 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:
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, RI 02940-3078
1-800-637-2304
M F S(R)
INVESTMENT MANAGEMENT
500 Boylston Street, Boston, MA 02116
ITEM 2. CODE OF ETHICS.
The Registrant has adopted a Code of Ethics pursuant to Section 406 of the
Sarbanes-Oxley Act and as defined in Form N-CSR that applies to the
Registrant's principal executive officer and principal financial and accounting
officer. The Registrant has not amended any provision in its Code of Ethics
(the "Code") that relates to an element of the Code's definitions enumerated in
paragraph (b) of Item 2 of this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Messrs. Robert E. Butler and Robert W. Uek and Ms. Laurie J. Thomsen, members
of the Audit Committee, have been determined by the Board of Trustees in their
reasonable business judgment to meet the definition of "audit committee
financial expert" as such term is defined in Form N-CSR. In addition, Messrs.
Butler, and Uek and Ms. Thomsen are "independent" members of the Audit
Committee (as such term has been defined by the Securities and Exchange
Commission in regulations implementing Section 407 of the Sarbanes-Oxley Act of
2002). The Securities and Exchange Commission has stated that the designation
of a person as an audit committee financial expert pursuant to this Item 3 on
the Form N-CSR does not impose on such a person any duties, obligations or
liability that are greater than the duties, obligations or liability imposed on
such person as a member of the Audit Committee and the Board of Trustees in the
absence of such designation or identification.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
ITEMS 4(a) THROUGH 4(d) AND 4(g):
The Board of Trustees has appointed Ernst & Young LLP ("E&Y") to serve as
independent accountants to the Registrant (hereinafter the "Registrant" or the
"Fund"). The tables below set forth the audit fees billed to the Fund as well
as fees for non-audit services provided to the Fund and/or to the Fund's
investment adviser, Massachusetts Financial Services Company ("MFS") and to
various entities either controlling, controlled by, or under common control
with MFS that provide ongoing services to the Fund ("MFS Related Entities").
For the fiscal years ended October 31, 2006 and 2005, audit fees billed to the
Fund by E&Y were as follows:
Audit Fees
FEES BILLED BY E&Y: 2006 2005
---- ----
MFS Multimarket Income Trust 41,610 41,610
For the fiscal years ended October 31, 2006 and 2005, fees billed by E&Y for
audit-related, tax and other services provided to the Fund and for
audit-related, tax and other services provided to MFS and MFS Related Entities
were as follows:
Audit-Related Fees(1) Tax Fees(2) All Other Fees(3)
FEES BILLED BY E&Y: 2006 2005 2006 2005 2006 2005
---- ---- ---- ---- ---- ----
To MFS Multimarket 15,000 20,000 9,382 10,620 144 1,635
Income Trust
To MFS and MFS Related 0 0 15,500 0 0 685,399
Entities of MFS
Multimarket Income
Trust*
AGGREGATE FEES FOR NON-AUDIT
SERVICES:
2006 2005
---- ----
To MFS Multimarket Income 114,395 749,654
Trust, MFS and MFS Related
Entities#
* This amount reflects the fees billed to MFS and MFS Related Entities for non-audit services relating directly to
the operations and financial reporting of the Fund (portions of which services also related to the operations and
financial reporting of other funds within the MFS Funds complex).
# This amount reflects the aggregate fees billed by E&Y for non-audit services rendered to the Fund and for
non-audit services rendered to MFS and the MFS Related Entities.
(1) The fees included under "Audit-Related Fees" are fees related to assurance and related services that are
reasonably related to the performance of the audit or review of financial statements, but not reported under
"Audit Fees," including accounting consultations, agreed-upon procedure reports, attestation reports, comfort
letters and internal control reviews.
(2) The fees included under "Tax Fees" are fees associated with tax compliance, tax advice and tax planning,
including services relating to the filing or amendment of federal, state or local income tax returns, regulated
investment company qualification reviews and tax distribution and analysis.
(3) The fees included under "All Other Fees" are fees for products and services provided by E&Y other than those
reported under "Audit Fees," "Audit-Related Fees" and "Tax Fees," including fees for the subscription to tax
treatise and for services related to analysis of fund administrative expenses, compliance program and records
management projects.
ITEM 4(e)(1):
Set forth below are the policies and procedures established by the Audit
Committee of the Board of Trustees relating to the pre-approval of audit and
non-audit related services: To the extent required by applicable law,
pre-approval by the Audit Committee of the Board is needed for all audit and
permissible non-audit services rendered to the Fund and all permissible
non-audit services rendered to MFS or MFS Related Entities if the services
relate directly to the operations and financial reporting of the Registrant.
Pre-approval is currently on an engagement-by-engagement basis. In the event
pre-approval of such services is necessary between regular meetings of the
Audit Committee and it is not practical to wait to seek pre-approval at the
next regular meeting of the Audit Committee, pre-approval of such services may
be referred to the Chair of the Audit Committee for approval; provided that the
Chair may not pre-approve any individual engagement for such services exceeding
$50,000 or multiple engagements for such services in the aggregate exceeding
$100,000 between such regular meetings of the Audit Committee. Any engagement
pre-approved by the Chair between regular meetings of the Audit Committee shall
be presented for ratification by the entire Audit Committee at its next
regularly scheduled meeting.
ITEM 4(e)(2):
None, or 0%, of the services relating to the Audit-Related Fees, Tax Fees and
All Other Fees paid by the Fund and MFS and MFS Related Entities relating
directly to the operations and financial reporting of the Registrant disclosed
above were approved by the audit committee pursuant to paragraphs (c)(7)(i)(C)
of Rule 2-01 of Regulation S-X (which permits audit committee approval after
the start of the engagement with respect to services other than audit, review
or attest services, if certain conditions are satisfied).
ITEM 4(f): Not applicable.
ITEM 4(h): The Registrant's Audit Committee has considered whether the
provision by a Registrant's independent registered public accounting firm of
non-audit services to MFS and MFS Related Entities that were not pre-approved
by the Committee (because such services were provided prior to the
effectiveness of SEC rules requiring pre-approval or because such services did
not relate directly to the operations and financial reporting of the
Registrant) was compatible with maintaining the independence of the independent
registered public accounting firm as the Registrant's principal auditors.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The Registrant has an Audit Committee established in accordance with Section
3(a)(58)(A) of the Securities Exchange Act of 1934. The members of the Audit
Committee are Messrs. Robert E. Butler, J. Dale Sherratt and Robert W. Uek and
Ms. Laurie J. Thomsen.
ITEM 6. SCHEDULE OF INVESTMENTS
A schedule of investments of the Registrant is included as part of the report
to shareholders of the Registrant under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The Board of Trustees and the Board of Managers of the investment
companies (the "MFS Funds") advised by Massachusetts Financial Services Company
("MFS") have delegated to MFS the right and obligation to vote proxies for
shares that are owned by the MFS Funds, in accordance with MFS' proxy voting
policies and procedures (the "MFS Proxy Policies"). The MFS Proxy Policies are
set forth below:
MASSACHUSETTS FINANCIAL SERVICES COMPANY
PROXY VOTING POLICIES AND PROCEDURES
SEPTEMBER 17, 2003, AS REVISED ON SEPTEMBER 20, 2004,
MARCH 15, 2005 AND MARCH 1, 2006
Massachusetts Financial Services Company, MFS Institutional Advisors,
Inc. and MFS' other investment adviser subsidiaries (collectively, "MFS") have
adopted proxy voting policies and procedures, as set forth below ("MFS Proxy
Voting Policies and Procedures"), with respect to securities owned by the
clients for which MFS serves as investment adviser and has the power to vote
proxies, including the registered investment companies sponsored by MFS, other
than the MFS Union Standard Equity Fund (the "MFS Funds"). References to
"clients" in these policies and procedures include the MFS Funds and other
clients of MFS, such as funds organized offshore, sub-advised funds and
separate account clients, to the extent these clients have delegated to MFS the
responsibility to vote proxies on their behalf under the MFS Proxy Voting
Policies and Procedures.
The MFS Proxy Voting Policies and Procedures include:
A. Voting Guidelines;
B. Administrative Procedures;
C. Monitoring System;
D. Records Retention; and
E. Reports.
A. VOTING GUIDELINES
1. GENERAL POLICY; POTENTIAL CONFLICTS OF INTEREST
MFS' policy is that proxy voting decisions are made in what MFS
believes to be the best long-term economic interests of MFS' clients, and not
in the interests of any other party or in MFS' corporate interests, including
interests such as the distribution of MFS Fund shares, administration of 401(k)
plans, and institutional relationships.
MFS has carefully reviewed matters that in recent years have been
presented for shareholder vote by either management or shareholders of public
companies. Based on the overall principle that all votes cast by MFS on behalf
of its clients must be in what MFS believes to be the best long-term economic
interests of such clients, MFS has adopted proxy voting guidelines, set forth
below, that govern how MFS generally will vote on specific matters presented
for shareholder vote. In all cases, MFS will exercise its discretion in voting
on these matters in accordance with this overall principle. In other words, the
underlying guidelines are simply that - guidelines. Proxy items of significance
are often considered on a case-by-case basis, in light of all relevant facts
and circumstances, and in certain cases MFS may vote proxies in a manner
different from these guidelines.
As a general matter, MFS maintains a consistent voting position on
similar proxy proposals with respect to various issuers. In addition, MFS
generally votes consistently on the same matter when securities of an issuer
are held by multiple client accounts. However, MFS recognizes that there are
gradations in certain types of proposals that might result in different voting
positions being taken with respect to different proxy statements. There also
may be situations involving matters presented for shareholder vote that are not
clearly governed by the guidelines, such as proposed mergers and acquisitions.
Some items that otherwise would be acceptable will be voted against the
proponent when it is seeking extremely broad flexibility without offering a
valid explanation. MFS reserves the right to override the guidelines with
respect to a particular shareholder vote when such an override is, in MFS' best
judgment, consistent with the overall principle of voting proxies in the best
long-term economic interests of MFS' clients.
From time to time, MFS receives comments on these guidelines as well
as regarding particular voting issues from its clients and corporate issuers.
These comments are carefully considered by MFS, when it reviews these
guidelines each year and revises them as appropriate.
These policies and procedures are intended to address any potential
material conflicts of interest on the part of MFS or its affiliates that are
likely to arise in connection with the voting of proxies on behalf of MFS'
clients. If such potential material conflicts of interest do arise, MFS will
analyze, document and report on such potential material conflicts of interest
(see Sections B.2 and E below), and shall ultimately vote the relevant proxies
in what MFS believes to be the best long-term economic interests of its
clients. The MFS Proxy Review Group is responsible for monitoring and reporting
with respect to such potential material conflicts of interest.
2. MFS' POLICY ON SPECIFIC ISSUES
ELECTION OF DIRECTORS
MFS believes that good governance should be based on a board with a
majority of directors who are "independent" of management, and whose key
committees (e.g., compensation, nominating, and audit committees) are comprised
entirely of "independent" directors. While MFS generally supports the board's
nominees in uncontested elections, we will withhold our vote for a nominee for
a board of a U.S. issuer if, as a result of such nominee being elected to the
board, the board would be comprised of a majority of members who are not
"independent" or, alternatively, the compensation, nominating or audit
committees would include members who are not "independent." MFS will also
withhold its vote for a nominee to the board if we can determine that he or she
failed to attend at least 75% of the board and/or relevant committee meetings
in the previous year without a valid reason. In addition, MFS will withhold its
vote for all nominees standing for election to a board of a U.S. issuer if we
can determine: (1) if, since the last annual meeting of shareholders and
without shareholder approval, the board or its compensation committee has
repriced underwater options; or (2) if, within the last year, shareholders
approved by majority vote a resolution recommending that the board rescind a
"poison pill" and the board has failed to take responsive action to that
resolution. Responsive action would include the rescission of the "poison
pill"(without a broad reservation to reinstate the "poison pill" in the event
of a hostile tender offer), or public assurances that the terms of the "poison
pill" would be put to a binding shareholder vote within the next five to seven
years.
MFS evaluates a contested election of directors on a case-by-case
basis considering the long-term financial performance of the company relative
to its industry, management's track record, the qualifications of the nominees
for both slates and an evaluation of what each side is offering shareholders.
MFS votes for reasonably crafted proposals calling for directors to be
elected with an affirmative majority of votes cast and/or the elimination of
the plurality standard for electing directors (including binding resolutions
requesting that the board amend the company's bylaws), provided the proposal
includes a carve-out for a plurality voting standard when there are more
director nominees than board seats (e.g., contested elections) ("Majority Vote
Proposals").
MFS considers voting against Majority Vote Proposals if the company
has adopted, or has proposed to adopt in the proxy statement, formal corporate
governance principles that present a meaningful alternative to the majority
voting standard and provide an adequate response to both new nominees as well
as incumbent nominees who fail to receive a majority of votes cast.
MFS believes that a company's election policy should address the
specific circumstances at that company. MFS considers whether a company's
election policy articulates the following elements to address each director
nominee who fails to receive an affirmative majority of votes cast in an
election:
o Establish guidelines for the process by which the company determines the
status of nominees who fail to receive an affirmative majority of votes cast
and disclose the guidelines in the annual proxy statement;
o Guidelines should include a reasonable timetable for resolution of the
nominee's status and a requirement that the resolution be disclosed together
with the reasons for the resolution;
o Vest management of the process in the company's independent directors, other
than the nominee in question; and
o Outline the range of remedies that the independent directors may consider
concerning the nominee.
CLASSIFIED BOARDS
MFS opposes proposals to classify a board (e.g., a board in which only
one-third of board members are elected each year). MFS supports proposals to
declassify a board.
NON-SALARY COMPENSATION PROGRAMS
Restricted stock plans should reward results rather than tenure. In
some cases, restricted stock is granted to the recipient at deep discounts to
fair market value, sometimes at par value. The holder cannot sell for a period
of years, but in the meantime the holder is able to vote and receive dividends.
Eventually the restrictions lapse and the stock can be sold by the holder.
MFS votes against stock option programs for officers, employees or
non-employee directors that do not require an investment by the optionee, that
give "free rides" on the stock price, or that permit grants of stock options
with an exercise price below fair market value on the date the options are
granted.
MFS opposes stock option programs that allow the board or the
compensation committee, without shareholder approval, to reprice underwater
options or to automatically replenish shares (i.e., evergreen plans). MFS will
consider on a case-by-case basis proposals to exchange existing options for
newly issued options (taking into account such factors as whether there is a
reasonable value-for-value exchange).
MFS opposes stock option and restricted stock plans that provide
unduly generous compensation for officers, directors or employees, or could
result in excessive dilution to other shareholders. As a general guideline, MFS
votes against stock option and restricted stock plans if all such plans for a
particular company involve potential dilution, in the aggregate, of more than
15%. However, MFS may accept a higher percentage (up to 20%) in the case of
startup or small companies which cannot afford to pay large salaries to
executives, or in the case where MFS, based upon the issuer's public
disclosures, believes that the issuer has been responsible with respect to its
recent compensation practices, including the mix of the issuance of restricted
stock and options.
MFS votes in favor of stock option or restricted stock plans for
non-employee directors as long as they satisfy the requirements set forth above
with respect to stock option and restricted stock plans for company executives.
EXPENSING OF STOCK OPTIONS
While we acknowledge that there is no agreement on a uniform
methodology for expensing stock options, MFS supports shareholder proposals to
expense stock options because we believe that the expensing of options presents
a more accurate picture of the company's financial results to investors. We
also believe that companies are likely to be more disciplined when granting
options if the value of stock options were treated as an expense item on the
company's income statements.
EXECUTIVE COMPENSATION
MFS believes that competitive compensation packages are necessary to
attract, motivate and retain executives. Therefore, MFS opposes shareholder
proposals that seek to set limits on executive compensation. Shareholder
proposals seeking to set limits on executive compensation tend to specify
arbitrary compensation criteria. MFS also opposes shareholder requests for
disclosure on executive compensation beyond regulatory requirements because we
believe that current regulatory requirements for disclosure of executive
compensation are appropriate and that additional disclosure is often
unwarranted and costly. Although we support linking executive stock option
grants to a company's stock performance, MFS opposes shareholder proposals that
mandate a link of performance-based options to a specific industry or peer
group index. MFS believes that compensation committees should retain the
flexibility to propose the appropriate index or other criteria by which
performance-based options should be measured. MFS evaluates other executive
compensation restrictions (e.g., terminating the company's stock option or
restricted stock programs, freezing executive pay during periods of large
layoffs, and establishing a maximum ratio between the highest paid executive
and lowest paid employee) based on whether such proposals are in the best
long-term economic interests of our clients.
EMPLOYEE STOCK PURCHASE PLANS
MFS supports the use of a broad-based employee stock purchase plans to
increase company stock ownership by employees, provided that shares purchased
under the plan are acquired for no less than 85% of their market value and do
not result in excessive dilution.
"GOLDEN PARACHUTES"
From time to time, shareholders of companies have submitted proxy
proposals that would require shareholder approval of severance packages for
executive officers that exceed certain predetermined thresholds. MFS votes in
favor of such shareholder proposals when they would require shareholder
approval of any severance package for an executive officer that exceeds a
certain multiple of such officer's annual compensation that is not determined
in MFS' judgment to be excessive.
ANTI-TAKEOVER MEASURES
In general, MFS votes against any measure that inhibits capital
appreciation in a stock, including proposals that protect management from
action by shareholders. These types of proposals take many forms, ranging from
"poison pills" and "shark repellents" to super-majority requirements.
MFS will vote for proposals to rescind existing "poison pills" and
proposals that would require shareholder approval to adopt prospective "poison
pills." Nevertheless, MFS will consider supporting the adoption of a
prospective "poison pill" or the continuation of an existing "poison pill" if
the following two conditions are met: (1) the "poison pill" allows MFS clients
to hold an aggregate position of up to 15% of a company's total voting
securities (and of any class of voting securities); and (2) either (a) the
"poison pill" has a term of not longer than five years, provided that MFS will
consider voting in favor of the "poison pill" if the term does not exceed seven
years and the "poison pill" is linked to a business strategy or purpose that
MFS believes is likely to result in greater value for shareholders; or (b) the
terms of the "poison pill" allow MFS clients the opportunity to accept a fairly
structured and attractively priced tender offer (e.g., a "chewable poison pill"
that automatically dissolves in the event of an all cash, all shares tender
offer at a premium price).
MFS will consider on a case-by-case basis proposals designed to
prevent tenders which are disadvantageous to shareholders such as tenders at
below market prices and tenders for substantially less than all shares of an
issuer.
REINCORPORATION AND REORGANIZATION PROPOSALS
When presented with a proposal to reincorporate a company under the
laws of a different state, or to effect some other type of corporate
reorganization, MFS considers the underlying purpose and ultimate effect of
such a proposal in determining whether or not to support such a measure. While
MFS generally votes in favor of management proposals that it believes are in
the best long-term economic interests of its clients, MFS may oppose such a
measure if, for example, the intent or effect would be to create additional
inappropriate impediments to possible acquisitions or takeovers.
ISSUANCE OF STOCK
There are many legitimate reasons for issuance of stock. Nevertheless,
as noted above under "Non-Salary Compensation Programs", when a stock option
plan (either individually or when aggregated with other plans of the same
company) would substantially dilute the existing equity (e.g., by approximately
15% or more), MFS generally votes against the plan. In addition, MFS votes
against proposals where management is asking for authorization to issue common
or preferred stock with no reason stated (a "blank check") because the
unexplained authorization could work as a potential anti-takeover device.
REPURCHASE PROGRAMS
MFS supports proposals to institute share repurchase plans in which
all shareholders have the opportunity to participate on an equal basis. Such
plans may include a company acquiring its own shares on the open market, or a
company making a tender offer to its own shareholders.
CONFIDENTIAL VOTING
MFS votes in favor of proposals to ensure that shareholder voting
results are kept confidential. For example, MFS supports proposals that would
prevent management from having access to shareholder voting information that is
compiled by an independent proxy tabulation firm.
CUMULATIVE VOTING
MFS opposes proposals that seek to introduce cumulative voting and for
proposals that seek to eliminate cumulative voting. In either case, MFS will
consider whether cumulative voting is likely to enhance the interests of MFS'
clients as minority shareholders. In our view, shareholders should provide
names of qualified candidates to a company's nominating committee, which now
for the first time (for U.S. listed companies) must be comprised solely of
"independent" directors.
WRITTEN CONSENT AND SPECIAL MEETINGS
Because the shareholder right to act by written consent (without
calling a formal meeting of shareholders) can be a powerful tool for
shareholders, MFS generally opposes proposals that would prevent shareholders
from taking action without a formal meeting or would take away a shareholder's
right to call a special meeting of company shareholders.
INDEPENDENT AUDITORS
MFS believes that the appointment of auditors is best left to the
board of directors of the company and therefore supports the ratification of
the board's selection of an auditor for the company. Recently, some shareholder
groups have submitted proposals to limit the non-audit activities of a
company's audit firm. Some proposals would prohibit the provision of any
non-audit services by a company's auditors to that company. MFS opposes
proposals recommending the prohibition or limitation of the performance of
non-audit services by an auditor, and proposals recommending the removal of a
company's auditor due to the performance of non-audit work for the company by
its auditor. MFS believes that the board, or its audit committee, should have
the discretion to hire the company's auditor for specific pieces of non-audit
work in the limited situations permitted under current law.
BEST PRACTICES STANDARDS
Best practices standards are rapidly developing in the corporate
governance areas as a result of recent corporate scandals, the Sarbanes-Oxley
Act of 2002 and revised listing standards on major stock exchanges. MFS
generally support these developments. However, many issuers are not publicly
registered, are not subject to these enhanced listing standards, or are not
operating in an environment that is comparable to that in the United States. In
reviewing proxy proposals under these circumstances, MFS votes for proposals
that enhance standards of corporate governance so long as we believe that -
given the circumstances or the environment within which the issuers operate -
the proposal is consistent with the best long-term economic interests of our
clients.
SOCIAL ISSUES
There are many groups advocating social change, and many have chosen
the publicly-held corporation as a vehicle for advancing their agenda. Common
among these are resolutions requiring the corporation to refrain from investing
or conducting business in certain countries, to adhere to some list of goals or
principles (e.g., environmental standards) or to promulgate special reports on
various activities. MFS votes against such proposals unless their
shareholder-oriented benefits will outweigh any costs or disruptions to the
business, including those that use corporate resources to further a particular
social objective outside the business of the company or when no discernible
shareholder economic advantage is evident.
The laws of various states may regulate how the interests of certain
clients subject to those laws (e.g., state pension plans) are voted with
respect to social issues. Thus, it may be necessary to cast ballots differently
for certain clients than MFS might normally do for other clients.
FOREIGN ISSUERS
MFS will evaluate items on proxies for foreign companies in the
context of the guidelines described above, as well as local market standards
and best practices. Proxies for foreign companies often contain significantly
more voting items than those of U.S. companies. Many of these items on foreign
proxies involve repetitive, non-controversial matters that are mandated by
local law. Accordingly, the items that are generally deemed routine and which
do not require the exercise of judgment under these guidelines (and therefore
voted in favor) for foreign issuers include the following: (i) receiving
financial statements or other reports from the board; (ii) approval of
declarations of dividends; (iii) appointment of shareholders to sign board
meeting minutes; (iv) discharge of management and supervisory boards; (v)
approval of share repurchase programs; (vi) election of directors in
uncontested elections and (vii) appointment of auditors.
In accordance with local law or business practices, many foreign
companies prevent the sales of shares that have been voted for a certain period
beginning prior to the shareholder meeting and ending on the day following the
meeting ("share blocking"). Depending on the country in which a company is
domiciled, the blocking period may begin a stated number of days prior to the
meeting (e.g., one, three or five days) or on a date established by the
company. While practices vary, in many countries the block period can be
continued for a longer period if the shareholder meeting is adjourned and
postponed to a later date. Similarly, practices vary widely as to the ability
of a shareholder to have the "block" restriction lifted early (e.g., in some
countries shares generally can be "unblocked" up to two days prior to the
meeting whereas in other countries the removal of the block appears to be
discretionary with the issuer's transfer agent). Due to these restrictions, MFS
must balance the benefits to its clients of voting proxies against the
potentially serious portfolio management consequences of a reduced flexibility
to sell the underlying shares at the most advantageous time. For companies in
countries with share blocking periods, the disadvantage of being unable to sell
the stock regardless of changing conditions generally outweighs the advantages
of voting at the shareholder meeting for routine items. Accordingly, MFS will
not vote those proxies in the absence of an unusual, significant vote.
B. ADMINISTRATIVE PROCEDURES
1. MFS PROXY REVIEW GROUP
The administration of these MFS Proxy Voting Policies and Procedures
is overseen by the MFS Proxy Voting Committee, which includes senior personnel
from the MFS Legal and Global Investment Support Departments. The MFS Proxy
Voting Committee:
a. Reviews these MFS Proxy Voting Policies and Procedures at least
annually and recommends any amendments considered to be necessary
or advisable;
b. Determines whether any potential material conflicts of interest
exist with respect to instances in which (i) MFS seeks to override
these MFS Proxy Voting Policies and Procedures and (ii) votes on
ballot items not clearly governed by these MFS Proxy Voting
Policies and Procedures; and
c. Considers special proxy issues as they may arise from time to time.
2. POTENTIAL CONFLICTS OF INTEREST
The MFS Proxy Voting Committee is responsible for monitoring potential
material conflicts of interest on the part of MFS or its affiliates that could
arise in connection with the voting of proxies on behalf of MFS' clients. Any
significant attempt to influence MFS' voting on a particular proxy matter
should be reported to the MFS Proxy Voting Committee.
In cases where proxies are voted in accordance with these MFS Proxy
Voting Policies and Procedures, no material conflict of interest will be deemed
to exist. In cases where (i) MFS is considering overriding these MFS Proxy
Voting Policies and Procedures, or (ii) matters presented for vote are not
clearly governed by these MFS Proxy Voting Policies and Procedures, the MFS
Proxy Voting Committee, or delegees, will follow these procedures:
a. Compare the name of the issuer of such proxy against a list of
significant current and potential (i) distributors of MFS Fund
shares, (ii) retirement plans administered by MFS, and (iii) MFS
institutional clients (the "MFS Significant Client List");
b. If the name of the issuer does not appear on the MFS Significant
Client List, then no material conflict of interest will be deemed
to exist, and the proxy will be voted as otherwise determined by
the MFS Proxy Voting Committee;
c. If the name of the issuer appears on the MFS Significant Client
List, then at least one member of the MFS Proxy Voting Committee
will carefully evaluate the proposed vote in order to ensure that
the proxy ultimately is voted in what MFS believes to be the best
long-term economic interests of MFS' clients, and not in MFS'
corporate interests; and
d. For all potential material conflicts of interest identified under
clause (c) above, the MFS Proxy Voting Committee will document: the
name of the issuer, the issuer's relationship to MFS, the analysis
of the matters submitted for proxy vote, and the basis for the
determination that the votes ultimately were cast in what MFS
believes to be the best long-term economic interests of MFS'
clients, and not in MFS' corporate interests. A copy of the
foregoing documentation will be provided to the MFS' Conflicts
Officer.
The members of the MFS Proxy Voting Committee are responsible for
creating and maintaining the MFS Significant Client List, in consultation with
MFS' distribution, retirement plan administration and institutional business
units. The MFS Significant Client List will be reviewed and updated
periodically, as appropriate.
3. GATHERING PROXIES
Most proxies received by MFS and its clients originate at Automatic
Data Processing Corp. ("ADP") although a few proxies are transmitted to
investors by corporate issuers through their custodians or depositories. ADP
and issuers send proxies and related material directly to the record holders of
the shares beneficially owned by MFS' clients, usually to the client's
custodian or, less commonly, to the client itself. This material will include
proxy cards, reflecting the proper shareholdings of Funds and of clients on the
record dates for such shareholder meetings, as well as proxy statements with
the issuer's explanation of the items to be voted upon.
MFS, on behalf of itself and the Funds, has entered into an agreement with
an independent proxy administration firm, Institutional Shareholder Services,
Inc. (the "Proxy Administrator"), pursuant to which the Proxy Administrator
performs various proxy vote related services, such as vote processing and
recordkeeping functions for MFS' Funds and institutional client accounts. The
Proxy Administrator receives proxy statements and proxy cards directly or
indirectly from various custodians, logs these materials into its database and
matches upcoming meetings with MFS Fund and client portfolio holdings, which
are input into the Proxy Administrator's system by an MFS holdings datafeed.
Through the use of the Proxy Administrator system, ballots and proxy material
summaries for the upcoming shareholders' meetings of over 10,000 corporations
are available on-line to certain MFS employees and the MFS Proxy Voting
Committee.
4. ANALYZING PROXIES
Proxies are voted in accordance with these MFS Proxy Voting Policies
and Procedures. The Proxy Administrator at the prior direction of MFS
automatically votes all proxy matters that do not require the particular
exercise of discretion or judgment with respect to these MFS Proxy Voting
Policies and Procedures as determined by the MFS Proxy Voting Committee. With
respect to proxy matters that require the particular exercise of discretion or
judgment, MFS considers and votes on those proxy matters. Representatives of
the MFS Proxy Voting Committee review, as appropriate, votes cast to ensure
conformity with these MFS Proxy Voting Policies and Procedures.
As a general matter, portfolio managers and investment analysts have
little or no involvement in specific votes taken by MFS. This is designed to
promote consistency in the application of MFS' voting guidelines, to promote
consistency in voting on the same or similar issues (for the same or for
multiple issuers) across all client accounts, and to minimize the potential
that proxy solicitors, issuers, or third parties might attempt to exert
inappropriate influence on the vote. In limited types of votes (e.g., corporate
actions, such as mergers and acquisitions), a representative of MFS Proxy
Voting Committee may consult with or seek recommendations from portfolio
managers or analysts.(3) However, the MFS Proxy Voting Committee would
ultimately determine the manner in which all proxies are voted.
--------
(1) From time to time, due to travel schedules and other commitments, an
appropriate portfolio manager or research analyst is not available to
provide a recommendation on a merger or acquisition proposal. If such a
recommendation cannot be obtained within a few business days prior to the
shareholder meeting, the MFS Proxy Review Group may determine to vote the
proxy in what it believes to be the best long-term economic interests of
MFS' clients.
As noted above, MFS reserves the right to override the guidelines when
such an override is, in MFS' best judgment, consistent with the overall
principle of voting proxies in the best long-term economic interests of MFS'
clients. Any such override of the guidelines shall be analyzed, documented and
reported in accordance with the procedures set forth in these policies.
5. VOTING PROXIES
In accordance with its contract with MFS, the Proxy Administrator also
generates a variety of reports for the MFS Proxy Voting Committee, and makes
available on-line various other types of information so that the MFS Proxy
Voting Committee may review and monitor the votes cast by the Proxy
Administrator on behalf of MFS' clients.
C. MONITORING SYSTEM
It is the responsibility of the Proxy Administrator and MFS' Proxy
Voting Committee to monitor the proxy voting process. When proxy materials for
clients are received, they are forwarded to the Proxy Administrator and are
input into the Proxy Administrator's system. Through an interface with the
portfolio holdings database of MFS, the Proxy Administrator matches a list of
all MFS Funds and clients who hold shares of a company's stock and the number
of shares held on the record date with the Proxy Administrator's listing of any
upcoming shareholder's meeting of that company.
When the Proxy Administrator's system "tickler" shows that the voting
cut-off date of a shareholders' meeting is approaching, a Proxy Administrator
representative checks that the vote for MFS Funds and clients holding that
security has been recorded in the computer system. If a proxy card has not been
received from the client's custodian, the Proxy Administrator calls the
custodian requesting that the materials be forwarded immediately. If it is not
possible to receive the proxy card from the custodian in time to be voted at
the meeting, MFS may instruct the custodian to cast the vote in the manner
specified and to mail the proxy directly to the issuer.
D. RECORDS RETENTION
MFS will retain copies of these MFS Proxy Voting Policies and
Procedures in effect from time to time and will retain all proxy voting reports
submitted to the Board of Trustees, Board of Directors and Board of Managers of
the MFS Funds for the period required by applicable law. Proxy solicitation
materials, including electronic versions of the proxy cards completed by
representatives of the MFS Proxy Voting Committee, together with their
respective notes and comments, are maintained in an electronic format by the
Proxy Administrator and are accessible on-line by the MFS Proxy Voting
Committee. All proxy voting materials and supporting documentation, including
records generated by the Proxy Administrator's system as to proxies processed,
including the dates when proxy ballots were received and submitted, and the
votes on each company's proxy issues, are retained as required by applicable
law.
E. REPORTS
MFS FUNDS
MFS will report the results of its voting to the Board of Trustees,
Board of Directors and Board of Managers of the MFS Funds. These reports will
include: (i) a summary of how votes were cast; (ii) a review of situations
where MFS did not vote in accordance with the guidelines and the rationale
therefor; (iii) a review of the procedures used by MFS to identify material
conflicts of interest; and (iv) a review of these policies and the guidelines
and, as necessary or appropriate, any proposed modifications thereto to reflect
new developments in corporate governance and other issues. Based on these
reviews, the Trustees, Directors and Managers of the MFS Funds will consider
possible modifications to these policies to the extent necessary or advisable.
ALL MFS ADVISORY CLIENTS
At any time, a report can be printed by MFS for each client who has
requested that MFS furnish a record of votes cast. The report specifies the
proxy issues which have been voted for the client during the year and the
position taken with respect to each issue.
Generally, MFS will not divulge actual voting practices to any party
other than the client or its representatives (unless required by applicable
law) because we consider that information to be confidential and proprietary to
the client.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
GENERAL. Information regarding the portfolio manager(s) of the MFS Multimarket
Income Trust (the "Fund") is set forth below.
PORTFOLIO MANAGER PRIMARY ROLE SINCE TITLE AND FIVE YEAR HISTORY
----------------- ------------ ----- ---------------------------
Richard O. Hawkins Lead Portfolio Manager April 2006 Senior Vice President of
MFS; employed in the
investment management
area of MFS since 1988.
John Addeo High Yield Debt 2005 Vie President of MFS;
Securities Portfolio employed in the
Manager investment management area
of MFS since 1998.
James J. Calmas High Grade Debt 2005 Senior Vice President of
Securities Portfolio MFS; employed in the
Manager investment management area
of MFS since 1988.
Matthew W. Ryan Emerging Markets Debt 2004 Senior Vice President of
Securities Portfolio MFS; employed in the
Manager investment management area
of MFS since 1997.
David P. Cole High Yield Debt October 2006 Vice President of MFS;
Securities Portfolio employed in the
Manager investment management
area of MFS since 2004.
High Yield Analyst at
Franklin Templeton
Investments from 1999 to
2004.
COMPENSATION. Portfolio manager total cash compensation is a combination of
base salary and performance bonus:
o Base Salary - Base salary represents a smaller percentage of portfolio
manager total cash compensation (generally below 33%) than incentive
compensation.
o Performance Bonus - Generally, incentive compensation represents a
majority of portfolio manager total cash compensation. The performance
bonus is based on a combination of quantitative and qualitative factors,
with more weight given to the former (generally over 60 %) and less
weight given to the latter.
>> The quantitative portion is based on pre-tax performance of all of
the accounts managed by the portfolio manager (which includes the
Fund and any other accounts managed by the portfolio manager) over a
one-, three- and five-year period relative to the appropriate Lipper
peer group universe and/or one or more benchmark indices with
respect to each account. Primary weight is given to portfolio
performance over a three-year time period with lesser consideration
given to portfolio performance over one- and five-year periods
(adjusted as appropriate if the portfolio manager has served for
shorter periods).
>> The qualitative portion is based on the results of an annual
internal peer review process (conducted by other portfolio managers,
analysts and traders) and management's assessment of overall
portfolio manager contributions to investor relations and the
investment process (distinct from fund and other account
performance).
Portfolio managers also typically benefit from the opportunity to participate
in the MFS Equity Plan. Equity interests and/or options to acquire equity
interests in MFS or its parent company are awarded by management, on a
discretionary basis, taking into account tenure at MFS, contribution to the
investment process, and other factors.
Finally, portfolio managers are provided with a benefits package including a
defined contribution plan, health coverage and other insurance, which are
available to other employees of MFS on substantially similar terms. The
percentage such benefits represent of any portfolio manager's compensation
depends upon the length of the individual's tenure at MFS and salary level, as
well as other factors.
OWNERSHIP OF FUND SHARES. The following table shows the dollar range of equity
securities of the Fund beneficially owned by the Fund's portfolio manager as of
the Fund's fiscal year ended October 31, 2006. The following dollar ranges
apply:
N. None
A. $1 - $10,000
B. $10,001 - $50,000
C. $50,001 - $100,000
D. $100,001 - $500,000
E. $500,001 - $1,000,000
F. Over $1,000,000
NAME OF PORTFOLIO MANAGER DOLLAR RANGE OF EQUITY SECURITIES IN FUND
------------------------- -----------------------------------------
Richard O. Hawkins N
John Addeo N
James J. Calmas N
Matthew W. Ryan N
David P. Cole N
OTHER ACCOUNTS. In addition to the Fund, the Fund's portfolio manager is
responsible (either individually or jointly) for the day-to-day management of
certain other accounts, the number and total assets of which as of the Fund's
fiscal year ended October 31, 2006 were as follows:
REGISTERED INVESTMENT OTHER POOLED INVESTMENT
COMPANIES VEHICLES OTHER ACCOUNTS
--------------------- ----------------------- --------------
NUMBER OF NUMBER OF NUMBER OF
NAME ACCOUNTS* TOTAL ASSETS* ACCOUNTS TOTAL ASSETS ACCOUNTS TOTAL ASSETS
Richard O. Hawkins 11 $24.7 billion 0 N/A 1 $40.4
million
John Addeo 14 $4.8 billion 3 $492.7 million 2 $536.2
million
James J. Calmas 8 $3.0 billion 4 $568.3 million 2 $620.2
million
Matthew W. Ryan 15 $5.0 billion 3 $1.9 billion 8 $1.4 billion
David P. Cole 11 $4.4 billion 2 $225.2 million 0 N/A
-----------------
* Includes the Fund.
Advisory fees are not based upon performance of any of the accounts identified
in the table above.
POTENTIAL CONFLICTS OF INTEREST. MFS seeks to identify potential conflicts of
interest resulting from a portfolio manager's management of both the Fund and
other accounts, and has adopted policies and procedures designed to address
such potential conflicts.
The management of multiple funds and accounts (including proprietary accounts)
may give rise to potential conflicts of interest if the funds and accounts have
different objectives and strategies, benchmarks, time horizons and fees as a
portfolio manager must allocate his or her time and investment ideas across
multiple funds and accounts. In certain instances there may be securities which
are suitable for the Fund's portfolio as well as for accounts of MFS or its
subsidiaries with similar investment objectives. A Fund's trade allocation
policies may give rise to conflicts of interest if the Fund's orders do not get
fully executed or are delayed in getting executed due to being aggregated with
those of other accounts of MFS or its subsidiaries. A portfolio manager may
execute transactions for another fund or account that may adversely impact the
value of the Fund's investments. Investments selected for funds or accounts
other than the Fund may outperform investments selected for the Fund.
When two or more clients are simultaneously engaged in the purchase or sale of
the same security, the securities are allocated among clients in a manner
believed by MFS to be fair and equitable to each. It is recognized that in some
cases this system could have a detrimental effect on the price or volume of the
security as far as the Fund is concerned. In most cases, however, MFS believes
that the Fund's ability to participate in volume transactions will produce
better executions for the Fund.
MFS does not receive a performance fee for its management of the Fund. As a
result, MFS and/or a portfolio manager may have a financial incentive to
allocate favorable or limited opportunity investments or structure the timing
of investments to favor accounts other than the Fund - for instance, those that
pay a higher advisory fee and/or have a performance fee.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
======================================================================================================================
MFS MULTIMARKET INCOME TRUST
----------------------------------------------------------------------------------------------------------------------
(D) MAXIMUM NUMBER
(C) TOTAL NUMBER OF (OR APPROXIMATE
SHARES PURCHASED AS DOLLAR VALUE) OF
(B) AVERAGE PART OF PUBLICLY SHARES THAT MAY YET
(A) TOTAL NUMBER OF PRICE PAID ANNOUNCED PLANS BE PURCHASED UNDER
PERIOD SHARES PURCHASED PER SHARE OR PROGRAMS THE PLANS OR PROGRAMS
======================================================================================================================
11/1/05-11/30/05 70,700 $6.13 70,700 7,390,085
----------------------------------------------------------------------------------------------------------------------
12/1/05-12/31/05 300,600 $5.97 300,600 7,089,485
----------------------------------------------------------------------------------------------------------------------
1/1/06-1/31/06 177,400 $6.12 177,400 6,912,085
----------------------------------------------------------------------------------------------------------------------
2/1/06-2/28/06 154,000 $6.10 154,000 6,758,085
----------------------------------------------------------------------------------------------------------------------
3/1/06-3/31/06 269,700 $6.06 269,700 7,759,635
----------------------------------------------------------------------------------------------------------------------
4/1/06-4/30/06 158,300 $5.87 158,300 7,601,335
----------------------------------------------------------------------------------------------------------------------
5/1/06-5/31/06 239,700 $5.88 239,700 7,361,635
----------------------------------------------------------------------------------------------------------------------
6/1/06-6/30/06 176,000 $5.84 176,000 7,185,635
----------------------------------------------------------------------------------------------------------------------
7/1/06-7/31/06 149,200 $5.85 149,200 7,036,435
----------------------------------------------------------------------------------------------------------------------
8/1/06-8/31/06 223,000 $5.94 223,000 6,813,435
----------------------------------------------------------------------------------------------------------------------
9/1/06-9/30/06 0 n/a 0 6,813,435
----------------------------------------------------------------------------------------------------------------------
10/1/06-10/31/06 0 n/a 0 6,813,435
----------------------------------------------------------------------------------------------------------------------
TOTAL 1,918,600 $5.97 1,918,600
======================================================================================================================
Note: The Board of Trustees approves procedures to repurchase shares annually.
The notification to shareholders of the program is part of the semi-annual and
annual reports sent to shareholders. These annual programs begin on March 1st
of each year. The programs conform to the conditions of Rule 10b-18 of the
securities Exchange Act of 1934 and limit the aggregate number of shares that
may be purchased in each annual period (March 1 through the following February
28) to 10% of the Registrant's outstanding shares as of the first day of the
plan year (March 1). The aggregate number of shares available for purchase for
the March 1, 2006 plan year is 8,029,335.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no material changes to the procedures by which shareholders may send
recommendations to the Board for nominees to the Registrant's Board since the
Registrant last provided disclosure as to such procedures in response to the
requirements of Item 7(d)(2)(ii)(G) of Schedule 14A.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act of
1940 (the "Act")) 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 second fiscal quarter covered by the report that has materially
affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant
intends to satisfy the Item 2 requirements through filing of an
exhibit: Code of Ethics attached hereto.
(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 Rule 23c-1 under
the Act sent or given during the period covered by the report by or on
behalf of the Registrant to 10 or more persons. Not applicable.
(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.
NOTICE
A copy of the Amended and Restated Declaration of Trust of the Registrant is on
file with the Secretary of State of the Commonwealth of Massachusetts and
notice is hereby given that this instrument is executed on behalf of the
Registrant by an officer of the Registrant as an officer and not individually
and the obligations of or arising out of this instrument are not binding upon
any of the Trustees or shareholders individually, but are binding only upon the
assets and property of the respective constituent series of the Registrant.
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)* MARIA F. DWYER
-----------------------------------------------------
Maria F. Dwyer, President
Date: December 21, 2006
-----------------
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)* MARIA F. DWYER
-----------------------------------------------------
Maria F. Dwyer, President (Principal Executive
Officer)
Date: December 21, 2006
-----------------
By (Signature and Title)* TRACY ATKINSON
-----------------------------------------------------
Tracy Atkinson, Treasurer (Principal Financial Officer
and Accounting Officer)
Date: December 21, 2006
-----------------
* Print name and title of each signing officer under his or her signature.