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: April 30, 2006
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ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) Mutual Funds 04/30/06
SEMIANNUAL REPORT
MFS(R) MULTIMARKET INCOME TRUST
A path for pursuing opportunity
M F S(SM)
INVESTMENT MANAGEMENT(R)
[graphic omitted]
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NOT FDIC INSURED MAY LOSE VALUE NO BANK OR CREDIT UNION GUARANTEE NOT A DEPOSIT
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
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MFS(R) MULTIMARKET INCOME TRUST 4/30/06
The trust seeks to provide a high current income
through investment in fixed-income securities.
New York Stock Exchange Symbol: MMT
TABLE OF CONTENTS
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LETTER FROM THE CEO 1
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PORTFOLIO COMPOSITION 2
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PORTFOLIO MANAGERS' PROFILES 3
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PERFORMANCE SUMMARY 5
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DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN 8
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PORTFOLIO OF INVESTMENTS 9
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FINANCIAL STATEMENTS 25
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NOTES TO FINANCIAL STATEMENTS 29
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REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM 38
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BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 39
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PROXY VOTING POLICIES AND INFORMATION 39
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QUARTERLY PORTFOLIO DISCLOSURE 39
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CONTACT INFORMATION BACK COVER
LETTER FROM THE CEO
[Photo of Robert J. Manning]
Dear Shareholders,
It has been said that change is the only constant in life. As investors have
seen, that theme is still accurate today as we recently have experienced
shifting economic cycles because of natural disasters and political
instability around the globe.
Markets worldwide have fluctuated in the past year as devastating hurricanes
had a dramatic effect on the international economy, particularly on oil
prices. We witnessed political unrest in the Middle East, highlighted by
instability in Iraq, and in Africa, the usually stable Nigeria also
experienced violence. As a result, energy prices have bounced up and down,
with crude oil prices at one point topping a record $70 per barrel.
Such cycles are not uncommon and in fact have almost become the norm in our
everyday lives. What does all of this mean to you as an investor? In times like
these, it helps to know that you're working with a seasoned investment
professional who has experience to guide you through difficult times. At
MFS(R), we believe our investment management team has the knowledge and
confidence to navigate through difficult cycles and at the same time see
through adversity to find investment opportunities for our clients and
shareholders.
Our investment management process, honed over 80 years, combines a unique
concept of teamwork with our unwavering focus on the long term. We firmly
believe that the best way to realize long-term financial goals - be it a
college education, a comfortable retirement, or a secure family legacy - is to
follow a three-pronged approach that focuses on longer time horizons. Allocate
holdings across the major asset classes - including stocks, bonds, and cash.
Diversify within each class to take advantage of different market segments and
investing styles. Rebalance assets regularly to maintain a desired asset
allocation. Of course, these strategies cannot guarantee a profit or protect
against a loss. This long-term approach requires diligence and patience, two
traits that in our experience are essential to capitalizing on the many
opportunities the financial markets can offer - through both up and down
economic cycles.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
June 15, 2006
The opinions expressed in this letter are those of MFS, and no forecasts can
be guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE (i)
Bonds 95.7%
Cash & Other Net Assets 4.0%
Convertible Preferred Stocks 0.2%
Stocks 0.1%
MARKET SECTORS (i)
High Yield Corporates 28.7%
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High Grade Corporates 24.0%
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Non-U.S. Government Bonds 12.4%
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Commercial Mortgage-Backed
Securities 9.2%
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U.S. Treasury Securities 7.2%
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Mortgage-Backed Securities 4.8%
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Cash & Other Net Assets 4.0%
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Emerging Market Bonds 4.0%
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Asset-Backed Securities 2.5%
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U.S. Government Agencies 2.3%
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Residential Mortgage-Backed Securities 0.6%
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U.S. Convertibles 0.2%
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U.S. Equities 0.1%
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CREDIT QUALITY OF BONDS (r)
AAA 36.2%
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AA 2.7%
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A 8.1%
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BBB 19.7%
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BB 22.0%
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B 10.3%
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CCC 0.8%
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Not Rated 0.2%
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PORTFOLIO FACTS
Average Duration (d) 4.6
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Average Life (m) 8.3 yrs.
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Average Maturity (m) 12.7 yrs.
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Average Credit Quality of Rated
Securities (a) A-
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Average Short Term Credit Quality A-1
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COUNTRY WEIGHTINGS (i)
United States 72.6%
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Switzerland 4.1%
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Germany 3.3%
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United Kingdom 3.0%
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France 2.5%
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Netherlands 1.8%
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Ireland 1.6%
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Finland 1.5%
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Spain 1.4%
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Other Countries 8.2%
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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 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 4/30/06.
Percentages are based on net assets as of 4/30/06, unless otherwise noted.
The portfolios are actively managed, and current holdings may be different.
PORTFOLIO MANAGERS' PROFILES
Richard O. Hawkins, CFA, is Senior Vice President of MFS Investment
Management(R) an investment grade fixed income research analyst; and a
portfolio manager of MFS(R) Charter Income Trust. 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 and Associate Director of Fixed Income
Research 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.
Scott B. Richards, CFA, is Vice President of MFS Investment Management(R)
(MFS(R)) and a portfolio manager of the firm's high-yield and strategic
income portfolios. He has been a portfolio manager of the fund since February
2005. Scott joined MFS in May 2004 with more than 24 years experience as a
high-yield bond portfolio manager and research director at several leading
investment management firms. He earned a M.B.A. degree from the Amos Tuck
School at Dartmouth College in 1984 and a bachelor's degree in applied
economics from Cornell University in 1981. He holds the Chartered Financial
Analyst (CFA) designation and is a member of The Boston Security Analyst
Society, Inc.
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.
Note to Shareholders: Effective March 31, 2006, Peter Vaream was no longer a
manager of the portfolio; effective April 1, 2006, Richard Hawkins became a
manager of the portfolio.
PERFORMANCE SUMMARY THROUGH 4/30/06
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
Six months ended
4/30/06
Date Price
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Net asset value per share 4/30/06 $6.65
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10/31/05 $6.74
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New York Stock Exchange Price 4/30/06 $5.85
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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
Six months ended
4/30/06
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Citigroup World Government Bond Non-Dollar Hedged Index (f) -0.08%
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J.P. Morgan Emerging Markets Bond Index Global (f) 4.85%
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Lehman Brothers U.S. Credit Bond Index (f) 0.04%
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Lehman Brothers U.S. Government/Mortgage Bond Index (f) 0.70%
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Lehman Brothers U.S. High Yield Corporate Bond Index (f) 4.97%
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Net asset value (r) 1.85%
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New York Stock Exchange Price (r) -1.80%
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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 April 30, 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.
J.P. Morgan Emerging Markets Bond Index Global (EMBI Global) - tracks total
returns for U.S. dollar-denominated debt instruments issued by 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 $100 in January and July on the 15th of the month or
shortly thereafter.
If your shares are in the name of a brokerage firm, bank, or other nominee,
you can ask the firm or nominee to participate in the plan on your behalf. If
the nominee does not offer the plan, you may wish to request that your shares
be re-registered in your own name so that you can participate.
There is no service charge to reinvest distributions, nor are there brokerage
charges for shares issued directly by the trust. However, when shares are
bought on the New York Stock Exchange or otherwise on the open market, each
participant pays a pro rata share of the commissions. The automatic
reinvestment of distributions does not relieve you of any income tax that may
be payable (or required to be withheld) on the distributions.
To enroll in or withdraw from the plan, or if you have any questions, call
1-800-637-2304 any business day from 8 a.m. to 8 p.m. Eastern time. Please
have available the name of the trust and your account and Social Security
numbers. For certain types of registrations, such as corporate accounts,
instructions must be submitted in writing. Please call for additional details.
When you withdraw from the plan, you can receive the value of the reinvested
shares in one of two ways: a check for the value of the full and fractional
shares, or a certificate for the full shares and a check for the fractional
shares.
PORTFOLIO OF INVESTMENTS (unaudited) - 4/30/06
The Portfolio of Investments is a complete list of all securities owned by your trust.
It is categorized by broad-based asset classes.
Bonds - 95.9%
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ISSUER SHARES/PAR VALUE ($)
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Advertising & Broadcasting - 2.3%
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Allbritton Communications Co., 7.75%, 2012 $ 795,000 $ 796,988
EchoStar DBS Corp., 6.375%, 2011 4,205,000 4,105,131
Intelsat Subsidiary Holding Co. Ltd., 8.625%, 2015 580,000 603,200
Lamar Media Corp., 7.25%, 2013 1,715,000 1,719,288
Liberty Media Corp., 5.7%, 2013 2,799,000 2,604,637
News America Holdings, 7.7%, 2025 2,217,000 2,374,629
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$ 12,203,873
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Aerospace - 0.3%
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DRS Technologies, Inc., 7.625%, 2018 $ 945,000 $ 969,806
Rolls-Royce PLC, 6.375%, 2007 EUR 300,000 390,239
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$ 1,360,045
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Airlines - 0.2%
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Continental Airlines, Inc., 7.566%, 2020 $ 1,015,699 $ 958,308
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Asset Backed & Securitized - 12.1%
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Amresco Commercial Mortgage Funding I, 7%, 2029 $ 3,570,000 $ 3,602,371
ARCap, Inc., "H", 6.1%, 2045 (a) 2,000,000 1,730,075
Asset Securitization Corp., FRN, 8.009%, 2029 1,877,956 1,952,132
Banc of America Commercial Mortgage, Inc., FRN, 4.857%, 2043 1,375,626 1,293,432
Banc of America Commercial Mortgage, Inc., FRN, 5.1818%, 2047 1,375,626 1,328,366
Bayview Financial Acquisition Trust, FRN, 5.483%, 2045 1,130,000 1,123,644
Bayview Financial Revolving Mortgage Loan Trust, FRN,
5.8%, 2040 (a) 4,000,000 4,006,520
Chalet Finance 1 PLC, 2.976%, 2013 EUR 300,000 378,776
Countrywide Asset-Backed Certificates, FRN, 4.575%, 2035 $ 614,000 605,687
CPS Auto Receivables Trust, 2.89%, 2009 (a) 273,398 268,656
Crest Ltd., 7%, 2040 (a) 2,000,000 1,799,000
DEPFA Bank, 5.5%, 2010 EUR 960,000 1,282,310
Deutsche Mortgage & Asset Receiving Corp., 7.5%, 2031 $ 1,847,000 2,003,743
DLJ Commercial Mortgage Corp., 6.04%, 2031 2,000,000 2,018,857
Falcon Franchise Loan LLC, FRN, 3.926%, 2025 (a)(i) 7,976,087 1,310,471
First Union National Bank Commercial Mortgage Trust, FRN, 0.95%,
2043 (a)(i) 28,977,068 1,090,468
First Union-Lehman Brothers Bank of America, FRN,
0.4943%, 2035 (i) 66,165,138 1,198,118
First Union-Lehman Brothers Commercial Mortgage Trust,
7%, 2029 (a) 1,847,000 2,026,081
First Union-Lehman Brothers Commercial Mortgage Trust, FRN,
7.5%, 2029 1,846,973 2,043,219
GMAC Commercial Mortgage Securities, Inc., 6.02%, 2033 2,542,000 2,541,356
GMAC Commercial Mortgage Securities, Inc., FRN,
7.661%, 2034 (a) 1,853,000 2,001,589
Granites Mortgages PLC, FRN, 5.15%, 2042 EUR 350,000 448,722
J.P. Morgan Chase Commercial Mortgage Securities Corp., FRN,
5.2944%, 2043 $ 1,375,626 1,337,514
J.P. Morgan Chase Commercial Mortgage Securities Corp., FRN,
5.1013%, 2046 2,592,895 2,594,526
Lehman Brothers Commercial Conduit Mortgage Trust, FRN, 0.9574%,
2030 (i) 17,914,707 428,162
Morgan Stanley Capital I, Inc., 6.86%, 2010 2,215,000 2,233,540
Morgan Stanley Capital I, Inc., FRN, 1.4628%, 2039 (a)(i) 14,915,475 1,026,602
Mortgage Capital Funding, Inc., FRN, 0.7719%, 2031 (i) 17,978,313 225,083
Multi-Family Capital Access One, Inc., 6.65%, 2024 108,511 110,645
Preferred Term Securities IV Ltd. FRN, 7.18%, 2031 (a) 3,000,000 3,036,000
Prudential Securities Secured Financing Corp., FRN,
7.3762%, 2013 (a) 2,581,000 2,698,248
RMAC PLC, FRN, 2.895%, 2036 (a) EUR 208,878 263,448
Structured Asset Securities Corp., FRN, 4.67%, 2035 $ 4,570,839 4,507,416
TIAA Real Estate CDO Ltd., 7.17%, 2032 (a) 1,993,445 2,019,513
Wachovia Bank Commercial Mortgage Trust, 4.935%, 2042 2,000,000 1,890,370
Wachovia Bank Commercial Mortgage Trust, FRN, 5.083%, 2042 2,000,000 1,909,589
Wachovia Bank Commercial Mortgage Trust, FRN, 5.118%, 2042 1,375,626 1,314,313
Wachovia Bank Commercial Mortgage Trust, FRN, 5.3162%, 2044 2,777,000 2,692,115
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$ 64,340,677
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Automotive - 2.6%
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Continental AG, 6.875%, 2008 EUR 100,000 $ 135,567
DaimlerChrysler N.A. Holdings Corp., 8.5%, 2031 $ 1,251,000 1,450,198
DaimlerChrysler Note, 5.625%, 2007 EUR 100,000 128,123
Ford Motor Credit Co., 4.95%, 2008 $ 435,000 404,355
Ford Motor Credit Co., 6.625%, 2008 422,000 396,488
Ford Motor Credit Co., 5.8%, 2009 410,000 371,112
Ford Motor Credit Co., 7.375%, 2009 2,115,000 1,954,209
Ford Motor Credit Co., 5.7%, 2010 1,102,000 968,769
Ford Motor Credit Co., 7%, 2013 546,000 480,413
General Motors Acceptance Corp., 6%, 2006 EUR 375,000 $ 473,433
General Motors Acceptance Corp., 6.125%, 2008 $ 503,000 484,435
General Motors Acceptance Corp., 5.85%, 2009 962,000 904,495
General Motors Acceptance Corp., 6.75%, 2014 2,998,000 2,732,452
General Motors Acceptance Corp., 8%, 2031 1,155,000 1,095,185
Johnson Controls, Inc., 5.25%, 2011 1,180,000 1,157,798
Lear Corp., 8.11%, 2009 694,000 678,385
Lear Corp., 5.75%, 2014 210,000 176,400
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$ 13,991,817
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Banks & Credit Companies - 4.9%
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ATF Bank JSC, 9.25%, 2012 (i) $ 14,000 $ 14,455
Banco BMG S.A., 9.15%, 2016 (a) 714,000 732,921
Banco do Estado de Sao Paulo S.A., 8.7%, 2049 15,000 15,075
Banco do Estado de Sao Paulo S.A., 8.7%, 2049 (a) 577,000 579,885
Banco Hipotecario S.A., 9.75%, 2016 (a) 35,000 35,525
Banco Mercantil del Norte S.A., 5.875% to 2009, FRN to 2014 (a) 655,000 651,725
Bank of Ireland, 7.4%, 2049 EUR 500,000 715,129
BNP Paribas Capital Trust III, 6.625% to 2011, FRN to 2049 EUR 100,000 139,999
BNP Paribas, 5.186% to 2015, FRN to 2049 (a) $ 2,099,000 1,939,516
Chuo Mitsui Trust & Banking Co., 5.506% to 2015, FRN to 2049 (a) 642,000 600,465
Credit Suisse First Boston (USA), Inc., 4.875%, 2010 1,023,000 996,276
Credit Suisse Group, 7.974%, 2010 EUR 265,000 380,790
HBOS Capital Funding LP, 6.071% to 2014, FRN to 2049 (a) $ 1,543,000 1,525,501
J.P. Morgan Chase & Co., 5.125%, 2014 2,755,000 2,620,630
Kazkommerts International B.V., 7%, 2009 986,000 988,465
Mizuho Capital Investment 1 Ltd., 6.686% to 2016, FRN to 2049 (a) 1,220,000 1,182,104
Mizuho Financial Group, Inc., 5.79%, 2014 (a) 1,633,000 1,614,908
MUFG Capital Finance 1 Ltd., 6.346% to 2016, FRN to 2049 1,568,000 1,536,430
National Westminster Bank PLC, 6.625% to 2009, FRN to 2049 EUR 330,000 450,253
RBS Capital Trust II, 6.425% to 2034, FRN to 2049 $ 833,000 813,968
Resona Bank Ltd., 5.85% to 2016, FRN to 2049 (a) 626,000 597,866
Russian Standard Finance S.A., 7.5%, 2010 (a) 257,000 247,363
Russian Standard Finance S.A., 8.625%, 2011 (a) 769,000 769,000
SG Capital Trust I, 7.875% to 2010, FRN to 2049 EUR 300,000 427,867
Turanalem Finance B.V., 7.875%, 2010 $ 15,000 15,225
Turanalem Finance B.V., 7.75%, 2013 (a) 595,000 587,563
VTB Capital S.A., 7.5%, 2011 68,000 71,230
Wachovia Capital Trust III, 5.8% to 2011, FRN to 2042 4,068,000 3,988,174
Woori Bank, 6.125% to 2001, FRN to 2016 (a) 1,510,000 1,508,339
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$ 25,746,647
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Broadcast & Cable TV - 3.0%
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CCH II LLC, 10.25%, 2010 $ 1,025,000 $ 1,032,688
Cox Communications, Inc., 4.625%, 2013 1,744,000 1,584,965
CSC Holdings, Inc., 8.125%, 2009 1,969,000 2,042,838
Lenfest Communications, Inc., 10.5%, 2006 500,000 502,485
Mediacom LLC, 9.5%, 2013 490,000 501,025
Rogers Cable, Inc., 5.5%, 2014 1,975,000 1,819,469
TCI Communications Financing III, 9.65%, 2027 5,000,000 5,360,640
TCI Communications, Inc., 9.8%, 2012 1,135,000 1,329,691
Time Warner Entertainment Co. LP, 8.375%, 2033 1,557,000 1,780,914
------------
$ 15,954,715
-------------------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 1.0%
-------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc., 5.7%, 2012 $ 2,665,000 $ 2,661,853
Morgan Stanley Dean Witter, Inc., 6.6%, 2012 2,538,000 2,652,949
------------
$ 5,314,802
-------------------------------------------------------------------------------------------------------
Building - 0.5%
-------------------------------------------------------------------------------------------------------
American Standard Cos., Inc., 7.375%, 2008 $ 2,500,000 $ 2,564,773
-------------------------------------------------------------------------------------------------------
Business Services - 0.5%
-------------------------------------------------------------------------------------------------------
Iron Mountain, Inc., 7.75%, 2015 $ 375,000 $ 380,625
Xerox Corp., 7.625%, 2013 2,010,000 2,075,325
------------
$ 2,455,950
-------------------------------------------------------------------------------------------------------
Chemicals - 1.5%
-------------------------------------------------------------------------------------------------------
Akzo Nobel N.V., 5.625%, 2009 EUR 100,000 $ 131,890
BCP Crystal Holdings Corp., 9.625%, 2014 $ 413,000 454,300
Equistar Chemicals, 10.125%, 2008 520,000 557,050
Equistar Chemicals, 10.625%, 2011 1,225,000 1,335,250
Hercules, Inc., 6.75%, 2029 1,890,000 1,826,213
Huntsman International LLC, 10.125%, 2009 575,000 585,063
Kronos International, Inc., 8.875%, 2009 EUR 95,000 125,211
Linde Finance B.V., 6% to 2013, FRN to 2049 EUR 101,000 128,456
Lyondell Chemical Co., 11.125%, 2012 $ 1,330,000 1,469,650
Nalco Co., 7.75%, 2011 1,410,000 1,417,050
Nalco Co., 8.875%, 2013 150,000 154,875
------------
$ 8,185,008
-------------------------------------------------------------------------------------------------------
Conglomerates - 0.0%
-------------------------------------------------------------------------------------------------------
Thyssenkrupp Finance B.V., 7%, 2009 EUR 100,000 $ 136,102
-------------------------------------------------------------------------------------------------------
Construction - 0.6%
-------------------------------------------------------------------------------------------------------
Beazer Homes USA, Inc., 6.875%, 2015 $ 2,050,000 $ 1,962,875
M/I Homes, Inc., 6.875%, 2012 1,325,000 1,235,563
Urbi Desarrollos Urbanos S.A. de C.V., 8.5%, 2016 (a) 25,000 25,250
------------
$ 3,223,688
-------------------------------------------------------------------------------------------------------
Consumer Goods & Services - 0.4%
-------------------------------------------------------------------------------------------------------
ASSA ABLOY AB, 5.125%, 2006 EUR 30,000 $ 38,230
Church & Dwight Co., Inc., 6%, 2012 $ 805,000 776,825
Fortune Brands, Inc., 5.125%, 2011 632,000 616,888
Service Corp. International, 7%, 2017 (a) 560,000 548,800
Sodexho Alliance S.A., 5.875%, 2009 EUR 100,000 132,732
------------
$ 2,113,475
-------------------------------------------------------------------------------------------------------
Containers - 0.8%
-------------------------------------------------------------------------------------------------------
Ball Corp., 6.625%, 2018 $ 1,025,000 $ 995,531
Crown Americas, 7.75%, 2015 (a) 1,215,000 1,248,413
Owens-Brockway Glass Container, Inc., 8.875%, 2009 515,000 535,600
Owens-Brockway Glass Container, Inc., 8.25%, 2013 1,655,000 1,700,513
------------
$ 4,480,057
-------------------------------------------------------------------------------------------------------
Defense Electronics - 0.3%
-------------------------------------------------------------------------------------------------------
L-3 Communications Corp., 5.875%, 2015 $ 1,630,000 $ 1,532,200
-------------------------------------------------------------------------------------------------------
Electronics - 0.3%
-------------------------------------------------------------------------------------------------------
Flextronics International Ltd., 6.5%, 2013 $ 1,660,000 $ 1,635,100
-------------------------------------------------------------------------------------------------------
Emerging Market Quasi-Sovereign - 0.6%
-------------------------------------------------------------------------------------------------------
Banco Nacional de Desenvolvi, FRN, 5.727%, 2008 $ 75,000 $ 73,969
Gaz Capital S.A., 8.625%, 2034 28,000 33,793
Gazprom International S.A., 7.201%, 2020 63,000 65,451
Gazprom OAO, 9.625%, 2013 620,000 733,150
Gazprom OAO, 8.625%, 2034 (a) 713,000 862,730
National Power Corp., FRN, 9.0238%, 2011 19,000 20,993
Pemex Project Funding Master Trust, 8.625%, 2022 395,000 457,410
Pemex Project Funding Master Trust, 9.5%, 2027 94,000 117,594
Pemex Project Funding Master Trust, 6.625%, 2035 46,000 43,470
Pemex Project Funding Master Trust, FRN, 6.21%, 2010 38,000 38,912
Pemex Project Funding Master Trust, FRN, 5.43%, 2012 (a) 113,000 113,000
Petronas Capital Ltd., 7.875%, 2022 602,000 699,201
------------
$ 3,259,673
-------------------------------------------------------------------------------------------------------
Emerging Market Sovereign - 1.6%
-------------------------------------------------------------------------------------------------------
Arab Republic of Egypt, 8.75%, 2011 $ 22,000 $ 24,640
Banco de La Republica Oriental del Uruguay, 10.5%, 2006 UYU 1,057,515 45,770
Banque Centrale de Tunisie, 7.375%, 2012 $ 28,000 29,750
Federative Republic of Brazil, 7.875%, 2015 49,000 52,773
Federative Republic of Brazil, 8%, 2018 107,000 116,149
Federative Republic of Brazil, 8.875%, 2019 197,000 227,043
Federative Republic of Brazil, 8.875%, 2024 89,000 101,683
Federative Republic of Brazil, 8.25%, 2034 52,000 56,550
Federative Republic of Brazil, 11%, 2040 14,000 18,025
Government of Jamaica, 10.625%, 2017 18,000 20,817
Republic of Algeria, FRN, 5.8125%, 2006 2,667 2,663
Republic of Algeria, FRN, 5.8125%, 2010 84,800 84,588
Republic of Argentina, 8.28%, 2033 51,184 50,928
Republic of Argentina, 0%, 2035 151,600 15,312
Republic of Argentina, FRN, 11.217%, 2008 ARS 38,000 12,539
Republic of Argentina, FRN, 4.889%, 2012 $ 873,750 956,545
Republic of Argentina, FRN, 2%, 2014 ARS 57,000 19,123
Republic of Bulgaria, 8.25%, 2015 $ 251,000 289,227
Republic of Colombia, 8.125%, 2024 22,000 24,475
Republic of Colombia, FRN, 6.55%, 2015 563,000 592,014
Republic of Croatia, FRN, 5.625%, 2010 49,500 49,624
Republic of El Salvador, 8.25%, 2032 10,000 10,800
Republic of El Salvador, 7.65%, 2035 (a) 38,000 38,095
Republic of Guatemala, 8.125%, 2034 (a) 24,000 26,460
Republic of Guatemala, 8.125%, 2034 32,000 35,280
Republic of Indonesia, 7.25%, 2015 36,000 36,990
Republic of Indonesia, 6.875%, 2017 (a) 100,000 99,000
Republic of Panama, 9.375%, 2029 768,000 958,848
Republic of Panama, 6.7%, 2036 9,000 8,820
Republic of Peru, 5%, 2017 47,400 45,267
Republic of Philippines, 9.375%, 2017 105,000 122,194
Republic of Philippines, 9.875%, 2019 40,000 48,100
Republic of Philippines, 9.5%, 2030 106,000 125,478
Republic of South Africa, 7.375%, 2012 23,000 24,581
Republic of Turkey, 11.5%, 2012 10,000 12,475
Republic of Turkey, 7.25%, 2015 161,000 167,038
Republic of Turkey, 7%, 2020 33,000 33,206
Republic of Turkey, 7.375%, 2025 47,000 48,058
Republic of Turkey, 8%, 2034 57,000 60,990
Republic of Uruguay, 7.5%, 2015 64,000 65,920
Republic of Venezuela, 8.5%, 2014 198,000 221,760
Republic of Venezuela, 7%, 2018 109,000 109,545
Republic of Venezuela, 9.375%, 2034 13,000 16,491
Republic of Vietnam, FRN, 5.875%, 2016 12,174 12,000
Russian Federation, 3%, 2008 1,549,000 1,467,832
Russian Federation, 11%, 2018 384,000 543,552
United Mexican States, 6.375%, 2013 448,000 455,392
United Mexican States, 8.125%, 2019 760,000 877,800
United Mexican States, 8%, 2022 10,000 11,500
United Mexican States, 8.3%, 2031 74,000 87,875
------------
$ 8,561,585
-------------------------------------------------------------------------------------------------------
Energy - Independent - 1.6%
-------------------------------------------------------------------------------------------------------
Chesapeake Energy Corp., 7.5%, 2014 $ 580,000 $ 595,950
Chesapeake Energy Corp., 7%, 2014 645,000 646,613
Chesapeake Energy Corp., 6.875%, 2016 1,825,000 1,797,625
Forest Oil Corp., 7.75%, 2014 950,000 980,875
Newfield Exploration Co., 6.625%, 2014 625,000 615,625
Ocean Energy, Inc., 4.375%, 2007 908,000 895,478
Plains Exploration & Production Co., 7.125%, 2014 1,080,000 1,093,500
Quicksilver Resources, Inc., 7.125%, 2016 730,000 719,050
Vintage Petroleum, Inc., 8.25%, 2012 950,000 1,011,225
------------
$ 8,355,941
-------------------------------------------------------------------------------------------------------
Energy - Integrated - 0.3%
-------------------------------------------------------------------------------------------------------
Amerada Hess Corp., 7.3%, 2031 $ 1,555,000 $ 1,689,786
-------------------------------------------------------------------------------------------------------
Entertainment - 0.4%
-------------------------------------------------------------------------------------------------------
AMC Entertainment, Inc., 9.5%, 2011 $ 484,000 $ 480,370
AMC Entertainment, Inc., 11%, 2016 (a) 435,000 471,975
Six Flags, Inc., 9.75%, 2013 475,000 483,313
Turner Broadcasting System, Inc., 8.375%, 2013 419,000 464,645
------------
$ 1,900,303
-------------------------------------------------------------------------------------------------------
Financial Institutions - 1.6%
-------------------------------------------------------------------------------------------------------
American General Finance Corp., 4.875%, 2012 $ 2,752,000 $ 2,617,036
Berkshire Hathaway Finance Corp., 5.1%, 2014 4,500,000 4,307,054
Capital One Bank, 4.25%, 2008 1,296,000 1,259,724
MBNA Europe Funding PLC, 6.5%, 2007 EUR 150,000 194,540
------------
$ 8,378,354
-------------------------------------------------------------------------------------------------------
Food & Non Alcoholic Beverages - 0.2%
-------------------------------------------------------------------------------------------------------
Allied Domecq Financial Services PLC, 5.875%, 2009 EUR 125,000 $ 165,728
B&G Foods Holding Corp., 8%, 2011 $ 375,000 384,375
Chaoda Modern Agriculture Holdings, 7.75%, 2010 (a) 53,000 53,000
Michael Foods, Inc., 8%, 2013 685,000 686,713
------------
$ 1,289,816
-------------------------------------------------------------------------------------------------------
Forest & Paper Products - 1.5%
-------------------------------------------------------------------------------------------------------
Buckeye Technologies, Inc., 8.5%, 2013 $ 795,000 $ 796,988
International Paper Co., 5.375%, 2006 EUR 140,000 177,595
Jefferson Smurfit Corp., 8.25%, 2012 $ 395,000 383,150
MDP Acquisitions PLC, 9.625%, 2012 640,000 675,200
MeadWestvaco Corp., 6.8%, 2032 679,000 634,490
Norske Skog Canada Ltd., 7.375%, 2014 1,210,000 1,134,375
Packaging Corp. of America, 5.75%, 2013 2,500,000 2,413,568
Sino-Forest Corp., 9.125%, 2011 (a) 10,000 10,763
Stora Enso Oyj, 6.404%, 2016 (a) 1,580,000 1,566,777
UPM Kymmene Corp., 6.125%, 2012 EUR 100,000 135,823
------------
$ 7,928,729
-------------------------------------------------------------------------------------------------------
Gaming & Lodging - 3.5%
-------------------------------------------------------------------------------------------------------
Boyd Gaming Corp., 6.75%, 2014 $ 1,140,000 $ 1,128,600
Caesars Entertainment, Inc., 8.125%, 2011 1,520,000 1,635,900
Grupo Posadas S.A. de C.V., 8.75%, 2011 13,000 13,488
GTECH Holdings Corp., 5.25%, 2014 515,000 497,054
Harrah's Operating Co., Inc., 5.625%, 2015 1,018,000 966,264
Host Marriott LP, 7.125%, 2013 950,000 964,250
Host Marriott LP, 6.375%, 2015 540,000 522,450
Mandalay Resort Group, 9.375%, 2010 950,000 1,021,250
MGM Mirage, Inc., 8.375%, 2011 2,530,000 2,662,825
MGM Mirage, Inc., 6.75%, 2013 (a) 500,000 492,500
MGM Mirage, Inc., 6.875%, 2016 (a) 420,000 409,500
NCL Corp. Ltd., 10.625%, 2014 1,000,000 1,010,000
Pinnacle Entertainment, Inc., 8.75%, 2013 505,000 542,875
Royal Caribbean Cruises Ltd., 8%, 2010 1,730,000 1,847,688
Scientific Games Corp., 6.25%, 2012 825,000 796,125
Starwood Hotels & Resorts Worldwide, Inc., 7.875%, 2012 2,775,000 2,983,125
Station Casinos, Inc., 6.5%, 2014 870,000 846,075
Wynn Las Vegas LLC, 6.625%, 2014 500,000 486,250
------------
$ 18,826,219
-------------------------------------------------------------------------------------------------------
Industrial - 0.4%
-------------------------------------------------------------------------------------------------------
Amsted Industries, Inc., 10.25%, 2011 (a) $ 1,510,000 $ 1,645,900
JohnsonDiversey Holdings, Inc., "B", 9.625%, 2012 690,000 704,663
------------
$ 2,350,563
-------------------------------------------------------------------------------------------------------
Insurance - 1.1%
-------------------------------------------------------------------------------------------------------
ING Groep N.V., 5.775% to 2015, FRN to 2049 $ 2,500,000 $ 2,394,403
Prudential Financial, Inc., 5.1%, 2014 1,985,000 1,887,364
UnumProvident Corp., 7.625%, 2011 470,000 492,893
UnumProvident Corp., 6.85%, 2015 (a) 1,251,000 1,245,001
------------
$ 6,019,661
-------------------------------------------------------------------------------------------------------
Insurance - Property & Casualty - 0.8%
-------------------------------------------------------------------------------------------------------
AIG SunAmerica Global Financing X, 6.9%, 2032 (a) $ 2,384,000 $ 2,549,252
AIG SunAmerica Institutional Funding III, 3.5%, 2009 EUR 100,000 124,975
Allianz AG, 5.5% to 2014, FRN to 2049 EUR 140,000 183,764
Fund American Cos., Inc., 5.875%, 2013 $ 1,464,000 1,428,353
------------
$ 4,286,344
-------------------------------------------------------------------------------------------------------
International Market Quasi-Sovereign - 1.7%
-------------------------------------------------------------------------------------------------------
KfW Bankengruppe, 4.75%, 2006 EUR 750,000 $ 950,109
KfW Bankengruppe, FRN, 2.563%, 2007 EUR 1,678,000 2,114,566
Landesbank Baden-Wurttemberg, FRN, 2.764%, 2007 EUR 557,000 702,389
Landesbank Baden-Wurttemberg, FRN, 2.594%, 2007 EUR 521,000 656,726
Landesbank Baden-Wurttemberg, FRN, 2.704%, 2007 EUR 990,000 1,248,660
Network Rail MTN Finance PLC, 2.628%, 2007 EUR 536,000 $ 676,005
Network Rail MTN Finance PLC, FRN, 2.628%, 2007 EUR 1,162,000 1,465,517
Societe Nationale des Chemins de Fer Francais, 7.5%, 2008 EUR 750,000 1,015,273
Vattenfall Treasury AB, 6%, 2010 EUR 125,000 169,449
------------
$ 8,998,694
-------------------------------------------------------------------------------------------------------
International Market Sovereign - 10.4%
-------------------------------------------------------------------------------------------------------
Federal Republic of Germany, 3.5%, 2008 EUR 2,097,000 $ 2,645,736
Federal Republic of Germany, 3.75%, 2015 EUR 1,959,000 2,435,136
Federal Republic of Germany, 6.25%, 2030 EUR 393,000 645,510
Government of New Zealand, 6.5%, 2013 NZD 4,905,000 3,247,433
Government of New Zealand, 6%, 2017 NZD 997,000 644,620
Kingdom of Netherlands, 5.75%, 2007 EUR 2,331,000 2,999,668
Kingdom of Netherlands, 3.75%, 2009 EUR 2,649,000 3,359,228
Kingdom of Spain, 6%, 2008 EUR 2,476,000 3,256,979
Kingdom of Spain, 5.35%, 2011 EUR 1,902,000 2,578,336
Republic of Austria, 5.5%, 2007 EUR 2,609,000 3,390,449
Republic of Finland, 5.375%, 2013 EUR 4,316,000 5,943,378
Republic of France, 4.75%, 2007 EUR 4,716,000 6,054,687
Republic of France, 4%, 2009 EUR 215,000 274,835
Republic of France, 5%, 2012 EUR 400,000 536,895
Republic of France, 4.75%, 2012 EUR 612,000 812,706
Republic of France, 5%, 2016 EUR 207,000 283,015
Republic of France, 6%, 2025 EUR 409,000 639,938
Republic of Ireland, 4.25%, 2007 EUR 4,742,000 6,060,550
Republic of Ireland, 4.6%, 2016 EUR 547,000 723,991
United Kingdom Treasury, 5.75%, 2009 GBP 1,567,000 2,955,004
United Kingdom Treasury, 8%, 2015 GBP 2,498,000 5,732,973
United Kingdom Treasury, 4.25%, 2036 GBP 69,000 125,035
------------
$ 55,346,102
-------------------------------------------------------------------------------------------------------
Machinery & Tools - 0.7%
-------------------------------------------------------------------------------------------------------
Case New Holland, Inc., 6%, 2009 $ 1,200,000 $ 1,173,000
Case New Holland, Inc., 9.25%, 2011 340,000 361,250
Case New Holland, Inc., 7.125%, 2014 (a) 820,000 805,650
Manitowoc Co., Inc., 10.5%, 2012 767,000 836,030
Terex Corp., 9.25%, 2011 570,000 607,050
------------
$ 3,782,980
-------------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 2.2%
-------------------------------------------------------------------------------------------------------
AmerisourceBergen Corp., 5.875%, 2015 (a) $ 1,010,000 $ 980,485
Baxter International, Inc., 9.5%, 2008 2,331,000 2,501,301
DaVita, Inc., 6.625%, 2013 300,000 296,250
Fisher Scientific International, Inc., 6.125%, 2015 655,000 623,888
HCA, Inc., 8.75%, 2010 2,085,000 2,258,220
HCA, Inc., 6.375%, 2015 2,075,000 1,997,935
Omnicare, Inc., 6.875%, 2015 1,090,000 1,077,738
Owens & Minor, Inc., 6.35%, 2016 1,420,000 1,407,520
Triad Hospitals, Inc., 7%, 2013 685,000 668,731
------------
$ 11,812,068
-------------------------------------------------------------------------------------------------------
Metals & Mining - 1.1%
-------------------------------------------------------------------------------------------------------
Codelco, Inc., 5.625%, 2035 (a) $ 446,000 $ 402,564
Foundation PA Coal Co., 7.25%, 2014 1,885,000 1,889,713
Massey Energy Co., 6.875%, 2013 (a) 1,295,000 1,246,438
Peabody Energy Corp., 5.875%, 2016 1,220,000 1,155,950
Peabody Energy Corp., "B", 6.875%, 2013 340,000 342,550
U.S. Steel Corp., 9.75%, 2010 795,000 858,600
------------
$ 5,895,815
-------------------------------------------------------------------------------------------------------
Mortgage Backed - 4.8%
-------------------------------------------------------------------------------------------------------
Fannie Mae, 6%, 2016 - 2036 $ 3,651,749 $ 3,657,175
Fannie Mae, 5.5%, 2021 - 2035 12,125,593 11,871,469
Fannie Mae, 5%, 2027 - 2035 8,355,991 8,079,590
Fannie Mae, 6.5%, 2031 - 2032 1,799,887 1,835,485
------------
$ 25,443,719
-------------------------------------------------------------------------------------------------------
Natural Gas - Distribution - 0.3%
-------------------------------------------------------------------------------------------------------
AmeriGas Partners LP, 7.25%, 2015 $ 1,030,000 $ 1,024,850
AmeriGas Partners LP, 7.125%, 2016 365,000 361,350
------------
$ 1,386,200
-------------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 1.9%
-------------------------------------------------------------------------------------------------------
ANR Pipeline Co., 8.875%, 2010 $ 440,000 $ 467,060
Atlas Pipeline Partners LP, 8.125%, 2015 (a) 810,000 836,325
CenterPoint Energy Resources Corp., 7.875%, 2013 1,250,000 1,379,499
Colorado Interstate Gas Co., 5.95%, 2015 365,000 345,276
Kinder Morgan Energy Partners LP, 7.4%, 2031 2,775,000 2,959,193
Magellan Midstream Partners LP, 5.65%, 2016 1,123,000 1,082,648
Southern Natural Gas Co., Inc., 8.875%, 2010 1,040,000 1,103,960
Williams Cos., Inc., 8.75%, 2032 1,500,000 1,728,750
------------
$ 9,902,711
-------------------------------------------------------------------------------------------------------
Network & Telecom - 3.8%
-------------------------------------------------------------------------------------------------------
Axtel S.A. de C.V., 11%, 2013 $ 11,000 $ 12,430
BellSouth Corp., 6.55%, 2034 3,213,000 3,170,042
Citizens Communications Co., 9.25%, 2011 1,785,000 1,961,269
Citizens Communications Co., 9%, 2031 870,000 933,075
Deutsche Telekom International Finance B.V., 8.125%, 2012 EUR 130,000 196,258
Deutsche Telekom International Finance B.V., 8.25%, 2030 $ 1,477,000 1,753,794
Nordic Telephone Co. Holdings, 8.25%, 2016 (a) EUR 185,000 233,040
Nordic Telephone Co. Holdings, 8.875%, 2016 (a) $ 205,000 213,200
Nordic Telephone Co. Holdings, FRN, 8.352%, 2016 (a) EUR 165,000 207,846
OTE Telecommunications PLC, 6.125%, 2007 EUR 195,000 251,032
Qwest Corp., 7.875%, 2011 $ 1,890,000 1,982,138
Qwest Corp., 8.875%, 2012 950,000 1,040,250
Telecom Italia Capital, 6%, 2034 2,020,000 1,802,733
Telefonica Europe B.V., 7.75%, 2010 1,500,000 1,610,543
Verizon New York, Inc., 7.375%, 2032 4,590,000 4,594,829
------------
$ 19,962,479
-------------------------------------------------------------------------------------------------------
Oil Services - 0.2%
-------------------------------------------------------------------------------------------------------
Basic Energy Services, Inc., 7.125%, 2016 (a) $ 280,000 $ 276,500
GulfMark Offshore, Inc., 7.75%, 2014 760,000 767,600
------------
$ 1,044,100
-------------------------------------------------------------------------------------------------------
Oils - 0.5%
-------------------------------------------------------------------------------------------------------
Premcor Refining Group, Inc., 7.5%, 2015 $ 2,575,000 $ 2,705,720
-------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.2%
-------------------------------------------------------------------------------------------------------
Schering-Plough Corp., 6.75%, 2033 $ 1,002,000 $ 1,049,088
-------------------------------------------------------------------------------------------------------
Pollution Control - 0.1%
-------------------------------------------------------------------------------------------------------
Veolia Environnement, 5.875%, 2008 EUR 250,000 $ 329,645
-------------------------------------------------------------------------------------------------------
Printing & Publishing - 0.6%
-------------------------------------------------------------------------------------------------------
Bertelsmann U.S. Finance, Inc., 4.625%, 2010 EUR 148,000 $ 189,477
Dex Media East LLC, 9.875%, 2009 $ 1,235,000 1,315,275
Dex Media West LLC, 9.875%, 2013 567,000 624,409
MediaNews Group, Inc., 6.875%, 2013 1,060,000 969,900
Pearson PLC, 6.125%, 2007 EUR 135,000 173,584
Reed Elsevier Capital, Inc., 5.75%, 2008 EUR 125,000 164,222
------------
$ 3,436,867
-------------------------------------------------------------------------------------------------------
Railroad & Shipping - 0.2%
-------------------------------------------------------------------------------------------------------
TFM S.A. de C.V., 10.25%, 2007 $ 21,000 $ 21,840
TFM S.A. de C.V., 9.375%, 2012 717,000 770,775
------------
$ 792,615
-------------------------------------------------------------------------------------------------------
Real Estate - 0.3%
-------------------------------------------------------------------------------------------------------
Simon Property Group LP, 4.6%, 2010 $ 1,375,000 $ 1,324,759
-------------------------------------------------------------------------------------------------------
Restaurants - 0.3%
-------------------------------------------------------------------------------------------------------
YUM! Brands, Inc., 6.25%, 2016 $ 1,630,000 $ 1,629,914
-------------------------------------------------------------------------------------------------------
Retailers - 1.6%
-------------------------------------------------------------------------------------------------------
Couche-Tard, Inc., 7.5%, 2013 $ 905,000 $ 920,838
Dollar General Corp., 8.625%, 2010 685,000 732,950
Gap, Inc., 9.55%, 2008 2,710,000 2,945,599
GSC Holdings Corp., 8%, 2012 (a) 525,000 525,656
Limited Brands, Inc., 5.25%, 2014 2,294,000 2,106,248
Rite Aid Corp., 8.125%, 2010 635,000 649,288
Steinway Musical Instruments, Inc., 7%, 2014 (a) 655,000 650,088
------------
$ 8,530,667
-------------------------------------------------------------------------------------------------------
Specialty Stores - 0.0%
-------------------------------------------------------------------------------------------------------
LVMH Moet Hennessy Louis Vuitton S.A., 4.625%, 2011 EUR 125,000 $ 160,032
-------------------------------------------------------------------------------------------------------
Steel - 0.2%
-------------------------------------------------------------------------------------------------------
Chaparral Steel Co., 10%, 2013 $ 995,000 $ 1,114,400
-------------------------------------------------------------------------------------------------------
Supermarkets - 0.5%
-------------------------------------------------------------------------------------------------------
Safeway, Inc., 6.5%, 2008 $ 2,500,000 $ 2,535,615
-------------------------------------------------------------------------------------------------------
Supranational - 0.3%
-------------------------------------------------------------------------------------------------------
Central American Bank, 4.875%, 2012 (a) $ 521,000 $ 491,042
European Investment Bank, 5.375%, 2012 EUR 750,000 1,022,036
------------
$ 1,513,078
-------------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 1.0%
-------------------------------------------------------------------------------------------------------
Centennial Communications Corp., 10.125%, 2013 $ 520,000 $ 568,750
Mobile TeleSystems Finance S.A., 8.375%, 2010 19,000 19,665
Nextel Communications, Inc., 5.95%, 2014 2,760,000 2,714,112
Rogers Wireless, Inc., 6.375%, 2014 950,000 935,750
Rogers Wireless, Inc., 7.5%, 2015 980,000 1,031,450
Vodafone Group PLC, 5.75%, 2006 EUR 140,000 178,725
------------
$ 5,448,452
-------------------------------------------------------------------------------------------------------
Tobacco - 0.5%
-------------------------------------------------------------------------------------------------------
Altria Group, Inc., 5.625%, 2008 EUR 75,000 $ 97,857
R.J. Reynolds Tobacco Holdings, Inc., 7.25%, 2012 $ 2,508,000 2,558,160
------------
$ 2,656,017
-------------------------------------------------------------------------------------------------------
Transportation - Services - 0.4%
-------------------------------------------------------------------------------------------------------
Hertz Corp., 8.875%, 2014 (a) $ 685,000 $ 727,813
Stena AB, 7%, 2016 812,000 767,340
Westinghouse Air Brake Technologies Corp., 6.875%, 2013 795,000 789,038
------------
$ 2,284,191
-------------------------------------------------------------------------------------------------------
U.S. Government Agencies - 2.3%
-------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 4.625%, 2008 $ 2,730,000 $ 2,705,564
Freddie Mac, 4.375%, 2015 8,830,000 8,211,194
Small Business Administration, 5.34%, 2021 1,359,787 1,353,546
------------
$ 12,270,304
-------------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 9.0%
-------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 4.5%, 2036 $ 5,000,000 $ 4,493,360
U.S. Treasury Notes, 6.5%, 2010 34,605,000 36,492,045
U.S. Treasury Notes, 4.5%, 2016 2,718,000 2,599,512
U.S. Treasury Notes, TIPS, 3.875%, 2009 3,826,623 4,016,760
------------
$ 47,601,677
-------------------------------------------------------------------------------------------------------
Utilities - Electric Power - 5.9%
-------------------------------------------------------------------------------------------------------
AES Corp., 8.75%, 2013 (a) $ 685,000 $ 741,513
Allegheny Energy Supply Co. LLC, 8.25%, 2012 (a) 805,000 875,438
Beaver Valley Funding Corp., 9%, 2017 4,599,000 5,136,875
BVPS II Funding Corp., 8.68%, 2017 775,000 863,583
DPL, Inc., 6.875%, 2011 1,393,000 1,455,331
Duke Capital Corp., 8%, 2019 691,000 794,803
Empresa Nacional de Electricidad S.A., 8.35%, 2013 5,000 5,467
Enersis S.A., 7.375%, 2014 844,000 871,627
HQI Transelec Chile S.A., 7.875%, 2011 383,000 408,594
MidAmerican Energy Holdings Co., 6.125%, 2036 (a) 2,000,000 1,907,822
Midwest Generation LLC, 8.75%, 2034 685,000 739,800
Mirant North America LLC, 7.375%, 2013 (a) 800,000 803,000
MSW Energy Holdings LLC, 7.375%, 2010 1,045,000 1,073,738
National Grid Group Finance PLC, 5.25%, 2006 EUR 200,000 253,823
Nevada Power Co., 5.875%, 2015 $ 1,965,000 1,893,095
NorthWestern Corp., 5.875%, 2014 1,695,000 1,667,909
NRG Energy, Inc., 7.375%, 2016 2,405,000 2,426,044
Reliant Resources, Inc., 9.25%, 2010 490,000 496,738
Reliant Resources, Inc., 9.5%, 2013 20,000 20,300
RWE Finance B.V., 5.375%, 2008 EUR 6,000 7,810
System Energy Resources, Inc., 5.129%, 2014 (a) $ 2,371,044 2,290,263
TXU Corp., 5.55%, 2014 2,020,000 1,877,129
TXU Energy Co., 7%, 2013 2,670,000 2,765,250
Waterford 3 Funding Corp., 8.09%, 2017 1,907,493 1,940,837
------------
$ 31,316,789
-------------------------------------------------------------------------------------------------------
TOTAL BONDS (IDENTIFIED COST, $513,159,888) $509,318,909
-------------------------------------------------------------------------------------------------------
Common Stocks - 0.1%
-------------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
-------------------------------------------------------------------------------------------------------
Printing & Publishing - 0.0%
-------------------------------------------------------------------------------------------------------
Golden Books Family Entertainment, Inc. (n) 19,975 $ 0
-------------------------------------------------------------------------------------------------------
Tobacco - 0.1%
-------------------------------------------------------------------------------------------------------
Reynolds American, Inc. 2,302 $ 252,414
-------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $906) $ 252,414
-------------------------------------------------------------------------------------------------------
Convertible Preferred Stocks - 0.2%
-------------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
-------------------------------------------------------------------------------------------------------
Automotive - 0.2%
-------------------------------------------------------------------------------------------------------
General Motors Corp., "B", 5.25% (Identified Cost, $737,595) 48,225 $ 801,017
-------------------------------------------------------------------------------------------------------
Preferred Stocks - 0.0%
-------------------------------------------------------------------------------------------------------
Real Estate - 0.0%
-------------------------------------------------------------------------------------------------------
HRPT Properties Trust, "B", 8.75% (Identified Cost, $139,485) 5,100 $ 130,407
-------------------------------------------------------------------------------------------------------
Warrants - 0.0%
-------------------------------------------------------------------------------------------------------
STRIKE FIRST
PRICE EXERCISE
---------------------------------------------------------------------------------------------------------------
Business Services - 0.0%
-------------------------------------------------------------------------------------------------------
Loral Space & Communications Ltd. (Business
Services) (n) $0.14 1/28/97 1,625 $ 0
Loral Space & Communications Ltd. (Business
Services) (n) 0.14 1/28/97 700 0
Emerging Market Sovereign - 0.0%
---------------------------------------------------------------------------------------------------------------
Republic of Venezuela, Oil-Indexed Payment
Obligation, expires 2020 N/A N/A 1,250 $ 46,131
-------------------------------------------------------------------------------------------------------------
TOTAL WARRANTS (IDENTIFIED COST, $75,292) $ 46,131
-------------------------------------------------------------------------------------------------------
Convertible Bonds - 0.0%
-------------------------------------------------------------------------------------------------------
Banks & Credit Companies - 0.0%
-------------------------------------------------------------------------------------------------------
Fortis Capital Co., 6.25% to 2009, FRN to 2049
(Identified Cost, $135,348) EUR 155,000 $ 207,357
-------------------------------------------------------------------------------------------------------
Call Options Purchased - 0.0%
-------------------------------------------------------------------------------------------------------
PAR AMOUNT
ISSUE/EXPIRATION/STRIKE PRICE OF CONTRACTS
-------------------------------------------------------------------------------------------------------
MXN currency - May 2006 @ $0.0896 MXN 1,115,450 $ 1,055
U.S. Treasury Notes 10 yr Future - June 2006 @ $106 $98,000 45,938
-------------------------------------------------------------------------------------------------------
TOTAL CALL OPTIONS PURCHASED (PREMIUMS PAID, $79,590) $ 46,993
-------------------------------------------------------------------------------------------------------
Put Options Purchased - 0.0%
-------------------------------------------------------------------------------------------------------
U.S. Treasury Notes 10 yr Future - June 2006 @ $106
(Premiums Paid, $83,031) $ 98,000 $ 98,000
-------------------------------------------------------------------------------------------------------
Short-Term Obligations - 4.0%
-------------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
-------------------------------------------------------------------------------------------------------
UBS Finance Delaware LLC, 4.82%, due 5/01/06,
at Amortized Cost (y) $ 21,210,000 $ 21,210,000
-------------------------------------------------------------------------------------------------------
Repurchase Agreement - 1.9%
-------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., 4.77%, dated 4/28/06, due 5/01/06, total to
be received $9,838,909 (secured by various U.S. Treasury and
Federal Agency obligations in a jointly traded account), at Cost $ 9,835,000 $ 9,835,000
-------------------------------------------------------------------------------------------------------
Rights - 0.0%
-------------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
-------------------------------------------------------------------------------------------------------
Emerging Market Sovereign - 0.0%
-------------------------------------------------------------------------------------------------------
Banco Central del Uruguay, Value Recovery Rights, Expiring
January 2021 (n) 1,250,000 $ 0
-------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $545,456,135) (k) $541,946,228
-------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (2.1)% (11,050,543)
-------------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $530,895,685
-------------------------------------------------------------------------------------------------------
(a) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities
may be sold in transactions exempt from registration, normally to qualified institutional buyers.
At period end, the aggregate value of these securities was $61,470,451, representing 11.6% of net
assets.
(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 April 30, 2006, the trust held securities fair valued in accordance with the policies
adopted by the Board of Trustees, aggregating $489,081,575 and 90.25% of market value, of which
90.25% of market value was provided by an independent pricing service using an evaluated bid.
(n) Non-income producing security.
(y) The rate shown represents an annualized yield at time of purchase.
DERIVATIVES
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
BRL 95,023 5/30/06 $ 44,331 $ 45,065 $ (734)
CAD 813,536 5/15/06 704,916 727,233 (22,317)
CLP 20,510,000 5/08/06 40,000 39,843 157
DKK 450,944 5/10/06 73,711 76,293 (2,582)
EUR 51,183,964 5/17/06 - 6/13/06 62,368,579 64,749,444 (2,380,865)
GBP 5,468,584 6/05/06 9,566,194 9,966,977 (400,783)
ILS 430,750 5/04/06 96,150 96,123 27
MXN 1,546,192 5/09/06 - 5/11/06 138,966 139,699 (733)
NOK 8,716,124 5/10/06 1,343,112 1,413,601 (70,489)
NZD 8,109,391 6/06/06 4,921,807 5,156,514 (234,707)
PLN 1,342,008 5/04/06 436,425 437,326 (901)
RUB 1,341,462 6/15/06 48,994 49,269 (275)
SGD 1,099,055 5/04/06 638,063 638,420 (357)
----------- ----------- -----------
$80,421,248 $83,535,807 $(3,114,559)
----------- ----------- -----------
NET UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
DELIVER/RECEIVE SETTLEMENT DATE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
-------------------------------------------------------------------------------------------------------
PURCHASES
BRL 255,130 5/22/06 $ 119,842 $ 121,279 $ 1,437
CLP 75,034,500 5/08/06 143,813 145,763 1,950
CNY 1,794,375 6/21/06 225,622 225,590 (32)
COP 350,395,458 5/17/06 - 5/25/06 149,892 147,287 (2,605)
CZK 9,495,980 5/15/06 396,111 420,974 24,863
DKK 450,944 5/10/06 72,383 76,293 3,910
EUR 2,476,324 5/10/06 - 5/17/06 3,000,060 3,126,872 126,812
GBP 462,713 6/05/06 827,425 843,335 15,910
IDR 126,267,902 5/30/06 14,292 14,275 (17)
ILS 861,500 5/04/06 - 6/06/06 188,437 192,225 3,788
INR 2,208,500 5/30/06 49,078 49,143 65
KRW 24,537,500 5/15/06 25,748 26,031 283
MXN 6,745,930 5/09/06 - 5/11/06 612,064 609,520 (2,544)
NOK 8,716,124 5/10/06 1,301,322 1,413,601 112,279
NZD 1,928,020 6/06/06 1,209,254 1,225,969 16,715
PHP 5,545,500 5/17/06 108,416 107,094 (1,322)
PLN 2,684,016 5/04/06 - 6/06/06 851,654 875,068 23,414
RUB 4,895,962 5/15/06 - 6/15/06 176,536 179,756 3,220
SGD 2,018,110 5/04/06 - 6/06/06 1,264,053 1,277,797 13,744
SKK 5,058,966 5/09/06 165,925 170,908 4,983
TRY 673,933 5/05/06 - 5/25/06 501,550 508,697 7,147
ZAR 247,632 5/04/06 40,000 41,145 1,145
----------- ----------- -----------
$11,443,477 $11,798,622 $ 355,145
----------- ----------- -----------
At April 30, 2006, forward foreign currency purchases and sales under master netting agreements
excluded above amounted to a net receivable of $224,067 with Merrill Lynch International.
FUTURES CONTRACTS OUTSTANDING AT APRIL 30, 2006:
UNREALIZED
EXPIRATION APPRECIATION
DESCRIPTION CONTRACTS VALUE DATE (DEPRECIATION)
-------------------------------------------------------------------------------------------------------
U.S. Treasury Note 10 yr (Short) 95 $10,029,922 June 2006 $33,809
At April 30, 2006, the trust had sufficient cash and/or securities to cover
any commitments under these derivative contracts.
The following abbreviations are used in the Portfolio of Investments and are defined:
CDO Collateralized Debt Obligation
FRN Floating Rate Note. The interest rate is the rate in effect as of period end.
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 GBP British Pound PHP Philippine Peso
BRL Brazilian Real IDR Indonesian Rupiah PLN Polish Zloty
CAD Canadian Dollar ILS Israeli Sheqel RUB Russian Ruble
CLP Chilean Peso INR Indian Rupee SGD Singapore Dollar
CNY Chinese Yuan Renminbi KRW Korean Won SKK Slovakian Koruna
COP Colombian Peso MXN Mexican Peso TRY Turkish Lira
CZK Czech Koruna NOK Norwegian Krone UYU Uruguayan Peso
DKK Danish Krone NZD New Zealand Dollar ZAR South African Rand
EUR Euro
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS Statement of Assets and Liabilities (unaudited)
This statement represents your trust's balance sheet, which details the assets
and liabilities comprising the total value of the trust.
AT 4/30/06
ASSETS
------------------------------------------------------------------------------------------------------
Investments, at value (identified cost, $545,456,135) $541,946,228
Cash 152,834
Foreign currency, at value (identified cost, $239) 224
Receivable for forward foreign currency exchange contracts 363,173
Receivable for forward foreign currency exchange contracts
subject to master netting agreements 224,067
Receivable for investments sold 3,401,902
Interest and dividends receivable 8,332,756
Other assets 81,210
------------------------------------------------------------------------------------------------------
Total assets $554,502,394
------------------------------------------------------------------------------------------------------
LIABILITIES
------------------------------------------------------------------------------------------------------
Payable to dividend disbursing agent $205,143
Payable for forward foreign currency exchange contracts 3,122,587
Payable for daily variation margin on open futures contracts 16,328
Payable for investments purchased 19,658,839
Payable to affiliates
Management fee 31,585
Transfer agent and dividend disbursing costs 43,004
Administrative services fee 598
Payable for independent trustees' compensation 374,979
Accrued expenses and other liabilities 153,646
------------------------------------------------------------------------------------------------------
Total liabilities $23,606,709
------------------------------------------------------------------------------------------------------
Net assets $530,895,685
------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
------------------------------------------------------------------------------------------------------
Paid-in capital $612,952,980
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies (5,944,215)
Accumulated net realized gain (loss) on investments and foreign
currency transactions (73,379,185)
Accumulated distributions in excess of net investment income (2,733,895)
------------------------------------------------------------------------------------------------------
Net assets $530,895,685
------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding (86,253,654 issued,
less 6,388,302 treasury shares) 79,865,352
------------------------------------------------------------------------------------------------------
Net asset value per share (net assets of $530,895,685/
79,865,352 shares of beneficial interest outstanding) $6.65
------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS Statement of Operations (unaudited)
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.
SIX MONTHS ENDED 4/30/06
NET INVESTMENT INCOME
------------------------------------------------------------------------------------------------------
Income
Interest $15,520,781
Dividends 65,799
Foreign taxes withheld 67
------------------------------------------------------------------------------------------------------
Total investment income $15,586,647
------------------------------------------------------------------------------------------------------
Expenses
Management fee $1,830,600
Transfer agent and dividend disbursing costs 129,111
Administrative services fee 33,093
Independent trustees' compensation 38,181
Custodian fee 103,217
Shareholder communications 164,580
Auditing fees 48,530
Legal fees 6,097
Miscellaneous 28,844
------------------------------------------------------------------------------------------------------
Total expenses $2,382,253
------------------------------------------------------------------------------------------------------
Fees paid indirectly (32,212)
Reduction of expenses by investment adviser (1,869)
------------------------------------------------------------------------------------------------------
Net expenses $2,348,172
------------------------------------------------------------------------------------------------------
Net investment income $13,238,475
------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
------------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $(1,173,725)
Written option transactions 9,735
Futures contracts 206,061
Foreign currency transactions 690,647
------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $(267,282)
------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $(2,508,926)
Futures contracts 33,809
Translation of assets and liabilities in foreign currencies (2,887,314)
------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $(5,362,431)
------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $(5,629,713)
------------------------------------------------------------------------------------------------------
Change in net assets from operations $7,608,762
------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS Statements of Changes in Net Assets
This statement describes the increases and/or decreases in net assets
resulting from operations, any distributions, and any shareholder
transactions.
SIX MONTHS
ENDED YEAR ENDED
4/30/06 10/31/05
(UNAUDITED)
CHANGE IN NET ASSETS
------------------------------------------------------------------------------------------------------
FROM OPERATIONS
------------------------------------------------------------------------------------------------------
Net investment income $13,238,475 $27,896,846
Net realized gain (loss) on investments and foreign
currency transactions (267,282) 19,709,683
Net unrealized gain (loss) on investments and foreign
currency translation (5,362,431) (33,557,272)
------------------------------------------------------------------------------------------------------
Change in net assets from operations $7,608,762 $14,049,257
------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
------------------------------------------------------------------------------------------------------
From net investment income $(15,542,382) $(31,635,467)
------------------------------------------------------------------------------------------------------
Change in net assets from trust share transactions $(6,816,053) $(5,859,433)
------------------------------------------------------------------------------------------------------
Total change in net assets $(14,749,673) $(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 $2,733,895 and
$429,988, respectively) $530,895,685 $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 semiannual period
and the past 5 fiscal years. Certain information reflects financial results for a single trust share. The total returns in
the table represent the rate by which an investor would have earned (or lost) on an investment in the trust (assuming
reinvestment of all distributions) held for the entire period.
SIX MONTHS YEARS ENDED 10/31
ENDED ------------------------------------------------------------------------
4/30/06 2005 2004 2003 2002 2001
(UNAUDITED)
Net asset value, beginning
of period $6.74 $6.94 $6.76 $6.32 $6.60 $6.69
------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS (x)
------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.16 $0.34 $0.38 $0.38 $0.41 $0.51
Net realized and unrealized gain
(loss) on investments and
foreign currency (0.07) (0.16) 0.17 0.46 (0.26) (0.06)
------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.09 $0.18 $0.55 $0.84 $0.15 $0.45
------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.19) $(0.39) $(0.39) $(0.40) $(0.43) $(0.49)
From paid-in capital -- -- -- -- -- (0.05)
------------------------------------------------------------------------------------------------------------------------------
Total distributions declared
to shareholders $(0.19) $(0.39) $(0.39) $(0.40) $(0.43) $(0.54)
------------------------------------------------------------------------------------------------------------------------------
Net increase from repurchase of
capital shares $0.01 $0.01 $0.02 $0.00(w) $0.00(w) $0.00(w)
------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.65 $6.74 $6.94 $6.76 $6.32 $6.60
------------------------------------------------------------------------------------------------------------------------------
Per share market value, end
of period $5.85 $6.15 $6.30 $6.41 $5.69 $6.06
------------------------------------------------------------------------------------------------------------------------------
Total return at market
value (%) (r)(s) (1.80)(n) 3.78 4.62 20.11 0.72 9.83
------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 0.89(a) 0.93 0.94 0.94 0.96 1.06
Expenses after expense
reductions (f) 0.89(a) 0.93 0.94 0.94 0.96 1.06
Net investment income (x) 4.93(a) 4.97 5.51 5.76 6.49 7.65
Portfolio turnover 43 67 59 126 152 103
Net assets at end of period
(000 Omitted) $530,896 $545,645 $569,091 $563,760 $528,945 $554,767
------------------------------------------------------------------------------------------------------------------------------
(a) Annualized.
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(n) Not annualized.
(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.
(x) Effective November 1, 2001, the trust adopted the provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began amortizing and accreting all premiums and discounts on debt securities. Per share data and ratios for
periods prior to October 31, 2002 have not been restated to reflect this change.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS (unaudited)
(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 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 - 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
397 days or less are generally 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. For exchange-traded options in
which there were no sales reported that day, exchange-traded options 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. Securities and other
assets generally valued on the basis of information from an independent
pricing service may also be valued at a broker-dealer 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. These valuations can be
based on 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. 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.
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, forward foreign currency exchange contracts, and futures contracts.
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.
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.
Legal fees and other related expenses incurred to preserve and protect the
value of a security owned are added to the cost of the security; other legal
fees are expensed. Capital infusions made directly to the security issuer,
which are generally non-recurring, incurred to protect or enhance the value of
high-yield debt securities, are reported as additions to the cost basis of the
security. Costs that are incurred to negotiate the terms or conditions of
capital infusions or that are expected to result in a plan of reorganization
are reported as realized losses. Ongoing costs incurred to protect or enhance
an investment, or costs incurred to pursue other claims or legal actions, are
expensed.
FEES PAID INDIRECTLY - The trust's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the trust. This amount, for the six months ended April 30, 2006, is shown as a
reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The trust intends to continue 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 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, wash sale loss deferrals, straddle loss
deferrals, foreign currency transactions, and derivative transactions.
The tax character of distributions made during the current period will be
determined at fiscal year end. The tax character of distributions declared to
shareholders is as follows:
OCTOBER 31, 2005 OCTOBER 31, 2004
Ordinary income (including any
short-term capital gains) $31,635,467 $32,540,604
The federal tax cost and the tax basis components of distributable earnings
were as follows:
AS OF APRIL 30, 2006
Cost of investments $551,447,091
----------------------------------------------------------
Gross appreciation $5,763,520
Gross depreciation (15,264,383)
----------------------------------------------------------
Net unrealized appreciation (depreciation) $(9,500,863)
AS OF OCTOBER 31, 2005
Undistributed ordinary income $4,536,676
Capital loss carryforwards (67,534,777)
Other temporary differences (4,547,582)
Net unrealized appreciation (depreciation) (6,577,992)
The aggregate cost above includes prior fiscal year end tax adjustments.
As of April 30, 2006, the trust had available capital loss carryforwards to
offset future realized gains. Such losses expire as follows:
October 31, 2008 $(6,883,833)
October 31, 2009 (22,359,865)
October 31, 2010 (38,291,079)
----------------------------------------------------------
$(67,534,777)
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - The trust has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.34%
of the trust's average daily net assets and 5.40% of gross investment income.
The management fee, from net assets and gross investment income, incurred for
the six months ended April 30, 2006 was equivalent to an annual effective rate
of 0.68% of the trust's average daily net assets.
TRANSFER AGENT - The trust pays a portion of transfer agent and dividend-
disbursing costs to MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary
of MFS. MFSC receives a fee from the trust, for its services as registrar and
dividend-disbursing agent. The agreement provides that the trust will pay MFSC
an account maintenance fee of no more than $9.00 and a dividend services fee
of $0.75 per reinvestment. For the six months ended April 30, 2006, these fees
amounted to $73,577. MFSC also receives payment from the trust for out-of-
pocket expenses paid by MFSC on behalf of the trust. For the six months ended
April 30, 2006, these costs amounted to $42,644.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to certain funds
for which MFS acts as investment adviser. Under an administrative services
agreement, the funds may partially reimburse MFS the costs incurred to provide
these services, subject to review and approval by the Board of Trustees. Each
fund 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 six months ended April 30,
2006 was equivalent to an annual effective rate of 0.0123% of the trust's
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 who are officers of the investment
adviser, or to officers of the trust, all of whom receive remuneration for
their services to the trust from MFS. Certain officers and Trustees of the
trust are officers or directors of MFS and MFSC. The trust has an unfunded,
defined benefit plan for retired Independent Trustees which resulted in a
pension expense of $4,031. The trust also has an unfunded retirement benefit
deferral plan for certain current Independent Trustees which resulted in an
expense of $1,464. Both amounts are included in Independent trustees'
compensation for the six months ended April 30, 2006. The deferred liability
for retirement benefits payable to retired Trustees and certain current
Trustees amounted to $154,405 and $136,094, respectively, at April 30, 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 $76,210 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 six months ended April 30, 2006, the fee paid to Tarantino
LLC was $2,285. MFS has agreed to reimburse the trust for a portion of the
payments made by the funds to Tarantino LLC in the amount of $1,869, 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 operations.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
PURCHASES SALES
U.S. government securities $86,545,436 $69,260,769
-----------------------------------------------------------------------------
Investments (non-U.S. government
securities) $139,460,823 $158,795,062
-----------------------------------------------------------------------------
(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 1,130,700 shares of
beneficial interest during the six months ended April 30, 2006 at an average
price per share of $6.03 and a weighted average discount of 10.24% 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:
PERIOD ENDED YEAR ENDED
APRIL 30, 2006 OCTOBER 31, 2005
SHARES AMOUNT SHARES AMOUNT
Treasury shares reacquired (1,130,700) $(6,816,053) (959,100) $(5,859,433)
(6) LINE OF CREDIT
The trust and other affiliated funds participate in a $1 billion unsecured
line of credit provided by a syndication of banks under a credit agreement.
Borrowings may be made for temporary financing needs. Interest is charged to
each fund, based on its borrowings, at a rate equal to the Federal Reserve
funds rate plus 0.35%. In addition, a commitment fee, based on the average
daily, unused portion of the line of credit, is allocated among the
participating funds at the end of each calendar quarter. The commitment fee
allocated to the trust for the six months ended April 30, 2006 was $1,894, and
is included in miscellaneous expense on the Statement of Operations. The trust
had no significant borrowings during the six months ended April 30, 2006.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees and Shareholders of the MFS Multimarket Income Trust
We have reviewed the accompanying statement of assets and liabilities of the
MFS Multimarket Income Trust (the Trust), including the portfolio of
investments, as of April 30, 2006, and the related statements of operations,
changes in net assets, and financial highlights for the six-month period ended
April 30, 2006. These interim financial statements are the responsibility of
the Trust's management.
We conducted our review in accordance with the standards of the Public
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States),
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying interim financial statements for them to be
in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the statement of changes
in net assets for the year ended October 31, 2005, and financial highlights
for each of the five years in the period ended October 31, 2005, and in our
report dated December 13, 2005, we expressed an unqualified opinion on such
statement of changes in net assets and financial highlights.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
June 12, 2006
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board's most recent review and renewal of the
Fund's investment advisory agreement is available by clicking on the fund's
name under "Select a fund" on 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.
CONTACT INFORMATION AND NUMBER OF SHAREHOLDERS
INVESTOR INFORMATION
Transfer Agent, Registrar and Dividend Disbursing Agent
Call 1-800-637-2304 any business day from 8 a.m. to 8 p.m. Eastern
time
Write to: MFS Service Center, Inc.
P.O. Box 55024
Boston, MA 02205-5024
NUMBER OF SHAREHOLDERS
As of April 30, 2006, our records indicate that there are 7,519 registered
shareholders and approximately 38,396 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:
MFS Service Center, Inc.
P.O. Box 55024
Boston, MA 02205-5024
1-800-637-2304
M F S(SM)
INVESTMENT MANAGEMENT(R)
(C) 2006 MFS Investment Management(R)
500 Boylston Street, Boston, MA 02116.
MMT-SEM-6/06 53M
ITEM 2. CODE OF ETHICS.
The Registrant has not amended any provision in its Code of Ethics (the "Code")
that relates to any element of the Code's definition enumerated in paragraph
(b) of Item 2 of this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for semi-annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for semi-annual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable for semi-annual reports.
ITEM 6. SCHEDULE OF INVESTMENTS
A schedule of investments for each series of the Registrant is included as part
of the report to shareholders of such series under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable for semi-annual reports.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
GENERAL. Information regarding the portfolio managers of the MFS Multimarket
Income Trust (the "Fund") provided as of April 30, 2006 is set forth below.
TITLE AND FIVE YEAR
PORTFOLIO MANAGER PRIMARY ROLE SINCE HISTORY
----------------- ------------ ----- --------------------
Richard O. Hawkins Lead Portfolio April Senior Vice President of
Manager 2006 MFS; employed in the
investment management
area of MFS since 1988.
John Addeo High Yield Debt 2005 Vice 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.
Scott B. Richards High Yield Debt 2005 Vice President of MFS;
Securities Portfolio employed in the
Manager investment management
area MFS since 2004;
Head of the High Yield
Group at Columbia
Management Group from
1999 to 2003.
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.
COMPENSATION. Portfolio manager total cash compensation as of April 30, 2006 is
a combination of base salary and performance bonus:
o Base Salary - Base salary represents a relatively 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. The 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 the investment process (distinct from portfolio
performance).
Portfolio managers also typically benefit from the opportunity to participate
in the MFS Equity Plan. 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 of compensation provided by these benefits 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 semi-annual period ended April 30, 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
Scott B. Richards N
Matthew W. Ryan 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
semi-annual period ended April 30, 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 $24.9 billion 0 N/A 2 $45.2 million
John Addeo 10 $4.3 billion 1 $187 million 2 $533.7 million
James J. Calmas 8 $3.1 billion 4 $635.1 2 $603.2 million
million
Scott Richards 13 $4.7 billion 2 $477.2 2 $533.7 million
million
Matthew W. Ryan 14 $4.8 billion 3 $1.8 billion 7 $1.1 billion
* 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 seek 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.
In certain instances there may be securities which are suitable for the Fund's
portfolio as well as for accounts with similar investment objectives of the
Adviser or subsidiary of the Adviser. Securities transactions for the Fund and
other accounts with similar investment objectives are generally executed on the
same day, or the next day. Nevertheless, it may develop that a particular
security is bought or sold for only one client even though it might be held by,
or bought or sold for, other clients. Likewise, a particular security may be
bought for one or more clients when one or more other clients are selling that
same security.
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. MFS
and/or a portfolio manager may have an 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
-------------------------------------------------------------------------------
(C) (D)
TOTAL NUMBER MAXIMUM NUMBER
OF SHARES (OR APPROXIMATE
PURCHASED AS DOLLAR VALUE) OF
(B) PART OF SHARES THAT MAY
(A) AVERAGE PUBLICLY YET BE PURCHASED
TOTAL NUMBER PRICE ANNOUNCED UNDER
OF SHARES PAID PER PLANS OR THE PLANS
PERIOD PURCHASED SHARE PROGRAMS OR PROGRAMS
-------------------------------------------------------------------------------
1/1/05 - 11/30/05 70,700 $6.13 70,700 7,390,085
-------------------------------------------------------------------------------
2/1/05 - 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
-------------------------------------------------------------------------------
Total 1,130,700 $6.03 1,130,700
-------------------------------------------------------------------------------
Note: The Board of Trustees approves procedures to repurchase Fund shares
annually. The notification to shareholders of the program is included in 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
Fund shares that may be repurchased 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 repurchase for the March 1, 2006 plan year are 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 or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the effectiveness 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 of the period covered by the report that have
materially affected, or are 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.
(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.
(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: June 23, 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: June 23, 2006
-------------
By (Signature and Title)* TRACY ATKINSON
-----------------------------------------------------
Tracy Atkinson, Treasurer (Principal Financial Officer
and Accounting Officer)
Date: June 23, 2006
-------------
* Print name and title of each signing officer under his or her signature.