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, 2007
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ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) MULTIMARKET INCOME TRUST
M F S(R)
INVESTMENT MANAGEMENT
[graphic omitted]
SEMIANNUAL REPORT
4/30/07
MMT-SEM
MFS(R) MULTIMARKET INCOME TRUST
LETTER FROM THE CEO 1
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PORTFOLIO COMPOSITION 2
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PORTFOLIO MANAGERS' PROFILES 4
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PERFORMANCE SUMMARY 6
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DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN 8
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PORTFOLIO OF INVESTMENTS 9
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STATEMENT OF ASSETS AND LIABILITIES 28
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STATEMENT OF OPERATIONS 30
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STATEMENTS OF CHANGES IN NET ASSETS 32
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FINANCIAL HIGHLIGHTS 33
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NOTES TO FINANCIAL STATEMENTS 34
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 46
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BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 47
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PROXY VOTING POLICIES AND INFORMATION 47
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QUARTERLY PORTFOLIO DISCLOSURE 47
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CONTACT INFORMATION BACK COVER
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TRUST OBJECTIVE: The Trust seeks to provide a high level of current income
through investment in fixed-income securities.
New York Stock Exchange Symbol: MMT
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NOT FDIC INSURED o MAY LOSE VALUE o
NO BANK OR CREDIT UNION GUARANTEE o NOT A DEPOSIT o
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR
NCUA/NCUSIF
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LETTER FROM THE CEO
[Photo of Robert J. Manning]
Dear Shareholders:
The past year has been a great example of why investors should keep their eyes
on the long term.
In 2006 the Dow Jones Industrial Average returned 19%. As of mid-May 2007, it
had returned another 8% and continued to reach new highs. But the Dow's upward
rise has not been without hiccups. After hitting new records in February, the
Dow lost 5.8% between February 20 and March 5, as stocks were sold off around
the globe. As we have said before, markets are volatile, and investors should
make sure they have an investment plan that can carry them through the peaks
and troughs.
If you are focused on a long-term investment strategy, the short-term ups and
downs of the markets should not necessarily dictate portfolio action on your
part. Both the bond and stock markets are cyclical. In our view, investors who
remain committed to a long-term plan are more likely to achieve their financial
goals. We believe you should not let the headlines guide you in your investment
decisions and should be cautious about overreacting to short-term volatility.
In any market environment, we believe individual investors are best served by
following a three-pronged investment strategy of allocating their holdings
across the major asset classes, diversifying within each class, and regularly
rebalancing their portfolios to maintain their desired allocations. Of course,
these strategies cannot guarantee a profit or protect against a loss. Investing
and planning for the long term require diligence and patience, two traits that
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, 2007
The opinions expressed in this letter are subject to change, may not be relied
upon for investment advice, and no forecasts can be guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE (i)
Bonds 92.9%
Floating Rate Loans 1.5%
Cash & Other Net Assets 5.6%
FIXED INCOME SECTORS (i)
High Yield Corporates 24.1%
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High Grade Corporates 19.7%
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Non U.S. Government Bonds 11.0%
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Mortgage-Backed Securities 9.7%
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Emerging Market Bonds 9.1%
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Commercial Mortgage-Backed Securities 8.9%
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U.S. Treasury Securities 8.2%
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Asset-Backed Securities 1.6%
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Floating Rate Loans 1.5%
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Residential Mortgage-Backed Securities 0.5%
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Collateralized Debt Obligations 0.1%
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CREDIT QUALITY OF BONDS (r)
AAA 32.4%
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AA 5.5%
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A 8.8%
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BBB 19.3%
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BB 16.8%
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B 14.5%
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CCC 1.8%
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Not Rated 0.9%
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PORTFOLIO FACTS
Average Duration (d)(i) 5.2
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Average Life (i)(m) 8.3 yrs.
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Average Maturity (i)(m) 13.6 yrs.
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Average Credit Quality of Rated
Securities (long-term) (a) A-
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Average Credit Quality of Rated
Securities (short-term) (a) A-1
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COUNTRY WEIGHTINGS (i)
United States 65.7%
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United Kingdom 5.4%
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France 4.8%
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Japan 3.6%
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Germany 3.5%
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Russia 2.4%
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Netherlands 2.1%
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Mexico 1.5%
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Canada 1.4%
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Other Countries 9.6%
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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 presentation, the bond component includes both accrued
interest amounts and the equivalent exposure from any derivative holdings,
if applicable.
(m) The average maturity shown is calculated using the final stated maturity on
the portfolio's holdings without taking into account any holdings which
have been pre- refunded or pre-paid to an earlier date or which have a
mandatory put date prior to the stated maturity. The average life shown
takes into account these earlier dates.
(r) Each security is assigned a rating from Moody's Investors Service. If not
rated by Moody's, the rating will be that assigned by Standard & Poor's.
Likewise, if not assigned a rating by Standard & Poor's, it will be based
on the rating assigned by Fitch, Inc. For those portfolios that hold a
security which is not rated by any of the three agencies, the security is
considered Not Rated. Holdings in U.S. Treasuries and government agency
mortgage-backed securities, if any, are included in the "AAA"-rating
category. Percentages are based on the total market value of investments as
of 04/30/07.
Percentages are based on net assets as of 04/30/07, unless otherwise noted.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO MANAGERS' PROFILES
Richard O. Hawkins, CFA, is Senior Vice President of MFS Investment
Management(R) (MFS(R)) and portfolio manager of fixed income mutual funds,
variable annuities, separate accounts, and closed end funds. Richard joined the
firm in 1988 and was named portfolio manager in 1996. He has been a portfolio
manager of the fund since April 2006. Richard earned a bachelor's degree from
Brown University and a Master's of Business Administration from the University
of Pennsylvania. He is a member of the Association for Investment Management
and Research (AIMR) and the Boston Security Analysts Society, Inc. He holds the
Chartered Financial Analyst (CFA) designation.
John F. Addeo, CFA, is Vice President of MFS Investment Management(R) (MFS(R))
and portfolio manager of the high-yield bond portfolios of our mutual funds,
variable annuities, offshore accounts and closed-end funds. John joined MFS as
a research analyst in 1998. He became Vice President in 1999, associate
portfolio manager in 2000, and portfolio manager in 2001. He has been a
portfolio manager of the fund since February 2005. John 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 team leader of the firm's strategic income and limited maturity
portfolios, and portfolio manager of variable annuities, and offshore
investment products. Jim joined MFS in 1988 and was named portfolio manager in
1998, and Senior Vice President in 2002. He has been a portfolio manager of the
fund since September 2004. Jim is a graduate of Dartmouth College and holds an
M.B.A. degree from the Amos Tuck School of Business Administration of Dartmouth
College.
David P. Cole, CFA, is Vice President of MFS Investment Management(R) (MFS(R)).
He is also a co-portfolio manager on the firm's high-yield portfolios and the
high-yield segment of the MFS Diversified Income Fund. He has been a portfolio
manager of the fund since October 2006. David joined MFS in 2004 after working
for five years as a High Yield Analyst for Franklin Templeton Investments.
Prior to this, he served as a Financial Economist/ Treasury Market Analyst for
Thomson Financial Services and three years as an Economist for Standard and
Poor's. David has a bachelor's degree from Cornell University and an M.B.A from
University of California, Berkeley. He holds the Chartered Financial Analyst
(CFA) designation.
Matthew W. Ryan, CFA, is Senior Vice President of MFS Investment Management(R)
(MFS(R)) and portfolio manager of strategic income and high yield portfolios,
as well as the firm's emerging market debt portfolios. 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 October 9, 2006, David Cole replaced Scott
Richards as a manager of the portfolio.
PERFORMANCE SUMMARY THROUGH 4/30/07
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 4/30/07
Date Price
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Net Asset Value Per Share 4/30/07 $6.78
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10/31/06 $6.74
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New York Stock Exchange Price 4/30/07 $6.08
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2/28/07(high) (t) $6.16
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11/09/06(low) (t) $5.93
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10/31/06 $6.00
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TOTAL RETURNS VS BENCHMARKS
Six months ended 4/30/07
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New York Stock Exchange Price (r) 4.29%
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Net Asset Value (r) 3.53%
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Citigroup World Government Bond Non-Dollar Hedged Index (f) 1.32%
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JPMorgan Emerging Markets Bond Index Global (f) 5.29%
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Lehman Brothers U.S. Credit Bond Index (f) 2.79%
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Lehman Brothers U.S. Government/Mortgage Bond Index (f) 2.62%
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Lehman Brothers U.S. High-Yield Corporate Bond Index (f) 6.89%
(f) Source: FactSet Research Systems Inc.
(r) Includes reinvestment of dividends and capital gain distributions.
(t) For the period November 1, 2006 through April 30, 2007.
INDEX DEFINITIONS
Citigroup World Government Bond Non-Dollar Hedged Index - a market
capitalization-weighted index that tracks the currency-hedged performance of
the major government bond markets, excluding the United States. Country
eligibility is determined based upon market capitalization and investability
criteria.
JPMorgan Emerging Markets Bond Index Global (EMBI Global) - tracks total
returns for U.S.-dollar-denominated debt instruments issued by emerging market
sovereign and quasi-sovereign entities: Brady bonds, loans, Eurobonds.
Lehman Brothers U.S. Credit Bond Index - measures publicly issued, SEC-
registered, U.S. corporate and specified foreign debentures and secured notes
that meet specified maturity, liquidity, and quality requirements.
Lehman Brothers U.S. Government/Mortgage Bond Index - measures debt issued by
the U.S. Government, and its agencies, 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.
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 $100 in January and July on the 15th of the month or shortly thereafter.
If your shares are in the name of a brokerage firm, bank, or other nominee, you
can ask the firm or nominee to participate in the plan on your behalf. If the
nominee does not offer the plan, you may wish to request that your shares be
re-registered in your own name so that you can participate. There is no service
charge to reinvest distributions, nor are there brokerage charges for shares
issued directly by the trust. However, when shares are bought on the New York
Stock Exchange or otherwise on the open market, each participant pays a pro
rata share of the transaction expenses, including commissions. The automatic
reinvestment of distributions does not relieve you of any income tax that may
be payable (or required to be withheld) on the distributions.
To enroll in or withdraw from the plan, or if you have any questions, call
1-800-637-2304 any business day from 9 a.m. to 5 p.m. Eastern time. Please have
available the name of the trust and your account and Social Security numbers.
For certain types of registrations, such as corporate accounts, instructions
must be submitted in writing. Please call for additional details. When you
withdraw from the plan, you can receive the value of the reinvested shares in
one of two ways: a check for the value of the full and fractional shares, or a
certificate for the full shares and a check for the fractional shares.
Effective May 1, 2007, Computershare Trust Company, N.A. (the Transfer Agent
for the trust) became the agent for the plan.
PORTFOLIO OF INVESTMENTS
4/30/07 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your
trust. It is categorized by broad-based asset classes.
Bonds - 90.1%
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ISSUER SHARES/PAR VALUE ($)
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Aerospace - 0.3%
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Bombardier, Inc., 8%, 2014 (n) $ 713,000 $ 748,650
DRS Technologies, Inc., 7.625%, 2018 250,000 261,875
Hawker Beechcraft Acquisition Corp., 9.75%, 2017 (n) 365,000 391,463
Rolls-Royce PLC, 6.375%, 2007 EUR 300,000 410,479
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$ 1,812,467
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Airlines - 0.2%
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Continental Airlines, Inc., 7.566%, 2020 $ 995,352 $ 1,017,747
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Asset Backed & Securitized - 11.0%
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ARCap REIT, Inc., "H", 6.1%, 2045 (n) $ 2,000,000 $ 1,789,766
Asset Securitization Corp., FRN, 8.1466%, 2029 1,877,956 2,024,683
Banc of America Commercial Mortgage, Inc., "A4", FRN, 5.3534%, 2047 1,375,626 1,369,526
Banc of America Commercial Mortgage, Inc., FRN, 4.857%, 2043 1,375,626 1,335,820
Bayview Financial Acquisition Trust, FRN, 5.483%, 2041 1,130,000 1,126,409
Bayview Financial Revolving Mortgage Loan Trust, FRN, 6.12%, 2040 (z) 4,000,000 3,999,991
Citigroup/Deutsche Bank Commercial Mortgage Trust, "H", FRN, 5.8817%, 2049 (z) 454,115 434,389
Citigroup/Deutsche Bank Commercial Mortgage Trust, "J", FRN, 5.8817%, 2049 (z) 700,000 650,562
Citigroup/Deutsche Bank Commercial Mortgage Trust, FRN, 5.366%, 2049 1,160,000 1,152,387
Countrywide Asset-Backed Certificates, FRN, 4.575%, 2035 351,970 349,879
Crest Ltd., 7%, 2040 (n) 2,000,000 1,904,000
DEPFA Bank, 5.5%, 2010 EUR 960,000 1,351,356
Deutsche Mortgage & Asset Receiving Corp., 7.5%, 2031 $ 1,847,000 2,000,259
DLJ Commercial Mortgage Corp., 6.04%, 2031 2,000,000 2,032,122
Falcon Franchise Loan LLC, FRN, 4.1216%, 2025 (i)(z) 7,206,309 1,013,351
First Union National Bank Commercial Mortgage Trust, FRN, 1.1842%, 2043 (i)(n) 28,235,079 842,202
First Union-Lehman Brothers Bank of America, FRN, 0.6911%, 2035 (i) 59,426,392 866,710
First Union-Lehman Brothers Commercial Mortgage Trust, 7%, 2029 (n) 1,847,000 2,002,905
First Union-Lehman Brothers Commercial Mortgage Trust, FRN, 7.5%, 2029 1,846,973 2,046,934
GMAC Commercial Mortgage Securities, Inc., 6.02%, 2033 2,542,000 2,581,526
GMAC Commercial Mortgage Securities, Inc., FRN, 7.9175%, 2034 (n) 1,853,000 2,000,933
JPMorgan Chase Commercial Mortgage Securities Corp., 5.552%, 2045 1,590,000 1,607,944
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 5.4721%, 2043 1,375,626 1,376,336
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 5.475%, 2043 1,590,000 1,600,271
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 6.0657%, 2045 1,590,000 1,653,610
Lehman Brothers Commercial Conduit Mortgage Trust, FRN, 1.092%, 2030 (i) 15,266,638 291,425
Morgan Stanley Capital I, Inc., FRN, 1.4083%, 2039 (i)(n) 14,915,475 836,665
Mortgage Capital Funding, Inc., FRN, 0.806%, 2031 (i) 13,023,249 65,099
Multi-Family Capital Access One, Inc., 6.65%, 2024 97,793 98,856
Preferred Term Securities IV Ltd., CDO, FRN, 7.6%, 2031 (z) 717,888 720,042
Prudential Securities Secured Financing Corp., FRN, 7.3872%, 2013 (z) 2,581,000 2,745,633
RMAC PLC, FRN, 4.078%, 2036 (n) EUR 109,634 149,632
Structured Asset Securities Corp., FRN, 4.67%, 2035 $ 4,130,346 4,089,095
TIAA Real Estate CDO Ltd., 7.17%, 2032 (n) 1,346,234 1,345,768
Wachovia Bank Commercial Mortgage Trust, 4.935%, 2042 2,000,000 1,948,918
Wachovia Bank Commercial Mortgage Trust, FRN, 5.118%, 2042 1,375,626 1,356,374
Wachovia Bank Commercial Mortgage Trust, FRN, 5.383%, 2043 2,660,000 2,656,686
Wachovia Bank Commercial Mortgage Trust, FRN, 6.021%, 2043 (z) 1,100,000 1,061,483
Wachovia Bank Commercial Mortgage Trust, FRN, 5.4906%, 2044 2,777,000 2,771,454
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$ 59,251,001
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Automotive - 1.8%
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Continental AG, 6.875%, 2008 EUR 100,000 $ 141,751
DaimlerChrysler N.A. Holdings Corp., 8.5%, 2031 $ 1,251,000 1,576,329
Ford Motor Credit Co., 7.375%, 2009 2,115,000 2,116,637
Ford Motor Credit Co., 7%, 2013 1,325,000 1,252,912
Ford Motor Credit Co., 8%, 2016 635,000 621,013
Ford Motor Credit Co. LLC, 9.75%, 2010 310,000 328,034
Ford Motor Credit Co., FRN, 8.105%, 2012 400,000 394,525
General Motors Corp., 8.375%, 2033 674,000 609,128
Goodyear Tire & Rubber Co., 9%, 2015 845,000 931,613
Johnson Controls, Inc., 5.25%, 2011 1,180,000 1,182,939
TRW Automotive, Inc., 7%, 2014 (n) 690,000 683,100
TRW Automotive, Inc., 7.25%, 2017 (n) 75,000 74,438
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$ 9,912,419
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Broadcasting - 2.3%
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Allbritton Communications Co., 7.75%, 2012 $ 875,000 $ 899,062
CBS Corp., 6.625%, 2011 1,043,000 1,089,111
Clear Channel Communications, Inc., 6.25%, 2011 1,310,000 1,299,448
Clear Channel Communications, Inc., 5.5%, 2014 1,210,000 1,072,914
Grupo Televisa S.A., 8.5%, 2032 463,000 587,659
Intelsat Bermuda Ltd., 9.25%, 2016 1,350,000 1,485,000
Intelsat Bermuda Ltd., 11.25%, 2016 355,000 405,144
Intelsat Subsidiary Holding Co. Ltd., 8.625%, 2015 580,000 619,875
Lamar Media Corp., 7.25%, 2013 1,460,000 1,492,850
News America Holdings, 7.7%, 2025 2,217,000 2,533,412
Umbrella Acquisition, Inc., 9.75%, 2015 (n)(p) 935,000 938,506
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$ 12,422,981
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Brokerage & Asset Managers - 1.5%
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AMVESCAP PLC, 5.625%, 2012 $ 1,450,000 $ 1,458,520
Goldman Sachs Group, Inc., 5.625%, 2017 3,378,000 3,362,883
Morgan Stanley, 5.75%, 2016 668,000 677,105
Morgan Stanley Dean Witter, Inc., 6.6%, 2012 2,538,000 2,688,041
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$ 8,186,549
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Building - 0.6%
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American Standard Cos., Inc., 7.375%, 2008 $ 2,500,000 $ 2,527,250
NTK Holdings, Inc., 8.5%, 2014 595,000 587,563
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$ 3,114,813
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Business Services - 0.2%
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SunGard Data Systems, Inc., 10.25%, 2015 $ 1,140,000 $ 1,254,000
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Cable TV - 1.1%
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CCH II Holdings LLC, 10.25%, 2010 $ 610,000 $ 649,650
CCO Holdings LLC, 8.75%, 2013 325,000 340,844
Cox Communications, Inc., 4.625%, 2013 1,744,000 1,667,339
Rogers Cable, Inc., 5.5%, 2014 1,975,000 1,955,250
TCI Communications, Inc., 9.8%, 2012 1,135,000 1,345,789
------------
$ 5,958,872
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Chemicals - 1.0%
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Akzo Nobel N.V., 5.625%, 2009 EUR 100,000 $ 139,468
Equistar Chemicals LP, 10.125%, 2008 $ 800,000 844,000
Equistar Chemicals LP, 10.625%, 2011 1,225,000 1,292,375
Linde Finance B.V., 6% to 2013, FRN to 2049 EUR 101,000 142,636
Lyondell Chemical Co., 11.125%, 2012 $ 830,000 883,950
Momentive Performance Materials, Inc., 11.5%, 2016 (n) 795,000 847,669
Mosaic Co., 7.625%, 2016 (n) 995,000 1,062,163
Nalco Co., 8.875%, 2013 95,000 101,650
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$ 5,313,911
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Computer Software - 0.2%
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Seagate Technology HDD Holdings, 6.375%, 2011 $ 1,217,000 $ 1,212,436
-------------------------------------------------------------------------------------------------------------
Conglomerates - 0.0%
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Thyssenkrupp Finance B.V., 7%, 2009 EUR 100,000 $ 142,675
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Construction - 0.2%
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Beazer Homes USA, Inc., 6.875%, 2015 $ 1,015,000 $ 933,800
-------------------------------------------------------------------------------------------------------------
Consumer Goods & Services - 0.7%
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Corrections Corp. of America, 6.25%, 2013 $ 455,000 $ 455,000
Fortune Brands, Inc., 5.125%, 2011 1,212,000 1,200,747
Jarden Corp., 7.5%, 2017 685,000 701,269
Service Corp. International, 7%, 2017 620,000 616,900
Service Corp. International, 7.625%, 2018 250,000 264,688
Sodexho Alliance S.A., 5.875%, 2009 EUR 100,000 139,941
Visant Holding Corp., 8.75%, 2013 $ 387,000 407,318
------------
$ 3,785,863
-------------------------------------------------------------------------------------------------------------
Containers - 1.3%
-------------------------------------------------------------------------------------------------------------
Berry Plastics Holding Corp., 8.875%, 2014 $ 755,000 $ 777,650
Crown Americas LLC, 7.75%, 2015 1,215,000 1,284,862
Greif, Inc., 6.75%, 2017 (n) 2,345,000 2,386,038
Owens-Brockway Glass Container, Inc., 8.875%, 2009 453,000 462,060
Owens-Brockway Glass Container, Inc., 8.25%, 2013 1,815,000 1,914,825
------------
$ 6,825,435
-------------------------------------------------------------------------------------------------------------
Defense Electronics - 0.2%
-------------------------------------------------------------------------------------------------------------
L-3 Communications Corp., 5.875%, 2015 $ 1,030,000 $ 1,002,963
-------------------------------------------------------------------------------------------------------------
Electronics - 0.1%
-------------------------------------------------------------------------------------------------------------
NXP B.V./NXP Funding LLC, 7.875%, 2014 (n) $ 615,000 $ 639,600
-------------------------------------------------------------------------------------------------------------
Emerging Market Quasi-Sovereign - 2.1%
-------------------------------------------------------------------------------------------------------------
Gaz Capital S.A., 6.212%, 2016 $ 1,148,000 $ 1,162,350
Gazprom International S.A., 7.201%, 2020 1,754,908 1,850,024
Gazprom International S.A., 6.51%, 2022 (n) 1,260,000 1,296,225
Gazprom OAO, 9.625%, 2013 550,000 655,600
Majapahit Holding B.V., 7.75%, 2016 (n) 605,000 640,544
Pemex Project Funding Master Trust, 8.625%, 2022 878,000 1,107,158
Pemex Project Funding Master Trust, 9.5%, 2027 84,000 116,130
Pemex Project Funding Master Trust, 6.625%, 2035 1,694,000 1,795,640
Ras Laffan Liquefied Natural Gas Co. Ltd., 8.294%, 2014 (n) 2,510,000 2,797,932
------------
$ 11,421,603
-------------------------------------------------------------------------------------------------------------
Emerging Market Sovereign - 2.9%
-------------------------------------------------------------------------------------------------------------
Federative Republic of Brazil, 6%, 2017 $ 3,299,000 $ 3,361,681
Federative Republic of Brazil, 8%, 2018 615,000 698,025
Federative Republic of Brazil, 7.125%, 2037 100,000 113,050
Federative Republic of Brazil, CLN, 10%, 2012 BRL 100,000 47,741
Federative Republic of Brazil, CLN, 10%, 2012 BRL 100,000 47,741
Federative Republic of Brazil, CLN, 10%, 2012 BRL 100,000 47,741
Federative Republic of Brazil, CLN, 10%, 2012 BRL 100,000 47,741
Nota do Tesouro Nacional, 6%, 2015 BRL 47,613 22,704
Nota do Tesouro Nacional, 10%, 2017 BRL 31,000 14,565
Republic of Argentina, 7%, 2013 $ 590,045 571,803
Republic of Argentina, FRN, 10.875%, 2008 ARS 3,868,000 1,264,739
Republic of Argentina, FRN, 5.475%, 2012 $ 2,537,250 2,423,793
Republic of Bulgaria, 8.25%, 2015 242,000 286,891
Republic of Colombia, FRN, 7.16%, 2015 1,350,000 1,437,750
Republic of Panama, 9.375%, 2029 1,241,000 1,690,863
Republic of Panama, 6.7%, 2036 554,000 585,855
Republic of Philippines, 9.375%, 2017 597,000 735,803
United Mexican States, 6.375%, 2013 448,000 473,312
United Mexican States, 5.625%, 2017 750,000 761,625
United Mexican States, 6.75%, 2034 871,000 971,165
------------
$ 15,604,588
-------------------------------------------------------------------------------------------------------------
Energy - Independent - 1.0%
-------------------------------------------------------------------------------------------------------------
Anadarko Petroleum Corp., 5.95%, 2016 $ 610,000 $ 614,738
Chaparral Energy, Inc., 8.875%, 2017 (n) 595,000 609,875
Chesapeake Energy Corp., 6.875%, 2016 1,310,000 1,332,925
Hilcorp Energy I LP, 7.75%, 2015 (n) 255,000 256,275
Newfield Exploration Co., 6.625%, 2014 995,000 999,975
Plains Exploration & Production Co., 7%, 2017 675,000 675,844
Quicksilver Resources, Inc., 7.125%, 2016 1,060,000 1,054,700
------------
$ 5,544,332
-------------------------------------------------------------------------------------------------------------
Energy - Integrated - 0.2%
-------------------------------------------------------------------------------------------------------------
TNK-BP Finance S.A., 7.5%, 2016 (n) $ 1,083,000 $ 1,146,626
-------------------------------------------------------------------------------------------------------------
Entertainment - 0.2%
-------------------------------------------------------------------------------------------------------------
AMC Entertainment, Inc., 11%, 2016 $ 435,000 $ 499,162
Turner Broadcasting System, Inc., 8.375%, 2013 419,000 477,664
------------
$ 976,826
-------------------------------------------------------------------------------------------------------------
Financial Institutions - 1.9%
-------------------------------------------------------------------------------------------------------------
Countrywide Financial Corp., 6.25%, 2016 $ 2,250,000 $ 2,272,975
General Motors Acceptance Corp., 5.85%, 2009 962,000 951,297
General Motors Acceptance Corp., 6.875%, 2011 990,000 993,327
General Motors Acceptance Corp., 6.75%, 2014 2,591,000 2,555,122
GMAC LLC, 6.125%, 2008 503,000 502,270
International Lease Finance Corp., 5.625%, 2013 1,248,000 1,270,984
Residential Capital LLC, 6.875%, 2015 1,520,000 1,539,178
------------
$ 10,085,153
-------------------------------------------------------------------------------------------------------------
Food & Beverages - 0.9%
-------------------------------------------------------------------------------------------------------------
Allied Domecq Financial Services PLC, 5.875%, 2009 EUR 125,000 $ 175,034
ARAMARK Corp., 8.5%, 2015 (n) $ 920,000 962,550
B&G Foods Holding Corp., 8%, 2011 375,000 380,625
Dean Foods Co., 7%, 2016 810,000 820,125
Del Monte Corp., 6.75%, 2015 185,000 185,462
Dole Foods Co., Inc., 8.875%, 2011 795,000 804,937
Tyson Foods, Inc., 6.85%, 2016 1,520,000 1,584,600
------------
$ 4,913,333
-------------------------------------------------------------------------------------------------------------
Food & Drug Stores - 0.2%
-------------------------------------------------------------------------------------------------------------
CVS Corp., 6.125%, 2016 $ 1,300,000 $ 1,347,801
-------------------------------------------------------------------------------------------------------------
Forest & Paper Products - 0.8%
-------------------------------------------------------------------------------------------------------------
Buckeye Technologies, Inc., 8.5%, 2013 $ 795,000 $ 839,719
MDP Acquisitions PLC, 9.625%, 2012 59,000 62,098
MeadWestvaco Corp., 6.8%, 2032 679,000 652,801
Norske Skog Canada Ltd., 7.375%, 2014 1,210,000 1,152,525
Stora Enso Oyj, 6.404%, 2016 (n) 1,580,000 1,620,347
UPM Kymmene Corp., 6.125%, 2012 EUR 100,000 143,931
------------
$ 4,471,421
-------------------------------------------------------------------------------------------------------------
Gaming & Lodging - 1.6%
-------------------------------------------------------------------------------------------------------------
Caesars Entertainment, Inc., 8.125%, 2011 $ 1,520,000 $ 1,611,200
Great Canadian Gaming Corp., 7.25%, 2015 (n) 665,000 675,806
Mandalay Resort Group, 9.375%, 2010 950,000 1,024,813
MGM Mirage, Inc., 8.375%, 2011 1,530,000 1,623,713
MGM Mirage, Inc., 6.75%, 2013 500,000 495,625
Scientific Games Corp., 6.25%, 2012 825,000 808,500
Station Casinos, Inc., 6.5%, 2014 630,000 592,988
Wimar Opco LLC, 9.625%, 2014 (n) 585,000 593,775
Wyndham Worldwide Corp., 6%, 2016 (n) 360,000 357,140
Wynn Las Vegas LLC, 6.625%, 2014 545,000 546,363
------------
$ 8,329,923
-------------------------------------------------------------------------------------------------------------
Industrial - 0.1%
-------------------------------------------------------------------------------------------------------------
JohnsonDiversey Holdings, Inc., "B", 9.625%, 2012 $ 690,000 $ 722,775
-------------------------------------------------------------------------------------------------------------
Insurance - 1.2%
-------------------------------------------------------------------------------------------------------------
Allianz AG, 5.5% to 2014, FRN to 2049 EUR 140,000 $ 194,876
American International Group, Inc., 6.25%, 2037 $ 300,000 298,604
ING Groep N.V., 5.775% to 2015, FRN to 2049 2,500,000 2,490,648
Prudential Financial, Inc., 5.1%, 2014 1,985,000 1,952,410
U.S.I. Holdings Corp., FRN, 9.23%, 2014 (n) 1,495,000 1,502,475
------------
$ 6,439,013
-------------------------------------------------------------------------------------------------------------
Insurance - Health - 0.1%
-------------------------------------------------------------------------------------------------------------
Centene Corp., 7.25%, 2014 (n) $ 350,000 $ 355,250
-------------------------------------------------------------------------------------------------------------
Insurance - Property & Casualty - 0.8%
-------------------------------------------------------------------------------------------------------------
AIG SunAmerica Global Financing X, 6.9%, 2032 (n) $ 2,384,000 $ 2,723,367
Fund American Cos., Inc., 5.875%, 2013 1,464,000 1,466,867
------------
$ 4,190,234
-------------------------------------------------------------------------------------------------------------
International Market Quasi-Sovereign - 3.6%
-------------------------------------------------------------------------------------------------------------
Canada Housing Trust, 4.6%, 2011 CAD 389,000 $ 356,019
Development Bank of Japan, 1.75%, 2010 JPY 183,000,000 1,565,508
Development Bank of Japan, 1.4%, 2012 JPY 274,000,000 2,323,388
Development Bank of Japan, 1.05%, 2023 JPY 459,000,000 3,318,944
Development Bank of Japan, 2.3%, 2026 JPY 120,000,000 1,031,042
Japan Finance Corp. for Municipal Enterprises, 1.55%, 2012 JPY 275,000,000 2,335,767
Japan Finance Corp. for Municipal Enterprises, 2%, 2016 JPY 510,000,000 4,437,970
KfW Bankengruppe, 1.35%, 2014 JPY 432,000,000 3,603,824
Vattenfall Treasury AB, 6%, 2010 EUR 125,000 177,746
------------
$ 19,150,208
-------------------------------------------------------------------------------------------------------------
International Market Sovereign - 7.3%
-------------------------------------------------------------------------------------------------------------
Commonwealth of Australia, 6%, 2017 AUD 337,000 $ 282,340
Federal Republic of Germany, 5.25%, 2010 EUR 1,989,000 2,803,080
Federal Republic of Germany, 3.75%, 2015 EUR 999,000 1,328,338
Federal Republic of Germany, 6.25%, 2030 EUR 1,544,000 2,679,355
Government of Canada, 5.5%, 2009 CAD 778,000 720,160
Government of Canada, 4.5%, 2015 CAD 311,000 287,052
Government of Canada, 8%, 2023 CAD 136,000 176,139
Government of Canada, 5.75%, 2033 CAD 351,000 393,684
Kingdom of Denmark, 4%, 2015 DKK 4,203,000 761,667
Kingdom of Netherlands, 3.75%, 2009 EUR 3,669,000 4,966,878
Kingdom of Netherlands, 3.75%, 2014 EUR 1,061,000 1,412,081
Kingdom of Netherlands, 4%, 2016 EUR 787,000 1,058,921
Kingdom of Spain, 5.35%, 2011 EUR 2,725,000 3,897,788
Republic of Austria, 4.65%, 2018 EUR 2,632,000 3,722,943
Republic of France, 4.75%, 2012 EUR 760,000 1,067,202
Republic of France, 5%, 2016 EUR 1,274,000 1,847,261
Republic of France, 6%, 2025 EUR 511,000 843,354
Republic of France, 4.75%, 2035 EUR 2,099,000 3,045,320
Republic of Ireland, 3.25%, 2009 EUR 1,569,000 2,106,553
Republic of Ireland, 4.6%, 2016 EUR 2,023,000 2,846,854
United Kingdom Treasury, 8%, 2015 GBP 290,000 695,042
United Kingdom Treasury, 8%, 2021 GBP 318,000 831,152
United Kingdom Treasury, 4.25%, 2036 GBP 803,000 1,537,608
------------
$ 39,310,772
-------------------------------------------------------------------------------------------------------------
Machinery & Tools - 0.5%
-------------------------------------------------------------------------------------------------------------
Case Corp., 7.25%, 2016 $ 750,000 $ 788,437
Case New Holland, Inc., 7.125%, 2014 820,000 861,000
Manitowoc Co., Inc., 10.5%, 2012 767,000 814,938
------------
$ 2,464,375
-------------------------------------------------------------------------------------------------------------
Major Banks - 2.7%
-------------------------------------------------------------------------------------------------------------
Bank of Ireland, 7.4%, 2049 EUR 500,000 $ 746,819
BNP Paribas, 5.186% to 2015, FRN to 2049(n) $ 2,099,000 2,022,619
BNP Paribas Capital Trust III, 6.625% to 2011, FRN to 2049 EUR 100,000 147,180
Credit Suisse Group, 7.974%, 2010 EUR 265,000 396,320
HBOS Capital Funding LP, 6.071% to 2014, FRN to 2049(n) $ 1,543,000 1,578,855
JPMorgan Chase & Co., 5.125%, 2014 2,755,000 2,724,031
MUFG Capital Finance 1 Ltd., 6.346% to 2016, FRN to 2049 1,568,000 1,601,460
National Westminster Bank PLC, 6.625% to 2009, FRN to 2049 EUR 330,000 472,060
SG Capital Trust I, 7.875% to 2010, FRN to 2049 EUR 300,000 444,160
Wachovia Capital Trust III, 5.8% to 2011, FRN to 2042 $ 4,068,000 4,128,613
------------
$ 14,262,117
-------------------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 2.0%
-------------------------------------------------------------------------------------------------------------
Advanced Medical Optics, Inc., 7.5%, 2017 (n) $ 355,000 $ 365,650
Cooper Cos., Inc., 7.125%, 2015 (n) 1,260,000 1,285,200
DaVita, Inc., 6.625%, 2013 300,000 301,125
DaVita, Inc., 7.25%, 2015 900,000 920,250
HCA, Inc., 8.75%, 2010 1,315,000 1,392,256
HCA, Inc., 6.375%, 2015 500,000 435,625
HCA, Inc., 9.25%, 2016 (n) 1,645,000 1,793,050
Hospira, Inc., 5.55%, 2012 360,000 361,965
Hospira, Inc., 6.05%, 2017 1,248,000 1,260,846
Omnicare, Inc., 6.875%, 2015 590,000 587,788
Owens & Minor, Inc., 6.35%, 2016 1,420,000 1,436,344
Tenet Healthcare Corp., 9.25%, 2015 740,000 740,000
------------
$ 10,880,099
-------------------------------------------------------------------------------------------------------------
Metals & Mining - 1.8%
-------------------------------------------------------------------------------------------------------------
Arch Western Finance LLC, 6.75%, 2013 $ 1,310,000 $ 1,300,175
Chaparral Steel Co., 10%, 2013 1,090,000 1,219,437
FMG Finance Ltd., 10.625%, 2016 (n) 1,405,000 1,643,850
Freeport-McMoRan Copper & Gold, 8.25%, 2015 595,000 643,344
Freeport-McMoRan Copper & Gold, 8.375%, 2017 995,000 1,088,281
International Steel Group, Inc., 6.5%, 2014 1,300,000 1,359,098
Peabody Energy Corp., 5.875%, 2016 720,000 689,400
Peabody Energy Corp., 7.375%, 2016 45,000 47,531
Peabody Energy Corp., "B", 6.875%, 2013 630,000 637,875
U.S. Steel Corp., 9.75%, 2010 795,000 834,750
------------
$ 9,463,741
-------------------------------------------------------------------------------------------------------------
Mortgage Backed - 9.7%
-------------------------------------------------------------------------------------------------------------
Fannie Mae, 4.78%, 2015 $ 708,849 $ 698,079
Fannie Mae, 6%, 2017 - 2037 5,764,156 5,815,779
Fannie Mae, 5.5%, 2021 - 2035 10,782,387 10,721,245
Fannie Mae, 5%, 2027 - 2035 6,875,146 6,727,390
Fannie Mae, 6.5%, 2031 - 2032 1,492,978 1,538,593
Freddie Mac, 6%, 2021 - 2036 10,501,358 10,598,331
Freddie Mac, 5%, 2024 349,986 348,708
Freddie Mac, 5.5%, 2036 15,615,781 15,447,210
------------
$51,895,335
-------------------------------------------------------------------------------------------------------------
Natural Gas - Distribution - 0.3%
-------------------------------------------------------------------------------------------------------------
AmeriGas Partners LP, 7.25%, 2015 $ 1,030,000 $ 1,048,025
AmeriGas Partners LP, 7.125%, 2016 365,000 369,562
------------
$ 1,417,587
-------------------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 2.2%
-------------------------------------------------------------------------------------------------------------
Atlas Pipeline Partners LP, 8.125%, 2015 $ 1,905,000 $ 1,981,200
CenterPoint Energy Resources Corp., 7.875%, 2013 1,250,000 1,396,001
Colorado Interstate Gas Co., 5.95%, 2015 365,000 368,618
El Paso Performance-Linked Trust, 7.75%, 2011 (n) 2,240,000 2,385,600
Kinder Morgan Energy Partners LP, 5.125%, 2014 1,147,000 1,117,105
Magellan Midstream Partners LP, 5.65%, 2016 1,123,000 1,114,053
Spectra Energy Capital LLC, 8%, 2019 691,000 795,333
Williams Cos., Inc., 8.75%, 2032 1,750,000 2,036,563
Williams Partners LP, 7.25%, 2017 (n) 765,000 808,988
------------
$ 12,003,461
-------------------------------------------------------------------------------------------------------------
Network & Telecom - 2.1%
-------------------------------------------------------------------------------------------------------------
BellSouth Corp., 6.55%, 2034 $ 3,213,000 $ 3,349,067
Citizens Communications Co., 9.25%, 2011 1,285,000 1,431,169
Citizens Communications Co., 9%, 2031 870,000 954,825
Deutsche Telekom International Finance B.V., 8.125%, 2012 EUR 130,000 205,003
Nordic Telephone Co. Holdings, 8.875%, 2016 (n) $ 640,000 688,000
Qwest Corp., 7.875%, 2011 535,000 569,775
Qwest Corp., 8.875%, 2012 950,000 1,049,750
Telefonica Europe B.V., 7.75%, 2010 1,500,000 1,615,838
Windstream Corp., 8.625%, 2016 1,040,000 1,141,400
Windstream Corp., 7%, 2019 (n) 195,000 195,975
------------
$ 11,200,802
-------------------------------------------------------------------------------------------------------------
Oil Services - 0.4%
-------------------------------------------------------------------------------------------------------------
Basic Energy Services, Inc., 7.125%, 2016 $ 630,000 $ 625,275
Compagnie Generale de Geophysique-Veritas, 7.75%, 2017 490,000 518,175
GulfMark Offshore, Inc., 7.75%, 2014 760,000 777,100
------------
$ 1,920,550
-------------------------------------------------------------------------------------------------------------
Oils - 0.5%
-------------------------------------------------------------------------------------------------------------
Premcor Refining Group, Inc., 7.5%, 2015 $ 2,575,000 $ 2,657,776
-------------------------------------------------------------------------------------------------------------
Other Banks & Diversified Financials - 3.4%
-------------------------------------------------------------------------------------------------------------
Alfa Diversified Payment Rights Finance Co., FRN, 7.2549%, 2011 (n) $ 2,383,550 $ 2,383,550
Banco BMG S.A., 9.15%, 2016 (n) 714,000 771,120
Banco de Credito del Peru, FRN, 6.95%, 2021 (n) 316,000 315,948
Banco do Estado de Sao Paulo S.A., 8.7%, 2010 15,000 15,900
Banco do Estado de Sao Paulo S.A., 8.7%, 2049 (n) 577,000 612,341
Banco Mercantil del Norte S.A., 5.875% to 2009, FRN to 2014 (n) 655,000 656,965
Bosphorus Financial Services Ltd., FRN, 7.16%, 2012 2,000,000 2,020,184
DFS Funding Corp., FRN, 7.3549%, 2010 2,000,000 2,025,000
Fifth Third Bancorp, 5.45%, 2017 1,500,000 1,494,547
Fortis Capital Co., 6.25% to 2009, FRN to 2049 EUR 155,000 218,120
HSBK Europe B.V., 7.25%, 2017 (z) $ 929,000 926,678
Kazkommerts International B.V., 8%, 2015 588,000 593,880
Mizuho Capital Investment 1 Ltd., 6.686% to 2016, FRN to 2049 (n) 1,220,000 1,253,114
Mizuho Financial Group, Inc., 5.79%, 2014 (n) 1,633,000 1,666,793
Resona Bank Ltd., 5.85% to 2016, FRN to 2049 (n) 626,000 622,970
Russian Standard Finance S.A., 7.5%, 2010 (n) 257,000 251,218
Russian Standard Finance S.A., 8.625%, 2011 (n) 769,000 777,651
Woori Bank, 6.125% to 2011, FRN to 2016 (n) 1,510,000 1,547,499
------------
$18,153,478
-------------------------------------------------------------------------------------------------------------
Pollution Control - 0.1%
-------------------------------------------------------------------------------------------------------------
Veolia Environnement, 5.875%, 2008 EUR 250,000 $ 346,756
-------------------------------------------------------------------------------------------------------------
Precious Metals & Minerals - 0.2%
-------------------------------------------------------------------------------------------------------------
Alrosa Finance S.A., 8.875%, 2014 $ 716,000 $ 827,266
-------------------------------------------------------------------------------------------------------------
Printing & Publishing - 1.5%
-------------------------------------------------------------------------------------------------------------
American Media Operations, Inc., 10.25%, 2009 $ 790,000 $ 744,575
Bertelsmann U.S. Finance, Inc., 4.625%, 2010 EUR 148,000 202,572
Dex Media East LLC, 9.875%, 2009 $ 1,235,000 1,289,031
Dex Media West LLC, 9.875%, 2013 567,000 617,321
Idearc, Inc., 8%, 2016 (n) 2,625,000 2,736,563
MediaNews Group, Inc., 6.875%, 2013 485,000 441,350
R.H. Donnelley Corp., 8.875%, 2016 1,890,000 2,050,650
Reed Elsevier Capital, Inc., 5.75%, 2008 EUR 125,000 173,041
------------
$ 8,255,103
-------------------------------------------------------------------------------------------------------------
Railroad & Shipping - 0.3%
-------------------------------------------------------------------------------------------------------------
TFM S.A. de C.V., 9.375%, 2012 $ 1,424,000 $ 1,537,920
-------------------------------------------------------------------------------------------------------------
Real Estate - 0.5%
-------------------------------------------------------------------------------------------------------------
HRPT Properties Trust, REIT, 6.25%, 2016 $ 663,000 $ 690,072
Kimco Realty Corp., REIT, 5.783%, 2016 720,000 732,855
Simon Property Group LP, REIT, 4.6%, 2010 1,375,000 1,352,637
------------
$ 2,775,564
-------------------------------------------------------------------------------------------------------------
Restaurants - 0.3%
-------------------------------------------------------------------------------------------------------------
YUM! Brands, Inc., 8.875%, 2011 $ 1,590,000 $ 1,783,064
-------------------------------------------------------------------------------------------------------------
Retailers - 1.1%
-------------------------------------------------------------------------------------------------------------
Couche-Tard, Inc., 7.5%, 2013 $ 905,000 $ 934,412
Dollar General Corp., 8.625%, 2010 685,000 729,525
Federated Retail Holdings, Inc., 5.35%, 2012 300,000 299,850
Gap, Inc., 9.8%, 2008 2,710,000 2,896,144
Home Depot, Inc., 5.4%, 2016 1,250,000 1,224,161
------------
$ 6,084,092
-------------------------------------------------------------------------------------------------------------
Specialty Stores - 0.1%
-------------------------------------------------------------------------------------------------------------
GSC Holdings Corp., 8%, 2012 $ 455,000 $ 485,144
LVMH Moet Hennessy Louis Vuitton S.A., 4.625%, 2011 EUR 125,000 171,146
Payless ShoeSource, Inc., 8.25%, 2013 $ 100,000 105,250
------------
$ 761,540
-------------------------------------------------------------------------------------------------------------
Supermarkets - 0.2%
-------------------------------------------------------------------------------------------------------------
Stater Bros. Holdings, Inc., 7.75%, 2015 (n) $ 350,000 $ 359,625
SUPERVALU, Inc., 7.5%, 2014 470,000 491,150
------------
$ 850,775
-------------------------------------------------------------------------------------------------------------
Supranational - 0.1%
-------------------------------------------------------------------------------------------------------------
Central American Bank, 4.875%, 2012 (n) $ 521,000 $ 507,927
-------------------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 0.7%
-------------------------------------------------------------------------------------------------------------
Centennial Communications Corp., 10.125%, 2013 $ 520,000 $ 561,600
Globo Comunicacoes Participacao, 7.25%, 2022 (z) 100,000 99,900
OJSC Vimpel Communications, 8.25%, 2016 1,945,000 2,086,985
Rogers Wireless, Inc., 7.5%, 2015 980,000 1,073,100
------------
$ 3,821,585
-------------------------------------------------------------------------------------------------------------
Telephone Services - 0.3%
-------------------------------------------------------------------------------------------------------------
Embarq Corp., 7.082%, 2016 $ 1,760,000 $ 1,818,325
-------------------------------------------------------------------------------------------------------------
Tobacco - 0.4%
-------------------------------------------------------------------------------------------------------------
Altria Group, Inc., 5.625%, 2008 EUR 75,000 $ 103,771
Reynolds American, Inc., 7.25%, 2012 $ 1,854,000 1,960,664
------------
$ 2,064,435
-------------------------------------------------------------------------------------------------------------
Transportation - Services - 0.4%
-------------------------------------------------------------------------------------------------------------
Hertz Corp., 8.875%, 2014 $ 685,000 $ 738,088
Stena AB, 7%, 2016 452,000 445,220
Westinghouse Air Brake Technologies Corp., 6.875%, 2013 795,000 798,975
------------
$ 1,982,283
-------------------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 5.3%
-------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 5.375%, 2031 $ 3,386,000 $ 3,626,724
U.S. Treasury Bonds, 4.5%, 2036 (f) 12,628,000 11,974,892
U.S. Treasury Notes, 4.5%, 2016 2,718,000 2,696,658
U.S. Treasury Notes, 6.375%, 2027 4,000,000 4,757,500
U.S. Treasury Notes, TIPS, 2.375%, 2017 5,044,600 5,123,225
------------
$ 28,178,999
-------------------------------------------------------------------------------------------------------------
Utilities - Electric Power - 5.4%
-------------------------------------------------------------------------------------------------------------
AES Corp., 9.375%, 2010 $ 625,000 $ 685,938
Allegheny Energy Supply Co. LLC, 8.25%, 2012 (n) 805,000 873,425
Beaver Valley Funding Corp., 9%, 2017 4,599,000 5,221,613
Edison Mission Energy, 7.75%, 2016 585,000 615,712
Enersis S.A., 7.375%, 2014 1,283,000 1,392,971
Exelon Generation Co. LLC, 6.95%, 2011 2,506,000 2,641,239
HQI Transelec Chile S.A., 7.875%, 2011 883,000 947,909
ISA Capital do Brasil S.A., 7.875%, 2012 (n) 464,000 475,600
ISA Capital do Brasil S.A., 8.8%, 2017 (n) 761,000 819,978
Midwest Generation LLC, 8.75%, 2034 250,000 276,250
Mirant Americas Generation, Inc., 8.3%, 2011 200,000 211,500
Mirant North American LLC, 7.375%, 2013 1,500,000 1,586,250
NorthWestern Corp., 5.875%, 2014 1,695,000 1,684,367
NRG Energy, Inc., 7.375%, 2016 3,450,000 3,583,688
Reliant Resources, Inc., 9.25%, 2010 895,000 938,631
RWE Finance B.V., 5.375%, 2008 EUR 6,000 8,268
System Energy Resources, Inc., 5.129%, 2014 (n) $ 2,133,558 2,088,391
TXU Energy Co., 7%, 2013 2,670,000 2,780,092
Waterford 3 Funding Corp., 8.09%, 2017 1,872,870 1,937,616
------------
$ 28,769,438
-------------------------------------------------------------------------------------------------------------
TOTAL BONDS (IDENTIFIED COST, $474,270,483) $483,481,783
-------------------------------------------------------------------------------------------------------------
Floating Rate Loans - 1.4% (g)(r)
-------------------------------------------------------------------------------------------------------------
Automotive - 0.4%
-------------------------------------------------------------------------------------------------------------
Ford Motor Co., Term Loan B, 8.36%, 2013 $ 1,184,923 $ 1,192,978
General Motors Corp., Term Loan B, 7.73%, 2013 740,998 746,092
------------
$ 1,939,070
-------------------------------------------------------------------------------------------------------------
Broadcasting - 0.2%
-------------------------------------------------------------------------------------------------------------
Gray Television, Inc.,Term Loan B, 6.56%, 2014 (o) $ 277,015 $ 276,668
Univision Communications, Inc. Term Loan B, 7.61%, 2014 748,341 746,938
------------
$ 1,023,606
-------------------------------------------------------------------------------------------------------------
Cable TV - 0.2%
-------------------------------------------------------------------------------------------------------------
Charter Communications Operating LLC, Term Loan, 7.35%, 2014 $ 167,554 $ 167,275
CSC Holdings, Inc., Incremental Term Loan, 7.08%, 2013 499,802 501,387
Mediacom Illinois LLC, Term Loan, 6.86%, 2012 448,333 443,943
------------
$ 1,112,605
-------------------------------------------------------------------------------------------------------------
Chemicals - 0.1%
-------------------------------------------------------------------------------------------------------------
Celanese AG, Term Loan B, 7.10%, 2014 $ 568,057 $ 571,074
-------------------------------------------------------------------------------------------------------------
Food & Beverages - 0.1%
-------------------------------------------------------------------------------------------------------------
Dean Foods Co., Term Loan B, 6.88%, 2014 $ 444,122 $ 444,770
-------------------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 0.1%
-------------------------------------------------------------------------------------------------------------
HCA, Inc., Term Loan B, 7.60%, 2013 $ 654,323 $ 660,954
-------------------------------------------------------------------------------------------------------------
Pollution Control - 0.1%
-------------------------------------------------------------------------------------------------------------
Allied Waste North America, Inc., Credit Linked Deposit, 7.07%, 2014 $ 199,980 $ 200,855
Allied Waste North America, Inc., Term Loan, 7.10%, 2014 428,549 430,423
------------
$ 631,278
-------------------------------------------------------------------------------------------------------------
Printing & Publishing - 0.2%
-------------------------------------------------------------------------------------------------------------
Idearc, Inc., Term Loan B, 7.35%, 2014 $ 1,347,228 $ 1,355,768
-------------------------------------------------------------------------------------------------------------
TOTAL FLOATING RATE LOANS (IDENTIFIED COST, $7,717,467) $ 7,739,125
-------------------------------------------------------------------------------------------------------------
Preferred Stocks - 0.0%
-------------------------------------------------------------------------------------------------------------
Real Estate - 0.0%
-------------------------------------------------------------------------------------------------------------
HRPT Properties Trust, "B", REIT, 8.75% 5,100 $ 128,724
-------------------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST, $139,485) $ 128,724
-------------------------------------------------------------------------------------------------------------
Common Stocks - 0.0%
-------------------------------------------------------------------------------------------------------------
Printing & Publishing - 0.0%
-------------------------------------------------------------------------------------------------------------
Golden Books Family Entertainment, Inc. (a) 19,975 $ 0
-------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $0) $ 0
-------------------------------------------------------------------------------------------------------------
Rights - 0.0%
-------------------------------------------------------------------------------------------------------------
Emerging Market Sovereign - 0.0%
-------------------------------------------------------------------------------------------------------------
Banco Central del Uruguay, Value Recovery Rights, Expiring January 2021 (a) 1,250,000 $ 0
-------------------------------------------------------------------------------------------------------------
TOTAL RIGHTS (IDENTIFIED COST, $0) $ 0
-------------------------------------------------------------------------------------------------------------
Short-Term Obligations - 7.7% (y)
-------------------------------------------------------------------------------------------------------------
Abbey National North America LLC, 5.313%, due 5/01/07 $ 21,410,000 $ 21,410,000
DEPFA Bank PLC, 5.27%, due 5/01/07 (t) 4,480,000 4,480,000
Societe Generale North America, 5.3%, due 5/01/07 15,189,000 15,189,000
-------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS, AT AMORTIZED COST AND VALUE $ 41,079,000
-------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $523,206,435) (k) $532,428,632
-------------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.8% 4,075,838
-------------------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $536,504,470
-------------------------------------------------------------------------------------------------------------
(a) Non-income producing security.
(f) All or a portion of the security has been segregated as collateral for an open futures contract.
(g) The rate shown represents a weighted average coupon rate on settled positions at period end.
(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, 2007, the trust held securities fair valued in accordance with the policies adopted by the
Board of Trustees, aggregating $465,968,003 and 87.52% of market value. An independent pricing service
provided an evaluated bid for 86.13% of the market value.
(n) Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be
sold in the ordinary course of business in transactions exempt from registration, normally to qualified
institutional buyers. At period end, the aggregate value of these securities was $65,670,150 representing
12.2% of net assets.
(o) All or a portion of this position has not settled. Upon settlement date, interest rates will be
determined.
(p) Payment-in-kind security.
(r) Remaining maturities of floating rate loans may be less than stated maturities shown as a result of
contractual or optional prepayments by the borrower. Such prepayments cannot be predicted with certainty.
These loans may be subject to restrictions on resale. Floating rate loans generally have rates of interest
which are determined periodically by reference to a base lending rate plus a premium.
(t) Security exempt from registration with the U.S. Securities and Exchange Commission under Section 4(2) of
the Securities Act of 1933.
(y) The rate shown represents an annualized yield at time of purchase.
(z) Restricted securities are not registered under the Securities Act of 1933 and are subject to legal
restrictions on resale. These securities generally may be resold in transactions exempt from registration
or to the public if the securities are subsequently registered. Disposal of these securities may involve
time-consuming negotiations and prompt sale at an acceptable price may be difficult. The trust holds the
following restricted securities:
CURRENT
ACQUISITION ACQUISITION MARKET TOTAL % OF
RESTRICTED SECURITIES DATE COST VALUE NET ASSETS
-----------------------------------------------------------------------------------------------------------------
Bayview Financial Revolving Mortgage Loan Trust,
FRN, 6.12%, 2040 3/01/06 $4,000,000 $ 3,999,991
Citigroup/Deutsche Bank Commercial Mortgage Trust,
"H", FRN, 5.8817%, 2049 3/14/07 450,525 434,389
Citigroup/Deutsche Bank Commercial Mortgage
Trust, "J", FRN, 5.8817%, 2049 3/14/07 689,357 650,562
Falcon Franchise Loan LLC, FRN, 4.1216%, 2025 1/29/03 1,368,933 1,013,351
Globo Comunicacoes Participacao, 7.25%, 2022 4/19/07 100,000 99,900
HSBK Europe B.V., 7.25%, 2017 4/25/07 921,271 926,678
Preferred Term Securities IV Ltd., CDO, FRN, 7.6%, 2031 9/13/05 730,315 720,042
Prudential Securities Secured Financing Corp.,
FRN, 7.3872%, 2013 12/06/04 2,865,414 2,745,633
Wachovia Bank Commercial Mortgage Trust, FRN, 6.021%, 2043 3/14/07 1,101,763 1,061,483
-----------------------------------------------------------------------------------------------------------------
Total Restricted Securities $11,652,029 2.2%
========================
UNFUNDED LOAN COMMITMENTS
As of April 30, 2007, the portfolio had unfunded loan commitments of $41,714, which could be extended at the
option of the borrower, pursuant to the following loan agreements:
UNFUNDED UNREALIZED
LOAN APPRECIATION
BORROWER COMMITMENT (DEPRECIATION)
-----------------------------------------------------------------------------------------------------------------
Gray Television, Inc., Delayed Draw, Term Loan B, 2014 $12,520 $(22)
Univision Communications, Inc., Delayed Draw, Term Loan, 2014 29,194 (55)
-----------------------------------------------------------------------------------------------------------------
$41,714 $(77)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS AT 4/30/07
Appreciation and Depreciation in the table below are reported by currency.
NET
UNREALIZED
CONTRACTS TO SETTLEMENT IN EXCHANGE CONTRACTS APPRECIATION
TYPE CURRENCY DELIVER/RECEIVE DATE RANGE FOR AT VALUE (DEPRECIATION)
-----------------------------------------------------------------------------------------------------------------
APPRECIATION
-----------------------------------------------------------------------------------------------------------------
BUY ARS 66,652 5/03/07 21,501 21,578 $ 77
BUY CAD 2,246,592 5/23/07 1,999,177 2,026,630 27,453
BUY CNY 82,836,000 5/08/07 - 5/31/07 10,759,320 10,775,368 16,048
BUY COP 197,285,000 5/08/07 88,389 93,813 5,424
BUY CZK 8,150,022 5/02/07 388,751 394,959 6,208
BUY DKK 547,063 6/13/07 100,000 100,375 375
BUY EUR 495,000 5/23/07 - 6/20/07 667,507 676,614 9,107
SELL GBP 3,182,274 6/20/07 6,378,614 6,360,401 18,213
BUY MXN 11,284,549 5/09/07 1,025,784 1,031,920 6,136
BUY PLN 1,556,645 5/02/07 527,683 561,430 33,747
BUY SKK 3,544,216 5/02/07 141,494 143,563 2,069
BUY TRY 76,166 5/02/07 54,203 55,777 1,574
-----------
$ 126,431
===========
DEPRECIATION
----------------------------------------------------------------------------------------------------------------
SELL ARS 66,652 5/03/07 21,570 21,577 $ (7)
BUY AUD 1,506,957 6/04/07 1,257,479 1,250,426 (7,053)
SELL AUD 4,009,853 6/04/07 3,294,032 3,327,252 (33,220)
SELL CAD 2,483,641 5/23/07 2,184,304 2,240,470 (56,166)
SELL CNY 41,418,000 5/08/07 5,361,553 5,380,925 (19,372)
SELL COP 197,285,000 5/08/07 90,915 93,813 (2,898)
SELL CZK 8,150,022 5/02/07 389,194 394,959 (5,765)
SELL DKK 4,675,949 6/13/07 843,882 857,943 (14,061)
SELL EUR 31,900,146 5/23/07 - 6/20/07 42,592,689 43,629,683 (1,036,994)
BUY GBP 1,618,374 6/20/07 3,244,760 3,234,640 (10,120)
SELL SKK 3,544,216 5/02/07 142,350 143,563 (1,213)
SELL TRY 76,166 5/02/07 53,973 55,777 (1,804)
-----------
$(1,188,673)
===========
At April 30, 2007, forward foreign currency purchases and sales under master netting agreements excluded above
amounted to a net payable of $27,816 with Goldman Sachs & Co. and a net receivable of $615,580 with Merrill Lynch
International Bank.
FUTURES CONTRACTS OUTSTANDING AT 4/30/07
UNREALIZED
EXPIRATION APPRECIATION
DESCRIPTION CONTRACTS VALUE DATE (DEPRECIATION)
-----------------------------------------------------------------------------------------------------------------
U.S. Treasury Bond (Long) 50 $5,587,500 Jun-07 $(80,643)
U.S. Treasury Note 10 yr (Long) 91 9,857,859 Jun-07 26,697
-----------------------------------------------------------------------------------------------------------------
$(53,946)
========
SWAP AGREEMENTS AT 4/30/07
UNREALIZED
NOTIONAL CASH FLOWS CASH FLOWS APPRECIATION
EXPIRATION AMOUNT COUNTERPARTY TO RECEIVE TO PAY (DEPRECIATION)
-----------------------------------------------------------------------------------------------------------------
CREDIT DEFAULT SWAPS
3/20/17 USD 1,370,000 JPMorgan Chase Bank 0.49% (1) $(10,543)
(fixed rate)
3/20/17 USD 1,370,000 JPMorgan Chase Bank (2) 0.38% 8,298
(fixed rate)
3/20/17 USD 1,370,000 Merrill Lynch International (3) 0.37% 8,848
(fixed rate)
3/20/17 USD 1,250,000 Merrill Lynch International (4) 0.81% 12,860
(fixed rate)
3/20/17 USD 1,040,000 Goldman Sachs International (5) 0.40% (13,263)
(fixed rate)
4/20/12 USD 1,330,000 Morgan Stanley Capital Services, Inc. (6) 2.08% (14,274)
(fixed rate)
4/20/12 USD 1,330,000 Morgan Stanley Capital Services, Inc. (7) 0.98% (8,685)
(fixed rate)
6/20/17 USD 1,150,000 Merrill Lynch International (8) 0.91% (4,441)
(fixed rate)
--------
$(21,200)
========
(1) Trust to pay notional amount upon a defined credit default event by Burlington Northern Santa Fe Corp.,
6.75%, 7/15/11.
(2) Trust to receive notional amount upon a defined credit default event by PPG Industries, Inc., 7.05%, 8/15/09.
(3) Trust to receive notional amount upon a defined credit default event by Rohm & Haas Co., 7.85%, 7/15/29.
(4) Trust to receive notional amount upon a defined credit default event by Waste Management, Inc.,
7.375%, 8/01/10.
(5) Trust to receive notional amount upon a defined credit default event by Dover Corp., 6.25%, 6/01/08.
(6) Trust to receive notional amount upon a defined credit default event by Republic of Argentina,
8.28%, 12/31/33.
(7) Trust to receive notional amount upon a defined credit default event by Republic of Colombia,
10.375%, 1/28/33.
(8) Trust to receive notional amount upon a defined credit default event by New York Times Co., 4.61%, 9/26/12.
At April 30, 2007, the trust had sufficient cash and/or other liquid securities to cover any commitments under
these derivative contracts.
The following abbreviations are used in this report and are defined:
CDO Collateralized Debt Obligation
CLN Credit-Linked Note
FRN Floating Rate Note. Interest rate resets periodically and may not be the rate reported at period end.
REIT Real Estate Investment Trust
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
AUD Australian Dollar
BRL Brazilian Real
CAD Canadian Dollar
CNY Chinese Yuan Renminbi
COP Colombian Peso
CZK Czech Koruna
DKK Danish Krone
EUR Euro
GBP British Pound
JPY Japanese Yen
MXN Mexican Peso
PLN Polish Zloty
SKK Slovakian Koruna
TRY Turkish Lira
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 4/30/07 (unaudited)
This statement represents your trust's balance sheet, which details the assets and liabilities
comprising the total value of the trust.
ASSETS
-----------------------------------------------------------------------------------------------------
Investments, at value (identified cost, $523,206,435) $532,428,632
Cash 94,331
Foreign currency, at value (identified cost, $1,303) 1,297
Receivable for forward foreign currency exchange contracts 126,431
Receivable for forward foreign currency exchange contracts
subject to master netting agreements 615,580
Receivable for daily variation margin on open futures contracts 86,266
Receivable for investments sold 2,977,504
Interest and dividends receivable 7,194,668
Unrealized appreciation on credit default swaps 30,006
Other assets 140,608
-----------------------------------------------------------------------------------------------------
Total assets $543,695,323
-----------------------------------------------------------------------------------------------------
LIABILITIES
-----------------------------------------------------------------------------------------------------
Distributions payable $185,026
Payable for forward foreign currency exchange contracts 1,188,673
Payable for forward foreign currency exchange contracts
subject to master netting agreements 27,816
Payable for investments purchased 5,034,030
Unrealized depreciation on credit default swaps 51,206
Unrealized depreciation on unfunded loan commitments 77
Payable to affiliates
Management fee 40,423
Transfer agent and dividend disbursing costs 96,503
Administrative services fee 1,122
Payable for independent trustees' compensation 372,078
Accrued expenses and other liabilities 193,899
-----------------------------------------------------------------------------------------------------
Total liabilities $7,190,853
-----------------------------------------------------------------------------------------------------
Net assets $536,504,470
-----------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
NET ASSETS CONSIST OF
-----------------------------------------------------------------------------------------------------
Paid-in capital $607,838,262
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies 8,711,515
Accumulated net realized gain (loss) on investments and
foreign currency transactions (79,159,652)
Accumulated distributions in excess of net investment income (885,655)
-----------------------------------------------------------------------------------------------------
Net assets $536,504,470
-----------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding (85,465,754 issued,
less 6,388,302 treasury shares) 79,077,452
-----------------------------------------------------------------------------------------------------
Net asset value per share (net assets of $536,504,470/
79,077,452 shares of beneficial interest outstanding) $6.78
-----------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF OPERATIONS
Six months ended 4/30/07 (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.
NET INVESTMENT INCOME
-----------------------------------------------------------------------------------------------------
Income
Interest $16,031,748
Dividends 5,578
Foreign taxes withheld (960)
-----------------------------------------------------------------------------------------------------
Total investment income $16,036,366
-----------------------------------------------------------------------------------------------------
Expenses
Management fee $1,808,492
Transfer agent and dividend disbursing costs 113,108
Administrative services fee 50,706
Independent trustees' compensation 45,782
Custodian fee 118,351
Shareholder communications 56,989
Auditing fees 27,906
Legal fees 5,972
Miscellaneous 58,024
-----------------------------------------------------------------------------------------------------
Total expenses $2,285,330
-----------------------------------------------------------------------------------------------------
Fees paid indirectly (23,246)
Reduction of expenses by investment adviser (1,339)
-----------------------------------------------------------------------------------------------------
Net expenses $2,260,745
-----------------------------------------------------------------------------------------------------
Net investment income $13,775,621
-----------------------------------------------------------------------------------------------------
Statement of Operations (unaudited) - continued
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
-----------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $2,967,412
Futures contracts 340,799
Swap transactions (367)
Foreign currency transactions (3,045,785)
-----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $262,059
-----------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $3,101,001
Futures contracts (445,533)
Swap transactions (21,200)
Translation of assets and liabilities in foreign currencies 604,659
Unfunded loan commitments (77)
-----------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $3,238,850
-----------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $3,500,909
-----------------------------------------------------------------------------------------------------
Change in net assets from operations $17,276,530
-----------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any
distributions, and any shareholder transactions.
SIX MONTHS ENDED YEAR ENDED
4/30/07 10/31/06
(UNAUDITED)
CHANGE IN NET ASSETS
FROM OPERATIONS
-----------------------------------------------------------------------------------------------------
Net investment income $13,775,621 $26,286,395
Net realized gain (loss) on investments and foreign
currency transactions 262,059 (3,395,601)
Net unrealized gain (loss) on investments and foreign
currency translation 3,238,850 6,054,449
-----------------------------------------------------------------------------------------------------
Change in net assets from operations $17,276,530 $28,945,243
-----------------------------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
-----------------------------------------------------------------------------------------------------
From net investment income $(13,917,578) $(29,991,840)
-----------------------------------------------------------------------------------------------------
Change in net assets from trust share transactions $-- $(11,453,243)
-----------------------------------------------------------------------------------------------------
Total change in net assets $3,358,952 $(12,499,840)
-----------------------------------------------------------------------------------------------------
NET ASSETS
-----------------------------------------------------------------------------------------------------
At beginning of period 533,145,518 545,645,358
At end of period (including accumulated distributions in
excess of net investment income of $885,655 and
$743,698, respectively) $536,504,470 $533,145,518
-----------------------------------------------------------------------------------------------------
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 (or life of a particular share class, if shorter). Certain information reflects financial results for a
single trust share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an
investment in the trust share class (assuming reinvestment of all distributions) held for the entire period.
SIX MONTHS YEARS ENDED 10/31
ENDED --------------------------------------------------------------
4/30/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value, beginning of period $6.74 $6.74 $6.94 $6.76 $6.32 $6.60
---------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
---------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.17 $0.33 $0.34 $0.38 $0.38 $0.41
Net realized and unrealized gain (loss)
on investments and foreign currency 0.05 0.03 (0.16) 0.17 0.46 (0.26)
---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.22 $0.36 $0.18 $0.55 $0.84 $0.15
---------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
---------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.18) $(0.38) $(0.39) $(0.39) $(0.40) $(0.43)
---------------------------------------------------------------------------------------------------------------------------------
Net increase from repurchase of capital shares $-- $0.02 $0.01 $0.02 $0.00(w) $0.00(w)
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.78 $6.74 $6.74 $6.94 $6.76 $6.32
---------------------------------------------------------------------------------------------------------------------------------
Per share market value, end of period $6.08 $6.00 $6.15 $6.30 $6.41 $5.69
---------------------------------------------------------------------------------------------------------------------------------
Total return at market value (%) 4.29(n) 3.82 3.78 4.62 20.11 0.72
---------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
---------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 0.86(a) 0.88 0.93 0.94 0.94 0.96
Expenses after expense reductions (f) 0.86(a) 0.88 0.93 0.94 N/A N/A
Net investment income 5.20(a) 4.93 4.97 5.51 5.76 6.49
Portfolio turnover 40 70 67 59 126 152
Net assets at end of period (000 omitted) $536,504 $533,146 $545,645 $569,091 $563,760 $528,945
---------------------------------------------------------------------------------------------------------------------------------
(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.
(w) Per share amount was less than $0.01.
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 diversified management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The trust
can invest in foreign securities, including securities of emerging market
issuers. Investments in foreign securities are vulnerable to the effects of
changes in the relative values of the local currency and the U.S. dollar and to
the effects of changes in each country's legal, political, and economic
environment. The markets of emerging markets countries are generally more
volatile than the markets of developed countries with more mature economies.
All of the risks of investing in foreign securities previously described are
heightened when investing in emerging markets countries.
INVESTMENT VALUATIONS - Equity securities, including restricted equity
securities, are generally valued at the last sale or official closing price as
reported by an independent pricing service on the market or exchange on which
they are primarily traded. For securities for which there were no sales
reported that day, equity securities are generally valued at the last quoted
daily bid quotation as reported by an independent pricing service on the market
or exchange on which they are primarily traded. For securities held short for
which there were no sales reported for the day, the position is generally
valued at the last quoted daily ask quotation as reported by an independent
pricing service on the market or exchange on which such securities are
primarily traded. Debt instruments (other than short-term instruments),
including restricted debt instruments, are generally valued at an evaluated or
composite bid as reported by an independent pricing service. Short-term
instruments with a maturity at issuance of 60 days or less may be valued at
amortized cost, which approximates market value. Exchange-traded options are
generally valued at the last sale or official closing price as reported by an
independent pricing service on the exchange on which such options are primarily
traded. Exchange-traded options for which there were no sales reported that day
are generally valued at the last daily bid quotation as reported by an
independent pricing service on the exchange on which such options are primarily
traded. Options not traded on an exchange are generally valued at a
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 such futures
contracts are primarily traded. Forward foreign currency contracts are
generally valued at the mean of bid and asked prices for the time period
interpolated from rates reported by an independent pricing service for
proximate time periods. Swaps are generally valued at an evaluated bid as
reported by an independent pricing service. Securities and other assets
generally valued on the basis of information from an independent pricing
service may also be valued at a broker-dealer bid quotation. Values 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. 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 and certain types of derivatives.
These investments are generally valued at fair value based on information from
independent pricing services. 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. 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 September 2006, FASB Statement No. 157, Fair Value Measurements (the
"Statement") was issued, and is effective for fiscal years beginning after
November 15, 2007 and for all interim periods within those fiscal years. This
Statement provides a single definition of fair value, a hierarchy for measuring
fair value and expanded disclosures about fair value measurements. Management
is evaluating the application of the Statement to the trust, and believes the
impact will be limited to expanded disclosures resulting from the adoption of
this Statement in the trust's financial statements.
In February 2007, the FASB issued Statement of Financial Accounting Standards
No. 159 (FAS 159) "The Fair Value Option for Financial Assets and Financial
Liabilities - including an amendment of FASB Statement No. 115." FAS 159
permits entities to elect to measure certain financial assets and liabilities
at fair value. Unrealized gains and losses on items for which the fair value
option has been elected will be reported in earnings at each subsequent
reporting date. FAS 159 is effective for fiscal years beginning after November
15, 2007. Management is evaluating the application of the Statement to the
trust and its impact on the trust's financial statements, if any, has not been
determined.
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 and other funds managed by
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 purchased options, futures contracts, forward
foreign currency exchange contracts, and swap agreements.
PURCHASED OPTIONS - The trust may purchase call or put options for a premium.
Purchasing call options may be a hedge against an anticipated increase in the
dollar cost of securities to be acquired or to increase the trust's exposure to
the underlying instrument. Purchasing put options may hedge against a decline
in the value of portfolio securities. The premium paid is included as an
investment in the Statement of Assets and Liabilities and is subsequently
adjusted to the current value of the option. Premiums paid for purchased
options which have expired are treated as realized losses on investments in the
Statement of Operations. Premiums paid for purchased options which are
exercised or closed are added to the amount paid or offset against the proceeds
on the underlying security or financial instrument to determine the realized
gain or loss. The risk of loss associated with purchased options is limited to
the premium paid.
FUTURES CONTRACTS - The trust may enter into futures contracts for the delayed
delivery of securities or currency, or contracts based on financial indices at
a fixed price on a future date. In entering such contracts, the trust is
required to deposit with the broker either in cash or securities an amount
equal to a certain percentage of the contract amount. Subsequent payments are
made or received by the trust each day, depending on the daily fluctuations in
the value of the contract, and are recorded for financial statement purposes as
unrealized gains or losses by the trust. Upon entering into such contracts, the
trust bears the risk of interest or exchange rates or securities prices moving
unexpectedly, in which case, the trust may not achieve the anticipated benefits
of the futures contracts and may realize a loss.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS - The trust may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of the contract. The trust may enter into forward foreign currency exchange
contracts for hedging purposes as well as for non-hedging purposes. For hedging
purposes, the trust may enter into contracts to deliver or receive foreign
currency it will receive from or require for its normal investment activities.
The trust may also use contracts in a manner intended to protect foreign
currency denominated securities from declines in value due to unfavorable
exchange rate movements. For non-hedging purposes, the trust may enter into
contracts with the intent of changing the relative exposure of the trust's
portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains or
losses on foreign currency transactions.
SWAP AGREEMENTS - The trust may enter into swap agreements. A swap is an
exchange of cash payments between the trust and another party. Net cash
payments are exchanged at specified intervals and are recorded as a realized
gain or loss in the Statement of Operations. The value of the swap is adjusted
daily and the change in value, including accruals of periodic amounts of
interest to be paid or received, is recorded as unrealized appreciation or
depreciation in the Statement of Operations. A liquidation payment received or
made upon early termination is recorded as a realized gain or loss in the
Statement of Operations. Collateral, in the form of cash or securities, may be
required to be held in segregated accounts with the trust's custodian in
connection with these agreements. Risk of loss may exceed amounts recognized on
the Statement of Assets and Liabilities. These risks include the possible lack
of a liquid market, failure of the counterparty to perform under the terms of
the agreements, and unfavorable market movement of the underlying instrument.
All swap agreements entered into by the trust with the same counterparty are
generally governed by a single master agreement, which provides for the netting
of all amounts owed by the parties under the agreement upon the occurrence of
an event of default, thereby reducing the credit risk to which such party is
exposed.
The trust holds a credit default swap in which one party makes a stream of
payments based on a fixed percentage applied to the notional amount to another
party in exchange for the right to receive a specified return in the event of a
default by a third party, such as a corporate issuer or foreign issuer, on its
obligation. The trust may enter into credit default swaps to limit or to reduce
its risk exposure to defaults of corporate and sovereign issuers or to create
direct or synthetic short or long exposure to corporate debt securities or
certain sovereign debt securities to which it is not otherwise exposed.
HYBRID INSTRUMENTS - The trust may invest in indexed or hybrid securities on
which any combination of interest payments, the principal or stated amount
payable at maturity is determined by reference to prices of other securities,
currencies, indexes, economic factors or other measures, including interest
rates, currency exchange rates, or securities indices. The risks of investing
in hybrid instruments reflect a combination of the risks of investing in
securities, swaps, options, futures and currencies. Hybrid instruments are
potentially more volatile and carry greater market risks than traditional debt
instruments. Depending on the structure of the particular hybrid instrument,
changes in a benchmark, underlying assets or economic indicator may be
magnified by the terms of the hybrid instrument and have an even more dramatic
and substantial effect upon the value of the hybrid instrument. Also, the
prices of the hybrid instrument and the benchmark, underlying asset or economic
indicator may not move in the same direction or at the same time.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS - The trust may invest in loans and
loan participations or other receivables. These investments may include standby
financing commitments, including revolving credit facilities, which obligate
the trust to supply additional cash to the borrower on demand. At April 30,
2007, the portfolio had unfunded loan commitments of $41,714, which could be
extended at the option of the borrower and which are covered by sufficient cash
and/or liquid securities held by the trust. Loan participations involve a risk
of insolvency of the lending bank or other financial intermediary.
INDEMNIFICATIONS - Under the trust's organizational documents, its officers and
trustees may be indemnified against certain liabilities and expenses arising
out of the performance of their duties to the trust. Additionally, in the
normal course of business, the trust enters into agreements with service
providers that may contain indemnification clauses. The trust's maximum
exposure under these agreements is unknown as this would involve future claims
that may be made against the trust that have not yet occurred.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized or accreted for financial statement purposes in
accordance with U.S. generally accepted accounting principles. All discount is
accreted for tax reporting purposes as required by federal income tax
regulations. The trust earns certain fees in connection with its floating rate
loan purchasing activities. These fees are in addition to interest payments
earned and may include amendment fees, commitment fees, facility fees, consent
fees, and prepayment fees. These fees are recorded on an accrual basis as
income in the accompanying financial statements. 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. Any proceeds
received from litigation involving portfolio holdings are reflected in the
Statement of Operations in realized gain/loss if the security has been disposed
of by the trust or in unrealized gain/loss if the security is still held by the
trust. Any other proceeds from litigation not related to portfolio holdings are
reflected as other income in the Statement of Operations.
The trust may enter into "TBA" (to be announced) purchase commitments to
purchase securities for a fixed unit price at a future date. Although the unit
price has been established, the principal value has not been finalized.
However, the principal amount of the commitments will not fluctuate more than
0.01%. The trust holds, and maintains until settlement date, cash or high-
grade debt obligations in an amount sufficient to meet the purchase price, or
the trust may enter into offsetting contracts for the forward sale of other
securities it owns. Income on the securities will not be earned until
settlement date. TBA purchase commitments may be considered securities in
themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to settlement date, which is in addition to the risk
of decline in the value of the trusts' other assets. Unsettled TBA purchase
commitments are valued at the current market value of the underlying
securities.
The trust may enter into "TBA" (to be announced) sale commitments to hedge its
portfolio positions or to sell mortgage-backed securities it owns under delayed
delivery arrangements. Proceeds of TBA sale commitments are not received until
the contractual settlement date. During the time a TBA sale commitment is
outstanding, equivalent deliverable securities, or an offsetting TBA purchase
commitment deliverable on or before the sale commitment date, are held as
"cover" for the transaction.
FEES PAID INDIRECTLY - The trust's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by the
trust. This amount, for the six months ended April 30, 2007, is shown as a
reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The trust intends to qualify as a regulated
investment company, as defined under Subchapter M of the Internal Revenue Code,
and to distribute all of its taxable income, including realized capital gains.
Accordingly, no provision for federal income tax is required in the financial
statements. Foreign taxes, if any, have been accrued by the trust in the
accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from U.S. generally accepted accounting
principles. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These adjustments have no impact on net assets or net asset value
per share. Temporary differences which arise from recognizing certain items of
income, expense, gain or loss in different periods for financial statement and
tax purposes will reverse at some time in the future. Distributions in excess
of net investment income or net realized gains are temporary overdistributions
for financial statement purposes resulting from differences in the recognition
or classification of income or distributions for financial statement and tax
purposes.
Book/tax differences primarily relate to amortization and accretion of debt
securities, defaulted bonds, straddle loss deferrals, foreign currency
transactions, and derivative transactions.
The tax character of distributions made during the current period will be
determined at fiscal year end. The tax character of distributions declared to
shareholders is as follows:
10/31/06
Ordinary income (including any
short-term capital gains) $29,991,840
----------------------------------------------------------
The federal tax cost and the tax basis components of distributable earnings
were as follows:
AS OF 4/30/07
Cost of investments $525,573,453
----------------------------------------------------------
Gross appreciation 10,915,076
Gross depreciation (4,059,897)
----------------------------------------------------------
Net unrealized appreciation (depreciation) $6,855,179
AS OF 10/31/06
Undistributed ordinary income 2,007,686
Capital loss carryforwards (75,413,701)
Other temporary differences (3,968,868)
Net unrealized appreciation (depreciation) 2,682,139
The aggregate cost above includes prior fiscal year end tax adjustments.
As of October 31, 2006, the trust had capital loss carryforwards available to
offset future realized gains. Such losses expire as follows:
10/31/08 $ (6,883,833)
10/31/09 (22,359,865)
10/31/10 (38,291,079)
10/31/14 (7,878,924)
----------------------------------------------------------
$(75,413,701)
In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (the "Interpretation") was issued, and is effective for fiscal years
beginning after December 15, 2006 and is to be applied to all open tax years as
of the effective date. On December 22, 2006, the SEC delayed the implementation
of the Interpretation for regulated investment companies for an additional six
months. This Interpretation prescribes a minimum threshold for financial
statement recognition of the benefit of a tax position taken or expected to be
taken in a tax return, and requires certain expanded disclosures. Management
has evaluated the application of the Interpretation to the trust, and has
determined that there is no impact resulting from the adoption of this
Interpretation on the trust's financial statements.
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - The trust has an investment advisory agreement with MFS to
provide overall investment management and related administrative services and
facilities to the trust. The management fee is computed daily and paid monthly
at an annual rate of 0.34% of the trust's average daily net assets and 5.40% of
gross income. Gross income is calculated based on tax elections that generally
include the accretion of discount and exclude the amortization of premium,
which may differ from investment income reported in the Statement of
Operations. The management fee, from net assets and gross income, incurred for
the six months ended April 30, 2007 was equivalent to an annual effective rate
of 0.68% of the trust's average daily net assets.
TRANSFER AGENT - Prior to December 18, 2006, MFS Service Center, Inc. (MFSC), a
wholly-owned subsidiary of MFS, received a fee from the trust for its services
as registrar and dividend-disbursing agent. Pursuant to a written agreement,
the trust paid MFSC an account maintenance fee of no more than $9.00 and a
dividend services fee of $0.75 per reinvestment. Effective December 18, 2006,
the trust has engaged Computershare Trust Company, N.A. ("Computershare") as
the sole transfer agent for the trust. MFSC will continue to monitor and
supervise the activities of Computershare for an agreed upon fee approved by
the Board of Trustees. For the six months ended April 30, 2007, these fees paid
to MFSC amounted to $54,859. 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, 2007, these costs amounted to $53,515.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to the trust.
Under an administrative services agreement, the trust partially reimburses MFS
the costs incurred to provide these services. The trust is charged a fixed
amount plus a fee based on calendar year average net assets. The trust's annual
fixed amount is $17,500.
The administrative services fee incurred for the six months ended April 30,
2007 was equivalent to an annual effective rate of 0.0191% 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 or to officers of the trust who are also
officers of the investment adviser, all of whom receive remuneration for their
services to the trust from MFS. Certain officers and trustees of the trust are
officers or directors of MFS and MFSC. The trust has an unfunded, defined
benefit plan for certain retired independent trustees which resulted in a
pension expense of $4,040. The trust also has an unfunded retirement benefit
deferral plan for certain independent trustees which resulted in an expense of
$5,561. Both amounts are included in independent trustees' compensation for the
six months ended April 30, 2007. The liability for deferred retirement benefits
payable to certain independent trustees under both plans amounted to $285,272
at April 30, 2007, 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 $74,540 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, 2007, the fee paid to Tarantino
LLC was $2,067. MFS has agreed to reimburse the trust for a portion of the
payments made by the funds to Tarantino LLC in the amount of $1,339, 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.
(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 $21,567,401 $47,662,764
Investments (non-U.S. government securities) $176,129,025 $184,143,597
(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. During the six months ended April 30, 2007, the trust
did not repurchase any shares. Transactions in trust shares were as follows:
PERIOD ENDED YEAR ENDED
4/30/07 10/31/06
SHARES AMOUNT SHARES AMOUNT
Treasury shares reacquired -- $-- (1,918,600) $(11,453,243)
(6) LINE OF CREDIT
The trust and other funds managed by MFS participate in a $1 billion unsecured
committed line of credit provided by a syndication of banks under a credit
agreement. In addition, the trust and other funds managed by MFS have
established uncommitted borrowing arrangements with certain banks. Borrowings
may be made for temporary financing needs. Interest is charged to each fund,
based on its borrowings, generally at a rate equal to the Federal Reserve funds
rate plus 0.30% for the committed line of credit and 0.35% for the uncommitted
line of credit. In addition, a commitment fee, based on the average daily,
unused portion of the committed line of credit, is allocated among the
participating funds at the end of each calendar quarter. For the six months
ended April 30, 2007, the trust's commitment fee and interest expense were
$1,534 and $1,756, respectively, and are included in miscellaneous expense on
the Statement of Operations.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees and Shareholders of 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, 2007, and the related statements of operations,
changes in net assets, and financial highlights for the six-month period ended
April 30, 2007. 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, 2006, and financial highlights
for each of the five years in the period ended October 31, 2006, and in our
report dated December 21, 2006, we expressed an unqualified opinion on such
statement of changes in net assets and financial highlights.
ERNST & YOUNG LLP
Boston, Massachusetts
June 13, 2007
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board's most recent review and renewal of the
trust's investment advisory agreement is available by clicking on the trust's
name under "Select a fund" on the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS trusts' 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 trust 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 fund'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: Computershare Trust Company, N.A.
P.O. Box 43078
Providence, RI 02940-3078
1-800-637-2304
NUMBER OF SHAREHOLDERS
As of April 30, 2007, our records indicate that there are 6,857 registered
shareholders and approximately 36,485 shareholders owning trust shares in
"street" name, such as through brokers, banks, and other financial
intermediaries.
If you are a "street" name shareholder and wish to directly receive our
reports, which contain important information about the trust, please write or
call:
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, RI 02940-3078
1-800-637-2304
M F S(R)
INVESTMENT MANAGEMENT
(C) 2007 MFS Investment Management(R)
500 Boylston Street, Boston, MA 02116
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.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
=====================================================================================================================
MFS MULTIMARKET INCOME TRUST
---------------------------------------------------------------------------------------------------------------------
(D) MAXIMUM NUMBER
(C) TOTAL NUMBER OF (OR APPROXIMATE
SHARES PURCHASED AS DOLLAR VALUE) OF
(B) AVERAGE PART OF PUBLICLY SHARES THAT MAY YET
(A) TOTAL NUMBER OF PRICE PAID ANNOUNCED PLANS BE PURCHASED UNDER
PERIOD SHARES PURCHASED PER SHARE OR PROGRAMS THE PLANS OR PROGRAMS
=====================================================================================================================
11/1/06 - 11/30/06 0 N/A N/A 6,813,435
---------------------------------------------------------------------------------------------------------------------
12/1/06 - 12/31/06 0 N/A N/A 6,813,435
---------------------------------------------------------------------------------------------------------------------
1/1/07 - 1/31/07 0 N/A N/A 6,813,435
---------------------------------------------------------------------------------------------------------------------
2/1/07 - 2/28/07 0 N/A N/A 6,813,435
---------------------------------------------------------------------------------------------------------------------
3/1/07 - 3/31/07 0 N/A N/A 7,907,745
---------------------------------------------------------------------------------------------------------------------
4/1/07 - 4/30/07 0 N/A N/A 7,907,745
---------------------------------------------------------------------------------------------------------------------
TOTAL 0 N/A N/A
---------------------------------------------------------------------------------------------------------------------
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 Fund shares
available for repurchase for the March 1, 2007 plan year is 7,907,745.
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 407(c)(2)(iv) of Regulation S-K (as required by Item
22(b)(15) 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 report on 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 13, 2007
-------------
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 13, 2007
-------------
By (Signature and Title)* TRACY ATKINSON
------------------------------------------------------
Tracy Atkinson, Treasurer (Principal Financial Officer
and Accounting Officer)
Date: June 13, 2007
-------------
* Print name and title of each signing officer under his or her signature.