UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4975
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MFS MULTIMARKET INCOME TRUST
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(Exact name of registrant as specified in charter)
500 Boylston Street, Boston, Massachusetts 02116
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(Address of principal executive offices) (Zip code)
Susan S. Newton
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
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(Name and address of agents for service)
Registrant's telephone number, including area code: (617) 954-5000
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Date of fiscal year end: October 31
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Date of reporting period: October 31, 2007
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ITEM 1. REPORTS TO STOCKHOLDERS.
M F S(R)
INVESTMENT MANAGEMENT
MFS(R) MULTIMARKET INCOME TRUST
[graphic omitted]
Annual report
10/31/07
MMT-ANN
MFS(R) Multimarket Income Trust
LETTER FROM THE CEO 1
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PORTFOLIO COMPOSITION 2
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MANAGEMENT REVIEW 4
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PERFORMANCE SUMMARY 6
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INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND RISK
OF THE FUND 8
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PORTFOLIO MANAGERS' PROFILES 10
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DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN 11
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PORTFOLIO OF INVESTMENTS 12
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STATEMENT OF ASSETS AND LIABILITIES 31
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STATEMENT OF OPERATIONS 32
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STATEMENTS OF CHANGES IN NET ASSETS 34
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FINANCIAL HIGHLIGHTS 35
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NOTES TO FINANCIAL STATEMENTS 36
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 46
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RESULTS OF SHAREHOLDER MEETING 47
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TRUSTEES AND OFFICERS 48
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BOARD REVIEW OF INVESTMENT
ADVISORY AGREEMENT 54
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PROXY VOTING POLICIES AND
INFORMATION 58
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QUARTERLY PORTFOLIO DISCLOSURE 58
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FEDERAL TAX INFORMATION 58
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MFS(R) PRIVACY NOTICE 59
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CONTACT INFORMATION BACK COVER
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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% and was fairly stable.
This year we have seen a greater level of volatility than has been experienced
in recent years. The Dow hit several new highs but also experienced swift drops
as a global credit crisis swept through markets, spurred by defaults on U.S.
subprime loans and a liquidity crunch. Still, even with this volatility, the
Dow ended the first three quarters of 2007 with a return near 13%.
U.S. Treasury bonds gained ground, especially in the third quarter as investors
sought less risky asset classes. The spreads of many lower quality debt
investments widened.
In 2007 the U.S. dollar fell against the euro, oil prices have hit their
highest levels yet, and gold has spiked to its steepest price in 28 years.
Around the globe, stocks sold off as risk aversion mounted. As we have said
before, markets can be 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. In our view, investors who remain committed to a long-term plan are more
likely to achieve their financial goals.
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)
December 14, 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 92.3%
Floating Rate Loans 1.4%
Preferred Stocks (o) 0.0%
Cash & Other Net Assets 6.3%
FIXED INCOME SECTORS (i)
High Yield Corporates 23.5%
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High Grade Corporates 19.9%
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Non-U.S. Government Bonds 12.4%
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Mortgage-Backed Securities 9.7%
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Emerging Market Bonds 8.8%
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U.S. Treasury Securities 7.4%
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Commercial Mortgage-Backed
Securities 6.9%
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Asset-Backed Securities 1.6%
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Floating Rate Loans 1.4%
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U.S. Government Agencies 1.3%
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Collateralized Debt Obligations 0.5%
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Residential Mortgage-Backed
Securities 0.3%
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CREDIT QUALITY OF BONDS (r)
AAA 33.9%
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AA 5.7%
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A 10.7%
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BBB 17.1%
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BB 17.1%
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B 13.4%
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CCC 1.6%
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Not Rated 0.5%
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PORTFOLIO FACTS
Average Duration (d)(i) 5.1
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Average Life (i)(m) 7.9 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 70.1%
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Japan 3.6%
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United Kingdom 3.6%
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Germany 3.5%
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Netherlands 2.4%
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Russia 2.1%
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France 2.1%
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Canada 1.7%
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Brazil 1.4%
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Other Countries 9.5%
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(a) The average credit quality of rated securities is based upon a market
weighted average of portfolio holdings that are rated by public rating
agencies.
(d) Duration is a measure of how much a bond's price is likely to fluctuate
with general changes in interest rates, e.g., if rates rise 1.00%, a bond
with a 5-year duration is likely to lose about 5.00% of its value.
(i) For purposes of this 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.
(o) Less than 0.1%.
(r) Each security is assigned a rating from Moody's Investors Service. If not
rated by Moody's, the rating will be that assigned by Standard & Poor's.
Likewise, if not assigned a rating by Standard & Poor's, it will be based
on the rating assigned by Fitch, Inc. For those portfolios that hold a
security which is not rated by any of the three agencies, the security is
considered Not Rated. Holdings in U.S. Treasuries and government agency
mortgage-backed securities, if any, are included in the "AAA"-rating
category. Percentages are based on the total market value of investments as
of 10/31/07.
Percentages are based on net assets as of 10/31/07, unless otherwise noted.
The portfolio is actively managed and current holdings may be different.
MANAGEMENT REVIEW
SUMMARY OF RESULTS
MFS Multimarket Income Trust (the fund or trust) is a closed-end fund and
maintains a portfolio that includes investments in investment-grade and high-
yield corporate bonds, U.S. government securities, and international
investment-grade and emerging markets debt securities.
In our review of the performance of this trust, we look to a number of
benchmarks, each reflecting the results of the various markets in which we
invest. The benchmarks are the Citigroup World Government Bond Non-Dollar
Hedged Index, JPMorgan Emerging Markets Bond Index Global (EMBI Global), Lehman
Brothers U.S. Credit Bond Index, Lehman Brothers U.S. Government/ Mortgage Bond
Index (Government/Mortgage), and the Lehman Brothers U.S. High-Yield Corporate
Bond Index (U.S. High-Yield). For the twelve months ended October 31, 2007,
these benchmarks generated returns of 3.94%, 8.07%, 4.62%, 5.74%, and 6.75%,
respectively. In addition, the Multimarket Income Trust Blended Index, which is
comprised of representative weightings of each of the aforementioned
benchmarks, generated a return of 5.58% over the same period.
For the twelve months ended October 31, 2007, shares of the MFS Multimarket
Income Trust provided a total return of 5.19%, at net asset value,
underperforming the Multimarket Income Trust Blended Index, the EMBI Global,
Government/Mortgage, and U.S. High-Yield indices.
MARKET ENVIRONMENT
The U.S. economy continues to decouple from the rest of the world. Despite
seemingly robust growth rates during the second and third quarters of 2007,
underlying economic activity in the U.S. remains muted relative to other major
economies. Overall, global economies have seen moderate to strong growth over
the last twelve months as domestic demand improves and world trade accelerates.
With the strong global growth, however, has come increased concern about rising
global inflation, especially as capacity becomes more constrained, wages rise,
and energy and food prices advance. During the reporting period, global central
banks tightened monetary conditions which in turn pushed global bond yields to
their highest levels during this economic expansion.
However, beginning in late July, heightened uncertainty and distress concerning
the subprime mortgage market caused several global credit markets to seize up,
forcing central banks to inject liquidity and to reassess their tightening
biases as sovereign bond yields declined and credit spreads widened. While
credit conditions improved somewhat by late October as the Federal Reserve
Board cut interest rates, the level of market turbulence remains significant.
Increased market volatility has also been exacerbated by U.S. home
foreclosures, falling housing prices, and a weakening trend in the labor
market. Despite increased volatility across all asset classes and the widening
in credit spreads, global equity markets remained elevated, generally having
erased losses incurred earlier in the summer.
DETRACTORS FROM PERFORMANCE
The trust's overweighted position in the financial sector held back performance
as holdings of some finance companies suffered from the recent turmoil in the
subprime market.
During the reporting period, our positioning along the yield curve(y) was also
an area of relative weakness.
CONTRIBUTORS TO PERFORMANCE
On the upside, the trust's underweighted position in corporate bonds in the
industrial sector had a positive impact on performance.
Some of our currency positions, particularly those in Chinese RMB (Yuan),
Singapore Dollar, and Brazilian Real, also contributed to results.
Security selection in the financial and industrial sectors added to
performance. Our holdings of auto credit companies, which posted strong
returns, led the charge.
Respectfully,
John Addeo James Calmas David Cole
Portfolio Manager Portfolio Manager Portfolio Manager
Richard Hawkins Matthew Ryan
Portfolio Manager Portfolio Manager
(y) A yield curve graphically depicts the yields of different maturity bonds
of the same credit quality and type; a normal yield curve is upward
sloping, with short-term rates lower than long-term rates.
The views expressed in this report are those of the portfolio managers only
through the end of the period of the report as stated on the cover and do not
necessarily reflect the views of MFS or any other person in the MFS
organization. These views are subject to change at any time based on market or
other conditions, and MFS disclaims any responsibility to update such views.
These views may not be relied upon as investment advice or an indication of
trading intent on behalf of any MFS portfolio. References to specific
securities are not recommendations of such securities, and may not be
representative of any MFS portfolio's current or future investments.
Note to Shareholders: Effective October 23, 2007, the Board of Trustees of the
trust authorized the trust to use leverage.
PERFORMANCE SUMMARY THROUGH 10/31/07
The following chart represents the fund's historical performance in comparison
to its benchmark. Investment return and principal value will fluctuate, and
shares, when sold, may be worth more or less than their original cost; current
performance may be lower or higher than quoted. The performance shown does not
reflect the deduction of taxes, if any, that a shareholder would pay on fund
distributions or the sale of fund shares.
PRICE SUMMARY
Year ended 10/31/07
Date Price
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Net Asset Value 10/31/07 $6.68
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10/31/06 $6.74
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New York Stock Exchange Price 10/31/07 $5.84
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2/28/07 (high) (t) $6.16
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8/16/07 (low) (t) $5.60
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10/31/06 $6.00
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TOTAL RETURNS VS BENCHMARKS
Year ended 10/31/07
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New York Stock Exchange Price (r) 3.30%
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Net Asset Value (r) 5.19%
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Citigroup World Government Bond Non-Dollar Hedged Index (f) 3.94%
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JPMorgan Emerging Markets Bond Index Global (f) 8.07%
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Lehman Brothers U.S. Credit Bond Index (f) 4.62%
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Lehman Brothers U.S. Government/Mortgage Bond Index (f) 5.74%
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Lehman Brothers U.S. High-Yield Corporate Bond Index (f) 6.75%
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Multimarket Income Trust Blended Index (f)(x) 5.58%
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(f) Source: FactSet Research Systems Inc.
(r) Includes reinvestment of dividends and capital gain distributions.
(t) For the period November 1, 2006 through October 31, 2007.
(x) Multimarket Income Trust Blended Index is at a point in time and
allocations during the period can change. As of October 31, 2007 the
blended index was comprised of 25% Lehman Brothers U.S. Credit Bond Index,
25% Lehman Brothers U.S. High-Yield Corporate Bond Index, 7% JPMorgan
Emerging Markets Bond Index Global, 18% Citigroup World Government Bond
Non- Dollar Hedged Index and 25% Lehman Brothers U.S. Government/Mortgage
Bond Index.
INDEX DEFINITIONS
Citigroup World Government Bond Non-dollar Hedged Index - a market
capitalization-weighted index that is designed to represent the currency-
hedged performance of the international developed government bond markets,
excluding the United States.
JPMorgan Emerging Markets Bond Index Global (EMBI Global) - measures the
performance of 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 or premium 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 return that is calculated based on
the net asset value and New York Stock Exchange price 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. Return of shareholder capital have the
effect of reducing the trust's assets and increasing 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.
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND RISKS
OF THE FUND
INVESTMENT OBJECTIVE
The fund's investment objective is to seek high current income, but may also
consider capital appreciation. The fund's objective may be changed without
shareholder approval.
PRINCIPAL INVESTMENT STRATEGIES
MFS normally invests at least 80% of the fund's net assets in fixed income
securities. This policy may not be changed without shareholder approval. MFS
normally invests the fund's assets in U.S. Government securities, foreign
government securities, mortgage backed and other asset-backed securities of
U.S. and foreign issuers, corporate bonds of U.S. and foreign issuers, and debt
instruments of issuers located in emerging market countries. MFS allocates the
fund's assets across these categories with a view toward broad diversification
across and within these categories. MFS may also invest the fund's assets in
equity securities. MFS may invest up to 100% of the fund's assets in lower
quality debt instruments, including those that are in default.
MFS may invest the fund's assets in U.S. and foreign securities, including
emerging market securities. MFS may invest a relatively high percentage of the
fund's assets in a single country or a small number of countries.
MFS may invest the fund's assets in mortgage dollar rolls.
MFS may use derivatives for different purposes, including to earn income and
enhance returns, to increase or decrease exposure to a particular market, to
manage or adjust the risk profile of the fund, or as alternatives to direct
investments.
MFS uses a bottom-up investment approach in buying and selling investments for
the fund. Investments are selected primarily based on fundamental analysis of
instruments and their issuers in light of current market, economic, political,
and regulatory conditions. Factors considered may include the instrument's
credit quality, collateral characteristics, and indenture provisions, and the
issuer's management ability, capital structure, leverage, and ability to meet
its current obligations. Quantitative analysis of the structure of the
instrument and its features may also be considered.
The fund may use leverage by borrowing up to 33 1/3% of the fund's gross assets
and investing the proceeds pursuant to its investment strategies.
PRINCIPAL RISKS
Stock markets are volatile and can decline due to adverse issuer, market,
industry, political, regulatory or economic conditions. The value of the
portfolio's equity investments will fluctuate in response to many factors
including company specific factors as well as general market, economic,
political and regulatory conditions. Foreign investments can be more volatile
than U.S. investments. Changes in currency exchange rates can affect the U.S.
dollar rate of foreign currency investments and investments denominated in
foreign currency. Investing in emerging markets can involve risks in addition
to those generally associated with investing in more developed foreign markets.
The portfolio's yield and share prices change daily based on the credit quality
of its investments and changes in interest rates. In general, the value of debt
securities will decline when interest rates rise and will increase when
interest rates fall. Debt securities with longer maturity dates will generally
be subject to greater price fluctuations than those with shorter maturities.
Mortgage securities are subject to prepayment risk which can offer less
potential for gains in a declining interest rate environment and greater
potential for loss in a rising interest rate environment. Derivatives can be
highly volatile and involve risks in addition to those of the underlying
indicator's in whose value the derivative is based. Gains or losses from
derivatives can be substantially greater than the derivatives' original cost.
Lower quality debt securities involve substantially greater risk of default and
their value can decline significantly over time. To the extent that investments
are purchased with the proceeds from borrowings from a bank, the fund's net
asset value will increase or decrease at a greater rate than a comparable
unleveraged fund. When you sell your shares, they may be worth more or less
than the amount you paid for them. Please see the prospectus for further
information regarding these and other risk considerations. A copy of the fund's
prospectus is available on the EDGAR database on the Securities and Exchange
Commission's Web site at http://sec.gov.
PORTFOLIO MANAGERS' PROFILES
John Addeo -- Investment Officer of MFS; employed in the
investment management area of MFS since 1998.
Portfolio Manager of the Trust since February
2005.
James Calmas -- Investment Officer of MFS; employed in the
investment management area of MFS since 1988.
Portfolio Manager of the Trust since September
2004.
David Cole -- Investment Officer of MFS; employed in the
investment management area of MFS since 2004. High
Yield Analyst at Franklin Templeton Investments
from 1999 to 2004. Portfolio Manager of the Trust
since October 2006.
Richard Hawkins -- Investment Officer of MFS; employed in the
investment management area of MFS since 1988.
Portfolio Manager of the Trust since April 2006.
Matthew Ryan -- Investment Officer of MFS; employed in the
investment management area of MFS since 1997.
Portfolio Manager of the Trust since September
2004.
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 $100 in January and July on the 15th of the month or shortly thereafter.
If your shares are in the name of a brokerage firm, bank, or other nominee, you
can ask the firm or nominee to participate in the plan on your behalf. If the
nominee does not offer the plan, you may wish to request that your shares be
re-registered in your own name so that you can participate. There is no service
charge to reinvest distributions, nor are there brokerage charges for shares
issued directly by the trust. However, when shares are bought on the New York
Stock Exchange or otherwise on the open market, each participant pays a pro
rata share of the transaction expenses, including commissions. The automatic
reinvestment of distributions does not relieve you of any income tax that may
be payable (or required to be withheld) on the distributions.
To enroll in or withdraw from the plan, or if you have any questions, call
1-800-637-2304 any business day from 9 a.m. to 5 p.m. Eastern time. Please have
available the name of the trust and your account and Social Security numbers.
For certain types of registrations, such as corporate accounts, instructions
must be submitted in writing. Please call for additional details. When you
withdraw from the plan, you can receive the value of the reinvested shares in
one of two ways: a check for the value of the full and fractional shares, or a
certificate for the full shares and a check for the fractional shares.
Effective May 1, 2007, Computershare Trust Company, N.A. (the Transfer Agent
for the trust) became the agent for the plan.
PORTFOLIO OF INVESTMENTS
10/31/07
The Portfolio of Investments is a complete list of all securities owned by your trust. It is categorized by
broad-based asset classes.
Bonds - 88.5%
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ISSUER SHARES/PAR VALUE ($)
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Aerospace - 0.3%
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Bombardier, Inc., 8%, 2014 (n) $ 713,000 $ 741,520
Hawker Beechcraft Acquisition Corp., 8.5%, 2015 (n) 600,000 610,500
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$ 1,352,020
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Airlines - 0.2%
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Continental Airlines, Inc., 7.566%, 2020 $ 844,859 $ 815,289
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Asset Backed & Securitized - 9.2%
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ARCap REIT, Inc., CDO, "H", 6.1%, 2045 (n) $ 2,000,000 $ 1,000,000
Asset Securitization Corp., FRN, 7.865%, 2029 1,468,652 1,569,334
Banc of America Commercial Mortgage, Inc., FRN, 4.857%, 2043 1,375,626 1,314,591
Bayview Financial Acquisition Trust, FRN, 5.483%, 2041 1,130,000 1,098,553
Bayview Financial Revolving Mortgage Loan Trust, FRN,
5.618%, 2040 (z) 4,000,000 3,999,984
Citigroup/Deutsche Bank Commercial Mortgage Trust, FRN,
5.366%, 2049 1,160,000 1,129,474
Countrywide Asset-Backed Certificates, FRN, 4.575%, 2035 208,831 207,296
Crest Ltd., CDO, 7%, 2040 2,000,000 1,722,300
DEPFA Bank, 5.5%, 2010 EUR 960,000 1,423,473
Deutsche Mortgage & Asset Receiving Corp., FRN, 7.5%, 2031 $ 1,847,000 2,003,725
DLJ Commercial Mortgage Corp., 6.04%, 2031 (z) 2,000,000 2,015,145
Falcon Franchise Loan LLC, FRN, 3.689%, 2025 (i)(z) 7,008,208 903,638
First Union National Bank Commercial Mortgage Trust, FRN,
0.935%, 2043 (i)(n) 27,900,338 707,979
First Union-Lehman Brothers Bank of America, FRN,
0.491%, 2035 (i) 56,275,770 685,799
First Union-Lehman Brothers Commercial Mortgage Trust,
7%, 2029 (n) 1,511,847 1,593,930
GMAC Commercial Mortgage Securities, Inc., FRN,
6.02%, 2033 (z) 2,542,000 2,493,235
GMAC Commercial Mortgage Securities, Inc., FRN,
7.662%, 2034 (n) 1,853,000 1,962,459
JPMorgan Chase Commercial Mortgage Securities Corp.,
5.552%, 2045 1,590,000 1,580,513
JPMorgan Chase Commercial Mortgage Securities Corp., FRN,
6.062%, 2017 270,000 259,058
JPMorgan Chase Commercial Mortgage Securities Corp., FRN,
5.294%, 2043 1,375,626 1,355,298
JPMorgan Chase Commercial Mortgage Securities Corp., FRN,
5.475%, 2043 1,590,000 1,575,174
JPMorgan Chase Commercial Mortgage Securities Corp., FRN,
5.875%, 2045 1,590,000 1,624,971
JPMorgan Chase Commercial Mortgage Securities Corp., FRN,
5.723%, 2047 600,374 528,155
Lehman Brothers Commercial Conduit Mortgage Trust, FRN,
0.806%, 2030 (i) 10,337,063 293,335
Merrill Lynch Mortgage Trust, FRN, 5.83%, 2050 270,000 255,439
Morgan Stanley Capital I, Inc., FRN, 1.434%, 2014 (i)(n) 14,915,475 702,071
Mortgage Capital Funding, Inc., FRN, 0.596%, 2031 (i) 11,970,373 26,178
Multi-Family Capital Access One, Inc., 6.65%, 2024 72,157 72,585
Prudential Securities Secured Financing Corp., FRN,
7.268%, 2013 (z) 2,581,000 2,633,567
RMAC PLC, FRN, 4.948%, 2036 (n) EUR 46,931 68,062
Structured Asset Securities Corp., FRN, 4.67%, 2035 $ 3,137,879 3,122,412
Wachovia Bank Commercial Mortgage Trust, 4.935%, 2042 2,000,000 1,917,257
Wachovia Bank Commercial Mortgage Trust, FRN, 5.118%, 2042 1,375,626 1,334,655
Wachovia Bank Commercial Mortgage Trust, FRN, 5.591%, 2047 1,300,000 1,280,807
Wachovia Bank Commercial Mortgage Trust, FRN, 5.603%, 2048 1,500,000 1,482,224
Wachovia Bank Commercial Mortgage Trust, FRN, 5.383%, 2048 2,660,000 2,583,497
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$ 48,526,173
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Automotive - 1.8%
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Continental AG, 6.875%, 2008 EUR 100,000 $ 148,676
DaimlerChrysler N.A. Holdings Corp., 8.5%, 2031 $ 1,251,000 1,589,522
Ford Motor Credit Co., 7.375%, 2009 2,115,000 2,039,820
Ford Motor Credit Co. LLC, 9.75%, 2010 310,000 308,701
Ford Motor Credit Co. LLC, 7%, 2013 1,325,000 1,189,350
Ford Motor Credit Co. LLC, 8%, 2016 635,000 587,879
Ford Motor Credit Co. LLC., FRN, 7.992%, 2012 400,000 370,310
General Motors Corp., 8.375%, 2033 999,000 909,090
Goodyear Tire & Rubber Co., 9%, 2015 504,000 551,250
Johnson Controls, Inc., 5.25%, 2011 1,180,000 1,185,118
TRW Automotive, Inc., 7%, 2014 (n) 545,000 531,375
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$ 9,411,091
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Broadcasting - 1.9%
----------------------------------------------------------------------------------------------------------------
Allbritton Communications Co., 7.75%, 2012 $ 1,270,000 $ 1,289,050
CBS Corp., 6.625%, 2011 1,043,000 1,084,347
Clear Channel Communications, Inc., 6.25%, 2011 1,310,000 1,204,744
Clear Channel Communications, Inc., 5.5%, 2014 675,000 537,581
Grupo Televisa S.A., 8.5%, 2032 463,000 581,065
Intelsat Bermuda Ltd., 11.25%, 2016 355,000 381,625
Intelsat Subsidiary Holding Co. Ltd., 8.625%, 2015 305,000 309,575
Lamar Media Corp., 7.25%, 2013 1,460,000 1,463,650
News America Holdings, 7.7%, 2025 2,217,000 2,466,532
Univision Communications, Inc., 9.75%, 2015 (n)(p) 755,000 739,900
------------
$ 10,058,069
----------------------------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 1.6%
----------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc., 5.625%, 2017 $ 2,378,000 $ 2,302,582
INVESCO PLC, 5.625%, 2012 1,450,000 1,433,102
Lehman Brothers Holdings, Inc., 6.5%, 2017 1,270,000 1,279,041
Morgan Stanley, 5.75%, 2016 668,000 660,750
Morgan Stanley Dean Witter, Inc., 6.6%, 2012 2,538,000 2,657,570
------------
$ 8,333,045
----------------------------------------------------------------------------------------------------------------
Building - 0.6%
----------------------------------------------------------------------------------------------------------------
American Standard Cos., Inc., 7.375%, 2008 $ 2,500,000 $ 2,508,085
Nortek Holdings, Inc., 8.5%, 2014 500,000 442,500
------------
$ 2,950,585
----------------------------------------------------------------------------------------------------------------
Business Services - 0.2%
----------------------------------------------------------------------------------------------------------------
SunGard Data Systems, Inc., 10.25%, 2015 $ 1,200,000 $ 1,251,000
----------------------------------------------------------------------------------------------------------------
Cable TV - 0.7%
----------------------------------------------------------------------------------------------------------------
CCO Holdings LLC, 8.75%, 2013 $ 325,000 $ 325,000
Cox Communications, Inc., 4.625%, 2013 1,744,000 1,661,286
TCI Communications, Inc., 9.8%, 2012 1,135,000 1,314,552
Videotron Ltee, 6.875%, 2014 345,000 344,138
------------
$ 3,644,976
----------------------------------------------------------------------------------------------------------------
Chemicals - 0.5%
----------------------------------------------------------------------------------------------------------------
Akzo Nobel N.V., 5.625%, 2009 EUR 100,000 $ 147,036
Equistar Chemicals LP, 10.125%, 2008 $ 457,000 471,853
Linde Finance B.V., 6% to 2013, FRN to 2049 EUR 101,000 148,130
Momentive Performance Materials, Inc., 9.75%, 2014 (z) $ 585,000 570,375
Momentive Performance Materials, Inc., 11.5%, 2016 (n) 110,000 106,150
Mosaic Co., 7.625%, 2016 (n) 995,000 1,072,113
Nalco Co., 7.75%, 2011 180,000 183,150
Nalco Co., 8.875%, 2013 95,000 99,988
------------
$ 2,798,795
----------------------------------------------------------------------------------------------------------------
Computer Software - 0.4%
----------------------------------------------------------------------------------------------------------------
Seagate Technology HDD Holdings, 6.375%, 2011 $ 1,967,000 $ 1,952,248
----------------------------------------------------------------------------------------------------------------
Conglomerates - 0.3%
----------------------------------------------------------------------------------------------------------------
Actuant Corp., 6.875%, 2017 (n) $ 1,495,000 $ 1,495,000
Thyssenkrupp Finance B.V., 7%, 2009 EUR 100,000 148,912
------------
$ 1,643,912
----------------------------------------------------------------------------------------------------------------
Consumer Goods & Services - 0.8%
----------------------------------------------------------------------------------------------------------------
Corrections Corp. of America, 6.25%, 2013 $ 455,000 $ 452,179
Fortune Brands, Inc., 5.125%, 2011 1,212,000 1,206,151
Jarden Corp., 7.5%, 2017 525,000 498,750
Service Corp. International, 7%, 2017 1,155,000 1,129,013
Service Corp. International, 7.625%, 2018 250,000 256,250
Sodexho Alliance S.A., 5.875%, 2009 EUR 100,000 147,412
Visant Holding Corp., 8.75%, 2013 $ 387,000 396,675
------------
$ 4,086,430
----------------------------------------------------------------------------------------------------------------
Containers - 1.2%
----------------------------------------------------------------------------------------------------------------
Crown Americas LLC, 7.75%, 2015 $ 1,215,000 $ 1,251,450
Greif, Inc., 6.75%, 2017 2,345,000 2,327,413
Owens-Brockway Glass Container, Inc., 8.875%, 2009 453,000 456,398
Owens-Brockway Glass Container, Inc., 8.25%, 2013 2,250,000 2,340,000
------------
$ 6,375,261
----------------------------------------------------------------------------------------------------------------
Defense Electronics - 0.2%
----------------------------------------------------------------------------------------------------------------
L-3 Communications Corp., 5.875%, 2015 $ 1,145,000 $ 1,116,375
----------------------------------------------------------------------------------------------------------------
Electronics - 0.2%
----------------------------------------------------------------------------------------------------------------
Flextronics International Ltd., 6.25%, 2014 $ 425,000 $ 401,625
NXP B.V./NXP Funding LLC, 7.875%, 2014 615,000 600,394
------------
$ 1,002,019
----------------------------------------------------------------------------------------------------------------
Emerging Market Quasi-Sovereign - 2.2%
----------------------------------------------------------------------------------------------------------------
Codelco, Inc., 5.625%, 2035 $ 1,950,000 $ 1,824,465
Gazprom International S.A., 7.201%, 2020 1,667,783 1,714,863
Gazprom International S.A., 6.51%, 2022 (n) 1,260,000 1,234,800
Majapahit Holding B.V., 7.25%, 2017 (n) 1,469,000 1,456,146
OAO Gazprom, 9.625%, 2013 550,000 633,875
OAO Gazprom, 6.212%, 2016 1,148,000 1,128,140
OAO Gazprom, 7.288%, 2037 (n) 100,000 106,220
Pemex Project Funding Master Trust, 5.75%, 2018 (z) 651,000 656,534
Ras Laffan Liquefied Natural Gas Co. Ltd., 8.294%, 2014 (n) 2,510,000 2,786,419
------------
$ 11,541,462
----------------------------------------------------------------------------------------------------------------
Emerging Market Sovereign - 2.8%
----------------------------------------------------------------------------------------------------------------
Brazil Notas do Tesouro Nacional, "B", 6%, 2015 BRL 48,428 $ 26,167
Federative Republic of Brazil, 6%, 2017 $ 3,299,000 3,371,578
Federative Republic of Brazil, 8%, 2018 615,000 688,800
Federative Republic of Brazil, 7.125%, 2037 100,000 115,500
JPMorgan Chase Bank (Federative Republic of Brazil, CLN),
10%, 2012 (z) BRL 100,000 54,409
JPMorgan Chase Bank (Federative Republic of Brazil, CLN),
10%, 2012 (z) BRL 100,000 54,409
JPMorgan Chase Bank (Federative Republic of Brazil, CLN),
10%, 2012 (z) BRL 100,000 54,409
JPMorgan Chase Bank (Federative Republic of Brazil, CLN),
10%, 2012 (z) BRL 100,000 54,409
Republic of Argentina, 7%, 2013 $ 590,045 526,091
Republic of Argentina, FRN, 5.389%, 2012 3,601,250 3,268,932
Republic of Colombia, FRN, 7.33%, 2015 1,350,000 1,417,500
Republic of Ghana, 8.5%, 2017 (z) 100,000 102,583
Republic of Panama, 9.375%, 2029 1,241,000 1,687,760
Republic of Panama, 6.7%, 2036 554,000 581,700
Republic of Philippines, 9.375%, 2017 597,000 738,788
Republic of South Africa, 5.875%, 2022 569,000 572,073
Republic of Uruguay, 5%, 2018 UYU 5,140,000 278,458
United Mexican States, 5.625%, 2017 $ 1,058,000 1,073,341
------------
$ 14,666,907
----------------------------------------------------------------------------------------------------------------
Energy - Independent - 1.1%
----------------------------------------------------------------------------------------------------------------
Chaparral Energy, Inc., 8.875%, 2017 (n) $ 595,000 $ 556,325
Chesapeake Energy Corp., 6.375%, 2015 420,000 407,400
Chesapeake Energy Corp., 6.875%, 2016 1,310,000 1,303,450
Forest Oil Corp., 7.25%, 2019 (n) 345,000 345,000
Hilcorp Energy I LP, 7.75%, 2015 (n) 925,000 909,969
Newfield Exploration Co., 6.625%, 2014 435,000 427,388
OPTI Canada, Inc., 8.25%, 2014 (n) 315,000 315,788
Plains Exploration & Production Co., 7%, 2017 1,015,000 964,250
Quicksilver Resources, Inc., 7.125%, 2016 595,000 586,075
------------
$ 5,815,645
----------------------------------------------------------------------------------------------------------------
Energy - Integrated - 0.2%
----------------------------------------------------------------------------------------------------------------
Petroleum Co. of Trinidad & Tobago Ltd., 6%, 2022 (n) $ 423,000 $ 423,000
TNK-BP Finance S.A., 7.5%, 2016 (n) 490,000 477,750
------------
$ 900,750
----------------------------------------------------------------------------------------------------------------
Entertainment - 0.2%
----------------------------------------------------------------------------------------------------------------
AMC Entertainment, Inc., 11%, 2016 $ 435,000 $ 470,888
Turner Broadcasting System, Inc., 8.375%, 2013 419,000 471,006
------------
$ 941,894
----------------------------------------------------------------------------------------------------------------
Financial Institutions - 2.1%
----------------------------------------------------------------------------------------------------------------
American Express Co., 6.15%, 2017 $ 560,000 $ 571,114
Capmark Financial Group, Inc., 5.875%, 2012 (n) 1,180,000 1,059,365
Countrywide Financial Corp., 6.25%, 2016 2,250,000 1,790,793
General Motors Acceptance Corp., 5.85%, 2009 962,000 928,258
General Motors Acceptance Corp., 6.875%, 2011 817,000 752,957
General Motors Acceptance Corp., 6.75%, 2014 1,048,000 928,627
GMAC LLC, 6.125%, 2008 503,000 501,636
ILFC E-Capital Trust I, 5.9% to 2010, FRN to 2065 (n) 2,500,000 2,499,160
International Lease Finance Corp., 5.625%, 2013 1,248,000 1,247,734
Residential Capital LLC, 7.125%, 2008 315,000 265,388
Residential Capital LLC, 7.5%, 2012 670,000 489,100
------------
$ 11,034,132
----------------------------------------------------------------------------------------------------------------
Food & Beverages - 0.8%
----------------------------------------------------------------------------------------------------------------
Allied Domecq Financial Services PLC, 5.875%, 2009 EUR 125,000 $ 184,218
ARAMARK Corp., 8.5%, 2015 $ 920,000 931,500
B&G Foods Holding Corp., 8%, 2011 375,000 371,250
Dean Foods Co., 7%, 2016 810,000 757,350
Del Monte Corp., 6.75%, 2015 185,000 179,913
General Mills, Inc., 5.65%, 2012 350,000 355,437
Tyson Foods, Inc., 6.85%, 2016 1,520,000 1,580,925
------------
$ 4,360,593
----------------------------------------------------------------------------------------------------------------
Food & Drug Stores - 0.2%
----------------------------------------------------------------------------------------------------------------
CVS Caremark Corp., 6.125%, 2016 $ 1,300,000 $ 1,325,918
----------------------------------------------------------------------------------------------------------------
Forest & Paper Products - 0.8%
----------------------------------------------------------------------------------------------------------------
Buckeye Technologies, Inc., 8.5%, 2013 $ 795,000 $ 818,850
MeadWestvaco Corp., 6.8%, 2032 679,000 618,553
Norske Skog Canada Ltd., 7.375%, 2014 1,210,000 886,325
Stora Enso Oyj, 6.404%, 2016 (n) 1,580,000 1,563,227
UPM Kymmene Corp., 6.125%, 2012 EUR 100,000 148,174
------------
$ 4,035,129
----------------------------------------------------------------------------------------------------------------
Gaming & Lodging - 1.5%
----------------------------------------------------------------------------------------------------------------
Harrah's Operating Co., Inc., 5.375%, 2013 $ 1,500,000 $ 1,205,978
Isle of Capri Casinos, Inc., 7%, 2014 420,000 372,750
Mandalay Resort Group, 9.375%, 2010 950,000 997,500
MGM Mirage, Inc., 8.375%, 2011 1,005,000 1,050,225
MGM Mirage, Inc., 6.75%, 2013 500,000 487,500
MGM Mirage, Inc., 7.5%, 2016 940,000 934,125
Scientific Games Corp., 6.25%, 2012 825,000 792,000
Station Casinos, Inc., 6.5%, 2014 630,000 526,050
Wimar Opco LLC, 9.625%, 2014 (n) 815,000 611,250
Wyndham Worldwide Corp., 6%, 2016 360,000 352,117
Wynn Las Vegas LLC, 6.625%, 2014 545,000 535,463
------------
$ 7,864,958
----------------------------------------------------------------------------------------------------------------
Industrial - 0.3%
----------------------------------------------------------------------------------------------------------------
JohnsonDiversey Holdings, Inc., "B", 9.625%, 2012 $ 1,325,000 $ 1,374,688
Wesco Distribution, Inc., 7.5%, 2017 90,000 84,150
------------
$ 1,458,838
----------------------------------------------------------------------------------------------------------------
Insurance - 0.9%
----------------------------------------------------------------------------------------------------------------
Allianz AG, 5.5% to 2014, FRN to 2049 EUR 140,000 $ 201,005
American International Group, Inc., 6.25%, 2037 $ 300,000 279,182
ING Groep N.V., 5.775% to 2015, FRN to 2049 2,500,000 2,414,708
Prudential Financial, Inc., 5.1%, 2014 1,985,000 1,917,063
------------
$ 4,811,958
----------------------------------------------------------------------------------------------------------------
Insurance - Health - 0.1%
----------------------------------------------------------------------------------------------------------------
Centene Corp., 7.25%, 2014 $ 350,000 $ 349,125
----------------------------------------------------------------------------------------------------------------
Insurance - Property & Casualty - 1.6%
----------------------------------------------------------------------------------------------------------------
AIG SunAmerica Global Financing X, 6.9%, 2032 (n) $ 2,384,000 $ 2,637,033
Fund American Cos., Inc., 5.875%, 2013 1,464,000 1,449,170
USI Holdings Corp., FRN, 9.432%, 2014 (n) 1,495,000 1,390,350
ZFS Finance USA Trust IV, FRN, 5.875%, 2032 (n) 500,000 479,219
ZFS Finance USA Trust V, FRN, 6.5%, 2037 (n) 2,700,000 2,598,488
------------
$ 8,554,260
----------------------------------------------------------------------------------------------------------------
International Market Quasi-Sovereign - 3.7%
----------------------------------------------------------------------------------------------------------------
Canada Housing Trust, 4.6%, 2011 CAD 389,000 $ 413,594
Development Bank of Japan, 1.75%, 2010 JPY 183,000,000 1,621,027
Development Bank of Japan, 1.4%, 2012 JPY 274,000,000 2,400,241
Development Bank of Japan, 1.05%, 2023 JPY 390,000,000 2,941,651
Development Bank of Japan, 2.3%, 2026 JPY 120,000,000 1,056,515
Japan Finance Corp. for Municipal Enterprises, 1.55%, 2012 JPY 275,000,000 2,437,224
Japan Finance Corp. for Municipal Enterprises, 2%, 2016 JPY 510,000,000 4,604,012
KfW Bankengruppe, 1.35%, 2014 JPY 432,000,000 3,765,477
Vattenfall Treasury AB, 6%, 2010 EUR 125,000 187,128
------------
$ 19,426,869
----------------------------------------------------------------------------------------------------------------
International Market Sovereign - 8.6%
----------------------------------------------------------------------------------------------------------------
Federal Republic of Germany, 5.25%, 2010 EUR 3,867,000 $ 5,763,857
Federal Republic of Germany, 3.75%, 2015 EUR 1,518,000 2,140,984
Federal Republic of Germany, 6.25%, 2030 EUR 1,544,000 2,768,643
Government of Canada, 5.5%, 2009 CAD 778,000 838,677
Government of Canada, 4.5%, 2015 CAD 671,000 719,772
Government of Canada, 5.75%, 2033 CAD 236,000 301,362
Kingdom of Denmark, 4%, 2015 DKK 4,203,000 802,469
Kingdom of Netherlands, 3.75%, 2009 EUR 5,181,000 7,464,045
Kingdom of Netherlands, 3.75%, 2014 EUR 1,061,000 1,498,001
Kingdom of Spain, 5.35%, 2011 EUR 2,725,000 4,117,400
Kingdom of Sweden, 4.5%, 2015 SEK 2,610,000 417,375
Republic of Austria, 4.65%, 2018 EUR 2,632,000 3,907,638
Republic of France, 4.75%, 2012 EUR 760,000 1,129,117
Republic of France, 5%, 2016 EUR 1,274,000 1,940,573
Republic of France, 6%, 2025 EUR 511,000 874,798
Republic of France, 4.75%, 2035 EUR 2,099,000 3,130,010
Republic of Ireland, 4.6%, 2016 EUR 2,023,000 2,993,033
United Kingdom Treasury, 8%, 2015 GBP 562,000 1,401,505
United Kingdom Treasury, 8%, 2021 GBP 583,000 1,580,723
United Kingdom Treasury, 4.25%, 2036 GBP 803,000 1,594,390
------------
$ 45,384,372
----------------------------------------------------------------------------------------------------------------
Machinery & Tools - 0.2%
----------------------------------------------------------------------------------------------------------------
Case New Holland, Inc., 7.125%, 2014 $ 820,000 $ 848,700
----------------------------------------------------------------------------------------------------------------
Major Banks - 2.0%
----------------------------------------------------------------------------------------------------------------
Bank of Ireland, 7.4%, 2049 EUR 500,000 $ 757,212
BNP Paribas, 5.186% to 2015, FRN to 2049 (n) $ 2,099,000 1,944,285
BNP Paribas Capital Trust III, 6.625% to 2011, FRN to 2049 EUR 100,000 151,841
MUFG Capital Finance 1 Ltd., 6.346% to 2016, FRN to 2049 $ 1,568,000 1,494,999
National Westminster Bank PLC, 6.625% to 2009, FRN to 2049 EUR 330,000 489,570
Royal Bank of Scotland Group PLC, 6.99% to 2017,
FRN to 2049 (z) $ 430,000 434,600
SG Capital Trust I, 7.875% to 2010, FRN to 2049 EUR 300,000 459,535
Unicredit Luxembourg Financial S.A., 6%, 2017 (z) $ 990,000 977,664
Wachovia Capital Trust III, 5.8% to 2011, FRN to 2042 4,068,000 4,035,672
------------
$ 10,745,378
----------------------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 2.5%
----------------------------------------------------------------------------------------------------------------
Advanced Medical Optics, Inc., 7.5%, 2017 $ 235,000 $ 221,488
Community Health Systems, Inc., 8.875%, 2015 (n) 890,000 901,125
Cooper Cos., Inc., 7.125%, 2015 1,260,000 1,247,400
Covidien Ltd., 6%, 2017 (z) 420,000 425,661
Covidien Ltd., 6.55%, 2037 (z) 250,000 254,689
DaVita, Inc., 6.625%, 2013 300,000 298,500
DaVita, Inc., 7.25%, 2015 1,360,000 1,375,300
Fisher Scientific International, Inc., 6.125%, 2015 1,500,000 1,491,878
HCA, Inc., 8.75%, 2010 1,315,000 1,338,013
HCA, Inc., 6.375%, 2015 500,000 426,875
HCA, Inc., 9.25%, 2016 1,645,000 1,731,363
Hospira, Inc., 5.55%, 2012 360,000 360,396
Hospira, Inc., 6.05%, 2017 1,248,000 1,246,143
Owens & Minor, Inc., 6.35%, 2016 1,420,000 1,427,293
Psychiatric Solutions, Inc., 7.75%, 2015 580,000 590,150
------------
$ 13,336,274
----------------------------------------------------------------------------------------------------------------
Metals & Mining - 2.0%
----------------------------------------------------------------------------------------------------------------
Arch Western Finance LLC, 6.75%, 2013 $ 1,105,000 $ 1,077,375
FMG Finance Ltd., 10.625%, 2016 (n) 1,405,000 1,664,925
Foundation PA Coal Co., 7.25%, 2014 710,000 697,575
Freeport-McMoRan Copper & Gold, Inc., 8.25%, 2015 595,000 642,600
Freeport-McMoRan Copper & Gold, Inc., 8.375%, 2017 1,445,000 1,582,275
International Steel Group, Inc., 6.5%, 2014 1,300,000 1,334,567
Peabody Energy Corp., 5.875%, 2016 720,000 685,800
Peabody Energy Corp., 7.375%, 2016 45,000 46,800
Peabody Energy Corp., "B", 6.875%, 2013 630,000 633,150
Steel Dynamics, Inc., 7.375%, 2012 (z) 2,380,000 2,380,000
------------
$ 10,745,067
----------------------------------------------------------------------------------------------------------------
Mortgage Backed - 9.7%
----------------------------------------------------------------------------------------------------------------
Fannie Mae, 6%, 2012 - 2037 $ 8,050,417 $ 8,118,229
Fannie Mae, 4.78%, 2015 703,471 684,699
Fannie Mae, 5.5%, 2021 - 2035 10,117,044 10,037,493
Fannie Mae, 5%, 2027 - 2035 6,168,392 6,016,374
Fannie Mae, 6.5%, 2031 - 2032 1,251,696 1,288,812
Freddie Mac, 6%, 2021 - 2036 9,762,720 9,837,655
Freddie Mac, 5%, 2024 300,919 300,744
Freddie Mac, 5.5%, 2036 14,978,982 14,747,650
------------
$ 51,031,656
----------------------------------------------------------------------------------------------------------------
Natural Gas - Distribution - 0.3%
----------------------------------------------------------------------------------------------------------------
AmeriGas Partners LP, 7.25%, 2015 $ 1,030,000 $ 1,019,700
AmeriGas Partners LP, 7.125%, 2016 365,000 356,788
Inergy LP, 6.875%, 2014 400,000 392,000
------------
$ 1,768,488
----------------------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 2.0%
----------------------------------------------------------------------------------------------------------------
Atlas Pipeline Partners LP, 8.125%, 2015 $ 1,905,000 $ 1,895,475
CenterPoint Energy Resources Corp., 7.875%, 2013 1,250,000 1,370,666
Deutsche Bank (El Paso Performance-Linked Trust, CLN),
7.75%, 2011 (n) 2,015,000 2,077,501
Intergas Finance B.V., 6.375%, 2017 (n) 322,000 301,070
Kinder Morgan Energy Partners LP, 5.125%, 2014 1,147,000 1,102,967
Spectra Energy Capital LLC, 8%, 2019 691,000 787,663
Williams Cos., Inc., 8.75%, 2032 1,750,000 2,038,750
Williams Partners LP, 7.25%, 2017 765,000 788,906
------------
$ 10,362,998
----------------------------------------------------------------------------------------------------------------
Network & Telecom - 2.3%
----------------------------------------------------------------------------------------------------------------
BellSouth Corp., 6.55%, 2034 $ 3,213,000 $ 3,354,937
Citizens Communications Co., 9.25%, 2011 1,285,000 1,403,863
Citizens Communications Co., 9%, 2031 870,000 895,013
Deutsche Telekom International Finance B.V., 8.125%, 2012 EUR 130,000 211,295
Nordic Telephone Co. Holdings, 8.875%, 2016 (n) $ 640,000 676,800
Qwest Corp., 7.875%, 2011 295,000 311,225
Qwest Corp., 8.875%, 2012 950,000 1,040,250
Telefonica Europe B.V., 7.75%, 2010 1,500,000 1,606,131
TELUS Corp., 8%, 2011 1,309,000 1,419,830
Windstream Corp., 8.625%, 2016 1,040,000 1,112,800
Windstream Corp., 7%, 2019 195,000 192,075
------------
$ 12,224,219
----------------------------------------------------------------------------------------------------------------
Oil Services - 0.4%
----------------------------------------------------------------------------------------------------------------
Basic Energy Services, Inc., 7.125%, 2016 $ 720,000 $ 693,000
Compagnie Generale de Geophysique - Veritas, 7.75%, 2017 510,000 525,300
GulfMark Offshore, Inc., 7.75%, 2014 760,000 763,800
------------
$ 1,982,100
----------------------------------------------------------------------------------------------------------------
Oils - 0.5%
----------------------------------------------------------------------------------------------------------------
Premcor Refining Group, Inc., 7.5%, 2015 $ 2,575,000 $ 2,683,186
----------------------------------------------------------------------------------------------------------------
Other Banks & Diversified Financials - 2.5%
----------------------------------------------------------------------------------------------------------------
Alfa Diversified Payment Rights Finance Co., FRN,
7.594%, 2011 (n) $ 2,132,650 $ 2,068,671
Banco BMG S.A., 9.15%, 2016 (n) 714,000 757,768
Banco do Estado de Sao Paulo S.A., 8.7%, 2010 15,000 15,656
Banco do Estado de Sao Paulo S.A., 8.7%, 2049 (n) 577,000 602,244
Banco Mercantil del Norte S.A., 5.875% to 2009, FRN
to 2014 (n) 655,000 650,088
Bosphorus Financial Services Ltd., FRN, 7.357%, 2012 2,000,000 1,979,954
Fifth Third Bancorp, 5.45%, 2017 714,000 694,990
Fortis Capital Co., 6.25% to 2009, FRN to 2049 EUR 155,000 227,083
ICICI Bank Ltd., 6.625%, 2012 (z) $ 71,000 71,556
Mizuho Capital Investment 1 Ltd., 6.686% to 2016,
FRN to 2049 (n) 1,220,000 1,156,048
Mizuho Financial Group, Inc., 5.79%, 2014 (n) 1,633,000 1,652,555
Resona Bank Ltd., 5.85% to 2016, FRN to 2049 (n) 626,000 579,943
Russian Standard Finance S.A., 8.625%, 2011 (n) 769,000 711,325
VTB Capital S.A., 6.609%, 2012 (z) 695,000 689,625
Woori Bank, 6.125% to 2011, FRN to 2016 (n) 1,510,000 1,515,299
------------
$ 13,372,805
----------------------------------------------------------------------------------------------------------------
Pollution Control - 0.1%
----------------------------------------------------------------------------------------------------------------
Veolia Environnement, 5.875%, 2008 EUR 250,000 $ 365,002
----------------------------------------------------------------------------------------------------------------
Precious Metals & Minerals - 0.1%
----------------------------------------------------------------------------------------------------------------
Alrosa Finance S.A., 8.875%, 2014 $ 716,000 $ 787,729
----------------------------------------------------------------------------------------------------------------
Printing & Publishing - 1.2%
----------------------------------------------------------------------------------------------------------------
American Media Operations, Inc., 10.25%, 2009 $ 507,000 $ 485,453
Bertelsmann U.S. Finance, Inc., 4.625%, 2010 EUR 148,000 213,596
Dex Media East LLC, 9.875%, 2009 $ 145,000 148,806
Dex Media West LLC, 9.875%, 2013 567,000 604,564
Idearc, Inc., 8%, 2016 2,435,000 2,441,088
Nielsen Finance LLC, 10%, 2014 360,000 378,900
R.H. Donnelley Corp., 8.875%, 2016 1,890,000 1,890,000
Reed Elsevier Capital, Inc., 5.75%, 2008 EUR 125,000 182,344
------------
$ 6,344,751
----------------------------------------------------------------------------------------------------------------
Railroad & Shipping - 0.3%
----------------------------------------------------------------------------------------------------------------
TFM S.A. de C.V., 9.375%, 2012 $ 1,424,000 $ 1,509,440
----------------------------------------------------------------------------------------------------------------
Real Estate - 0.5%
----------------------------------------------------------------------------------------------------------------
HRPT Properties Trust, REIT, 6.25%, 2016 $ 663,000 $ 651,134
Kimco Realty Corp., REIT, 5.783%, 2016 720,000 709,586
Simon Property Group LP, REIT, 4.6%, 2010 1,375,000 1,350,025
------------
$ 2,710,745
----------------------------------------------------------------------------------------------------------------
Restaurants - 0.3%
----------------------------------------------------------------------------------------------------------------
YUM! Brands, Inc., 8.875%, 2011 $ 1,590,000 $ 1,760,030
----------------------------------------------------------------------------------------------------------------
Retailers - 0.9%
----------------------------------------------------------------------------------------------------------------
Couche-Tard, Inc., 7.5%, 2013 $ 905,000 $ 916,313
Federated Retail Holdings, Inc., 5.35%, 2012 300,000 292,478
Gap, Inc., 10.05%, 2008 2,710,000 2,839,945
Home Depot, Inc., 5.875%, 2036 1,000,000 873,097
------------
$ 4,921,833
----------------------------------------------------------------------------------------------------------------
Specialty Stores - 0.1%
----------------------------------------------------------------------------------------------------------------
GSC Holdings Corp., 8%, 2012 $ 440,000 $ 459,250
LVMH Moet Hennessy Louis Vuitton S.A., 4.625%, 2011 EUR 125,000 179,703
Payless ShoeSource, Inc., 8.25%, 2013 $ 100,000 98,875
------------
$ 737,828
----------------------------------------------------------------------------------------------------------------
Supermarkets - 0.4%
----------------------------------------------------------------------------------------------------------------
Delhaize America, Inc., 9%, 2031 $ 983,000 $ 1,189,819
Stater Brothers Holdings, Inc., 7.75%, 2015 350,000 349,125
SUPERVALU, Inc., 7.5%, 2014 470,000 482,925
------------
$ 2,021,869
----------------------------------------------------------------------------------------------------------------
Supranational - 0.1%
----------------------------------------------------------------------------------------------------------------
Central American Bank, 4.875%, 2012 (n) $ 521,000 $ 511,542
----------------------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 1.3%
----------------------------------------------------------------------------------------------------------------
American Tower Corp., 7%, 2017 (z) $ 250,000 $ 255,625
Centennial Communications Corp., 10.125%, 2013 520,000 552,500
Globo Comunicacoes e Participacoes S.A., 7.25%, 2022 (n) 100,000 99,000
MetroPCS Wireless, Inc., 9.25%, 2014 (n) 390,000 387,075
Nextel Communications, Inc., 5.95%, 2014 1,305,000 1,246,275
OJSC Vimpel-Communications, 8.25%, 2016 1,459,000 1,510,065
Rogers Cable, Inc., 5.5%, 2014 1,975,000 1,930,482
Rogers Wireless, Inc., 7.5%, 2015 980,000 1,062,158
------------
$ 7,043,180
----------------------------------------------------------------------------------------------------------------
Telephone Services - 0.3%
----------------------------------------------------------------------------------------------------------------
Embarq Corp., 7.082%, 2016 $ 1,760,000 $ 1,839,434
----------------------------------------------------------------------------------------------------------------
Tobacco - 0.6%
----------------------------------------------------------------------------------------------------------------
Altria Group, Inc., 5.625%, 2008 EUR 75,000 $ 109,149
Reynolds American, Inc., 6.75%, 2017 $ 3,016,000 3,155,490
------------
$ 3,264,639
----------------------------------------------------------------------------------------------------------------
Transportation - Services - 0.3%
----------------------------------------------------------------------------------------------------------------
Hertz Corp., 8.875%, 2014 $ 685,000 $ 705,550
Westinghouse Air Brake Technologies Corp., 6.875%, 2013 795,000 795,000
------------
$ 1,500,550
----------------------------------------------------------------------------------------------------------------
U.S. Government Agencies - 1.0%
----------------------------------------------------------------------------------------------------------------
Freddie Mac, 5.5%, 2017 $ 5,200,000 $ 5,415,036
----------------------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 4.4%
----------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 7.5%, 2016 $ 2,075,000 $ 2,536,682
U.S. Treasury Bonds, 5.375%, 2031 3,386,000 3,668,521
U.S. Treasury Bonds, 4.5%, 2036 (f) 12,628,000 12,122,880
U.S. Treasury Notes, 6.375%, 2027 4,000,000 4,799,688
------------
$ 23,127,771
----------------------------------------------------------------------------------------------------------------
Utilities - Electric Power - 5.0%
----------------------------------------------------------------------------------------------------------------
AES Corp., 9.375%, 2010 $ 1,250,000 $ 1,321,875
Allegheny Energy Supply Co. LLC, 8.25%, 2012 (n) 805,000 873,425
Beaver Valley Funding Corp., 9%, 2017 2,509,000 2,823,779
Edison Mission Energy, 7%, 2017 (n) 1,385,000 1,353,838
EDP Finance B.V., 6%, 2018 (z) 1,340,000 1,335,902
EEB International Ltd., 8.75%, 2014 (z) 550,000 567,875
Enersis S.A., 7.375%, 2014 1,283,000 1,362,851
Exelon Generation Co. LLC, 6.95%, 2011 2,506,000 2,630,699
HQI Transelec Chile S.A., 7.875%, 2011 883,000 941,341
Intergen N.V., 9%, 2017 (n) 895,000 946,463
ISA Capital do Brasil S.A., 7.875%, 2012 (n) 464,000 475,600
ISA Capital do Brasil S.A., 8.8%, 2017 (n) 761,000 791,440
Mirant Americas Generation LLC, 8.3%, 2011 200,000 202,250
Mirant North American LLC, 7.375%, 2013 1,500,000 1,520,625
NiSource Finance Corp., 7.875%, 2010 1,155,000 1,236,111
NorthWestern Corp., 5.875%, 2014 1,695,000 1,695,561
NRG Energy, Inc., 7.375%, 2016 1,870,000 1,865,325
Reliant Energy, Inc., 7.875%, 2017 675,000 680,906
RWE Finance B.V., 5.375%, 2008 EUR 6,000 8,724
System Energy Resources, Inc., 5.129%, 2014 (n) $ 2,133,558 2,133,964
Waterford 3 Funding Corp., 8.09%, 2017 1,872,870 1,893,266
------------
$ 26,661,820
----------------------------------------------------------------------------------------------------------------
TOTAL BONDS (IDENTIFIED COST, $463,321,219) $467,414,168
----------------------------------------------------------------------------------------------------------------
Floating Rate Loans - 1.4% (g)(r)
----------------------------------------------------------------------------------------------------------------
Aerospace - 0.1%
----------------------------------------------------------------------------------------------------------------
Hawker Beechcraft Acquisition Co., Letter of Credit, 7.2%, 2014 $ 15,262 $ 14,882
Hawker Beechcraft Acquisition Co., Term Loan, 7.17%, 2014 373,505 364,400
------------
$ 379,282
----------------------------------------------------------------------------------------------------------------
Automotive - 0.2%
----------------------------------------------------------------------------------------------------------------
Ford Motor Co., Term Loan B, 8.7%, 2013 $ 927,374 $ 891,568
Goodyear Tire & Rubber Co., Term Loan, 6.43%, 2014 383,100 371,726
------------
$ 1,263,294
----------------------------------------------------------------------------------------------------------------
Broadcasting - 0.1%
----------------------------------------------------------------------------------------------------------------
Gray Television, Inc., Term Loan, 6.73%, 2014 $ 289,535 $ 278,557
Univision Communications, Inc., Term Loan B, 7.2%, 2014 (o) 361,029 341,669
------------
$ 620,226
----------------------------------------------------------------------------------------------------------------
Cable TV - 0.3%
----------------------------------------------------------------------------------------------------------------
Charter Communications Operating LLC, Term Loan, 6.99%, 2013 $ 480,846 $ 461,473
CSC Holdings, Inc., Incremental Term Loan, 6.88%, 2013 497,277 484,989
Mediacom Illinois LLC, Term Loan A, 6.69%, 2011 448,333 429,502
------------
$ 1,375,964
----------------------------------------------------------------------------------------------------------------
Chemicals - 0.1%
----------------------------------------------------------------------------------------------------------------
Celanese AG, Term Loan B, 6.98%, 2014 $ 565,217 $ 554,922
----------------------------------------------------------------------------------------------------------------
Food & Beverages - 0.1%
----------------------------------------------------------------------------------------------------------------
Dean Foods Co., Term Loan B, 6.7%, 2014 $ 441,901 $ 427,539
----------------------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 0.3%
----------------------------------------------------------------------------------------------------------------
Advanced Medical Optics, Inc., Term Loan, 7.03%, 2014 (o) $ 243,239 $ 233,509
Community Health Systems, Inc., Term Loan B, 7.75%, 2014 311,162 304,063
HCA, Inc., Term Loan B, 7.45%, 2013 865,500 844,511
------------
$ 1,382,083
----------------------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 0.0%
----------------------------------------------------------------------------------------------------------------
Kinder Morgan, Inc., Term Loan, 6.3%, 2014 $ 154,213 $ 150,242
----------------------------------------------------------------------------------------------------------------
Pollution Control - 0.1%
----------------------------------------------------------------------------------------------------------------
Allied Waste North America, Inc., Term Loan, 6.54%, 2012 $ 349,705 $ 343,016
Allied Waste North America, Inc., Term Loan A, Credit
Linked Deposit, 6.62%, 2012 197,940 194,154
------------
$ 537,170
----------------------------------------------------------------------------------------------------------------
Printing & Publishing - 0.1%
----------------------------------------------------------------------------------------------------------------
Idearc, Inc., Term Loan B, 7.2%, 2014 $ 664,628 $ 654,410
----------------------------------------------------------------------------------------------------------------
TOTAL FLOATING RATE LOANS (IDENTIFIED COST, $7,484,578) $ 7,345,132
----------------------------------------------------------------------------------------------------------------
Preferred Stocks - 0.0%
----------------------------------------------------------------------------------------------------------------
Real Estate - 0.0%
----------------------------------------------------------------------------------------------------------------
HRPT Properties Trust, "B", REIT, 8.75%
(Identified Cost, $81,366) 22,950 $ 74,375
----------------------------------------------------------------------------------------------------------------
Common Stocks - 0.0%
----------------------------------------------------------------------------------------------------------------
Printing & Publishing - 0.0%
----------------------------------------------------------------------------------------------------------------
Golden Books Family Entertainment, Inc. (a)
(Identified Cost, $0) 19,975 $ 0
----------------------------------------------------------------------------------------------------------------
Rights - 0.0%
----------------------------------------------------------------------------------------------------------------
Emerging Market Sovereign - 0.0%
----------------------------------------------------------------------------------------------------------------
Banco Central del Uruguay, Value Recovery Rights,
Expiring January 2021 (a) (Identified Cost, $0) 1,250,000 $ 0
----------------------------------------------------------------------------------------------------------------
Short-Term Obligations - 6.2% (y)
----------------------------------------------------------------------------------------------------------------
Abbey National North America LLC, 4.813%, due 11/01/07 $ 11,547,000 $ 11,547,000
Falcon Asset Securitization Co. LLC, 4.95%, due 11/01/07 (t) 21,194,000 21,194,000
----------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS, AT AMORTIZED COST AND VALUE $ 32,741,000
----------------------------------------------------------------------------------------------------------------
Repurchase Agreements - 3.2%
----------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., 4.94%, dated 10/31/07, due 11/01/07,
total to be received $17,049,339 (secured by various U.S.
Treasury and Federal Agency obligations and Mortgage Backed
securities in a jointly traded account), at Cost $ 17,047,000 $ 17,047,000
----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $520,675,163) (k) $524,621,675
----------------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.7% 3,436,068
----------------------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $528,057,743
----------------------------------------------------------------------------------------------------------------
(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 October 31, 2007, the trust held securities fair valued in accordance with the policies adopted by
the Board of Trustees, aggregating $458,269,939 and 87.35% of market value. An independent pricing service
provided an evaluated bid for 86.29% 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 $57,612,562, representing
10.91% 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:
ACQUISITION ACQUISITION CURRENT TOTAL % OF
RESTRICTED SECURITIES DATE COST MARKET VALUE NET ASSETS
----------------------------------------------------------------------------------------------------------------
American Tower Corp., 7%, 2017 9/24/07 $ 250,000 $ 255,625
Bayview Financial Revolving
Mortgage Loan Trust, FRN,
5.618%, 2040 3/01/06 4,000,000 3,999,984
Covidien Ltd., 6%, 2017 10/17/07 419,693 425,661
Covidien Ltd., 6.55%, 2037 10/17/07 248,900 254,689
DLJ Commercial Mortgage Corp.,
6.04%, 2031 7/23/04 1,969,453 2,015,145
EDP Finance B.V., 6%, 2018 10/26/07 - 10/30/07 1,341,911 1,335,902
EEB International Ltd.,
8.75%, 2014 10/24/07 550,000 567,875
Falcon Franchise Loan LLC, FRN,
3.689%, 2025 1/29/03 1,331,301 903,638
JPMorgan Chase Bank (Federative
Republic of Brazil, CLN),
10%, 2012 7/10/06 37,617 54,409
JPMorgan Chase Bank (Federative
Republic of Brazil, CLN),
10%, 2012 9/05/06 40,206 54,409
JPMorgan Chase Bank (Federative
Republic of Brazil, CLN),
10%, 2012 8/11/06 39,194 54,409
JPMorgan Chase Bank (Federative
Republic of Brazil, CLN),
10%, 2012 9/21/06 38,913 54,409
GMAC Commercial Mortgage
Securities, Inc., FRN, 6.02%, 2033 11/17/00 1,991,746 2,493,235
Icici Bank Ltd., 6.625%, 2012 9/26/07 70,940 71,556
Momentive Performance
Materials, Inc., 9.75%, 2014 9/10/07 - 10/18/07 571,363 570,375
Pemex Project Funding Master
Trust, 5.75%, 2018 10/17/07 646,547 656,534
Prudential Securities Secured
Financing Corp., FRN,
7.268%, 2013 12/06/04 2,865,414 2,633,567
Republic of Ghana, 8.5%, 2017 6/06/07 1,489,125 102,583
Royal Bank of Scotland Group
PLC, 6.99% to 2017, FRN to 2049 9/26/07 430,000 434,600
Steel Dynamics, Inc.,
7.375%, 2012 10/04/07 2,380,000 2,380,000
Unicredit Luxembourg Financial
S.A., 6%, 2017 10/24/07 989,267 977,664
VTB Capital S.A., 6.609%, 2012 10/25/07 695,000 689,625
----------------------------------------------------------------------------------------------------------------
Total Restricted Securities $20,985,894 4.0%
==================================
UNFUNDED LOAN COMMITMENTS
As of October 31, 2007, the portfolio had the following unfunded loan commitments of $33,058, which could be
extended at the option of the borrower:
UNFUNDED UNREALIZED
LOAN APPRECIATION
BORROWER COMMITMENT (DEPRECIATION)
----------------------------------------------------------------------------------------------------------------
Community Health Systems, Inc., Delayed Draw Term Loan, 2014 $20,522 $(468)
Univision Communications, Inc., Delayed Draw Term Loan, 2014 12,536 209
----------------------------------------------------------------------------------------------------------------
$33,058 $(259)
=====================================
At October 31, 2007 the trust had sufficient cash and/or liquid securities to cover any commitments under these
contracts.
DERIVATIVE CONTRACTS AT 10/31/07
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS AT 10/31/07
NET
IN UNREALIZED
CONTRACTS TO SETTLEMENT EXCHANGE CONTRACTS APPRECIATION
CURRENCY TYPE DELIVER/RECEIVE DATE RANGE FOR AT VALUE (DEPRECIATION)
----------------------------------------------------------------------------------------------------------------
APPRECIATION
----------------------------------------------------------------------------------------------------------------
AUD BUY 2,906,541 11/19/07 $ 2,604,917 $ 2,711,092 $ 106,175
BRL BUY 2,862,400 11/01/07 - 11/30/07 1,610,557 1,645,243 34,686
CHF BUY 1,462,995 12/03/07 1,258,609 1,267,996 9,387
CNY BUY 41,418,000 11/27/07 5,566,935 5,583,446 16,511
EUR BUY 3,918,524 11/19/07 - 12/19/07 5,509,646 5,686,089 176,443
JPY SELL 2,160,180,974 11/13/07 18,839,883 18,762,415 77,468
MXN BUY 14,529,821 12/18/07 1,301,605 1,355,566 53,961
PLN BUY 3,693,308 11/30/07 1,382,174 1,478,269 96,095
SEK BUY 8,693,338 11/13/07 1,284,799 1,369,538 84,739
SGD BUY 2,103,240 11/23/07 1,439,590 1,456,410 16,820
-----------
$ 672,285
===========
DEPRECIATION
----------------------------------------------------------------------------------------------------------------
BRL SELL 1,431,200 11/01/07 $ 813,182 $ 824,130 $ (10,948)
CAD SELL 3,463,405 11/13/07 3,422,708 3,661,256 (238,548)
DKK SELL 4,128,887 12/10/07 783,991 803,816 (19,825)
EUR SELL 35,227,224 11/19/07 - 12/19/07 48,898,749 51,104,776 (2,206,027)
GBP SELL 2,880,739 12/19/07 5,777,108 5,986,797 (209,689)
MXN SELL 14,529,820 12/18/07 1,321,800 1,355,566 (33,766)
NZD SELL 1,754,355 11/19/07 1,316,854 1,353,303 (36,449)
PLN SELL 3,693,307 11/30/07 1,453,909 1,478,269 (24,360)
SEK SELL 2,661,521 11/13/07 408,923 419,293 (10,370)
-----------
$(2,789,982)
===========
FUTURES CONTRACTS OUTSTANDING AT 10/31/07
UNREALIZED
EXPIRATION APPRECIATION
DESCRIPTION CONTRACTS VALUE DATE (DEPRECIATION)
----------------------------------------------------------------------------------------------------------------
U.S. Treasury Bond (Long) 50 $ 5,629,688 Dec-07 $ 55,329
U.S. Treasury Note 10 yr (Long) 91 10,011,422 Dec-07 135,470
----------------------------------------------------------------------------------------------------------------
$190,799
========
SWAP AGREEMENTS AT 10/31/07
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 (1) 0.38% (fixed rate) $(3,619)
3/20/17 USD 1,250,000 Merrill Lynch (2) 0.81% (fixed rate) (28,305)
3/20/17 USD 1,040,000 Goldman Sachs (3) 0.40% (fixed rate) (4,240)
9/20/12 USD 1,500,000 JPMorgan Chase 0.33% (fixed rate) (4) 4,252
6/20/09 USD 300,000 JPMorgan Chase 4.10% (fixed rate) (5) (12,898)
6/20/17 USD 1,150,000 Merrill Lynch (6) 0.91% (fixed rate) (3,017)
--------
$(47,827)
========
(1) Fund to receive notional amount upon a defined credit event by PPG Industries, Inc., 7.05%, 8/15/09.
(2) Fund to receive notional amount upon a defined credit event by Waste Management, Inc., 7.38%, 8/01/10.
(3) Fund to receive notional amount upon a defined credit event by Dover Corp., 6.25%, 6/01/08.
(4) Fund to pay notional amount upon a defined credit event by FNMA, 5.8%, 6/9/33.
(5) Fund to pay notional amount upon a defined credit event by Abitibi Consolidated, 8.375%, 4/1/15.
(6) Fund to receive notional amount upon a defined credit event by New York Times Co., 4.61%, 9/26/12.
At October 31, 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
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:
AUD Australian Dollar
BRL Brazilian Real
CAD Canadian Dollar
CHF Swiss Franc
CNY Chinese Yuan Renminbi
DKK Danish Krone
EUR Euro
GBP British Pound
JPY Japanese Yen
MXN Mexican Peso
NZD New Zealand Dollar
PLN Polish Zloty
SEK Swedish Krona
SGD Singapore Dollar
UYU Uruguayan Peso
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 10/31/07
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, $520,675,163) $524,621,675
Cash 797,155
Foreign currency, at value (identified cost, $211,428) 211,428
Receivable for forward foreign currency exchange contracts 672,285
Receivable for investments sold 619,141
Interest and dividends receivable 7,195,480
Unrealized appreciation on credit default swaps 4,252
Other assets 96,295
---------------------------------------------------------------------------------------------------------
Total assets $534,217,711
---------------------------------------------------------------------------------------------------------
LIABILITIES
---------------------------------------------------------------------------------------------------------
Distributions payable $178,740
Payable for forward foreign currency exchange contracts 2,789,982
Payable for daily variation margin on open futures contracts 108,297
Payable for investments purchased 2,413,350
Unrealized depreciation on credit default swaps 52,079
Unrealized depreciation on unfunded loan commitments 259
Payable to affiliates
Management fee 20,094
Transfer agent and dividend disbursing costs 27,275
Administrative services fee 503
Payable for independent trustees' compensation 365,986
Accrued expenses and other liabilities 203,403
---------------------------------------------------------------------------------------------------------
Total liabilities $6,159,968
---------------------------------------------------------------------------------------------------------
Net assets $528,057,743
---------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
---------------------------------------------------------------------------------------------------------
Paid-in capital $607,349,706
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies 2,032,982
Accumulated net realized gain (loss) on investments and
foreign currency transactions (80,574,977)
Accumulated distributions in excess of net investment income (749,968)
---------------------------------------------------------------------------------------------------------
Net assets $528,057,743
---------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding (90,140,454
issued, less 11,063,002 treasury shares) 79,077,452
---------------------------------------------------------------------------------------------------------
Net asset value per share (net assets of $528,057,743 / 79,077,452
shares of beneficial interest outstanding) $6.68
---------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF OPERATIONS
Year ended 10/31/07
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 $32,412,883
Dividends 11,157
Foreign taxes withheld (625)
-----------------------------------------------------------------------------------------------------
Total investment income $32,423,415
-----------------------------------------------------------------------------------------------------
Expenses
Management fee $3,633,062
Transfer agent and dividend disbursing costs 196,207
Administrative services fee 99,086
Independent trustees' compensation 89,045
Custodian fee 156,710
Shareholder communications 95,248
Auditing fees 47,993
Legal fees 11,023
Miscellaneous 116,087
-----------------------------------------------------------------------------------------------------
Total expenses $4,444,461
-----------------------------------------------------------------------------------------------------
Fees paid indirectly (24,415)
Reduction of expenses by investment adviser (2,610)
-----------------------------------------------------------------------------------------------------
Net expenses $4,417,436
-----------------------------------------------------------------------------------------------------
Net investment income $28,005,979
-----------------------------------------------------------------------------------------------------
Statement of Operations - continued
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
-----------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $2,214,483
Futures contracts 325,262
Swap transactions 131,392
Foreign currency transactions (4,015,532)
-----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $(1,344,395)
-----------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $(2,174,684)
Futures contracts (200,788)
Swap transactions (47,827)
Translation of assets and liabilities in foreign
currencies (1,016,125)
Unfunded loan commitments (259)
-----------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments
and foreign currency translation $(3,439,683)
-----------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $(4,784,078)
-----------------------------------------------------------------------------------------------------
Change in net assets from operations $23,221,901
-----------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any
distributions, and any shareholder transactions.
YEARS ENDED 10/31
--------------------------------------
2007 2006
CHANGE IN NET ASSETS
FROM OPERATIONS
-------------------------------------------------------------------------------------------------------
Net investment income $28,005,979 $26,286,395
Net realized gain (loss) on investments and foreign
currency transactions (1,344,395) (3,395,601)
Net unrealized gain (loss) on investments and foreign
currency translation (3,439,683) 6,054,449
-------------------------------------------------------------------------------------------------------
Change in net assets from operations $23,221,901 $28,945,243
-------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
-------------------------------------------------------------------------------------------------------
From net investment income $(28,309,676) $(29,991,840)
-------------------------------------------------------------------------------------------------------
Change in net assets from trust share transactions $-- $(11,453,243)
-------------------------------------------------------------------------------------------------------
Total change in net assets $(5,087,775) $(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 $749,968 and
$743,698, respectively) $528,057,743 $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 past 5 years.
Certain information reflects financial results for a single trust share. The total returns in the table represent the rate
by which an investor would have earned (or lost) on an investment in the trust share class (assuming reinvestment of all
distributions) held for the entire period.
YEARS ENDED 10/31
-----------------------------------------------------------------------------
2007 2006 2005 2004 2003
Net asset value, beginning of period $6.74 $6.74 $6.94 $6.76 $6.32
-----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
-----------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.35 $0.33 $0.34 $0.38 $0.38
Net realized and unrealized gain (loss)
on investments and foreign currency (0.05) 0.03 (0.16) 0.17 0.46
-----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.30 $0.36 $0.18 $0.55 $0.84
-----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
-----------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.36) $(0.38) $(0.39) $(0.39) $(0.40)
-----------------------------------------------------------------------------------------------------------------------------
Net increase from repurchase of
capital shares $-- $0.02 $0.01 $0.02 $0.00(w)
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.68 $6.74 $6.74 $6.94 $6.76
-----------------------------------------------------------------------------------------------------------------------------
Per share market value, end of period $5.84 $6.00 $6.15 $6.30 $6.41
-----------------------------------------------------------------------------------------------------------------------------
Total return at market value (%) 3.30 3.82 3.78 4.62 20.11
-----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
-----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 0.84 0.88 0.93 0.94 0.94
Expenses after expense reductions (f) 0.84 0.88 0.93 0.94 N/A
Net investment income 5.29 4.93 4.97 5.51 5.76
Portfolio turnover 61 70 67 59 126
Net assets at end of period (000 Omitted) $528,058 $533,146 $545,645 $569,091 $563,760
-----------------------------------------------------------------------------------------------------------------------------
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(w) Per share amount was less than $0.01.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
(1) BUSINESS AND ORGANIZATION
MFS Multimarket Income Trust (the trust or fund) is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended, as a closed-end management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The trust
can invest in foreign securities, including securities of emerging market
issuers. Investments in foreign securities are vulnerable to the effects of
changes in the relative values of the local currency and the U.S. dollar and to
the effects of changes in each country's legal, political, and economic
environment. The markets of emerging markets countries are generally more
volatile than the markets of developed countries with more mature economies.
All of the risks of investing in foreign securities previously described are
heightened when investing in emerging markets countries.
INVESTMENT VALUATIONS - 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.
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.
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.
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 credit default swaps 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 October 31,
2007, the portfolio had unfunded loan commitments of $33,058, 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.
FEES PAID INDIRECTLY - The trust's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by the
trust. This amount, for the year ended October 31, 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, straddle loss deferrals, foreign currency transactions and
derivative transactions.
The tax character of distributions declared to shareholders is as follows:
10/31/07 10/31/06
Ordinary income (including any
short-term capital gains) $28,309,676 $29,991,840
The federal tax cost and the tax basis components of distributable earnings
were as follows:
AS OF 10/31/07
Cost of investments $523,325,875
--------------------------------------------------------
Gross appreciation $2,449,177
Gross depreciation (1,153,377)
--------------------------------------------------------
Net unrealized appreciation (depreciation) $1,295,800
Undistributed ordinary income 2,737,421
Capital loss carryforwards (77,703,309)
Other temporary differences (5,621,875)
As of October 31, 2007, 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)
10/31/15 (2,289,608)
-------------------------------------------------
$(77,703,309)
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 year ended October 31, 2007 was equivalent to an annual effective rate of
0.69% 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 year ended October 31, 2007, these fees paid to
MFSC amounted to $74,213. MFSC also receives payment from the trust for
out-of-pocket expenses paid by MFSC on behalf of the trust. For the year ended
October 31, 2007, these costs amounted to $11,854.
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 average daily net assets. The trust's annual fixed
amount is $17,500. The administrative services fee incurred for the year ended
October 31, 2007 was equivalent to an annual effective rate of 0.0187% 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 $8,165. The trust also has an
unfunded retirement benefit deferral plan for certain independent trustees
which resulted in an expense of $7,625. Both amounts are included in
independent trustees' compensation for the year ended October 31, 2007. The
liability for deferred retirement benefits payable to certain independent
trustees under both plans amounted to $278,596 at October 31, 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 certain 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 $77,969
of deferred trustees' compensation.
OTHER - This trust and certain other MFS funds (the funds) have entered into a
services agreement (the Agreement) which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an
Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an
officer of the funds and the sole member of Tarantino LLC. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement. For the year ended October 31, 2007, the fee paid to Tarantino LLC
was $3,362. MFS has agreed to reimburse the trust for a portion of the payments
made by the funds to Tarantino LLC in the amount of $2,610, 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 $39,247,309 $58,976,935
-------------------------------------------------------------------------------
Investments (non-U.S. government securities) $257,759,302 $268,830,595
-------------------------------------------------------------------------------
(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 year ended October 31, 2007, the trust did
not repurchase any shares. The trust repurchased 1,918,600 shares of beneficial
interest during the year ended October 31, 2006 at an average price per share
of $5.97 and a weighted average discount of 10.48% per share. Transactions in
trust shares were as follows:
YEAR ENDED YEAR ENDED
10/31/07 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%. In addition, a commitment fee, based on the average daily,
unused portion of the committed line of credit, is allocated among the
participating funds at the end of each calendar quarter. For the year ended
October 31, 2007, the trust's commitment fee and interest expense were $2,703
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 MFS Multimarket Income Trust:
We have audited the accompanying statement of assets and liabilities of MFS
Multimarket Income Trust (the Fund), including the portfolio of investments, as
of October 31, 2007, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Fund's internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of October 31, 2007, by correspondence with
the Fund's custodian and brokers or by other appropriate auditing procedures
where replies from brokers were not received. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Multimarket Income Trust at October 31, 2007, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and its financial highlights for each of the five years
in the period then ended, in conformity with U.S. generally accepted accounting
principles.
ERNST & YOUNG LLP
Boston, Massachusetts
December 14, 2007
RESULTS OF SHAREHOLDER MEETING
10/31/07 (unaudited)
At the annual meeting of shareholders of MFS Multimarket Income Trust, which
was held on October 4, 2007, the following actions were taken:
ITEM 1. To elect the following individuals as Trustees:
NUMBER OF SHARES
----------------
NOMINEE AFFIRMATIVE WITHHOLD AUTHORITY
------- ----------- ------------------
Robert J. Manning 67,174,917 5,147,719
Lawrence Cohn, M.D. 67,182,655 5,139,982
Lawrence Perera 67,219,179 5,103,457
Laurie Thomsen 67,240,745 5,081,891
TRUSTEES AND OFFICERS --
IDENTIFICATION AND BACKGROUND
The Trustees and officers of the Trust, as of December 1, 2007, are listed below, together with
their principal occupations during the past five years. (Their titles may have varied during that
period.) The address of each Trustee and officer is 500 Boylston Street, Boston, Massachusetts
02116.
PRINCIPAL OCCUPATIONS
DURING
POSITION(s) HELD TRUSTEE/OFFICER THE PAST FIVE YEARS &
NAME, DATE OF BIRTH WITH FUND SINCE(h) OTHER DIRECTORSHIPS(j)
------------------- ---------------- --------------- ------------------------
INTERESTED TRUSTEES
Robert J. Manning(k) Trustee February 2004 Massachusetts Financial
(born 10/20/63) Services Company, Chief
Executive Officer,
President, Chief
Investment Officer and
Director
Robert C. Pozen(k) Trustee February 2004 Massachusetts Financial
(born 8/08/46) Services Company, Chairman
(since February 2004); MIT
Sloan School (education),
Senior Lecturer (since
2006); Secretary of
Economic Affairs, The
Commonwealth of
Massachusetts (January
2002 to December 2002);
Fidelity Investments, Vice
Chairman (June 2000 to
December 2001); Fidelity
Management & Research
Company (investment
adviser), President (March
1997 to July 2001); Bell
Canada Enterprises
(telecommunications),
Director; Medtronic, Inc.
(medical technology),
Director; Telesat
(satellite
communications), Director
INDEPENDENT TRUSTEES
J. Atwood Ives Trustee and Chair of February 1992 Private investor; Eastern
(born 5/01/36) Trustees Enterprises (diversified
services company),
Chairman, Trustee and
Chief Executive Officer
(until November 2000)
Robert E. Butler(n) Trustee January 2006 Consultant - regulatory
(born 11/29/41) and compliance matters
(since July 2002);
PricewaterhouseCoopers LLP
(professional services
firm), Partner (until
2002)
Lawrence H. Cohn, M.D. Trustee August 1993 Brigham and Women's
(born 3/11/37) Hospital, Chief of Cardiac
Surgery (2005); Harvard
Medical School, Professor
of Cardiac Surgery;
Physician Director of
Medical Device Technology
for Partners HealthCare
David H. Gunning Trustee January 2004 Retired; Cleveland-Cliffs
(born 5/30/42) Inc. (mining products and
service provider), Vice
Chairman/Director (until
May 2007); Portman Limited
(mining), Director (since
2005); Encinitos Ventures
(private investment
company), Principal (1997
to April 2001); Lincoln
Electric Holdings, Inc.
(welding equipment
manufacturer), Director
William R. Gutow Trustee December 1993 Private investor and real
(born 9/27/41) estate consultant; Capitol
Entertainment Management
Company (video franchise),
Vice Chairman; Atlantic
Coast Tan (tanning
salons), Vice Chairman
(since 2002)
Michael Hegarty Trustee December 2004 Retired; AXA Financial
(born 12/21/44) (financial services and
insurance), Vice Chairman
and Chief Operating
Officer (until May 2001);
The Equitable Life
Assurance Society
(insurance), President and
Chief
Operating Officer (until
May 2001)
Lawrence T. Perera Trustee July 1981 Hemenway & Barnes
(born 6/23/35) (attorneys), Partner
J. Dale Sherratt Trustee August 1993 Insight Resources, Inc.
(born 9/23/38) (acquisition planning
specialists), President;
Wellfleet Investments
(investor in health care
companies), Managing
General Partner (since
1993); Cambridge
Nutraceuticals
(professional nutritional
products), Chief Executive
Officer (until May 2001)
Laurie J. Thomsen Trustee March 2005 New Profit, Inc. (venture
(born 8/05/57) philanthropy), Partner
(since 2006); Private
investor; Prism Venture
Partners (venture
capital), Co-founder and
General Partner (until
June 2004); The Travelers
Companies (commercial
property liability
insurance), Director
Robert W. Uek Trustee January 2006 Retired (since 1999);
(born 5/18/41) PricewaterhouseCoopers LLP
(professional services
firm), Partner (until
1999); Consultant to
investment company
industry (since 2000); TT
International Funds
(mutual fund complex),
Trustee (2000 until 2005);
Hillview Investment Trust
II Funds (mutual fund
complex), Trustee (2000
until 2005)
OFFICERS
Maria F. Dwyer(k) President November 2005 Massachusetts Financial
(born 12/01/58) Services Company,
Executive Vice President
and Chief Regulatory
Officer (since March 2004)
Chief Compliance Officer
(since December 2006);
Fidelity Management &
Research Company, Vice
President (prior to March
2004); Fidelity Group of
Funds, President and
Treasurer (prior to March
2004)
Tracy Atkinson(k) Treasurer September 2005 Massachusetts Financial
(born 12/30/64) Services Company, Senior
Vice President (since
September 2004);
PricewaterhouseCoopers
LLP, Partner (prior to
September 2004)
Christopher R. Bohane(k) Assistant Secretary July 2005 Massachusetts Financial
(born 1/18/74) and Assistant Clerk Services Company, Vice
President and Senior
Counsel (since April
2003); Kirkpatrick &
Lockhart LLP (law firm),
Associate (prior to April
2003)
Ethan D. Corey(k) Assistant Secretary July 2005 Massachusetts Financial
(born 11/21/63) and Assistant Clerk Services Company, Special
Counsel (since December
2004); Dechert LLP (law
firm), Counsel (prior to
December 2004)
David L. DiLorenzo(k) Assistant Treasurer July 2005 Massachusetts Financial
(born 8/10/68) Services Company, Vice
President (since June
2005); JP Morgan Investor
Services, Vice President
(prior to June 2005)
Timothy M. Fagan(k) Assistant Secretary September 2005 Massachusetts Financial
(born 7/10/68) and Assistant Clerk Services Company, Vice
President and Senior
Counsel (since September
2005); John Hancock
Advisers, LLC, Vice
President and Chief
Compliance Officer
(September 2004 to August
2005), Senior Attorney
(prior to September 2004);
John Hancock Group of
Funds, Vice President and
Chief Compliance Officer
(September 2004 to
December 2004)
Mark D. Fischer(k) Assistant Treasurer July 2005 Massachusetts Financial
(born 10/27/70) Services Company, Vice
President (since May
2005); JP Morgan
Investment
Management Company, Vice
President (prior to May
2005)
Brian E. Langenfeld(k) Assistant Secretary June 2006 Massachusetts Financial
(born 3/07/73) and Assistant Clerk Services Company,
Assistant Vice President
and Counsel (since May
2006); John Hancock
Advisers, LLC, Assistant
Vice President and Counsel
(May 2005 to April 2006);
John Hancock Advisers,
LLC, Attorney and
Assistant Secretary (prior
to May 2005)
Ellen Moynihan(k) Assistant Treasurer April 1997 Massachusetts Financial
(born 11/13/57) Services Company, Senior
Vice President
Susan S. Newton(k) Assistant Secretary May 2005 Massachusetts Financial
(born 3/07/50) and Assistant Clerk Services Company, Senior
Vice President and
Associate General Counsel
(since April 2005); John
Hancock Advisers, LLC,
Senior Vice President,
Secretary and Chief Legal
Officer (prior to April
2005); John Hancock Group
of Funds, Senior Vice
President, Secretary and
Chief Legal Officer (prior
to April 2005)
Susan A. Pereira(k) Assistant Secretary July 2005 Massachusetts Financial
(born 11/05/70) and Assistant Clerk Services Company, Vice
President and Senior
Counsel (since June 2004);
Bingham McCutchen LLP (law
firm), Associate (prior to
June 2004)
Mark N. Polebaum(k) Secretary and Clerk January 2006 Massachusetts Financial
(born 5/01/52) Services Company,
Executive Vice President,
General Counsel and
Secretary (since January
2006); Wilmer Cutler
Pickering Hale and Dorr
LLP (law firm), Partner
(prior to January 2006)
Frank L. Tarantino Independent Chief June 2004 Tarantino LLC (provider of
(born 3/07/44) Compliance Officer compliance services),
Principal (since June
2004); CRA Business
Strategies Group
(consulting services),
Executive Vice President
(April 2003 to June 2004);
David L. Babson & Co.
(investment adviser),
Managing Director, Chief
Administrative Officer and
Director (prior to March
2003)
James O. Yost(k) Assistant Treasurer September 1990 Massachusetts Financial
(born 6/12/60) Services Company, Senior
Vice President
------------
(h) Date first appointed to serve as Trustee/officer of an MFS fund. Each Trustee has served
continuously since appointment unless indicated otherwise.
(j) Directorships or trusteeships of companies required to report to the Securities and Exchange
Commission (i.e., "public companies").
(k) "Interested person" of the Trust within the meaning of the Investment Company Act of 1940
(referred to as the 1940 Act), which is the principal federal law governing investment companies
like the fund, as a result of position with MFS. The address of MFS is 500 Boylston Street,
Boston, Massachusetts 02116.
(n) In 2004 and 2005, Mr. Butler provided consulting services to the independent compliance
consultant retained by MFS pursuant to its settlement with the SEC concerning market timing and
related matters. The terms of that settlement required that compensation and expenses related to
the independent compliance consultant be borne exclusively by MFS and, therefore, MFS paid Mr.
Butler for the services he rendered to the independent compliance consultant. In 2004 and 2005,
MFS paid Mr. Butler a total of $351,119.29.
The Trust holds annual shareholder meetings for the purpose of electing Trustees, and Trustees are
elected for fixed terms. The Board of Trustees is currently divided into three classes, each having
a term of three years.
Each year the term of one class expires. Each Trustee's term of office expires on the date of the
third annual meeting following the election to office of the Trustee's class. Each Trustee and
officer will serve until next elected or his or her earlier death, resignation, retirement or
removal.
Messrs. Butler, Gutow, Sherratt and Uek and Ms. Thomsen are members of the Trust's Audit Committee.
Each of the Trust's Trustees and officers holds comparable positions with certain other funds of
which MFS or a subsidiary is the investment adviser or distributor, and, in the case of the
officers, with certain affiliates of MFS. As of January 1, 2007, the Trustees served as board
members of 97 funds within the MFS Family of Funds.
The Statement of Additional Information for the Trust and further information about the Trustees are
available without charge upon request by calling 1-800-225-2606.
On October 22, 2007, Maria F. Dwyer, as Chief Executive Officer of the Trust, certified to the New
York Stock Exchange that as of the date of her certification she was not aware of any violation by
the Trust of the corporate governance listing standards of the New York Stock Exchange.
The Trust filed with the Securities and Exchange Commission the certifications of its principal
executive officer and principal financial officer under Section 302 of the Sarbanes-Oxley Act of
2003 as an exhibit to the Trust's Form N-CSR for the period covered by this report.
---------------------------------------------------------------------------------------------------
INVESTMENT ADVISER CUSTODIAN
Massachusetts Financial Services Company State Street Bank and Trust Company
500 Boylston Street, Boston, MA 225 Franklin Street, Boston, MA 02110
02116-3741
INDEPENDENT REGISTERED PUBLIC
PORTFOLIO MANAGERS ACCOUNTING FIRM
John Addeo Ernst & Young LLP
James Calmas 200 Clarendon Street, Boston, MA 02116
David Cole
Richard Hawkins
Matthew Ryan
BOARD REVIEW OF INVESTMENT
ADVISORY AGREEMENT
The Investment Company Act of 1940 requires that both the full Board of
Trustees and a majority of the non-interested ("independent") Trustees, voting
separately, annually approve the continuation of the Fund's investment advisory
agreement with MFS. The Trustees consider matters bearing on the Fund and its
advisory arrangements at their meetings throughout the year, including a review
of performance data at each regular meeting. In addition, the independent
Trustees met several times over the course of three months beginning in May and
ending in July, 2007 ("contract review meetings") for the specific purpose of
considering whether to approve the continuation of the investment advisory
agreement for the Fund and the other investment companies that the Board
oversees (the "MFS Funds"). The independent Trustees were assisted in their
evaluation of the Fund's investment advisory agreement by independent legal
counsel, from whom they received separate legal advice and with whom they met
separately from MFS during various contract review meetings. The independent
Trustees were also assisted in this process by the MFS Funds' Independent Chief
Compliance Officer, a full-time senior officer appointed by and reporting to
the independent Trustees.
In connection with their deliberations regarding the continuation of the
investment advisory agreement, the Trustees, including the independent
Trustees, considered such information and factors as they believed, in light of
the legal advice furnished to them and their own business judgment, to be
relevant. The investment advisory agreement for the Fund was considered
separately, although the Trustees also took into account the common interests
of all MFS Funds in their review. As described below, the Trustees considered
the nature, quality, and extent of the various investment advisory,
administrative, and shareholder services performed by MFS under the existing
investment advisory agreement and other arrangements with the Fund.
In connection with their contract review meetings, the Trustees received and
relied upon materials that included, among other items: (i) information
provided by Lipper Inc. on the investment performance (based on net asset
value) of the Fund for various time periods ended December 31, 2006 and the
investment performance (based on net asset value) of a group of funds with
substantially similar investment classifications/objectives (the "Lipper
performance universe"), as well as the investment performance (based on net
asset value) of a group of funds identified by objective criteria suggested by
MFS ("MFS peer funds"), (ii) information provided by Lipper Inc. on the Fund's
advisory fees and other expenses and the advisory fees and other expenses of
comparable funds identified by Lipper (the "Lipper expense group"), as well as
the advisory fees and other expenses of MFS peer funds, (iii) information
provided by MFS on the advisory fees of comparable portfolios of other clients
of MFS, including institutional separate accounts and other clients, (iv)
information as to whether and to what extent applicable expense waivers,
reimbursements or fee "breakpoints" are observed for the Fund, (v) information
regarding MFS" financial results and financial condition, including MFS" and
certain of its affiliates' estimated profitability from services performed for
the Fund and the MFS Funds as a whole, (vi) MFS" views regarding the outlook
for the mutual fund industry and the strategic business plans of MFS, (vii)
descriptions of various functions performed by MFS for the Funds, such as
compliance monitoring and portfolio trading practices, and (viii) information
regarding the overall organization of MFS, including information about MFS'
senior management and other personnel providing investment advisory,
administrative and other services to the Fund and the other MFS Funds. The
comparative performance, fee and expense information prepared and provided by
Lipper Inc. was not independently verified and the independent Trustees did not
independently verify any information provided to them by MFS.
The Trustees' conclusion as to the continuation of the investment advisory
agreement was based on a comprehensive consideration of all information
provided to the Trustees and not the result of any single factor. Some of the
factors that figured particularly in the Trustees' deliberations are described
below, although individual Trustees may have evaluated the information
presented differently from one another, giving different weights to various
factors. It is also important to recognize that the fee arrangements for the
Fund and other MFS Funds are the result of years of review and discussion
between the independent Trustees and MFS, that certain aspects of such
arrangements may receive greater scrutiny in some years than in others, and
that the Trustees' conclusions may be based, in part, on their consideration of
these same arrangements during the course of the year and in prior years.
Based on information provided by Lipper Inc. and MFS, the Trustees reviewed the
Fund's total return investment performance as well as the performance of peer
groups of funds over various time periods. The Trustees placed particular
emphasis on the total return performance of the Fund's common shares in
comparison to the performance of funds in its Lipper performance universe over
the three-year period ended December 31, 2006, which the Trustees believed was
a long enough period to reflect differing market conditions. The total return
performance of the Fund's common shares ranked 2nd out of a total of 4 funds in
the Lipper performance universe for this three-year period (a ranking of first
place out of the total number of funds in the performance universe indicating
the best performer and a ranking of last place out of the total number of funds
in the performance universe indicating the worst performer). The total return
performance of the Fund's common shares ranked 2nd out of a total of 4 funds
for each of the one- and five-year periods ended December 31, 2006. Given the
size of the Lipper performance universe and information previously provided by
MFS regarding differences between the Fund and other funds in its Lipper
performance universe, the Trustees also reviewed the Fund's performance in
comparison to a custom benchmark developed by MFS. The Fund under-performed its
custom benchmark for the one-year period ended December 31, 2006 (6.01% total
return for the Fund versus 6.33% total return for the benchmark), and
out-performed its custom benchmark for each of the three-year and five-year
periods ended December 31, 2006 (three-year: 5.74% total return for the Fund
versus 5.59% total return for the benchmark; five-year: 7.50% total return for
the Fund versus 7.05% total return for the benchmark). Because of the passage
of time, these performance results are likely to differ from the performance
results for more recent periods, including those shown elsewhere in this
report.
In the course of their deliberations, the Trustees took into account
information provided by MFS in connection with the contract review meetings, as
well as during investment review meetings conducted with portfolio management
personnel during the course of the year regarding the Fund's performance. After
reviewing these and related factors, the Trustees concluded, within the context
of their overall conclusions regarding the investment advisory agreement, that
they were satisfied with MFS' responses and efforts relating to investment
performance.
In assessing the reasonableness of the Fund's advisory fee, the Trustees
considered, among other information, the Fund's advisory fee and the total
expense ratio of the Fund's common shares as a percentage of average daily net
assets and the advisory fee and total expense ratios of peer groups of funds
based on information provided by Lipper Inc. and MFS. The Trustees considered
that, according to the Lipper data, the Fund's effective advisory fee rate was
approximately at the Lipper expense group median, and the Fund's total expense
ratio was lower than the Lipper expense group median.
The Trustees also considered the advisory fees charged by MFS to institutional
accounts. In comparing these fees, the Trustees considered information provided
by MFS as to the generally broader scope of services provided by MFS to the
Fund in comparison to institutional accounts and the impact on MFS and expenses
associated with the more extensive regulatory regime to which the Fund is
subject in comparison to institutional accounts.
The Trustees considered that, as a closed-end fund, the Fund is unlikely to
experience meaningful asset growth. As a result, the Trustees did not view the
potential for realization of economies of scale as the Fund's assets grow to be
a material factor in their deliberations. The Trustees noted that they would
consider economies of scale in the future in the event the Fund experiences
significant asset growth, such as through an offering of preferred shares
(which is not currently contemplated) or a material increase in the market
value of the Fund's portfolio securities.
The Trustees also considered information prepared by MFS relating to MFS' costs
and profits with respect to the Fund, the MFS Funds considered as a group, and
other investment companies and accounts advised by MFS, as well as MFS'
methodologies used to determine and allocate its costs to the MFS Funds, the
Fund and other accounts and products for purposes of estimating profitability.
After reviewing these and other factors described herein, the Trustees
concluded, within the context of their overall conclusions regarding the
investment advisory agreement, that the advisory fees charged to the Fund
represent reasonable compensation in light of the services being provided by
MFS to the Fund.
In addition, the Trustees considered MFS' resources and related efforts to
continue to retain, attract and motivate capable personnel to serve the Fund.
The Trustees also considered current and developing conditions in the financial
services industry, including the entry into the industry of large and
well-capitalized companies which are spending, and appear to be prepared to
continue to spend, substantial sums to engage personnel and to provide services
to competing investment companies. In this regard, the Trustees also considered
the financial resources of MFS and its ultimate parent, Sun Life Financial Inc.
The Trustees also considered the advantages and possible disadvantages to the
Fund of having an adviser that also serves other investment companies as well
as other accounts.
The Trustees also considered the nature, quality, cost, and extent of
administrative services provided to the Fund by MFS under agreements other than
the investment advisory agreement. The Trustees also considered the nature,
extent and quality of certain other services MFS performs or arranges for on
the Fund's behalf, which may include securities lending programs, directed
expense payment programs, class action recovery programs, and MFS' interaction
with third-party service providers, principally custodians and sub-custodians.
The Trustees concluded that the various non-advisory services provided by MFS
and its affiliates on behalf of the Funds were satisfactory.
The Trustees also considered benefits to MFS from the use of the Fund's
portfolio brokerage commissions, if applicable, to pay for investment research
(excluding third-party research, for which MFS pays directly) and various other
factors. Additionally, the Trustees considered so-called "fall-out benefits" to
MFS such as reputational value derived from serving as investment manager to
the Fund.
Based on their evaluation of factors that they deemed to be material, including
those factors described above, the Board of Trustees, including a majority of
the independent Trustees, concluded that the Fund's investment advisory
agreement with MFS should be continued for an additional one-year period,
commencing August 1, 2007.
A discussion regarding the Board's most recent review and renewal of the Fund's
investment advisory agreement is available by clicking on the fund's name under
"Select a fund" on the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds' proxy voting policies and procedures is
available without charge, upon request, by calling 1-800-225-2606, by visiting
the Proxy Voting section of mfs.com or by visiting the SEC's Web site at
http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is
available without charge by visiting the Proxy Voting section of mfs.com or by
visiting the SEC's Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The fund 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 fund'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 1-800-SEC-0330. 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.
FEDERAL TAX INFORMATION (unaudited)
The trust will notify shareholders of amounts for use in preparing 2007 income
tax forms in January 2008.
MFS(R) PRIVACY NOTICE
Privacy is a concern for every investor today. At MFS Investment Management(R)
and the MFS funds, we take this concern very seriously. We want you to
understand our policies about the investment products and services that we
offer, and how we protect the nonpublic personal information of investors who
have a direct relationship with us and our wholly owned subsidiaries.
Throughout our business relationship, you provide us with personal
information. We maintain information and records about you, your investments,
and the services you use. Examples of the nonpublic personal information we
maintain include
o data from investment applications and other forms
o share balances and transactional history with us, our affiliates, or others
o facts from a consumer reporting agency
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. We may share nonpublic
personal information with third parties or certain of our affiliates in
connection with servicing your account or processing your transactions. We may
share information with companies or financial institutions that perform
marketing services on our behalf or with other financial institutions with
which we have joint marketing arrangements, subject to any legal requirements.
Authorization to access your nonpublic personal information is limited to
appropriate personnel who provide products, services, or information to you.
We maintain physical, electronic, and procedural safeguards to help protect
the personal information we collect about you.
If you have any questions about the MFS privacy policy, please call
1-800-225-2606 any business day between 8 a.m. and 8 p.m. Eastern time.
Note: If you own MFS products or receive MFS services in the name of a third
party such as a bank or broker-dealer, their privacy policy may apply to you
instead of ours.
CONTACT INFORMATION AND NUMBER OF SHAREHOLDERS
INVESTOR INFORMATION
Transfer Agent, Registrar and Dividend Disbursing Agent
Call 1-800-637-2304 any business day from 9 a.m. to 5 p.m. Eastern
time
Write to: Computershare Trust Company, N.A.
P.O. Box 43078
Providence, RI 02940-3078
Effective December 18, 2006, Computershare Trust Company, N.A. became the
Transfer Agent and Registrar and Computershare Shareholder Services, Inc.
became the Dividend Disbursing Agent, succeeding MFS Service Center, Inc.
NUMBER OF SHAREHOLDERS
As of October 31, 2007, our records indicate that there are 6,549 registered
shareholders and approximately 34,005 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 adopted a Code of Ethics pursuant to Section 406 of the
Sarbanes-Oxley Act and as defined in Form N-CSR that applies to the
Registrant's principal executive officer and principal financial and accounting
officer. The Registrant has not amended any provision in its Code of Ethics
(the "Code") that relates to an element of the Code's definitions enumerated in
paragraph (b) of Item 2 of this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Messrs. Robert E. Butler and Robert W. Uek and Ms. Laurie J. Thomsen, members
of the Audit Committee, have been determined by the Board of Trustees in their
reasonable business judgment to meet the definition of "audit committee
financial expert" as such term is defined in Form N-CSR. In addition, Messrs.
Butler, and Uek and Ms. Thomsen are "independent" members of the Audit
Committee (as such term has been defined by the Securities and Exchange
Commission in regulations implementing Section 407 of the Sarbanes-Oxley Act of
2002). The Securities and Exchange Commission has stated that the designation
of a person as an audit committee financial expert pursuant to this Item 3 on
the Form N-CSR does not impose on such a person any duties, obligations or
liability that are greater than the duties, obligations or liability imposed on
such person as a member of the Audit Committee and the Board of Trustees in the
absence of such designation or identification.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
ITEMS 4(a) THROUGH 4(d) AND 4(g):
The Board of Trustees has appointed Ernst & Young LLP ("E&Y") to serve as
independent accountants to the Registrant (hereinafter the "Registrant" or the
"Fund"). The tables below set forth the audit fees billed to the Fund as well
as fees for non-audit services provided to the Fund and/or to the Fund's
investment adviser, Massachusetts Financial Services Company ("MFS"), and to
various entities either controlling, controlled by, or under common control
with MFS that provide ongoing services to the Fund ("MFS Related Entities").
For the fiscal years ended October 31, 2007 and 2006, audit fees billed to the
Fund by E&Y were as follows:
Audit Fees
FEES BILLED BY E&Y: 2007 2006
---- ----
MFS Multimarket Income Trust 45,135 41,610
For the fiscal years ended October 31, 2007 and 2006, fees billed by E&Y for
audit-related, tax and other services provided to the Fund and for
audit-related, tax and other services provided to MFS and MFS Related Entities
were as follows:
Audit-Related Fees(1) Tax Fees(2) All Other Fees(3)
FEES BILLED BY E&Y: 2007 2006 2007 2006 2007 2006
---- ---- ---- ---- ---- ----
To MFS Multimarket 10,000 15,000 9,674 9,382 0 144
Income Trust
To MFS and MFS Related 0 0 0 15,500 0 0
Entities of MFS
Multimarket Income
Trust*
AGGREGATE FEES FOR NON-AUDIT
SERVICES:
2007 2006
---- ----
To MFS Multimarket Income 220,690 114,395
Trust, MFS and MFS Related
Entities#
* This amount reflects the fees billed to MFS and MFS Related Entities for non-audit services relating directly to
the operations and financial reporting of the Fund (portions of which services also related to the operations
and financial reporting of other funds within the MFS Funds complex).
# This amount reflects the aggregate fees billed by E&Y for non-audit services rendered to the Fund and for
non-audit services rendered to MFS and the MFS Related Entities.
(1) The fees included under "Audit-Related Fees" are fees related to assurance and related services that are
reasonably related to the performance of the audit or review of financial statements, but not reported under
"Audit Fees," including accounting consultations, agreed-upon procedure reports, attestation reports, comfort
letters and internal control reviews.
(2) The fees included under "Tax Fees" are fees associated with tax compliance, tax advice and tax planning,
including services relating to the filing or amendment of federal, state or local income tax returns, regulated
investment company qualification reviews and tax distribution and analysis.
(3) The fees included under "All Other Fees" are fees for products and services provided by E&Y other than those
reported under "Audit Fees," "Audit-Related Fees" and "Tax Fees," including fees for the subscription to tax
treatise and for services related to analysis of fund administrative expenses, compliance program and records
management projects.
ITEM 4(e)(1):
Set forth below are the policies and procedures established by the Audit
Committee of the Board of Trustees relating to the pre-approval of audit and
non-audit related services: To the extent required by applicable law,
pre-approval by the Audit Committee of the Board is needed for all audit and
permissible non-audit services rendered to the Fund and all permissible
non-audit services rendered to MFS or MFS Related Entities if the services
relate directly to the operations and financial reporting of the Registrant.
Pre-approval is currently on an engagement-by-engagement basis. In the event
pre-approval of such services is necessary between regular meetings of the
Audit Committee and it is not practical to wait to seek pre-approval at the
next regular meeting of the Audit Committee, pre-approval of such services may
be referred to the Chair of the Audit Committee for approval; provided that the
Chair may not pre-approve any individual engagement for such services exceeding
$50,000 or multiple engagements for such services in the aggregate exceeding
$100,000 between such regular meetings of the Audit Committee. Any engagement
pre-approved by the Chair between regular meetings of the Audit Committee shall
be presented for ratification by the entire Audit Committee at its next
regularly scheduled meeting.
ITEM 4(e)(2):
None, or 0%, of the services relating to the Audit-Related Fees, Tax Fees and
All Other Fees paid by the Fund and MFS and MFS Related Entities relating
directly to the operations and financial reporting of the Registrant disclosed
above were approved by the audit committee pursuant to paragraphs (c)(7)(i)(C)
of Rule 2-01 of Regulation S-X (which permits audit committee approval after
the start of the engagement with respect to services other than audit, review
or attest services, if certain conditions are satisfied).
ITEM 4(f): Not applicable.
ITEM 4(h): The Registrant's Audit Committee has considered whether the
provision by a Registrant's independent registered public accounting firm of
non-audit services to MFS and MFS Related Entities that were not pre-approved
by the Committee (because such services were provided prior to the
effectiveness of SEC rules requiring pre-approval or because such services did
not relate directly to the operations and financial reporting of the
Registrant) was compatible with maintaining the independence of the independent
registered public accounting firm as the Registrant's principal auditors.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The Registrant has an Audit Committee established in accordance with Section
3(a)(58)(A) of the Securities Exchange Act of 1934. The members of the Audit
Committee are Messrs. Robert E. Butler, William R. Gutow, J. Dale Sherratt and
Robert W. Uek and Ms. Laurie J. Thomsen.
ITEM 6. SCHEDULE OF INVESTMENTS
A schedule of investments of the Registrant is included as part of the report
to shareholders of the Registrant under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The Board of Trustees and the Board of Managers of the investment
companies (the "MFS Funds") advised by Massachusetts Financial Services Company
("MFS") have delegated to MFS the right and obligation to vote proxies for
shares that are owned by the MFS Funds, in accordance with MFS' proxy voting
policies and procedures (the "MFS Proxy Policies"). The MFS Proxy Policies are
set forth below:
MASSACHUSETTS FINANCIAL SERVICES COMPANY
PROXY VOTING POLICIES AND PROCEDURES
MARCH 1, 2007
Massachusetts Financial Services Company, MFS Institutional Advisors,
Inc. and MFS' other investment adviser subsidiaries (collectively, "MFS") have
adopted proxy voting policies and procedures, as set forth below ("MFS Proxy
Voting Policies and Procedures"), with respect to securities owned by the
clients for which MFS serves as investment adviser and has the power to vote
proxies, including the registered investment companies sponsored by MFS, other
than the MFS Union Standard Equity Fund (the "MFS Funds"). References to
"clients" in these policies and procedures include the MFS Funds and other
clients of MFS, such as funds organized offshore, sub-advised funds and
separate account clients, to the extent these clients have delegated to MFS the
responsibility to vote proxies on their behalf under the MFS Proxy Voting
Policies and Procedures.
The MFS Proxy Voting Policies and Procedures include:
A. Voting Guidelines;
B. Administrative Procedures;
C. Monitoring System;
D. Records Retention; and
E. Reports.
A. VOTING GUIDELINES
1. GENERAL POLICY; POTENTIAL CONFLICTS OF INTEREST
MFS' policy is that proxy voting decisions are made in what MFS
believes to be the best long-term economic interests of MFS' clients, and not
in the interests of any other party or in MFS' corporate interests, including
interests such as the distribution of MFS Fund shares, administration of 401(k)
plans, and institutional relationships.
MFS periodically reviews matters that are presented for shareholder
vote by either management or shareholders of public companies. Based on the
overall principle that all votes cast by MFS on behalf of its clients must be
in what MFS believes to be the best long-term economic interests of such
clients, MFS has adopted proxy voting guidelines, set forth below, that govern
how MFS generally will vote on specific matters presented for shareholder vote.
In all cases, MFS will exercise its discretion in voting on these matters in
accordance with this overall principle. In other words, the underlying
guidelines are simply that - guidelines. Proxy items of significance are often
considered on a case-by-case basis, in light of all relevant facts and
circumstances, and in certain cases MFS may vote proxies in a manner different
from these guidelines.
As a general matter, MFS maintains a consistent voting position on
similar proxy proposals with respect to various issuers. In addition, MFS
generally votes consistently on the same matter when securities of an issuer
are held by multiple client accounts. However, MFS recognizes that there are
gradations in certain types of proposals that might result in different voting
positions being taken with respect to different proxy statements. There also
may be situations involving matters presented for shareholder vote that are not
governed by the guidelines. Some items that otherwise would be acceptable will
be voted against the proponent when it is seeking extremely broad flexibility
without offering a valid explanation. MFS reserves the right to override the
guidelines with respect to a particular shareholder vote when such an override
is, in MFS' best judgment, consistent with the overall principle of voting
proxies in the best long-term economic interests of MFS' clients.
From time to time, MFS receives comments on these guidelines as well
as regarding particular voting issues from its clients. These comments are
carefully considered by MFS when it reviews these guidelines each year and
revises them as appropriate.
These policies and procedures are intended to address any potential
material conflicts of interest on the part of MFS or its affiliates that are
likely to arise in connection with the voting of proxies on behalf of MFS'
clients. If such potential material conflicts of interest do arise, MFS will
analyze, document and report on such potential material conflicts of interest
(see Sections B.2 and E below), and shall ultimately vote the relevant proxies
in what MFS believes to be the best long-term economic interests of its
clients. The MFS Proxy Voting Committee is responsible for monitoring and
reporting with respect to such potential material conflicts of interest.
2. MFS' POLICY ON SPECIFIC ISSUES
ELECTION OF DIRECTORS
MFS believes that good governance should be based on a board with at
least a simple majority of directors who are "independent" of management, and
whose key committees (e.g., compensation, nominating, and audit committees) are
comprised entirely of "independent" directors. While MFS generally supports the
board's nominees in uncontested elections, we will withhold our vote for, or
vote against, as applicable, a nominee to a board of a U.S. issuer if, as a
result of such nominee being elected to the board, the board would be comprised
of a majority of members who are not "independent" or, alternatively, the
compensation, nominating or audit committees would include members who are not
"independent."
MFS will also withhold its vote for, or vote against, as applicable, a
nominee to a board if we can determine that he or she failed to attend at least
75% of the board and/or relevant committee meetings in the previous year
without a valid reason stated in the proxy materials. In addition, MFS will
withhold its vote for, or vote against, as applicable, all nominees standing
for re-election to a board if we can determine: (1) since the last annual
meeting of shareholders and without shareholder approval, the board or its
compensation committee has re-priced underwater stock options; or (2) since the
last annual meeting, the board has either implemented a poison pill without
shareholder approval or has not taken responsive action to a majority
shareholder approved resolution recommending that the "poison pill" be
rescinded. Responsive action would include the rescission of the "poison
pill"(without a broad reservation to reinstate the "poison pill" in the event
of a hostile tender offer), or assurance in the proxy materials that the terms
of the "poison pill" would be put to a binding shareholder vote within the next
five to seven years.
MFS will also withhold its vote for, or vote against, as applicable, a
nominee (other than a nominee who serves as the issuer's Chief Executive
Officer) standing for re-election if such nominee participated (as a director
or committee member) in the approval of a senior executive compensation package
MFS deems to be "excessive." In the event that MFS determines that an issuer
has adopted an "excessive" executive compensation package, MFS will withhold
its vote for, or vote against, as applicable, the re-election of the issuer's
Chief Executive Officer as director regardless of whether the Chief Executive
Officer participated in the approval of the package. MFS will determine whether
a senior executive compensation package is excessive on a case by case basis.
Examples of "excessive" executive compensation packages include packages that
contain egregious employment contract terms or pension payouts, backdated stock
options, overly generous hiring bonuses for chief executive officers or
packages which include excessive perks.
MFS evaluates a contested election of directors on a case-by-case
basis considering the long-term financial performance of the company relative
to its industry, management's track record, the qualifications of the nominees
for both slates and an evaluation of what each side is offering shareholders.
MFS votes for reasonably crafted proposals calling for directors to be
elected with an affirmative majority of votes cast and/or the elimination of
the plurality standard for electing directors (including binding resolutions
requesting that the board amend the company's bylaws), provided the proposal
includes a carve-out for a plurality voting standard when there are more
director nominees than board seats (e.g., contested elections) ("Majority Vote
Proposals").
MFS considers voting against Majority Vote Proposals if the company
has adopted, or has proposed to adopt in the proxy statement, formal corporate
governance principles that present a meaningful alternative to the majority
voting standard and provide an adequate response to both new nominees as well
as incumbent nominees who fail to receive a majority of votes cast.
MFS believes that a company's election policy should address the
specific circumstances at that company. MFS considers whether a company's
election policy articulates the following elements to address each director
nominee who fails to receive an affirmative majority of votes cast in an
election:
o Establish guidelines for the process by which the company determines the
status of nominees who fail to receive an affirmative majority of votes cast
and disclose the guidelines in the annual proxy statement;
o Guidelines should include a reasonable timetable for resolution of the
nominee's status and a requirement that the resolution be disclosed together
with the reasons for the resolution;
o Vest management of the process in the company's independent directors, other
than the nominee in question; and
o Outline the range of remedies that the independent directors may consider
concerning the nominee.
CLASSIFIED BOARDS
MFS opposes proposals to classify a board (e.g., a board in which only
one-third of board members are elected each year). MFS supports proposals to
declassify a board.
NON-SALARY COMPENSATION PROGRAMS
MFS votes against stock option programs for officers, employees or
non-employee directors that do not require an investment by the optionee, that
give "free rides" on the stock price, or that permit grants of stock options
with an exercise price below fair market value on the date the options are
granted.
MFS also opposes stock option programs that allow the board or the
compensation committee, without shareholder approval, to reprice underwater
options or to automatically replenish shares (i.e., evergreen plans). MFS will
consider on a case-by-case basis proposals to exchange existing options for
newly issued options (taking into account such factors as whether there is a
reasonable value-for-value exchange).
MFS opposes stock option programs and restricted stock plans that
provide unduly generous compensation for officers, directors or employees, or
could result in excessive dilution to other shareholders. As a general
guideline, MFS votes against restricted stock plans, stock option, non-employee
director, omnibus stock plans and any other stock plan if all such plans for a
particular company involve potential dilution, in the aggregate, of more than
15%. However, MFS may accept a higher percentage (up to 20%) in the case of
startup or small companies which cannot afford to pay large salaries to
executives, or in the case where MFS, based upon the issuer's public
disclosures, believes that the issuer has been responsible with respect to its
recent compensation practices, including the mix of the issuance of restricted
stock and options.
EXPENSING OF STOCK OPTIONS
MFS supports shareholder proposals to expense stock options because we
believe that the expensing of options presents a more accurate picture of the
company's financial results to investors. We also believe that companies are
likely to be more disciplined when granting options if the value of stock
options were treated as an expense item on the company's income statements.
EXECUTIVE COMPENSATION
MFS believes that competitive compensation packages are necessary to
attract, motivate and retain executives. Therefore, except as provided in
paragraph 2 above with respect to "excessive compensation" and the election of
directors, MFS opposes shareholder proposals that seek to set restrictions on
executive compensation. MFS also opposes shareholder requests for disclosure on
executive compensation beyond regulatory requirements because we believe that
current regulatory requirements for disclosure of executive compensation are
appropriate and that additional disclosure is often unwarranted and costly.
Although we support linking executive stock option grants to a company's
performance, MFS opposes shareholder proposals that mandate a link of
performance-based options to a specific industry or peer group stock index. MFS
believes that compensation committees should retain the flexibility to propose
the appropriate index or other criteria by which performance-based options
should be measured.
MFS supports reasonably crafted shareholder proposals that (i) require
the issuer to adopt a policy to recover the portion of performance-based
bonuses and awards paid to senior executives that were not earned based upon a
significant negative restatement of earnings unless the company already has
adopted a clearly satisfactory policy on the matter, or (ii) expressly prohibit
any future backdating of stock options.
EMPLOYEE STOCK PURCHASE PLANS
MFS supports the use of a broad-based employee stock purchase plans to
increase company stock ownership by employees, provided that shares purchased
under the plan are acquired for no less than 85% of their market value and do
not result in excessive dilution.
"GOLDEN PARACHUTES"
From time to time, shareholders of companies have submitted proxy
proposals that would require shareholder approval of severance packages for
executive officers that exceed certain predetermined thresholds. MFS votes in
favor of such shareholder proposals when they would require shareholder
approval of any severance package for an executive officer that exceeds a
certain multiple of such officer's annual compensation that is not determined
in MFS' judgment to be excessive.
ANTI-TAKEOVER MEASURES
In general, MFS votes against any measure that inhibits capital
appreciation in a stock, including proposals that protect management from
action by shareholders. These types of proposals take many forms, ranging from
"poison pills" and "shark repellents" to super-majority requirements.
MFS will vote for proposals to rescind existing "poison pills" and
proposals that would require shareholder approval to adopt prospective "poison
pills." Nevertheless, MFS will consider supporting the adoption of a
prospective "poison pill" or the continuation of an existing "poison pill" if
we can determine that the following two conditions are met: (1) the "poison
pill" allows MFS clients to hold an aggregate position of up to 15% of a
company's total voting securities (and of any class of voting securities); and
(2) either (a) the "poison pill" has a term of not longer than five years,
provided that MFS will consider voting in favor of the "poison pill" if the
term does not exceed seven years and the "poison pill" is linked to a business
strategy or purpose that MFS believes is likely to result in greater value for
shareholders; or (b) the terms of the "poison pill" allow MFS clients the
opportunity to accept a fairly structured and attractively priced tender offer
(e.g., a "chewable poison pill" that automatically dissolves in the event of an
all cash, all shares tender offer at a premium price).
MFS will consider on a case-by-case basis proposals designed to
prevent tenders which are disadvantageous to shareholders such as tenders at
below market prices and tenders for substantially less than all shares of an
issuer.
REINCORPORATION AND REORGANIZATION PROPOSALS
When presented with a proposal to reincorporate a company under the
laws of a different state, or to effect some other type of corporate
reorganization, MFS considers the underlying purpose and ultimate effect of
such a proposal in determining whether or not to support such a measure. While
MFS generally votes in favor of management proposals that it believes are in
the best long-term economic interests of its clients, MFS may oppose such a
measure if, for example, the intent or effect would be to create additional
inappropriate impediments to possible acquisitions or takeovers.
ISSUANCE OF STOCK
There are many legitimate reasons for the issuance of stock.
Nevertheless, as noted above under "Non-Salary Compensation Programs," when a
stock option plan (either individually or when aggregated with other plans of
the same company) would substantially dilute the existing equity (e.g. by
approximately 15% or more), MFS generally votes against the plan. In addition,
MFS votes against proposals where management is asking for authorization to
issue common or preferred stock with no reason stated (a "blank check") because
the unexplained authorization could work as a potential anti-takeover device.
MFS may also vote against the authorization or issuance of common or preferred
stock if MFS determines that the requested authorization is not warranted.
REPURCHASE PROGRAMS
MFS supports proposals to institute share repurchase plans in which
all shareholders have the opportunity to participate on an equal basis. Such
plans may include a company acquiring its own shares on the open market, or a
company making a tender offer to its own shareholders.
CONFIDENTIAL VOTING
MFS votes in favor of proposals to ensure that shareholder voting
results are kept confidential. For example, MFS supports proposals that would
prevent management from having access to shareholder voting information that is
compiled by an independent proxy tabulation firm.
CUMULATIVE VOTING
MFS opposes proposals that seek to introduce cumulative voting and for
proposals that seek to eliminate cumulative voting. In either case, MFS will
consider whether cumulative voting is likely to enhance the interests of MFS'
clients as minority shareholders. In our view, shareholders should provide
names of qualified candidates to a company's nominating committee, which (for
U.S. listed companies) must be comprised solely of "independent" directors.
WRITTEN CONSENT AND SPECIAL MEETINGS
Because the shareholder right to act by written consent (without
calling a formal meeting of shareholders) can be a powerful tool for
shareholders, MFS generally opposes proposals that would prevent shareholders
from taking action without a formal meeting or would take away a shareholder's
right to call a special meeting of company shareholders.
INDEPENDENT AUDITORS
MFS believes that the appointment of auditors for U.S. issuers is best
left to the board of directors of the company and therefore supports the
ratification of the board's selection of an auditor for the company. Some
shareholder groups have submitted proposals to limit the non-audit activities
of a company's audit firm or prohibit any non-audit services by a company's
auditors to that company. MFS opposes proposals recommending the prohibition or
limitation of the performance of non-audit services by an auditor, and
proposals recommending the removal of a company's auditor due to the
performance of non-audit work for the company by its auditor. MFS believes that
the board, or its audit committee, should have the discretion to hire the
company's auditor for specific pieces of non-audit work in the limited
situations permitted under current law.
OTHER CORPORATE GOVERNANCE, CORPORATE RESPONSIBILITY AND SOCIAL ISSUES
There are many groups advocating social change or changes to corporate
governance or corporate responsibility standards, and many have chosen the
publicly-held corporation as a vehicle for advancing their agenda. Generally,
MFS votes with management on such proposals unless MFS can determine that the
benefit to shareholders will outweigh any costs or disruptions to the business
if the proposal were adopted. Common among the shareholder proposals that MFS
generally votes against are proposals requiring the company to use corporate
resources to further a particular social objective outside the business of the
company, to refrain from investing or conducting business in certain countries,
to adhere to some list of goals or principles (e.g., environmental standards),
to disclose political contributions made by the issuer, to separate the
Chairman and Chief Executive Officer positions, or to promulgate special
reports on various activities or proposals for which no discernible shareholder
economic advantage is evident.
The laws of various states may regulate how the interests of certain
clients subject to those laws (e.g., state pension plans) are voted with
respect to social issues. Thus, it may be necessary to cast ballots differently
for certain clients than MFS might normally do for other clients.
FOREIGN ISSUERS
Many of the items on foreign proxies involve repetitive,
non-controversial matters that are mandated by local law. Accordingly, the
items that are generally deemed routine and which do not require the exercise
of judgment under these guidelines (and therefore voted in favor) for foreign
issuers include the following: (i) receiving financial statements or other
reports from the board; (ii) approval of declarations of dividends; (iii)
appointment of shareholders to sign board meeting minutes; (iv) discharge of
management and supervisory boards; and (v) approval of share repurchase
programs.
MFS generally supports the election of a director nominee standing for
re-election in uncontested elections unless it can be determined that (1) he or
she failed to attend at least 75% of the board and/or relevant committee
meetings in the previous year without a valid reason given in the proxy
materials; (2) since the last annual meeting of shareholders and without
shareholder approval, the board or its compensation committee has re-priced
underwater stock options; or (3) since the last annual meeting, the board has
either implemented a poison pill without shareholder approval or has not taken
responsive action to a majority shareholder approved resolution recommending
that the "poison pill" be rescinded. MFS will also withhold its vote for, or
vote against, as applicable, a director nominee standing for re-election of an
issuer that has adopted an excessive compensation package for its senior
executives as described above in the section entitled "Voting Guidelines-MFS'
Policy on Specific Issues-Election of Directors."
MFS generally supports the election of auditors, but may determine to
vote against the election of a statutory auditor in certain markets if MFS
reasonably believes that the statutory auditor is not truly independent. MFS
will evaluate all other items on proxies for foreign companies in the context
of the guidelines described above, but will generally vote against an item if
there is not sufficient information disclosed in order to make an informed
voting decision.
In accordance with local law or business practices, many foreign
companies prevent the sales of shares that have been voted for a certain period
beginning prior to the shareholder meeting and ending on the day following the
meeting ("share blocking"). Depending on the country in which a company is
domiciled, the blocking period may begin a stated number of days prior to the
meeting (e.g., one, three or five days) or on a date established by the
company. While practices vary, in many countries the block period can be
continued for a longer period if the shareholder meeting is adjourned and
postponed to a later date. Similarly, practices vary widely as to the ability
of a shareholder to have the "block" restriction lifted early (e.g., in some
countries shares generally can be "unblocked" up to two days prior to the
meeting whereas in other countries the removal of the block appears to be
discretionary with the issuer's transfer agent). Due to these restrictions, MFS
must balance the benefits to its clients of voting proxies against the
potentially serious portfolio management consequences of a reduced flexibility
to sell the underlying shares at the most advantageous time. For companies in
countries with share blocking periods, the disadvantage of being unable to sell
the stock regardless of changing conditions generally outweighs the advantages
of voting at the shareholder meeting for routine items. Accordingly, MFS will
not vote those proxies in the absence of an unusual, significant vote.
B. ADMINISTRATIVE PROCEDURES
1. MFS PROXY VOTING COMMITTEE
The administration of these MFS Proxy Voting Policies and Procedures
is overseen by the MFS Proxy Voting Committee, which includes senior personnel
from the MFS Legal and Global Investment Support Departments. The MFS Proxy
Voting Committee:
a. Reviews these MFS Proxy Voting Policies and Procedures at least
annually and recommends any amendments considered to be necessary
or advisable;
b. Determines whether any potential material conflicts of interest
exist with respect to instances in which (i) MFS seeks to override
these MFS Proxy Voting Policies and Procedures and (ii) votes on
ballot items not clearly governed by these MFS Proxy Voting
Policies and Procedures; and
c. Considers special proxy issues as they may arise from time to time.
2. POTENTIAL CONFLICTS OF INTEREST
The MFS Proxy Voting Committee is responsible for monitoring potential
material conflicts of interest on the part of MFS or its affiliates that could
arise in connection with the voting of proxies on behalf of MFS' clients. Any
significant attempt to influence MFS' voting on a particular proxy matter
should be reported to the MFS Proxy Voting Committee.
In cases where proxies are voted in accordance with these MFS Proxy
Voting Policies and Procedures, no material conflict of interest will be deemed
to exist. In cases where (i) MFS is considering overriding these MFS Proxy
Voting Policies and Procedures, or (ii) matters presented for vote are not
governed by these MFS Proxy Voting Policies and Procedures, the MFS Proxy
Voting Committee, or delegees, will follow these procedures:
a. Compare the name of the issuer of such proxy against a list of
significant current and potential (i) distributors of MFS Fund
shares, (ii) retirement plans administered by MFS or its affiliate
MFS Retirement Services, Inc. ("RSI"), and (iii) MFS institutional
clients (the "MFS Significant Client List");
b. If the name of the issuer does not appear on the MFS Significant
Client List, then no material conflict of interest will be deemed
to exist, and the proxy will be voted as otherwise determined by
the MFS Proxy Voting Committee;
c. If the name of the issuer appears on the MFS Significant Client
List, then the MFS Proxy Voting Committee will be apprised of that
fact and each member of the MFS Proxy Voting Committee will
carefully evaluate the proposed vote in order to ensure that the
proxy ultimately is voted in what MFS believes to be the best
long-term economic interests of MFS' clients, and not in MFS'
corporate interests; and
d. For all potential material conflicts of interest identified under
clause (c) above, the MFS Proxy Voting Committee will document: the
name of the issuer, the issuer's relationship to MFS, the analysis
of the matters submitted for proxy vote, the votes as to be cast
and the reasons why the MFS Proxy Voting Committee determined that
the votes were cast in the best long-term economic interests of
MFS' clients, and not in MFS' corporate interests. A copy of the
foregoing documentation will be provided to MFS' Conflicts Officer.
The members of the MFS Proxy Voting Committee are responsible for
creating and maintaining the MFS Significant Client List, in consultation with
MFS' distribution, institutional business units and RSI. The MFS Significant
Client List will be reviewed and updated periodically, as appropriate.
3. GATHERING PROXIES
Most proxies received by MFS and its clients originate at Automatic
Data Processing Corp. ("ADP") although a few proxies are transmitted to
investors by corporate issuers through their custodians or depositories. ADP
and issuers send proxies and related material directly to the record holders of
the shares beneficially owned by MFS' clients, usually to the client's
custodian or, less commonly, to the client itself. This material will include
proxy cards, reflecting the shareholdings of Funds and of clients on the record
dates for such shareholder meetings, as well as proxy statements with the
issuer's explanation of the items to be voted upon.
MFS, on behalf of itself and the Funds, has entered into an agreement
with an independent proxy administration firm, Institutional Shareholder
Services, Inc. (the "Proxy Administrator"), pursuant to which the Proxy
Administrator performs various proxy vote related administrative services, such
as vote processing and recordkeeping functions for MFS' Funds and institutional
client accounts. The Proxy Administrator receives proxy statements and proxy
cards directly or indirectly from various custodians, logs these materials into
its database and matches upcoming meetings with MFS Fund and client portfolio
holdings, which are input into the Proxy Administrator's system by an MFS
holdings datafeed. Through the use of the Proxy Administrator system, ballots
and proxy material summaries for all upcoming shareholders' meetings are
available on-line to certain MFS employees and the MFS Proxy Voting Committee.
4. ANALYZING PROXIES
Proxies are voted in accordance with these MFS Proxy Voting Policies
and Procedures. The Proxy Administrator at the prior direction of MFS
automatically votes all proxy matters that do not require the particular
exercise of discretion or judgment with respect to these MFS Proxy Voting
Policies and Procedures as determined by the MFS Proxy Voting Committee. With
respect to proxy matters that require the particular exercise of discretion or
judgment, MFS considers and votes on those proxy matters. MFS receives research
from ISS which it may take into account in deciding how to vote. In addition,
MFS expects to rely on ISS to identify circumstances in which a board may have
approved excessive executive compensation. Representatives of the MFS Proxy
Voting Committee review, as appropriate, votes cast to ensure conformity with
these MFS Proxy Voting Policies and Procedures.
As a general matter, portfolio managers and investment analysts have
little or no involvement in specific votes taken by MFS. This is designed to
promote consistency in the application of MFS' voting guidelines, to promote
consistency in voting on the same or similar issues (for the same or for
multiple issuers) across all client accounts, and to minimize the potential
that proxy solicitors, issuers, or third parties might attempt to exert
inappropriate influence on the vote. In limited types of votes (e.g., corporate
actions, such as mergers and acquisitions), a representative of MFS Proxy
Voting Committee may consult with or seek recommendations from portfolio
managers or analysts.(1) However, the MFS Proxy Voting Committee would
ultimately determine the manner in which all proxies are voted.
-----------
(1) From time to time, due to travel schedules and other commitments, an
appropriate portfolio manager or research analyst is not available to
provide a recommendation on a merger or acquisition proposal. If such a
recommendation cannot be obtained prior to the cut-off date of the
shareholder meeting, certain members of the MFS Proxy Voting Committee may
determine to abstain from voting.
As noted above, MFS reserves the right to override the guidelines when
such an override is, in MFS' best judgment, consistent with the overall
principle of voting proxies in the best long-term economic interests of MFS'
clients. Any such override of the guidelines shall be analyzed, documented and
reported in accordance with the procedures set forth in these policies.
5. VOTING PROXIES
In accordance with its contract with MFS, the Proxy Administrator also
generates a variety of reports for the MFS Proxy Voting Committee, and makes
available on-line various other types of information so that the MFS Proxy
Voting Committee may review and monitor the votes cast by the Proxy
Administrator on behalf of MFS' clients.
C. MONITORING SYSTEM
It is the responsibility of the Proxy Administrator and MFS' Proxy
Voting Committee to monitor the proxy voting process. When proxy materials for
clients are received, they are forwarded to the Proxy Administrator and are
input into the Proxy Administrator's system. Through an interface with the
portfolio holdings database of MFS, the Proxy Administrator matches a list of
all MFS Funds and clients who hold shares of a company's stock and the number
of shares held on the record date with the Proxy Administrator's listing of any
upcoming shareholder's meeting of that company.
When the Proxy Administrator's system "tickler" shows that the voting
cut-off date of a shareholders' meeting is approaching, a Proxy Administrator
representative checks that the vote for MFS Funds and clients holding that
security has been recorded in the computer system. If a proxy card has not been
received from the client's custodian, the Proxy Administrator calls the
custodian requesting that the materials be forwarded immediately. If it is not
possible to receive the proxy card from the custodian in time to be voted at
the meeting, MFS may instruct the custodian to cast the vote in the manner
specified and to mail the proxy directly to the issuer.
D. RECORDS RETENTION
MFS will retain copies of these MFS Proxy Voting Policies and
Procedures in effect from time to time and will retain all proxy voting reports
submitted to the Board of Trustees, Board of Directors and Board of Managers of
the MFS Funds for the period required by applicable law. Proxy solicitation
materials, including electronic versions of the proxy cards completed by
representatives of the MFS Proxy Voting Committee, together with their
respective notes and comments, are maintained in an electronic format by the
Proxy Administrator and are accessible on-line by the MFS Proxy Voting
Committee. All proxy voting materials and supporting documentation, including
records generated by the Proxy Administrator's system as to proxies processed,
including the dates when proxy ballots were received and submitted, and the
votes on each company's proxy issues, are retained as required by applicable
law.
E. REPORTS
MFS FUNDS
MFS will report the results of its voting to the Board of Trustees,
Board of Directors and Board of Managers of the MFS Funds. These reports will
include: (i) a summary of how votes were cast; (ii) a review of situations
where MFS did not vote in accordance with the guidelines and the rationale
therefore; (iii) a review of the procedures used by MFS to identify material
conflicts of interest; and (iv) a review of these policies and the guidelines
and, as necessary or appropriate, any proposed modifications thereto to reflect
new developments in corporate governance and other issues. Based on these
reviews, the Trustees, Directors and Managers of the MFS Funds will consider
possible modifications to these policies to the extent necessary or advisable.
ALL MFS ADVISORY CLIENTS
At any time, a report can be printed by MFS for each client who has
requested that MFS furnish a record of votes cast. The report specifies the
proxy issues which have been voted for the client during the year and the
position taken with respect to each issue.
Generally, MFS will not divulge actual voting practices to any party
other than the client or its representatives (unless required by applicable
law) because we consider that information to be confidential and proprietary to
the client.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
GENERAL. Information regarding the portfolio manager(s) of the MFS Multimarket
Income Trust (the "Fund") is set forth below.
PORTFOLIO MANAGER PRIMARY ROLE SINCE TITLE AND FIVE YEAR HISTORY
----------------- ------------ ----- ---------------------------
Richard O. Hawkins Lead Portfolio Manager April 2006 Senior Vice President of
MFS; employed in the
investment management
area of MFS since 1988.
John Addeo High Yield Debt 2005 Vice President of MFS;
Securities Portfolio employed in the
Manager investment management
area of MFS since 1998.
James J. Calmas High Grade Debt 2005 Senior Vice President of
Securities Portfolio MFS; employed in the
Manager investment management area
of MFS since 1988.
Matthew W. Ryan Emerging Markets Debt 2004 Senior Vice President of
Securities Portfolio MFS; employed in the
Manager investment management area
of MFS since 1997.
David P. Cole High Yield Debt October 2006 Vice President of MFS;
Securities Portfolio employed in the
Manager investment management
area of MFS since 2004.
High Yield Analyst at
Franklin Templeton
Investments from 1999 to
2004.
COMPENSATION. Portfolio manager total cash compensation is a combination of
base salary and performance bonus:
o Base Salary - Base salary represents a smaller percentage of portfolio
manager total cash compensation (generally below 33%) than incentive
compensation.
o Performance Bonus - Generally, incentive compensation represents a
majority of portfolio manager total cash compensation. The performance
bonus is based on a combination of quantitative and qualitative factors,
with more weight given to the former (generally over 60 %) and less
weight given to the latter.
>> The quantitative portion is based on pre-tax performance of all of
the accounts managed by the portfolio manager (which includes the
Fund and any other accounts managed by the portfolio manager) over a
one-, three- and five-year period relative to the appropriate Lipper
peer group universe and/or one or more benchmark indices with
respect to each account. Primary weight is given to portfolio
performance over a three-year time period with lesser consideration
given to portfolio performance over one- and five-year periods
(adjusted as appropriate if the portfolio manager has served for
shorter periods).
>> The qualitative portion is based on the results of an annual
internal peer review process (conducted by other portfolio managers,
analysts and traders) and management's assessment of overall
portfolio manager contributions to investor relations and the
investment process (distinct from fund and other account
performance).
Portfolio managers also typically benefit from the opportunity to participate
in the MFS Equity Plan. Equity interests and/or options to acquire equity
interests in MFS or its parent company are awarded by management, on a
discretionary basis, taking into account tenure at MFS, contribution to the
investment process, and other factors.
Finally, portfolio managers are provided with a benefits package including a
defined contribution plan, health coverage and other insurance, which are
available to other employees of MFS on substantially similar terms. The
percentage such benefits represent of any portfolio manager's compensation
depends upon the length of the individual's tenure at MFS and salary level, as
well as other factors.
OWNERSHIP OF FUND SHARES. The following table shows the dollar range of equity
securities of the Fund beneficially owned by the Fund's portfolio manager as of
the Fund's fiscal year ended October 31, 2007. The following dollar ranges
apply:
N. None
A. $1 - $10,000
B. $10,001 - $50,000
C. $50,001 - $100,000
D. $100,001 - $500,000
E. $500,001 - $1,000,000
F. Over $1,000,000
NAME OF PORTFOLIO MANAGER DOLLAR RANGE OF EQUITY SECURITIES IN FUND
------------------------- -----------------------------------------
Richard O. Hawkins N
John Addeo N
James J. Calmas N
Matthew W. Ryan N
David P. Cole N
OTHER ACCOUNTS. In addition to the Fund, the Fund's portfolio manager is
responsible (either individually or jointly) for the day-to-day management of
certain other accounts, the number and total assets of which as of the Fund's
fiscal year ended October 31, 2007 were as follows:
REGISTERED INVESTMENT OTHER POOLED INVESTMENT
COMPANIES VEHICLES OTHER ACCOUNTS
--------------------- ------------------------ --------------
NUMBER OF NUMBER OF NUMBER OF
NAME ACCOUNTS* TOTAL ASSETS* ACCOUNTS TOTAL ASSETS ACCOUNTS TOTAL ASSETS
Richard O. Hawkins 11 $24.8 billion 0 N/A 1 $42.3
million
John Addeo 14 $4.9 billion 3 $518.8 million 2 $535.8
million
James J. Calmas 6 $2.0 billion 4 $549.9 million 2 $629.7
million
Matthew W. Ryan 13 $4.2 billion 3 $2.6 billion 5 $1.2 billion
David P. Cole 11 $4.5 billion 2 $238.2 million 0 N/A
-----------------
* Includes the Fund.
Advisory fees are not based upon performance of any of the accounts identified
in the table above.
POTENTIAL CONFLICTS OF INTEREST. MFS seeks to identify potential conflicts of
interest resulting from a portfolio manager's management of both the Fund and
other accounts, and has adopted policies and procedures designed to address
such potential conflicts.
The management of multiple funds and accounts (including proprietary accounts)
may give rise to potential conflicts of interest if the funds and accounts have
different objectives and strategies, benchmarks, time horizons and fees as a
portfolio manager must allocate his or her time and investment ideas across
multiple funds and accounts. In certain instances there may be securities which
are suitable for the Fund's portfolio as well as for accounts of MFS or its
subsidiaries with similar investment objectives. A Fund's trade allocation
policies may give rise to conflicts of interest if the Fund's orders do not get
fully executed or are delayed in getting executed due to being aggregated with
those of other accounts of MFS or its subsidiaries. A portfolio manager may
execute transactions for another fund or account that may adversely impact the
value of the Fund's investments. Investments selected for funds or accounts
other than the Fund may outperform investments selected for the Fund.
When two or more clients are simultaneously engaged in the purchase or sale of
the same security, the securities are allocated among clients in a manner
believed by MFS to be fair and equitable to each. It is recognized that in some
cases this system could have a detrimental effect on the price or volume of the
security as far as the Fund is concerned. In most cases, however, MFS believes
that the Fund's ability to participate in volume transactions will produce
better executions for the Fund.
MFS does not receive a performance fee for its management of the Fund. As a
result, MFS and/or a portfolio manager may have a financial incentive to
allocate favorable or limited opportunity investments or structure the timing
of investments to favor accounts other than the Fund - for instance, those that
pay a higher advisory fee and/or have a performance fee.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
============================================================================================================
MFS MULTIMARKET INCOME TRUST
------------------------------------------------------------------------------------------------------------
(D)
(C) MAXIMUM NUMBER
TOTAL NUMBER OF (OR APPROXIMATE
(B) SHARES PURCHASED AS DOLLAR VALUE) OF
(A) AVERAGE PART OF PUBLICLY SHARES THAT MAY YET
TOTAL NUMBER OF PRICE PAID ANNOUNCED PLANS OR BE PURCHASED UNDER
PERIOD SHARES PURCHASED PER SHARE PROGRAMS THE PLANS OR PROGRAMS
============================================================================================================
11/1/06-11/30/06 0 N/A 0 6,813,435
------------------------------------------------------------------------------------------------------------
12/1/06-12/31/06 0 N/A 0 6,813,435
------------------------------------------------------------------------------------------------------------
1/1/07-1/31/07 0 N/A 0 6,813,435
------------------------------------------------------------------------------------------------------------
2/1/07-2/28/07 0 N/A 0 6,813,435
------------------------------------------------------------------------------------------------------------
3/1/07-3/31/07 0 N/A 0 7,907,745
------------------------------------------------------------------------------------------------------------
4/1/07-4/30/07 0 N/A 0 7,907,745
------------------------------------------------------------------------------------------------------------
5/1/07-5/31/07 0 N/A 0 7,907,745
------------------------------------------------------------------------------------------------------------
6/1/07-6/30/07 0 N/A 0 7,907,745
------------------------------------------------------------------------------------------------------------
7/1/07-7/31/07 0 N/A 0 7,907,745
------------------------------------------------------------------------------------------------------------
8/1/07-8/31/07 0 N/A 0 7,907,745
------------------------------------------------------------------------------------------------------------
9/1/07-9/30/07 0 N/A 0 7,907,745
------------------------------------------------------------------------------------------------------------
10/1/07-10/31/07 0 N/A 0 7,907,745
------------------------------------------------------------------------------------------------------------
TOTAL 0 N/A 0
============================================================================================================
Note: The Board of Trustees approves procedures to repurchase shares annually.
The notification to shareholders of the program is part of the semi-annual and
annual reports sent to shareholders. These annual programs begin on March 1st
of each year. The programs conform to the conditions of Rule 10b-18 of the
securities Exchange Act of 1934 and limit the aggregate number of shares that
may be purchased in each annual period (March 1 through the following February
28) to 10% of the Registrant's outstanding shares as of the first day of the
plan year (March 1). The aggregate number of shares available for purchase for
the March 1, 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 7(d)(2)(ii)(G) of Schedule 14A.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act of
1940 (the "Act")) as conducted within 90 days of the filing date of this
Form N-CSR, the registrant's principal financial officer and principal
executive officer have concluded that those disclosure controls and
procedures provide reasonable assurance that the material information
required to be disclosed by the registrant on this report is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during
the second fiscal quarter covered by the report that has materially
affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) File the exhibits listed below as part of this form. Letter or number the
exhibits in the sequence indicated.
(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant
intends to satisfy the Item 2 requirements through filing of an
exhibit: Code of Ethics attached hereto.
(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Act (17 CFR 270.30a-2): Attached hereto.
(3) Any written solicitation to purchase securities under Rule 23c-1 under
the Act sent or given during the period covered by the report by or on
behalf of the Registrant to 10 or more persons. Not applicable.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the Act (17 CFR
270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17
CFR 240.13a-14(b) or 240.15d-14(b)) and Section 1350 of Chapter 63 of Title
18 of the United States Code (18 U.S.C. 1350) as an exhibit. A
certification furnished pursuant to this paragraph will not be deemed
"filed" for the purposes of Section 18 of the Exchange Act (15 U.S.C. 78r),
or otherwise subject to the liability of that section. Such certification
will not be deemed to be incorporated by reference into any filing under
the Securities Act of 1933 or the Exchange Act, except to the extent that
the registrant specifically incorporates it by reference: Attached hereto.
NOTICE
A copy of the Amended and Restated Declaration of Trust of the Registrant is on
file with the Secretary of State of the Commonwealth of Massachusetts and
notice is hereby given that this instrument is executed on behalf of the
Registrant by an officer of the Registrant as an officer and not individually
and the obligations of or arising out of this instrument are not binding upon
any of the Trustees or shareholders individually, but are binding only upon the
assets and property of the respective constituent series of the Registrant.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant MFS MULTIMARKET INCOME TRUST
--------------------------------------------------------------------
By (Signature and Title)* MARIA F. DWYER
-----------------------------------------------------
Maria F. Dwyer, President
Date: December 17, 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: December 17, 2007
-----------------
By (Signature and Title)* TRACY ATKINSON
-----------------------------------------------------
Tracy Atkinson, Treasurer (Principal Financial Officer
and Accounting Officer)
Date: December 17, 2007
-----------------
* Print name and title of each signing officer under his or her signature.