[COVER]
[MFS LOGO]
THE FIRST NAME IN MUTUAL FUNDS
MFS(R) Multimarket Income Trust
Semiannual Report
April 30, 1995
[graphic] (silhouette of people and window)
<PAGE>
MFS(R) Multimarket
Income Trust
Trustees
A. Keith Brodkin*
Chairman and President
Richard B. Bailey*(2)
Private Investor; Former Chairman and
Director (until 1991), Massachusetts
Financial Services Company
Peter G. Harwood(1)
Private Investor
J. Atwood Ives(2)
Chairman and Chief Executive Officer,
Eastern Enterprises
Lawrence T. Perera(2)
Partner, Hemenway & Barnes
William J. Poorvu(1)
Adjunct Professor, Harvard University
Graduate School of Business
Administration
Charles W. Schmidt(2)
Private Investor;
Former Senior Vice President
and Group Executive (until 1990),
Raytheon Company
Arnold D. Scott*
Senior Executive Vice President
and Secretary,
Massachusetts Financial
Services Company
Jeffrey L. Shames*
President, Massachusetts Financial
Services Company
Elaine R. Smith(2)
Independent Consultant
David B. Stone(1)(2)
Chairman, North American
Management Corp.
(Investment Advisers)
*Affiliated with the Investment Adviser
(1)Member of Audit Committee
(2)Member of Portfolio Trading Committee
Portfolio Manager
James T. Swanson*
Treasurer
W. Thomas London*
Assistant Treasurer
James O. Yost*
Secretary
Stephen E. Cavan*
Assistant Secretary
James R. Bordewick, Jr.*
Transfer Agent,
Registrar and Dividend
Disbursing Agent
State Street Bank and
Trust Company
c/o MFS Service Center, Inc.
P.O. Box 9024
Boston, MA 02205-9824
1-800-637-2304
Custodian
State Street Bank and
Trust Company
Independent Auditors
Ernst & Young LLP
Investment Adviser
Massachusetts Financial
Services Company
500 Boylston Street,
Boston, MA 02116-3741
MMTCE-3-6/95 102.5M
<PAGE>
Dear Shareholders:
During the past six months, the Trust has enjoyed favorable performance. The net
asset value of the Trust increased from $7.06 on October 31, 1994 to $7.28 on
April 30, 1995. At the same time, the stock market price increased from $6.125
on October 31, 1994 to $6.375 at the end of April 1995. For the six months ended
April 30, 1995, the Trust experienced a total return of +8.73%. That return is
based on the beginning and ending stock market prices and assumes the investment
of all distributions paid during the period.
The share repurchase program which the Trustees approved last year remains an
active program and one which we believe has enhanced shareholder value.
U.S. Government Sector
As the economy enters its fifth year of expansion, it is
evidencing a decidedly decelerating trend from its robust pace of 1994, when
gross domestic product expanded by 4.1%. Estimated growth in this year's first
quarter diminished to an annual rate of 2.8%.
As evidence of a slowdown has continued to mount, the fixed-income markets have
become increasingly convinced that the Federal Reserve Board has concluded its
monetary-tightening initiatives. As a result, long-term U.S. Treasury bond
yields have declined to near 7.00% as of April 30, 1995, down from 7.87% at the
beginning of the year and from their cyclical peak of 8.15% in November 1994.
For the 12 months ended in April of this year, the Consumer Price Index, a
popular measure of change in prices, increased by a still moderate 3.1%.
Continued benign growth in labor costs and the inability of many businesses to
effectively raise prices have combined to extend the favorable price
environment. Nevertheless, we do anticipate a minor cyclical pickup in
inflationary pressure this year to the 3% - 3-1/2% range.
The decline in interest rates has been particularly precipitous during the past
month, leaving the market potentially vulnerable to a near-term correction.
However, we believe continuing moderate growth will result in interest rates
trending near to, and possibly somewhat lower than, present levels during the
balance of this year. As a result, we have increased our holdings in U.S.
government securities from approximately 16% of the portfolio six months ago to
about 24% on April 30, 1995. We are also maintaining a high level of interest
rate sensitivity, with an average duration of five years in this segment of the
portfolio.
International Bond Sector
Economic recoveries in both Europe and Japan have been inhibited somewhat by the
yen's and deutsche mark's strengthening against the U.S. dollar. The central
banks of both Germany and Japan have recently lowered interest rates in an
effort to stimulate domestic demand as well as to arrest the strength of their
currencies against the dollar. We believe that these expansions remain intact,
although at a somewhat sluggish pace. Inflationary pressures in overseas
economies remain even more favorable than those in the U.S., providing
fixed-income investors with opportunities to obtain relatively attractive real
(adjusted for inflation) rates of interest. Currently, approximately 25% of the
Trust's assets is invested in foreign securities in countries such as Australia,
Denmark, Germany and the Netherlands.
Recently, the dollar has stabilized in world currency markets. Although we
believe that over the long term the dollar continues to represent a sound store
of value, in the near term its relative strength may be restrained by the large
U.S. current-account deficit.
While we view emerging bond markets with caution, we believe that there are
opportunities in these securities, particularly at the more attractive prices
resulting from sell-offs in many of these markets last year. Thus, we have
increased our investments in emerging-market debt to about 9% of the Trust's
total net assets. These investments have been made in the U.S.
dollar-denominated bonds of Argentina, Brazil, Mexico and Poland.
Corporate Bond Sector
Approximately 35% of the Trust's total net assets is allocated to the high-yield
sector of the corporate
1
<PAGE>
bond market, as these investments have been consistent performers for the Trust.
The average credit quality of high-yield bonds has improved during the past six
months as the continuation of the economic expansion has allowed companies to
pay down their debt through either increased cash flow or equity issuance. This
sector of the portfolio remains significantly overweighted in economically
sensitive companies (paper, metal and general industrial firms) and
underweighted in industries with no pricing leverage due to excess capacity or
high exposure to consumer demand, such as general retailing, transportation and
utilities companies. We expect the economic climate to continue to be very
healthy for the types of companies we own and, thus, have not significantly
changed our strategy of focusing on fundamental credit research when selecting
securities for this portion of the portfolio.
Recently, we have found many attractive opportunities in investment-grade
corporate bonds. This sector remains small because these securities currently
are priced quite expensively relative to government securities. However, as this
relationship changes, we intend to increase our investments in this sector of
the market.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
[sig]
A. Keith Brodkin
Chairman and President
[sig]
James T. Swanson
Portfolio Manager
May 17, 1995
Performance Summary
(For the six months ended April 30, 1995)
Net Asset Value Per Share
October 31, 1994 $ 7.06
April 30, 1995 $ 7.28
New York Stock Exchange Price
October 31, 1994 $6.125
November 25, 1994 (high)* $6.500
November 14, 1994 (low)* $5.750
April 30, 1995 $6.375
*For the period November 1, 1994 through April 30, 1995.
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.
2
<PAGE>
Number of Employees
The Trust is organized as a Massachusetts business trust and is registered
under the Investment Company Act of 1940, as amended, as a closed-end,
non-diversified, management investment company and has no employees.
Number of Shareholders
As of April 30, 1995, our records indicate that there are 23,588 registered
shareholders and approximately 67,800 shareholders owning Trust shares in
"street" name, such as through brokers, banks and other financial
intermediaries.
New York Stock Exchange Symbol
The New York Stock Exchange symbol is MMT.
Investment Objective and Policy
The investment objective of MFS Multimarket
Income Trust is to provide a high level of current income through investments in
fixed-income securities.
The Trust will attempt to achieve this objective by allocating portfolio assets
among various categories of fixed-income securities. MFS will monitor the
Trust's portfolio performance on an ongoing basis and will reallocate assets in
response to actual and anticipated market and economic changes. In pursuing this
objective, preservation of capital will be a consideration, although capital
appreciation, if any, will be incidental. The Trust may enter into options and
futures transactions and forward foreign currency exchange contracts and
purchase securities on a "when-issued" basis.
Dividend Reinvestment and Cash Purchase Plan
The Trust offers a Dividend Reinvestment and Cash Purchase Plan which allows you
to reinvest either all of the distributions or only the long-term capital gains
paid by the Trust. Unless the shares are trading at a premium (exceeding net
asset value), purchases are made at the market price. Otherwise, purchases will
be made at a discounted price of either the net asset value or 95% of the market
price, whichever is greater. You can also buy shares of the Trust. Investments
from $100 to $500 can be made in January and July on the 15th of the month or
shortly thereafter.
If your shares are in the name of a brokerage firm, bank or other nominee, you
can ask the firm or nominee to participate in the Plan on your behalf. If the
nominee does not offer the Plan, you may wish to request that your shares be
re-registered in your own name so that you can participate.
There is no service charge to reinvest distributions, nor are there brokerage
charges for shares issued directly by the Trust. However, when shares are bought
on the New York Stock Exchange or otherwise on the open market, each participant
pays a pro rata share of the commissions. A service fee of $0.75 is charged for
each cash purchase as well as a pro rata share of the brokerage commissions, if
any. 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 to receive a brochure providing a
complete description of the Plan, please contact the Plan agent at the address
and telephone number located on the back cover of this report. 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. 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.
3
<PAGE>
Portfolio of Investments -- April 30, 1995
Bonds -- 97.9%
Principal
Amount
Issuer (000 Omitted) Value
U.S. Dollar Denominated -- 74.7%
Corporate Asset Backed -- 1.1%
Merrill Lynch Home Equity Loan,
9.3s, 2016+ $ 7,774 $ 7,850,999
Merrill Lynch Mortgage Investors,
0s, 2023+ 1,200 869,629
-----------
$ 8,720,628
-----------
Financial Institutions -- 6.1%
American Annuity Group, Inc., 9.5s,
2001 $ 1,000 $ 985,000
American Annuity Group, Inc.,
11.125s, 2003 800 832,000
American Financial Corp., 9.75s, 2004 2,000 1,985,000
American Life Holdings Co., 11.25s, 2004 1,250 1,287,500
Americo Life, Inc., 9.25s, 2005+ 3,250 2,884,375
Auburn Hills Trust, 0s, 2020 5,000 6,850,050
CCP Insurance, Inc.,10.5s, 2004 4,000 4,011,000
Conseco, Inc., 8.125s, 2003 3,100 2,718,979
Financing Corp., 9.4s, 2018 12,000 14,015,640
Leucadia National Corp., 10.375s, 2002 2,000 2,140,000
Leucadia National Corp., 7.75s, 2013 6,500 5,903,105
Resolution Funding Corp., 0s, 2020 20,000 2,885,400
Tiphook Finance Corp., 8s, 2000 2,509 1,906,840
-----------
$48,404,889
-----------
Foreign -- U.S. Dollar Denominated -- 8.7%
Banco Nacional de Commerce, 8s, 2000 $ 2,500 $ 1,965,625
Banco Nacional de Commerce, 7.25s, 2004 5,750 3,852,500
Federal Republic of Brazil, 0s, 2001 1,940 1,469,550
Federal Republic of Brazil, 0s, 2006 1,500 855,000
Federal Republic of Brazil, 0s, 2009 2,250 1,155,938
Federal Republic of Brazil, 0s, 2024 3,500 1,911,875
Federal Republic of Brazil, 4s, 2024 2,500 993,750
Financiera Energetica Nacional,
9s, 1999++ 3,000 2,880,000
Hidroelectrica Alicura, 8.375s, 1999++ 1,500 1,215,000
U.S. Dollar Denominated -- continued
Foreign -- U.S. Dollar Denominated -- continued
Korea Electric Power Corp., 7.75s, 2013 $ 4,185 $ 3,814,376
Mexico Discount Notes, 0s, 2019 2,000 1,320,000
Mexico Discount Notes, 0s, 2019 1,584 1,045,440
Mexico Discount Notes, 0s, 2019 11,983 7,908,780
Mexico Discount Notes, 0s, 2019 333 219,780
Petroliam Nasional Berhad, 6.875s,
2003++ 1,000 941,530
Poland Discount Notes, 0s, 2014 3,000 1,406,250
Poland Discount Notes, 0s, 2024 7,750 5,376,563
Republic of Argentina, 0s, 2005 15,000 8,887,500
Republic of Argentina, 0s, 2023 4,000 1,740,000
Republic of Argentina, 0s, 2023 5,750 3,428,438
Republic of Colombia, 8.75s, 1999 3,000 2,955,000
Republic of Malta, 7.5s, 2009++ 2,000 1,930,000
Republic of Venezuela, 0s, 2007 8,500 3,941,875
South Africa Global Bond, 9.625s, 1999 5,000 4,956,250
United Mexican States, 6.25s, 2019 5,000 2,618,750
-----------
$68,789,770
-----------
Industrials -- 28.5%
Apparel and Textiles -- 0.2%
Guess, Inc., 9.5s, 2003 $ 1,500 $ 1,447,500
-----------
Automotive -- 0.7%
Exide Corp., 10s, 2005+ $ 600 $ 607,500
Harvard Industries, Inc., 12s, 2004 1,000 1,040,000
SPX Corp., 11.75s, 2002 2,000 2,130,000
Venture Holdings Trust, 9.75s, 2004 2,500 2,162,500
-----------
$ 5,940,000
-----------
Building -- 1.5%
American Standard, Inc., 10.5s, 2005 $ 6,200 $ 4,541,500
Congoleum Corp., 9s, 2001 1,550 1,499,625
Nortek, Inc., 9.875s, 2004 1,250 1,179,689
4
<PAGE>
Principal
Amount
Issuer (000 Omitted) Value
U.S. Dollar Denominated -- continued
Industrials -- continued
Building -- continued
Schuller International Group, Inc.,
10.875s, 2004 $1,000 $ 1,070,000
UDC Homes, Inc., 11.75s, 2003 1,000 630,000
USG Corp., 9.25s, 2001 3,150 3,118,500
-----------
$12,039,314
-----------
Chemicals -- 1.7%
Arcadian Partners Co., 10.75s, 2005++ $2,025 $ 2,078,157
Huntsman Corp., 10.625s, 2001 2,600 2,736,500
Koppers Industries, Inc., 8.5s, 2004 1,500 1,383,750
NL Industries, Inc., 11.75s, 2003 2,105 2,236,563
OSI Specialties Holding Co., 0s, 2004 1,250 862,500
Rexene Corp., 11.75s, 2004 1,500 1,610,625
UCC Investors Holdings, Inc.,
10.5s, 2002 1,750 1,798,125
UCC Investors Holdings, Inc., 0s, 2005 1,250 906,250
-----------
$13,612,470
-----------
Conglomerates -- 0.4%
Bell & Howell Co., 10.75s, 2002 $2,500 $ 2,625,000
Figgie International, Inc., 9.875s, 1999 500 465,000
-----------
$ 3,090,000
-----------
Consumer Goods and Services -- 2.8%
ADT Operations, Inc., 9.25s, 2003 $2,500 $ 2,500,000
Calmar Spraying Systems, Inc., 12s, 1997 1,300 1,319,500
Consolidated Cigar Corp., 10.5s, 2003 1,000 942,500
Fieldcrest Cannon, Inc., 11.25s, 2004 2,000 2,090,000
International Semi-Tech
Microelectronics, Inc., 0s, 2003 3,000 1,440,000
Ithaca Industries, Inc., 11.125s, 2002 1,000 930,000
Remington Arms, Inc., 0s, 2003++ 300 267,000
Revlon Consumer Products, 10.5s, 2003 4,000 3,850,000
U.S. Dollar Denominated -- continued
Industrials -- continued
Consumer Goods and Services -- continued
Revlon Worldwide Corp., 0s, 1998 $2,000 $ 1,275,000
Roadmaster Industries, Inc.,
11.75s, 2002 1,500 1,443,750
Sealy Corp., 9.5s, 2003 1,750 1,697,500
Westpoint Stevens, Inc., 9.375s, 2005 4,500 4,275,000
-----------
$22,030,250
-----------
Containers -- 3.2%
Container Corp. of America, 9.75s, 2003 $4,150 $ 4,170,750
Gaylord Container Co., 0s, 2005 1,500 1,441,875
Ivex Packaging Corp., 12.5s, 2002 950 1,011,750
Owens-Illinois, Inc., 11s, 2003 2,500 2,706,250
Owens-Illinois, Inc., 9.75s, 2004 1,750 1,728,125
Owens-Illinois, Inc., 9.95s, 2004 1,000 995,000
Plastic Containers, Inc., 0.75s, 2001 500 510,000
Riverwood International Corp.,
10.75s, 2000 2,300 2,426,500
Riverwood International Corp.,
11.25s, 2002 900 965,250
SD Warren Co., 12s, 2004++ 2,400 2,592,000
Silgan Corp., 11.75s, 2002 1,700 1,819,000
Stone Consolidated Corp., 10.25s, 2000 1,200 1,231,500
Stone Container Corp., 9.875s, 2001 3,925 3,905,375
-----------
$25,503,375
-----------
Electronics -- 0.1%
Alliant Technology Systems, 11.75s,
2003++ $ 400 $ 415,000
-----------
Entertainment -- 0.8%
ACT III Theatres, Inc., 11.875s, 2003 $2,300 $ 2,461,000
Imax Corp., 0s, 2001 500 445,000
SCI Television, Inc., 11s, 2005 2,000 2,080,000
United Artist Theater Circuit,
Inc., 11.5s, 2002 1,000 1,075,000
-----------
$ 6,061,000
-----------
Food and Beverage Products -- 1.1%
Canandaigua Wine, Inc., 8.75s, 2003 $2,450 $ 2,376,500
5
<PAGE>
Portfolio of Investments -- continued
Bonds -- continued
Principal
Amount
Issuer (000 Omitted) Value
Industrials -- continued
Food and Beverage Products -- continued
Coca-Cola Bottling Group Southwest,
Inc., 9s, 2003 $1,000 $ 960,000
Envirodyne Industries, Inc., 10.25s, 2001 1,500 1,230,000
Specialty Foods Corp., 10.25s, 2001 2,250 2,227,500
Texas Bottling Group, Inc., 9s, 2003 2,250 2,160,000
-----------
$ 8,954,000
-----------
Forest and Paper Products -- 0.1%
Repap New Brunswick, 10.625s, 2005 $ 500 $ 507,500
-----------
Machinery -- 0.1%
Fairfield Manufacturing Corp.,
11.375s, 2001 $1,000 $ 940,000
-----------
Medical and Health Technology and Services -- 1.8%
Community Health System, 10.25s, 2003 $3,100 $ 3,193,000
Healthtrust, Inc., 10.25s, 2004 1,500 1,683,750
Integrated Health Services, Inc.,
10.75s, 2004 3,200 3,368,000
National Medical Enterprises,
10.125s, 2005 2,500 2,606,250
OrNda Healthcorp, 12.25s, 2002 2,950 3,215,500
-----------
$14,066,500
-----------
Metals and Minerals -- 0.7%
Easco Corp., 10s, 2001 $1,500 $ 1,485,000
Jorgensen, Earle (M.) Co., 10.75s, 2000 1,700 1,644,750
Kaiser Aluminum & Chemical Corp.,
9.875s, 2002 1,600 1,556,000
Weirton Steel Corp., 10.875s, 1999 550 555,500
-----------
$ 5,241,250
-----------
Oil Services -- 0.8%
Amerigas Partners Co., 10.125s, 2007+ $ 600 $ 610,500
Ferrellgas L.P., 10s, 2001 2,600 2,691,000
Giant Industries, Inc., 9.75s, 2003 600 555,000
Global Marine, Inc., 12.75s, 1999 1,900 2,078,125
Tuboscope Vetco International,
Inc., 10.75s, 2003 650 653,250
-----------
$ 6,587,875
-----------
U.S. Dollar Denominated -- continued
Industrials -- continued
Oils -- 0.5%
Gulf Canada, 9.25s, 2004 $1,650 $ 1,584,000
Mesa Capital Corp., 0s, 1998 2,392 2,296,320
-----------
$ 3,880,320
-----------
Printing and Publishing -- 0.7%
News America Holdings, Inc., 8.25s, 2018 $1,500 $ 1,420,335
News America Holdings, Inc., 9.5s, 2024 2,000 2,141,640
World Color Press, Inc.,
9.125s, 2003 2,000 1,900,000
-----------
$ 5,461,975
-----------
Restaurants and Lodging -- 0.1%
Kloster Cruise Lines Ltd.,13s, 2003 $1,000 $ 857,500
-----------
Special Products and Services -- 3.1%
Astrum International Corp., 11.5s, 2003 $1,152 $ 1,209,600
Blount, Inc., 9s, 2003 1,250 1,200,000
Eagle Industries, Inc., 0s, 2003 7,250 5,002,500
IMO Industries, Inc.,
12.25s, 1997 1,283 1,302,245
IMO Industries, Inc., 12s, 2001 1,150 1,184,500
Idex Corp., 9.75s, 2002 1,000 1,020,000
Interlake Corp., 6.062s, 1996 473 458,420
Interlake Corp., 5.75s, 1997 500 485,000
Interlake Corp., 12.125s, 2002 2,650 2,650,000
K & F Industries, Inc., 11.875s, 2003 725 734,063
Mark IV Industries, Inc., 8.75s, 2003 2,750 2,708,750
Newflo Corp., 13.25s, 2002 750 733,125
OSI Specialties, Inc., 9.25s, 2003 1,750 1,732,500
Polymer Group, Inc., 12.25s, 2002 2,000 1,980,000
Spreckels Industries, Inc., 11.5s, 2000 200 199,000
Synthetic Industries, Inc., 12.75s, 2002 900 886,500
Talley Manufacturing & Technology, Inc.,
10.75s, 2003 1,300 1,270,750
-----------
$24,756,953
-----------
6
<PAGE>
Principal
Amount
Issuer (000 Omitted) Value
U.S. Dollar Denominated -- continued
Industrials -- continued
Steel -- 1.1%
AK Steel Holdings Corp., 10.75s, 2004 $1,000 $ 1,045,000
Bayou Steel Corp., 10.25s, 2001 1,400 1,288,000
Geneva Steel Co., 9.5s, 2004 1,800 1,530,000
Sheffield Steel Corp., 12s, 2001 700 679,000
UCAR Global Enterprises, 12s, 2005++ 1,250 1,343,750
WCI Steel Co.,10.5s, 2002 1,400 1,382,500
Wheeling Pittsburgh, 9.375s, 2003 1,500 1,320,000
-----------
$ 8,588,250
-----------
Stores -- 1.6%
Eckerd (Jack) Corp., 9.25s, 2004 $2,000 $ 2,010,000
Finlay Fine Jewelry, 10.625s, 2003 3,760 3,553,200
Pathmark Stores, Inc., 11.625s, 2002 3,700 3,811,000
Payless Cashways, Inc., 9.125s, 2003 2,400 2,016,000
Woodward & Lothrop, Inc.,
12s, 1995** 2,002 1,682,085
-----------
$13,072,285
-----------
Supermarkets -- 0.7%
Dominicks Fine Foods, Inc., 10.875s,
2005++$ 500 $ 500,000
Kroger Co., 8.5s, 2003 850 862,750
Purity Supreme, Inc., 11.75s, 1999 100 108,000
Ralphs Grocery Co., 10.25s, 2002 3,000 2,992,500
Safeway Stores, Inc., 10s, 2002 1,000 1,095,000
-----------
$ 5,558,250
-----------
Telecommunications -- 4.7%
ACT III Broadcasting, 9.625s, 2003 $1,000 $ 965,000
Albritton Communications Corp.,
11.5s, 2004 500 515,000
Cablevision Industries Corp., 10.75s, 2002 1,500 1,597,500
Cablevision Industries Corp., 9.25s, 2008 1,150 1,141,375
Cablevision Systems Corp., 10.75s, 2004 1,250 1,300,000
Century Communications Corp., 0s, 2003 3,000 1,350,000
U.S. Dollar Denominated -- continued
Industrials -- continued
Telecommunications -- continued
Century Communications Corp., 9.5s, 2005 $ 3,500 $ 3,403,750
Continental Cablevision, Inc.,
8.875s, 2005 1,000 992,500
Falcon Holdings Group, Inc., 11s, 2003# 3,257 2,931,505
Infinity Broadcasting Corp.,
10.375s, 2002 1,150 1,190,250
Jones Intercable, Inc., 11.5s, 2004 1,650 1,765,500
Jones Intercable, Inc., 10.5s, 2008 1,500 1,537,500
K-III Communications Corp.,
10.625s, 2002 3,150 3,276,000
MFS Communications, Inc., 0s, 2004 5,250 3,465,000
Mobilemedia Communications, Inc.,
0s, 2003 3,725 2,179,125
Paging Network, Inc., 8.875s, 2006 4,500 3,982,500
Rogers Cablesystems Ltd., 9.625s, 2002 800 800,000
Tele-Communications Corp., 9.25s, 2023 3,800 3,636,410
USA Mobile Communication, 9.5s, 2004 1,375 1,216,875
-----------
$ 37,245,790
-----------
Total Industrials $225,857,357
-----------
Transportation -- 0.1%
Moran Transportation Co., 11.75s, 2004 $ 600 $ 582,000
-----------
U.S. Federal Agencies -- 3.3%
Federal Home Loan Mortgage Corp.,
7s, 1997 - 1999 $ 4,578 $ 4,563,273
Federal Home Loan Mortgage Corp.,
9s, 2024 - 2025 20 20,638
Federal National Mortgage Assn.,
8.5s, 2005 10,000 10,378,100
Federal National Mortgage Assn.,
9.5s, 1999 7,900 8,244,391
Federal National Mortgage Assn.,
Stripped Mortgage Backed
Security, 7s, 2023 8,265 2,951,915
-----------
$ 26,158,317
-----------
7
<PAGE>
Portfolio of Investments -- continued
Bonds -- continued
Principal
Amount
Issuer (000 Omitted) Value
U.S. Dollar Denominated -- continued
U.S. Government Guaranteed -- 19.9%
Government Aid Bonds -- 0.2%
State of Israel, 0s, 2023 $15,900 $ 1,787,160
-----------
Government National Mortgage Association -- 6.6%
GNMA, 7s, 2023 - 2024 $23,728 22,460,193
GNMA, 8s, 2006 - 2009 2,363 2,399,036
GNMA, 9s, 2004 - 2025 14,381 14,915,322
GNMA, 9.5s, 2024 3,000 3,155,610
GNMA, 10.5s, 2020 4,804 5,230,070
GNMA, 11s, 2021 3,845 4,239,627
-----------
$ 52,399,858
-----------
U.S. Treasury Obligations -- 13.1%
U.S. Treasury Notes, 6.875s, 1996 $12,000 $ 12,061,920
U.S. Treasury Notes, 7.375s, 1996 9,000 9,088,560
U.S. Treasury Notes, 8.875s, 1996 20,000 20,384,400
U.S. Treasury Notes, 8.25s, 1998 4,000 4,169,360
U.S. Treasury Notes, 7.5s, 2005 15,750 16,234,785
U.S. Treasury Bonds, 0s, 1997 12,000 10,507,920
U.S. Treasury Bonds, 8.875s, 2017 7,400 8,511,185
U.S. Treasury Bonds, 7.625s, 2025 21,750 22,487,543
-----------
$103,445,673
-----------
Total U.S. Government Guaranteed $157,632,691
-----------
Utilities -- 7.0%
Electric -- 6.8%
BVPS II Funding Corp., 8.89s, 2017 $ 5,250 $ 4,644,938
CMS Energy Corp., 0s, 1999 4,750 4,698,700
DQU II Funding Corp., 8.7s, 2016 5,000 4,993,700
First PV Funding Corp., 10.3s, 2014 2,500 2,531,250
First PV Funding Corp., 10.15s, 2016 6,000 5,970,000
Kenetech Corp., 12.75s, 2002 1,000 1,030,000
Midland Cogeneration Corp.,
10.33s, 2002 3,828 3,809,839
Midland Funding Corp. II, 11.75s, 2005 3,100 3,099,380
Midland Funding Corp. II, 13.25s, 2006 650 667,745
U.S. Dollar Denominated -- continued
Utilities -- continued
Electric -- continued
National Power Corp.,
7.625s, 2000++ $ 2,000 $ 1,775,000
Niagara Mohawk Power Corp., 8.77s, 2018 6,500 5,859,880
PNPP II Funding Corp., 9.12s, 2016 5,500 4,883,890
Texas & New Mexico Power Co.,
12.5s, 1999 5,200 5,648,553
Texas & New Mexico Power Co.,
10.75s, 2003 4,250 4,441,250
-----------
$ 54,054,125
-----------
Gas -- 0.2%
Maxus Energy Corp., 11.25s, 2013 $ 1,150 $ 1,063,750
TransTexas Gas Corp., 10.5s, 2000 500 527,500
-----------
$ 1,591,250
-----------
Total Utilities $ 55,645,375
-----------
Total U.S. Dollar Denominated $591,791,027
-----------
Foreign -- Non-U.S. Dollar Denominated -- 22.9%
Australian Dollars -- 4.6%
Commonwealth of Australia, 12.5s,
1998 AUD 2,000 $ 1,573,557
Commonwealth of Australia, 6.25s, 1999 8,000 5,262,623
Commonwealth of Australia, 12s, 1999 10,000 7,958,591
Commonwealth of Australia, 8.75s, 2001 2,700 1,900,690
New South Wales Treasury Corp.,
11.5s, 1999 25,000 19,460,582
-----------
$ 36,156,043
-----------
British Pounds -- 1.4%
United Kingdom Treasury, 9s, 2000 GBP 6,745 $ 11,148,647
-----------
Canadian Dollars -- 0.7%
Canada Government Bond, 8.5s, 2000 CAD 7,500 $ 5,640,884
-----------
Danish Kroner -- 3.9%
Kingdom of Denmark, 9s, 1998 DKK 60,100 $ 11,380,979
Kingdom of Denmark, 6s, 1999 31,000 5,266,954
Kingdom of Denmark, 9s, 2000 74,000 14,013,186
-----------
$ 30,661,119
-----------
8
<PAGE>
Principal
Amount
Issuer (000 Omitted) Value
Foreign -- Non-U.S. Dollar Denominated -- continued
Deutsche Marks -- 2.6%
German Unity Fund, 8.5s, 2001 DEM 3,430 $ 2,688,378
Republic of Germany, 8.5s, 2000 10,290 8,068,843
Republic of Germany, 6.5s, 2003 1,100 767,027
Treuhandanstalt Obligationen,
6.375s, 1999 12,515 9,069,429
------------
$ 20,593,677
------------
Dutch Guilders -- 2.6%
Dutch State Loan, 6.25s, 1998 NLG 2,530 $ 1,638,036
Dutch State Loan, 7s, 1999 7,940 5,248,024
Dutch State Loan, 7.5s, 1999 8,820 5,940,359
Dutch State Loan, 7.75s, 2005 11,160 7,502,008
------------
$ 20,328,427
------------
French Francs -- 2.5%
Government of France, 8s, 1998 FRF 43,200 $ 8,968,190
Government of France, 7s, 1999 35,870 7,184,201
Government of France, 7.75s, 2000 18,270 3,761,252
------------
$ 19,913,643
------------
Irish Punts -- 0.9%
Republic of Ireland, 9s, 2001 IEP 4,415 $ 7,295,883
------------
Italian Lire -- 0.3%
Republic of Italy, 9.5s, 1999 ITL 4,755,000 $ 2,544,208
------------
New Zealand Dollars -- 1.9%
Government of New Zealand, 8s, 1995 NZD 15,320 $ 10,238,384
Government of New Zealand, 9s, 1996 7,300 4,947,282
------------
$ 15,185,666
------------
Spanish Pesetas -- 1.1%
Government of Spain,
10.25s, 1998 ESP 1,138,000 $ 8,870,683
------------
Thai Bahts -- 0.4%
Siam Commercial Bank, 7s, 1995+ THB 75,000 $ 3,048,505
------------
Total Foreign --
Non-U.S. Dollar Denominated $181,387,385
------------
Convertible Bond -- 0.3%
Roadmaster Industries, Inc., 8s, 2003 $3,000 $ 2,662,500
------------
Total Bonds (Identified Cost, $775,773,606) $775,840,912
------------
Common Stocks and Warrants*
Shares
Ampex Corp., "A" 33,974 $ 63,700
Forest Oil Corp., Warrants 42,615 15,980
OSI Specialties, Inc. 1,250 2,500
Protection One, Warrants 14,000 77,000
RJR Nabisco Holdings Corp. 6,909 189,130
Thrifty Payless Holdings 14,250 57,000
-----------
Total Common Stock and Warrants
(Identified Cost, $405,196) $ 405,310
-----------
Preferred Stocks -- 0.1%
K-III Communications Corp. 1,089 $ 101,798
Supermarkets General Holdings Corp. 22,827 593,502
UDC Homes, Inc. 29,300 43,950
-----------
Total Preferred Stocks
(Identified Cost, $676,391) $ 739,250
-----------
Call Option Purchased
Principal
Amount
of Contracts
Expiration Month/Strike Price (000 Omitted)
Canadian Dollars
July/1.375 (Premium Paid, $24,804) CAD 5,239 $ 61,295
-----------
Put Option Purchased
Deutsche Marks/British Pounds
July/2.29 (Premium Paid, $104,122) DEM 17,370 $ 87,196
-----------
Short-Term Obligation -- 1.0%
Principal
Amount
Issuer (000 Omitted)
IFCT Thailand, due 5/02/95, at
Amortized Cost THB 190,000 $ 7,615,516
-----------
Repurchase Agreement -- 0.1%
Lehman Brothers, dated 4/28/95,
due 5/01/95, total to be
received $500,246 (secured by
$510,000 U.S. Treasury Bonds,
7.25s, due 5/15/16, market
value $514,639), at Cost $500 $ 500,000
-----------
Total Investments
(Identified Cost, $785,099,635) $785,249,479
-----------
9
<PAGE>
Portfolio of Investments -- continued
Call Options Written -- (0.1)%
Principal
Amount
of Conracts
Expiration Month/Strike Price (000 Omitted) Value
British Pounds September/1.64 GBP 9,487 $ (178,379)
Deutsche Marks May/1.34 DEM 22,105 (6,013)
July/1.420 21,393 (533,717)
Deutsche Marks/British Pounds
August/2.1139 16,034 (31,218)
-----------
Total Call Options Written
(Premiums Received, $568,824) $ (749,327)
-----------
Put Option Written
British Pounds
September/1.53 (Premium
Received, $163,713) GBP 8,851 $ (95,024)
-----------
Other Assets,
Less Liabilities -- 1.0% $ 8,158,214
-----------
Net Assets -- 100.0% $792,563,342
===========
Abbreviations have been used throughout this report to indicate amounts shown in
currencies other than the U.S. dollar. A list of abbreviations is shown below.
AUD = Australian Dollars GBP = British Pounds
CAD = Canadian Dollars IEP = Irish Punts
CHF = Swiss Francs ITL = Italian Lire
DEM = Deutsche Marks JPY = Japanese Yen
DKK = Danish Kroner NLG = Dutch Guilders
ESP = Spanish Pesetas NZD = New Zealand Dollars
FRF = French Francs THB = Thai Bhats
*Non-income producing security.
**Non-income producing security -- in default.
+Restricted security.
++SEC Rule 144A restriction.
#Payment-in-kind security.
See notes to financial statements
10
<PAGE>
Statement of Assets and Liabilities -- April 30, 1995
<TABLE>
Assets:
<S> <C>
Investments, at value (identified cost, $785,099,635) $785,249,479
Cash 1,155,087
Net receivable for forward foreign currencyexchange contracts purchased 5,885,258
Net receivable for forward foreign currency exchange contracts 2,169,928
Receivable for investments sold 23,094,557
Interest receivable 19,606,896
Receivable from investment adviser 104,222
Other assets 13,940
--------------
Total assets $837,279,367
--------------
Liabilities:
Distributions payable $ 494,680
Payable for investments purchased 26,186,929
Payable for Trust shares reacquired 5,085,211
Written options outstanding, at value(premiums received, $732,537) 844,351
Net payable for forward foreign currencyexchange contracts sold 11,388,195
Payable to affiliates --
Management fee 56,280
Transfer and dividend disbursing agent fee 35,000
Accrued expenses and other liabilities 625,379
--------------
Total liabilities $ 44,716,025
--------------
Net assets $792,563,342
==============
Net assets consist of:
Paid-in capital $824,073,353
Unrealized depreciation on investments and translation of assets
and liabilities in foreign currencies (2,841,695)
Accumulated distributions in excess of net realized loss on investments and
foreign currency transactions (27,968,803)
Accumulated distributions in excess of net investment income (699,513)
--------------
Total $792,563,342
==============
Shares of beneficial interest outstanding 108,885,852
==============
Net asset value per share (net assets / shares of beneficial
interest outstanding) $ 7.28
==============
</TABLE>
See notes to financial statements
11
<PAGE>
Statement of Operations -- Six Months Ended April 30, 1995
<TABLE>
<CAPTION>
<S> <C>
Net investment income:
Income --
Interest income $ 38,146,316
Dividend income 2,614
------------
$ 38,148,930
------------
Expenses --
Management fee $ 3,390,317
Trustees' compensation 91,807
Transfer and dividend disbursing agent fee 203,941
Interest expense 663,348
Custodian fee 209,770
Auditing fees 26,280
Printing 12,348
Legal fees 5,399
Miscellaneous 421,748
------------
Total expenses $ 5,024,958
Reduction of expenses by investment adviser (104,222)
------------
Net expenses $ 4,920,736
------------
Net investment income $ 33,228,194
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) --
Investment transactions $(15,021,162)
Written option transactions 695,710
Foreign currency transactions (224,931)
------------
Net realized loss on investments $(14,550,383)
------------
Change in unrealized appreciation (depreciation) --
Investments $ 31,879,504
Written options (164,122)
Translation of assets and liabilities in foreign currencies 334,042
------------
Net unrealized gain on investments $ 32,049,424
------------
Net realized and unrealized gain on investments and foreign currency $ 17,499,041
------------
Increase in net assets from operations $ 50,727,235
============
</TABLE>
See notes to financial statements
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
April 30, October 31,
1995 1994
--------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations --
Net investment income $ 33,228,194 $ 65,002,676
Net realized loss on investments and foreign currency transactions (14,550,383) (52,796,297)
Net unrealized gain (loss) on investments and foreign currency transactions 32,049,424 (46,045,322)
------------- --------------
Increase (decrease) in net assets from operations $ 50,727,235 $ (33,838,943)
------------- --------------
Distributions declared to shareholders --
From net investment income $(32,071,588) $ (24,947,555)
From net realized gain on investments and foreign currency transactions -- (1,144,064)
From paid-in capital -- (41,080,548)
------------- --------------
Total distributions declared to shareholders $(32,071,588) $ (67,172,167)
------------- --------------
Trust share (principal) transactions --
Net asset value of shares reacquired from shareholders $(55,448,032) $ (16,946,722)
------------- --------------
Decrease in net assets from Trust share transactions $(55,448,032) $ (16,946,722)
------------- --------------
Total decrease in net assets $(36,792,385) $(117,957,832)
Net assets:
At beginning of period 829,355,727 947,313,559
------------- --------------
At end of period (including accumulated distributions in excess of net investment
income of $(699,513) and $(1,856,119), respectively) $792,563,342 $ 829,355,727
============= ==============
</TABLE>
See notes to financial statements
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Year Ended October 31,
Per share data (for Six
a share outstanding Months
throughout each Ended
period): 4/30/95** 1994** 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net asset value --
beginning of period $ 7.06 $ 7.90 $ 7.69 $ 7.93 $ 7.54
-------- -------- -------- -------- --------
Income from investment operations --
Net investment
income $ 0.29 $ 0.55 $ 0.63+++ $ 0.68+++ $ 0.72+++
Net realized and
unrealized gain
(loss) on
investments 0.21 (0.82) 0.31 -- 0.90
-------- -------- -------- -------- --------
Total from
investment
operations $ 0.50 $ (0.27) $ 0.94 $ 0.68 $ 1.62
-------- -------- -------- -------- --------
Less distributions declared to shareholders --
From net investment
income $ (0.28) $ (0.21) $ (0.51) $ (0.65) $ (0.70)
From net realized
gain on
investments and
foreign currency
transactions -- (0.01) (0.17) -- --
In excess of net
realized gain on
investments and
foreign currency
transactions -- -- (0.05) -- --
From paid-in capital -- (0.35) -- (0.27) (0.53)
-------- -------- -------- -------- --------
Total distributions
declared to
shareholders $ (0.28) $ (0.57) $ (0.73) $ (0.92) $ (1.23)
-------- -------- -------- -------- --------
Net asset value --
end of period $ 7.28 $ 7.06 $ 7.90 $ 7.69 $ 7.93
======== ======== ======== ======== ========
Per share market
value -- end of
period $ 6.375 $ 6.125 $ 7.375 $ 7.625 $ 7.750
========= ========= ======== ======== ========
Total return 8.73%# (9.57)% 6.49% 10.25% 36.98%
Ratios (to average net assets)/
Supplemental data:
Interest expense 0.17%* 0.08% 0.08% 0.24% 0.23%
Other expense 1.08%*+++ 1.06%+++ 1.03%+++ 1.11%+++ 1.11%+++
Net investment
income 8.43%*+++ 7.51%+++ 8.14%+++ 8.69%+++ 9.22%+++
Portfolio turnover 82% 133% 415% 425% 740%
Net assets at end of
period (000
omitted) $792,563 $829,356 $947,314 $947,292 $968,813
Leverage analysis:
Debt outstanding at
end of period (000
omitted) $ -- $ 90,000 $ -- $ -- $ --
Average daily
balance of debt
outstanding (000
omitted) $ 21,878 $ 9,616 $ 15,304 $ 39,230 $ 24,409
Average daily number
of shares
outstanding (000
omitted) 113,086 117,774 123,067 122,612 121,698
Average debt per
share $ 0.19 $ 0.08 $ 0.12 $ 0.32 $ 0.20
+ For the period from the commencement of investment operations, March 12, 1987 to October 31, 1987.
++ The investment adviser did not impose a portion of its management fee for the periods indicated. If this fee
had been incurred by the Trust, net investment income would have changed by less than $0.01 per share and the
ratios would have been:
Ratios (to average daily net assets):
Other expenses 1.11% 1.07% 1.06% 1.14% 1.13%
Net investment
income 8.41% 7.50% 8.11% 8.66% 9.20%
</TABLE>
See notes to financial statements
14
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Year Ended October 31,
Per share data
(for a share
outstanding
throughout each
period): 1990 1989 1988 1987+
<S> <C> <C> <C> <C>
Net asset value --
beginning of period $ 8.66 $ 9.01 $ 8.81 $ 9.40
-------- ---------- ---------- ----------
Income from investment operations --
Net investment income $ 0.86+++ $ 0.94 $ 0.90 $ 0.57
Net realized and unrealized
gain (loss) on
investments (0.75) (0.06) 0.53 (0.55)
-------- ---------- ---------- ----------
Total from investment
operations $ 0.11 $ 0.88 $ 1.43 $ 0.02
-------- ---------- ---------- ----------
Less distributions declared to shareholders --
From net investment
income $ (0.79) $ (1.11) $ (0.74) $ (0.46)
From net realized gain
on investments
and foreign
currency
transactions -- -- -- (0.13)
In excess of net
realized gain
on investments
and foreign
currency transactions -- -- -- --
From paid-in capital (0.44) (0.12) (0.49) (0.02)
-------- ---------- ---------- ----------
Total
distributions
declared to
shareholders $ (1.23) $ (1.23) $ (1.23) $ (0.61)
-------- ---------- ---------- ----------
Net asset value --
end of period $ 7.54 $ 8.66 $ 9.01 $ 8.81
======== ========== ========== ==========
Per share market value --
end of period $ 6.625 $ 9.000 $ 10.000 $ 9.125
======== ========== ========== ==========
Total return (14.08)% 2.68% 24.57% (3.99)%*
Ratios (to average net assets)/
Supplemental data:
Interest expense 0.45% -- -- --
Other expense 1.19%+++ 1.23% 1.12% 1.08%*
Net investment income 10.61%+++ 10.90% 9.96% 9.94%*
Portfolio turnover 365% 423% 159% 58%
Net assets at
end of period
(000 omitted) $917,522 $1,056,536 $1,086,400 $1,052,274
Leverage analysis:
Debt outstanding
at end of
period (000 omitted) $ -- $ -- $ -- $ --
Average daily
balance of debt
outstanding
(000 omitted) $ 43,956 $ -- $ -- $ --
Average daily
number of shares
outstanding
(000 omitted) 122,431 -- -- --
Average debt per share $ 0.36 $ -- $ -- $ --
+ For the period from the commencement of investment operations, March 12, 1987 to October 31, 1987.
++ The investment adviser did not impose a portion of its management fee for the periods indicated. If this fee
had been incurred by the Trust, net investment income would have changed by less than $0.01 per share and the
ratios would have been:
Ratios (to average daily net assets):
Other expenses 1.23% -- -- --
Net investment income 10.57% -- -- --
</TABLE>
* Annualized.
** Per share data for the periods subsequent to October 31, 1993 were
calculated using the average share method.
# Not annualized.
See notes to financial statements
14
<PAGE>
Notes to Financial Statements
(1) Business and Organization
MFS Multimarket Income Trust (the Trust) is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as a non-diversified, closed-end management investment company.
(2) Significant Accounting Policies
Investment Valuations -- Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues and forward
contracts, are valued on the basis of valuations furnished by dealers or by a
pricing service with consideration to factors such as institutional-size
trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics and other market data,
without exclusive reliance upon exchange or over-the-counter prices.
Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates value. Non-U.S. dollar denominated
short-term obligations are valued at amortized cost as calculated in the base
currency and translated into U.S. dollars at the closing daily exchange rate.
Futures contracts, options and options on futures contracts listed on
commodities exchanges are valued at closing settlement prices.
Over-the-counter options are valued by brokers through the use of a pricing
model which takes into account closing bond valuations, implied volatility
and short-term repurchase rates. Equity securities listed on securities
exchanges or reported through the NASDAQ system are valued at last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are valued at last quoted bid prices.
Securities for which there are no such quotations or valuations are valued at
fair value as determined in good faith by or at the direction of the
Trustees.
Repurchase Agreements -- The Trust may enter into repurchase agreements with
institutions that the Trust's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The Trust
requires that the securities purchased 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 securities
transferred to ensure that the value, including accrued interest, of the
securities under each repurchase agreement is greater than amounts owed to
the Trust under each such repurchase agreement.
Foreign Currency Translation -- Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments and 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.
Written Options -- The Trust may write covered call or put options for which
premiums are received and are recorded as liabilities, and are subsequently
adjusted to the current value of the options written. Premiums received from
writing options which expire are treated as realized gains. Premiums received
from writing options which are exercised or are closed are offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
security purchased by the Trust. The Trust, as writer of an option, may have
no control over whether the underlying securities may be sold (call) or
purchased (put) and, as a result, bears the market risk of an unfavorable
change in the price of the securities underlying the written option. In
general, written call options
15
<PAGE>
Notes to Financial Statements--Continued
may serve as a partial hedge against decreases in value in the underlying
securities to the extent of the premium received. Written options may also be
used as part of an income producing strategy reflecting the view of the
Trust's management on the direction of interest rates.
Futures Contracts -- The Trust may enter into financial futures contracts for
the delayed delivery of securities, 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 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 underlying security, and are recorded for financial statement
purposes as unrealized gains or losses by the Trust. The Trust's investment
in financial futures contracts is designed to hedge against anticipated
future changes in interest or exchange rates or securities prices. For
example, interest rate futures may be used in modifying the duration of the
portfolio without incurring the additional transaction costs involved in
buying and selling the underlying securities. Should interest or exchange
rates or securities prices move unexpectedly, the Trust may not achieve the
anticipated benefits of the financial futures contracts and may realize a
loss.
Security Loans -- The Trust may lend its securities to member banks of the
Federal Reserve System and to member firms of the New York Stock Exchange or
subsidiaries thereof. The loans are collateralized at all times by cash or
securities with a market value at least equal to the market value of
securities loaned. As with other extensions of credit, the Trust may bear the
risk of delay in recovery or even loss of rights in the collateral should the
borrower of the securities fail financially. The Trust receives compensation
for lending its securities in the form of fees or from all or a portion of
the income from investment of the collateral. The Trust would also continue
to earn income on the securities loaned. At April 30, 1995, the Trust had no
securities on loan.
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 these contracts from the potential inability of counterparties
to meet the terms of their contracts and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar. The Trust will enter
into forward 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. It 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 for financial statement purposes as unrealized until
the contract settlement date.
Investment Transactions and Income -- Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and original issue discount are amortized or accreted for both financial
statement and tax reporting purposes as required by federal income tax
regulations. Dividend income is recorded on the ex-dividend date for
dividends received in cash. 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 has approximately 72% of its portfolio invested in high-yield
securities rated below investment grade. Investments in high-yield securities
are accompanied by a greater degree of credit risk and the risk tends to be
more sensitive to economic conditions than that of higher-rated securities.
16
<PAGE>
The Trust uses the effective interest method for reporting interest income on
payment-in-kind (PIK) bonds, whereby interest income on PIK bonds is recorded
ratably by the Trust at a constant yield to maturity. Legal fees and other
related expenses incurred to preserve and protect the value of a security
owned are added to the cost of the security; other legal fees are expensed.
Capital infusions, which are generally non-recurring, incurred to protect or
enhance the value of high-yield debt securities, are reported as an addition
to the cost basis of the security. Costs that are incurred to negotiate the
terms or conditions of capital infusions or that are expected to result in a
plan of reorganization are considered workout expenses and are reported as
realized losses. Ongoing costs incurred to protect or enhance an investment,
or costs incurred to pursue other claims or legal actions, are reported as
operating expenses.
Tax Matters and Distributions -- The Trust's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
The Trust files a tax return annually using tax accounting methods required
under provisions of the Code which may differ from generally accepted
accounting principles, the basis on which these financial statements are
prepared. Accordingly, the amount of net investment income and net realized
gain reported on these financial statements may differ from that reported on
the Trust's tax return and, consequently, the character of distributions to
shareholders reported in the financial highlights may differ from that
reported to shareholders on Form 1099-DIV. Foreign taxes have been provided
for on interest and dividend income earned on foreign investments in
acccordance with the applicable country's tax rates and to the extent
unrecoverable are recorded as a reduction of investment income. Distributions
to shareholders are recorded on the ex-dividend date.
The Trust distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a return of
capital. Differences in the recognition or classification of income between
the financial statements and tax earnings and profits which result in
temporary over-distributions for financial statement purposes are classified
as distributions in excess of net investment income or accumulated net
realized gains.
(3) Transactions with Affiliates
Investment Adviser -- The Trust has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee, computed daily and paid monthly at an effective annual rate
of 0.34% of average daily net assets and 5.40% of investment income, amounted
to $3,390,317 for the six months ended April 30, 1995. The investment adviser
did not impose a portion of its fee ($104,222), which is reflected as a
preliminary reduction of expenses in the Statement of Operations.
The Trust pays no compensation directly to its Trustees who are officers of
the investment adviser, or to officers of the Trust, all of whom receive
remuneration for their services to the Trust from MFS. Certain of the
officers and Trustees of the Trust are officers or directors of MFS, MFS Fund
Distributors, Inc. (MFD) and MFS Service Center, Inc. (MFSC). The Trust has
an unfunded defined benefit plan for all its independent Trustees. Included
in Trustees' compensation is a net periodic pension expense of $26,092 for
the six months ended April 30, 1995.
17
<PAGE>
Notes to Financial Statements--Continued
Transfer Agent -- Commencing August 15, 1994, the Trust entered into an
agreement with MFSC to act as registrar and dividend disbursing agent for the
Trust. The agreement provides that the Trust will pay MFSC an account
maintenance fee and dividend services fee and will reimburse MFSC for
reasonable out-of-pocket expenses. The account maintenance fee is computed as
follows:
<TABLE>
<CAPTION>
Total Number of Accounts Annual Account Fee
- -------------------------- --------------------
<S> <C>
Less than 75,000 $9.00
75,000 and over $8.00
</TABLE>
The dividend services fee is $0.75 per dividend reinvestment and $0.75 per
cash infusion. Fees incurred under the agreement for the six months ended
April 30, 1995 amounted to $203,941.
(4) Portfolio Securities
Purchases and sales of investments,
other than purchased option transactions and short-term obligations, were as
follows:
<TABLE>
<CAPTION>
Purchases Sales
- ---------------------------------------------- -------------- ----------------
<S> <C> <C>
U.S. government securities $331,257,029 $288,806,696
============ ==============
Investments (non-U.S. government securities) $336,548,270 $317,178,899
============ ==============
</TABLE>
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Trust, as
computed on a federal income tax basis, are as follows:
<TABLE>
<CAPTION>
<S> <C>
Aggregate cost $786,751,843
===============
Gross unrealized depreciation $(20,069,233)
Gross unrealized appreciation 18,566,869
---------------
Net unrealized depreciation $ (1,502,364)
===============
</TABLE>
(5) Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of
beneficial interest (without par value). Transactions in Trust shares were as
follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1995 October 31, 1994
-------------------------------- ----------------------------------
Shares Amount Shares Amount
- ---------------------------- ------------- --------------- ------------- -----------------
<S> <C> <C> <C> <C>
Treasury shares reacquired (8,654,400) $(55,448,032) (2,372,000) $(16,946,722)
----------- ------------- ----------- ---------------
Net decrease (8,654,400) $(55,448,032) (2,372,000) $(16,946,722)
=========== ============= =========== ===============
</TABLE>
In accordance with the provisions of the prospectus, 8,654,400 and 2,372,000
shares of beneficial interest were purchased by the Trust during the six
months ended April 30, 1995 and the year ended October 31, 1994, at an
average price per share of $6.41 and $7.14 and a weighted average discount of
8.66% and 8.51%, respectively.
18
<PAGE>
(Table has been restubbed to accommodate 132 character limit)
(6) Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
Quarterly Period Investment Income Net Investment Income
- ------------------ ------------------------ ------------------------
Per Per
Fiscal 1995 Amount Share Amount Share
- ------------------ ------------- ------- ------------- -------
<S> <C> <C> <C> <C>
January 31, 1995 $19,940,462 $0.17 $17,058,034 $0.15
April 30, 1995 18,208,468 0.16 16,170,160 0.14
----------- ----- ----------- -----
$38,148,930 $0.33 $33,228,194 $0.29
=========== ===== =========== =====
Fiscal 1994
- ------------------
January 31, 1994 $18,043,695 $0.15 $15,609,109 $0.13
April 30, 1994 17,551,635 0.15 15,375,127 0.13
July 31, 1994 19,540,252 0.17 17,191,421 0.15
October 31, 1994 19,722,433 0.17 16,827,019 0.14
----------- ----- ----------- -----
$74,858,015 $0.64 $65,002,676 $0.55
=========== ===== =========== =====
Fiscal 1993
- ------------------
January 31, 1993 $20,548,108 $0.17 $17,861,265 $0.14
April 30, 1993 27,398,097 0.22 24,712,240 0.19
July 31, 1993 20,799,767 0.18 17,897,812 0.16
October 31, 1993 18,869,905 0.16 16,615,553 0.14
----------- ----- ----------- -----
$87,615,877 $0.73 $77,086,870 $0.63
=========== ===== =========== =====
Net Realized and Net Increase (Decrease)
Unrealized Gain (Loss) in Net Assets Resulting
Quarterly Period on Investments from Operations
- ------------------ ------------------------ ------------------------
Per Per
Fiscal 1995 Amount Share Amount Share
- ------------------ ------------- ------- ------------- -------
<S> <C> <C> <C> <C>
January 31, 1995 $(15,938,110) $(0.19) $ 1,119,924 $(0.04)
April 30, 1995 33,437,151 0.40 49,607,311 0.54
----------- ----- ----------- -----
$ 17,499,041 $ 0.21 $ 50,727,235 $ 0.50
=========== ===== =========== =====
Fiscal 1994
- ------------------
January 31, 1994 $ 4,353,365 $ 0.06 $ 19,962,474 $ 0.19
April 30, 1994 (75,952,694) (0.65) (60,577,567) (0.52)
July 31, 1994 (21,157,245) (0.18) (3,965,824) (0.03)
October 31, 1994 (6,085,045) (0.05) 10,741,974 0.09
----------- ----- ----------- -----
$(98,841,619) $(0.82) $(33,838,943) $(0.27)
=========== ===== =========== =====
Fiscal 1993
- ------------------
January 31, 1993 $ 1,216,844 $ 0.02 $ 19,078,109 $ 0.16
April 30, 1993 10,636,344 0.09 35,348,584 0.28
July 31, 1993 11,822,506 0.09 29,720,318 0.25
October 31, 1993 12,993,430 0.11 29,608,983 0.25
----------- ----- ----------- -----
$ $
36,669,124 0.31 $113,755,994 $ 0.94
=========== ===== =========== =====
</TABLE>
(7) Line of Credit
The Trust entered into an agreement for an unsecured line of credit with several
banks which allowed the Trust to borrow up to $150 million to invest in
accordance with the investment practices of the Trust. During the period, the
maximum amount outstanding was $90 million, and there was no outstanding debt at
April 30, 1995. Interest rates on the amounts borrowed vary depending upon the
source and are based upon either the bank's base rate, the bank's adjusted
certificate of deposit rate, or the Eurodollar rate. Interest expense incurred
on the borrowings amounted to $663,348 for the period ended April 30, 1995, and
the weighted average interest rate on these borrowings was 5.3%. Interest
expense includes a commitment fee of $78,698, which is based on the average
daily unused portion of the line of credit.
(8) Financial Instruments
The Trust may trade financial instruments with off-balance sheet risk in the
normal course of its investing activities in order to manage exposure to market
risks such as interest rates and foreign currency exchange rates. These
financial instruments include written options, forward foreign currency exchange
contracts and indexed securities. The notional or contractual amounts of these
instruments represent the investment the Trust has in particular classes of
financial instruments and does not necessarily represent the amounts potentially
subject to risk. The measurement of the risks associated with these instruments
is meaningful only when all related and offsetting transactions are considered.
A summary of obligations under these financial instruments at April 30, 1995 is
as follows:
19
<PAGE>
Notes to Financial Statements -- continued
Written Option Transactions
<TABLE>
<CAPTION>
1995 Calls 1995 Puts
---------------------------- ------------------------------
Principal Principal
Amounts Amounts
of Contracts of Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
- ----------------------------------------------- -------------- ---------- -------------- ------------
<S> <C> <C> <C> <C>
Outstanding, beginning of period --
Australian Dollars 11,216 $ 78,508 -- $ --
Options written --
Australian Dollars 6,097 46,513 13,587 157,050
British Pounds 9,487 163,713 8,851 163,713
Canadian Dollars -- -- 20,491 86,195
Deutsche Marks 93,710 732,016 67,147 510,496
Deutsche Marks/British Pounds 16,034 104,122 -- --
Finnish Markkaa/Deutsche Marks -- -- 26,134 19,115
Japanese Yen -- -- 2,803,911 337,664
Japanese Yen/Deutsche Marks -- -- 5,038,371 132,323
Spanish Pesetas/Deutsche Marks -- -- 874,685 57,322
Swiss Francs/Deutsche Marks 11,268 47,449 -- --
U.S. Dollars 9,000 46,406 -- --
Options terminated in closing transactions --
Australian Dollars (17,313) (125,021) (13,587) (157,050)
Canadian Dollars -- -- (20,491) (86,195)
Deutsche Marks (50,211) (431,027) (67,147) (510,496)
Japanese Yen -- -- (2,803,911) (337,664)
Japanese Yen/Deutsche Marks -- -- (5,038,371) (132,323)
Spanish Pesetas/Deutsche Marks -- -- (874,685) (57,322)
Options exercised --
Swiss Francs/Deutsche Marks (11,269) (47,449) -- --
U.S. Dollars (9,000) (46,406) -- --
Options expired --
Finnish Markkaa/Deutsche Marks -- -- (26,134) (19,115)
------------- -------- ------------- ----------
Outstanding, end of period 69,019 $ 568,824 8,851 $ 163,713
============= ======== ============= ==========
Options outstanding at end of period consist of --
British Pounds 9,487 $ 163,713 8,851 $ 163,713
============= ======== ============= ==========
Deutsche Marks 43,498 $ 300,989 -- --
============= ======== ============= ==========
Deutsche Marks/British Pounds 16,034 $ 104,122 -- --
============= ======== ============= ==========
</TABLE>
At April 30, 1995, the Trust had sufficient cash and/or securities at least
equal to the value of the written options.
20
<PAGE>
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
Net Unrealized
Settlement Contracts to Contracts Appreciation
Date Deliver/Receive In Exchange for at Value (Depreciation)
- ----------- -------------- ----- --------------- --------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Sales 6/09/95 -
7/05/95 AUD 54,578,717 $ 40,310,316 $ 39,567,113 $ 743,203
6/09/95 -
7/07/95 CAD 7,735,808 5,625,337 5,685,861 (60,524)
7/12/95 -
7/19/95 CHF 12,482,305 10,865,054 10,919,755 (54,701)
5/02/95 -
8/16/95 DEM 190,524,584 135,256,457 137,696,210 (2,439,753)
5/08/95 DKK 158,494,833 28,894,469 29,102,346 (207,877)
6/21/95 -
7/05/95 ESP 2,789,965,912 21,416,273 22,509,936 (1,093,663)
5/02/95 -
8/02/95 FRF 258,936,257 51,458,798 52,479,301 (1,020,503)
6/09/95 -
7/07/95 GBP 10,452,482 16,648,691 16,821,421 (172,730)
5/04/95 -
8/04/95 IEP 6,615,538 10,550,826 10,788,720 (237,894)
5/02/95 -
7/10/95 JPY 4,925,558,337 52,747,624 59,043,298 (6,295,674)
6/26/95 NLG 52,684,892 33,714,879 33,993,715 (278,836)
6/09/95 NZD 8,531,643 5,447,871 5,717,114 (269,243)
------------- ------------ --------------
$412,936,595 $424,324,790 $(11,388,195)
============= ============ ==============
Purchases 7/05/95 AUD 7,597,876 $ 5,773,375 $ 5,502,618 $ (270,757)
7/07/95 CAD 5,559,900 3,942,996 4,082,868 139,872
7/12/95 CHF 11,991,914 10,676,372 10,487,301 (189,071)
5/02/95 -
8/16/95 DEM 277,251,705 196,880,185 200,371,374 3,491,189
6/21/95 -
7/05/95 ESP 1,476,367,713 11,473,797 11,907,887 434,090
5/02/95 -
5/04/95 FRF 134,980,820 27,753,318 27,416,369 (336,949)
6/09/95 -
7/07/95 GBP 7,697,088 12,288,878 12,388,240 99,362
5/04/95 IEP 4,075,393 6,570,323 6,650,829 80,506
6/16/95 -
8/01/95 JPY 3,794,017,574 43,333,040 45,528,484 2,195,444
6/26/95 NLG 21,885,065 13,931,885 14,120,835 188,950
6/09/95 -
11/15/95 NZD 16,228,170 10,719,977 10,772,599 52,622
------------- ------------ --------------
$343,344,146 $349,229,404 $ 5,885,258
============= ============ ==============
</TABLE>
Forward foreign currency purchases and sales under master netting
arrangements and closed forward foreign currency exchange contracts excluded
above amounted to a net receivable of $2,169,928 at April 30, 1995.
At April 30, 1995, the Trust had sufficient cash and/or securities to cover
any commitments under these contracts.
21
<PAGE>
Notes to Financial Statements -- continued
(9) Restricted Securities
The Trust may invest not more than 10% of its net assets in securities which
are subject to legal or contractual restrictions on resale. At April 30,
1995, the Trust owned the following restricted securities (constituting 4.0%
of net assets) which may not be publicly sold without registration under the
Securities Act of 1933. The Trust does not have the right to demand that such
securities be registered. The value of these securities is determined by
valuations supplied by a pricing service or brokers or, if not available, in
good faith by or at the direction of the Trustees. Certain of these
securities may be offered and sold to "qualified institutional buyers" under
Rule 144A of the 1933 Act.
<TABLE>
<CAPTION>
Dates of Share/
Description Acquisition Par Amount Cost Value
- -------------------------------------------- ----------------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
Alliant Technology Systems, 11.75s, 2003 3/07/95 400,000 $ 400,000 $ 415,000
Americo Life, Inc., 9.25s, 2005 5/19/93 -
1/12/94 3,250,000 3,283,125 2,884,375
Amerigas Partners Co., 10.125s, 2007 4/12/95 600,000 600,000 610,500
Arcadian Partners Co., 10.75s, 2005 5/03/93 -
6/04/93 2,025,000 2,015,375 2,078,157
Dominicks Finer Foods, Inc., 10.875s, 2005 4/27/95 500,000 500,000 500,000
Exide Corp., 10s, 2005 4/21/95 600,000 600,000 607,500
Financiera Energetica Nacional, 9s, 1999 4/05/95 3,000,000 2,877,000 2,880,000
Hidroelectrica Alicura, 8.375s, 1999 4/08/94 1,500,000 1,411,875 1,215,000
Merrill Lynch Home Equity Loan, 9.3s, 2016 12/16/92 7,774,883 7,804,039 7,850,999
Merrill Lynch Mortgage Investors, 0s, 2023 6/22/94 1,200,000 831,750 869,629
National Power Corp., 7.625s, 2000 1/28/94 2,000,000 1,970,000 1,775,000
Petroliam Nasional Berhad, 6.875s, 2003 6/22/93 1,000,000 1,000,000 941,530
Remington Arms, Inc., 0s, 2003 11/19/93 300,000 298,125 267,000
Republic of Malta, 7.5s, 2009 3/17/94 2,000,000 1,997,220 1,930,000
SD Warren Co., 12s, 2004 12/13/94 2,400,000 2,400,000 2,592,000
Siam Commercial Bank, 7s, 1995 9/01/94 75,000,000 2,927,458 3,048,505
UCAR Global Enterprises, 12s, 2005 1/20/95 1,250,000 1,250,000 1,343,750
------------
$31,808,945
============
</TABLE>
22
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
To the Trustees and Shareholders of MFS Multimarket Income Trust:
We have audited the accompanying statement of assets and liabilities of MFS
Multimarket Income Trust, including the schedule of portfolio investments, as
of April 30, 1995, the related statement of operations for the six-month
period then ended and the statement of changes in net assets and financial
highlights for the six-month period then ended and for the year ended October
31, 1994. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for each of the six years in the period
ended October 31, 1993 and for the period from March 12, 1987 (commencement
of operations) to October 31, 1987 were audited by other auditors whose
report dated December 17, 1993 expressed an unqualified opinion on those
statements and financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of April 30, 1995, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Multimarket Income Trust as of April 30, 1995, the results of its operations
for the six-month period then ended, and the changes in its net assets and
financial highlights for the six-month period then ended and for the year
ended October 31, 1994, in conformity with generally accepted accounting
principles.
(signature of Ernst & Young LLP)
Boston, Massachusetts
June 2, 1995
