Dear Shareholders:
The past six months have seen both euphoria and shock in the world bond
markets. The euphoria of late 1995 followed a year-long period when bond
prices, for the most part, progressively rose, while the yield on 30-year
U.S. Treasury bonds fell to 5.87% in a market driven by optimism on
inflation. However, this optimism disappeared in February of this year as the
federal government reported unusually high job growth. As a result, bond
prices in the United States and overseas suddenly fell and continued to fall
well into the second quarter. This new information caused the markets to
conclude that consumer prices could be on their way up, destroying purchasing
power in 1996.
For the six months ended April 30, 1996, the Trust had a total return of
10.14%, based on the beginning and ending stock market prices and assuming
the reinvestment of all distributions paid during the period. The Trust's
total return based on its net asset value was 3.72% for the same period. We
believe the difference in returns reflected investors' positive response to a
repurchase program announced by the Board of Trustees on April 10, 1996.
Under this program, up to 10% of the outstanding shares of the Trust may be
repurchased annually when the shares are trading at a discount to net asset
value. In addition, the Trustees voted to pay the shareholders special
distributions on a monthly basis throughout each year, based on the
difference between the price of any shares repurchased under the program and
the net asset value of such shares on the date of repurchase. These special
distributions of the captured economic value may constitute a return of
capital to shareholders for tax purposes. We believe this plan to return the
value of the discount to shareholders in the form of higher monthly
distributions may continue to have a positive effect on the discount and
should not disrupt the portfolio management of the Trust. This plan replaces
the existing share repurchase plan previously implemented by the Trustees in
November 1994.
The Trust derives much of its diversification from investing in markets other
than U.S. government bonds such as international bonds, corporate bonds, and
emerging market bonds. This has provided a favorable mix of assets that has
helped us cushion moves in U.S. interest rates while providing a measure of
stability to the Trust's net asset value. The following gives a general
review of these specific markets and how our strategies differ for each
market.
U.S. Government Sector
Over the past six months, our management of the U.S. government portion of
the portfolio has sought to benefit from low inflation and further increases
in bond prices. These strategies helped the Trust in the latter half of 1995
and into early 1996. We altered this approach early in 1996 as interest rates
began rising and we began to give back earlier gains. Thus, we took a more
cautious approach temporarily in the first quarter, while de-emphasizing our
U.S. government weighting. Going forward, we believe increases in interest
rates will be moderate, but that the risk of rising inflation spurred by
higher oil and metals prices is higher now than earlier in this business
cycle. Thus, bond vigilance will become ever more critical to managing fixed-
income assets.
Corporate Bond Sector
The biggest share of this sector remains in below- investment-grade bonds,
and more funds were dedicated to this sector during the market turmoil of the
first quarter. Because high-yield corporate bonds often benefit from economic
growth, we believe they can be an excellent diversifier when rates begin to
rise. Their prices also have the advantage of being less sensitive to rising
interest rates. While this sector is no longer particularly cheap, we believe
that, with careful research and intelligent industry selection, high-yield
corporate bonds can continue to benefit the Trust.
1
<PAGE>
International Bond Sector
Movements in the international bond market have been highly correlated to the
U.S. bond market in recent months. While prices there have declined with
those of the U.S. market, this sector remains our best hope for capital
appreciation in the coming months. We have particularly focused our
international investments in central Europe (Germany) and in some of the
other higher-yielding countries in Europe. Europe has proven to be less
flexible than the United States in coming to grips with slow growth and in
maintaining a flexible labor force. As a result, we believe that interest
rates in countries such as Italy and Spain are too high to be sustained, and
that the real rate of return on bonds (nominal yields minus local inflation
rates) could provide significant relative value. Looking ahead, we foresee
somewhat higher bond prices in Europe and weaker currency returns. As a
result, much of our international holdings are hedged back into U.S. dollars.
We have been maintaining a 10% to 25% weighting (25% maximum allowable) in
emerging market debt (mostly U.S. dollar Brady bonds), and the Trust has
benefited greatly in the last six months from credit improvements in Poland
(which has received an investment-grade rating) and Mexico. We may soon shift
some money from this sector because of its recent strong relative
performance.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/ A. Keith Brodkin
A. Keith Brodkin
Chairman and President
/s/ James T. Swanson
James T. Swanson
Portfolio Manager
May 10, 1996
******************************[BOXED TEXT]**********************************
Performance Summary
(For the six months ended April 30, 1996)
Net Asset Value Per Share
October 31, 1995 $7.57
April 30, 1996 $7.54
New York Stock Exchange Price
October 31, 1995 $6.50
April 24, 1996 (high)* $7.00
January 16, 1996 (low)* $6.375
April 30, 1996 $6.875
*For the period November 1, 1995 through April 30, 1996.
****************************************************************************
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.
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, 1996, our records indicate that there are 20,525 registered
shareholders and approximately 67,800 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:
State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
1-800-637-2304
New York Stock Exchange Symbol
The New York Stock Exchange symbol is MMT.
2
<PAGE>
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, 1996
<TABLE>
Bonds -- 95.3%
<CAPTION>
Principal
Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Dollar Denominated -- 76.5%
Corporate Asset-Backed -- 0.1%
Merrill Lynch Mortgage Investors, 8.227s,
2023+ $1,200 $ 891,375
--------------
Financial Institutions -- 3.0%
American Annuity Group, Inc., 9.5s, 2001 $1,000 $ 1,030,000
American Annuity Group, Inc., 11.125s, 2003 800 856,000
Americo Life, Inc., 9.25s, 2005 2,650 2,510,875
Arkwright CSN Trust, 9.625s, 2026## 1,000 1,005,620
Auburn Hills Trust, 12s, 2020 5,000 7,197,100
Leucadia National Corp., 8.25s, 2005 4,000 3,924,640
Leucadia National Corp., 7.75s, 2013 6,500 6,112,535
--------------
$22,636,770
--------------
Foreign -- U.S. Dollar Denominated -- 10.4%
Banco Nacional de Commerce, 8s, 2000 $2,500 $ 2,315,625
Bell Cablemedia PLC, 0s, 2005 4,625 3,017,813
Diamond Cable Communication PLC, 0s, 2005 2,000 1,205,000
Federal Republic of Brazil, 8.75s, 2001 1,860 1,704,225
Federal Republic of Brazil, 6.5625s, 2009 4,000 2,760,000
Federal Republic of Brazil, 4s, 2014 5,412 3,254,062
Federal Republic of Brazil, 6.5s, 2024 15,000 10,143,750
GPA PLC, 10.875s, 2019 250 260,000
Gulf Canada Resources Ltd., 9.25s, 2004 2,400 2,400,000
Hidroelectrica Alicura, 8.375s, 1999 ## 1,500 1,425,000
National Power Corp., 7.625s, 2000 ## 2,000 1,950,000
Newsquest Capital PLC, 11s, 2006 ## 750 750,000
Poland Discount Notes, 3.75s, 2014 3,000 2,302,500
Poland Discount Notes, 6.4375s, 2024 8,000 7,420,000
Republic of Argentina, 9.25, 2001 3,500 3,355,625
Republic of Argentina, 6.3125s, 2005 9,900 7,561,125
Republic of Argentina, 6.5625s, 2023 14,000 9,080,000
U.S. Dollar Denominated -- continued
Foreign -- U.S. Dollar Denominated -- continued
Republic of Ecuador, 6.0625s, 2015 $2,083 $ 911,111
Republic of Ecuador, 3.25s 2025 3,000 1,065,000
Telecom Argentina, 12s, 2002 5,000 5,362,500
United Mexican States, "A", 6.25s, 2019 4,750 3,129,063
United Mexican States, "B", 6.76563s, 2019 2,433 1,873,035
United Mexican States, "C", 6.60938s, 2019 333 267,233
United Mexican States, "D", 6.54688s, 2019 7,417 5,952,143
--------------
$79,464,810
--------------
Industrials -- 29.1%
Aerospace -- 0.2%
CHC Helicopter, 11.5s, 2002 $1,425 $ 1,350,188
--------------
Airlines -- 0.4%
K&F Industries, Inc., 13.75s, 2001 $2,500 $ 2,600,000
K&F Industries, Inc., 11.875s, 2003 725 783,000
--------------
$ 3,383,000
--------------
Apparel and Textiles
Guess, Inc., 9.5s, 2003 $250 $ 242,500
--------------
Automotive -- 0.7%
Exide Corp., 10s, 2005 $1,100 $ 1,124,750
Harvard Industries, Inc., 12s, 2004 1,000 1,030,000
Harvard Industries, Inc., 11.125s, 2005 750 755,625
SPX Corp., 11.75s, 2002 2,000 2,150,000
--------------
$ 5,060,375
--------------
Building -- 1.8%
American Standard, Inc., 0s, 2005 $7,175 $ 6,098,750
Building Materials Corp., 0s, 2004 1,087 807,469
Nortek, Inc., 9.875s, 2004 2,750 2,609,063
Schuller International Group, Inc., 10.875s,
2004 1,000 1,080,000
UDC Homes, Inc., "C", 14.5s, 2000 29 14,650
USG Corp., 9.25s, 2001 3,150 3,299,625
--------------
$13,909,557
--------------
Cellular Telephones -- 0.5%
Vanguard Cellular Systems, Inc., 9.375s,
2006 $3,500 $ 3,469,375
--------------
4
<PAGE>
Principal
Amount
Issuer (000 Omitted) Value
U.S. Dollar Denominated -- continued
Industrials -- continued
Chemicals -- 1.6%
Arcadian Partners LP, 10.75s, 2005 $2,475 $ 2,660,625
Indspec Chemical Corp., 0s, 2003 3,250 2,762,500
Koppers Industries, Inc., 8.5s, 2004 1,500 1,428,750
NL Industries, Inc., 11.75s, 2003 2,105 2,178,675
UCC Investors Holdings, Inc., 10.5s, 2002 1,750 1,815,625
UCC Investors Holdings, Inc., 0s, 2005 1,250 1,006,250
--------------
$11,852,425
--------------
Consumer Goods and Services -- 2.1%
ADT Operations, Inc., 9.25s, 2003 $ 540 $ 561,600
Consolidated Cigar Corp., 10.5s, 2003 1,000 1,050,000
International Semi-Tech Microelectronics,
Inc., 0s, 2003 3,000 1,800,000
Ithaca Industries, Inc., 11.125s, 2002** 1,000 420,000
Reeves Industries, Inc., 11s, 2002 2,000 1,905,000
Remington Arms, Inc., 9.5s, 2003## 300 273,000
Revlon, Inc., 10.5s, 2003 3,750 3,825,000
Samsonite Corp., 11.125s, 2005 1,000 1,015,000
Sealy Corp., 9.5s, 2003 1,250 1,231,250
Westpoint Stevens, Inc., 9.375s, 2005 4,500 4,410,000
--------------
$16,490,850
--------------
Containers -- 1.9%
Calmar, Inc., 11.5s, 2005 $1,000 $ 990,000
Container Corp. of America, 9.75s, 2003 1,050 1,050,000
Gaylord Container Co., 11.5s, 2001 1,000 1,035,000
Gaylord Container Co., 0s, 2005 1,150 1,196,000
Ivex Packaging Corp., 12.5s, 2002 2,550 2,677,500
Owens-Illinois, Inc., 11s, 2003 3,500 3,828,125
Owens-Illinois, Inc., 9.95s, 2004 1,000 1,023,750
Plastic Containers, Inc., 10.75s, 2001 500 502,500
U.S. Dollar Denominated -- continued
Industrials -- continued
Containers -- continued
SD Warren Co., 12s, 2004 $ 250 $ 260,625
Silgan Corp., 11.75s, 2002 1,700 1,776,500
Stone Consolidated Corp., 10.25s, 2000 200 209,000
--------------
$14,549,000
--------------
Defense Electronics -- 0.2%
Alliant Techsystems, Inc., 11.75s, 2003 $1,100 $ 1,207,250
--------------
Entertainment -- 1.7%
ACT III Theatres, Inc., 11.875s, 2003 $2,300 $ 2,524,250
Albritton Communications Corp., 11.5s, 2004 500 517,500
SCI Television, Inc., 11s, 2005 4,000 4,170,000
Turner Broadcasting Systems, Inc., 8.375s,
2013 5,000 4,799,450
United Artist Theater Circuit, Inc., 11.5s,
2002 1,000 1,060,000
--------------
$13,071,200
--------------
Financial Institutions -- 0.4%
American Life Holdings Co., 11.25s, 2004 $1,250 $ 1,300,000
Tiphook Finance Corp., 8s, 2000 2,509 1,881,750
--------------
$ 3,181,750
--------------
Food and Beverage Products -- 0.8%
Coca-Cola Bottling Group Southwest, Inc.,
9s, 2003 $1,000 $ 1,010,000
Nabisco, Inc., 7.55s, 2015 2,965 2,809,545
Specialty Foods Corp., 10.25s, 2001 1,350 1,242,000
Texas Bottling Group, Inc., 9s, 2003 1,000 1,005,000
--------------
$ 6,066,545
--------------
Forest and Paper Products -- 0.2%
Fort Howard Corp., 9.25s, 2001 $1,650 $ 1,633,500
--------------
Insurance -- 0.3%
Conseco, Inc., 10.5s, 2004 $2,100 $ 2,359,140
--------------
Machinery -- 0.1%
AGCO Corp., 8.5s, 2006## $1,000 $ 1,005,000
--------------
Medical and Health Technology
and Services -- 1.4%
Beverly Enterprises, Inc., 9s, 2006 $1,100 $ 1,034,000
Community Health System, 10.25s, 2003 3,100 3,255,000
5
<PAGE>
Portfolio of Investments -- continued
Bonds -- continued
Principal
Amount
Issuer (000 Omitted) Value
U.S. Dollar Denominated -- continued
Industrials -- continued
Medical and Health Technology
and Services -- continued
Integrated Health Services, Inc., 10.75s,
2004 $ 850 $ 884,000
OrNda Healthcorp, 12.25s, 2002 2,450 2,664,375
Tenet Healthcare Corp., 10.125s, 2005 2,500 2,675,000
--------------
$10,512,375
--------------
Metals and Minerals -- 0.6%
Easco Corp., 10s, 2001 $ 950 $ 950,000
Jorgensen (Earle M.) Co., 10.75s, 2000 1,350 1,336,500
Kaiser Aluminum & Chemical Corp., 9.875s,
2002 2,100 2,110,500
--------------
$ 4,397,000
--------------
Oil Services -- 1.1%
AmeriGas Partners LP, 10.125s, 2007 $ 600 $ 631,500
Clark USA, Inc., 10.875s, 2005 1,000 1,040,000
Falcon Drilling Co., 8.875s, 2003 1,750 1,732,500
Ferrell Gas LP, 10s, 2001 1,600 1,680,000
Ferrell Gas, 9.375s, 2006## 500 497,500
Global Marine, Inc., 12.75s, 1999 1,900 2,042,500
Nuevo Energy Co., 9.5s, 2006 500 501,250
Tuboscope Vetco International, Inc., 10.75s,
2003 650 672,750
--------------
$ 8,798,000
--------------
Oils
Kelley Oil & Gas Corp., 13.5s, 1999 $ 275 $ 291,500
--------------
Printing and Publishing -- 0.2%
Day International Group, Inc., 11.125s, 2005 $1,000 $ 1,020,000
Western Publishing Group, 7.65s, 2002 575 464,313
--------------
$ 1,484,313
--------------
Special Products and Services -- 3.2%
AAF-McQuay, Inc., 8.875s, 2003 $2,000 $ 1,915,000
Blount, Inc., 9s, 2003 1,250 1,268,750
Fairfield Manufacturing, 11.375s, 2001 1,850 1,887,000
U.S. Dollar Denominated -- continued
Industrials -- continued
Special Products and Services -- continued
IMO Industries, Inc., 12.25s, 1997 $2,317 $ 2,325,689
IMO Industries, Inc., 12s, 2001 1,150 1,181,625
IMO Industries, Inc., 11.75s, 2006## 1,650 1,662,375
Idex Corp., 9.75s, 2002 1,000 1,045,000
Interlake Corp., 12s, 2001 750 780,000
Interlake Corp., 12.125s, 2002 1,400 1,351,000
Interlake Revolver, "B", 5.75s, 1997## 315 307,872
Mark IV Industries, Inc., 8.75s, 2003 2,750 2,805,000
Newflo Corp., 13.25s, 2002 750 787,500
Polymer Group, Inc., 12.25s, 2002 1,250 1,350,000
Spreckels Industries, Inc., 11.5s, 2000 200 207,000
Synthetic Industries, Inc., 12.75s, 2002 900 949,500
Talley Manufacturing & Technology, Inc.,
10.75s, 2003 2,550 2,575,500
Thermadyne Holdings Corp., 10.75s, 2003 2,250 2,250,000
--------------
$24,648,811
--------------
Steel -- 1.2%
AK Steel Holdings Corp., 10.75s, 2004 $3,828 $ 4,182,090
Armco, Inc., 11.375s, 1999 1,000 1,032,500
UCAR Global Enterprises, Inc., 12s, 2005 665 758,100
WCI Steel, Inc., 10.5s, 2002 3,550 3,558,875
--------------
$ 9,531,565
--------------
Stores -- 1.1%
Eckerd (Jack) Corp., 9.25s, 2004 $1,000 $ 1,035,000
Finlay Enterprises, Inc., 0s, 2005 950 684,000
Finlay Fine Jewelry, 10.625s, 2003 2,760 2,704,800
Limited, Inc., 7.5s, 2023 750 637,500
Pathmark Stores, Inc., 11.625s, 2002 3,500 3,535,000
Pathmark Stores, Inc., 9.625s, 2003 200 192,000
--------------
$ 8,788,300
--------------
6
<PAGE>
Principal
Amount
Issuer (000 Omitted) Value
U.S. Dollar Denominated -- continued
Industrials -- continued
Supermarkets -- 0.6%
Carr-Gottstein Foods Co., 12s, 2005 $1,000 $ 1,020,000
Dominick's Finer Foods, Inc., 10.875s, 2005 1,500 1,575,000
Grand Union Co., 12s, 2004 1,250 1,112,500
Ralphs Grocery Co., 10.45s, 2004 800 782,000
--------------
$ 4,489,500
--------------
Telecommunications -- 6.8%
American Communication Services, Inc., 0s,
2006## $ 575 $ 296,125
American Radio Systems Corp., 9s, 2006 1,500 1,458,750
Bell & Howell Co., 10.75s, 2002 1,500 1,605,000
Brooks Fiber Properties, 0s, 2006## 1,500 821,250
Cablevision Industries Corp., 10.75s, 2002 1,500 1,616,250
Cablevision Industries Corp., 9.25s, 2008 1,150 1,224,750
Century Communications, 9.5s, 2005 1,240 1,227,600
Charter Communication LP, 11.25s, 2006## 1,000 1,003,750
Comcast Corp., 9.375s, 2005 1,800 1,800,000
Continental Cablevision, Inc., 8.875s, 2005 1,000 1,065,000
Continental Cablevision, Inc., 8.3s, 2006## 1,750 1,789,375
EchoStar Communication Corp., 0s, 2004 1,250 928,125
EchoStar Satellite Broadcasting, 0s, 2004## 2,000 1,245,000
Falcon Holdings Group, Inc., 11s, 2003 3,625 3,489,424
Granite Broadcasting Corp., 10.375s, 2005 2,000 2,000,000
Intelcom Group, Inc., 12.5s, 2006## 3,500 1,922,235
Jones Intercable, Inc., 9.625s, 2002 250 255,625
Jones Intercable, Inc., 11.5s, 2004 1,400 1,540,000
U.S. Dollar Denominated -- continued
Industrials -- continued
Telecommunications -- continued
Jones Intercable, Inc., 10.5s, 2008 $ 500 $ 532,500
K-III Communications Corp., 10.625s, 2002 2,875 3,018,750
MFS Communications, Inc., 0s, 2006 2,650 1,662,875
MFS Communications, Inc., 0s, 2004 300 230,250
Marcus Cable Operating Co., 0s, 2004 4,250 3,060,000
Metrocall, Inc., 10.375s, 2007 1,250 1,250,000
Mobile Telecommunication Technologies Corp.,
13.5s, 2002 1,000 1,050,000
MobileMedia Corp., 9.375s, 2007 3,425 3,288,000
Paging Network, Inc., 8.875s, 2006 4,500 4,342,500
ProNet, Inc., 11.875s, 2005 1,000 1,067,500
Rifkin Acquisition Partners LP, 11.125s,
2006## 500 498,750
Rogers Cablesystems Ltd., 9.625s, 2002 800 800,000
Rogers Cablesystems Ltd., 10.125s, 2012 1,500 1,522,500
Turner Broadcasting System, Inc., 8.4s, 2024 3,000 2,779,320
USA Mobile Communication, 9.5s, 2004 1,375 1,326,875
--------------
$ 51,718,079
--------------
Total Industrials $223,491,098
--------------
Transportation -- 1.2%
Airlines -- 1.1%
Delta Air Lines, 9.75s, 2021 $7,500 $ 8,610,375
--------------
Other -- 0.1%
Moran Transportation Co., 11.75s, 2004 $ 600 $ 594,000
--------------
Total Transportation $ 9,204,375
--------------
U.S. Federal Agencies -- 5.3%
Federal Home Loan Mortgage Corp., 6.5s, 2025 $7,057 $ 6,626,647
Federal Home Loan Mortgage Corp., 7.5s, 2026 10,100 9,992,631
7
<PAGE>
Portfolio of Investments -- continued
Bonds -- continued
Principal
Amount
Issuer (000 Omitted) Value
U.S. Dollar Denominated -- continued
U.S. Federal Agencies -- continued
Federal National Mortgage Assn., 7.5s,
2009-2011 $8,239 $ 8,290,011
Federal National Mortgage Assn., Stripped
Mortgage- Backed Security, 7s, 2023 4,281 1,461,857
Financing Corp., 9.4s, 2018 12,000 14,606,280
--------------
$ 40,977,426
--------------
U.S. Government Guaranteed -- 20.7%
Government Aid Bonds -- 0.6%
State of Israel, 5.89s, 2005 $4,750 $ 4,402,728
--------------
Government National Mortgage Association -- 6.1%
GNMA, 7.5s, 2009 $5,584 $ 5,657,379
GNMA, 7.5s, 2022 14,964 14,791,339
GNMA, 7s, 2025 22,122 21,299,184
GNMA, 9s, 2018 4,756 4,993,590
--------------
$ 46,741,492
--------------
U.S. Treasury Obligations -- 14.0%
U.S. Treasury Notes, 5.5s, 1998 $6,000 $ 5,908,140
U.S. Treasury Notes, 9.125s, 1999 16,500 17,788,980
U.S. Treasury Notes, 8.5s, 2000 14,000 15,006,180
U.S. Treasury Bonds, 12s, 2005 4,600 6,233,000
U.S. Treasury Bonds, 12s, 2013 22,300 31,526,625
U.S. Treasury Bonds, 11.25s, 2015 21,750 31,251,923
--------------
$107,714,848
--------------
Total U.S. Government Guaranteed $158,859,068
--------------
Utilities -- Electric -- 6.3%
CMS Energy Corp., 9.5s, 1997 $4,500 $ 4,601,250
Cleveland Electric Illuminating, 9s, 2023 2,500 2,158,325
Coastal Bancorp, Inc., 10s, 2002 1,360 1,346,400
First PV Funding Corp., 10.3s, 2014 2,500 2,646,425
First PV Funding Corp., 10.15s, 2016 6,000 6,300,000
Midland Cogeneration Venture Corp., 10.33s,
2002 5,401 5,663,841
Midland Funding Corp. II, "A", 11.75s, 2005 1,650 1,730,471
Niagara Mohawk Power Corp., 6.875s, 2001 2,500 2,251,825
Niagara Mohawk Power Corp., 8s, 2004 1,500 1,359,120
Niagara Mohawk Power Corp., 8.77s, 2018 6,500 5,911,230
U.S. Dollar Denominated -- continued
Utilities -- Electric -- continued
Niagara Mohawk Power Corp., 8.75s, 2022 $1,500 $ 1,322,520
Texas & New Mexico Power Co., 12.5s, 1999 5,200 5,665,764
Texas & New Mexico Power Co., 10.75s, 2003 7,025 7,446,500
--------------
$ 48,403,671
--------------
Utilities -- Gas -- 0.4%
Maxus Energy Corp., 9.875s, 2002 $2,000 $ 1,980,000
Maxus Energy Corp., 11.25s, 2013 1,150 1,178,750
--------------
$ 3,158,750
--------------
Total U.S. Dollar Denominated $587,087,343
--------------
Foreign -- Non-U.S. Dollar Denominated -- 18.8%
Australia -- 1.5%
Australian Government, 7s, 2000 AUD 9,000 $ 6,764,465
Commonwealth of Australia, 9.5s, 2003 6,000 4,929,474
--------------
$ 11,693,939
--------------
Canada -- 2.6%
Canadian Government Bond, 7.5s, 2003 CAD 2,300 $ 1,678,086
Canadian Government Bond, 9s, 2004 12,000 9,504,296
Canadian Government Bond,
8.75s, 2005 11,500 8,981,604
--------------
$ 20,163,986
--------------
Denmark -- 2.6%
Kingdom of Denmark, 9s, 2000 DKK 49,000 $ 9,274,082
Kingdom of Denmark, 8s, 2001 58,100 10,583,308
--------------
$ 19,857,390
--------------
France -- 0.7%
Government of France, 7s, 1999 FRF 18,900 $ 3,884,888
Republic of France, 7s, 2000 7,980 1,642,601
--------------
$ 5,527,489
--------------
Germany -- 3.3%
Federal Republic of Germany, 8.5s, 2001 DEM 6,514 $ 4,821,406
Treuhandanstalt Obligationen, 6.375s, 1999 29,208 20,093,488
--------------
$ 24,914,894
--------------
8
<PAGE>
Principal
Amount
Issuer (000 Omitted) Value
Foreign -- Non-U.S. Dollar Denominated -- continued
Italy -- 1.2%
Republic of Italy, 8.5s, 1999 ITL 4,475,000 $ 2,850,879
Republic of Italy,
9.5s, 1999 3,730,000 2,432,141
Republic of Italy, 8.5s, 2004 6,755,000 4,084,569
--------------
$ 9,367,589
--------------
New Zealand -- 1.3%
New Zealand Government,
9s, 1996 NZD 13,400 $ 9,173,427
New Zealand Government,
8s, 2001 1,000 662,623
--------------
$ 9,836,050
--------------
Spain -- 3.4%
Spanish Government,
10.5s, 2003 ESP 1,770,000 $ 15,024,467
Spanish Government,
10.9s, 2003 1,300,000 11,244,515
--------------
$ 26,268,982
--------------
Sweden -- 0.9%
Kingdom of Sweden,
10.25s, 2000 SEK 40,900 $ 6,629,876
--------------
United Kingdom -- 1.3%
United Kingdom Treasury,
8s, 2000 GBP 6,650 $ 10,238,757
--------------
Total Foreign --
Non-U.S. Dollar Denominated $144,498,952
--------------
Total Bonds (Identified Cost, $728,907,404) $731,586,295
--------------
Common Stocks Shares
Consumer Goods and Services
RJR Nabisco Holdings Corp. 6,908 $ 206,377
--------------
Total Common Stocks
(Identified Cost, $2,716) $ 206,377
--------------
Preferred Stocks -- 1.0%
Cablevision Systems Corp.## 31,795 $ 3,107,961
First Nationwide Bank 10,000 1,115,000
K-III Communications Corp. 1,223 123,475
Supermarkets General Holdings Corp. 22,827 576,382
Time Warner, Inc.## 2,300 2,300,000
--------------
Total Preferred Stocks
(Identified Cost, $7,150,417) $ 7,222,818
--------------
Short-Term Obligations -- 1.0%
Principal
Amount
Issuer (000 Omitted)
Eurolira Time Deposit, due 10/21/96, at
Amortized Cost ITL 12,720,000 $ 8,120,013
--------------
Repurchase Agreement -- 0.9%
Goldman Sachs Group L.P., dated 4/30/96, due
5/01/96, total to be received $6,792,005
(secured by $1,511,344 par, FNMA at 7.58s,
due 4/19/06, market value $1,510,770;
$912,018 par, FNMA at 6.17s, due 12/30/03,
market value $863,432; $674,212 par, FNMA
at 5.3s, due 12/10/98, market value
$656,511; $3,269,907 par, FHLMC at 0s, due
5/23/96, market value $3,258,550; and
$586,884 par, FHLB at 7.65s, due 3/25/97,
market value $597,122) at Cost $6,791 $ 6,791,000
--------------
Total Investments
(Identified Cost, $750,971,550) $753,926,503
--------------
Put Options Written
Principal
Amount
of Contracts
Expiration Month/Strike Price (000 Omitted) Value
Canadian Dollars
June/11.385 (Premiums Received, $17,650) CAD 7,885 $ (4,818)
--------------
Other Assets,
Less Liabilities -- 1.8% $ 13,634,558
--------------
Net Assets -- 100.0% $767,556,243
==============
</TABLE>
+Restricted security.
**Non-income producing security - in default.
##SEC Rule 144A restriction.
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
CAD = Canadian Dollars
DEM = Deutsche Marks
DKK = Danish Kroner
ESP = Spanish Pesetas
FRF = French Francs
GBP = British Pounds
ITL = Italian Lire
NZD = New Zealand Dollars
SEK = Swedish Kronor
See notes to financial statements
9
<PAGE>
Statement of Assets and Liabilities -- April 30, 1996
<TABLE>
<S> <C>
Assets:
Investments, at value (identified cost, $750,971,550) $753,926,503
Net receivable for forward foreign currency exchange contracts sold 4,559,809
Net receivable for interest rate swap agreements 70,848
Receivable for investments sold 1,434,238
Interest receivable 18,263,861
Other assets 10,917
------------
Total assets $778,266,176
------------
Liabilities:
Cash overdraft $342,685
Payable to dividend disbursing agent 440,595
Payable for Treasury shares reacquired 1,733,053
Payable for investments purchased 5,987,195
Written options outstanding, at value (premiums received, $17,650) 4,818
Payable for daily variation margin on open futures contracts 29,455
Net payable for forward foreign currency exchange contracts purchased 1,114,606
Net payable for forward foreign currency exchange contracts 118,222
Payable to affiliates --
Management fee 51,075
Transfer agent fee 60,200
Accrued expenses and other liabilities 828,029
------------
Total liabilities $10,709,933
============
Net assets $767,556,243
============
Net assets consist of:
Paid-in capital $772,601,473
Unrealized appreciation on investments and translation of assets and liabilities in foreign currencies 7,115,976
Accumulated distributions in excess of net realized gain on investments and foreign currency
transactions (8,833,594)
Accumulated distributions in excess of net investment income (3,327,612)
------------
Total $767,556,243
============
Shares of beneficial interest outstanding 101,831,052
==============
Net asset value per share (net assets / shares of beneficial interest outstanding) $7.54
==============
</TABLE>
See notes to financial statements
10
<PAGE>
Statement of Operations -- Six Months Ended April 30, 1996
<TABLE>
<S> <C>
Net investment income:
Income --
Interest $ 33,062,774
Dividends 34,535
-------------
Total investment income $ 33,097,309
-------------
Expenses --
Management fee $ 3,079,626
Trustees' compensation 84,903
Transfer and dividend disbursing agent fee 180,580
Investor's communications 392,306
Custodian fee 304,167
Postage 36,312
Printing 28,136
Auditing fees 27,900
Miscellaneous 169,709
-------------
Total expenses $ 4,303,639
Fees paid indirectly (42,035)
-------------
Net expenses $ 4,261,604
-------------
Net investment income $ 28,835,705
-------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) --
Investment transactions $ 7,702,361
Written option transactions 260,313
Foreign currency transactions 105,996
Futures contracts (848,069)
-------------
Net realized gain on investments and foreign currency transactions $ 7,220,601
-------------
Change in unrealized appreciation (depreciation) --
Investments and interest rate swap agreements $(16,383,485)
Written options (104,499)
Translation of assets and liabilities in foreign currencies 3,985,276
Futures contracts 826,523
-------------
Net unrealized loss on investments $(11,676,185)
-------------
Net realized and unrealized loss on investments and foreign
currency $ (4,455,584)
-------------
Increase in net assets from operations $ 24,380,121
=============
</TABLE>
See notes to financial statements
11
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
April 30, 1996 October 31, 1995
-------------- ----------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations --
Net investment income $ 28,835,705 $ 63,939,117
Net realized gain (loss) on investments and foreign currency transactions 7,220,601 (9,707,694)
Net unrealized gain (loss) on investments and foreign currency transactions (11,676,185) 53,683,280
------------- --------------
Increase in net assets from operations $ 24,380,121 $107,914,703
------------- --------------
Distributions declared to shareholders --
From net investment income $(28,574,476) $(58,599,920)
From paid-in capital -- (3,650,802)
------------- --------------
Total distributions declared to shareholders $(28,574,476) $(62,250,722)
------------- --------------
Trust share (principal) transactions --
Net asset value of Treasury shares acquired $ (9,164,602) $(94,104,508)
------------- --------------
Decrease in net assets from Trust share transactions $ (9,164,602) $(94,104,508)
------------- --------------
Total decrease in net assets $(13,358,957) $(48,440,527)
Net assets:
At beginning of period 780,915,200 829,355,727
------------- --------------
At end of period (including accumulated distributions in excess of net investment
income of $3,327,612 and $3,588,841, respectively) $767,556,243 $780,915,200
============= ==============
</TABLE>
See notes to financial statements
12
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Per share data (for a Six Months
share outstanding Ended Year Ended October 31,
throughout each period): April 30, --------------------------------------------------
1996 1995 1994 1993 1992
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value -- beginning of period $ 7.57 $ 7.06 $ 7.90 $ 7.69 $ 7.93
---------- --------- --------- --------- ----------
Income from investment operations# --
Net investment income(sec) $ 0.28 $ 0.59 $ 0.55 $ 0.63 $ 0.68
Net realized and unrealized gain (loss) on investments
and foreign currency transactions (0.03) 0.49 (0.82) 0.31 --
---------- --------- --------- --------- ----------
Total from investment operations $ 0.25 $ 1.08 ($ 0.27) $ 0.94 $ 0.68
---------- --------- --------- --------- ----------
Less distributions declared to shareholders --
From net investment income $ (0.28) $ (0.53) $ (0.21) $ (0.51) $ (0.65)
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 -- (0.04) (0.35) -- (0.27)
---------- --------- --------- --------- ----------
Total distributions declared to shareholders $ (0.28) $ (0.57) $ (0.57) $ (0.73) $ (0.92)
---------- --------- --------- --------- ----------
Net asset value -- end of period $ 7.54 $ 7.57 $ 7.06 $ 7.90 $ 7.69
========== ========= ========= ========= ==========
Per share market value -- end of period $ 6.875 $ 6.500 $ 6.125 $ 7.375 $ 7.625
========== ========= ========= ========= ==========
Total return 10.14%++ 15.69% (9.57)% 6.49% 10.25%
Ratios (to average net assets)/Supplemental data(sec):
Interest expense -- 0.09% 0.08% 0.08% 0.24%
Other expenses## 0.91%+ 1.10% 1.06% 1.03% 1.11%
Net investment income 7.36%+ 8.13% 7.51% 8.14% 8.69%
Portfolio turnover 124% 189% 133% 415% 425%
Net assets at end of period (000 omitted) $767,556 $780,915 $829,356 $947,314 $947,292
Leverage analysis:
Debt outstanding at end of period (000 omitted) $ -- $ -- $ 90,000 $ -- $ --
Average daily balance of debt outstanding (000 omitted) $ -- $ 10,750 $ 9,616 $ 15,304 $ 39,230
Average daily number of shares outstanding
(000 omitted) -- 108,970 117,774 123,067 122,612
Average debt per share $ -- $ 0.10 $ 0.08 $ 0.12 $ 0.32
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to October 31, 1993 is based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Trust's expenses are calculated without reduction for fees paid
indirectly.
(sec) 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, the expenses 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%
Net investment income -- 8.11% 7.50% 8.11% 8.66%
</TABLE>
See notes to financial statements
13
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Per share data (for a
share outstanding Year Ended October 31,
throughout each period): ----------------------------------------------------------------
1991 1990 1989 1988 1987*
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value -- beginning of period $ 7.54 $ 8.66 $ 9.01 $ 8.81 $ 9.40
---------- --------- --------- --------- ----------
Income from investment operations# --
Net investment income(sec) $ 0.72 $ 0.86 $ 0.94 $ 0.90 $ 0.57
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 0.90 (0.75) (0.06) 0.53 (0.55)
---------- --------- --------- --------- ----------
Total from investment operations $ 1.62 $ 0.11 $ 0.88 $ 1.43 $ 0.02
---------- --------- --------- --------- ----------
Less distributions declared to shareholders --
From net investment income $ (0.70) $ (0.79) $ (1.11) $ (0.74) $ (0.46)
From net realized gain on investments and foreign
currency transactions -- -- -- -- (0.13)
From paid-in capital (0.53) (0.44) (0.12) (0.49) (0.02)
---------- --------- --------- --------- ----------
Total distributions declared to shareholders $ (1.23) $ (1.23) $ (1.23) $ (1.23) $ (0.61)
---------- --------- --------- --------- ----------
Net asset value -- end of period $ 7.93 $ 7.54 $ 8.66 $ 9.01 $ 8.81
========== ========= ========= ========= ==========
Per share market value -- end of period $ 7.750 $ 6.625 $ 9.000 $ 10.000 $ 9.125
========== ========= ========= ========= ==========
Total return 36.98% (14.08)% 2.68% 24.57% (3.99)%+
Ratios (to average net assets)/ Supplemental data(sec):
Interest expense 0.23% 0.45% -- -- --
Other expenses 1.11% 1.19% 1.23% 1.12% 1.08%+
Net investment income 9.22% 10.61% 10.90% 9.96% 9.94%+
Portfolio turnover 740% 365% 423% 159% 58%
Net assets at end of period (000 omitted) $968,813 $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) $ 24,409 $ 43,956 $ -- $ -- $ --
Average daily number of shares outstanding
(000 omitted) 121,698 122,431 -- -- --
Average debt per share $ 0.20 $ 0.36 $ -- $ -- $ --
* For the period from the commencement of investment operations, March 12, 1987 to October 31, 1987.
+ Annualized.
(sec) 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, the expenses would have changed by less than $0.01 per share and the ratios would have been:
Ratios (to average daily net assets):
Other expenses 1.13% 1.23% -- -- --
Net investment income 9.20% 10.57% -- -- --
</TABLE>
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
General -- The preparation of financial statements in conformity with
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. 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 and economic environment.
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 market 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, 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.
15
<PAGE>
Notes to Financial Statements -- continued
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
securities purchased by the Trust. The Trust, as writer of an option, may
have no control over whether the underlying securities may be sold (call) or
purchased (put) and, as a result, bears the market risk of an unfavorable
change in the price of the securities underlying the written option. In
general, written call options may serve as a partial hedge against decreases
in value in the underlying securities to the extent of the premium received.
Written 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 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, dependent 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 futures contracts is designed to hedge against anticipated future changes
in interest or exchange rates or securities prices. Should interest or
exchange rates or securities prices move unexpectedly, 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 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.
Swap Agreements -- The Trust may enter into swap agreements. A swap is an
exchange of cash payments between the Trust and another party which is based
on a specific financial index. Cash payments are exchanged at specified
intervals and the expected income or expense is recorded on the accrual
basis. The value of the swap is adjusted daily and the change in value is
recorded as unrealized appreciation or depreciation. Risks may arise upon
entering into these agreements from the potential inability of counterparties
to meet the terms of their contract and from unanticipated changes in the
value of the financial index on which the swap agreement is based. The Trust
uses swaps for both hedging and non-hedging purposes. For hedging purposes,
the Trust may use swaps to reduce its exposure to interest and foreign
exchange rate fluctuations. For non-hedging purposes, the Trust may use swaps
to take a position on anticipated changes in the underlying financial index.
16
<PAGE>
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 invests in high-yield securities rated below investment grade.
Investments in high-yield securities involve greater degrees of credit and
market risks than investments in higher-rated securities, and tend to be more
sensitive to economic conditions.
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.
Fees Paid Indirectly -- The Trust's custodian bank calculates its fee based
on the Trust's average daily net assets. The fee is reduced according to a
fee arrangement, which provides for custody fees to be reduced based on a
formula developed to measure the value of cash deposited with the custodian
by the Trust. This amount is shown as a reduction of expenses on the
Statement of Operations.
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 tax 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.
17
<PAGE>
Notes to Financial Statements -- continued
(3) Transactions with Affiliates
Investment Adviser -- The Trust has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an effective annual rate
of 0.34% of average daily net assets and 5.40% of investment income.
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 and MFS
Service Center, Inc. (MFSC). The Trust has an unfunded defined benefit plan
for all its independent Trustees and Mr. Bailey. Included in Trustees'
compensation is a net periodic pension expense of $25,903 for the period
ended April 30, 1996.
Transfer Agent -- 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 a dividend
services fee and will reimburse MFSC for reasonable out-of-pocket expenses.
The account maintenance fee is computed as follows:
Total Number of Accounts Annual Account Fee
- --------------------------- ------------------
Less than 75,000 $9.00
75,000 and over $8.00
The dividend service fee is $0.75 per dividend reinvestment and $0.75 per
cash infusion.
(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 $432,791,787 $433,411,466
============ ============
Investments (non-U.S. government securities) $519,321,908 $480,788,653
============ ============
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:
Aggregate cost $752,173,028
============
Gross unrealized appreciation $ 15,158,411
Gross unrealized depreciation (13,404,936)
------------
Net unrealized appreciation $ 1,753,475
============
18
<PAGE>
(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>
Period Ended Year Ended
April 30, 1996 October 31, 1995
--------------------------- ------------------------------
Shares Amount Shares Amount
- ------------------------ ------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Treasury shares acquired (1,325,900) $(9,164,602) (14,383,300) $(94,104,508)
----------- ------------ ------------ -------------
Net decrease (1,325,900) $(9,164,602) (14,383,300) $(94,104,508)
=========== ============ ============ =============
</TABLE>
In accordance with the provisions of the prospectus, 1,325,900 and 14,383,300
shares of beneficial interest were purchased by the Trust during the six
month period ended April 30, 1996 and the year ended October 31, 1995, at an
average price per share of $6.91 and $6.54 and a weighted average discount of
8.11% and 5.10%, respectively.
(6) Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
Net Realized and Net Increase (Decrease)
Net Investment Unrealized Gain (Loss) in Net Assets Resulting
Quarterly Period Investment Income Income on Investments from Operations
- ---------------- -------------------- -------------------- ------------------------ -------------------------
Per Per Per Per
Fiscal 1996 Amount Share Amount Share Amount Share Amount Share
- ---------------- ------------ ------ ------------ ------ -------------- -------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 31 $16,495,557 $0.16 $14,350,401 $0.14 $ 19,679,715 $ 0.20 $ 34,030,116 $ 0.34
April 30 16,601,752 0.16 14,485,304 0.14 (24,135,299) (0.23) (9,649,995) (0.09)
----------- ----- ----------- ----- ------------- ------- ------------- -------
$33,097,309 $0.32 $28,835,705 $0.28 $ (4,455,584) $(0.03) $ 24,380,121 $ 0.25
=========== ===== =========== ===== ============= ======= ============= =======
Fiscal 1995
- ----------------
January 31 $19,940,462 $0.17 $17,058,034 $0.15 $(15,938,110) $(0.19) $ 1,119,924 $(0.04)
April 30 18,208,468 0.16 16,170,160 0.14 33,437,151 0.40 49,607,311 0.54
July 31 18,223,432 0.17 15,990,698 0.16 90,372,326 0.90 106,363,024 1.06
October 31 16,901,679 0.16 14,720,225 0.14 (63,895,781) (0.62) (49,175,556) (0.48)
----------- ----- ----------- ----- ------------- ------- ------------- -------
$73,274,041 $0.66 $63,939,117 $0.59 $ 43,975,586 $ 0.49 $107,914,703 $ 1.08
=========== ===== =========== ===== ============= ======= ============= =======
Fiscal 1994
- ----------------
January 31 $18,043,695 $0.15 $15,609,109 $0.13 $ 4,353,365 $ 0.06 $ 19,962,474 $ 0.19
April 30 17,551,635 0.15 15,375,127 0.13 (75,952,694) (0.65) (60,577,567) (0.52)
July 31 19,540,252 0.17 17,191,421 0.15 (21,157,245) (0.18) (3,965,824) (0.03)
October 31 19,722,433 0.17 16,827,019 0.14 (6,085,045) (0.05) 10,741,974 0.09
----------- ----- ----------- ----- ------------- ------- ------------- -------
$74,858,015 $0.64 $65,002,676 $0.55 $(98,841,619) $(0.82) $(33,838,943) $(0.27)
=========== ===== =========== ===== ============= ======= ============= =======
</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 $200 million to invest
in accordance with the investment practices of the Trust. During the period,
the Trust did not borrow any amounts on the line of credit. 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. The Trust was charged a committment fee of $93,578, which is
based on the average daily unused portion of the line of credit.
19
<PAGE>
Notes to Financial Statements -- continued
(8) Financial Instruments
The Trust trades 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, futures contracts and interest rate swap agreements. 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, 1996 is as
follows:
Written Option Transactions
<TABLE>
<CAPTION>
1996 Calls 1996 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 12,707 $ 137,669 12,284 $ 145,560
Deutsche Marks -- -- 12,529 33,470
Deutsche Marks/British Pounds 14,941 90,634 -- --
Japanese Yen -- -- 303,000 33,082
Options written --
Australian Dollars 9,333 55,219 4,658 28,468
Canadian Dollars -- -- 7,885 17,650
Deutsche Marks -- -- -- --
Deutsche Marks/British Pounds 17,824 79,249 -- --
Italian Lire/Deutsche Marks -- -- -- --
Japanese Yen 696,000 96,285 524,000 64,475
Options terminated in closing transactions --
Australian Dollars (22,040) (192,888) (11,762) (107,617)
Deutsche Marks -- -- (12,529) (33,470)
Deutsche Marks/British Pounds (23,852) (130,258) -- --
Japanese Yen (696,000) (96,285) (827,000) (97,557)
Options expired --
Australian Dollars -- -- (5,180) (66,411)
Deutsche Marks/British Pounds (8,913) (39,625) -- --
-------------- --------- -------------- ---------
Outstanding, end of period -- $ -- 7,885 $ 17,650
============== ========= ============== =========
Options outstanding at end of period consist of --
Canadian Dollars -- $ -- 7,885 $ 17,650
============== ========= ============== =========
</TABLE>
At April 30, 1996, 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
Contracts to In Exchange Contracts Appreciation
Settlement Date Deliver/Receive for at Value (Depreciation)
- ----------- --------------------- ---- -------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Sales 5/20/96 AUD 8,027,832 $ 6,267,328 $ 6,304,891 $ (37,563)
5/31/96 CAD 28,719,484 21,098,806 21,101,469 (2,663)
5/28/96 - 5/31/96 CHF 19,154,823 16,480,178 15,427,854 1,052,324
5/15/96 - 11/04/96 DEM 75,700,120 50,967,022 49,615,408 1,351,614
5/31/96 DKK 119,707,055 21,038,147 20,292,740 745,407
5/28/96 ESP 2,316,706,316 18,540,843 18,190,778 350,065
5/31/96 FRF 97,566,795 19,431,947 18,889,712 542,235
5/31/96 GBP 8,756,652 13,295,463 13,166,765 128,698
5/06/96 - 8/06/96 ITL 63,168,893,264 39,878,885 40,286,414 (407,529)
6/07/96 JPY 1,891,775,631 19,085,711 18,125,102 960,609
10/18/96 NZD 14,871,407 9,928,152 10,026,883 (98,731)
8/02/96 SEK 47,249,481 6,923,001 6,947,658 (24,657)
------------- ------------ -------------
$242,935,483 $238,375,674 $ 4,559,809
============= ============ =============
Purchases 5/20/96 AUD 3,591,676 $ 2,832,252 $ 2,820,827 $ (11,425)
5/31/96 CHF 7,258,533 6,251,485 5,846,531 (404,954)
5/15/96 CZK 163,777,380 6,000,000 5,887,142 (112,858)
5/28/96 - 5/31/96 DEM 24,384,401 16,608,163 15,940,832 (667,331)
5/31/96 ESP 442,951,500 3,525,000 3,477,612 (47,388)
5/31/96 FRF 66,421,761 13,464,771 12,859,784 (604,987)
5/31/96 GBP 1,797,960 2,743,686 2,703,466 (40,220)
5/06/96 - 5/31/96 ITL 41,504,240,846 25,818,472 26,507,385 688,913
5/31/96 - 6/07/96 JPY 1,900,385,654 18,114,490 18,200,134 85,644
------------- ------------ -------------
$ 95,358,319 $ 94,243,713 $(1,114,606)
============= ============ =============
</TABLE>
Forward foreign currency purchases and sales under master netting
arrangements and closed forward foreign currency exchange contracts, excluded
from above, amounted to a net payable of $118,222 at April 30, 1996.
At April 30, 1996, the Trust had sufficient cash and/or securities to cover
any commitments under these contracts.
Futures Contracts
Unrealized
Expiration Contracts Position Appreciation
- ------------ ------------------------------ --------- --------------
June 1996 412 U.S. Treasury (5 year) Long $ 3,949
June 1996 300 U.S. Treasury (10 year) Short 822,574
------------
$826,523
============
At April 30, 1996, the Trust had sufficient cash and/or securities to cover
margin requirements on open futures contracts.
21
<PAGE>
Notes to Financial Statements -- continued
Interest Rate Swaps
<TABLE>
<CAPTION>
Rate Type
---------------------------------------
Payments
Swap Notional Termination Payments made received Unrealized
Counterparty Amount Date by the Trust by the Trust Appreciation
- -------------- ------------- ---- ----------- ---------------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
J.P. Morgan 12,720,000,000 ITL 4/20/99 Floating--6M LIBOR Fixed--9.535% $70,848
-----------
</TABLE>
At April 30, 1996, the Trust had sufficient cash and/or securities to cover
any commitments under these contracts.
(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,
1996, the Trust owned the following restricted securities (constituting 3.0%
of net assets) which may not be publicly sold without registration under the
Securities Act of 1933 (the 1933 Act). 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>
Date Par Amount/
Description Acquisition Shares Cost Value
- ------------------------------------------------ -------------------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
AGCO Corp., 8.50s, 2006 3/15/96 1,000,000 $ 991,390 $ 1,005,000
American Communication Services, Inc., 0s, 2006 3/21/96 575,000 309,401 296,135
Arkwright CSN Trust, 9.625s, 2026 4/17/96 1,000,000 999,680 1,005,620
Brooks Fiber Properties, 0s, 2006 3/04/96 1,500,000 911,250 821,250
Cablevision Systems Corp. 2/09/96 - 3/08/96 31,795 3,185,000 3,107,961
Charter Communication LP, 11.25s, 2006 3/25/96 1,000,000 1,005,000 1,003,750
Continental Cablevision, Inc., 8.30s, 2006 3/26/96 1,750,000 1,824,375 1,789,375
EchoStar Satellite Broadcasting, 0s, 2004 3/19/96 2,000,000 1,207,060 1,245,000
Ferrell Gas LP, 9.375s, 2006 4/23/96 500,000 500,000 497,500
Hidroelectrica Alicura, 8.375s, 1999 4/08/94 1,500,000 1,411,875 1,425,000
IMO Industries Inc., 11.75s, 2006 4/23/96 1,650,000 1,653,503 1,662,375
Intelcom Group, Inc., 12.5s, 2006 4/25/96 3,500,000 1,908,235 1,922,235
Interlake Revolver, "B", 5.75s, 1997 1/21/94 314,958 281,190 307,872
Merrill Lynch Mortgage Investors, 8.227s, 2023 6/22/94 1,200,000 831,750 891,375
National Power Corp., 7.625s, 2006 6/22/94 2,000,000 1,920,000 1,950,000
Newsquest Capital PLC, 11s, 2006 4/03/96 750,000 750,000 750,000
Remington Arms, Inc., 9.5s, 2003 11/19/93 300,000 298,125 273,000
Rifkin Acquisition Partners, LP, 11.125s, 2006 1/26/96 500,000 500,000 498,750
Time Warner, Inc. 4/03/96 - 4/22/96 2,300 2,312,500 2,300,000
----------
$22,752,198
==========
</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, 1996, and the related statement of operations for the six month
period ended April 30, 1996, the statement of changes in net assets for the
six month period ended April 30, 1996 and for the year ended October 31,
1995, and financial highlights for the six month period ended April 30, 1996
and for each of the two years in the period ended October 31, 1995. 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 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, 1996, 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 at April 30, 1996 and the results of its operations
for the six month period ended April 30, 1996, the changes in its net assets
for the six month period ended April 30, 1996 and for the year ended October
31, 1995, and the financial highlights for the six month period ended April
30, 1996 and for each of the two years in the period ended October 31, 1995,
in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
May 31, 1996
23
<PAGE>
[cover]
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; Director, Cambridge Bancorp; Director, Cambridge
Trust 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
Arnold D. Scott*
Senior Executive Vice President, Director and Secretary, Massachusetts
Financial Services Company
Jeffrey L. Shames*
President and Director, Massachusetts Financial Services Company
Elaine R. Smith(2)
Independent Consultant
David B. Stone(1)(2)
Chairman, North American Management Corp. (investment advisers)
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
*Affiliated with the Investment Adviser
(1)Member of Audit Committee
(2)Member of Portfolio Trading Committee MMTCE-3 6/96 100M
[logo] MFS(R)
THE FIRST NAME IN MUTUAL FUNDS
MFS(R) Multimarket Income Trust
Semiannual Report
April 30, 1996
[graphic--two people in silhouette]
