[Front Cover]
[MFS Logo]
THE FIRST NAME IN MUTUAL FUNDS
MFS(r) Multimarket Income Trust
Annual Report
October 31, 1995
[Silhouette of two figures against a large round window]
Dear Shareholders:
The decline in interest rates and the favorable inflation environment
throughout most of the world have helped the Trust enjoy strong performance
over the past year. The net asset value of the Trust increased from $7.06 on
October 31, 1994 to $7.57 on October 31, 1995. Over the same period, the
stock market price increased from $6.125 to $6.50. For the year ended October
31, 1995, the Trust experienced a total return of +15.69%. 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
The U.S. Government bond market has seen spectacular gains during 1995.
Moderate, but sustainable, growth appears to be the hallmark of the current
U.S. expansion, now in its fifth year. While initial estimates showed the
U.S. economy growing at an annual real (adjusted for inflation) rate of 4.2%
in the third quarter, this surprisingly strong growth was mainly driven by a
pickup in consumer spending and an increase in business and government
outlays. Although impressive, this growth rate is not expected to continue in
coming months. Recent retail sales have been disappointing, in part because
of rising levels of consumer debt. Also, an extended period of lower mortgage
rates seems to have relieved much of the pent-up demand for housing. Growth
is not expected to get much help from the manufacturing sector, either, as
order flows from manufacturers have moderated. The Federal Reserve Board's
consistent and, so far, successful efforts to fight inflation seem to be
giving consumers and businesses enough longer term confidence to help
maintain modest growth in real gross domestic product into 1996.
Given the growth of the U.S. economy in the third quarter, prospects for
further decreases in short-term interest rates by the Federal Reserve seem
uncertain in the near term. Long-term rates, meanwhile, have moved noticeably
downward in recent months in anticipation of more modest fourth-quarter
growth with continued low inflation. Thus, with long-term government bonds
yielding over 6% in an environment of 2% to 3% inflation, real rates of
return in the U.S. fixed-income markets remain relatively attractive.
International Bond Sector
As in the United States, a pattern of slow to moderate growth and low and
controlled inflation remains a dominant theme in major industrialized
countries, particularly Europe's. While the recent recovery of the dollar
against the yen and the mark has provided some export impetus to the
economies of Europe and Japan, the outlook is still for sluggish economic
growth in the near term. Recent moves by central banks in Germany and Japan
to lower interest rates are intended to stimulate domestic demand, but many
industrial companies in these countries are still struggling to compete in a
global marketplace in which the prices of their products are less
competitively priced. On the positive side, this does mean, as it does in the
United States, that there is little to no inflationary pressure in these
countries, and we believe that this, combined with further reductions in
interest rates, should help provide fixed-income investors with opportunities
to obtain relatively attractive real 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.
Corporate Bond Sector
Approximately 31% of the Trust's total net assets is allocated to the
high-yield sector of the corporate bond markets. These investments have been
consistent performers for the Trust, and the quality of high-yield bonds has
improved over the past year as the economic expansion has helped companies
pay down their debt through increased cash flow or new equity issuance. A
similar pattern has been seen in the broader corporate bond market, where
steady gains in a wide range of industries have boosted the overall quality
of balance sheets, enhancing companies' abilities to make future bond
payments. Bond prices in this market have risen along with those in world
bond markets.
1
<PAGE>
Among emerging markets, the December 1994 debt crisis in Mexico passed with
time, and most of these countries have since posted gains. Also, the decline
in interest rates in the developed world has helped reduce pressure on
developing countries to meet debt obligations because their absolute level of
debt service has decreased, an event that should enhance credit quality.
For over a year, we have been pursuing a more quantitative and disciplined
approach to the weighting of asset classes in the Trust. The central thrust
of this approach has been to seek the best relative value among the world's
various bond markets, without placing extreme weight in any individual
market. This change in approach has enabled us to reduce risk while
maintaining competitive returns. We will continue to change the weightings in
the Trust based on our measure of historic risk patterns together with
expected future returns and risks. The dividend distribution rate on the
Trust will reflect the rise and fall of bond yields generated by its various
fixed-income sectors. Given the themes mentioned above, we would expect
dividend yields to face downward pressure in the coming year.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
[/s/ of A. Keith Brodkin]
A. Keith Brodkin
Chairman and President
[/s/ of James T. Swanson]
James T. Swanson
Portfolio Manager
November 10, 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.
Performance Summary
(For the year ended October 31, 1995)
<TABLE>
<CAPTION>
<S> <C>
Net Asset Value Per Share
October 31, 1994 $7.06
October 31, 1995 $7.57
New York Stock Exchange Price
October 31, 1994 $6.125
June 6, 1995 (high)* $6.875
November 14, 1994 (low)* $5.750
October 31, 1995 $6.500
</TABLE>
*For the period November 1, 1994 through October 31, 1995.
Federal Income Tax Information
on Distributions
(For the year ended October 31, 1995)
Distribution Sources
The Trust made no long-term capital gain distributions for tax purposes
during the year ended October 31, 1995.
<TABLE>
<CAPTION>
<S> <C>
Distributions eligible for the 70%
dividends-received deduction
for corporations 0%
</TABLE>
Tax Form Summary
In January 1996, shareholders will be mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1995.
Number of Shareholders
As of October 31, 1995, our records indicate that there are 21,991 registered
shareholders and approximately 67,800 shareholders owning Trust shares in
"street" name, such as through brokers, banks and other financial
intermediaries.
2
<PAGE>
Results of Shareholder Meeting
At the annual meeting of shareholders of MFS Multimarket Income Trust, which
was held on October 18, 1995, the following actions were taken:
Item 1. The election of Peter G. Harwood, J. Atwood Ives, and Lawrence T.
Perera as Trustees of the Trust.
<TABLE>
<CAPTION>
Number of Shares
Nominee For Withhold Authority
<S> <C> <C>
Peter G. Harwood 85,424,999.560 2,909,257.341
J. Atwood Ives 85,953,889.428 2,382,068.473
Lawrence T.
Perera 85,943,926.108 2,392,031.793
</TABLE>
Trustees continuing in office who were not subject to re-election at this
meeting are A. Keith Brodkin, Richard B. Bailey, William J. Poorvu, Charles
W. Schmidt, Arnold D. Scott, Jeffrey L. Shames, Elaine R. Smith, and David B.
Stone.
Item 2. The ratification of the selection of Ernst & Young LLP as the
independent public accountants to be employed by the Trust for the fiscal
year ended October 31, 1995.
<TABLE>
<CAPTION>
Number of Shares
<S> <C>
For 86,040,798.510
Against 812,672.430
Abstain 1,482,486.961
</TABLE>
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.
New York Stock Exchange Symbol
The New York Stock Exchange symbol is MMT.
Investment Objective and Policy
The investment objective of MFS(R) 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. The investment
adviser 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 also 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 -- October 31, 1995
Bonds -- 91.3%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Dollar Denominated -- 72.6%
Corporate Asset Backed -- 1.1%
Merrill Lynch Home Equity Loan, 9.3s,
2016 + $ 7,630 $ 7,773,487
Merrill Lynch Mortgage Investors, Inc.,
8.227s, 2023 + 1,200 918,396
-----------
$ 8,691,883
-----------
Financial Institutions -- 4.3%
American Annuity Group, Inc., 9.5s,
2001 $ 1,000 $ 1,030,000
American Annuity Group, Inc., 11.125s,
2003 800 860,000
American Life Holdings Co., 11.25s,
2004 1,250 1,318,750
Americo Life, Inc., 9.25s, 2005 3,050 2,867,000
Auburn Hills Trust, 12s, 2020 5,000 7,496,800
CCP Insurance, Inc., 10.5s, 2004 7,100 7,671,266
Leucadia National Corp.,
8.25s, 2005 4,000 4,054,480
Leucadia National Corp.,
7.75s, 2013 6,500 6,470,165
Tiphook Finance Corp., 8s, 2000 2,509 1,957,020
-----------
$33,725,481
-----------
Foreign -- U.S. Dollar Denominated -- 8.1%
Banco de Comercio Exterior de Colombia,
8.625s, 2000* $ 5,000 $ 5,050,000
Banco Nacional de Commerce, 8s, 2000 2,500 2,115,625
Federal Republic of Brazil, 0s, 2001 1,940 1,658,700
Federal Republic of Brazil, 0s, 2009 4,000 2,340,000
Federal Republic of Brazil, 0s, 2014 8,354 4,239,864
Federal Republic of Brazil, 4s, 2024 3,500 2,078,125
Hidroelectrica Alicura, 8.375s, 1999 ## 1,500 1,320,000
Korea Electric Power Corp., 7.75s, 2013 4,185 4,311,806
Mexico Discount Notes, 0s, 2019 12,150 8,110,125
National Power Corp., 7.625s, 2000 ## 2,000 1,950,000
Petroliam Nasional Berhad, 6.875s,
2003 ## 1,000 1,011,200
Poland Discount Notes, 3.25s, 2014 $ 7,000 $ 4,497,500
Poland Discount Notes, 6.813s, 2024 4,000 3,055,000
Republic of Argentina, 0s, 2005 10,250 6,085,938
Republic of Argentina, 0s, 2023 12,000 6,282,500
Siam Commercial Bank, 7s, 1995 + 75,000 2,984,797
United Mexican States, "A", 6.25s, 2019 11,000 6,435,000
-----------
$63,526,180
-----------
Industrials -- 23.6%
Apparel and Textiles -- 0.2%
Guess, Inc., 9.5s, 2003 $ 1,500 $ 1,485,000
-----------
Automotive -- 0.5%
Exide Corp., 10s, 2005 ## $ 600 $ 645,000
Harvard Industries, Inc., 12s, 2004 1,000 1,060,000
SPX Corp., 11.75s, 2002 2,000 2,130,000
-----------
$ 3,835,000
-----------
Building -- 1.6%
American Standard, Inc., 0s, 2005 $ 6,200 $ 5,192,500
Congoleum Corp., 9s, 2001 1,550 1,526,750
Nortek, Inc., 9.875s, 2004 1,250 1,168,750
Schuller International Group, Inc.,
10.875s, 2004 1,000 1,111,250
USG Corp., 9.25s, 2001 3,150 3,362,625
-----------
$12,361,875
-----------
Chemicals -- 1.4%
Arcadian Partners LP, 10.75s, 2005 $ 2,025 $ 2,192,063
Koppers Industries, Inc., 8.5s, 2004 1,500 1,455,000
NL Industries, Inc., 11.75s, 2003 2,105 2,231,300
OSI Specialties Holding Co.,
0s, 2004 1,250 1,062,500
Rexene Corp., 11.75s, 2004 1,400 1,505,000
UCC Investors Holdings, Inc., 10.5s,
2002 1,750 1,798,125
UCC Investors Holdings, Inc., 0s, 2005 1,250 934,375
-----------
$11,178,363
-----------
4
<PAGE>
U.S. Dollar Denominated -- continued
Industrials -- continued
Conglomerates -- 0.3%
Bell & Howell Co., 10.75s, 2002 $2,500 $ 2,662,500
-----------
Consumer Goods and Services -- 2.2%
ADT Operations, Inc.,
9.25s, 2003 $1,500 $ 1,586,250
Consolidated Cigar Corp., 10.5s, 2003 1,000 1,010,000
Fieldcrest Cannon, Inc., 11.25s, 2004 2,000 2,060,000
International Semi-Tech
Microelectronics, Inc., 0s, 2003 3,000 1,545,000
Ithaca Industries, Inc., 11.125s, 2002 1,000 880,000
Remington Arms, Inc., 0s, 2003 ## 300 264,000
Revlon Consumer Products Corp., 10.5s,
2003 3,750 3,843,750
Sealy Corp., 9.5s, 2003 1,750 1,758,750
Westpoint Stevens, Inc., 9.375s, 2005 4,500 4,500,000
-----------
$17,447,750
-----------
Containers -- 1.8%
Container Corp. of America, 9.75s, 2003 $1,050 $ 1,057,875
Gaylord Container Co., 0s, 2005 1,150 1,121,250
Ivex Packaging Corp., 12.5s, 2002 950 1,021,250
Owens-Illinois, Inc., 11s, 2003 2,500 2,775,000
Plastic Containers, Inc., 10.75s, 2001 500 525,000
SD Warren Co., 12s, 2004 2,400 2,640,000
Silgan Corp., 11.75s, 2002 1,700 1,789,250
Stone Consolidated Corp., 10.25s, 2000 1,200 1,284,000
Stone Container Corp., 9.875s, 2001 1,875 1,856,250
-----------
$14,069,875
-----------
Defense Electronics -- 0.1%
Alliant Techsystems, Inc., 11.75s, 2003 $ 400 $ 438,000
-----------
Entertainment -- 1.4%
ACT III Theatres, Inc.,
11.875s, 2003 $2,300 $ 2,461,000
SCI Television, Inc., 11s, 2005 2,000 2,110,000
U.S. Dollar Denominated -- continued
Turner Broadcasting Systems, Inc.,
8.375s, 2013 $5,000 $ 5,007,850
United Artist Theater Circuit, Inc.,
11.5s, 2002 1,000 1,070,000
-----------
$10,648,850
-----------
Food and Beverage Products -- 0.8%
Coca-Cola Bottling Group Southwest,
Inc., 9s, 2003 $1,000 $ 995,000
Envirodyne Industries, Inc., 10.25s,
2001 935 736,313
Nabisco, Inc., 7.55s, 2015 3,565 3,563,218
Specialty Foods Corp., 10.25s, 2001 1,350 1,269,000
-----------
$ 6,563,531
-----------
Forest and Paper Products -- 0.1%
Repap New Brunswick, Inc., 10.625s,
2005 $ 500 $ 510,000
-----------
Machinery -- 0.1%
Fairfield Manufacturing, 11.375s, 2001 $1,000 $ 945,000
-----------
Medical and Health Products -- 0.4%
Tenet Healthcare Corp., 10.125s, 2005 $2,500 $ 2,700,000
-----------
Medical and Health Technology and Services -- 1.2%
Community Health System, 10.25s, 2003 $3,100 $ 3,332,500
Integrated Health Services, Inc.,
10.75s, 2004 3,200 3,392,000
OrNda Healthcorp, 12.25s, 2002 2,450 2,695,000
-----------
$ 9,419,500
-----------
Metals and Minerals -- 0.5%
Easco Corp., 10s, 2001 $1,050 $ 1,039,500
Jorgensen (Earle M.) Co., 10.75s, 2000 1,350 1,296,000
Kaiser Aluminum & Chemical Corp.,
9.875s, 2002 1,600 1,640,000
-----------
$ 3,975,500
-----------
Oil Services -- 0.6%
AmeriGas Partners LP, 10.125s, 2007 $ 600 $ 642,000
Ferrell Gas LP, 10s, 2001 1,600 1,668,000
Global Marine, Inc., 12.75s, 1999 1,900 2,099,500
5
<PAGE>
U.S. Dollar Denominated -- continued
Industrials -- continued
Oil Services -- continued
Tuboscope Vetco International, Inc.,
10.75s, 2003 $ 650 $ 656,500
-----------
$ 5,066,000
-----------
Oils -- 0.2%
Gulf Canada, 9.25s, 2004 $1,650 $ 1,654,125
Mesa Capital Corp., 12.75s, 1998 53 48,098
-----------
$ 1,702,223
-----------
Printing and Publishing -- 0.3%
World Color Press, Inc., 9.125s, 2003 $2,000 $ 2,030,000
-----------
Special Products and Services -- 2.9%
Blount, Inc., 9s, 2003 $1,250 $ 1,262,500
Eagle Industries,
Inc., 0s, 2003 5,750 4,571,250
IMO Industries, Inc., 12.25s, 1997 817 821,085
IMO Industries, Inc., 12s, 2001 1,150 1,178,750
Idex Corp., 9.75s, 2002 1,000 1,050,000
Interlake Corp., 12s, 2001 750 742,500
Interlake Corp., 12.125s, 2002 2,400 2,256,000
Interlake Revolver, "B", 5.75s, 1997 315 313,668
K & F Industries, Inc., 11.875s, 2003 725 768,500
Mark IV Industries, Inc., 8.75s, 2003 2,750 2,846,250
Newflo Corp., 13.25s, 2002 750 774,375
OSI Specialties, Inc., 9.25s, 2003 1,750 1,925,000
Polymer Group, Inc., 12.25s, 2002 ## 2,000 2,060,000
Spreckels Industries, Inc., 11.5s, 2000 200 200,000
Synthetic Industries, Inc., 12.75s,
2002 900 882,000
Talley Manufacturing & Technology,
Inc., 10.75s, 2003 1,300 1,306,500
-----------
$22,958,378
-----------
Steel -- 0.5%
AK Steel Holdings Corp., 10.75s, 2004 $1,000 $ 1,090,000
Sheffield Steel Corp., 12s, 2001 700 640,500
UCAR Global Enterprises, Inc., 12s,
2005 665 748,956
WCI Steel, Inc., 10.5s, 2002 1,400 1,354,500
-----------
$ 3,833,956
-----------
Stores -- 1.1%
Eckerd (Jack) Corp., 9.25s, 2004 $1,000 $ 1,050,000
Finlay Fine Jewelry, 10.625s, 2003 3,760 3,713,000
Pathmark Stores, Inc., 11.625s, 2002 3,500 3,640,000
Pathmark Stores, Inc., 9.625s, 2003 200 198,000
-----------
$ 8,601,000
-----------
Supermarkets -- 0.4%
Dominick's Finer Foods, Inc., 10.875s,
2005 $ 500 $ 526,250
Ralphs Grocery Co., 11s, 2005 3,000 2,910,000
-----------
$ 3,436,250
-----------
Telecommunications -- 4.7%
ACT III Broadcasting, 9.625s, 2003 $1,000 $ 1,010,000
Albritton Communications Corp., 11.5s,
2004 500 525,000
Cablevision Industries Corp., 10.75s,
2002 1,500 1,631,250
Cablevision Industries Corp., 9.25s,
2008 1,150 1,224,750
Cablevision Systems Corp., 10.75s, 2004 1,000 1,045,000
Century Communications, 9.5s, 2005 1,500 1,511,250
Continental Cablevision, Inc., 8.875s,
2005 1,000 1,045,000
Falcon Holdings Group, Inc., 11s, 2003 3,436 3,281,738
Jones Intercable, Inc., 11.5s, 2004 1,650 1,815,000
Jones Intercable, Inc., 10.5s, 2008 500 537,500
K-III Communications Corp., 10.625s,
2002 3,150 3,362,625
MFS Communications, Inc., 0s, 2004 3,250 2,518,750
Mobilemedia Communications, Inc., 0s,
2003 3,725 2,793,750
Paging Network, Inc., 8.875s, 2006 4,500 4,466,250
ProNet, Inc., 11.875s, 2005 ## 1,000 1,070,000
Rogers Cablesystems Ltd., 9.625s, 2002 800 818,000
TCI Communications, Inc., 8.75s, 2015 652 688,375
6
<PAGE>
U.S. Dollar Denominated -- continued
Industrials -- continued
Telecommunications -- continued
Tele Communications, Inc., 9.25s, 2023 $ 3,148 $ 3,312,829
Turner Broadcasting System, Inc., 8.4s,
2024 3,000 2,879,190
USA Mobile Communication, 9.5s, 2004 1,375 1,306,250
------------
$ 36,842,507
------------
Miscellaneous -- 0.3%
Reeves Industries, Inc., 11s, 2002 $ 2,000 $ 1,960,000
------------
Total Industrials $184,671,058
------------
Transportation -- 0.1%
Moran Transportation Co., 11.75s, 2004 $ 600 $ 561,000
------------
U.S. Federal Agencies -- 5.2%
Federal Home Loan Mortgage Corp., 9.5s,
2025 $ 7,000 $ 7,391,511
Federal National Mortgage Assn., 8.5s,
2005 10,000 10,803,100
Federal National Mortgage Assn., 9.5s,
2025 142 150,105
Federal National Mortgage Assn.,
Stripped Mortgage
Backed Security, 7s, 2023 7,983 2,457,392
Financing Corp., 9.4s, 2018 12,000 15,605,640
Resolution Funding Corp., 0s, 2020 20,000 3,842,800
------------
$ 40,250,548
-----------
U.S. Government Guaranteed -- 22.2%
Government Aid Bonds -- 0.3%
State of Israel, 0s, 2023 $15,900 $ 2,464,500
------------
Government National Mortgage Association -- 7.4%
GNMA, 7s, 2023 - 2025 $22,879 $ 22,721,764
GNMA, 7.5s, 2022 - 2025 10,438 10,575,134
GNMA, 9s, 2004 - 2025 18,468 19,419,745
GNMA, 10.5s, 2020 4,308 4,772,809
------------
$ 57,489,452
------------
U.S. Treasury Obligations -- 14.5%
U.S. Treasury Note, 7.875s, 1998 $ 5,000 $ 5,226,550
U.S. Treasury Note, 8.25s, 1998 21,600 22,960,152
U.S. Treasury Note, 0s, 1999 4,700 3,900,107
U.S. Treasury Note, 7.5s, 1999 31,000 32,850,390
U.S. Treasury Note, 6.25s, 2000 $20,000 $ 20,343,800
U.S. Treasury Bond, 7.125s, 2023 21,750 23,680,313
U.S. Treasury Bond, 7.625s, 2025 3,500 4,063,290
------------
$113,024,602
------------
Total U.S. Government Guaranteed $172,978,554
------------
Utilities -- Electric -- 7.6%
BVPS II Funding Corp., 8.33s, 2007 $ 4,000 $ 3,953,320
CMS Energy Corp., 9.5s, 1997 4,500 4,640,625
CMS Energy Corp., 9.875s, 1999 1,700 1,751,000
Coastal Bancorp, Inc., 10s, 2002 2,750 2,695,000
First PV Funding Corp., 10.3s, 2014 2,500 2,578,125
First PV Funding Corp., 10.15s, 2016 6,000 6,075,000
Kenetech Corp., 12.75s, 2002 1,000 700,000
Midland Cogeneration Venture Corp.,
10.33s, 2002 5,629 5,881,931
Midland Funding Corp. II, "A", 11.75s,
2005 3,100 3,273,476
Midland Funding Corp., "B", 13.25s,
2006 650 687,031
Niagara Mohawk Power Corp., 8.77s, 2018 6,500 6,296,875
Tennessee Valley Authority, 6.75s, 2025 10,500 10,437,105
Texas & New Mexico Power Co., 12.5s,
1999 5,200 5,850,000
Texas & New Mexico Power Co., 10.75s,
2003 4,000 4,317,640
------------
$ 59,137,128
------------
Utilities -- Gas -- 0.4%
Maxus Energy Corp., 9.875s, 2002 $ 2,000 $ 1,970,000
Maxus Energy Corp., 11.25s, 2013 1,150 1,184,500
------------
$ 3,154,500
------------
Total U.S. Dollar Denominated $566,696,332
------------
7
<PAGE>
Foreign -- Non-U.S. Dollar Denominated -- 18.7%
Australia -- 3.0%
Commonwealth of Australia, 8.75s, 2001 AUD 6,000 $ 4,632,208
Commonwealth of Australia, 9.5s, 2003 14,500 11,520,022
Queensland Treasury Corp., 8s, 2001 10,000 7,404,533
------------
$ 23,556,763
------------
Canada -- 0.8%
Canada Government Bond, 8.5s, 2000 CAD 7,500 $ 5,878,906
------------
Denmark -- 4.1%
Danish Government Bullet, 6s, 1999 DKK 31,000 $ 5,571,146
Kingdom of Denmark, 9s, 1998 60,100 11,765,824
Kingdom of Denmark, 9s, 2000 74,000 14,672,648
-----------
$ 32,009,618
------------
France -- 0.9%
Government of France, BTAN, 7.75s, 2000 FRF 34,620 $ 7,413,254
------------
Germany -- 4.1%
Deutschland Republic, 8.5s, 2000 DEM 10,290 $ 8,193,117
Deutschland Republic, 6.5s, 2003 1,100 790,681
Deutschland Republic, 6.875s, 2005 6,631 4,844,082
German Unity Fund, 8.5s, 2001 9,314 7,432,544
Nordrhein Westfalen, 6.25s, 2002 15,640 11,042,091
------------
$ 32,302,515
------------
Ireland -- 1.4%
Republic of Ireland, 8s, 2000 IEP 6,560 $ 10,849,034
------------
Italy -- 0.8%
Republic of Italy, 8.5s, 1999 ITL 8,725,000 $ 5,129,642
Republic of Italy, 9.5s, 1999 2,415,000 1,435,634
------------
$ 6,565,276
------------
Netherlands -- 1.4%
Dutch State Loan, 6.25s, 1998 NLG 2,530 $ 1,661,224
Dutch State Loan, 8.25s, 2007 13,020 9,271,118
------------
$ 10,932,342
------------
New Zealand -- 1.2%
New Zealand Government, 9s, 1996 NZD 13,400 $ 8,957,261
------------
Spain -- 1.0%
Government of Spain, 8s, 2004 ESP 1,138,000 $ 7,916,076
------------
Total Foreign -- Non-U.S. Dollar Denominated $146,381,045
------------
Total Bonds (Identified Cost, $694,154,773) $713,077,377
------------
Common Stocks and Warrants* -- 0.1%
Shares
Forest Oil Corp., Warrants 42,615 $ 29,298
OSI Specialties, Inc. 1,250 81,250
Protection One, Inc. 4,400 34,650
RJR Nabisco Holdings Corp. 6,908 212,421
Thrifty Payless Holdings 14,250 57,000
-----------
Total Common Stock and Warrants
(Identified Cost, $5,326) $ 414,619
------------
Preferred Stocks -- 0.1%
K-III Communications Corp. 1,154 $ 113,092
Supermarkets General Holdings Corp. 22,827 650,570
UDC Homes, Inc., Cv. 29,300 43,950
------------
Total Preferred Stocks (Identified Cost, $657,241) $ 807,612
------------
Call Option Purchased
Expiration Month/Strike Price Principal Amount
of Contracts
(000 Omitted)
Japanese Bonds/December/ 112.062
(Premium Paid, $33,082) JPY 303,000 $ 29,997
------------
Put Options Purchased
Deutsche Marks/November/
1.42 DEM 12,187 $ 68,946
Deutsche Marks/British
Pounds/January/2.25 15,750 104,297
Swedish Kronor/Deutsche
Marks/November/5.00 SEK 69,687 18
------------
Total Put Options Purchased (Premium
Paid, $171,599) $ 173,261
------------
Short-Term Obligation -- 0.8%
Issuer Principal Amount
(000 Omitted)
Czech Republic Note, due 11/15/95, at
Amortized Cost CZK 163,049 $ 6,211,593
------------
</TABLE>
8
<PAGE>
Repurchase Agreement -- 7.9%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Prudential, dated 10/31/95, due
11/01/95, total to be received
$61,620,926 (secured by $66,250,000
U.S. Treasury Bills, 0s, due
10/17/96, market value $62,937,500),
at Cost $61,611 $ 61,611,000
------------
Total Investments
(Identified Cost, $762,844,614) $782,325,459
------------
</TABLE>
Call Options Written
<TABLE>
<CAPTION>
Principal Amount
of Contracts
Expiration Month/Strike Price (000 Omitted)
<S> <C> <C>
Australian Dollars
January/0.77 AUD 5,365 $ (50,912)
January/0.77 7,342 (72,054)
Deutsche Marks/British Pounds
January/2.13440 DEM/GBP 14,941 (45,883)
----------
Total Call Options Written
(Premiums Received, $228,303) $(168,849)
----------
Put Options Written
Australian Dollars
January/0.745 AUD 5,180 $ (41,384)
January/0.745 7,104 (59,768)
Deutsche Marks
November/1.46 DEM 12,529 (25,511)
Japanese Government Bond
December/112.062 JPY 303,000 (27,573)
----------
Total Put Options Written
(Premiums Received, $212,112) $(154,236)
----------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Other Assets,
Less Liabilities --
(0.2)% $ (1,087,174)
----------
Net Assets -- 100.0% $780,915,200
============
</TABLE>
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
AUD = Australian Dollars FRF = French Francs
CAD = Canadian Dollars GBP = British Pounds
CHF = Swiss Francs IEP = Irish Punts
CZK = Czech Korunas ITL = Italian Lire
DEM = Deutsche Marks JPY = Japanese Yen
DKK = Danish Kroner NLG = Dutch Guilders
ESP = Spanish Pesetas NZD = New Zealand Dollars
FIM = Finnish Markaa SEK = Swedish Kronor
</TABLE>
+ Restricted security.
## SEC Rule 144A restriction.
* Non-income producing security.
See notes to financial statements
9
<PAGE>
Statement of Assets and Liabilities -- October 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investments, at value (identified cost, $762,844,614) $782,325,459
Net receivable for forward foreign currency exchange
contracts purchased 1,458,788
Net receivable for forward foreign currency exchange
contracts 1,592,218
Receivable for investments sold 3,608,292
Premium receivable on options written 33,470
Interest receivable 16,547,179
Other assets 10,917
-----------
Total assets $805,576,323
-----------
Liabilities:
Cash overdraft $ 332,387
Distributions payable 480,653
Payable for Trust shares reacquired 6,809
Payable for investments purchased 18,805,111
Written options outstanding, at value (premiums received,
$440,415) 323,085
Net payable for closed forward foreign currency exchange
contracts 3,970,577
Payable to affiliates --
Management fee 70,752
Shareholder servicing agent fee 30,069
Accrued expenses and other liabilities 641,680
-----------
Total liabilities $ 24,661,123
-----------
Net assets $780,915,200
===========
Net assets consist of:
Paid-in capital $781,766,075
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 18,792,161
Accumulated distributions in excess of net realized gain
on investments and foreign currency transactions (16,054,195)
Accumulated distributions in excess of net investment
income (3,588,841)
-----------
Total $780,915,200
===========
Shares of beneficial interest outstanding 103,156,952
===========
Net asset value per share (net assets / shares of
beneficial interest outstanding) $7.57
===========
</TABLE>
See notes to financial statements
10
<PAGE>
Statement of Operations -- Year Ended October 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Net investment income:
Income --
Interest $ 73,266,246
Dividends 7,795
-----------
Total investment income $ 73,274,041
-----------
Expenses --
Management fee $ 6,671,157
Trustees' compensation 204,380
Interest expense 741,841
Custodian fee 427,484
Transfer and dividend disbursing agent fee 383,042
Auditing fees 54,580
Printing 51,631
Legal fees 21,861
Miscellaneous 912,587
-----------
Total expenses $ 9,468,563
Fees paid indirectly (29,417)
Reduction of expenses by investment adviser (104,222)
-----------
Net expenses $ 9,334,924
-----------
Net investment income $ 63,939,117
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) --
Investment transactions $ (4,431,109)
Written option transactions 2,527,201
Foreign currency transactions (7,803,610)
Futures contracts (176)
-----------
Net realized loss on investments and foreign currency
transactions $ (9,707,694)
-----------
Change in unrealized appreciation --
Investments $ 51,138,945
Written options 65,023
Translation of assets and liabilities in foreign
currencies 2,479,312
-----------
Net unrealized gain on investments $ 53,683,280
-----------
Net realized and unrealized gain on investments and
foreign currency $ 43,975,586
-----------
Increase in net assets from operations $107,914,703
===========
</TABLE>
See notes to financial statements
11
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31,
-----------------------------
1995 1994
------------ -------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations --
Net investment income $ 63,939,117 $ 65,002,676
Net realized loss on investments and foreign currency
transactions (9,707,694) (52,796,297)
Net unrealized gain (loss) on investments and foreign
currency translation 53,683,280 (46,045,322)
---------- -----------
Increase (decrease) in net assets from operations $107,914,703 $ (33,838,943)
---------- -----------
Distributions declared to shareholders --
From net investment income $(58,599,920) $ (24,947,555)
From net realized gain on investments and foreign
currency transactions -- (1,144,064)
From paid-in capital (3,650,802) (41,080,548)
---------- -----------
Total distributions declared to shareholders $(62,250,722) $ (67,172,167)
---------- -----------
Trust share (principal) transactions --
Net asset value of shares reacquired from
shareholders $(94,104,508) $ (16,946,722)
---------- -----------
Decrease in net assets from Trust share
transactions $(94,104,508) $ (16,946,722)
---------- -----------
Total decrease in net assets $(48,440,527) $(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 $3,588,841 and
$1,856,119, respectively) $780,915,200 $ 829,355,727
========== ===========
</TABLE>
See notes to financial statements
12
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Year Ended October 31,
-----------------------------------------------------
Per share data (for a
share outstanding
throughout each period): 1995 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 $ 0.59[S]$ 0.55[S]$ 0.63[S]$ 0.68[S] $ 0.72[S]
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions 0.49 (0.82) 0.31 -- 0.90
----- ----- ----- ----- -------
Total from investment
operations $ 1.08 $ (0.27) $ 0.94 $ 0.68 $ 1.62
----- ----- ----- ----- -------
Less distributions declared to shareholders --
From net investment income $ (0.53) $ (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 (0.04) (0.35) -- (0.27) (0.53)
----- ----- ----- ----- -------
Total distributions declared
to shareholders $ (0.57) $ (0.57) $ (0.73) $ (0.92) $ (1.23)
----- ----- ----- ----- -------
Net asset value --
end of period $ 7.57 $ 7.06 $ 7.90 $ 7.69 $ 7.93
===== ===== ===== ===== =======
Per share market value --
end of period $ 6.500 $ 6.125 $ 7.375 $ 7.625 $ 7.750
===== ===== ===== ===== =======
Total return 15.69% (9.57)% 6.49% 10.25% 36.98%
Ratios (to average net
assets)/
Supplemental data:
Interest expense 0.09% 0.08% 0.08% 0.24% 0.23%
Other expenses## 1.10%[S] 1.06%[S] 1.03%[S] 1.11%[S] 1.11%[S]
Net investment income 8.13%[S] 7.51%[S] 8.14%[S] 8.69%[S] 9.22%[S]
Portfolio turnover 189% 133% 415% 425% 740%
Net assets at end of period
(000 omitted) $780,915 $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) $ 10,750 $ 9,616 $ 15,304 $ 39,230 $ 24,409
Average daily number of
shares outstanding (000
omitted) 108,970 117,774 123,067 122,612 121,698
Average debt per share $ 0.10 $ 0.08 $ 0.12 $ 0.32 $ 0.20
</TABLE>
<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[S] $ 0.94 $ 0.90 $ 0.57
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions (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 expenses## 1.19%[S] 1.23% 1.12% 1.08%+
Net investment income 10.61%[S] 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 $ -- $ -- $ --
</TABLE>
* For the period from the commencement of investment operations, March 12,
1987 to October 31, 1987.
+ 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.
[S] 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:
<TABLE>
<CAPTION>
Ratios (to average daily net assets):
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Other expenses## 1.11% 1.07% 1.06% 1.14% 1.13% 1.23% -- -- --
Net investment income 8.11% 7.50% 8.11% 8.66% 9.20% 10.57% -- -- --
</TABLE>
See notes to financial statements
13
<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 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.
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
14
<PAGE>
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, 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 futures contracts is designed to hedge against anticipated future changes
in interest or exchange rates or securities prices. Investments in interest
rate futures for purposes other than hedging may be made to modify the
duration of the portfolio without incurring the additional transaction costs
involved in buying and selling the underlying securities. Investments in
currency futures for purposes other than hedging may be made to change the
Trust's relative position in one or more currencies without buying and
selling portfolio assets. Investments in equity-index contracts, or contracts
on related options, for purposes other than hedging may be made when the
Trust has cash on hand and wishes to participate in anticipated market
appreciation while the cash is being invested. 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 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 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 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.
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
15
<PAGE>
Notes to Financial Statements -- continued
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 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 in 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 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. During the year ended October 31, 1995, accumulated
distributions in excess of net investment income were increased by
$3,421,117, accumulated distributions in excess of net realized gains were
decreased by $7,071,919, and paid-in capital was decreased by $3,650,802.
This change had no effect on the net assets or net asset value per share. At
October 31, 1995, accumulated distributions in excess of net investment
income (realized gain on investments and foreign currency transactions) under
book accounting were different from tax accounting due to temporary
differences in currency transactions.
At October 31, 1995, the Trust, for federal income tax purposes, had a
capital loss carryforward of $16,246,013, which may be applied against any
net taxable realized gains of each succeeding year until the earlier of its
utilization or expiration on October 31, 2002 ($2,878,043), and October 31,
2003 ($13,367,970).
(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
investment adviser did not impose a portion of its fee, which is reflected as
a reduction of expenses in the Statement of Operations.
16
<PAGE>
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 $52,665 for the year ended
October 31, 1995.
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 a 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 year ended October
31, 1995, amounted to $383,042.
(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 $666,670,400 $637,900,511
============ ============
Investments (non-U.S. Government securities) $707,711,995 $764,171,438
============ ============
</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 $763,647,492
===========
Gross unrealized appreciation $ 25,717,372
Gross unrealized depreciation (7,039,405)
-----------
Net unrealized appreciation $ 18,677,967
===========
</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>
Year Ended Year Ended
October 31, 1995 October 31, 1994
--------------------------- ----------------------------
Shares Amount Shares Amount
- ------------------------ ----------- ------------ ---------- --------------
<S> <C> <C> <C> <C>
Treasury shares acquired (14,383,300) $(94,104,508) (2,372,000) $(16,946,722)
------------ ------------- ----------- -------------
Net decrease (14,383,300) $(94,104,508) (2,372,000) $(16,946,722)
============ ============= =========== =============
</TABLE>
In accordance with the provisions of the Trust's prospectus, 14,383,300 and
2,372,000 shares of beneficial interest were purchased by the Trust during
the year ended October 31, 1995 and the year ended October 31, 1994, at an
average price per share of $6.54 and $7.14 and a weighted average discount of
5.10% and 8.51%, respectively.
17
<PAGE>
Notes to Financial Statements -- continued
(6) Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
Net Realized and Net Increase (Decrease)
Unrealized Gain (Loss) in Net Assets Resulting
Quarterly Net Investment
Period Investment Income Income on Investments from Operations
- --------------- ------------------ ------------------ ---------------------- ------------------------
Per Per Per Per
Fiscal 1995 Amount Share Amount Share Amount Share Amount Share
- --------------- ---------- ---- ---------- ---- ------------ ------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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 a bank
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 none was outstanding at October 31,
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 $741,841 for the year ended October 31, 1995, and the
weighted average interest rate on these borrowings was 5.3%. Interest expense
includes a commitment fee of $197,174, which is based on the average daily
unused portion of the line of credit.
(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 and forward foreign
currency exchange contracts. 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 October 31, 1995 is as follows:
18
<PAGE>
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 24,212 236,518 25,871 302,610
British Pounds 9,487 163,713 8,851 163,713
Canadian Dollars 12,133 25,448 33,369 141,263
Deutsche Marks 162,872 1,124,059 124,894 824,320
Deutsche Marks/British Pounds 30,975 194,756 -- --
Finnish Markkaa/Deutsche Marks -- -- 26,134 19,115
Italian Lire/Deutsche Marks -- -- 23,085,670 247,846
Japanese Yen -- -- 4,733,911 608,854
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 (22,721) (177,357) (13,587) (157,050)
British Pounds (9,487) (163,713) (8,851) (163,713)
Canadian Dollars (12,133) (25,448) (33,369) (141,263)
Deutsche Marks (50,212) (431,028) (67,147) (510,497)
Deutsche Marks/British Pounds (16,034) (104,122) -- --
Italian Lire/Deutsche Marks -- -- (5,188,180) (38,818)
Japanese Yen -- -- (4,430,911) (575,772)
Japanese Yen/Deutsche Marks -- -- (5,038,371) (132,323)
Spanish Pesetas/Deutsche Marks -- -- (874,685) (57,322)
Options exercised--
Swiss Francs/Deutsche Marks (11,268) (47,449) -- --
Italian Lire/Deutsche Marks -- -- (11,729,303) (159,491)
U.S. Dollars (9,000) (46,406) -- --
Options expired--
Deutsche Marks (112,660) (693,031) (45,218) (280,353)
Finnish Markkaa/Deutsche Marks -- -- (26,134) (19,115)
Italian Lire/Deutsche Marks -- -- (6,168,187) (49,537)
--------- ---------- ----------- ----------
Outstanding, end of period 27,648 $ 228,303 327,813 $ 212,112
========= ========== =========== ==========
Options outstanding at end of period consist of --
Australian Dollars 12,707 $ 137,669 12,284 $ 145,560
Deutsche Marks -- -- 12,529 33,470
Deutsche Marks/British Pounds 14,941 90,634 -- --
Jananese Yen -- -- 303,000 33,082
--------- ---------- ----------- ----------
27,648 $ 228,303 327,813 $ 212,112
========= ========== =========== ==========
</TABLE>
At October 31, 1995, the Trust had sufficient cash and/or securities at
least equal to the value of the written options.
19
<PAGE>
Notes to Financial Statements -- continued
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 12/07/95 AUD 39,601,404 $ 29,557,498 $ 30,087,800 $ (530,302)
11/09/95 -11/30/95 CAD 25,870,666 19,135,800 19,247,223 (111,423)
12/15/95 -12/18/95 CHF 11,828,561 10,208,841 10,472,478 (263,637)
11/02/95 -1/24/96 DEM 262,404,916 183,899,758 186,656,190 (2,756,432)
11/09/95 DKK 191,266,952 34,417,864 35,020,214 (602,350)
12/07/95 ESP 1,313,354,590 10,345,855 10,732,734 (386,879)
12/15/95 FIM 15,343,338 3,487,915 3,618,573 (130,658)
11/17/95 -4/12/96 FRF 112,621,727 22,775,455 23,040,410 (264,955)
11/06/95 -12/06/95 IEP 13,492,371 21,849,710 21,859,638 (9,928)
12/7/95 ITL 43,811,571,974 26,983,121 27,426,044 (442,923)
12/7/95 JPY 1,891,775,631 20,329,338 18,607,505 1,721,833
11/24/95 NLG 17,234,213 10,890,429 10,935,608 (45,179)
11/15/95 NZD 20,696,123 13,619,865 13,652,653 (32,788)
12/14/95 SEK 23,869,368 3,473,040 3,587,996 (114,956)
------------ ----------- ------------
$410,974,489 $414,945,066 $(3,970,577)
============ =========== ============
Purchases 11/27/95 AUD 13,004,050 $ 9,577,741 $ 9,884,495 $ 306,754
11/09/95 -11/30/95 CAD 21,085,385 15,647,970 15,687,019 39,049
12/14/95 -12/18/95 CHF 16,874,865 14,544,355 14,938,350 393,995
1/24/96 CZK 53,038,000 2,000,000 2,005,738 5,738
11/07/95 -4/12/96 DEM 231,191,416 162,223,889 164,509,230 2,285,341
12/07/95 ESP 238,191,416 1,906,219 1,946,502 40,283
12/14/95 FIM 14,984,091 3,491,216 3,533,788 42,572
12/27/95 FRF 39,602,174 8,076,555 8,104,506 27,951
11/06/95 IEP 6,746,185 10,901,836 10,927,977 26,141
12/07/95 -1/31/96 ITL 45,598,186,464 28,115,209 28,526,384 411,175
11/27/95 -2/23/96 JPY 2,443,679,302 27,140,624 24,112,945 (3,027,679)
11/15/95 -12/20/95 NZD 37,936,910 24,748,009 25,020,911 272,902
12/15/95 SEK 153,662,425 22,461,972 23,096,538 634,566
------------ ------------ ------------
$330,835,595 $332,294,383 $ 1,458,788
============ ============ ============
</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
receivable of $1,592,218 at October 31, 1995.
At October 31, 1995, the Trust had sufficient cash and/or securities to cover
any commitments under these contracts.
20
<PAGE>
(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 October 31,
1995, the Trust owned the following restricted securities (constituting 2.6%
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>
Dates of
Description Acquisition Par Amount Cost Value
- --------------------------------------------- ---------- ---------- -------- -----------
<S> <C> <C> <C> <C>
Exide Corp., 10s, 2005 4/21/95 $ 600,000 $ 600,000 $ 645,000
Hidroelectrica Alicura, 8.375s, 1999 4/08/94 1,500,000 1,411,875 1,320,000
Merrill Lynch Home Equity Loan, 9.3s, 2016 12/16/92 7,629,892 7,658,504 7,773,487
Merrill Lynch Mortgage Investors, Inc.,
8.227s, 2023 6/22/94 1,200,000 831,750 918,396
National Power Corp., 7.625s, 2000 1/28/94 2,000,000 1,970,000 1,950,000
Petroliam Nasional Berhad, 6.875s, 2003 6/22/93 1,000,000 1,000,000 1,011,200
Polymer Group, Inc., 12.25s, 2002 9/16/94 2,000,000 2,007,500 2,060,000
ProNet, Inc., 11.875s, 2005 6/12/95 1,000,000 992,830 1,070,000
Remington Arms, Inc., 0s, 2003 11/19/93 300,000 298,125 264,000
Siam Commercial Bank, 7s, 1995 9/01/94 75,000,000 2,927,458 2,984,797
---------
$19,996,880
=========
</TABLE>
21
<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 October 31, 1995, and the related statement of operations for the year
then ended and the statement of changes in net assets and financial
highlights for each of the two years in the period then ended. 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 investment
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 October 31, 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 at October 31, 1995, the results of its operations
for the year then ended and the changes in its net assets and financial
highlights for each of the two years in the period then ended, in conformity
with generally accepted accounting principles.
[s/s Ernst & Young LLP]
December 8, 1995
Boston, Massachusetts
22
<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;
Director, Cambridge Bancorp;
Director, Cambridge Trust Company
Peter G. Harwood(1)
Private Investor
J. Atwood Ives(1)
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
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-2-12/95 100M
23
<PAGE>
APPENDIX
MFS Multimarket Income Trust
Front cover
[a photo of two people talking]
