[logo] MFS(SM)
INVESTMENT MANAGEMENT
MFS(R) Multimarket Income Trust
Semiannual Report
April 30, 1998
[graphic of 2 silhouettes]
<PAGE>
In Memoriam
A. Keith Brodkin
1935 - 1998
Chairman and Chief Executive Officer
MFS Investment Management(SM)
[photo of A. Keith Brodkin]
On February 2, 1998, Keith Brodkin, a friend and leader to everyone at MFS, died
unexpectedly at age 62. His thoughtful letters to shareholders on the markets
and economy have been an integral part of MFS shareholder reports like this one
for many years.
Keith joined MFS in 1970 as the firm's first fixed-income manager, managing the
bond portion of MFS(R) Total Return Fund. He went on to manage our first pure
bond fund, MFS(R) Bond Fund, when it was introduced in 1974, and he was
considered a pioneer in the art of active bond management.
Keith was named President and Chief Investment Officer of MFS in 1987 and four
years later became Chairman and Chief Executive Officer. During his stewardship,
MFS has achieved significant growth in total assets under management, rising
from some $25 billion in 1991 to the over $80 billion today entrusted to us by
three million individual and institutional investors worldwide. Under Keith's
leadership, MFS has carefully but steadily built its domestic and international
investment capabilities through the introduction of a range of new products and
a still-growing staff that now numbers over 100 equity and fixed-income
professionals.
Throughout his career, Keith was very active in a wide range of charitable
endeavors. He is survived by his wife and three children. His leadership,
friendship, and wise counsel will be sorely missed.
<PAGE>
Dear Shareholders:
For the six months ended April 30, 1998, the Trust had a total return of 3.08%,
based on its 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 (NAV) was 5.85% for the same period.
The Trust's performance was negatively impacted in the fourth quarter of 1997
by the Asian turmoil as yields rose in relation to U.S. Treasuries, even though
the Trust had fewer than 1% of its assets invested in Asia. However, a flight
to quality during the same quarter benefited our U.S. government position and
helped offset some of the Asian effect. In the first quarter of 1998, the
Trust's performance was helped by its holdings in Treasury securities with a
long duration, or sensitivity to changes in interest rates, by the fact that it
held mostly U.S. dollars, not local currencies, and, later, by the comeback of
emerging markets. As investors began to feel that problems in Asia were
temporary, confidence began to rebuild in some emerging markets.
Corporate Bond Sector
The Trust's heaviest weighting, at over 40% of assets, remains high-yield
corporate bonds. This segment of the market has continued to show very good
price and yield performance, benefiting from a strong U.S. economy, a strong
stock market that has cushioned these companies, and a worldwide shortage of
investments with good yields. The Trust also has approximately 12% of assets in
high-grade corporate bonds, in this case utilities, which continue to perform
fairly well.
U.S. Government Sector
The allocation to U.S. government securities has remained at about 19% of
assets because we felt falling interest rates in the United States resulting
from the Asian crisis, El Nino, and increasing inventories in U.S. businesses
would lead to capital appreciation. Continuing gains in productivity and the
strong U.S. economy are also tempering inflation risk.
Emerging Market Sector
Among emerging markets, we believe the best outlook is in Mexico, where the
economy is performing well and the government is sticking to its reform
programs. In Russia, political turmoil is obscuring what we believe to be
strong economic potential, making Russian bonds cheap relative to anticipated
growth. We also like the Philippines and Panama, two countries that we do not
believe will be hurt by the second leg of the Asian crisis. The Trust is
currently at its maximum exposure to emerging markets, at 25% of assets.
Crossover Bonds
Approximately 12% of the portfolio is invested in crossover bonds that have a
high "BB" rating and that we believe have the potential to move up to
investment-grade status. The Trust's holdings in these bonds are all in the
electric utility sector and include Texas & New Mexico Power and Cleveland
Electric. The fundamentals and the strong economy are good for this industry,
and these companies provide good yield.
Going forward, we view the longer-term outlook for fixed-income markets as very
positive because baby boomers are aging and people in countries such as the
United States, Germany, and Japan are looking for fixed-income investments. At
the same time, the U.S. government is producing surpluses instead of deficits,
so the supply of Treasury bonds is going down, while inflation is being
contained around the
2
<PAGE>
world. In the near term, there is more risk because economic growth could
result in higher interest rates. In the long run, however, we believe that even
this will be positive for fixed-income markets because it will help preempt a
pickup in inflation.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management
/s/ James T. Swanson
James T. Swanson
Portfolio Manager
May 14, 1998
The opinions expressed in this report are those of the portfolio manager and
are only through the end of the period of the report as stated on the cover.
The manager's views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
- --------------------------------------------------------------------------------
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.
[boxed text]
Performance Summary
(For the six months ended April 30, 1998)
<TABLE>
<S> <C>
Net Asset Value Per Share
October 31, 1997 $7.79
April 30, 1998 $7.93
New York Stock Exchange Price
October 31, 1997 $7.125
February 6, 1998 (high)* $7.438
April 28, 1998 (low)* $7.000
April 30, 1998 $7.063
</TABLE>
*For the period November 1, 1997, through April 30, 1998.
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, nondiversified, management investment company and has
no employees.
Number of Shareholders
As of April 30, 1998, our records indicate that there are 16,066 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.
Investment Objective and Policies
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. MFS will monitor the
Trust's portfolio performance on an ongoing basis
3
<PAGE>
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. If shares are trading
at a premium, purchases will be made at a discounted price of either the net
asset value or 95% of the market price, whichever is greater. 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.
[boxed text]
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
4
<PAGE>
Portfolio of Investments -- April 30, 1998
Bonds -- 91.8%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- 58.1%
Advertising -- 0.2%
Outdoor Systems, Inc.,
8.875s, 2007 .................... $1,525 $1,574,563
----------
Aerospace -- 0.2%
Argo Tech Corp., 8.625s,
2007 ............................ $ 300 $ 306,375
BE Aerospace, Inc., 8s,
2008## .......................... 1,000 987,500
K & F Industries, Inc., 9.25s,
2007## .......................... 200 208,000
----------
$1,501,875
----------
Automotive -- 1.3%
Exide Corp., 10s, 2005 ............ $2,750 $2,866,875
Hayes Wheels International,
Inc., "B", 9.125s, 2007 ......... 2,000 2,100,000
Lear Corp., 9.5s, 2006 ............ 1,725 1,906,125
Titan Wheel International, Inc.,
8.75s, 2007 ..................... 2,650 2,729,500
----------
$9,602,500
----------
Broadcasting -- 0.3%
American Radio Systems
Corp., 9s, 2006 ................. $1,700 $1,819,000
----------
Building -- 1.0%
AAF- McQuay, Inc., 8.875s,
2003 ............................ $2,075 $2,049,062
American Standard, Inc.,
7.375s, 2008 .................... 1,050 1,018,500
Building Materials Corporation
of America, "B", 8s, 2007 ....... 1,100 1,100,000
Nortek, Inc., 9.875s, 2004 ........ 2,600 2,665,000
Nortek, Inc., "B", 9.25s, 2007..... 775 802,125
UDC Homes, Inc., 0s, 2000+ ........ 29 16,115
----------
$7,650,802
----------
Business Services -- 0.5%
Iron Mountain, Inc., 8.75s,
2009 ............................ $1,600 $1,624,000
Iron Mountain, Inc., 10.125s,
2006 ............................ 150 162,000
Pierce Leahy Corp., 11.125s,
2006 ............................ 2,000 2,240,000
----------
$4,026,000
----------
Chemicals -- 0.9%
Harris Chemical North
America, Inc., "B", 10.25s,
2001 ............................ $ 775 $ 806,000
NL Industries, Inc., 11.75s,
2003 ............................ 2,105 2,315,500
U.S. Bonds -- continued
Chemicals -- continued
UCAR Global Enterprises, Inc.,
12s, 2005 ....................... $1,700 $1,819,000
UCC Investors Holdings, Inc.,
12s, 2005 ....................... 600 594,000
UCC Investors Holdings, Inc.,
10.5s, 2002 ..................... 1,025 1,148,000
----------
$6,682,500
----------
Computer Software Services -- 0.3%
Unisys Corp., 7.875s, 2008 ........ $2,250 $2,250,000
----------
Consumer Goods and Services -- 0.7%
Kindercare Learning Centers,
Inc., "B", 9.5s, 2009 ........... $ 350 $ 359,625
Westpoint Stevens, Inc.,
9.375s, 2005 .................... 4,525 4,773,875
----------
$5,133,500
----------
Containers -- 0.8%
Gaylord Container Corp., "B",
9.75s, 2007 ..................... $1,200 $1,215,000
Gaylord Container
Corporation, 9.875s,
2008## .......................... 1,200 1,182,000
Silgan Holdings, Inc., 9s,
2009 ............................ 1,500 1,567,500
Synthetic Industries, Inc., "B",
9.25s, 2007 ..................... 1,750 1,820,000
----------
$5,784,500
----------
Defense Electronics -- 0.4%
Alliant Techsystem, Inc.,
11.75s, 2003 .................... $ 900 $ 981,000
United Defense Industries,
Inc., 8.75s, 2007 ............... 1,550 1,581,000
----------
$2,562,000
----------
Entertainment -- 0.4%
AMC Entertainment, Inc., 9.5s,
2009 ............................ $2,400 $2,496,000
Cinemark USA, Inc., "B",
9.625s, 2008 .................... 750 781,875
----------
$3,277,875
----------
Financial Institutions -- 3.0%
Americo Life, Inc., 9.25s,
2005 ............................ $2,650 $2,712,938
APP Global Finance VII
Mauritius Ltd., 3.5s, 2003## 2,750 2,753,437
Constellation Finance LLC,
9.8s, 2001 ...................... 1,750 1,785,000
</TABLE>
5
<PAGE>
Portfolio of Investments -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
Financial Institutions -- continued
Leucadia Capital Trust, 8.65s,
2027 ............................ $1,500 $ 1,607,610
Leucadia National Corp.,
7.75s, 2013 ..................... 9,585 9,927,184
Leucadia National Corp.,
8.25s, 2005 ..................... 2,000 2,163,300
Merrill Lynch Mortgage
Investors, Inc., 8.160s,
2022##+ ......................... 1,200 1,145,438
-----------
$22,094,907
-----------
Food and Beverage Products -- 0.9%
Borden, Inc., 9.2s, 2021 .......... $2,500 $ 2,741,550
Borden, Inc., 9.25s, 2019 ......... 750 781,710
Coca-Cola Bottling Group,
Inc., 9s, 2003 .................. 1,000 1,052,500
Specialty Foods Corp.,
10.25s, 2001 .................... 1,350 1,323,000
Texas Bottling Group, Inc., 9s,
2003 ............................ 1,000 1,052,500
-----------
$ 6,951,260
-----------
Forest and Paper Products -- 0.9%
Calmar, Inc., "B", 11.5s, 2005..... $1,000 $ 1,075,000
U.S. Timberlands, 9.625s,
2007 ............................ 1,700 1,751,000
Waterford 3 Funding Corp.,
8.09s, 2017 ..................... 3,500 3,643,325
-----------
$ 6,469,325
-----------
Industrial -- 0.5%
AGCO Corp., 8.5s, 2006 ............ $2,625 $ 2,703,750
Wheeling Pittsburgh Corp.,
9.25s, 2007## ................... 1,000 1,015,000
-----------
$ 3,718,750
-----------
Information, Paging, and Technology -- 1.5%
Globalstar Telecommunications
LP, 11.375s, 2004 ## ............ $1,500 $ 1,541,250
ICG Holdings, Inc., 0s to
2001, 12.5s, 2006 ............... 3,500 2,800,000
Orion Network Systems, Inc.,
11.25s, 2007 .................... 1,625 1,868,750
Orion Network Systems, Inc.,
0s to 2002, 12.5s, 2007 ......... 700 547,750
U.S. Bonds -- continued
Information, Paging, and Technology -- continued
Paging Network, Inc., 8.875s,
2006 ............................ $4,100 $ 3,997,500
-----------
$10,755,250
-----------
Insurance -- 0.3%
Residential Reinsurance Ltd.
"A", 8.41s, 1998## .............. $2,000 $ 2,020,000
-----------
Medical and Health Products -- 0.2%
Polymer Group, Inc., "B", 9s,
2007 ............................ $1,645 $ 1,698,463
-----------
Medical and Health Technology and Services -- 0.2%
Beverly Enterprises, Inc., 9s,
2006 ............................ $1,100 $ 1,141,250
Quorum Health Group, Inc.,
8.75s, 2005 ..................... 200 208,000
Tenet Healthcare Corp.,
8.625s, 2007 .................... 450 465,750
-----------
$ 1,815,000
-----------
Metals and Minerals -- 0.9%
Commonwealth Aluminum
Corp., 10.75s, 2006 ............. $1,000 $ 1,055,000
Haynes International, Inc.,
11.625s, 2004 ................... 2,200 2,469,500
Kaiser Aluminum & Chemical
Corp., 9.875s, 2002 ............. 2,640 2,725,800
-----------
$ 6,250,300
-----------
Oil Services -- 1.9%
AmeriGas Partners, LP, "B",
10.125s, 2007 ................... $ 600 $ 639,000
Clark USA, Inc., "B", 10.875s,
2005 ............................ 995 1,084,550
Falcon Holdings Group, Inc.,
"B", 11s, 2003[dbldag] .......... 2,675 2,861,786
Ferrell Gas LP, 10s, 2001 ......... 1,400 1,494,500
Noble Drilling Corp., 9.125s,
2006 ............................ 800 883,832
Triton Energy Limited, 8.75s,
2002 ............................ 3,000 3,123,090
Triton Energy Limited, 9.25s,
2005 ............................ 2,500 2,701,125
Triton PCS, Inc. 0s to 2003,
11s, 2008## ..................... 2,450 1,451,625
-----------
$14,239,508
-----------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
Printing and Publishing -- 0.2%
Day International Group, Inc.,
"B", 11.125s, 2005 ............. $1,000 $ 1,090,000
Golden Books Publishing, Inc.,
7.65s, 2002 .................... 705 683,850
-----------
$ 1,773,850
-----------
Real Estate -- 1.0%
Dynex Capital, Inc., 7.875s,
2002 ........................... $3,000 $ 3,027,540
George Town Real Estate Ltd.,
5.9s, 2007+ .................... 4,000 4,120,000
-----------
$ 7,147,540
-----------
Restaurants and Lodging -- 0.3%
Red Roof Inns, Inc., 9.625s,
2003 ........................... $1,750 $ 1,815,625
-----------
Retail -- 0.8%
Cole National Group, Inc.,
8.625s, 2007 ................... $1,300 $ 1,313,000
Finlay Fine Jewelry Corp.,
10.625s, 2003 .................. 2,760 2,870,400
Revlon Consumer Products
Corp., 8.125s, 2006## .......... 550 550,000
Revlon Consumer Products
Corp., 8.625s, 2008## .......... 1,400 1,421,000
-----------
$ 6,154,400
-----------
Special Products and Services -- 1.7%
Blount, Inc., 9s, 2003 ........... $1,250 $ 1,287,500
Buckeye Cellulose
Corporation, 9.25s, 2008 ....... 2,150 2,257,500
Fairfield Manufacturing Corp.,
11.375s, 2001 .................. 1,780 1,855,650
IMO Industries, Inc., 11.75s,
2006 ........................... 1,650 1,885,125
Interlake Revolver Corp., 12s,
2001 ........................... 750 825,000
Interlake Revolver Corp.,
12.125s, 2002 .................. 1,400 1,442,000
Reeves Industries, Inc., 11s,
2002 ........................... 700 504,000
Thermadyne Industries
Holdings Corp., 10.75s,
2003 ........................... 2,250 2,340,000
-----------
$12,396,775
-----------
Steel -- 1.0%
Alaska Steel Holdings Corp.,
9.125s, 2006 ................... $1,500 $ 1,582,500
U.S. Bonds -- continued
Steel -- continued
Alaska Steel Holdings Corp.,
10.75s, 2004 ................... $2,078 $ 2,220,862
Armco, Inc., 9s, 2007 ............ 525 543,375
Keystone Consolidated
Industries, Inc., 9.625s,
2007 ........................... 700 715,750
WCI Steel, Inc., 10s, 2004 ....... 2,000 2,070,000
-----------
$ 7,132,487
-----------
Stores -- 0.2%
Pathmark Stores, Inc., 9.625s,
2003 ........................... $1,250 $ 1,262,500
-----------
Telecommunications -- 8.4%
Adelphia Communications
Corp., "B", 9.875s, 2007 ....... $ 575 $ 618,125
Allbritton Communications
Co., "B", 9.75s, 2007 .......... 1,005 1,055,250
Chancellor Media Corp., "B",
8.75s, 2007## .................. 1,000 1,035,000
Charter Communication LP,
11.25s, 2006 ................... 1,000 1,102,500
Comcast Corp., 9.375s, 2005....... 2,740 2,919,607
Continental Cablevision, Inc.,
9.5s, 2013 ..................... 5,000 5,871,900
DTI Holdings, Inc., 0s to 2003,
12.5s, 2008 .................... 3,825 2,199,375
Echostar Communications
Corp., 0s to 1999, 12.875s,
2004 ........................... 1,750 1,675,625
EchoStar Satellite
Broadcasting Corp.,
Principal Stripped, 0s to
2000, 13.125s, 2004 ............ 750 682,500
Fox/Liberty Networks LLC,
Inc., 8.875s, 2007 ............. 1,450 1,479,000
Granite Broadcasting Corp.,
10.375s, 2005 .................. 2,220 2,353,200
Intermedia Capital Partners IV,
LP, 11.25s, 2006 ............... 1,300 1,456,000
Intermedia Communications,
Inc., "B", 0s to 2002,
11.25s, 2007 ................... 2,875 2,113,125
ITC Deltacom, Inc., 11s, 2007..... 195 221,325
Jones Intercable, Inc., 8.875s,
2007 ........................... 1,500 1,575,000
Lenfest Communications, Inc.,
10.5s, 2006 .................... 500 566,250
Level 3 Commerce
Incorporated, 9.125s,
2008## ......................... 1,050 1,039,500
</TABLE>
7
<PAGE>
Portfolio of Investments -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
Telecommunications -- continued
Marcus Cable Operating Co.,
0s to 1999, 13.5s, 2004 ................... $ 4,250 $ 4,058,750
Mobile Telecommunication
Technologies Corp., 13.5s,
2002 ...................................... 1,000 1,172,500
NEXTEL Communications,
Inc., 0s to 2002, 9.75s to
2007 ...................................... 300 195,000
NEXTEL Communications,
Inc., 0s to 1999, 9.75s,
2004 ...................................... 1,500 1,443,750
NEXTEL Communications,
Inc., 0s to 2003, 9.95s,
2008 ...................................... 1,450 931,625
NEXTEL International, Inc., 0s
to 2003, 12.125s, 2008## .................. 2,000 1,200,000
Pagemart Wireless, Inc., 0s to
2003, 11.25s, 2008## ...................... 1,025 635,500
Qwest Communications
International, Inc., 0s to
2003, 8.29s, 2008## ....................... 3,575 2,457,812
Qwest Communications
International, Inc., 10.875s,
2007 ...................................... 750 862,500
Sprint Spectrum LP, 0s to
2001, 12.5s, 2006 ......................... 3,000 2,460,000
Sprint Spectrum LP, 11s, 2006................ 300 342,750
TCI Communications
Financing III, 9.65s, 2027 ................ 5,000 5,910,500
Turner Broadcasting Systems,
Inc., 8.375s, 2013 ........................ 5,000 5,620,350
Turner Broadcasting Systems,
Inc., 8.4s, 2024 .......................... 3,000 3,179,790
United International Holdings,
Inc., 10.75s, 2008 ........................ 1,200 759,000
Western Wireless Corp.,
10.5s, 2007 ............................... 1,500 1,623,750
WorldCom, Inc., 8.875s, 2006................. 900 980,973
-----------
$61,797,832
-----------
Transportation -- 0.1%
Moran Transportation Co.,
11.75s, 2004 .............................. $ 600 $ 668,250
-----------
Utilities -- Electric -- 8.5%
Beaver Valley Funding Corp.,
9s, 2017 .................................. $ 4,624 $ 5,232,426
BVPS II Funding Corp., 8.68s,
2017 ...................................... 1,000 1,089,320
U.S. Bonds -- continued
Utilities -- Electric -- continued
Cleveland Electric Illuminating
Co., 9s, 2023 ............................. $ 2,000 $ 2,176,580
Connecticut Light & Power
Company, 5.75s, 2000 ...................... 2,000 1,953,180
El Paso Electric Co., "D", 8.9s,
2006 ...................................... 3,425 3,801,305
El Paso Electric Co., "E", 9.4s,
2011 ...................................... 3,000 3,375,600
First PV Funding Corp.,
10.15s, 2016 .............................. 2,235 2,334,234
First PV Funding Corp., 10.3s,
2014 ...................................... 1,713 1,791,729
Midland Cogeneration Venture
Corp., 10.33s, 2002 ....................... 7,116 7,674,562
Midland Funding Corp. I,
10.33s, 2002 .............................. 2,912 3,140,724
Niagara Mohawk Power Corp.,
8.77s, 2018 ............................... 7,235 7,845,923
Niagara Mohawk Power Corp.,
9.75s, 2005 ............................... 4,000 4,693,600
Northeast Utilities "B", 8.38s,
2005 ...................................... 109 111,322
Texas & New Mexico Power
Co., 10.75s, 2003 ......................... 7,790 8,395,049
Texas & New Mexico Power
Co., 12.5s, 1999 .......................... 6,700 6,959,625
Toledo Edison Company, 8.7s,
2002 ...................................... 2,192 2,305,392
-----------
$62,880,571
-----------
U.S. Federal Agencies -- 10.0%
Financing Corp., 9.4s, 2018 ................. $12,000 $16,228,080
FNMA TBA 6.5s, 2013 ......................... 4,485 4,500,384
GNMA 7s, 2023-2024 .......................... 15,993 16,213,875
GNMA 8s, 2023 ............................... 56 59,153
GNMA 6.5s, 2028 ............................. 2,962 2,935,066
GNMA TBA 7s, 2002-2025 ...................... 7,170 7,290,092
GNMA TBA 7.5s, 2002-2027 .................... 12,020 12,369,696
GNMA TBA 8s, 2027 ........................... 13,747 14,262,332
-----------
$73,858,678
-----------
U.S. Government Guaranteed -- 8.6%
U.S. Treasury Bonds, 6.125s,
2027 ...................................... $ 7,250 $ 7,417,620
U.S. Treasury Bonds, 11.25s,
2015 ...................................... 6,950 10,846,309
U.S. Treasury Bonds, 12s,
2005 ...................................... 14,000 18,991,840
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
U.S. Government Guaranteed -- continued
U.S. Treasury Notes, 5.75s,
2000 ............................... $10,200 $ 10,231,824
U.S. Treasury Notes, 8.5s,
2000 ............................... 15,000 15,728,850
------------
Total U.S. Government Guaranteed ...................... $ 63,216,443
------------
Total U.S. Bonds ...................................... $427,982,829
------------
Foreign Bonds -- 33.7%
Argentina -- 5.2%
Autopistas Del Sol SA "B",
10.25s, 2009## ..................... $ 4,500 $ 4,432,500
Compania De Infraes & Svcs
SA, 11.625s, 2004## ................ 1,500 1,530,150
Hidroelectrica Alicura, 8.375s,
1999 (Utilities -- Electric) ##..... 2,400 2,388,000
Industrias Metalurgicas
Pescarmona, 9.5s, 2002
(Utilities -- Electric) ## ......... 750 717,660
Republic of Argentina, 8.726s,
2005 ............................... 2,000 2,015,000
Republic of Argentina, 6.625s,
2005 ............................... 5,225 4,793,938
Republic of Argentina, 9.75s,
2027 ............................... 16,105 15,420,537
Republic of Argentina, 11.75s,
2007## ............................. 1,500 1,507,500
Telecom Argentina, 12s, 2002
(Telecommunications) ............... 5,000 5,700,000
------------
$ 38,505,285
------------
Bermuda -- 0.1%
Flag Limited, 8.25s, 2008
(Telecommunications) ## ............ $ 700 $ 712,250
------------
Brazil -- 4.2%
Banco BMG SA, 9.625s, 2005
(Commercial Bank) ## ............... $ 2,000 $ 1,900,000
Companhia Energetica de
Minas, 9.125s, 2004
(Utilities -- Electric) ## ......... 3,500 3,412,500
Espirito Santo Centrais
Escelsa, 10s, 2007
(Utilities -- Electric) ## ......... 1,500 1,432,500
Federal Republic of Brazil,
10.125s, 2027 ...................... 6,602 6,429,027
Federal Republic of Brazil, 5s,
2014 ............................... 4,931 4,080,314
Federal Republic of Brazil,
6.625s, 2006 ....................... 39 34,582
Foreign Bonds -- continued
Brazil -- continued
Federal Republic of Brazil,
6.688s, 2009 ....................... $ 7,000 $ 5,871,600
Federal Republic of Brazil,
6.875s, 2001 ....................... 1,400 1,366,820
Companhia Paranaense, 9.75s,
2005 (Uitilites -- Electric) ....... 2,000 2,007,500
Companhia Paranaense,
9.75s, 2005 (Utilities --
Electric) ## ...................... 1,250 1,253,725
Leasing Bank Boston/Brazil,,
8.375s, 2004 (Finance) ## .......... 750 753,750
Voto Votorantim Overseas
Trading, 8.5s, 2005
(Finance) ## ....................... 2,750 2,564,375
------------
$ 31,106,693
------------
Bulgaria -- 0.6%
Bulgaria National Republic,
2.25s, 2012 ........................ $ 7,000 $ 4,698,750
------------
Canada -- 1.0%
CHC Helicopter Corp., 11.5s,
2002 (Aerospace) ................... $ 1,425 $ 1,515,844
Repap New Brunswick, Inc.,
10.625s, 2005 (Forest and
Paper Products) .................... 1,800 1,881,000
Gulf Canada Resources Ltd.,
9.25s, 2004 (Oil Services) ......... 400 419,660
Rogers Cablesystems, Inc.,
9.625s, 2002
(Telecommunications) ............... 800 854,000
Rogers Cablesystems, Inc.,
10.125s, 2012
(Telecommunications) ............... 1,500 1,627,500
Rogers Cantel, Inc., 9.375s,
2008 (Telecommunications)........... 800 828,000
------------
$ 7,126,004
------------
Denmark -- 0.8%
Danish Nykredit, 6s, 2026 ............DKK 20,919 $ 2,999,388
Danish Nykredit, 7s, 2024 ............ 20,373 3,003,559
------------
$ 6,002,947
------------
Ecuador -- 0.7%
Republic of Ecuador, 3.75s,
2015 ............................... $ 3,338 $ 2,111,291
Republic of Ecuador, 3.5s,
2025 ............................... 2,000 1,087,600
Republic of Ecuador, 10.563s,
2004## ............................. 2,000 1,990,000
------------
$ 5,188,891
------------
</TABLE>
9
<PAGE>
Portfolio of Investments -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Foreign Bonds -- continued
Germany -- 1.3%
Germany Federal Republic, 6s,
2007 ................................. DEM 6,923 $ 4,127,952
Germany Federal Republic,
6.25s, 2006 .......................... 5,654 3,421,702
Treuhandanstalt, 6.625s,
2003 ................................. 3,795 2,300,897
-----------
$ 9,850,551
-----------
Greece -- 0.6%
Fage Dairy Industries SA, 9s,
2007 (Food and Beverage
Products) ............................ $ 4,500 $ 4,331,250
-----------
Hong Kong -- 0.9%
Guangdong International,
6.269s, 1998 (Finance) ............... $ 2,500 $ 2,443,750
Guangzhou Shen Superhighway
Holdings, 10.25s, 2007
(Construction)## ..................... 5,000 4,100,000
-----------
$ 6,543,750
-----------
India -- 0.3%
Power Finance Corp. Ltd.,
7.5s, 2009 (Utilities) ## ............ $ 2,000 $ 1,760,000
-----------
Indonesia -- 0.2%
Indah Kiat Finance Mauritius
Limited, 10s, 2007
(Textiles) ........................... $ 1,750 $ 1,426,250
-----------
Italy -- 0.8%
Republic of Italy, 5.75s, 2002 ......... ITL 5,110,000 $ 2,987,407
Republic of Italy, 7.75s, 2006 ......... 4,385,000 2,915,001
-----------
$ 5,902,408
-----------
Luxembourg -- 0.1%
Millicom International Cellular
Communications Corp., 0s
to 2001, 13.5s, 2006,
(Telecommunications) ................. $ 700 $ 549,500
-----------
Mexico -- 6.7%
Banco Nacional de
Commerce, 8s, 2000
(Bank) ............................... $ 2,500 $ 2,528,750
Empresas ICA Sociedad SA,
11.875s, 2001
(Construction) ....................... 5,000 5,450,000
Grupo Industrial Durango SA
De CV, 12s, 2001(Forest
Products) ............................ 2,750 2,994,063
Grupo Industrial Durango SA
De CV, 12.625s, 2003
(Forest Products) .................... 3,850 4,360,125
Foreign Bonds -- continued
Mexico -- continued
Sanluis Corporation SA De CV,
8.875s, 2008
(Mining) ## .......................... $ 3,500 $ 3,447,500
TFM SA De CV, 11.75s, 2009
(Railroad) ........................... 2,500 1,610,900
United Mexican States, 6.25s,
2019 ................................. 11,250 9,437,813
United Mexican States,
8.625s, 2008 ......................... 4,500 4,477,500
United Mexican States, 11.5s,
2026 ................................. 11,000 13,233,000
United Mexican States, "B",
6.617s, 2019 ......................... 1,334 1,247,290
United Mexican States, "C",
6.719s, 2019 ......................... 333 311,355
United Mexican States, "D",
6.75s, 2019 .......................... 917 857,395
-----------
$49,955,691
-----------
New Zealand -- 1.8%
Government of New Zealand,
8s, 2001 ............................. NZD 3,970 $ 2,220,948
Government of New Zealand,
8s, 2004 ............................. 15,890 9,149,028
Government of New Zealand,
10s, 2002 ............................ 3,345 2,009,334
-----------
$13,379,310
-----------
Panama -- 1.2%
Republic of Panama, 7.875s,
2002 ................................. $ 3,500 $ 3,501,750
Republic of Panama, 8.25s,
2008 ................................. 1,000 987,500
Republic of Panama, 8.875s,
2027 ................................. 4,616 4,523,680
-----------
$ 9,012,930
-----------
Philippines -- 0.7%
National Power, 7.625s, 2000
(Utilities) .......................... $ 2,000 $ 1,937,000
Philippines Republic, 8.875s,
2008 ................................. 3,000 2,958,750
-----------
$ 4,895,750
-----------
Russia -- 3.0%
CSFB Gazprom Note, 13.5s,
2000 ................................. $ 3,000 $ 2,995,200
Ministry of Finance, Russia,
10s, 2007 ............................ 1,000 962,500
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Foreign Bonds -- continued
Russia -- continued
Russia Principal Loans,
3.359s, 2020+ .................. $20,750 $ 13,124,375
St. Petersburg Russia, 9.5s,
2002## ......................... 1,750 1,626,345
Vnesheconombank USSR,
6.719s, 2015## ................. 5,000 3,593,750
------------
$ 22,302,170
------------
United Kingdom -- 3.5%
Colt Telecom Group PLC, 0s
to 2001, 12s, 2006,
(Telecommunications) ........... $ 500 $ 525,000
Colt Telecom Group PLC,
8.875s, 2007
(Telecommunications) ...........DEM 1,000 607,412
Diamond Cable
Communication Corp. PLC,
0s to 2000, 11.75, 2005,
(Telecommunications) ........... $ 2,000 1,590,000
Diamond Cable
Communications Corp.
PLC, 0s to 2002, 10.75,
2007, (Telecommunications)...... 2,000 1,415,000
GPA PLC, 10.875s,
2019(Airlines)+ ................ 250 281,645
Newsquest Capital PLC, 11s,
2006 (Printing and
Publishing) .................... 450 504,000
United Kingdom Treasury,
8.5s, 2005 .....................GBP 7,008 13,540,422
United Kingdom Treasury,
9.75s, 2002 .................... 3,707 7,038,517
------------
$ 25,501,996
------------
Total Foreign Bonds ............................... $248,752,376
------------
Total Bonds (Identified Cost, $653,115,122) $676,735,205
------------
Convertible Bond -- 0.2%
Mexico -- 0.2%
Empresas ICA Sociedad SA,
5s, 2004 (Identified Cost
$1,267,353) .................... $ 1,500 $ 1,155,000
------------
Shares
Stocks -- 0.1%
Ithaca Industries, Inc. (Apparel
and Textiles)* ................. 59,000 $ 202,842
RJR Nabisco Holdings Corp.
(Consumer Goods and Services) 6,908 192,129
------------
Total Stocks (Identified Cost, $740,216) .......... $ 394,971
------------
</TABLE>
Preferred Stock -- 1.9%
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
CSC Holdings, Inc., 11.25s,
(Telecommunications) .......... 58,279 $ 6,687,515
Long Island Lighting Co., 7s,
(Electric Utilities) .......... 125,000 3,343,750
Primedia, Inc., 10s
(Telecommunications) .......... 1,360 142,800
Supermarkets General
Holdings Corp., $3.52
(Supermarkets)* ............... 22,827 636,303
Time Warner, Inc., 10.25
(Entertainment) ## ............ 2,734 3,048,410
-----------
Total Preferred Stock
(Identified Cost, $10,609,182) ........... $13,858,778
-----------
Rights
United Mexican States* expire
06/30/03 (Identified Cost, $0). 4,475,000 $ 0
-----------
Warrants
Globalstar Telecommunications
LP Expire 2/15/04* ............ 1,500 $ 217,500
Orion Network Systems, Inc.,
Expire 01/15/2007* ............ 1,625 16,250
Orion Network Systems, Inc.,
Expire 01/15/2007* ............ 700 14,000
-----------
Total Warrants (Identified Cost, $116,434) $ 247,750
-----------
Contingent Promissory
Note -- 1.3%
Principal Amount
(000 Omitted)
Cargill COLT (commodity
option linked trading), due
2002, (Illiquid)+ (Identified
Cost $10,474,225)............ $10,000 $ 9,874,619
-----------
Short-Term Obligations
-- 0.7%
CSFB Russia Note, due
5/01/98 (Identified Cost,
$5,000,000) ................. $ 5,000 $ 5,000,000
-----------
</TABLE>
11
<PAGE>
Portfolio of Investments -- continued
<TABLE>
<CAPTION>
Principal
Amount
(000 Omitted) Value
<S> <C> <C>
Repurchase Agreement
-- 3.0%
Goldman Sachs Group, LP
dated 4/30/98 due 5/1/98,
total to be received
$22,465,437 (secured by
various U.S. government
securities is a jointly traded
account), at cost. ............. $22,462 $ 22,462,000
------------
</TABLE>
<TABLE>
<CAPTION>
Call Options Purchased
Principal
Amount
of Contracts
(000 Omitted)
<S> <C> <C>
Japanese Government Bonds/
June/104.247 .......................... JPY 431,000 $ 22,749
------------
Total Call Options Purchased
(Premium Paid, $29,798) ............................... $ 22,749
Total Investments
(Identified Cost, $703,814,330) ....................... $729,751,072
------------
Put Options Written
Description/Expiration Month/Strike Price
Japanese Government Bonds/
June/100.00 ........................... JPY 431,000 $ (6,034)
Canadian Dollars/July/1.43 .............. CAD 8,482 (43,080)
Deutsche Marks/British
Pounds/June/1.87 ...................... DEM 22,119 (25,150)
------------
Total Put Options Written
(Premiums Received, $173,459) ......................... $ (74,264)
------------
Call Options Written
Japanese Government Bonds/
June/104.247 ............................ JPY 431,000 $ (5,603)
------------
Total Call Options Written
(Premiums Received, $6,622) ........................... $ (5,603)
------------
Other Assets,
Less Liabilities -- 1.0% ................................ 7,189,527
------------
Net Assets -- 100.0% ...................................... $736,860,732
------------
</TABLE>
* Non-income producing security.
## SEC Rule 144A restriction.
+ Restricted security.
[dbldag] Payment in kind.
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
CHF = Swiss Francs
DEM = Deutsche Marks
DKK = Danish Kroner
ESP = Spanish Pesetas
GBP = British Pounds
ITL = Italian Lire
JPY = Japanese Yen
NZD = New Zealand Dollars
See notes to financial statements
12
<PAGE>
Statement of Assets and Liabilities -- April 30, 1998
<TABLE>
<S> <C>
Assets:
Investments, at value (identified cost, $703,814,330) ................................... $729,751,072
Cash .................................................................................... 205,237
Net receivable for forward foreign currency exchange contracts to sell .................. 263,657
Receivable for investments sold ......................................................... 7,719,540
Interest and Dividends receivable ....................................................... 13,772,409
Other assets ............................................................................ 6,430
------------
Total assets .......................................................................... $751,718,345
------------
Liabilities:
Distributions payable ................................................................... 421,557
Payable for investments purchased ....................................................... 12,757,662
Written options outstanding, at value (premiums received, $180,081) ..................... 79,867
Net payable for forward foreign currency exchange contracts to purchase ................. 827,579
Net payable for forward foreign currency exchange contracts closed or subject to master
netting agreements ..................................................................... 307,357
Payable to affiliates -
Management fee ......................................................................... 12,962
Shareholder servicing agent fee ........................................................ 24,007
Administrative fee ..................................................................... 492
Accrued expenses and other liabilities .................................................. 426,130
------------
Total liabilities ..................................................................... $ 14,857,613
------------
Net assets ............................................................................... $736,860,732
============
Net assets consist of:
Paid-in capital ......................................................................... $709,999,123
Unrealized appreciation on investments and translation of assets and liabilities in
foreign currencies ..................................................................... 25,174,719
Accumulated net realized gain on investments and foreign currency transactions .......... 3,817,216
Accumulated distributions in excess of net investment income ............................ (2,130,326)
------------
Total ................................................................................. $736,860,732
============
Shares of beneficial interest outstanding (124,846,052 shares authorized less 31,965,700
treasury shares) ....................................................................... 92,880,352
==========
Net asset value per share (net assets [divided by] shares of beneficial interest
outstanding) ........................................................................... $7.93
=====
</TABLE>
See notes to financial statements
13
<PAGE>
Statement of Operations -- Six Months Ended April 30, 1998
<TABLE>
<S> <C>
Net investment income:
Income --
Interest ................................................................... $ 31,075,803
Dividends .................................................................. 205,122
------------
Total investment income .................................................. $ 31,280,925
------------
Expenses --
Management fee ............................................................ $ 2,920,950
Commitment fee ............................................................ 93,325
Trustees' compensation .................................................... 86,410
Custodian fee ............................................................. 152,782
Transfer and dividend disbursing agent fee ................................ 144,047
Administrative fee ........................................................ 48,414
Auditing fees ............................................................. 26,230
Legal fees ................................................................ 8,983
Postage ................................................................... 44,484
Printing .................................................................. 26,373
Registration fee .......................................................... 105,162
Miscellaneous ............................................................. 181,536
------------
Total expenses ........................................................... $ 3,838,696
Fees paid indirectly ...................................................... (71,798)
------------
Net expenses ............................................................. $ 3,766,898
------------
Net investment income ................................................... $ 27,514,027
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) --
Investment transactions .................................................. $ 1,300,797
Written option transactions .............................................. (418,462)
Foreign currency transactions ............................................ 6,691,425
Interest rate swaps ...................................................... 64,509
------------
Net realized gain on investments and foreign currency transactions ...... $ 7,638,269
------------
Change in unrealized appreciation (depreciation) --
Investments .............................................................. $ 8,775,953
Written options .......................................................... 721,643
Translation of assets and liabilities in foreign currencies .............. (4,277,690)
Interest rate swaps ...................................................... (47,636)
------------
Net unrealized gain on investments ...................................... $ 5,172,270
------------
Net realized and unrealized gain on investments and foreign currency ... $ 12,810,539
------------
Increase in net assets from operations ................................ $ 40,324,566
============
</TABLE>
See notes to financial statements
14
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1998 October 31, 1997
----------------- -----------------
<S> <C> <C>
Increase (Decrease) in net assets:
From operations --
Net investment income ................................................................... $ 27,514,027 $ 55,755,879
Net realized gain on investments and foreign currency transactions ...................... 7,638,269 1,779,630
Net unrealized gain on investments and foreign currency transactions .................... 5,172,270 5,789,268
------------- -------------
Increase in net assets from operations ................................................. $ 40,324,566 $ 63,324,777
------------- -------------
Distributions declared to shareholders --
From net investment income .............................................................. $ (27,113,252) $ (57,910,460)
------------- -------------
Trust share (principal) transactions --
Net asset value of shares reacquired from shareholders .................................. $ -- $ (21,646,951)
------------- -------------
Total increase (decrease) in net assets ............................................... $ 13,211,314 $ (16,232,634)
------------- -------------
Net assets:
At beginning of period .................................................................. 723,649,418 739,882,052
------------- -------------
At end of period (including accumulated distributions in excess of net investment income
of $2,130,326 and $2,531,101, respectively) ............................................ $ 736,860,732 $ 723,649,418
============= =============
</TABLE>
See notes to financial statements
15
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Six Months
Ended
April 30,
1998
Per share data (for a share outstanding throughout each period): ----------------
<S> <C>
Net asset value --
beginning of period ....................................................... $ 7.79
--------
Income from investment operations# --
Net investment income[sec] ................................................ $ 0.30
Net realized and unrealized gain (loss) on investments and foreign
currency transactions .................................................... 0.13
--------
Total from investment operations ......................................... $ 0.43
--------
Less distributions declared to shareholders
From net investment income ................................................ $ (0.29
From net realized gain on investments and foreign currency transactions ... --
From paid in capital ...................................................... --
--------
Total distributions declared to shareholders ............................. $ (0.29)
--------
Net asset value -- end of period ........................................... $ 7.93
========
Per share market value -- end of period .................................... $ 7.063
Total return .............................................................. 3.08%**
Ratios (to average net assets)/Supplemental data[sec]
Interest Expense ......................................................... -- %
Other Expenses## ......................................................... 1.06%*
Net investment income .................................................... 7.56%*
Portfolio turnover ........................................................ 68%
Net assets at end of period
(000 omitted) ............................................................ $736,861
Leverage analysis: ........................................................
Debt outstanding at end of period (000 omitted) .......................... $ --
Average daily balance of debt outstanding (000 omitted) .................. $ --
Average daily number of shares outstanding (000 omitted) ................. 92,880
Average debt per share ................................................... $ --
*Annualized.
**Not annualized.
#Per share data for the periods subsequent to October 31, 1993 are 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 voluntarily waived a portion of their management fee for certain
of the periods indicated. If the fee had been incurred by the Trust, the net investment income
per share would have changed by less than $0.01 and the ratios would have been:
Ratios (to average net assets)
Expenses## ...............................................................
Net investment income ....................................................
<CAPTION>
Year Ended October 31,
---------------------------------------------------
1997 1996 1995 1994
Per share data (for a share outstanding throughout each period): -------- ------- -------- --------
<S> <C> <C> <C> <C>
Net asset value --
beginning of period ....................................................... $ 7.71 $ 7.57 $ 7.06 $ 7.90
-------- ------- -------- --------
Income from investment operations# --
Net investment income[sec] ................................................ $ 0.59 $ 0.57 $ 0.59 $ 0.55
Net realized and unrealized gain (loss) on investments and foreign
currency transactions .................................................... 0.11 0.16 0.49 (0.82)
-------- ------- -------- --------
Total from investment operations ......................................... $ 0.70 $ 0.73 $ 1.08 $ (0.27)
-------- ------- -------- --------
Less distributions declared to shareholders
From net investment income ................................................ $ (0.62) $ (0.59) $ (0.53) $ (0.21)
From net realized gain on investments and foreign currency transactions ... -- -- -- (0.01)
From paid in capital ...................................................... -- -- (0.04) (0.35)
-------- -------- -------- --------
Total distributions declared to shareholders ............................. $ (0.62) $ (0.59) $ (0.57) $ (0.57)
-------- -------- -------- --------
Net asset value -- end of period ........................................... $ 7.79 $ 7.71 $ 7.57 $ 7.06
======== ======== ======== ========
Per share market value -- end of period .................................... $ 7.125 $ 7.125 $ 6.500 $ 6.125
Total return .............................................................. 8.93% 19.32% 15.69% (9.57)%
Ratios (to average net assets)/Supplemental data[sec]
Interest Expense ......................................................... 0.18% -- % 0.09% 0.08%
Other Expenses## ......................................................... 0.93% 1.11% 1.10% 1.06%
Net investment income .................................................... 7.64% 7.49% 8.13% 7.51%
Portfolio turnover ........................................................ 172% 214% 189% 133%
Net assets at end of period
(000 omitted) ............................................................ $723,649 $739,882 $780,915 $829,356
Leverage analysis: ........................................................
Debt outstanding at end of period (000 omitted) .......................... $ -- $ -- $ -- $ 90,000
Average daily balance of debt outstanding (000 omitted) .................. $ 18,854 $ -- $ 10,750 $ 9,616
Average daily number of shares outstanding (000 omitted) ................. 93,951 100,810 108,970 117,774
Average debt per share ................................................... $ 0.20 $ -- $ 0.10 $ 0.08
*Annualized.
**Not annualized.
#Per share data for the periods subsequent to October 31, 1993 are 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 voluntarily waived a portion of their management fee for certain
of the periods indicated. If the fee had been incurred by the Trust, the net investment income
per share would have changed by less than $0.01 and the ratios would have been:
Ratios (to average net assets)
Expenses## .............................................................. 1.11% 1.07%
Net investment income ................................................... 8.11% 7.50%
</TABLE>
See notes to financial statements
16
<PAGE>
<TABLE>
<CAPTION>
Year Ended October 31,
-----------------------------------------
1993 1992 1991
Per share data (for a share outstanding throughout each period): ------------- ------------- -------------
<S> <C> <C> <C>
Net asset value --
beginning of period ................................................ $ 7.69 $ 7.93 $ 7.54
-------- -------- --------
Net investment income[sec] ......................................... $ 0.63 $ 0.68 $ 0.72
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ..................................... 0.31 -- 0.90
-------- -------- --------
Total from investment operations .................................. $ 0.94 $ 0.68 $ 1.62
-------- -------- --------
Less distributions declared to shareholders
From net investment income ......................................... $ (0.51) $ (0.65) $ (0.70)
From net realized gain on investments and foreign
currency transactions ............................................. (0.17) -- --
In excess of net investment income and foreign currency
transactions ...................................................... (0.05) -- --
From paid in capital ............................................... -- (0.27) (0.53)
-------- -------- --------
Total distributions declared to shareholders ...................... $ (0.73) $ (0.92) $ (1.23)
-------- -------- --------
Net asset value -- end of period .................................... $ 7.90 $ 7.69 $ 7.93
======== ======== ========
Per share market value -- end of period ............................. $ 7.375 $ 7.625 $ 7.750
Total return ....................................................... 6.49% 10.25% 36.98%
Ratios (to average net assets)/Supplemental data[sec]
Interest Expense .................................................. 0.08% 0.24% 0.23%
Other Expenses ## ................................................. 1.03% 1.11% 1.11%
Net investment income ............................................. 8.14% 8.69% 9.22%
Portfolio turnover ................................................. 415% 425% 740%
Net assets at end of period
(000 omitted) ..................................................... $947,314 $947,292 $968,813
Leverage analysis: .................................................
Debt outstanding at end of period (000 omitted) ................... $ -- $ -- $ --
Average daily balance of debt outstanding (000 omitted) ........... $ 15,304 $ 39,230 $ 24,409
Average daily number of shares outstanding (000 omitted) .......... 123,067 122,612 121,698
Average debt per share ............................................ $ 0.12 $ 0.32 $ 0.20
##For fiscal years ending after September 1, 1995, the Trust's expenses are calculated without reduction for
fees paid indirectly.
[sec]The investment adviser voluntarily waived a portion of their management fee for certain of the periods
indicated. If the fee had been incurred by the Trust, the net investment income per share would have changed
by less than $0.01 and the ratios would have been:
Ratios (to average net assets)
Expenses## ........................................................ 1.06% 1.14% 1.13%
Net investment income ............................................. 8.11% 8.66% 9.20%
<CAPTION>
Year Ended October 31,
---------------------------------------------
1990 1989 1988
Per share data (for a share outstanding throughout each period): ------------- --------------- ---------------
<S> <C> <C> <C>
Net asset value --
beginning of period ................................................ $ 8.66 $ 9.01 $ 8.81
-------- -------- --------
Net investment income[sec] ......................................... $ 0.86 $ 0.94 $ 0.90
Net realized and unrealized gain (loss) on investments and
foreign currency transactions ..................................... (0.75) (0.06) 0.53
-------- --------- --------
Total from investment operations .................................. $ 0.11 $ 0.88 $ 1.43
-------- --------- --------
Less distributions declared to shareholders
From net investment income ......................................... $ (0.79) $ (1.11) $ (0.74)
From net realized gain on investments and foreign
currency transactions ............................................. -- -- --
In excess of net investment income and foreign currency
transactions ...................................................... -- -- --
From paid in capital ............................................... (0.44) (0.12) (0.49)
-------- --------- ---------
Total distributions declared to shareholders ...................... $ (1.23) $ (1.23) $ (1.23)
-------- --------- ---------
Net asset value -- end of period .................................... $ 7.54 $ 8.66 $ 9.01
======== ========= =========
Per share market value -- end of period ............................. $ 6.625 $ 9.000 $ 10.000
Total return ....................................................... (14.08)% 2.68% 24.57%
Ratios (to average net assets)/Supplemental data[sec]
Interest Expense .................................................. 0.45% -- % -- %
Other Expenses ## ................................................. 1.19% 1.23% 1.12%
Net investment income ............................................. 10.61% 10.90% 9.96%
Portfolio turnover ................................................. 365% 423% 159%
Net assets at end of period
(000 omitted) ..................................................... $917,522 $1,056,536 $1,086,400
Leverage analysis: .................................................
Debt outstanding at end of period (000 omitted) ................... $ -- $ -- $ --
Average daily balance of debt outstanding (000 omitted) $ 43,956 $ -- $ --
Average daily number of shares outstanding (000 omitted) .......... 122,431 -- --
Average debt per share ............................................ $ 0.36 $ -- $ --
##For fiscal years ending after September 1, 1995, the Trust's expenses are calculated without reduction for
fees paid indirectly.
[sec]The investment adviser voluntarily waived a portion of their management fee for certain of the periods
indicated. If the fee had been incurred by the Trust, the net investment income per share would have changed
by less than $0.01 and the ratios would have been:
Ratios (to average net assets)
Expenses## ........................................................ 1.23%
Net investment income ............................................. 10.57%
</TABLE>
See notes to financial statements
17
<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, political, and economic environment. Debt securities
(other than short-term obligations which mature in 60 days or less), including
listed issues, forward contracts, and swap agreements, 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
foreign 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 reported at market value using closing settlement
prices. Over-the-counter options on securities are valued by brokers. Over-the-
counter currency options are valued through the use of a pricing model which
takes into account foreign currency exchange spot and forward rates, implied
volatility, and short-term repurchase rates. Equity securities listed on
securities exchanges or reported through the NASDAQ system are reported at
market value using last sale prices. Unlisted equity securities or listed
equity securities for which last sale prices are not available are reported at
market value using 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 collateral in a repurchase transaction be transferred to
the custodian in a manner sufficient to enable the Trust to obtain those
securities in the event of a default under the repurchase agreement. The Trust
monitors, on a daily basis, the value of the collateral to ensure that its
value, including accrued interest, is greater than amounts owed to the Trust
under each such repurchase agreement. The Trust, along with other affiliated
entities of Massachusetts Financial Services Company (MFS), may utilize a joint
trading account for the purpose of entering into one or more repurchase
agreements.
Foreign Currency Translation -- 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
18
<PAGE>
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 call or put options in exchange for a
premium. The premium is initially recorded as a liability which is subsequently
adjusted to the current value of the options contract. When a written option
expires, the Trust realizes a gain equal to the amount of the premium received.
When a written call option is exercised or closed, the premium received is
offset against the proceeds to determine the realized gain or loss. When a
written put option is exercised, the premium reduces the cost basis of the
security purchased by the Trust. The Trust, as writer of an option, may have no
control over whether the underlying securities may be sold (call) or purchased
(put) and, as a result, bears the market risk of an unfavorable change in the
price of the securities underlying the written option. In general, written call
options 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 or currency, or contracts based on financial indices at
a fixed price on a future date. In entering such contracts, the Trust is
required to deposit with the broker either in cash or securities an amount
equal to a certain percentage of the contract amount. Subsequent payments are
made or received by the Trust each day, depending on the daily fluctuations in
the value of the contract, and are recorded for financial statement purposes as
unrealized gains or losses by the Trust. 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 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. The Trust may also use contracts in a manner intended to protect
foreign currency-denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, the Trust may
enter into contracts with the intent of changing the relative exposure of the
Trust's portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains or
losses on foreign currency transactions.
Swap Agreements -- The Trust may enter into swap agreements. A swap is an
exchange of cash payments between the Trust and another party 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
19
<PAGE>
Notes to Financial Statements -- continued
the swap agreement is based. The Trust uses swaps for hedging purposes i.e., to
reduce its exposure to interest and foreign exchange rate fluctuations.
Investment Transactions and Income -- Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
discount is amortized or accreted for financial statement and tax reporting
purposes as required by federal income tax regulations. Dividends received in
cash are recorded on the ex-dividend date. Dividend and interest payments
received in additional securities are recorded on the ex-dividend or
ex-interest date in an amount equal to the value of the security on such date.
The Trust uses the effective interest method for reporting interest income on
payment-in-kind (PIK) bonds. Some securities may be purchased on a
"when-issued" or "forward delivery" basis, which means that the securities will
be delivered to the Trust at a future date, usually beyond customary settlement
time.
The Trust invests in high-yield securities rated below investment grade.
Investments in high-yield securities involve greater degrees of credit and
market risk than investments in higher-rated securities, and tend to be more
sensitive to economic conditions.
Fees Paid Indirectly -- The Trust's custody fee is calculated as a percentage
of the Trust's average net assets. The fee is reduced according to an
arrangement that measures 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.
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 net realized gains.
At April 30, 1998, the Trust, for federal income tax purposes, had a capital
loss carryforward of $3,630,601 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, 2003.
20
<PAGE>
(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 annual rate of 0.34% of
average daily net assets and 5.40% of investment income.
Administrator -- The Trust has an administrative services agreement with MFS to
provide the Trust with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Trust pays MFS an administrative fee
at the following annual percentages of the Trust's average daily net assets:
<TABLE>
<S> <C>
First $1 billion .................. 0.0150%
Next $1 billion ................... 0.0125%
Next $1 billion ................... 0.0100%
In excess of $3 billion ........... 0.0000%
</TABLE>
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 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 of its
independent Trustees and Mr. Bailey. Included in Trustees' compensation is a
net periodic pension expense of $25,660 for the six months ended April 30,
1998.
Transfer Agent -- MFSC acts as registrar and dividend disbursing agent for the
Trust. The agreement provides that the Trust will pay MFSC an account
maintenance fee of no more than $9.00 and a dividend services fee of $0.75 per
reinvestment and will reimburse MFSC for reasonable out-of-pocket expenses.
(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 ............................ $163,156,027 $159,966,618
============ ============
Investments (non-U.S. government securities) .......... $317,617,211 $328,641,081
============ ============
</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>
<S> <C>
Aggregate cost ...................................... $703,814,330
============
Gross unrealized appreciation ....................... 33,478,298
Gross unrealized depreciation ....................... $ (7,541,556)
------------
Net unrealized appreciation (depreciation) ......... $ 25,936,742
============
</TABLE>
(5) Shares of Beneficial Interest
The Trust's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Trust shares were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1998 October 31, 1997
--------------------- -----------------------------------
Shares Amount Shares Amount
-------- ---------- --------------- -----------------
<S> <C> <C> <C> <C>
Treasury shares reacquired ......... -- $ -- (3,052,100) $ (21,646,951)
-- --------- ---------- -------------
Net decrease ...................... -- $ -- (3,052,100) $ (21,646,951)
== ========= ========== =============
</TABLE>
21
<PAGE>
Notes to Financial Statements -- continued
(6) Line of Credit
The Trust entered into an agreement for an unsecured line of credit with
several banks which allowed the Trust to borrow up to $150 million to invest in
accordance with the investment practices of the Trust. 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 commitment fee allocated to the Trust for the period ended
April 30, 1998, was $93,325. There were no loans outstanding during the period
ended April 30, 1998.
(7) 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, swap agreements, and futures 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.
Written Option Transactions
- ---------------------------
<TABLE>
<CAPTION>
1998 Calls 1998 Puts
----------------------------------- --------------------------------
Principal Amounts Principal Amounts
of Contracts of Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
------------------- ------------- ------------------ -----------
<S> <C> <C> <C> <C>
Outstanding, beginning of period
Swiss Francs/Deutsche Marks ............ 22,128 $ 154,313 -- $ --
Options written
Japanese Government Bonds .............. 431,000 6,622 431,000 14,568
Canadian Dollars ....................... -- -- 8,482 31,734
Deutsche Marks/British Pounds .......... -- -- 22,119 127,157
Options terminated in closing transactions
Swiss Francs/Deutsche Marks ............ (22,128) (154,313) -- --
---------- ---------
Outstanding, end of period ............... $ 6,622 $173,459
---------- ---------
Outstanding, end of period consist of:
Japanese Government Bonds .............. 431,000 $ 6,622 431,000 $ 14,568
Canadian Dollars ....................... -- -- 8,482 31,734
Deutsche Marks/British Pounds .......... -- -- 22,119 127,157
---------- ---------
Outstanding, end of period ............... $ 6,622 $173,459
---------- ---------
</TABLE>
At April 30, 1998, the Trust had sufficient cash and/or securities at least
equal to the value of the written options.
22
<PAGE>
Forward Foreign Currency Exchange Contracts
- -------------------------------------------
<TABLE>
<CAPTION>
Net Unrealized
Contracts to Contracts Appreciation
Settlement Date Deliver/Receive In Exchange for at Value (Depreciation)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales 05/15/98 .......... AUD 5,309,430 $ 3,558,061 $ 3,457,032 $ 101,029
05/15/98 .......... CAD 3,456,601 2,408,781 2,418,283 (9,502)
05/15/98 .......... DEM 37,228,778 20,929,277 20,758,843 170,434
05/15/98 .......... DKK 51,627,362 7,589,156 7,584,576 4,580
05/15/98 .......... GBP 101,837 167,235 170,119 (2,884)
----------- ----------- ----------
$34,652,510 $34,388,853 $ 263,657
=========== =========== ==========
Purchases 05/15/98 .......... CAD 5,020,175 $ 3,558,061 $ 3,512,179 (45,882)
05/15/98 .......... CHF 20,224,068 14,287,884 13,499,889 (787,995)
05/15/98 .......... DKK 1,971,923 288,512 288,280 (232)
05/15/98 .......... ESP 1,683,885,445 11,218,424 11,054,708 (163,716)
05/15/98 .......... GBP 5,411,256 8,882,654 9,039,514 156,860
05/15/98 .......... NZD 6,342,182 3,496,128 3,509,514 13,386
----------- ----------- ----------
$41,731,663 $40,904,084 $ (827,579)
=========== =========== ==========
</TABLE>
Forward foreign currency purchases and sales under master netting agreements
excluded above amounted to a net payable of $327,064 with Deutsche Bank,
$919,848 with C.S. First Boston, and a net receivable of $330,711 with Bankers
Trust, $170,155 with Merrill Lynch, and $500,407 with Smith Barney at April 30,
1998. Closed forward foreign currency exchange contracts excluded above amount
to a net payable of $109,724 with Goldman Sachs and a net receivable of $8,330
with Merrill Lynch and $39,676 with
Salomon Brothers.
At April 30, 1998, 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, 1998,
the Trust owned the following restricted securities (constituting 3.9% of net
assets) which may not be publicly sold without registration under the
Securities Act of 1933. The Trust does not have the right to demand that such
securities be registered. The value of these securities is determined by
valuations furnished by dealers or by a pricing service, or if not available,
are valued at fair value as determined in good faith by or at the direction of
the Trustees.
<TABLE>
<CAPTION>
Date of Share
Description Acquisition Amount Cost Value
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cargill, Inc. 2002 .................... 8/29/97 10,000,000 $10,474,225 $ 9,874,619
George Town Real Estate Ltd.
5.9s, 2007 ........................... 12/20/96 4,000,000 4,000,000 4,120,000
GPA PLC 10.875s, 2019 ................. 3/13/96 250,000 250,000 281,645
Russia Principal Loan
3.359s, 2020 ......................... 12/12/97 20,750,000 12,149,773 13,124,375
Merrill Lynch Mortgage
Investors, Inc. 8.160s, 2022 ......... 6/22/96 1,200,000 831,750 1,145,438
UDC Homes, Inc. Trust 14.5s,
2000 ................................. 4/30/93 29,000 14,650 16,115
-----------
$28,562,192
===========
</TABLE>
23
<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, 1998, and the related statement of operations for the six month
period ended April 30, 1998, the statement of changes in net assets for the six
month period ended April 30, 1998 and for the year ended October 31, 1997, and
the financial highlights for the six month period ended April 30, 1998 and for
each of the four years in the period ended October 31, 1997. 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 the periods prior to the year ended October 31, 1994 indicated
herein, 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 and financial highlights. Our procedures included confirmation of
securities owned as of April 30, 1998, 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, 1998, the results of its operations for
the six month period ended April 30, 1998, the changes in its net assets for
the six month period ended April 30, 1998 and for the year ended October 31,
1997, and the financial highlights for the six month period ended April 30,
1998 and for each of the four years in the period ended October 31, 1997, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
June 5, 1998
24
<PAGE>
MFS(R) Multimarket Income Trust
Trustees
Richard B. Bailey* (2)
Private Investor; Former Chairman and
Director (until 1991), MFS Investment
Management
Peter G. Harwood(1)
Private Investor
J. Atwood Ives(2)
Chairman and Chief Executive Officer,
Eastern Enterprises
(diversified services company)
Lawrence T. Perera(2)
Partner, Hemenway & Barnes
(attorneys)
William J. Poorvu(1)
Adjunct Professor, Harvard University
Graduate School of Business
Administration
Charles W. Schmidt(1)
Private Investor
Arnold D. Scott*
Senior Executive Vice President,
Director, and Secretary,
MFS Investment Management
Jeffrey L. Shames*
Chairman, Chief Executive
Officer, and Director, MFS Investment
Management
Elaine R. Smith(1)
Independent Consultant
David B. Stone(1)(2)
Chairman and Director,
North American
Management Corp.
(investment advisers)
Portfolio Manager
James T. Swanson*
Treasurer
W. Thomas London*
Assistant Treasurers
Mark E. Bradley*
Ellen Moynihan*
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.
[recycle symbol] This report is printed on recycled paper. MMTCE-3 6/98 89M
