Dear Shareholders,
The current investment and economic environment bears little resemblance to
last year's. One year ago, global economies were floundering, and the crisis in
Asia threatened an already weak U.S. economy. Corporate earnings were flat, and
economists used the word "deflation" for the first time in recent memory.
Entering 1999, expectations for corporate earnings growth were lowered
dramatically. In an attempt to foster U.S. growth, the Federal Reserve Board
(the Fed) lowered interest rates.
As a result, this year the U.S. economy is booming and unemployment is low.
Many corporations are focused on improving their profitability, and investors
have been rewarded with positive surprises across a variety of industries. Our
analysts predict that corporate earnings growth for 1999 will average 12% -
15%.
Global economies also are showing signs of strength, and the Asian crisis has
passed. In fact, Japan's economic woes seem to have reached bottom. Although
the process is in its infancy, some Japanese corporations not only are talking
about restructuring and cost cutting, they also are beginning to take action,
looking within to become more competitive and improve returns on equity. While
still lagging the United States, Europe is beginning to restructure and
consolidate. These signs of international growth have contributed to concerns
that the U.S. economy now may be too strong. In June, and again in August, the
Fed raised rates by one-quarter of a percentage point to help ward off the
specter of inflation.
After an unprecedented four years of 20% annual returns in the U.S. equity
market, we fear that many investors have become accustomed to high returns and
have lost sight of the risks they take on to achieve them. In the current
market many investors are taking on additional risk -- whether through day
trading or investing in speculative Internet stocks.
Risks are as much a part of the market today as they were one year ago. We
believe the market remains overvalued, with stocks priced 30% above our
analysts' earnings projections. And market narrowness has not abated; the top
25 stocks in the Standard & Poor's 500 Composite Index, a popular, unmanaged
index of common stock total return performance, are still the most overvalued.
Such extreme overvaluation makes the stock market sensitive to interest-rate
news and any negative earnings surprises. The Year 2000 (Y2K) computer problem
is another factor causing investor concern. While we believe corporate America
is well prepared to address any Y2K situations that may arise at year-end, no
one can predict investor behavior. In our opinion, it is investor behavior that
has the greatest potential to create market volatility.
We believe the best way to address Y2K and other market risks is through our
continuing commitment to MFS Original Research[RegTM] and our fundamental
investment tenet of long-term investing. Whether markets are up or down, MFS
analysts focus on analyzing industries and visiting companies to determine the
long-term winners and the prices that will make them attractive opportunities.
Because all companies will not benefit equally from the improving international
environment, bottom-up research remains critical to identifying those that we
believe are successfully restructuring, consolidating, and gaining market
share.
Changes in market and economic conditions can't be predicted but should always
be expected. The changes we have seen over the past year only reinforce our
commitment to long-term planning and investing. We believe volatility helps to
create opportunity for long-term investors to buy solid companies at attractive
prices. For this reason, we are continuing to expand our domestic and
international capabilities to ensure that MFS has primary, in-house research on
companies worldwide. We believe that we have built the right investment team,
backed by MFS Original Research, to take advantage of those opportunities for
our shareholders.
1
<PAGE>
We appreciate your confidence and welcome any questions or comments you may
have.
Respectfully,
/s/ Jeffrey L. Shames
- ---------------------
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management[RegTM]
November 15, 1999
Management Review and Outlook
Dear Shareholders,
The Trust's stock market price, which stood at $6.44 on October 30, 1998,
decreased to $6.06 on October 31, 1999, while its net asset value (NAV)
decreased from $7.17 to $7.03, representing a total return of 2.81% 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
NAV was 7.04% for the same period.
The Trust's results compare to returns over the same period for the following
unmanaged indices: -1.21% for the J.P. Morgan Non-Dollar Government Bond Index
(the Morgan Index), 4.85% for the Lehman Brothers Government Bond Index, and
4.34% for the Lehman Brothers High Yield Bond Index. The Morgan Index is an
index of actively traded government bonds issued by 12 countries (excluding the
United States) with remaining maturities of at least one year. The Lehman
Brothers Government Bond Index is comprised of all publicly issued debt
obligations of the U.S. Treasury, U.S. government agencies, quasi-federal
corporations, and corporate debt guaranteed by the U.S. government. The Lehman
Brothers High Yield Bond Index is an index of noninvestment-grade corporate
debt.
We were able to buy some bonds issued by banks in Thailand and Korea that
performed well. Additionally, the Trust's high-yield bonds, which comprise the
largest sector, have done well in the thriving U.S. economy. They rebounded,
along with other debt issues, after the late-1998 credit crisis. Our high-yield
bond holdings are mostly in the telecommunications, entertainment, media, and
energy industries. Good examples of holdings that have performed well are
popular media company Time Warner Entertainment and utility Texas & New Mexico
Power Co.
Another positive factor was convertible bonds, which are exchangeable for a set
number of common shares at a prestated price. At mid-year, we began rebuilding
our position because we saw that many convertibles had fallen to prices that
were less than the stock values. Historically, convertible bonds tend to
provide protection when bonds do poorly and return when stocks do well. In
particular, convertibles issued by Colt Telecom Group provided the Trust with
good performance. Finally, we also decided in the second half of the period to
increase our exposure to the euro, the new currency of the European monetary
union, because we believed it was undervalued and would appreciate.
We have somewhat reduced our holdings in government bonds issued by the United
States and developed countries. The increased economic growth here in the
United States and in Europe indicated that interest rates were likely to
continue rising, thereby pushing bond prices down. By the end of the period,
the domestic and international government bond portion of the Trust had
decreased. The government bonds we held were generally of shorter duration -- 4
to 4.3 years -- compared to the first half of the period. Duration indicates a
portfolio's sensitivity to changes in interest rates.
The Trust's emerging market debt holdings also performed well and represented
nearly one-quarter of the portfolio's assets. Near the end of last year, we
began to see signs of recovery in emerging markets and bought bonds
opportunistically from these markets at attractive prices. Since then, bond
prices have increased steadily as countries such as South
2
<PAGE>
Korea and Thailand have taken meaningful steps toward economic reform. Also,
Latin American bonds provided some opportunities in light of the recession in
the area, which was not as severe as expected. There had been concern that
Brazil was going to default on its debt, but the government helped to avoid
that by undertaking important economic reforms while keeping inflation in
check.
Mexico has had a spectacular comeback largely due to North American Free Trade
Agreement-related (NAFTA) export business with the United States. We own both
government and corporate bonds in Mexico, and corporates have done well as
interest rates have fallen.
The Trust has benefited from what we call crossover credits, specifically,
high-yield corporate bonds issued by companies that then get acquired by
fiscally stronger companies, often resulting in an upgrade of the original
bond's rating. Utilities, which have undergone huge changes as a result of
deregulation, have been significant sources of crossover credits.
The Trust's allocations are 27.0% of assets in high-yield corporate bonds,
24.2% in U.S. government securities (which include U.S. Treasury, U.S agency,
and mortgage-backed securities), 17.8% in emerging markets, 12.0% in U.S.
high-grade corporate bonds, 9.4% in international government-issued debt, and
the rest in convertible equities, preferred stocks, and cash.
We continue to monitor interest rates. Currently, we see no signs of inflation
in the United States. The economy here is very strong, and the Fed may raise
interest rates slightly, which could help to forestall any price increases.
Such a move would essentially put interest rates back to 5.5%, where they were
before the credit crisis of 1998. In any event, our relatively high reserves in
cash, preferred stocks, and convertible equities should help us cope with any
changes in interest rates in the near term.
For the longer term, once the usual year-end concerns about adequate liquidity
in the event of a rise in redemptions have ended and the Fed has decided what
to do with interest rates, we will look to Japan and the emerging Asian markets
for opportunities.
The Trust has had a very good 12 months despite a bad overall bond market, and
we have been able to move in and out of markets as our analysts have uncovered
opportunities in corporate bond and emerging bond issuance. The contribution
made by our high-yield analysts has been important to the Trust's performance,
as much for their ability to avoid companies that might default as for their
ability to identify those that can pay their debts on time. We're looking
forward to their continued contribution in helping us diversify our holdings
across industry sectors and countries while trying to manage the volatility
global investing entails.
Respectfully,
/s/ James T. Swanson
- --------------------
James T. Swanson
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and
are current 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.
It is not possible to invest directly in an index.
The portfolio is actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
U.S. Treasury bills and U.S. government bonds fluctuate in value, but they are
guaranteed as to the timely payment of interest and, if held to maturity,
provide a guaranteed return of principal. Government guarantees apply to
individual securities only and not to prices and yields of shares in a managed
portfolio. Nondiversified Trusts have more risk than
3
<PAGE>
diversified Trusts. An investment in shares of the Trust should not be
considered to constitute a complete investment program. The Trust may invest in
high-yield foreign, emerging market, and derivative securities. Lower-rated
securities may provide greater returns, but they are also associated with
greater-than-average risk. Investing in foreign and emerging market securities
also involves special risks. The Trust has the flexibility to invest in
derivative securities when its manager believes such securities can provide
better value relative to direct investments in stocks or bonds.
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, 1999)
<TABLE>
<S> <C>
Net Asset Value Per Share
October 31, 1998 $7.17
October 31, 1999 $7.03
New York Stock Exchange Price
October 30, 1998 $6.4375
December 2, 1998 (high)* $7.0000
October 20, 1999 (low)* $5.8125
October 31, 1999 $6.0625
</TABLE>
*For the period November 1, 1998, through October 31, 1999.
- -------------------------------------------------------------
Federal Tax Information
In January 2000, shareholders will be mailed a Form 1099-DIV reporting the
federal tax status of all distributions paid during the calendar year 1999.
For the year ended October 31, 1999, the amount of distributions from income
eligible for the 70% dividends received deduction for corporations is 0.37%.
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 October 31, 1999, our records indicate that there are 13,581 registered
shareholders and approximately 52,255 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 recieve 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.
Results of Shareholder Meeting
At the annual meeting of shareholders of MFS Multimarket Income Trust, which
was held on September 15, 1999, the following actions were taken:
Item 1. The election of Richard B. Bailey, Charles W. Schmidt, and Elaine R.
Smith as Trustees of the Trust.
<TABLE>
<CAPTION>
Election of Trustees For Against
- -------------------- --- -------
<S> <C> <C>
Richard B. Bailey 82,884,601.0112 1,497,003.7789
Charles W. Schmidt 82,896,982.5833 1,484,622.2068
Elaine R. Smith 82,893,541.1839 1,488,063.6062
</TABLE>
Item 2. The ratification of the selection of Ernst & Young LLP as the
independent accountants to be employed by the Trust for the fiscal year
ending October 31, 2000.
<TABLE>
<CAPTION>
% of % of
Shares to Total Shares to Total
Shares Outstanding Shares Shares Voted
------ ------------------ ------------
<S> <C> <C> <C>
For 82,890,894.9997 89.6132% 98.2334%
Against 486,374.2506 0.5258% 0.5764%
Abstain 1,004,335.5398 1.0858% 1.1902%
</TABLE>
4
<PAGE>
Investment Objective and Policies
The investment objective of the Trust is to provide a high level of current
income through investments in fixed-income securities.
The Trust will attempt to achieve this objective by allocating portfolio assets
among various categories of fixed-income securities. MFS will monitor the
Trust's portfolio performance on an ongoing basis and will reallocate assets in
response to actual and anticipated market and economic changes. In pursuing
this objective, preservation of capital will be a consideration, although
capital appreciation, if any, will be incidental. The Trust may enter into
options and futures transactions and forward foreign currency exchange
contracts and purchase securities on a "when-issued" basis.
Dividend Reinvestment and
Cash Purchase Plan
MFS offers a Dividend Reinvestment and Cash Purchase Plan that allows you to
reinvest either all of the distributions paid by the Trust or only the long-term
capital gains. Purchases are made at the market price unless that price exceeds
the net asset value (the shares are trading at a premium). If the shares are
trading at a premium, purchases will be made at a discounted price of either the
net asset value or 95% of the market price, whichever is greater. Twice each
year you can also buy shares. Investments 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. 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, call 1-800-637-2304 any business day
from 8 a.m. to 8 p.m. Eastern time. Please have available the name of the Trust
and your account and Social Security numbers. For certain types of
registrations, such as corporate accounts, instructions must be submitted in
writing. Please call for additional details. When you withdraw, 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.
If you have any questions or would like a brochure providing a complete
description of the plan, please call 1-800-637-2304 any business day from 8
a.m. to 8 p.m. Eastern time.
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------
5
<PAGE>
Portfolio of Investments -- October 31, 1999
Bonds -- 90.0%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- 58.8%
Advertising -- 0.2%
Outdoor Systems, Inc.,
8.875s, 2007 ................... $1,525 $1,547,875
----------
Aerospace -- 0.6%
Argo Tech Corp., 8.625s,
2007 ........................... $ 300 $ 255,000
BE Aerospace, Inc., 8s, 2008 ..... 2,500 2,181,250
K & F Industries, Inc., 9.25s,
2007 ........................... 200 191,500
United Defense Industries,
Inc., 8.75s, 2007 .............. 1,550 1,460,875
----------
$4,088,625
----------
Automotive -- 0.3%
Lear Corp., 9.5s, 2006 ........... $1,725 $1,768,125
----------
Broadcasting -- 0.6%
American Radio Systems
Corp., 9s, 2006 ................ $ 750 $ 780,000
Cumulus Media, Inc., 10.375s,
2008 ........................... 1,000 1,030,000
Granite Broadcasting Corp.,
10.375s, 2005 .................. 2,220 2,269,950
----------
$4,079,950
----------
Building Materials -- 1.1%
AAF- McQuay, Inc., 8.875s,
2003 ........................... $1,925 $1,535,187
American Standard, Inc.,
7.375s, 2008 ................... 1,050 924,000
Building Materials Corp., 8s,
2007 ........................... 1,100 1,003,750
Grove Worldwide LLC/Capital,
Inc., 9.25s, 2008 .............. 1,250 412,500
Nortek, Inc., 9.25s, 2007 ........ 125 121,250
Nortek, Inc., 9.875s, 2004 ....... 3,250 3,185,000
UDC Homes, Inc., 14.5s,
2000 ........................... 29 16,115
----------
$7,197,802
----------
Business Services -- 0.6%
Iron Mountain, Inc., 8.75s,
2009 ........................... $1,600 $1,504,000
Iron Mountain, Inc., 10.125s,
2006 ........................... 150 153,000
Pierce Leahy Corp., 11.125s,
2006 ........................... 2,000 2,115,000
----------
$3,772,000
----------
Chemicals -- 0.6%
Huntsman ICI Chemicals, Inc.,
10.125s, 2009## ................ $1,025 $1,019,875
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
Chemicals -- continued
NL Industries, Inc., 11.75s,
2003 ........................... $1,270 $1,308,100
UCAR Global Enterprises, Inc.,
12s, 2005 ...................... 1,700 1,772,250
----------
$4,100,225
----------
Computer Hardware
Systems -- 0.2%
Anacomp, Inc., 10.875s, 2004 $1,250 $1,231,250
----------
Computer Software
Services -- 0.5%
Unisystem Corp., 7.875s,
2008 ........................... $3,250 $3,111,875
----------
Consumer Goods and
Services -- 0.6%
Hayes Wheels International,
Inc., 9.125s, 2007 ............. $2,100 $2,005,500
Kindercare Learning Centers,
Inc., 9.5s, 2009 ............... 350 327,250
Williams Scotsman, Inc.,
9.875s, 2007 ................... 1,250 1,196,875
----------
$3,529,625
----------
Containers -- 0.4%
Synthetic Industries, Inc.,
9.25s, 2007 .................... $2,750 $2,750,000
----------
Container, Forest and
Paper Products -- 0.9%
Ball Corp., 7.75s, 2006 .......... $ 500 $ 487,500
Gaylord Container Corp.,
9.875s, 2008 ................... 1,200 1,044,000
Gaylord Container Corp.,"B",
9.75s, 2007 .................... 1,200 1,140,000
Silgan Holdings, Inc., 9s, 2009 1,500 1,421,250
U.S. Timberlands, 9.625s, 2007. 1,700 1,547,000
----------
$5,639,750
----------
Energy -- 0.1%
AmeriGas Partners LP "B",
10.125s, 2007 .................. $ 600 $ 618,000
----------
Entertainment -- 0.8%
AMC Entertainment, Inc., 9.5s,
2009 ........................... $1,650 $1,460,250
Cinemark USA, Inc.,"B",
9.625s, 2008 ................... 750 656,250
Circus Circus Enterprises, Inc.,
6.7s, 2096 ..................... 2,900 2,699,929
----------
$4,816,429
----------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
Financial Institutions -- 1.5%
Constellation Finance LLC,
9.8s, 2001 ..................... $4,250 $ 3,931,250
DTI Holdings, Inc., 0s to 2003,
12.5s to 2008 .................. 3,825 1,338,750
Merrill Lynch Mortgage
Investors, Inc., 8.43s, 2022+ 1,200 1,118,437
Natexis AMBS Co. LLC,
8.44s, 2049## .................. 1,000 935,000
Residential Accredit Loans,
Inc., 7.75s, 2027 .............. 2,556 2,434,591
-----------
$ 9,758,028
-----------
Financial Services -- 0.4%
Americo Life, Inc., 9.25s, 2005 $2,650 $ 2,623,500
-----------
Food and Beverage
Products -- 0.5%
Borden, Inc., 9.25s, 2019 ........ $ 750 $ 690,278
Borden, Inc., 9.2s, 2021 ......... 2,500 2,315,925
-----------
$ 3,006,203
-----------
Industrial -- 0.8%
Allied Waste North America,
Inc., 10s, 2009## .............. $1,500 $ 1,269,375
Day International Group,
Inc.,"B", 11.125s, 2005 ........ 1,000 1,000,000
IMO Industries, Inc., 11.75s,
2006 ........................... 1,650 1,790,250
Numatics, Inc., 9.625s, 2008 ..... 1,600 1,276,000
-----------
$ 5,335,625
-----------
Information, Paging and
Technology -- 0.6%
NEXTEL International, Inc., 0s
to 2003, 12.125 to 2008 ........ $2,750 $ 1,395,625
NEXTEL Communications,
Inc., 9.75s, 2004 .............. 1,500 1,528,125
NEXTEL Communications,
Inc., 0s to 2002, 9.75s to
2007 ........................... 300 216,000
NEXTEL Communications,
Inc., 0s to 2003, 9.95s to
2008 ........................... 450 319,500
Paging Network, Inc., 8.875s,
2006 ........................... 1,000 275,000
-----------
$ 3,734,250
-----------
Media -- 1.1%
Chancellor Media Corp.,
8.125s, 2007 ................... $3,625 $ 3,516,250
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
Media -- continued
Fox/Liberty Networks LLC,
Inc., 8.875s, 2007 ............. $2,450 $ 2,486,750
Golden Books Publishing, Inc.,
7.65s, 2002 .................... 705 303,150
Lenfest Communications, Inc.,
10.5s, 2006 .................... 500 565,000
-----------
$ 6,871,150
-----------
Medical and Health
Products -- 0.2%
Polymer Group, Inc.,"B", 9s,
2007 ........................... $1,645 $ 1,570,975
-----------
Medical and Health Technology
and Services -- 0.1%
Quorum Health Group, Inc.,
8.75s, 2005 .................... $ 200 $ 183,000
Tenet Healthcare Corp.,
8.625s, 2007 ................... 450 419,625
-----------
$ 602,625
-----------
Metals and Minerals -- 1.7%
Commonwealth Aluminum
Corp., 10.75s, 2006 ............ $1,000 $ 1,000,000
Haynes International, Inc.,
11.625s, 2004 .................. 2,200 1,914,000
Kaiser Aluminum & Chemical
Corp., 9.875s, 2002 ............ 1,015 1,004,850
Kaiser Aluminum & Chemical
Corp., 10.875s, 2006 ........... 1,625 1,629,062
Metal Management, Inc., 10s,
2008 ........................... 2,000 1,340,000
P&L Coal Holdings Corp.,
9.625s, 2008 ................... 1,750 1,671,250
Thermadyne Manufacturing /
Capital Corp., 9.875s, 2008 1,500 1,222,500
Wheeling Pittsburgh Corp.,
9.25s, 2007 .................... 1,000 922,500
-----------
$10,704,162
-----------
Oil Services -- 1.1%
Clark USA, Inc., 10.875s,
2005 ........................... $ 995 $ 853,212
Continental Resources, Inc.,
10.25s, 2008 ................... 1,000 835,000
Triton Energy Limited, 8.75s,
2002 ........................... 3,000 2,959,110
Triton Energy Limited, 9.25s,
2005 ........................... 2,500 2,463,450
-----------
$ 7,110,772
-----------
</TABLE>
7
<PAGE>
Portfolio of Investments -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
Printing and Publishing -- 0.3%
Hollinger International
Publishing, Inc., 9.25s, 2007 $1,950 $1,911,000
----------
Real Estate -- 0.4%
Dynex Capital, Inc., 7.875s,
2002 ............................... $3,600 $2,794,500
----------
Restaurants and
Lodging -- 0.2%
Red Roof Inns, Inc., 9.625s,
2003 ............................... $1,025 $1,033,969
----------
Retail -- 0.9%
Cole National Group, Inc.,
8.625s, 2007 ....................... $ 800 $ 624,000
Cole National Group, Inc.,
9.875s, 2006 ....................... 500 425,000
J.Crew Operating Corp.,
10.375s, 2007 ...................... 1,680 1,512,000
Musicland Group, Inc., 9.875s,
2008 ............................... 600 504,000
Revlon Consumer Products
Corp., 8.125s, 2006 ................ 1,955 1,524,900
Samsonite Corp., 10.75s,
2008 ............................... 1,400 1,162,000
----------
$5,751,900
----------
Special Products and
Services -- 0.3%
Buckeye Cellulose Corp.,
9.25s, 2008 ........................ $2,150 $2,128,500
----------
Steel -- 0.4%
Alaska Steel Holdings Corp.,
9.125s, 2006 ....................... $ 750 $ 742,500
WCI Steel, Inc., 10s, 2004 ........... 1,950 1,906,125
----------
$2,648,625
----------
Telecommunications -- 9.9%
Adelphia Communications
Corp., 9.875s, 2007 ................ $1,725 $1,759,500
Allbritton Communications
Co., 9.75s, 2007 ................... 1,005 1,002,488
Allegiance
Telecommunications, Inc.,
12.875s, 2008 ...................... 2,000 2,190,000
American Celluar Corp., 10.5s,
2008 ............................... 1,800 1,939,500
Century Communications
Corp., 9.5s, 2005 .................. 450 448,875
Chancellor Media Corp. "B",
8.75s, 2007 ........................ 1,000 990,000
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
Telecommunications -- continued
Comcast Corp., 9.375s, 2005 $1,940 $2,043,868
Continental Cablevision, Inc.,
9.5s, 2013 ......................... 5,000 5,548,300
Cox Communications, Inc.,
7.75s, 2006 ........................ 2,500 2,546,425
FrontierVision Holdings LP,
11.875s, 2007 ...................... 500 422,500
FrontierVision Holdings LP,
11s, 2006 .......................... 2,000 2,105,000
Global Crossings Holdings
Ltd., 9.625s, 2008 ................. 1,325 1,344,875
ICG Holdings, Inc., 0s to
2001, 12.5s to 2006 ................ 3,500 2,677,500
Intermedia Communications,
Inc., "B", 0s to 2002,
11.25s to 2007 ..................... 2,875 1,983,750
ITC Deltacom, Inc., 11s, 2007 2,945 3,077,525
ITC Deltacom, Inc., 9.75s,
2008 ............................... 750 750,000
Jones Intercable, Inc., 8.875s,
2007 ............................... 1,500 1,575,000
Level 3 Communications, Inc.,
9.125s, 2008 ....................... 2,050 1,906,500
Mobile Telecommunication
Technologies Corp., 13.5s,
2002 ............................... 1,665 1,885,612
NTL Communications Corp.,
0s to 2003, 12.375s to
2006 ............................... 1,025 686,750
NTL, Inc., 0s to 2003, 9.75
to 2008 ............................ 1,860 1,234,575
Pagemart Wireless, Inc., 0s to
2003, 11.25s to 2008 ............... 725 224,750
PSINet, Inc., 11s, 2009## ............ 1,000 1,020,000
Qwest Communications
International, Inc., 0s to
2003, 8.29 to 2008 ................. 3,575 2,701,663
Qwest Communications
International, Inc., 10.875s,
2007 ............................... 487 544,963
Spectrasite Holdings Inc., 12s,
2008## ............................. 2,550 1,434,375
Sprint Spectrum LP, 0s to
2001, 12.5s to 2006 ................ 2,000 1,840,000
Sprint Spectrum LP, 11s, 2006 300 336,810
TCI Communications
Financing III, 9.65s, 2027 ......... 5,000 5,620,400
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
Telecommunications -- continued
Time Warner
Telecommunications LLC,
9.75s, 2008 ........................... $2,500 $ 2,550,000
Triton PCS, Inc., 0s to 2003,
11s to 2008 ........................... 2,450 1,678,250
Turner Broadcasting Systems,
Inc., 8.4s, 2024 ...................... 3,000 3,008,310
United International Holdings,
Inc., 10.75s, 2008 .................... 3,200 1,840,000
Western Wireless Corp.,
10.5s, 2007 ........................... 1,500 1,623,750
WorldCom, Inc., 8.875s, 2006 900 947,484
-----------
$63,489,298
-----------
Textiles
Galey & Lord, Inc., 9.125s,
2008 .................................. $ 570 $ 74,100
-----------
U.S. Government
Guaranteed -- 12.0%
U.S. Treasury Bonds, 3.875s,
2029 .................................. $2,028 $ 1,941,867
U.S. Treasury Bonds, 5.25s,
2029 .................................. 3,000 2,593,110
U.S. Treasury Bonds, 6.125s,
2029 .................................. 1,001 996,616
U.S. Treasury Bonds, 9.875s,
2015 .................................. 14,825 19,763,504
U.S. Treasury Bonds, 12s,
2005 .................................. 14,000 17,775,660
U.S. Treasury Notes, 8s, 2001 15,250 15,738,458
U.S. Treasury Notes, 8.5s,
2000 .................................. 17,750 17,910,815
-----------
Total U.S. Government Guaranteed ....................... $76,720,030
-----------
U.S. Federal Agencies -- 11.8%
Federal Home Loan Bank,
5.125s, 2001 .......................... $3,750 $ 3,694,913
Federal Home Loan Bank,
5.7s, 2009 ............................ 14,325 13,308,784
Federal Home Loan Bank,
7.5s, 2028 ............................ 2,719 2,728,965
Financing Corp., 9.4s, 2018 ............. 12,000 14,998,080
FNMA, 6.625s, 2009 ...................... 12,190 12,102,354
FNMA, 7s, 2029 .......................... 2,664 2,616,091
GNMA, 6.5s, 2028 ........................ 3,574 3,415,824
GNMA, 7s, 2011 .......................... 16,976 16,750,333
GNMA, 7.5s, 2025 ........................ 4,658 4,670,045
GNMA TBA, 7s, 2012 ...................... 766 767,424
GNMA TBA, 7.5s, 2027 .................... 534 535,013
-----------
$75,587,826
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
Utilities -- Electric -- 7.1%
Beaver Valley Funding Corp.,
9s, 2017 ......................................... $2,124 $ 2,168,264
BVPS II Funding Corp., 8.68s,
2017 ............................................. 1,000 1,060,570
Cheasapeake Energy Corp.,
9.625s, 2005 ..................................... 1,600 1,520,000
CMS Energy Corp., 6.75s,
2004 ............................................. 2,350 2,230,197
El Paso Electric Co."D", 8.9s,
2006 ............................................. 3,425 3,582,790
El Paso Electric Co."E", 9.4s,
2011 ............................................. 3,000 3,282,990
Midland Cogeneration Venture
Corp., 10.33s, 2002 .............................. 5,602 5,815,070
Midland Funding Corp. I,
10.33s, 2002 ..................................... 1,086 1,127,092
Midland Funding Corp. II, "A",
11.75s, 2005 ..................................... 1,265 1,391,209
Niagara Mohawk Power Corp.,
7.25s, 2002 ...................................... 1,437 1,438,985
Niagara Mohawk Power Corp.,
8.77s, 2018 ...................................... 2,468 2,533,501
Texas & New Mexico Power
Co., 10.75s, 2003 ................................ 13,690 14,037,315
Toledo Edison Co., 8.7s, 2002 2,192 2,233,517
Waterford 3 Funding Entergy
Corp., 8.09s, 2017 ............................... 3,213 3,144,710
------------
$ 45,566,210
------------
Total U.S. Bonds .............................................. $377,274,779
------------
Foreign Bonds -- 31.2%
Argentina -- 4.6%
Supercanal Holdings SA,
11.5s, 2005
(Telecommunications)## ........................... $2,000 $ 940,000
Autopistas Del Sol SA,"B",
10.25s, 2009 (Industrial)## ...................... 4,500 3,420,000
Cia Latino Americano SA,
11.625s, 2004 (Diversified
Operations) ...................................... 1,500 911,250
Industrias Metalurgicas
Pescarm, 9.5s, 2002
(Utilities -- Electric)## ........................ 750 457,054
Perez Companc SA, 9s, 2006
(Oils)## ......................................... 3,000 2,684,700
Republic of Argentina, 6.813s,
2005 ............................................. 10,780 9,636,539
</TABLE>
9
<PAGE>
Portfolio of Investments -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Foreign Bonds -- continued
Argentina -- continued
Republic of Argentina, 9.75s,
2027 ............................ $ 844 $ 706,850
Republic of Argentina,
11.874s, 2004## ................. 2,500 2,500,000
Telecom Argentina, 12s, 2002
(Telecommunications) ............ 5,000 5,100,000
Telefonica de Argentina,
9.125s, 2008
(Telecommunications) ............ 3,400 2,954,600
-----------
$29,310,993
-----------
Australia -- 1.9%
Commonwealth of Australia,
7.5s, 2005 ...................... AUD 18,333 $12,271,717
-----------
Bermuda -- 0.2%
Flag Ltd., 8.25s, 2008
(Telecommunications) ............ $ 1,600 $1,416,000
-----------
Brazil -- 2.1%
Bahia Sul Celulose SA,
10.625s, 2004 (Paper &
Related Products)+ .............. $ 850 $ 790,500
Companhia Energetica de
Minas Gerais (Utility --
Electric), 9.125s, 2004 ........ 2,000 1,779,000
Companhia Paranaense,
9.75s, 2005 (Utilities --
Electric) ...................... 2,000 1,865,000
Federal Republic of Brazil,
6.5s, 2001 ...................... 2,491 2,440,935
Federal Republic of Brazil, 7s,
2009 ............................ 2,000 1,465,000
Federal Republic of Brazil,
11.625s, 2004 ................... 5,000 4,800,000
Federal Republic of Brazil,
14.5s, 2009 ..................... 69 71,505
-----------
$13,211,940
-----------
Canada -- 2.7%
Government of Canada, 5s,
2004 ............................ CAD 16,242 $10,599,136
Gulf Canada Resources Ltd.,
9.25s, 2004 (Oil Services) ...... 400 400,360
Metronet Communications
Corp., 0s to 2003, 9.95s to
2008 (Telecommunications) ....... $ 4,150 3,229,032
PCI Chemicals Canada, Inc.,
9.25s, 2007 (Chemicals) ......... 1,500 1,173,750
Rogers Cantel, Inc., 9.375s,
2008 (Telecommunications) ....... 1,800 1,872,000
-----------
$17,274,278
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Foreign Bonds -- continued
Denmark -- 0.4%
Kingdom of Denmark, 7s,
2007 ............................ DKK 16,432 $ 2,550,026
-----------
Germany -- 0.7%
Allgemeine Hypothekenbank
AG, 5s, 2009 (Banks &
Credit Cos.) .................... EUR 3,300 $ 3,315,538
Federal Republic of Germany,
4.5s, 2009 ...................... 1,231 1,234,208
-----------
$ 4,549,746
-----------
Grand Cayman Islands -- 1.4%
APP Finance IX Ltd., 9.961s,
2001 (Paper & Related
Products) ....................... $ 6,900 $ 4,906,245
Fuji Finance, 6.574s, 2049
(Banks and Credit Cos.) ......... JPY 2,250 2,124,450
Sakura Capital Funding,
6.446s, 2049 (Banks and
Credit Cos.) .................... $ 2,000 1,870,000
-----------
$ 8,900,695
-----------
Greece -- 2.7%
Fage Dairy Industries SA, 9s,
2007 (Food and Beverage
Products) ....................... $ 5,000 $ 4,500,000
Hellenic Republic, 5.75s, 2008 EUR 1,089 1,143,366
Hellenic Republic, 8.01s, 2003 GRD 3,128,000 10,345,564
Hellenic Republic, 8.7s, 2005 ..... 485,000 1,640,425
-----------
$17,629,355
-----------
Hong Kong -- 0.5%
Bank of Ayudhya Public Co.
Ltd., 5.98s, 2006 (Utilities --
Electric) ...................... $ 350 $ 266,000
Daewoo Hong Kong Ltd.,
5.675s, 2001 (Distribution/
Wholesale) (In default) ......... 5,000 3,000,000
-----------
$ 3,266,000
-----------
India -- 0.2%
Power Finance Corp. Ltd.,
7.5s, 2009 (Electric)## ......... $ 1,500 $ 1,297,650
-----------
Indonesia -- 0.5%
Tjiwi Kimia International
Finance, 13.25s, 2001 ........... $ 850 $ 714,000
Indah Kiat Finance Mauritius
Ltd., 10s, 2007(Textiles) ....... 3,600 2,313,000
-----------
$ 3,027,000
-----------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Foreign Bonds -- continued
Luxembourg -- 0.1%
Millicom International Cellular
Communications Corp., 0s
to 2001, 13.5s to 2006
(Telecommunications) ............. $ 700 $ 507,500
-----------
Malaysia -- 0.4%
Tenaga Nasional Berhad, 7.5s,
2096 (Utilities)+ ................ $3,350 $ 2,351,365
-----------
Mexico -- 5.6%
Espirito Santo Centrais
Eletricas SA, 10s, 2007 .......... $2,500 $ 1,818,750
Alestra S De R L De CV,
12.625s, 2009 (Telephone-
Integrated)## .................... 5,000 4,837,500
Banco Nacional de
Commerce, 7.25s, 2004
(Banks) .......................... 1,900 1,740,970
Banco Nacional de
Commerce, 8s, 2000
(Banks) .......................... 2,500 2,506,250
Empresas ICA Sociedad
Controladora SA De CV, 5s,
2004 (Construction) .............. 2,500 1,400,000
Empresas ICA Sociedad
Controladora SA De CV,
11.875s, 2001
(Construction) ................... 3,000 2,850,000
Espirit Telecom Group PLC,
10.875s, 2008
(Telecommunications) ............. 700 701,750
Grupo Minero Mexico SA De
CV, 8.25s, 2008 (Metals and
Minerals) ........................ 2,600 2,054,000
Sanluis Corp. SA De CV,
8.875s, 2008 (Mining)## .......... 1,500 1,301,250
Sanluis Corp. SA De CV,
8.875s, 2008 (Mining) ............ 2,750 2,385,625
Satelites Mexicanos SA De CV,
10.125s, 2004
(Telecommunications) ............. 1,250 934,375
TFM SA De CV, 11.75s, 2009 1,250 750,000
United Mexican States,
5.875s, 2019 ..................... 1,334 1,167,250
United Mexican States,
6.068s, 2019 ..................... 917 802,375
United Mexican States, 6.25s,
2019 ............................. 1,000 747,500
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Foreign Bonds -- continued
Mexico -- continued
United Mexican States,
8.625s, 2008* .................... $1,650 $ 1,547,700
United Mexican States, 11.5s,
2026 ............................. 7,750 8,660,625
-----------
$36,205,920
-----------
Panama -- 0.8%
Republic of Panama, 8.25s,
2008 ............................. $1,000 $ 860,000
Republic of Panama, 8.875s,
2027 ............................. 5,316 4,339,185
-----------
$ 5,199,185
-----------
Philippines -- 0.1%
National Power Corp., 9.625s,
2028 (Utilities -- Electric) ..... $1,000 $ 824,220
-----------
Poland -- 0.5%
Republic of Poland, 4s, 2024 ....... $4,500 $ 2,942,100
-----------
Russia -- 0.6%
CSFB Gazprom Note, 13.5s,
2000+ ............................ $3,000 $ 1,775,700
Russia Principal Loans,
6.906s, 2020+ .................... 26,000 2,373,800
-----------
$ 4,149,500
-----------
South Korea -- 0.1%
Korea Electric Power Corp.,
8s, 2002 (Utilities -- Electric) $ 750 $ 750,000
-----------
Thailand -- 0.2%
Krung Thai Bank Public Co.
Ltd., 6.534s, 2006 (Banks) ....... $1,800 $ 1,368,000
-----------
United Kingdom -- 4.4%
GPA PLC, 10.875s, 2019
(Airlines)+ ...................... $ 250 $ 223,018
Diamond Cable
Communications Corp.
PLC, 0s to 2001, 11.75 to
2005 ............................. 2,000 1,815,000
Colt Telecom Group PLC,
8.875s, 2007
(Telecommunications) .............DEM 1,000 553,752
Colt Telecom Group PLC, 0s
to 2001, 12s to 2006
(Telecommunications)* ............ $1,500 1,260,000
Daiwa PB Ltd., 6.563s, 2049
(Banks and Credit Cos.) .......... 5,350 4,387,000
Dolphin Telecommunications
PLC, 0s to 2003, 11.50 to
2008 (Telecommunications) ........ 2,515 1,119,175
</TABLE>
11
<PAGE>
Portfolio of Investments -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Foreign Bonds -- continued
United Kingdom -- continued
Energis PLC, 9.75s, 2009
(Telecommunications)## ......................... $ 1,000 $ 1,015,000
Telewest PLC, 9.625s, 2006
(Media) ........................................ 2,000 2,020,000
United Kingdom Treasury,
6.75s, 2004 .................................... GBP 9,175 15,508,851
------------
$ 27,901,796
------------
Venezuela -- 0.2%
Republic of Venezuela-DCB,
6.313s, 2007 ................................... VEB 1,214 $ 971,424
------------
Uruguay -- 0.3%
Banco Central de Uruguay,
6.75s, 2021 (Banks and
Credit Cos.) ................................... $ 1,250 $ 1,087,500
Republic Orient of Uruguay,
7.875s, 2027 ................................... 1,102 1,131,754
------------
$ 2,219,254
------------
Total Foreign Bonds ............................................. $200,095,664
------------
Total Bonds (Identified Cost, $611,044,659) $577,370,443
------------
Shares
Preferred Stock -- 1.6%
CSC Holdings, Inc., 11.125%
(Telecommunications)* .......................... 68,702 $ 7,351,114
Equitable Iowa Cos Capital
Trust, 8.70% (Banks and
Credit Cos.) ................................... 20,000 502,500
Primedia, Inc., 10% (Printing
and Publishing) ................................ 1,360 132,600
Primedia, Inc., 8.625%
(Printing and Publishing) ...................... 20,000 1,840,000
Supermarkets General
Holdings Corp., 14.125%
(Supermarkets)* ................................ 22,827 719,051
------------
Total Preferred Stock
(Identified Cost, $7,663,327) ................................. $ 10,545,265
------------
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Convertible Bond -- 0.8%
Rite Aid Corp., 5.25s, 2002
(Stores) ....................................... $ 3,100 $ 2,069,250
Tenet Healthcare Corp., 6s,
2005 (Medical and Health
Technology and Services) ....................... 4,250 3,373,438
------------
Total Convertible Bond
(Identified Cost, $6,280,085) ................................. $ 5,442,688
------------
<CAPTION>
Shares
Stocks
RJR Nabisco Holding Corp.
(Consumer Goods and
Services) ...................................... 6,908 $ 88,509
RJR Nabisco Inc. (Consumer
Goods and Services) ............................ 2,302 49,924
------------
Total Stocks (Identified Cost, $2,716) .......................... $ 138,433
------------
Warrants -- 0.1%
Colt Telecom Group PLC,
Expire 12/31/06
(Telecommunications)*## ........................ 252 $ 226,069
DTI Holdings, Inc., Expire
3/1/08
(Telecommunications)* .......................... 19,125 191
Loral Orion Network Systems,
Inc., Expire 1/15/07
(Telecommunications)* .......................... 1,625 13,000
Loral Orion Network Systems,
Inc., Expire 1/15/07
(Telecommunications)* .......................... 700 12,600
Republic of Argentina, Expire
9/19/27* ....................................... 3,000 3,000
------------
Total Warrants (Identified Cost, $177,228) ...................... $ 254,860
------------
Rights
United Mexican States*
(Identified Cost, $0) .......................... 4,475,000 $ --
------------
<CAPTION>
Principal Amount
(000 Omitted)
Repurchase Agreement -- 5.2%
Goldman Sachs Group, LP
dated 10/29/99 due 11/1/99,
total to be received
$33,109,286 (secured by
various U.S. Government
Securities in a jointly traded
account), at cost .............................. $ 33,095 $ 33,095,000
------------
Total Investments
(Identified Cost, $658,263,015) ............................... $626,846,689
------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted) Value
<S> <C> <C>
Put Options Written
Australian Dollars/
November/0.64 ........................... AUD (15,522)
Total Put Options Written
(Premiums Received, $139,456) ............................. $ (188,438)
-----------
Call Options Written
Euro/January/1.1 .......................... EUR (20,195)
Total Call Options Written
(Premiums Received, $311,190) ............................. $ (124,180)
-----------
Other Assets,
Less Liabilities -- 2.3% .................................... $ 14,679,156
------------
Net Assets -- 100.0% .......................................... $641,213,227
------------
</TABLE>
* Non-income producing security
## SEC Rule 144A restriction
+ Restricted Security
Abbreviations have been used throughout this report to indicate amounts shown
in currencies other than the U.S. Dollar. A list of abbreviations is shown
below.
AUD = Australian Dollars
CAD = Canadian Dollars
DEM = Deutsche Marks
DKK = Danish Kronor
EUR = Euro
GBP = British Pounds
GRD = Greek Drachma
JPY = Japanese Yen
VEB = Venezuelan Bolivar
See notes to financial statements.
13
<PAGE>
Statement of Assets and Liabilities -- October 31, 1999
<TABLE>
<S> <C>
Assets:
Investments, at value (identified cost, $658,263,015) ............................................ $ 626,846,689
Net receivable for forward foreign currency exchange contracts to purchase ....................... 116,762
Net receivable for forward foreign currency exchange contracts to sell ........................... 599,107
Net receivable for forward currency exchange contracts subject to master netting agreements ...... 96,271
Receivable for investments sold .................................................................. 2,845,562
Interest and dividends receivable ................................................................ 14,237,859
Other assets ..................................................................................... 9,164
-------------
Total assets ................................................................................... $ 644,751,414
-------------
Liabilities:
Cash overdraft ................................................................................... 966,475
Distributions payable ............................................................................ 361,462
Payable for investments purchased ................................................................ 878,135
Payable for Fund shares reacquired ............................................................... 298,375
Payable for swap agreements ...................................................................... 200,875
Written options outstanding, at value (premiums received, $450,646) .............................. 312,618
Payable to affiliates -
Management fee .................................................................................. 24,891
Shareholder servicing agent fee ................................................................. 22,200
Administrative fee .............................................................................. 977
Accrued expenses and other liabilities ........................................................... 472,179
-------------
Total liabilities .............................................................................. $ 3,538,187
-------------
Net assets ........................................................................................ $ 641,213,227
=============
Net assets consist of:
Paid-in capital .................................................................................. $ 699,448,848
Unrealized depreciation on investments and translation of assets and liabilities in (30,676,223)
foreign currencies
Accumulated net realized loss on investments and foreign currency transactions ................... (24,207,612)
Accumulated distributions in excess of net investment income ..................................... (3,351,786)
-------------
Total .......................................................................................... $ 641,213,227
=============
Shares of beneficial interest outstanding (124,846,052 issued, less 33,638,000 treasury shares).... 91,208,052
=============
Net asset value per share (net assets/shares of beneficial interest outstanding) ......... $ 7.03
=============
</TABLE>
See notes to financial statements.
14
<PAGE>
Statement of Operations -- Year Ended October 31, 1999
<TABLE>
<S> <C>
Net investment income:
Income --
Interest ................................................................... $ 58,779,010
Dividends .................................................................. 221,081
------------
Total investment income .................................................. $ 59,000,091
------------
Expenses --
Management fee ............................................................ $ 5,449,161
Trustees' compensation .................................................... 188,336
Custodian fee ............................................................. 291,064
Transfer and dividend disbursing agent fee ................................ 264,677
Administrative fee ........................................................ 83,642
Auditing fees ............................................................. 38,295
Legal fees ................................................................ 3,862
Postage ................................................................... 56,263
Printing .................................................................. 44,006
Investor communication expense ............................................ 430,546
Stock Exchange fee ........................................................ 105,262
Commitment fee ............................................................ 42,444
Miscellaneous ............................................................. 33,462
------------
Total expenses ........................................................... $ 7,031,020
Fees paid indirectly ...................................................... (100,321)
------------
Net expenses ............................................................. $ 6,930,699
------------
Net investment income ................................................... $ 52,069,392
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) --
Investment transactions .................................................. $(20,231,769)
Written option transactions .............................................. 1,100,353
Foreign currency transactions ............................................ (3,743,784)
------------
Net realized loss on investments and foreign currency transactions ...... $(22,875,200)
------------
Change in unrealized appreciation (depreciation) --
Investments .............................................................. $ 9,163,711
Written options .......................................................... 138,028
Translation of assets and liabilities in foreign currencies .............. 353,437
Swap transactions ........................................................ (200,875)
------------
Net unrealized gain on investments and foreign currency translation ..... $ 9,454,301
------------
Net realized and unrealized loss on investments and foreign currency ... $(13,420,899)
------------
Increase in net assets from operations ................................ $ 38,648,493
============
</TABLE>
See notes to financial statements.
15
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31,
-------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations --
Net investment income ................................................................ $ 52,069,392 $ 55,244,697
Net realized gain (loss) on investments and foreign currency transactions ............ (22,875,200) 1,452,948
Net unrealized gain (loss) on investments and foreign currency transactions .......... 9,454,301 (60,132,973)
------------ ------------
Increase (decrease) in net assets from operations ................................... $ 38,648,493 $ (3,435,328)
------------ ------------
Distributions declared to shareholders --
From net investment income ........................................................... $(52,765,596) $(54,333,485)
------------ ------------
Trust share (principal) transactions --
Net asset value of shares reacquired from shareholders ............................... $(10,550,275) $ --
------------ ------------
Total decrease in net assets ....................................................... $(24,667,378) $(57,768,813)
------------ ------------
Net assets:
At beginning of year ................................................................. 665,880,605 723,649,418
------------ ------------
At end of year (including accumulated distributions in excess of net investment income
and accumulated undistributed net investment income of $(3,351,786) and $924,695,
respectively) ....................................................................... $641,213,227 $665,880,605
============ ============
</TABLE>
See notes to financial statements.
16
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
For the Year Ended October 31,
-----------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each year):
Net asset value -- beginning of year .......................... $ 7.17 $ 7.79 $ 7.71 $ 7.57 $ 7.06
-------- -------- -------- -------- --------
Income from investment operations# --
Net investment income[sec] ................................... $ 0.56 $ 0.59 $ 0.59 $ 0.57 $ 0.59
Net realized and unrealized gain (loss) on investments and
foreign currency ............................................ (0.13) (0.63) 0.11 0.16 0.49
-------- -------- -------- -------- --------
Total from investment operations ............................ $ 0.43 $ (0.04) $ 0.70 $ 0.73 $ 1.08
-------- -------- -------- -------- --------
Less distributions declared to shareholders --
From net investment income ................................... $ (0.57) $ (0.58) $ (0.62) $ (0.59) $ (0.53)
From paid in capital ......................................... -- -- -- -- (0.04)
-------- -------- --------- -------- --------
Total distributions declared to shareholders ................ $ (0.57) $ (0.58) $ (0.62) $ (0.59) $ (0.57)
-------- -------- -------- -------- --------
Net asset value -- end of year ................................ $ 7.03 $ 7.17 $ 7.79 $ 7.71 $ 7.57
======== ======== ======== ======== ========
Per share market value -- end of year ......................... $ 6.063 $ 6.438 $ 7.125 $ 7.125 $ 6.500
Total return ................................................. 2.81% (1.89)% 8.93% 19.32% 15.69%
Ratios (to average net assets)/Supplemental data[sec]
Interest Expense ............................................ --% --% 0.18% --% 0.09%
Other Expenses## ............................................ 1.05% 1.05% 0.93% 1.11% 1.10%
Total Expense ............................................... 1.05% 1.05% 1.11% 1.11% 1.19%
Net investment income ....................................... 7.80% 7.70% 7.64% 7.49% 8.13%
Portfolio turnover ........................................... 98% 155% 172% 214% 189%
Net assets at end of year
(000 omitted) ............................................... $641,213 $665,881 $723,649 $739,882 $780,915
Leverage analysis:
Debt outstanding at end of year (000 omitted) ............... $ -- $ -- $ -- $ -- $ --
Average daily balance of debt outstanding (000 omitted) ..... $ -- $ -- $ 18,854 $ -- $ 10,750
Average daily number of shares outstanding (000 omitted) .... 92,464 92,880 93,951 100,810 108,970
Average debt per share ...................................... $ -- $ -- $ 0.20 $ -- $ 0.10
#Per share data is based on average shares outstanding.
##Ratios do not reflect expense reductions from certain expense offset arrangements.
[sec]The investment adviser voluntarily waived a portion of their management fee for certain of the
periods indicated. If this fee had been incurred by the
Trust, the net investment income per share and the ratios would have been:
Ratios (to average net assets)
Expenses## .................................................. 1.11%
Net investment income ....................................... 8.11%
</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.
Investment Valuations -- 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. The Trust can invest in
foreign securities. 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. 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 in good faith by 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.
Deferred Trustee Compensation -- Effective July 24, 1999, under a Deferred
Compensation Plan (the Plan) independent Trustees may elect to defer receipt of
all or a portion of their annual compensation. Deferred amounts are treated as
though equivalent dollar amounts had been invested in shares of the Trust or
other MFS funds selected by the Trustee. Deferred amounts represent an
unsecured obligation of the Trust until distributed in accordance with the
Plan.
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.
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 may 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 the swap agreement is based. The Trust uses swaps for both
hedging and non-hedging purposes. For hedging purposes, the Trust may use swaps
to reduce its exposure to interest and foreign exchange rate fluctuations. For
non-hedging purposes, the Trust may use swaps to take a position on anticipated
changes in the underlying financial index.
19
<PAGE>
Notes to Financial Statements -- continued
Investment Transactions and Income -- Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. 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.
Some securities may be purchased on a "when-issued" or "forward delivery"
basis, which means that the securities will be delivered to the Fund at a
future date, usually beyond customary settlement time.
The Trust uses the effective interest method for reporting interest income on
payment-in-kind (PIK) bonds.
Fees Paid Indirectly -- The Trust's custody fee is calculated as a percentage
of the Trust's month end 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 taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
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 be reported in the financial statements as distributions from paid-in
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. During
the year ended October 31, 1999, $3,580,277 was reclassified from accumulated
distributions in excess of net investment income to accumulated undistributed
net realized loss on investments and foreign currency transactions due to
differences between book and tax accounting. This change had no effect on the
net assets or net asset value per share. At October 31, 1999, accumulated
undistributed net investment income (realized gain on investments and foreign
currency transactions) under book accounting were different from tax accounting
due to temporary differences in accounting.
At October 31, 1999, the Trust for federal income tax purposes, had a capital
loss carryforward of $21,403,462 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, 2007, ($18,400,021), and October 31, 2003,
($3,003,441).
(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 the Trust's average daily net assets and 5.40% of investment income.
The Trust pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Trust, all of whom receive
remuneration for their services to the Trust from MFS. Certain 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 $67,774 for the year ended October 31, 1999.
Administrator--The Trust has an administrative service agreement with MFS to
provide the Trust with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
20
<PAGE>
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>
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 ............................ $244,346,179 $210,807,768
============ ============
Investments (non-U.S. government securities) .......... $381,702,147 $461,044,597
============ ============
</TABLE>
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the Trust, as computed on a federal income tax basis, are
as follows:
<TABLE>
<S> <C>
Aggregate cost .......................................................... $660,767,695
============
Gross unrealized appreciation ........................................... $ 11,829,241
Gross unrealized depreciation ........................................... $(45,750,247)
------------
Net unrealized depreciation ............................................ $(33,921,006)
============
</TABLE>
(5) Shares of Beneficial Interest
The Trustees have authorized an unlimited number of full and fractional shares
of beneficial interest. Transactions in Trust shares were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1999 October 31, 1998
------------------------------ ------------------
Shares Amount Shares Amount
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Treasury shares acquired ......... (1,672,300) $ (10,550,275) -- $--
---------- ------------- -- ---
Net decrease .................... (1,672,300) $ (10,550,275) -- $--
========== ============= == ===
</TABLE>
The Trust repurchased 1,672,300 shares of beneficial interest during the year
ended October 31, 1999, at an average price per share $6.308 and a weighted
average discount of 7.719% per share. During the year ended October 31, 1998,
the Trust did not repurchase any shares.
(6) Line of Credit
The Trust and other affiliated funds participate in an $820 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of
Trust shares. Interest is charged to each fund, based on its borrowings, at a
rate equal to the bank's base rate. In addition, a commitment fee, based on the
average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated to
the Trust for the year ended October 31, 1999, was $42,444. The Trust had no
borrowings during the year.
21
<PAGE>
Notes to Financial Statements -- continued
(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>
Number of
Contracts
(000 Omitted) Premiums
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding, beginning of year -- $ --
Options written .................................... 10,535,073 2,740,462
Options terminated in closing transactions ......... (2,689,601) (985,272)
Options exercised .................................. (2,201,048) (237,930)
Options expired .................................... (5,608,707) (1,066,614)
---------- -----------
Outstanding, end of year ............................. 35,717 $ 450,646
---------- -----------
</TABLE>
At October 31, 1999, the Trust had sufficient cash and/or securities at least
equal to the value of the written options.
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 12/01/99 .......... AUD 14,134,634 $ 9,123,316 $ 9,009,595 $ 113,721
12/01/99 .......... CAD 9,128,548 6,147,170 6,207,785 (60,615)
12/01/99 .......... DKK 19,376,669 2,727,418 2,748,013 (20,595)
11/01/99 .......... JPY 3,214,024,269 30,565,227 30,929,928 (364,701)
12/01/99 .......... NZD 34,574,667 18,450,771 17,519,474 931,297
----------- ----------- ---------
$67,013,902 $66,414,795 $ 599,107
=========== =========== =========
Purchases 12/01/99 .......... AUD 13,829,463 $ 9,033,129 $ 8,815,075 $(218,054)
12/01/99 .......... EUR 4,850,640 5,117,328 5,110,764 (6,564)
11/01/99 .......... JPY 4,795,318,026 45,479,723 46,168,020 688,297
12/01/99 .......... NZD 38,013,485 19,608,888 19,261,971 (346,917)
----------- ----------- ---------
$79,239,068 $79,355,830 $ 116,762
=========== =========== =========
</TABLE>
At October 31, 1999 forward foreign currency purchases and sales under master
netting agreements excluded above amounted to a net payable of $49,304 with
Deutsche Bank and $247,614 with CS First Boston and a net receivable of
$393,189 with Merrill Lynch.
Interest Rate Swaps
<TABLE>
<CAPTION>
Cash Flows Unrealized
Notional Principal Cash Flows Paid Received by the Appreciation
Expiration Amount of Contract by the Trust Trust (Depreciation)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3/22/03 SEK .......... 108,700,000 Fixed - 4.38% Floating - 3M STIBOR $(500,149)
299,274
3/22/03 EUR .......... 11,560,000 Floating - 6M EURIBOR Fixed - 3.76% ---------
$(200,875)
=========
</TABLE>
22
<PAGE>
At October 31, 1999, the Trust had sufficient cash and/or securities to cover
any commitments under these contracts.
(8) 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,
1999, the Trust owned the following restricted securities, excluding securities
issued under Rule 144A, constituting 1.35% 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, in good faith by the Trustees.
<TABLE>
<CAPTION>
Date of Share/Par
Description Acquisition Amount Cost Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CSFB Gazprom Note, 13.5s, 2000 .............. 4/25/97 3,000,000 $3,000,000 $1,775,700
Russia Principal Loans 6.906s, 2020 ......... 12/12/97 26,000,000 3,465,000 2,373,800
Bahia Sul Celulose, 10.625s, 2004 ........... 9/16/99 850,000 785,300 795,000
GPA PLC, 10.875s, 2019 ...................... 3/3/96 250,000 250,000 223,018
Tenaga Nasional Berhad, 7.5s, 2096 .......... 4/14/99 3,350,000 382,500 2,351,365
Merrill Lynch Mortgage Investors, Inc.
8.43s, 2022 ................................ 6/22/96 1,200,000 831,750 1,118,437
----------
$8,637,320
==========
</TABLE>
23
<PAGE>
Report of Ernst & Young, 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, 1999, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with 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 October 31, 1999, 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 the
MFS Multimarket Income Trust at October 31, 1999, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended, in conformity with generally accepted
accounting principles.
Boston, Massachusetts
December 9, 1999
/s/ Ernst & Young LLP
24
<PAGE>
MFS' Year 2000 Readiness Disclosure
[Graphic: MFS > Year 2000; Y2K]
MFS Investment Management[RegTM], as an investment adviser and on behalf of the
MFS funds, is committed to the effective use of technology in managing our
portfolio investments, delivering high-quality service to MFS fund shareholders,
retirement plan participants, and MFS' institutional clients, and supporting the
financial consultants who sell our products.
MFS can now say that it is ready for the Year 2000. Our testing has demonstrated
that MFS' computer hardware and software will recognize "00" as the Year 2000
and will not confuse those digits with 1900. All of our critical business
applications and processes have been successfully tested, and we have adopted
companywide policies that will help us maintain our readiness through the
remainder of the year. Any new technology that is brought into the company
before the end of the year will be held to the same stringent standards as our
current technology. We have also developed a vendor readiness survey, contacted
over 700 of our vendors, and established an ongoing process to review responses,
as well as to review readiness statements of new vendors and products.
MFS recognizes that fund shareholders and institutional clients also are
concerned about whether the companies whose securities are held in their
portfolios are addressing Y2K issues. As part of the MFS Original
Research[RegTM] process of evaluating portfolio investments, one of the many
relevant factors that MFS' portfolio managers and research analysts may consider
is a company's Y2K readiness.
Y2K readiness is an enormously complex, worldwide issue. No company or
institution can guarantee that it will be unaffected by the Y2K issue. While MFS
is taking significant steps to protect the integrity of its internal systems,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on MFS fund shareholders, retirement plan participants, or
institutional clients.
If you have further questions regarding MFS' Year 2000 Readiness Program,
please visit our Web site at www.mfs.com, call our toll-free line,
1-800-637-4406, or write to the MFS Year 2000 Program Management Office by
e-mail at [email protected] or by letter at 500 Boylston Street, Boston, MA
02116-3741.
25
<PAGE>
[Back cover]
MFS[RegTM] Multimarket Income Trust
<TABLE>
<S> <C>
Trustees Portfolio Manager
James T. Swanson*
Richard B. Bailey (2)
Private Investor; Former Chairman and Treasurer
Director (until 1991), MFS Investment Management W. Thomas London*
J. Atwood Ives+ (2) Assistant Treasurers
Chairman and Chief Executive Officer, Mark E. Bradley*
Eastern Enterprises Ellen Moynihan*
(diversified services company) James O. Yost*
Lawrence T. Perera+ (1) Secretary
Partner, Hemenway & Barnes Stephen E. Cavan*
(attorneys)
Assistant Secretary
William J. Poorvu+ (1) James R. Bordewick, Jr.*
Adjunct Professor, Harvard University
Graduate School of Business Transfer Agent,
Administration Registrar, and Dividend Disbursing Agent
State Street Bank and Trust Company
Charles W. Schmidt+ (2) c/o MFS Service Center, Inc.
Private Investor P.O. Box 9024
Boston, MA 02205-9824
Arnold D. Scott* 1-800-637-2304
Senior Executive Vice President,
Director, and Secretary, Custodian
MFS Investment Management State Street Bank and
Trust Company
Jeffrey L. Shames*
Chairman and Chief Executive Independent Auditors
Officer, MFS Investment Management Ernst & Young LLP
Elaine R. Smith+ (1) Investment Adviser
Independent Consultant Massachusetts Financial
Services Company
David B. Stone+ (1)(2) 500 Boylston Street
Chairman, North American Boston, MA 02116-3741
Management Corp. (investment advisers)
</TABLE>
+ Independent Trustee
* MFS Investment Management
(1) Member of Audit Committee.
(2) Member of Portfolio Trading Committee.
[Recycle logo] This report is printed on recycled paper. MMTCE-2 12/99 83M
[Front cover]
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[Graphic: MFS[RegTM] Logo]
INVESTMENT MANAGEMENT
We invented the mutual fund[RegTM]
MFS[RegTM] Multimarket
Income Trust
Annual Report o October 31, 1999
