UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-CSR
Investment Company Act file number 811-5689
SCUDDER MULTI-MARKET INCOME TRUST
---------------------------------
(Exact Name of Registrant as Specified in Charter)
222 S. RIVERSIDE PLAZA
CHICAGO, IL 60606
--------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (617) 295-1000
--------------
John Millette
Deutsche Investment Management Americas Inc.
Two International Place, Boston, MA 02110
---------------------------------------
(Name and Address of Agent for Service)
Date of fiscal year end: 11/30
Date of reporting period: 5/31/03
ITEM 1. REPORT TO STOCKHOLDERS
[Scudder Investments logo]
| ||
Semiannual Report to Shareholders | ||
May 31, 2003 | ||
Contents |
<Click Here> Performance Summary <Click Here> Portfolio Management Review <Click Here> Portfolio Summary <Click Here> Investment Portfolio <Click Here> Financial Statements <Click Here> Financial Highlights <Click Here> Notes to Financial Statements <Click Here> Shareholder Meeting Results <Click Here> Dividend Reinvestment Plan <Click Here> Additional Information <Click Here> Privacy Statement |
Scudder Investments is part of Deutsche Asset Management, which is the marketing name in the US for the asset management activities of Deutsche Bank AG, Deutsche Investment Management Americas Inc., Deutsche Asset Management Inc., Deutsche Asset Management Investment Services Ltd., Deutsche Bank Trust Company Americas and Scudder Trust Company.
Fund shares are not FDIC-insured and are not deposits or other obligations of, or guaranteed by, any bank. Fund shares involve investment risk, including possible loss of principal.
Average Annual Total Returns | |||||
6-Month++ | 1-Year | 3-Year | 5-Year | 10-Year | |
| Based on Net Asset Value(a) | 19.14% | 16.41% | 10.17% | 5.97% | 7.58% |
| Based on Market Price | 25.39% | 16.97% | 14.66% | 8.91% | 7.84% |
| CS First Boston High Yield Index(b) | 15.37% | 13.25% | 6.71% | 3.30% | 6.98% |
| CS First Boston High Yield Index (50%), Lehman Brothers Treasury Index (25%), Citigroup Non-US World Government Bond Currency Hedged Index (15%), J.P. Morgan Emerging Markets Bond Index Plus (10%)(b) | 12.39% | 14.57% | 8.86% | 6.01% | 8.15% |
++ Total returns shown for periods less than one year are not annualized.
Net Asset Value and Market Price | ||
As of 5/31/03 | As of 11/30/02 | |
| Net Asset Value | $ 8.52 | $ 7.52 |
| Market Price | $ 8.74 | $ 7.33 |
Distribution Information | |
| Six Months: Income Dividends | $ .39 |
| May Income Dividend | $ .0615 |
| Current Annualized Distribution Rate (based on Net Asset Value)+ | 8.66% |
| Current Annualized Distribution Rate (based on Market Price)+ | 8.44% |
a Total investment returns reflect changes in net asset value per share during each period and assume that dividends and capital gains distributions, if any, were reinvested. These percentages are not an indication of the performance of a shareholder's investment in the Fund based on market price.
b CS First Boston High Yield Index is an unmanaged trader-priced portfolio constructed to mirror the global high-yield debt market. Lehman Brothers Treasury Index is an unmanaged index reflecting the performance of all public obligations and does not focus on one particular segment of the Treasury market. Citigroup Non-USD World Government Bond Currency Hedged Index is an unmanaged foreign securities index representing major government bond markets other than the US. J.P. Morgan Emerging Markets Bond Index Plus is an unmanaged index tracking total returns for traded external currency-denominated debt instruments in the emerging markets: Brady bonds, loans, Eurobonds and US dollar-denominated local market instruments. Index returns assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
+ Current annualized distribution rate is the latest monthly dividend shown as an annualized percentage of net asset value/market price on May 31, 2003. Distribution rate simply measures the level of dividends and is not a complete measure of performance. Distribution rates are historical and will fluctuate.
All performance is historical, assumes reinvestment of all dividends and capital gains, and is not indicative of future results. Investment return and principal value will fluctuate.
Investments in funds involve risk. Some funds have more risk than others. These include funds that allow exposure to or otherwise concentrate investments in certain sectors, geographic regions, security types, market capitalization or foreign securities (e.g., political or economic instability, which can be accentuated in emerging market countries).
In the following interview, Jan C. Faller, lead portfolio manager of Scudder Multi-Market Income Trust, discusses market conditions and the Trust's investment strategy during the six-month period ended May 31, 2003.
Q: How would you characterize the market environment during the six months ended May 31, 2003?
A: At a time when central banks around the world have changed interest rates very little, both emerging-market and high-yield debt provided strong returns. In emerging markets, the biggest story - and, by far, the best performer - was Brazil. At the beginning of the period, the country elected a new president, Luiz Inacio Lula da Silva. Since then, the new government has pleasantly surprised investors with its political appointments and statements relating to economic stimulus and debt management. As a result, prices of Brazilian debt rose substantially, while other emerging markets rallied with Brazil.
The high-yield market, meanwhile, benefited from the fact that investors saw it as an opportunity to earn higher yields than they could get from Treasury securities or investment-grade corporate bonds albeit with greater risks. Also, an increase in popularity of these securities helped to fuel the high-yield market and suggested that investors now believed that prices of high-yield debt had been depressed to the point that it had become a good value. Moreover, as people became concerned that interest rates might rise, they did not want to be in Treasuries, because they believed Treasury prices would decline if rates rose. This gave them another reason to consider the high-yield market, as certain market participants believe that high-yield securities would be less price sensitive to a rise in rates than would Treasury securities in general. We have seen some evidence of this attitude in the past several months as mutual fund companies have reported relatively large inflows into high-yield funds.
Q: How did the Trust perform over this period?
A: Over the six-month period ended May 31, 2003, the Trust's total return was 25.39% based on its market value. The Trust's return based on its net asset value was 19.14%. This compares with a 20.60% return for the typical peer in the Lipper General Bond Funds category for closed-end funds (based on net asset value) during the period.1
1 The general bond funds category for closed-end funds as defined by Lipper Inc. are those closed-end bond funds that do not have quality or maturity restrictions and intend to keep the bulk of assets in corporate and government debt issues. Lipper figures represent the average of the total returns reported by all mutual funds designated by Lipper Inc. as falling into the category indicated.Q: What impact have your stakes in various asset classes had on the Trust's performance?
A: The Trust's emerging-markets and high-yield bond allocation were each about 50% of assets. The Trust's relatively large positions in both of these asset classes contributed to performance. High-yield bonds aided returns, as investors sought out the higher yields offered by such securities. In emerging markets, Brazil made an important positive contribution to performance. We also had some exposure to Argentina. Last year, the Argentine economy was so weak that it seemed that it could only improve. In fact, we finally did begin to see some signs of stability, and our position in Argentina worked in our favor. We believe the environment for most emerging markets has been relatively positive. Two exceptions were Venezuela and Turkey. Venezuela continues to experience political turmoil and sharply reduced oil exports. Turkey's refusal to allow US troops to use the country as a staging area prior to the war with Iraq resulted in an aid package from the International Monetary Fund that was much smaller than investors expected. However, we think both of these are isolated situations and expect them to have almost no impact on other emerging markets.
Q: What are your performance goals for the Trust?
A: While no one can guarantee future performance, our goal is to generate relatively high current income. On a long-term basis, we seek returns that are above those of the average fund in our peer group. We believe that our investment discipline has the potential to help us achieve that goal.
The views expressed in this report reflect those of the portfolio managers only through the end of the period of the report as stated on the cover. The managers' views are subject to change at any time based on market and other conditions and should not be construed as a recommendation.
Asset Allocation | 5/31/03 | 11/30/02 |
| Emerging Market Bonds | 44% | 56% |
| High-Yield Corporate Bonds | 51% | 39% |
| Other | 4% | 4% |
| US Government Agency Pass-Thrus | 1% | 1% |
| 100% | 100% | |
Quality | 5/31/03 | 11/30/02 |
| Government and Agency | 1% | 5% |
| A | 1% | - |
| BBB | 12% | 13% |
| BB | 31% | 28% |
| B | 38% | 44% |
| Below B | 16% | 9% |
| Not rated | 1% | 1% |
| 100% | 100% | |
Interest Rate Sensitivity | 5/31/03 | 11/30/02 |
| Average Maturity | 11.6 years | 11.8 years |
| Duration | 6.3 years | 5.5 years |
Asset allocation, quality and interest rate sensitivity are subject to change.
For more complete details about the fund's investment portfolio, see page 10. A quarterly Fund Summary and Portfolio Holdings are available upon request.
Principal Amount ($)(c) | Value ($) | |
Corporate Bonds 49.2% | ||
| Consumer Discretionary 16.6% | ||
| Adelphia Communications Corp.: | ||
7.75%, 1/15/2009* | 55,000 | 30,250 |
10.25%, 6/15/2011* | 195,000 | 110,175 |
| Advantica Restaurant Co.: | ||
11.25%, 1/15/2008 | 113,638 | 85,513 |
12.75%, 9/30/2007 | 95,000 | 97,375 |
| American Achieve Corp., 11.625%, 1/1/2007 | 355,000 | 383,844 |
| American Lawyer Media, Inc., Series B, 9.75%, 12/15/2007 | 405,000 | 342,225 |
| Ameristar Casino, Inc., 10.75%, 2/15/2009 | 425,000 | 471,750 |
| Avondale Mills, Inc., 10.25%, 5/1/2006 | 480,000 | 484,800 |
| Boca Resorts, Inc., 9.875%, 4/15/2009 | 715,000 | 765,050 |
| Buffets, Inc., 11.25%, 7/15/2010 | 320,000 | 304,000 |
| Central Garden & Pet Co., 9.125%, 2/1/2013 | 105,000 | 111,038 |
| Charter Communications Holdings LLC: | ||
8.25%, 4/1/2007 | 75,000 | 54,750 |
8.625%, 4/1/2009 | 340,000 | 244,800 |
Step-up Coupon, 0% to 1/15/2007, 12.125% to 1/15/2012 | 90,000 | 39,150 |
Step-up Coupon, 0% to 5/15/2006, 11.75% to 5/15/2011 | 505,000 | 234,825 |
| Choctaw Resort Development Enterprises, 9.25%, 4/1/2009 | 360,000 | 386,100 |
| Chumash Casino & Resort Enterprise, 9.0%, 7/15/2010 | 175,000 | 187,688 |
| Cinemark USA, Inc.: | ||
8.5%, 8/1/2008 | 385,000 | 396,550 |
9.0%, 2/1/2013 | 435,000 | 467,625 |
| Circus & Eldorado, 10.125%, 3/1/2012 | 455,000 | 433,956 |
| CKE Restaurants, Inc., 9.125%, 5/1/2009 | 270,000 | 253,800 |
| CSC Holdings, Inc., 7.875%, 12/15/2007 | 270,000 | 277,425 |
| Dex Media East LLC/ Financial: | ||
9.875%, 11/15/2009 | 250,000 | 282,500 |
12.125%, 11/15/2012 | 520,000 | 608,400 |
| DIMON, Inc.: | ||
7.75%, 6/1/2013 | 325,000 | 327,438 |
Series B, 9.625%, 10/15/2011 | 600,000 | 658,500 |
| Dyersburg Corp., Series B, 9.75%, 9/1/2007* | 1,085,000 | 109 |
| EchoStar Communications Corp., 9.375%, 2/1/2009 | 575,000 | 615,969 |
| Eldorado Resorts LLC, 10.5%, 8/15/2006 | 545,000 | 546,363 |
| Finlay Fine Jewelry Corp., 8.375%, 5/1/2008 | 340,000 | 346,800 |
| Guitar Center Management, 11.0%, 7/1/2006 | 1,645,000 | 1,682,013 |
| Hard Rock Hotel, Inc.: | ||
8.875%, 6/1/2013 | 75,000 | 77,063 |
9.25%, 4/1/2005 | 50,000 | 51,250 |
| Herbst Gaming, Inc., 10.75%, 9/1/2008 | 695,000 | 759,288 |
| Hines Horticulture, Inc., Series B, 12.75%, 10/15/2005 | 777,000 | 819,735 |
| HLI Operating Co., Inc., 10.5%, 6/15/2010 | 315,000 | 322,875 |
| Imperial Home Decor Group, Inc., Series B, 11.0%, 3/15/2008* | 150,000 | 15 |
| Insight Communications Co., Inc., Step-up Coupon, 0% to 2/15/2006, 12.25% to 2/15/2011 | 160,000 | 123,200 |
| Interep National Radio Sales, Inc., 10.0%, 7/1/2008 | 520,000 | 421,200 |
| International Game Technology, 8.375%, 5/15/2009 | 525,000 | 631,313 |
| Intrawest Corp., 10.5%, 2/1/2010 | 260,000 | 278,200 |
| Jacobs Entertainment Co., 11.875%, 2/1/2009 | 290,000 | 304,500 |
| Jafra Cosmetics International, Inc., 10.75%, 5/15/2011 | 425,000 | 433,500 |
| Kellwood Co., 7.625%, 10/15/2017 | 100,000 | 93,500 |
| Kindercare Learning Centers, Inc., 9.5%, 2/15/2009 | 590,000 | 590,000 |
| Krystal, Inc., 10.25%, 10/1/2007 | 210,000 | 193,200 |
| Laidlaw International, Inc., 10.75%, 6/15/2011 | 240,000 | 244,800 |
| Levi Strauss & Co., 12.25%, 12/15/2012 | 325,000 | 271,375 |
| Lin Television Corp., 6.5%, 5/15/2013 | 100,000 | 100,000 |
| MGM Mirage, Inc., 9.75%, 6/1/2007 | 485,000 | 534,106 |
| MTR Gaming Group, 9.75%, 4/1/2010 | 100,000 | 103,750 |
| National Vision, Inc., 12.0%, 3/30/2009 | 760,310 | 413,419 |
| Old Evangeline Downs, 13.0%, 3/1/2010 | 155,000 | 156,938 |
| Park Place Entertainment Corp.: | ||
7.0%, 4/15/2013 | 125,000 | 129,063 |
8.875%, 9/15/2008 | 50,000 | 54,250 |
9.375%, 2/15/2007 | 615,000 | 668,813 |
| Petro Stopping Centers, 10.5%, 2/1/2007 | 920,000 | 929,200 |
| PRIMEDIA, Inc.: | ||
7.625%, 4/1/2008 | 180,000 | 177,750 |
8.0%, 5/15/2013 | 65,000 | 65,325 |
8.875%, 5/15/2011 | 255,000 | 266,475 |
| Remington Arms Co., 10.5%, 2/1/2011 | 300,000 | 300,750 |
| Remington Product Co. LLC, Series D, 11.0%, 5/15/2006 | 165,000 | 165,825 |
| Renaissance Media Group, 10.0%, 4/15/2008 | 490,000 | 461,825 |
| Rent-A-Center, Inc., 7.5%, 5/1/2010 | 145,000 | 148,263 |
| Rent-Way, Inc., 11.875%, 6/15/2010 | 205,000 | 205,513 |
| Restaurant Co., 11.25%, 5/15/2008 | 260,582 | 200,974 |
| Rite Aid Corp.: | ||
6.125%, 12/15/2008 | 150,000 | 130,500 |
6.875%, 8/15/2013 | 400,000 | 337,000 |
9.25%, 6/1/2013 | 50,000 | 48,000 |
| Rogers Cablesystems Ltd., 10.0%, 3/15/2005 | 95,000 | 101,650 |
| Samsonite Corp., 10.75%, 6/15/2008 | 890,000 | 890,000 |
| Schuler Homes, Inc.: | ||
9.375%, 7/15/2009 | 330,000 | 361,350 |
10.5%, 7/15/2011 | 345,000 | 386,400 |
| Scientific Games Corp., 12.5%, 8/15/2010 | 167,000 | 191,215 |
| Sealy Mattress Co.: | ||
9.875%, 12/15/2007 | 120,000 | 114,600 |
Series B, 9.875%, 12/15/2007 | 20,000 | 19,100 |
| Service Corp. International, 7.7%, 4/15/2009 | 355,000 | 358,550 |
| Sinclair Broadcast Group, Inc.: | ||
8.0%, 3/15/2012 | 605,000 | 640,544 |
8.75%, 12/15/2011 | 85,000 | 92,544 |
| Six Flags, Inc.: | ||
8.875%, 2/1/2010 | 375,000 | 357,656 |
9.5%, 2/1/2009 | 75,000 | 74,813 |
9.75%, 4/15/2013 | 280,000 | 280,700 |
| Sonic Automotive, Inc., 11.0%, 8/1/2008 | 490,000 | 516,950 |
| Speedway Motorsports, Inc., 6.75%, 6/1/2013 | 50,000 | 51,250 |
| Starwood Hotels, 7.875%, 5/1/2012 | 120,000 | 127,200 |
| Transwestern Publishing, Series F, 9.625%, 11/15/2007 | 545,000 | 566,119 |
| Turning Stone Casino Entertainment, 9.125%, 12/15/2010 | 70,000 | 73,763 |
| Unisys Corp., 6.875%, 3/15/2010 | 70,000 | 72,100 |
| Venetian Casino Resort LLC, 11.0%, 6/15/2010 | 445,000 | 486,719 |
| Wheeling Island Gaming, Inc., 10.125%, 12/15/2009 | 440,000 | 444,400 |
| Wynn Las Vegas Corp., 12.0%, 11/1/2010 | 50,000 | 54,125 |
| XM Satellite Radio, Inc., Step-up Coupon, 0% to 12/31/2005, 14.0% to 12/31/2009 | 155,000 | 111,988 |
28,817,270 | ||
| Consumer Staples 1.7% | ||
| Agrilink Foods, Inc., 11.875%, 11/1/2008 | 610,000 | 660,325 |
| Elizabeth Arden, Inc., Series B, 11.75%, 2/1/2011 | 490,000 | 539,000 |
| La Petite Academy, Inc., 10.0%, 5/15/2008 | 435,000 | 256,650 |
| Michael Foods, Inc., Series B, 11.75%, 4/1/2011 | 105,000 | 118,650 |
| Salton, Inc.: | ||
10.75%, 12/15/2005 | 185,000 | 175,750 |
12.25%, 4/15/2008 | 140,000 | 131,600 |
| Smithfield Foods, Inc., 7.75%, 5/15/2013 | 165,000 | 169,125 |
| Stater Brothers Holdings, Inc., 10.75%, 8/15/2006 | 650,000 | 685,750 |
| Swift & Co., 10.125%, 10/1/2009 | 175,000 | 172,375 |
2,909,225 | ||
| Energy 5.6% | ||
| ANR Pipeline Co., 8.875%, 3/15/2010 | 100,000 | 108,500 |
| Avista Corp., 9.75%, 6/1/2008 | 1,095,000 | 1,209,975 |
| Chesapeake Energy Corp.: | ||
7.5%, 9/15/2013 | 55,000 | 57,200 |
8.125%, 4/1/2011 | 75,000 | 79,500 |
| Citgo Petroleum Corp., 11.375%, 2/1/2011 | 865,000 | 964,475 |
| Coastal Corp., 6.5%, 6/1/2008 | 80,000 | 67,300 |
| Continental Resources, Inc., 10.25%, 8/1/2008 | 500,000 | 492,500 |
| Edison Mission Energy, 7.73%, 6/15/2009 | 920,000 | 754,400 |
| El Paso Corp., 7.375%, 12/15/2012 | 130,000 | 107,900 |
| Frontier Escrow Corp., 8.0%, 4/15/2013 | 135,000 | 138,713 |
| Key Energy Services, Inc., 6.375%, 5/1/2013 | 100,000 | 101,250 |
| Nevada Power Co., 10.875%, 10/15/2009 | 95,000 | 104,738 |
| Newpark Resources, Inc., 8.625%, 12/15/2007 | 310,000 | 311,550 |
| On Semiconductor Corp., 13.0%, 5/15/2008 | 275,000 | 266,750 |
| Panhandle Eastern Pipe Line: | ||
7.2%, 8/15/2024 | 145,000 | 136,300 |
7.95%, 3/15/2023 | 235,000 | 240,288 |
| Parker & Parsley, 8.25%, 8/15/2007 | 60,000 | 68,250 |
| Parker Drilling Co., Series B, 10.125%, 11/15/2009 | 395,000 | 423,638 |
| Pemex Project Funding Master Trust, 8.625%, 2/1/2022 | 700,000 | 813,750 |
| Pen Holdings, Inc., Series B, 9.875%, 6/15/2008* | 90,000 | 9,000 |
| Pioneer Natural Resources Co.: | ||
6.5%, 1/15/2008 | 145,000 | 156,840 |
7.5%, 4/15/2012 | 165,000 | 187,866 |
9.625%, 4/1/2010 | 415,000 | 510,944 |
| Southern Natural Gas, 8.875%, 3/15/2010 | 160,000 | 173,600 |
| Stone Energy Corp., 8.75%, 9/15/2007 | 285,000 | 296,400 |
| Transocean, Inc., 9.5%, 12/15/2008 | 60,000 | 78,395 |
| Trico Marine Services, 8.875%, 5/15/2012 | 500,000 | 425,000 |
| Westar Energy, Inc., 7.875%, 5/1/2007 | 350,000 | 390,250 |
| Westport Resources Corp., 8.25%, 11/1/2011 | 640,000 | 694,400 |
| Williams Co., Inc., 8.75%, 3/15/2032 | 135,000 | 129,600 |
| Williams Holdings of Delaware, Inc., 6.5%, 12/1/2008 | 195,000 | 179,400 |
9,678,672 | ||
| Financials 2.8% | ||
| Ahold Finance USA, Inc., 6.25%, 5/1/2009 | 570,000 | 521,550 |
| Americredit Corp.: | ||
9.25%, 5/1/2009 | 170,000 | 149,600 |
9.875%, 4/15/2006 | 225,000 | 207,000 |
| Capstar Hotel Co., 8.75%, 8/15/2007 | 105,000 | 85,575 |
| CBRE Escrow, Inc., 9.75%, 5/15/2010 | 315,000 | 327,600 |
| Farmers Exchange Capital: | ||
7.05%, 7/15/2028 | 50,000 | 42,657 |
7.2%, 7/15/2048 | 90,000 | 72,650 |
| Farmers Insurance Exchange, 8.625%, 5/1/2024 | 180,000 | 165,600 |
| FRD Acquisition Co., Series B, 12.5%, 7/15/2004* | 80,000 | 0 |
| Global Exchange Services, LIBOR plus 9.0%, 10.286%**, 7/15/2008 | 370,000 | 351,500 |
| LaBranche & Co., Inc., 12.0%, 3/2/2007 | 565,000 | 644,100 |
| PCA LLC/ PCA Finance Corp., 11.875%, 8/1/2009 | 140,000 | 152,600 |
| PEI Holdings, Inc., 11.0%, 3/15/2010 | 270,000 | 294,300 |
| Qwest Capital Funding, Inc.: | ||
5.875%, 8/3/2004 | 200,000 | 191,500 |
7.0%, 8/3/2009 | 50,000 | 42,250 |
7.75%, 8/15/2006 | 205,000 | 185,525 |
| R.H. Donnelly Finance Corp., 10.875%, 12/15/2012 | 140,000 | 158,550 |
| TCI Communication Finance, 9.65%, 3/31/2027 | 50,000 | 58,500 |
| Thornburg Mortgage, Inc., 8.0%, 5/15/2013 | 435,000 | 432,825 |
| Trump Holdings & Funding, 11.625%, 3/15/2010 | 180,000 | 165,600 |
| Universal City Development, 11.75%, 4/1/2010 | 435,000 | 463,275 |
| Xerox Credit Corp., 7.0%, 6/9/2003 | 205,000 | 205,000 |
4,917,757 | ||
| Health Care 1.3% | ||
| Ameripath, Inc., 10.5%, 4/1/2013 | 130,000 | 135,200 |
| AmerisourceBergen Corp., 7.25%, 11/15/2012 | 195,000 | 210,600 |
| HEALTHSOUTH Corp., 7.625%, 6/1/2012 | 245,000 | 165,375 |
| HMP Equity Holdings Corp., Zero Coupon, 5/15/2008 | 260,000 | 123,500 |
| Magellan Health Services, Inc., 9.375%, 11/15/2007* | 210,000 | 193,725 |
| Mariner Post-Acute Network, Inc., Series B, 10.5%, 8/1/2006 | 510,000 | 511,275 |
| Province Healthcare Co., 7.5%, 6/1/2013 | 60,000 | 60,000 |
| Radiologix, Inc., 10.5%, 12/15/2008 | 105,000 | 95,025 |
| Sybron Dental Specialties, 8.125%, 6/15/2012 | 100,000 | 104,000 |
| Tenet Healthcare Corp.: | ||
6.375%, 12/1/2011 | 215,000 | 209,088 |
7.375%, 2/1/2013 | 260,000 | 265,850 |
| Vanguard Health Systems, Inc., 9.75%, 8/1/2011 | 115,000 | 120,463 |
2,194,101 | ||
| Industrials 7.9% | ||
| Allied Waste North America, Inc.: | ||
7.875%, 4/15/2013 | 50,000 | 50,500 |
Series B, 8.5%, 12/1/2008 | 460,000 | 484,150 |
9.25%, 9/1/2012 | 65,000 | 69,713 |
Series B, 10.0%, 8/1/2009 | 1,120,000 | 1,177,400 |
| Ami Semiconductor, Inc., 10.75%, 2/1/2013 | 85,000 | 93,288 |
| AutoNation, Inc., 9.0%, 8/1/2008 | 465,000 | 506,850 |
| Browning-Ferris Industries: | ||
7.4%, 9/15/2035 | 205,000 | 179,375 |
9.25%, 5/1/2021 | 80,000 | 85,600 |
| Buckeye Technologies, Inc., 8.25%, 12/15/2005 | 265,000 | 258,375 |
| Chukchansi Economic Development Authority, 14.5%, 6/15/2009 | 110,000 | 115,500 |
| Collins & Aikman Floor Cover, Series B, 9.75%, 2/15/2010 | 210,000 | 214,200 |
| Collins & Aikman Products, 10.75%, 12/31/2011 | 270,000 | 232,200 |
| Congoleum Corp., 8.625%, 8/1/2008 | 240,000 | 151,200 |
| Corrections Corp. of America: | ||
7.5%, 5/1/2011 | 165,000 | 168,713 |
9.875%, 5/1/2009 | 320,000 | 354,400 |
| CP Ships Ltd., 10.375%, 7/15/2012 | 185,000 | 206,275 |
| Dana Corp.: | ||
7.0%, 3/1/2029 | 365,000 | 308,425 |
10.125%, 3/15/2010 | 380,000 | 414,200 |
| Day International Group, Inc.: | ||
9.5%, 3/15/2008 | 50,000 | 45,500 |
11.125%, 6/1/2005 | 390,000 | 396,825 |
| DeCrane Aircraft Holdings, Inc., Series B, 12.0%, 9/30/2008 | 380,000 | 133,000 |
| Delta Air Lines, Inc.: | ||
7.7%, 12/15/2005 | 85,000 | 70,125 |
7.9%, 12/15/2009 | 130,000 | 93,600 |
| Eagle-Picher Industries, Inc., 9.375%, 3/1/2008 | 265,000 | 241,150 |
| Equistar Chemicals LP, 10.125%, 9/1/2008 | 260,000 | 263,900 |
| Evergreen International Aviation, 12.0%, 5/15/2010 | 195,000 | 187,688 |
| Flextronics International Ltd., 6.5%, 5/15/2013 | 430,000 | 418,175 |
| Flowserve Corp., 12.25%, 8/15/2010 | 129,000 | 148,350 |
| Golden State Petroleum Transportation, 8.04%, 2/1/2019 | 215,000 | 201,083 |
| Goodyear Tire & Rubber Co., 7.857%, 8/15/2011 | 115,000 | 82,800 |
| Grove Holdings LLC, 11.625%, 5/1/2009* | 100,000 | 10 |
| Grove Investors, Inc., 14.5%, 5/1/2010* | 229,720 | 0 |
| GS Technologies: | ||
12.0%, 9/1/2004* | 76,805 | 4,224 |
12.25%, 10/1/2005* | 1,610,000 | 88,550 |
| Hercules, Inc., 11.125%, 11/15/2007 | 656,000 | 747,840 |
| Hornbeck Offshore Services, Inc., 10.625%, 8/1/2008 | 135,000 | 146,475 |
| ISP Chemco, Inc., Series B, 10.25%, 7/1/2011 | 300,000 | 328,500 |
| ISP Holdings, Inc., Series B, 10.625%, 12/15/2009 | 70,000 | 71,050 |
| Kansas City Southern: | ||
7.5%, 6/15/2009 | 220,000 | 222,200 |
9.5%, 10/1/2008 | 245,000 | 262,150 |
| Lyondell Chemicals Co., 10.5%, 6/1/2013 | 100,000 | 99,250 |
| Meritage Corp., 9.75%, 6/1/2011 | 140,000 | 154,700 |
| Metaldyne Corp., 11.0%, 6/15/2012 | 185,000 | 142,450 |
| Millennium America, Inc.: | ||
7.0%, 11/15/2006 | 810,000 | 810,000 |
7.625%, 11/15/2026 | 160,000 | 150,400 |
9.25%, 6/15/2008 | 480,000 | 518,400 |
| Motors and Gears, Inc., 10.75%, 11/15/2006 | 135,000 | 118,125 |
| Overseas Shipholding Group, 8.75%, 12/1/2013 | 160,000 | 168,800 |
| Plainwell, Inc., Series B, 11.0%, 3/1/2008* | 335,000 | 6,700 |
| Republic Engineered Products LLC, 10.0%, 8/16/2009* | 137,412 | 34,353 |
| Resolution Performance Products LLC, 13.5%, 11/15/2010 | 935,000 | 939,675 |
| Tech Olympic USA, Inc., 10.375%, 7/1/2012 | 215,000 | 224,675 |
| Tenneco Automotive, Inc., 11.625%, 10/15/2009 | 410,000 | 366,950 |
| The Brickman Group LTD., 11.75%, 12/15/2009 | 185,000 | 205,813 |
| United Rentals, Inc., Series B, 9.0%, 4/1/2009 | 120,000 | 112,200 |
| Universal Compression, Inc., 7.25%, 5/15/2010 | 50,000 | 51,000 |
| Xerox Corp.: | ||
5.5%, 11/15/2003 | 205,000 | 204,488 |
9.75%, 1/15/2009 | 250,000 | 273,125 |
13,804,663 | ||
| Information Technology 1.1% | ||
| Lucent Technologies, Inc.: | ||
5.5%, 11/15/2008 | 1,175,000 | 1,010,500 |
6.45%, 3/15/2029 | 160,000 | 112,000 |
| Riverwood International Corp., 10.875%, 4/1/2008 | 620,000 | 637,825 |
| Titan Corp., 8.0%, 5/15/2011 | 250,000 | 256,875 |
2,017,200 | ||
| Materials 6.0% | ||
| ARCO Chemical Co.: | ||
9.8%, 2/1/2020 | 710,000 | 624,800 |
10.25%, 11/1/2010 | 170,000 | 164,050 |
| Caraustar Industries, Inc., 9.875%, 4/1/2011 | 450,000 | 459,000 |
| Cascades, Inc., 7.25%, 2/15/2013 | 275,000 | 283,938 |
| Crown Cork & Seal, 8.0%, 4/15/2023 | 205,000 | 144,525 |
| Dan River, Inc., 12.75%, 4/15/2009 | 215,000 | 215,000 |
| Dayton Superior Corp., 13.0%, 6/15/2009 | 410,000 | 350,550 |
| DIMAC Corp., 12.5%, 10/1/2008* | 1,030,000 | 10,300 |
| Equistar Chemical/ Funding Corp., 10.625%, 5/1/2011 | 120,000 | 121,800 |
| Equistar Chemicals LP, 8.75%, 2/15/2009 | 1,685,000 | 1,600,750 |
| Fibermark, Inc., 10.75%, 4/15/2011 | 425,000 | 433,500 |
| Foamex LP, 10.75%, 4/1/2009 | 325,000 | 260,000 |
| Fonda Group, 9.5%, 3/1/2007 | 320,000 | 156,800 |
| Georgia-Pacific Corp.: | ||
7.375%, 7/15/2008 | 235,000 | 232,650 |
7.7%, 6/15/2015 | 620,000 | 564,200 |
8.0%, 1/15/2014 | 365,000 | 361,350 |
8.875%, 2/1/2010 | 490,000 | 509,600 |
8.875%, 5/15/2031 | 655,000 | 609,150 |
9.375%, 2/1/2013 | 220,000 | 233,200 |
| Graham Packaging Co., 8.75%, 1/15/2008 | 50,000 | 49,250 |
| Hexcel Corp., 9.75%, 1/15/2009 | 205,000 | 197,313 |
| Louisiana Pacific Corp., 10.875%, 11/15/2008 | 160,000 | 178,800 |
| Metals USA, Inc., 8.625%, 2/15/2008* | 175,000 | 0 |
| MMI Products, Inc., Series B, 11.25%, 4/15/2007 | 495,000 | 376,200 |
| Omnova Solutions, Inc., 11.25%, 6/1/2010 | 125,000 | 130,000 |
| Owens-Brockway Glass Container, 8.25%, 5/15/2013 | 220,000 | 222,200 |
| Owens-Illinois, Inc., 7.5%, 5/15/2010 | 110,000 | 104,500 |
| Pliant Corp.: | ||
11.125%, 9/1/2009 | 310,000 | 319,300 |
13.0%, 6/1/2010 | 120,000 | 109,200 |
| Sweetheart Cup Co., Inc., 12.0%, 7/15/2004 | 180,000 | 156,600 |
| Texas Industries, Inc., 10.25%, 6/15/2011 | 520,000 | 520,138 |
| Toll Corp.: | ||
7.75%, 9/15/2007 | 105,000 | 108,675 |
8.0%, 5/1/2009 | 65,000 | 68,738 |
8.125%, 2/1/2009 | 50,000 | 52,750 |
8.25%, 2/1/2011 | 100,000 | 108,000 |
| United States Steel LLC, 9.75%, 5/15/2010 | 220,000 | 217,800 |
| US Can Corp., Series B, 12.375%, 10/1/2010 | 255,000 | 178,500 |
10,433,127 | ||
| Telecommunication Services 4.2% | ||
| Alamosa Delaware, Inc., 13.625%, 8/15/2011 | 50,000 | 37,750 |
| Alamosa Holdings, Inc., Step-up Coupon, 0% to 2/15/2005, 12.875% to 2/15/2010 | 50,000 | 26,750 |
| American Tower Corp., 9.375%, 2/1/2009 | 375,000 | 369,375 |
| American Tower Escrow Corp., Zero Coupon, 8/1/2008 | 265,000 | 165,625 |
| Avaya, Inc., 11.125%, 4/1/2009 | 290,000 | 316,100 |
| Century Communications Corp.: | ||
8.375%, 1/15/2007* | 50,000 | 24,750 |
8.75%, 10/1/2007* | 180,000 | 89,100 |
8.875%, 11/15/2017* | 60,000 | 29,700 |
| Crown Castle International Corp.: | ||
9.375%, 8/1/2011 | 220,000 | 220,000 |
10.625%, 11/15/2007 | 365,000 | 385,988 |
| DirecTV Holdings, 8.375%, 3/15/2013 | 95,000 | 105,213 |
| Level 3 Communications, Inc., 11.0%, 3/15/2008 | 175,000 | 152,250 |
| Nextel Communications, Inc.: | ||
9.375%, 11/15/2009 | 170,000 | 182,325 |
9.5%, 2/1/2011 | 640,000 | 697,600 |
| Nextel Partners, Inc.: | ||
11.0%, 3/15/2010 | 110,000 | 118,250 |
Step-up Coupon, 0% to 2/1/2004, 14.0% to 2/1/2009 | 315,000 | 318,938 |
| Nortel Networks Corp., 7.4%, 6/15/2006 | 340,000 | 333,200 |
| Qwest Services Corp.: | ||
5.625%, 11/15/2008 | 985,000 | 950,525 |
13.5%, 12/15/2010 | 720,000 | 819,000 |
14.0%, 12/15/2014 | 193,000 | 224,363 |
| Shaw Communications, Inc., 8.25%, 4/11/2010 | 280,000 | 303,800 |
| Sprint Capital Corp.: | ||
6.375%, 5/1/2009 | 70,000 | 73,698 |
8.375%, 3/15/2012 | 520,000 | 607,064 |
| Triton PCS, Inc.: | ||
8.5%, 6/1/2013 | 205,000 | 205,000 |
11.0%, 5/1/2008 | 100,000 | 106,000 |
| US West Communication, Inc., 7.25%, 9/15/2025 | 415,000 | 374,538 |
7,236,902 | ||
| Utilities 2.0% | ||
| AES Corp., 9.0%, 5/15/2015 | 120,000 | 122,400 |
| Calpine Corp., 8.5%, 2/15/2011 | 650,000 | 442,000 |
| CMS Energy Corp.: | ||
7.5%, 1/15/2009 | 700,000 | 658,000 |
8.5%, 4/15/2011 | 810,000 | 787,725 |
8.9%, 7/15/2008 | 155,000 | 154,225 |
| El Paso Production Holding Corp., 7.75%, 6/1/2013 | 370,000 | 367,225 |
| Sonat, Inc., 7.625%, 7/15/2011 | 100,000 | 86,000 |
| TNP Enterprises, Inc., Series B, 10.25%, 4/1/2010 | 365,000 | 348,575 |
| Western Resources, Inc., 9.75%, 5/1/2007 | 520,000 | 570,700 |
3,536,850 | ||
| Total Corporate Bonds (Cost $87,613,743) | 85,545,767 | |
Foreign Bonds - US$ Denominated 63.3% | ||
| Ainsworth Lumber, 12.5%, 7/15/2007 | 50,000 | 55,500 |
| Antenna TV SA, 9.0%, 8/1/2007 | 120,000 | 108,000 |
| Avecia Group PLC, 11.0%, 7/1/2009 | 115,000 | 101,200 |
| Bluewater Finance Ltd., 10.25%, 2/15/2012 | 370,000 | 373,700 |
| British Sky Broadcasting PLC: | ||
6.875%, 2/23/2009 | 345,000 | 379,500 |
8.2%, 7/15/2009 | 335,000 | 391,113 |
| Burns, Philp & Co., Ltd.: | ||
9.75%, 7/15/2012 | 360,000 | 347,400 |
10.75%, 2/15/2011 | 60,000 | 60,600 |
| Central European Media Enterprises Ltd., 9.375%, 8/15/2004 | 365,000 | 366,825 |
| Conproca SA de CV, 12.0%, 6/16/2010 | 135,000 | 176,850 |
| Corp Durango SA, 13.375%, 7/15/2009* | 215,000 | 113,950 |
| Crown Euro Holdings SA, 10.875%, 3/1/2013 | 300,000 | 316,500 |
| Disco SA, 9.875%, 5/15/2008 | 80,000 | 65,600 |
| Dolphin Telecom PLC, Series B, Step-up-Coupon, 0% to 5/15/2004, 14.0% to 5/15/2009* | 499,091 | 50 |
| Esprit Telecom Group PLC: | ||
10.875%, 6/15/2008* | 200,000 | 20 |
11.5%, 12/15/2007* | 550,000 | 55 |
| Euramax International PLC, 11.25%, 10/1/2006 | 400,000 | 412,000 |
| Fage Dairy Industry SA, 9.0%, 2/1/2007 | 200,000 | 195,000 |
| Federative Republic of Brazil: | ||
8.0%, 4/15/2014 | 3,915,884 | 3,485,137 |
8.875%, 4/15/2024 | 1,000,000 | 802,000 |
10.125%, 5/15/2027 | 1,300,000 | 1,149,200 |
11.0%, 1/11/2012 | 600,000 | 594,000 |
11.0%, 8/17/2040 | 3,200,000 | 2,968,000 |
Floating Rate Bond, LIBOR plus .875%, 2.188%, 4/15/2009 | 2,682,373 | 2,219,664 |
Floating Rate Bond, LIBOR plus .875%, 2.188%, 4/15/2012 | 3,600,000 | 2,646,000 |
| Government of Ukraine, 11.0%, 3/15/2007 | 739,199 | 824,946 |
| Grupo Elektra SA de CV, 12.0%, 4/1/2008 | 240,000 | 237,600 |
| Innova S de R.L., 12.875%, 4/1/2007 | 455,000 | 459,550 |
| Ivory Coast, Step-up Coupon, 2.0% to 3/31/2005, 4.0% to 3/29/2018* | 4,460,000 | 825,100 |
| LeGrand SA, 8.5%, 2/15/2025 | 170,000 | 168,300 |
| Luscar Coal Ltd., 9.75%, 10/15/2011 | 185,000 | 207,200 |
| Mexico, 9.875%, 2/1/2010 | 2,100,000 | 2,719,500 |
| Millicom International Cellular SA, 11.0%, 6/1/2006 | 177,000 | 166,380 |
| Ministry Finance Russia, Series V, 3.0%, 5/14/2008 | 1,500,000 | 1,380,000 |
| Norske Skog Canada, 8.625%, 6/15/2011 | 180,000 | 184,500 |
| Nortel Networks Corp., 6.125%, 2/15/2006 | 540,000 | 523,800 |
| OAO Gazprom, 9.625%, 3/1/2013 | 390,000 | 441,675 |
| Ocean Rig Norway AS, 10.25%, 6/1/2008 | 130,000 | 107,900 |
| Petroleum Geo-Services ASA, 7.125%, 3/30/2028 | 140,000 | 79,100 |
| Petronas Capital Ltd.: | ||
7.0%, 5/22/2012 | 600,000 | 695,729 |
7.875%, 5/22/2022 | 3,450,000 | 4,107,290 |
| PTC International Finance II SA, 11.25%, 12/1/2009 | 65,000 | 71,500 |
| Republic of Argentina: | ||
9.75%, 9/19/2027* | 2,200,000 | 638,000 |
11.375%, 3/15/2010* | 5,520,000 | 1,600,800 |
11.75%, 4/7/2009* | 6,390,000 | 1,917,000 |
11.75%, 6/15/2015* | 2,910,000 | 873,000 |
12.375%, 2/21/2012* | 750,000 | 232,500 |
Series BGL4, 11.0%, 10/9/2006* | 900,000 | 270,000 |
Series BGL5, 11.375%, 1/30/2017* | 850,000 | 261,375 |
| Republic of Bulgaria: | ||
8.25%, 1/15/2015 | 7,590,000 | 9,001,740 |
8.25%, 1/15/2015 | 100,000 | 119,000 |
| Republic of Colombia: | ||
7.625%, 2/15/2007 | 1,850,000 | 1,947,125 |
8.625%, 4/1/2008 | 700,000 | 759,500 |
9.75%, 4/9/2011 | 1,475,879 | 1,664,792 |
10.5%, 7/9/2010 | 1,200,000 | 1,371,000 |
| Republic of El Salvador, 8.25%, 4/10/2032 | 3,000,000 | 3,000,000 |
| Republic of Panama, 8.875%, 9/30/2027 | 1,800,000 | 1,944,000 |
| Republic of Philippines: | ||
8.375%, 3/12/2009 | 760,000 | 809,400 |
9.875%, 1/15/2019 | 1,140,000 | 1,251,150 |
10.625%, 3/16/2025 | 200,000 | 231,173 |
10.625%, 3/16/2025 | 1,600,000 | 1,852,000 |
| Republic of Turkey: | ||
11.0%, 1/14/2013 | 2,200,000 | 2,262,700 |
11.0%, 1/14/2013 | 55,000 | 56,375 |
11.5%, 1/23/2012 | 85,000 | 89,463 |
11.875%, 1/15/2030 | 3,750,000 | 3,998,438 |
| Republic of Venezuela: | ||
Series DL, Floating Rate Debt Conversion Bond, LIBOR plus .875%, 2.312%, 12/18/2007 | 3,809,521 | 3,078,569 |
9.25%, 9/15/2027 | 5,870,000 | 4,197,050 |
| Rhodia SA, 8.875%, 6/1/2011 | 50,000 | 50,250 |
| Royal Caribbean Cruises Ltd., 7.25%, 3/15/2018 | 235,000 | 202,100 |
| Russian Federation: | ||
Step-up Coupon, 5.0% to 3/31/2007, 7.5% to 3/31/2030 | 4,900,000 | 4,802,000 |
11.0%, 7/24/2018 | 500,000 | 719,375 |
| Russian Ministry of Finance: | ||
Series VI, 3.0%, 5/14/2006 | 5,800,000 | 5,655,000 |
Series V, 3.0%, 5/14/2008 | 3,200,000 | 2,944,000 |
| Stagecoach Holdings PLC, 8.625%, 11/15/2009 | 315,000 | 331,538 |
| State of Qatar, 9.75%, 6/15/2030 | 1,600,000 | 2,292,000 |
| Stena AB: | ||
8.75%, 6/15/2007 | 130,000 | 133,792 |
9.625%, 12/1/2012 | 245,000 | 266,131 |
| Stone Container Corp., 11.5%, 8/15/2006 | 190,000 | 202,350 |
| Telus Corp., 8.0%, 6/1/2011 | 450,000 | 515,813 |
| Tembec Industries, Inc.: | ||
8.5%, 2/1/2011 | 125,000 | 123,750 |
8.625%, 6/30/2009 | 265,000 | 262,350 |
| TFM SA de CV: | ||
10.25%, 6/15/2007 | 865,000 | 865,000 |
11.75%, 6/15/2009 | 180,000 | 181,800 |
12.5%, 6/15/2012 | 195,000 | 209,625 |
| Tyco International Group SA: | ||
5.8%, 8/1/2006 | 980,000 | 989,800 |
6.125%, 11/1/2008 | 1,310,000 | 1,326,375 |
6.125%, 1/15/2009 | 1,140,000 | 1,154,250 |
6.375%, 10/15/2011 | 290,000 | 290,725 |
6.75%, 2/15/2011 | 185,000 | 189,163 |
| United Mexican States: | ||
4.625%, 10/8/2008 | 1,500,000 | 1,543,500 |
6.375%, 1/16/2013 | 1,130,000 | 1,215,880 |
7.5%, 4/8/2033 | 660,000 | 719,400 |
8.125%, 12/30/2019 | 2,900,000 | 3,371,250 |
Series MTN, 8.3%, 8/15/2031 | 200,000 | 236,600 |
Series XW, 10.375%, 2/17/2009 | 2,820,000 | 3,680,100 |
Value Recovery Rights* | 1,000 | 4 |
| Vicap SA, 11.375%, 5/15/2007 | 820,000 | 725,700 |
| Vivendi Universal SA, 9.25%, 4/15/2010 | 740,000 | 840,825 |
| Yell Finance BV, Step-up Coupon, 0% to 8/1/2006, 13.5% to 8/1/2011 | 195,000 | 157,463 |
| Total Foreign Bonds - US$ Denominated (Cost $102,290,264) | 110,151,993 | |
Foreign Bonds - Non US$ Denominated 7.1% | ||
| Banque Cent de Tunisie, 6.25%, 2/20/2013 EUR | 2,500,000 | 3,135,733 |
| Barry Callebaut Services NV, 9.25%, 3/15/2010 EUR | 90,000 | 111,297 |
| Infineon Technologies AG, Series IFX, 4.25%, 2/6/2007 EUR | 250,000 | 250,655 |
| Ivory Coast, LIBOR plus .8125%, 2.0%, 3/29/2018* EUR | 2,256,245 | 498,242 |
| Pemex Project Funding Master Trust, 6.625%, 4/4/2010 EUR | 700,000 | 872,653 |
| Prosieben Media AG, 11.25%, 7/31/2009 EUR | 155,000 | 175,249 |
| Republic of Argentina: | ||
EURIBOR plus 5.1%, 7.628%, 12/22/2004* EUR | 1,700,000 | 572,530 |
Series FEB, 8.0%, 2/26/2008* EUR | 1,160,000 | 399,610 |
9.0%, 5/24/2005* EUR | 470,000 | 167,741 |
| Romania: | ||
8.5%, 5/8/2012 EUR | 2,130,000 | 2,903,712 |
10.625%, 6/27/2008 EUR | 760,000 | 1,092,009 |
| Royal Numico NV: | ||
1.5%, 9/22/2004 EUR | 100,000 | 119,542 |
4.25%, 6/26/2005 EUR | 130,000 | 135,500 |
| Ukraine Government, 10.0%, 3/15/2007 EUR | 1,493,340 | 1,899,483 |
| Total Foreign Bonds - Non US$ Denominated (Cost $10,599,790) | 12,333,956 | |
Convertible Bonds 0.7% | ||
| Aether Systems, 6.0%, 3/22/2005 | 195,000 | 182,813 |
| Charming Shoppes, Inc., 4.75%, 6/1/2012 | 50,000 | 44,565 |
| DIMON, Inc., 6.25%, 3/31/2007 | 250,000 | 232,500 |
| Nortel Networks Corp., 4.25%, 9/1/2008 | 245,000 | 211,190 |
| Millicom International Cellular SA, 2.0%, 6/1/2006 | 455 | 871 |
| Parker Drilling Co., 5.5%, 8/1/2004 | 500,000 | 480,000 |
| Total Convertible Bonds (Cost $1,115,078) | 1,151,939 | |
US Treasury Obligations 1.5% | ||
| US Treasury Bond: | ||
5.375%, 2/15/2031 | 310,000 | 360,181 |
10.375%, 11/15/2009 | 500,000 | 564,824 |
12.0%, 8/15/2013 | 1,000,000 | 1,469,336 |
| US Treasury STRIPS, Principal Only, 3.595%***, 5/15/2013 | 310,000 | 214,805 |
| Total US Treasury Obligations (Cost $2,567,675) | 2,609,146 | |
Units | Value ($) | |
Other 0.0% | ||
| SpinCycle, Inc.* | 13,881 | 45,113 |
| SpinCycle, Inc. "F"* | 97 | 5 |
| Total Other (Cost $33,925) | 45,118 | |
Shares | Value ($) | |
Common Stocks 0.1% | ||
| AMF Bowling Worldwide, Inc.* | 1,806 | 45,150 |
| Catalina Restaurant Group, Inc.* | 1,474 | 2,358 |
| ICG Communications, Inc.* | 3,481 | 13,924 |
| ICG Communications, Inc.* | 1,056 | 11 |
| IMPSAT Fiber Networks, Inc.* | 7,638 | 8,784 |
| MEDIQ, Inc.* | 184 | 799 |
| National Vision, Inc.* | 42,395 | 16,958 |
| The Manitowoc Co., Inc. | 769 | 15,688 |
| XO Communications, Inc.* | 711 | 4,110 |
| Total Common Stocks (Cost $2,078,537) | 107,782 | |
Warrants 0.0% | ||
| American Tower Corp.* | 265 | 29,813 |
| DeCrane Aircraft Holdings, Inc.* | 350 | 4 |
| Destia Communications, Inc.* | 370 | 0 |
| Empire Gas Corp.* | 552 | 0 |
| ICG Communications, Inc.* | 564 | 5 |
| KMC Telecom Holdings, Inc.* | 650 | 0 |
| Mariner Health Care, Inc.* | 1,634 | 9 |
| Republic Technologies International LLC* | 730 | 7 |
| XO Communications, Inc.* | 1,424 | 1,424 |
| XO Communications, Inc. "C"* | 1,068 | 534 |
| XO Communications, Inc. "B"* | 1,068 | 801 |
| Waxman Industries, Inc.* | 12,154 | 122 |
| Total Warrants (Cost $1,486,776) | 32,719 | |
Preferred Stocks 0.4% | ||
| Paxson Communications Corp. | 25 | 236,875 |
| Sinclair Capital | 3,600 | 374,400 |
| TNP Enterprises, Inc.* | 736 | 52,274 |
| Total Preferred Stocks (Cost $652,575) | 663,549 | |
Convertible Preferred Stocks 0.1% | ||
| Hercules Trust II | 165 | 107,103 |
| Lucent Technologies, Inc. | 100 | 103,375 |
| World Access, Inc. "D"* | 215 | 0 |
| Total Convertible Preferred Stocks (Cost $508,921) | 210,478 | |
Cash Equivalents 2.6% | ||
| Scudder Cash Management QP Trust, 1.32% (b) (Cost $4,603,279) | 4,603,279 | 4,603,279 |
% of Net Assets | Value ($) | |
| Total Investment Portfolio (Cost $213,550,563) (a) | 125.0 | 217,455,726 |
| Other Assets and Liabilities, Net | 1.2 | 1,998,426 |
| Notes payable | (26.2) | (45,500,000) |
| Net Assets | 100.0 | 173,954,152 |
* Non-income producing security. In the case of a bond, generally denotes that the issuer has defaulted on the payment of principal or interest or has filed for bankruptcy.
** These securities are shown at their current rate as of May 31, 2003.
*** Bond equivalent yield to maturity; not a coupon rate.
(a) The cost for federal income tax purposes was $213,808,490. At May 31, 2003, net unrealized appreciation for all securities based on tax cost was $3,647,236. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $15,298,186 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $11,650,950.
(b) Scudder Cash Management QP Trust is also managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) Principal amount stated in US dollars unless otherwise noted.
Currency Abbreviations | |
| EUR | Euro |
The accompanying notes are an integral part of the financial statements.
Statement of Assets and Liabilities as of May 31, 2003 (Unaudited) | |
| Assets | |
| Investments in securities, at value (cost $208,947,284) | $ 212,852,447 |
| Investment in Scudder Cash Management QP Trust (cost $4,603,279) | 4,603,279 |
| Cash | 35,375 |
| Foreign currency, at value (cost $175,365) | 180,118 |
| Receivable for investments sold | 2,634,595 |
| Dividends receivable | 10,462 |
| Interest receivable | 4,214,625 |
| Unrealized appreciation on forward currency exchange contracts | 263,209 |
| Other assets | 123,694 |
| Total assets | 224,917,804 |
| Liabilities | |
| Notes payable | 45,500,000 |
| Payable for investments purchased | 3,999,193 |
| Interest payable on notes | 78,004 |
| Distributions payable to shareholders | 85,830 |
| Unrealized depreciation on forward currency exchange contracts | 1,067,575 |
| Accrued management fee | 125,306 |
| Other accrued expenses and payables | 107,744 |
| Total liabilities | 50,963,652 |
| Net assets, at value | $ 173,954,152 |
| Net Assets | |
| Net assets consist of: Accumulated distributions in excess of net investment income | (570,483) |
| Net unrealized appreciation (depreciation) on: Investments | 3,905,163 |
| Foreign currency related transactions | (790,348) |
| Accumulated net realized gain (loss) | (49,558,320) |
| Paid-in capital | 220,968,140 |
| Net assets, at value | $ 173,954,152 |
| Net Asset Value | |
| Net Asset Value per share ($173,954,152 / 20,412,470 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 8.52 |
The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended May 31, 2003 (Unaudited) | |
| Investment Income | |
| Income: Interest | $ 8,716,185 |
| Interest - Scudder Cash Management QP Trust | 44,439 |
| Dividends | 26,519 |
| Total Income | 8,787,143 |
| Expenses: Management fee | 678,664 |
| Services to shareholders | 11,110 |
| Custodian fees | 29,361 |
| Auditing | 21,803 |
| Legal | 45,708 |
| Trustees' fees and expenses | 5,521 |
| Reports to shareholders | 42,663 |
| Interest expense | 363,278 |
| Other | 45,556 |
| Total expenses | 1,243,664 |
| Net investment income | 7,543,479 |
| Realized and Unrealized Gain (Loss) on Investment Transactions | |
| Net realized gain (loss) from: Investments | (1,186,132) |
| Foreign currency related transactions | (919,617) |
| (2,105,749) | |
| Net unrealized appreciation (depreciation) during the period on: Investments | 23,939,631 |
| Foreign currency related transactions | (887,021) |
| 23,052,610 | |
| Net gain (loss) on investment transactions | 20,946,861 |
| Net increase (decrease) in net assets resulting from operations | $ 28,490,340 |
The accompanying notes are an integral part of the financial statements.
Statement of Changes in Net Assets | ||
| Increase (Decrease) in Net Assets | Six Months Ended May 31, 2003 (Unaudited) | Year Ended November 30, 2002 |
| Operations: Net investment income | $ 7,543,479 | $ 16,423,179 |
| Net realized gain (loss) on investment transactions | (2,105,749) | (17,050,584) |
| Net unrealized appreciation (depreciation) during the period on investment transactions | 23,052,610 | 7,144,799 |
| Net increase (decrease) in net assets resulting from operations | 28,490,340 | 6,517,394 |
| Distributions to shareholders from: Net investment income | (8,011,228) | (16,127,007) |
| Return of capital | - | (937,595) |
| Fund share transactions: Reinvestment of distributions | 361,177 | 850,147 |
| Net Increase (decrease) in net assets from fund share transactions | 361,177 | 850,147 |
| Increase (decrease) in net assets | 20,840,289 | (9,697,061) |
| Net assets at beginning of period | 153,113,863 | 162,810,924 |
| Net assets at end of period (including accumulated distributions in excess of net investment income of $570,483 and $102,734, respectively) | $ 173,954,152 | $ 153,113,863 |
| Other Information | ||
| Shares outstanding at beginning of period | 20,365,909 | 20,258,342 |
| Shares issued to shareholders in reinvestment of distributions | 46,561 | 107,567 |
| Shares outstanding at end of period | 20,412,470 | 20,365,909 |
The accompanying notes are an integral part of the financial statements.
Statement of Cash Flows for the six months ended May 31, 2003 (Unaudited) | |
| Cash Flows from Operating Activities: | |
| Investment income received | $ 8,230,915 |
| Payment of operating expenses | (888,412) |
| Payment of interest expense | (479,861) |
| Proceeds from sales and maturities of investments | 210,568,214 |
| Purchases of investments | (214,168,851) |
| Net purchases and maturities of short-term investments | (3,449,072) |
| Cash used by operating activities | $ (187,067) |
| Cash Flows from Financing Activities: | |
| Net increase (decrease) in notes payable | $ 7,500,000 |
| Distributions paid (net of reinvestment of distributions) | (7,564,221) |
| Cash used by financing activities | (64,221) |
| Decrease in cash | (251,288) |
| Cash at beginning of period* | 466,781 |
| Cash at end of period* | $ 215,493 |
| Reconciliation of Net Increase (Decrease) in Net Assets Resulting from Operations to Cash Used by Operating Activities: | |
| Net increase in net assets resulting from operations | $ 28,490,340 |
| Net increase in cost of investments | (9,467,075) |
| Net increase in unrealized appreciation (depreciation) on investments | (23,939,631) |
| Increase in dividends and interest receivable | (10,989) |
| Decrease in other net assets | 28,535 |
| Decrease in receivable for investments sold | 3,381,631 |
| Increase in payable for investments purchased | 572,945 |
| Increase in unrealized appreciation/depreciation on forward currency exchange contracts | 881,786 |
| Decrease in interest payable on notes | (116,583) |
| Decrease in other accrued expenses and payables | (8,026) |
| Cash used by operating activities | $ (187,067) |
| Non-cash financing activities | |
| Reinvestment of distributions | $ 361,177 |
* Includes foreign currency
The accompanying notes are an integral part of the financial statements.
Years Ended November 30, | 2003a | 2002b | 2001 | 2000 | 1999 | 1998 |
| Selected Per Share Data | ||||||
| Net asset value, beginning of period | $ 7.52 | $ 8.04 | $ 8.27 | $ 9.72 | $ 10.42 | $ 10.83 |
| Income (loss) from investment operations: | ||||||
| Net investment income | .37c | .81c | .89c | 1.01c | 1.02c | .88 |
| Net realized and unrealized gain (loss) on investment transactions | 1.02 | (.49) | (.05) | (1.43) | (.86) | (.48) |
Total from investment operations | 1.39 | .32 | .84 | (.42) | .16 | .40 |
| Less distributions from: Net investment income | (.39) | (.80) | (1.07) | (1.03) | (.86) | (.81) |
| Return of capital | - | (.04) | - | - | - | - |
| Total Distributions | (.39) | (.84) | (1.07) | (1.03) | (.86) | (.81) |
| Net asset value, end of period | $ 8.52 | $ 7.52 | $ 8.04 | $ 8.27 | $ 9.72 | $ 10.42 |
| Market value, end of period | $ 8.74 | $ 7.33 | $ 8.52 | $ 8.06 | $ 8.31 | $ 9.25 |
| Total Return | ||||||
| Based on net asset value (%)d | 19.14** | 4.17 | 10.21 | (3.86) | 2.48 | 3.77 |
| Based on market value (%)d | 25.39** | (4.18) | 19.80 | 9.60 | (1.27) | (5.46) |
| Ratios to Average Net Assets and Supplemental Data | ||||||
| Net assets, end of period ($ millions) | 174 | 153 | 163 | 166 | 195 | 209 |
| Ratio of expenses (%) | 1.56* | 1.66 | 2.08 | 2.20 | 1.65 | .98 |
| Ratio of expenses excluding interest expense (%) | 1.10* | 1.09 | 1.04 | 1.03 | 1.09 | .98 |
| Ratio of net investment income (%) | 9.45* | 10.45 | 10.80 | 10.90 | 10.16 | 8.25 |
| Portfolio turnover rate (%) | 216* | 117 | 31 | 26 | 51 | 118 |
| Total debt outstanding end of period ($ thousands) | 45,500 | 38,000 | 30,000 | 30,000 | 30,000 | - |
| Asset coverage per $1,000 of debt | 4,823 | 5,029 | 6,427 | 6,541 | 7,510 | - |
| a For the six months ended May 31, 2003 (Unaudited). b As required, effective December 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. The effect of this change for the year ended November 30, 2002 was to decrease net investment income per share by $.01, increase net realized and unrealized gain (loss) per share by $.01, and decrease the ratio of net investment income to average net assets from 10.66% to 10.45%. Per share data and ratios for periods prior to December 1, 2001 have not been restated to reflect this change in presentation. c Based on average shares outstanding during the period. d Total return based on net asset value reflects changes in the Fund's net asset value during the period. Total return based on market value reflects changes in market value. Each figure includes reinvestments of dividends. These figures will differ depending upon the level of any discount or premium to net asset value at which the Fund's shares trade during the period. * Annualized ** Not Annualized | ||||||
A. Significant Accounting Policies
Scudder Multi-Market Income Trust (the ``Fund'') is registered under the Investment Company Act of 1940, as amended (the ``1940 Act''), as a closed-end, diversified management investment company organized as a Massachusetts business trust.
The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading. Debt securities are valued by independent pricing services approved by the Trustees of the Fund. If the pricing services are unable to provide valuations, the securities are valued at the most recent bid quotation or evaluated price, as applicable, obtained from one or more broker-dealers. Such services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as broker quotes. Equity securities are valued at the most recent sale price reported on the exchange (US or foreign) or over-the-counter market on which the security it traded most extensively. Securities for which no sales are reported are valued at the calculated mean between the most recent bid and asked quotations on the relevant market or, if a mean cannot be determined, at the most recent bid quotation.
Money market instruments purchased with an original or remaining maturity of sixty days or less, maturing at par, are valued at amortized cost. Investments in open-end investment companies and Scudder Cash Management QP Trust are valued at their net asset value each business day.
Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Trustees.
Foreign Currency Translations. The books and records of the Fund are maintained in US dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into US dollars at the prevailing exchange rates at period end. Purchases and sales of investment securities, income and expenses are translated into US dollars at the prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions represent net gains and losses between trade and settlement dates on securities transactions, the disposition of forward foreign currency exchange contracts and foreign currencies, and the difference between the amount of net investment income accrued and the US dollar amount actually received. 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 but is included with net realized and unrealized gains and losses on investment securities.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange contract ("forward currency contract") is a commitment to purchase or sell a foreign currency at the settlement date at a negotiated rate. The Fund may enter into forward currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign currency denominated portfolio holdings and to facilitate transactions in foreign currency denominated securities.
Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies and unrealized gain (loss) is recorded daily. Sales and purchases of forward currency contracts having the same settlement date and broker are offset and any gain (loss) is realized on the date of offset; otherwise, gain (loss) is realized on settlement date. Realized and unrealized gains and losses which represent the difference between the value of a forward currency contract to buy and a forward currency contract to sell are included in net realized and unrealized gain (loss) from foreign currency related transactions.
Certain risks may arise upon entering into forward currency contracts from the potential inability of counterparties to meet the terms of their contracts. Additionally, when utilizing forward currency contracts to hedge, the Fund gives up the opportunity to profit from favorable exchange rate movements during the term of the contract.
Federal Income Taxes. The Fund's policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies and to distribute all of its taxable income to its shareholders. Accordingly, the Fund paid no federal income taxes and no federal income tax provision was required.
At November 30, 2002, the Fund had a net tax basis capital loss carryforward of approximately $45,656,000, which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until November 30, 2003 ($5,253,000), November 30, 2006 ($746,000), November 30, 2007 ($2,251,000), November 30, 2008 ($7,175,000), November 30, 2009 ($13,990,000) and November 30, 2010 ($16,241,000), the respective expiration dates, whichever occurs first.
In addition, from November 1, 2002 through November 30, 2002, the Fund incurred approximately $750,000 of net realized capital losses. As permitted by tax regulations, the Fund intends to elect to defer these losses and treat them as arising in the fiscal year ending November 30, 2003.
Distribution of Income and Gains. All of the net investment income of the Fund is declared and distributed to shareholders monthly. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually.
The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to certain securities sold at a loss and premium amortization on debt securities. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.
At November 30, 2002, the Fund's components of distributable earnings (accumulated losses) on a tax-basis were as follows:
| Undistributed ordinary income* | $ - |
| Undistributed net long-term capital gains | $ - |
| Capital loss carryforwards | $ (45,656,000) |
| Net unrealized appreciation (depreciation) on investments | $ (21,084,927) |
In addition, during the year ended November 30, 2002 the tax character of distributions paid to shareholders by the Fund is summarized as follows:
| Distributions from ordinary income* | $ 16,127,007 |
| Distributions from return of capital | $ 937,595 |
* For tax purposes short-term capital gains distributions are considered ordinary income distributions.
The tax character of current year distributions, if any, will be determined at the end of the current fiscal year.
Statement of Cash Flows. Information of financial transactions which have been settled through the receipt and disbursement of cash is presented in the Statement of Cash Flows. The cash amount shown in the Statement of Cash Flows represents the cash position in its custodian bank at May 31, 2003. Significant non-cash activity from market discount accretion and premium amortization has been excluded from the Statement of Cash Flows.
Other. Investment transactions are accounted for on the trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date net of foreign withholding taxes. Realized gains and losses from investment transactions are recorded on an identified cost basis. All premiums and discounts are amortized/accreted for financial reporting purposes, with the exception of securities bought in default.
Other Considerations. The Fund invests a substantial portion of its assets in high yield bonds. These bonds ordinarily are in the lower rating categories of recognized rating agencies or are non-rated, and thus involve more risk than higher rated bonds.
B. Purchases and Sales of Securities
During the six months ended May 31, 2003, purchases and sales of investment securities (excluding short-term investments and US Treasury securities) aggregated $207,714,144 and $203,417,126, respectively. Purchase and sales of US Treasury securities aggregated $7,027,652 and $4,654,469, respectively.
C. Related Parties
Management Agreement. Under the Management Agreement with Deutsche Investment Management Americas Inc. ("DeIM" or the "Advisor"), the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund. In addition to portfolio management services, the Advisor provides certain administrative services in accordance with the Management Agreement. The Fund pays a monthly investment management fee of 1/12 of the annual rate of 0.85% of average weekly net assets.
Deutsche Asset Management Investment Services Limited ("DeAMIS"), an affiliate of the Advisor, serves as sub-advisor to the Fund with respect to a portion of the Fund's portfolio that is allocated to it by the Advisor for management. The Advisor compensates DeAMIS out of the management fee it receives from the Fund.
Service Provider Fees. Scudder Investments Service Company (``SISC''), an affiliate of the Advisor, is the transfer, dividend-paying and shareholder service agent for the Fund. Effective January 15, 2003, pursuant to a sub-transfer agency agreement between SISC and DST Systems, Inc. ("DST"), SISC has delegated certain transfer agent and dividend paying agent functions to DST. SISC compensates DST out of the shareholder servicing fee it receives from the Fund. The amount charged to the Fund by SISC aggregated $11,110, of which $4,526 is unpaid at May 31, 2003.
Trustees' Fees and Expenses. The Fund pays each Trustee not affiliated with the Advisor retainer fees plus specified amounts for attended board and committee meetings.
Scudder Cash Management QP Trust. Pursuant to an Exemptive Order issued by the SEC, the Fund may invest in the Scudder Cash Management QP Trust (the ``QP Trust''), and other affiliated funds managed by the Advisor. The QP Trust seeks to provide as high a level of current income as is consistent with the preservation of capital and the maintenance of liquidity. The QP Trust does not pay the Advisor a management fee for the affiliated funds' investments in the QP Trust.
D. Borrowings
The notes payable represents a secured loan of $45,500,000 from Barton Capital Corporation at May 31, 2003. The note bears interest at the commercial paper rate plus dealer fees (1.50% at May 31, 2003) which is payable at maturity. A commitment fee is charged to the Fund and is included with interest expense on the Statement of Operations. An arrangement fee incurred by the Fund in connection with its loan was deferred and is being amortized on a straight-line basis over a three year period. The loan amounts and rates are reset periodically under a credit facility obtained by the Fund in an amount not to exceed $60,000,000 at any one time and which is renewable annually until May 28, 2005.
The weighted average outstanding daily balance of all loans (based on the number of days the loans were outstanding) during the six months ended May 31, 2003 was approximately $39,343,407 with a weighted average interest rate of 1.76%.
E. Expense Off-Set Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances were used to reduce a portion of the Fund's expenses. During the six months ended May 31, 2003, there were no custodian credits earned.
F. Investing in Emerging Markets.
Investing in emerging markets may involve special risks and considerations not typically associated with investing in the United States of America. These risks include revaluation of currencies, high rates of inflation, repatriation restrictions on income and capital, and future adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls, delayed settlements and their prices more volatile than those of comparable securities in the United States of America.
G. Forward Foreign Currency Commitments
As of May 31, 2003, the Fund had the following open forward currency exchange contracts:
Contracts to Deliver | In Exchange For | Settlement Date | Net Unrealized Appreciation | |||||
| USD | 11,734 | EUR | 10,716 | 6/13/2003 | $ 883 | |||
| USD | 1,416,673 | EUR | 1,246,000 | 7/31/2003 | 48,298 | |||
| USD | 2,070,160 | EUR | 1,808,000 | 8/8/2003 | 55,109 | |||
| USD | 697,828 | EUR | 610,000 | 7/31/2003 | 19,373 | |||
| USD | 104,652 | EUR | 90,522 | 6/27/2003 | 1,885 | |||
| ZAR | 16,000,000 | USD | 2,068,520 | 8/14/2003 | 137,131 | |||
| ZAR | 15,000 | USD | 1,848 | 8/14/2003 | 37 | |||
| EUR | 51,033 | USD | 60,321 | 6/27/2003 | 259 | |||
| EUR | 23,183 | USD | 27,518 | 6/27/2003 | 234 | |||
$ 263,209 | ||||||||
Contracts to Deliver | In Exchange For | Settlement Date | Net Unrealized (Depreciation) | |||||
| USD | 2,726,190 | EUR | 2,300,000 | 7/31/2003 | $ (21,990) | |||
| EUR | 161,684 | USD | 177,428 | 6/13/2003 | (12,940) | |||
| EUR | 57,372 | USD | 61,158 | 6/13/2003 | (6,391) | |||
| EUR | 115,447 | USD | 125,649 | 6/13/2003 | (10,280) | |||
| EUR | 11,549,000 | USD | 12,680,802 | 7/31/2003 | (897,811) | |||
| USD | 333,500 | EUR | 366,983 | 7/31/2003 | (25,126) | |||
| EUR | 130,880 | USD | 145,984 | 7/31/2003 | (7,897) | |||
| EUR | 176,469 | USD | 201,996 | 6/13/2003 | (5,780) | |||
| EUR | 2,461,000 | USD | 2,864,422 | 7/31/2003 | (29,072) | |||
| EUR | 90,522 | USD | 104,652 | 6/27/2003 | (1,885) | |||
| EUR | 555,000 | USD | 647,890 | 7/31/2003 | (4,645) | |||
| EUR | 86,211 | USD | 99,668 | 6/27/2003 | (1,795) | |||
| EUR | 97,591 | USD | 113,986 | 6/27/2003 | (870) | |||
| EUR | 50,957 | USD | 59,916 | 6/27/2003 | (57) | |||
| USD | 1,974,236 | ZAR | 16,015,00 | 8/14/2003 | (41,036) | |||
$ (1,067,575) | ||||||||
| Currency Abbreviations | |||||
| EUR | Euro | USD | United States Dollar | ZAR | South African Rand |
A Special Meeting of Shareholders of Scudder Multi-Market Income Trust (the "fund") was held on May 29, 2003, at the office of Deutsche Investment Management Americas Inc., Two International Place, Boston, Massachusetts. At the meeting, the following matters were voted upon by the shareholders:
1. To elect eleven Trustees to the Board of Trustees of the fund.
Number of Votes: | ||
For | Withheld | |
| John W. Ballantine | 17,448,135 | 207,925 |
| Lewis A. Burnham | 17,448,135 | 207,925 |
| Donald L. Dunaway | 17,448,135 | 207,925 |
| James R. Edgar | 17,448,135 | 207,925 |
| Paul K. Freeman | 17,448,135 | 207,925 |
| Richard T. Hale | 17,448,135 | 207,925 |
| Robert B. Hoffman | 17,448,135 | 207,925 |
| Shirley D. Peterson | 17,448,135 | 207,925 |
| Fred B. Renwick | 17,448,135 | 207,925 |
| William P. Sommers | 17,448,135 | 207,925 |
| John G. Weithers | 17,448,135 | 207,925 |
2. To ratify the selection of Ernst & Young LLP as the independent auditors for the fund for the current fiscal year.
Affirmative | Against | Abstain |
17,463,835 | 106,248 | 85,977 |
A. Participation
We invite you to review the description of the Dividend Reinvestment Plan (the ``Plan'') which is available to you as a shareholder of Scudder Multi-Market Income Trust (the ``Fund''). If you wish to participate and your shares are held in your own name, simply contact Scudder Investments Service Company, whose address and phone number are provided in Paragraph E for the appropriate form. If your shares are held in the name of a brokerage firm, bank, or other nominee, you must instruct that nominee to re-register your shares in your name so that you may participate in the Plan, unless your nominee has made the Plan available on shares held by them. Shareholders who so elect will be deemed to have appointed UMB Bank, N.A. ("United Missouri Bank" or "UMB") as their agent and as agent for the Fund under the Plan.
B. Dividend Investment Account
The Fund's transfer agent and dividend disbursing agent or its delegate (the ``Transfer Agent'') will establish a Dividend Investment Account (the ``Account'') for each shareholder participating in the Plan. The Transfer Agent will credit to the Account of each participant funds it receives from the following sources: (a) cash dividends and capital gains distributions paid on shares of beneficial interest (the ``Shares'') of the Fund registered in the participant's name on the books of the Fund; and (b) cash dividends and capital gains distributions paid on Shares registered in the name of the Transfer Agent but credited to the participant's Account. Sources described in clauses (a) and (b) of the preceding sentence are hereinafter called ``Distributions.''
C. Investment of Distribution Funds held in each account
If on the record date for a Distribution (the ``Record Date''), Shares are trading at a discount from net asset value per Share (according to the evaluation most recently made on Shares of the Fund), funds credited to a participant's Account will be used to purchase Shares (the ``Purchase''). UMB will attempt, commencing five days prior to the Payment Date and ending at the close of business on the Payment Date (``Payment Date'' as used herein shall mean the last business day of the month in which such Record Date occurs), to acquire Shares in the open market. If and to the extent that UMB is unable to acquire sufficient Shares to satisfy the Distribution by the close of business on the Payment Date, the Fund will issue to UMB Shares valued at net asset value per Share (according to the evaluation most recently made on Shares of the Fund) in the aggregate amount of the remaining value of the Distribution. If, on the Record Date, Shares are trading at a premium over net asset value per Share, the Fund will issue on the Payment Date, Shares valued at net asset value per Share on the Record Date to the Transfer Agent in the aggregate amount of the funds credited to the participants' accounts.
D. Voluntary Cash Contributions
A participant may from time to time make voluntary cash contributions to his Account by sending to Transfer Agent a check or money order, payable to Transfer Agent, in a minimum amount of $100 with appropriate accompanying instructions. (No more than $500 may be contributed per month.) Transfer Agent will inform UMB of the total funds available for the purchase of Shares and UMB will use the funds to purchase additional Shares for the participant's Account the earlier of: (a) when it next purchases Shares as a result of a Distribution or (b) on or shortly after the first day of each month and in no event more than 30 days after such date except when temporary curtailment or suspension of purchases is necessary to comply with applicable provisions of federal securities laws. Cash contributions received more than fifteen calendar days or less than five calendar days prior to a Payment Date will be returned uninvested. Interest will not be paid on any uninvested cash contributions. Participants making voluntary cash investments will be charged a $.75 service fee for each such investment and will be responsible for their pro rata share of brokerage commissions.
E. Additional Information
Address all notices, correspondence, questions, or other communication regarding the Plan, or if you would like a copy of the Plan, to:
Scudder Investments Service Company
P.O. Box 219066
Kansas City, Missouri 64121-9066
1-800-294-4366
F. Adjustment of Purchase Price
The Fund will increase the price at which Shares may be issued under the Plan to 95% of the fair market value of the shares on the Record Date if the net asset value per Share of the Shares on the Record Date is less than 95% of the fair market value of the Shares on the Record Date.
G. Determination of Purchase Price
The cost of Shares and fractional Shares acquired for each participant's Account in connection with a Purchase shall be determined by the average cost per Share, including brokerage commissions as described in Paragraph G hereof, of the Shares acquired by UMB in connection with that Purchase. Shareholders will receive a confirmation showing the average cost and number of Shares acquired as soon as practicable after the Transfer Agent has received or UMB has purchased Shares. The Transfer Agent may mingle the cash in a participant's account with similar funds of other participants of the Fund for whom UMB acts as agent under the Plan.
H. Brokerage Charges
There will be no brokerage charges with respect to Shares issued directly by the Fund as a result of Distributions. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to UMB's open market purchases in connection with the reinvestment of Distributions. Brokerage charges for purchasing small amounts of Shares for individual Accounts through the Plan can be expected to be less than the usual brokerage charges for such transactions, as UMB will be purchasing Shares for all participants in blocks and prorating the lower commission thus attainable.
I. Service Charges
There is no service charge by the Transfer Agent or UMB to shareholders who participate in the Plan other than service charges specified in Paragraphs D and M hereof. However, the Fund reserves the right to amend the Plan in the future to include a service charge.
J. Transfer of Shares Held by Agent
The Transfer Agent will maintain the participant's Account, hold the additional Shares acquired through the Plan in safekeeping and furnish the participant with written confirmation of all transactions in the Account. Shares in the Account are transferable upon proper written instructions to the Transfer Agent. Upon request to the Transfer Agent, a certificate for any or all full Shares in a participant's Account will be sent to the participant.
K. Shares Not Held in Shareholder's Name
Beneficial owners of Shares which are held in the name of a broker or nominee will not be automatically included in the Plan and will receive all distributions in cash. Such shareholders should contact the broker or nominee in whose name their Shares are held to determine whether and how they may participate in the Plan.
L. Amendments
Experience under the Plan may indicate that changes are desirable. Accordingly, the Fund reserves the right to amend or terminate the Plan, including provisions with respect to any Distribution paid, subsequent to notice thereof sent to participants in the Plan at least ninety days before the record date for such Distribution, except when such amendment is necessary or appropriate to comply with applicable law or the rules or policies of the Securities and Exchange Commission or any other regulatory authority, in which case such amendment shall be effective as soon as practicable. The amendment shall be deemed to be accepted by each participant unless, prior to the effective date thereof, the Transfer Agent receives notice of the termination of such participant's account under the Plan in accordance with the terms hereof. The Plan may be terminated by the Fund.
M. Withdrawal from Plan
Shareholders may withdraw from the Plan at any time by giving the Transfer Agent a written notice. If the proceeds are $100,000 or less and the proceeds are to be payable to the shareholder of record and mailed to the address of record, a signature guarantee normally will not be required for notices by individual account owners (including joint account owners), otherwise a signature guarantee will be required. In addition, if the certificate is to be sent to anyone other than the registered owner(s) at the address of record, a signature guarantee will be required on the notice. A notice of withdrawal will be effective for the next Distribution following receipt of the notice by the Transfer Agent provided the notice is received by the Transfer Agent at least ten days prior to the Record Date for the Distribution. When a participant withdraws from the Plan, or when the Plan is terminated in accordance with Paragraph L hereof, the participant will receive a certificate for full Shares in the Account, plus a check for any fractional Shares based on market price; or if a Participant so desires, the Transfer Agent will notify UMB to sell his Shares in the Plan and send the proceeds to the participant, less brokerage commissions and a $2.50 service fee.
N. Tax Implications
Shareholders will receive tax information annually for personal records and to assist in preparation of their Federal income tax returns. If Shares are purchased at a discount, the amount of the discount is considered taxable income and is added to the cost basis of the purchased shares.
Automated Information Lines | Scudder Closed-End Fund Info Line (800) 349-4281 |
Web Site | www.scudder.com or visit our Direct Link:CEF.Scudder.com (Do not use www.) Obtain monthly fact sheets, financial reports, press releases and webcasts when available. |
Written correspondence | Deutsche Investment Management Americas Inc. 222 South RiversideChicago, IL 60606 |
Legal Counsel | Vedder, Price, Kaufman & Kammholz 222 North LaSalle StreetChicago, IL 60601 |
Dividend Reinvestment Plan Agent | UMB Bank P.O. Box 410064Kansas City, MO 64141-0064 |
Shareholder Service Agent | Scudder Investments Service Company P.O. Box 219066Kansas City, MO 64121-9066 (800) 294-4366 |
Custodian and Transfer Agent | State Street Bank and Trust Company 225 Franklin StreetBoston, MA 02110 |
Independent Auditors | Ernst & Young LLP 200 Clarendon StreetBoston, MA 02116 |
NYSE Symbol | KMM |
CUSIP Number | 81118Q101 |
This privacy statement is issued by Scudder Distributors, Inc., Scudder Financial Services, Inc., Scudder Investor Services, Inc., Scudder Trust Company and the Scudder Funds.
We consider privacy fundamental to our client relationships and adhere to the policies and practices described below to protect current and former clients' information.
We never sell customer lists or individual client information. Internal policies are in place to protect confidentiality, while allowing client needs to be served. Only individuals who need to do so in carrying out their job responsibilities may access client information. We maintain physical, electronic and procedural safeguards that comply with federal standards to protect confidentiality. These safeguards extend to all forms of interaction with us, including the Internet.
In the normal course of business, clients give us nonpublic personal information on applications and other forms, on our Web sites, and through transactions with us or our affiliates. To be able to serve our clients, information is shared with affiliates and other companies. Specifically, we disclose client information to parties that perform various services for us, such as transfer agents, custodians, and broker-dealers. Limited information also may be shared with affiliates, with companies with which we have joint marketing agreements, or with other parties as required by law. Any organization receiving client information may only use it for the purpose designated by the entities listed above.
Questions on this policy may be sent to:
Scudder Investments
Attention: Correspondence - Chicago
P.O. Box 219415
Kansas City, MO 64121-9415
July 2002
ITEM 2. CODE OF ETHICS.
Not currently applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not currently applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not currently applicable.
ITEM 5. [RESERVED]
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIERS AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The Chief Executive and Financial Officers concluded that the
Registrant's Disclosure Controls and Procedures are effective based on the
evaluation of the Disclosure Controls and Procedures as of a date within 90 days
of the filing date of this report.
(b) During the six month period ended May 31, 2003, management identified
an issue related to a different registrant within the Scudder fund complex.
Management discussed the issue with the Registrant's Audit Committee and
auditors and instituted additional procedures to enhance its internal controls
over financial reporting.
Form N-CSR Item F
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: Scudder Multi-Market Income Trust
By: /s/Richard T. Hale
---------------------------
Richard T. Hale
Chief Executive Officer
Date: July 25, 2003
---------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Registrant: Scudder Multi-Market Income Trust
By: /s/Richard T. Hale
---------------------------
Richard T. Hale
Chief Executive Officer
Date: July 25, 2003
---------------------------
By: /s/Charles A. Rizzo
---------------------------
Charles A. Rizzo
Chief Financial Officer
Date: July 25, 2003
---------------------------