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
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(Exact Name of Registrant as Specified in Charter)
222 South Riverside Plaza, Chicago, IL 60606
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 454-7190
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Paul Schubert
345 Park Avenue
New York, NY 10154
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(Name and Address of Agent for Service)
Date of fiscal year end: 11/30
Date of reporting period: 11/30/05
ITEM 1. REPORT TO STOCKHOLDERS
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| Annual Report to Shareholders | |
| November 30, 2005 | |
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Contents |
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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 Report of Independent Registered Public Accounting Firm Click Here Tax Information Click Here Dividend Reinvestment Plan Click Here Investment Management Agreement Approval Click Here Trustees and Officers Click Here Additional Information |
Investments in funds involve risk. Yields and market value will fluctuate. Investing in emerging markets presents certain unique risks not associated with domestic investments, such as currency fluctuation, political and economic changes and market risks. Additionally, the fund invests in lower-quality and non-rated securities which present greater risk of loss of principal and interest than higher-quality securities. Bond investments are subject to interest-rate risk such that when interest rates rise, the prices of the bonds, and thus the value of the bond investment, can decline and the investor can lose principal value. All of these factors may result in greater share price volatility. Closed-end funds, unlike open-end funds, are not continuously offered. There is a one time public offering and once issued, shares of closed-end funds are sold in the open market through a stock exchange. Shares of closed-end funds frequently trade at a discount to net asset value. The price of the fund's shares is determined by a number of factors, several of which are beyond the control of the fund. Therefore, the fund cannot predict whether its shares will trade at, below or above net asset value.
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 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.
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Performance is historical, assumes reinvestment of all dividend and capital gain distributions, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when sold, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Please visit scudder.com for the Fund's most recent month-end performance.
Average Annual Total Returns as of 11/30/05 | ||||
Scudder Multi-Market Income Trust | 1-Year | 3-Year | 5-Year | 10-Year |
Based on Net Asset Value(a) | 10.85% | 18.94% | 14.08% | 9.02% |
Based on Market Price(a) | 21.12% | 21.58% | 15.58% | 9.61% |
CS First Boston High Yield Index(b) | 2.94% | 13.71% | 10.08% | 7.18% |
CS First Boston High Yield Index (50%), Lehman Brothers Treasury Index (25%), Citigroup Non-USD World Government Bond Currency Hedged Index (15%), J.P. Morgan Emerging Markets Bond Index Plus (10%)(b) | 4.22% | 10.07% | 8.63% | 7.74% |
Sources: Lipper Inc. and Deutsche Investment Management Americas Inc.
Net Asset Value and Market Price | ||
| As of 11/30/05 | As of 11/30/04 |
Net Asset Value | $ 9.75 | $ 9.53 |
Market Price | $ 10.15 | $ 9.08 |
Prices and net asset value fluctuate and are not guaranteed.
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Distribution Information | |
Twelve Months: Income Dividends as of 11/30/05 | $ .78 |
November Income Dividend | $ .065 |
Current Annualized Distribution Rate (based on Net Asset Value) as of 11/30/05+ | 8.00% |
Current Annualized Distribution Rate (based on Market Price) as of 11/30/05+ | 7.68% |
(a) Total return based on net asset value reflects changes in the Fund's net asset value during each period. Total return based on market value reflects changes in market value. Each figure assumes that dividend and capital gain distributions, if any, were reinvested. These figures will differ depending upon the level of any discount from or premium to NAV at which the Fund's shares traded during the period.
(b) CS First Boston High Yield Index is an unmanaged, unleveraged, trader-priced portfolio constructed to mirror the global high-yield debt market. Lehman Brothers Treasury Index is an unmanaged, unleveraged, 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, unleveraged, foreign securities index representing major government bond markets other than the US. J.P. Morgan Emerging Markets Bond Index Plus is an unmanaged, unleveraged, 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 November 30, 2005. Distribution rate simply measures the level of dividends and is not a complete measure of performance. Distribution rates are historical and will fluctuate.
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Scudder Multi-Market Income Trust
Deutsche Investment Management Americas Inc. ("DeIM" or the "Advisor"), which is part of Deutsche Asset Management, is the investment advisor for Scudder Multi-Market Income Trust. DeIM and its predecessors have more than 80 years of experience managing mutual funds and DeIM provides a full range of investment advisory services to institutional and retail clients. DeIM is also responsible for selecting brokers and dealers and for negotiating brokerage commissions and dealer charges.
Deutsche Asset Management is a global asset management organization that offers a wide range of investing expertise and resources. This well-resourced global investment platform brings together a wide variety of experience and investment insight across industries, regions, asset classes and investing styles.
DeIM is an indirect, wholly owned subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major global banking institution that is engaged in a wide range of financial services, including investment management, mutual funds, retail, private and commercial banking, investment banking and insurance.
Portfolio Manager
Andrew P. Cestone
Managing Director of Deutsche Asset Management and Portfolio Manager of the fund.
Joined Deutsche Asset Management in March 1998 and the fund team in 2002.
Prior to that, Investment Analyst, Phoenix Investment Partners, from 1997 to 1998.
In the following interview, Andrew P. Cestone, who replaced Jan Faller as lead portfolio manager in October 2005, discusses market conditions and investment strategy during Scudder Multi-Market Income Trust's most recent annual period ended November 30, 2005.
Q: How did the fund perform over the 12-month period ended November 30, 2005?
A: For the 12-month period, the fund returned 10.85% based on net asset value. The fund's total return based on its market price was 21.12%. This compares with the 2.94% return of its benchmark, the CS First Boston High Yield Index, for the same period.1 (Performance is calculated based on the reinvestment of dividends. Past performance is no guarantee of future results. Please see page 3 for more complete performance information.)
1 The Credit Suisse (CS) First Boston High Yield Index is an unmanaged, unleveraged, trader-priced portfolio constructed to mirror the global high-yield debt market. Index returns assume reinvestment of all distributions and, unlike fund returns, do not reflect fees or expenses. It is not possible to invest directly into an index.
Q: Will you discuss the general market environment for the sectors in which the fund was invested during the period?
A: The bond markets — particularly credit markets — over the past 12 months began to show more volatility than they have for some time. Prior to this year, spreads of both the emerging markets and high-yield sectors had remained on an almost uninterrupted tightening course, benefiting holders of lower-quality credits. The trend carried through the end of 2004, as investors remained comfortable with improving credit fundamentals and attractive technical factors in the credit markets.
During the past 12 months, the volatility which investors saw in the high-yield market was the result of uncertainty around weaker economic data, and the looming downgrades of Ford Motor Corp. and General Motors Corp. (GM). Despite these uncertainties and concerns during the period over rising interest rates, higher commodity prices, geopolitical risks and the impact of natural disasters such as Hurricanes Katrina and Rita, the solid fundamental underpinnings of the high-yield market ultimately remained in place. The catalyst for investors ultimately returning to their focus on fundamentals ironically was the downgrade of Ford and GM, coupled with revised economic numbers which eased concerns about an economic slowdown. This refreshed focus resulted in the market rallying off its lows, and consequently spreads compressing back to levels near those seen at the beginning of the calendar year. At the close of the period, the high-yield spread stood at 398 basis points (3.98 percentage points), versus 357 basis points 12 months ago.2 Helped by strength in the US economy and low interest rates, high-yield companies generally maintained sound financial positions through actions such as cutting costs, reducing debt and refinancing their existing debt at lower interest rates. Probably the best indication of solid fundamentals in the high-yield market was the continuation of low defaults. At the end of November 2005, Moody's 12-month rolling default rate stood at 1.84% compared with 2.54% at the end of November 2004.3 In addition to low defaults, recovery rates remained strong.4 Lastly, the ratio of rating upgrades to downgrades continued to remain stable — another indication of the market's solid fundamentals.5
2 The long-term historical spread-to-worst average is based upon the average monthly spread-to-worst of the CS First Boston High Yield Bond Index from January 31, 1986 to November 30, 2005. The yield spread is the difference between the yield of a given fixed-income asset class and the yield on Treasuries. A large spread indicates that investors require yields substantially above those of Treasuries in order to invest in high-yield bonds. This is generally indicative of a higher-risk environment. A smaller spread generally indicates a more positive environment, since investors are less concerned about risk and therefore willing to accept lower yields.
3 Source: Moody's Investors Service.
4 The recovery rate is the amount investors recover when a bond defaults.
Emerging markets debt posted strong performance for the year, returning 11.00% as measured by the JPMorgan Emerging Markets Bond Index Global Diversified.6 Overall, emerging markets debt continued to show signs of fundamental strength. Many emerging market countries have benefited from sound global growth and high commodity prices, particularly for oil. In addition, strong investor demand for the asset class also helped to support returns. At the close of the fiscal year, the emerging markets debt spread stood at 243 basis points, 143 basis points tighter than the close of the prior year.7
5 Bond ratings are the alphabetical designations indicating the credit quality of a particular bond, as measured by the major agencies. Treasuries, which are backed by the government and therefore free of default risk, are ranked AAA. The riskiest bonds are generally rated CCC and below.
6 The JP Morgan Emerging Markets Bond Index Global Diversified is an unmanaged, unleveraged, capitalization- weighted total return index of US dollar and other external-currency-denominated Brady bonds, loans, Eurobonds and local-market debt instruments traded in emerging markets. Index returns assume reinvestment of all distributions and unlike fund returns, do not reflect fees or expenses. It is not possible to invest directly into an index.
7 The long-term historical spread-to-worst average is based upon the average monthly spread-to-worst of the JPMorgan Emerging Markets Bond Index Global Diversified from December 31, 1993 to November 30, 2005. The yield spread is the difference between the yield of a given fixed-income asset class and the yield on Treasuries. A large spread indicates that investors require yields substantially above those of Treasuries in order to invest in emerging market sovereign bonds. This is generally indicative of a higher-risk environment. A smaller spread generally indicates a more positive environment, since investors are less concerned about risk and therefore willing to accept lower yields.
The US Treasury yield curve flattened dramatically over the past 12 months, with two-year yields rising approximately 140 basis points while 30-year yields fell by nearly 30 basis points. Ultimately, the 10-year Treasury note ended the year at a yield of 4.48%, not much higher from where it stood at the beginning of the period.
Q: How did the fund's allocations affect performance?
A: Throughout the period, the fund maintained an approximately 50/50 balance between its high-yield and emerging markets portfolio allocations. As previously discussed, spreads widened slightly in the high-yield sector for the year, thus that allocation held back the performance of the fund in comparison with the emerging markets allocation. However, both sectors did provide attractive income for the fund, although the price return for the high-yield asset class was moderately negative over the past 12 months. Having credit exposure diversified between corporate credit and emerging markets debt helped to boost the fund's return.
Q: Will you comment on developments in the emerging markets over the period?
A: In general, emerging markets were very well behaved over the period. The beginning of the period saw the peaceful resolution of an election crisis in the Ukraine, much to the satisfaction of the international community. Importantly, during the period of uncertainty this situation had created, the debt of other emerging markets did not respond negatively, a sign of the overall health and maturity of this sector. Turkey has benefited for some time from its commitment to fiscal discipline and the perception that it has made substantial progress toward eventually joining the European Economic Union. However, the outlook in this regard wavered over the period and created substantial volatility for Turkish issues, with some intraperiod carryover to other emerging markets. Russia continued to benefit from crude oil prices that reached near historic highs. In addition, Russia was upgraded by Moody's Investors Service in October, which also added to Russia's overall strong performance for the year. Economic expansion continued to accelerate in many Latin American countries such as Argentina and Venezuela. This economic growth was largely driven by strong investment demand and fiscal stimulus. While Brazil's economy showed signs of easing earlier in 2005, a jump in oil production and strong growth in net exports caused later-period economic growth to rebound somewhat. In addition, the Lula administration appears committed to pursuing the sound monetary and fiscal policies that have worked thus far to avoid crisis there. Despite recent concerns over the negative impact of high oil prices on Asian countries and the threat of increased inflation, the economies and currencies of Asia were a strong focus of investors throughout the year. Both China and Malaysia revaluated their currencies, thus resulting in currency appreciation. Within the Philippines, there remained a degree of political uncertainty; however, the country continued to show improvement in its fiscal performance.
Q: Will you comment on leverage employed by the fund over the period?
A: During the period, we maintained the fund's use of leverage at approximately 23% of portfolio assets. In employing leverage, the fund borrows money through a bank loan at short-term interest rates and then invests the proceeds in longer-term securities. The increase in short-term interest rates and flattening of the yield curve over the past year has made this strategy somewhat less attractive. However, leverage continued to benefit the return and income of the fund over the period. The current Federal Reserve Board (the Fed) approach of incrementally raising short-term interest rates has been supportive of the economy, but we will continue to closely evaluate the fund's use of leverage.
Q: What is your current assessment of the fixed-income environment?
A: We believe there is more reason to be concerned about inflation than there was 12 months ago, mainly because of continued high oil prices and the increased pricing power for businesses which has flowed from the economic recovery. Still, the underlying economic environment is stable. Monetary and financial conditions remain accommodative and the Federal Reserve appears to be moving steadily to a neutral monetary policy. In addition, US wage inflation remains under control, so we do not expect any of the more extreme scenarios with respect to inflation and interest rates to unfold.
The high-yield market continues to exhibit sound fundamentals as the economy continues to be robust, which results in low default rates. We believe the low default environment the high-yield market currently enjoys will not last forever, which means good security selection is paramount at this point in the cycle. Given that, we are particularly focused on seeking to limit downside risk while looking for opportunities that offer nice yield and some opportunity for lower-risk capital appreciation. This is consistent with our long-term focus of seeking credits which are improving, or which are trading at what we believe are undervalued levels.
With respect to emerging markets, we expect the trend of solid fundamentals to remain on course, and investor demand for the asset class to be strong. However, a rapid rise in US yields caused by an unexpectedly restrictive monetary policy in the United States, or a sharp drop in oil prices, would most likely contribute to increased volatility in the asset class.
We remain focused on adding value by doing fundamental research. Going forward, we will continue to monitor the global economy as well as the relative value provided by emerging markets and high-yield issuers. We believe that Scudder Multi-Market Income Trust remains an attractive vehicle for investors seeking a high current return and income.
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.
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Asset Allocation | 11/30/05 | 11/30/04 |
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Foreign Bonds — US$ Denominated | 45% | 45% |
Corporate Bonds | 41% | 38% |
Foreign Bonds — Non US$ Denominated | 5% | 11% |
US Treasury Obligations | 4% | 1% |
Cash Equivalents | 3% | 3% |
Loan Participation | 1% | 1% |
Other | 1% | 1% |
| 100% | 100% |
Corporate and Foreign Bond Diversification | 11/30/05 | 11/30/04 |
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Emerging Market Sovereign Bonds | 43% | 49% |
Consumer Discretionary | 13% | 14% |
Energy | 9% | 5% |
Industrials | 8% | 7% |
Materials | 8% | 8% |
Financials | 7% | 5% |
Telecommunication Services | 5% | 7% |
Utilities | 3% | 2% |
Information Technology | 2% | 1% |
Consumer Staples | 1% | 1% |
Health Care | 1% | 1% |
| 100% | 100% |
Quality | 11/30/05 | 11/30/04 |
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Government and Agency | 4% | 1% |
A | 2% | — |
BBB | 10% | 16% |
BB | 23% | 34% |
B | 40% | 33% |
Below B | 15% | 12% |
Not rated | 6% | 4% |
| 100% | 100% |
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Interest Rate Sensitivity | 11/30/05 | 11/30/04 |
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Average Maturity | 11.2 years | 11.5 years |
Duration | 6.7 years | 6.8 years |
Asset allocation, corporate and foreign bond diversification, quality and interest rate sensitivity are subject to change.
The quality ratings represent the lower of Moody's Investors Services, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") credit ratings. The ratings of Moody's Investors Service, Inc. and Standard and Poor's Corporation represent their opinions as to the quality of the securities they rate. Ratings are relative and subjective and are not absolute standards of quality. The Fund's credit quality does not remove market risk.
For more complete details about the Fund's investment portfolio, see page 14. A quarterly Fact Sheet is available upon request. Please see the Additional Information section for contact information.
Following the Fund's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
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| Principal Amount ($)(a) | Value ($) |
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Corporate Bonds 52.8% | ||
Consumer Discretionary 13.4% | ||
155 East Tropicana LLC, 8.75%, 4/1/2012 (b) | 300,000 | 291,000 |
Adesa, Inc., 7.625%, 6/15/2012 | 100,000 | 99,500 |
Affinia Group, Inc., 9.0%, 11/30/2014 | 495,000 | 398,475 |
AMC Entertainment, Inc., 8.0%, 3/1/2014 (b) | 625,000 | 559,375 |
Amscan Holdings, Inc., 8.75%, 5/1/2014 | 145,000 | 109,475 |
AutoNation, Inc., 9.0%, 8/1/2008 | 310,000 | 332,475 |
Aztar Corp., 7.875%, 6/15/2014 (b) | 705,000 | 729,675 |
Cablevision Systems Corp., Series B, 8.716%**, 4/1/2009 | 185,000 | 188,700 |
Caesars Entertainment, Inc.: |
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8.875%, 9/15/2008 | 170,000 | 183,600 |
9.375%, 2/15/2007 | 185,000 | 193,325 |
Charter Communications Holdings LLC: |
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9.625%, 11/15/2009 | 65,000 | 52,325 |
10.25%, 9/15/2010 | 1,145,000 | 1,139,275 |
144A, 11.0%, 10/1/2015 | 1,076,000 | 922,670 |
Cooper-Standard Automotive, Inc., 8.375%, 12/15/2014 (b) | 500,000 | 375,000 |
CSC Holdings, Inc.: |
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7.25%, 7/15/2008 | 170,000 | 170,000 |
7.875%, 12/15/2007 | 560,000 | 571,200 |
Dex Media East LLC/Financial, 12.125%, 11/15/2012 | 1,616,000 | 1,882,640 |
Dura Operating Corp., Series B, 8.625%, 4/15/2012 (b) | 480,000 | 398,400 |
EchoStar DBS Corp., 6.625%, 10/1/2014 | 200,000 | 193,000 |
Foot Locker, Inc., 8.5%, 1/15/2022 | 285,000 | 303,525 |
Ford Motor Co., 7.45%, 7/16/2031 (b) | 95,000 | 66,975 |
General Motors Corp., 8.25%, 7/15/2023 (b) | 85,000 | 56,738 |
Goodyear Tire & Rubber Co.: |
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144A, 9.0%, 7/1/2015 | 15,000 | 14,663 |
Series AI, 144A, 12.75%, 3/1/2011 | 725,000 | 806,562 |
Gregg Appliances, Inc., 9.0%, 2/1/2013 | 135,000 | 122,175 |
GSC Holdings Corp., 144A, 8.0%, 10/1/2012 (b) | 195,000 | 188,175 |
ITT Corp., 7.375%, 11/15/2015 | 180,000 | 193,050 |
Jacobs Entertainment, Inc., 11.875%, 2/1/2009 | 1,175,000 | 1,249,906 |
Levi Strauss & Co.: |
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8.804%**, 4/1/2012 | 255,000 | 258,187 |
12.25%, 12/15/2012 | 165,000 | 184,388 |
Liberty Media Corp.: |
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5.7%, 5/15/2013 (b) | 15,000 | 13,681 |
7.875%, 7/15/2009 (b) | 15,000 | 15,714 |
8.5%, 7/15/2029 (b) | 80,000 | 76,837 |
Mandalay Resort Group, Series B, 10.25%, 8/1/2007 | 120,000 | 128,100 |
Mediacom Broadband LLC, 144A, 8.5%, 10/15/2015 | 215,000 | 201,025 |
Mediacom LLC, 9.5%, 1/15/2013 (b) | 105,000 | 103,163 |
MGM MIRAGE: |
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8.375%, 2/1/2011 | 615,000 | 653,437 |
9.75%, 6/1/2007 | 325,000 | 342,062 |
MTR Gaming Group, Inc., Series B, 9.75%, 4/1/2010 | 170,000 | 178,500 |
NCL Corp., 10.625%, 7/15/2014 | 265,000 | 275,600 |
Norcraft Holdings/Capital, Step-up Coupon, 0% to 9/1/2008, 9.75% to 9/1/2012 | 620,000 | 434,000 |
Paxson Communications Corp.: |
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Step-up Coupon, 0% to 1/15/2006, 12.25% to 1/15/2009 (b) | 185,000 | 190,319 |
10.75%, 7/15/2008 | 160,000 | 163,600 |
Petro Stopping Centers, 9.0%, 2/15/2012 | 545,000 | 540,912 |
Pinnacle Entertainment, Inc., 8.75%, 10/1/2013 (b) | 625,000 | 659,375 |
Premier Entertainment Biloxi LLC/Finance, 10.75%, 2/1/2012 | 485,000 | 421,950 |
PRIMEDIA, Inc.: |
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8.875%, 5/15/2011 | 225,000 | 215,438 |
9.715%**, 5/15/2010 | 630,000 | 623,700 |
Renaissance Media Group LLC, 10.0%, 4/15/2008 | 325,000 | 325,000 |
Resorts International Hotel & Casino, Inc., 11.5%, 3/15/2009 | 650,000 | 719,875 |
Schuler Homes, Inc., 10.5%, 7/15/2011 (b) | 480,000 | 517,200 |
Simmons Bedding Co.: |
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144A, Step-up Coupon, 0% to 12/15/2009, 10.0% to 12/15/2014 (b) | 860,000 | 447,200 |
7.875%, 1/15/2014 (b) | 65,000 | 58,825 |
Sinclair Broadcast Group, Inc.: |
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8.0%, 3/15/2012 | 350,000 | 360,500 |
8.75%, 12/15/2011 | 870,000 | 918,937 |
Sirius Satellite Radio, Inc., 144A, 9.625%, 8/1/2013 | 750,000 | 733,125 |
Toys "R" Us, Inc.: |
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6.875%, 8/1/2006 | 85,000 | 84,575 |
7.375%, 10/15/2018 | 295,000 | 216,825 |
Trump Entertainment Resorts, Inc., 8.5%, 6/1/2015 (b) | 1,195,000 | 1,159,150 |
TRW Automotive, Inc.: |
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11.0%, 2/15/2013 | 885,000 | 988,987 |
11.75%, 2/15/2013 EUR | 120,000 | 162,702 |
United Auto Group, Inc., 9.625%, 3/15/2012 | 525,000 | 543,375 |
Wheeling Island Gaming, Inc., 10.125%, 12/15/2009 | 155,000 | 162,363 |
XM Satellite Radio, Inc., Step-up Coupon, 0% to 12/31/2005, 14.0% to 12/31/2009 | 875,003 | 925,316 |
Young Broadcasting, Inc.: |
|
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8.75%, 1/15/2014 (b) | 1,085,000 | 952,087 |
10.0%, 3/1/2011 (b) | 135,000 | 126,900 |
26,874,809 | ||
Consumer Staples 1.7% | ||
Agrilink Foods, Inc., 11.875%, 11/1/2008 | 192,000 | 196,320 |
Alliance One International, Inc.: |
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144A, 11.0%, 5/15/2012 | 485,000 | 419,525 |
144A, 12.75%, 11/15/2012 | 35,000 | 26,950 |
Del Laboratories, Inc.: |
|
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8.0%, 2/1/2012 (b) | 215,000 | 170,925 |
144A, 9.23%**, 11/1/2011 | 225,000 | 226,125 |
GNC Corp., 8.5%, 12/1/2010 | 60,000 | 51,600 |
North Atlantic Trading Co., 9.25%, 3/1/2012 | 1,075,000 | 731,000 |
Swift & Co.: |
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10.125%, 10/1/2009 | 460,000 | 484,150 |
12.5%, 1/1/2010 | 195,000 | 207,675 |
Viskase Co., Inc., 11.5%, 6/15/2011 | 765,000 | 810,900 |
3,325,170 | ||
Energy 4.7% | ||
Belden & Blake Corp., 8.75%, 7/15/2012 | 715,000 | 732,875 |
Chaparral Energy, Inc., 144A, 8.5%, 12/1/2015 | 385,000 | 390,775 |
Chesapeake Energy Corp.: |
|
|
144A, 6.5%, 8/15/2017 | 220,000 | 215,050 |
6.875%, 1/15/2016 | 510,000 | 512,550 |
Dynegy Holdings, Inc.: |
|
|
6.875%, 4/1/2011 (b) | 135,000 | 131,288 |
7.125%, 5/15/2018 (b) | 230,000 | 204,125 |
7.625%, 10/15/2026 | 140,000 | 124,600 |
8.75%, 2/15/2012 (b) | 60,000 | 63,900 |
144A, 9.875%, 7/15/2010 | 965,000 | 1,054,262 |
El Paso Production Holding Corp., 7.75%, 6/1/2013 | 355,000 | 363,875 |
Mission Resources Corp., 9.875%, 4/1/2011 | 35,000 | 36,838 |
Newpark Resources, Inc., Series B, 8.625%, 12/15/2007 | 560,000 | 558,600 |
NGC Corp. Capital Trust I, Series B, 8.316%, 6/1/2027 (b) | 590,000 | 519,200 |
NorthWestern Corp., 5.875%, 11/1/2014 | 115,000 | 114,418 |
NRG Energy, Inc., 8.0%, 12/15/2013 | 892,000 | 978,970 |
Sonat, Inc., 7.0%, 2/1/2018 | 70,000 | 64,750 |
Southern Natural Gas, 8.875%, 3/15/2010 | 575,000 | 614,882 |
Stone Energy Corp.: |
|
|
6.75%, 12/15/2014 | 485,000 | 452,263 |
8.25%, 12/15/2011 (b) | 515,000 | 531,737 |
Transmeridian Exploration, Inc., 12.0%**, 12/15/2010 (f) | 175,000 | 175,000 |
Williams Companies, Inc.: |
|
|
8.125%, 3/15/2012 (b) | 1,170,000 | 1,260,675 |
8.75%, 3/15/2032 | 280,000 | 317,800 |
9,418,433 | ||
Financials 7.4% | ||
Alamosa Delaware, Inc.: |
|
|
8.5%, 1/31/2012 | 65,000 | 70,850 |
11.0%, 7/31/2010 | 235,000 | 266,725 |
12.0%, 7/31/2009 | 227,000 | 249,133 |
AmeriCredit Corp., 9.25%, 5/1/2009 (b) | 1,185,000 | 1,244,250 |
Ashton Woods USA LLC, 144A, 9.5%, 10/1/2015 | 375,000 | 339,375 |
Atlantic Mutual Insurance Co., 144A, 8.15%, 2/15/2028 | 120,000 | 72,506 |
E*TRADE Financial Corp.: |
|
|
144A, 7.375%, 9/15/2013 | 400,000 | 397,000 |
7.875%, 12/1/2015 | 420,000 | 425,250 |
8.0%, 6/15/2011 | 315,000 | 322,087 |
Ford Motor Credit Co.: |
|
|
6.5%, 1/25/2007 | 270,000 | 262,174 |
7.25%, 10/25/2011 | 1,560,000 | 1,405,824 |
7.375%, 10/28/2009 | 1,410,000 | 1,296,119 |
General Motors Acceptance Corp.: |
|
|
5.22%**, 3/20/2007 | 400,000 | 386,526 |
6.875%, 9/15/2011 | 585,000 | 528,563 |
8.0%, 11/1/2031 (b) | 4,080,000 | 4,000,970 |
H&E Equipment/Finance, 11.125%, 6/15/2012 | 520,000 | 575,900 |
Poster Financial Group, Inc., 8.75%, 12/1/2011 (b) | 560,000 | 576,800 |
PXRE Capital Trust I, 8.85%, 2/1/2027 | 335,000 | 328,300 |
R.H. Donnelly Finance Corp., 10.875%, 12/15/2012 | 540,000 | 611,550 |
TIG Capital Holdings Trust, 144A, 8.597%, 1/15/2027 | 480,000 | 388,800 |
Triad Acquisition, 144A, 11.125%, 5/1/2013 | 265,000 | 262,350 |
Universal City Development, 11.75%, 4/1/2010 | 800,000 | 896,000 |
14,907,052 | ||
Health Care 1.5% | ||
Accellent, Inc., 144A, 10.5%, 12/1/2013 (b) | 500,000 | 505,000 |
Eszopiclone Royalty Subordinated LLC, 144A, 12.0%, 3/15/2014 | 250,000 | 250,000 |
HEALTHSOUTH Corp., 10.75%, 10/1/2008 (b) | 930,000 | 892,800 |
InSight Health Services Corp.: |
|
|
144A, 9.174%**, 11/1/2011 | 125,000 | 121,875 |
Series B, 9.875%, 11/1/2011 (b) | 165,000 | 131,175 |
Tenet Healthcare Corp., 144A, 9.25%, 2/1/2015 | 1,025,000 | 1,004,500 |
2,905,350 | ||
Industrials 7.5% | ||
Aavid Thermal Technologies, Inc., 12.75%, 2/1/2007 | 785,000 | 808,550 |
Allied Security Escrow Corp., 11.375%, 7/15/2011 | 470,000 | 443,331 |
Allied Waste North America, Inc.: |
|
|
Series B, 5.75%, 2/15/2011 (b) | 660,000 | 628,650 |
Series B, 9.25%, 9/1/2012 | 638,000 | 693,825 |
American Color Graphics, 10.0%, 6/15/2010 (b) | 470,000 | 317,250 |
Avondale Mills, Inc., 144A, 11.065%**, 7/1/2012 | 240,000 | 234,000 |
Bear Creek Corp., 144A, 8.87%**, 3/1/2012 | 120,000 | 120,600 |
Beazer Homes USA, Inc.: |
|
|
6.875%, 7/15/2015 | 40,000 | 37,400 |
8.375%, 4/15/2012 (b) | 350,000 | 360,500 |
8.625%, 5/15/2011 | 445,000 | 462,800 |
Browning-Ferris Industries: |
|
|
7.4%, 9/15/2035 | 640,000 | 566,400 |
9.25%, 5/1/2021 | 135,000 | 137,025 |
Case New Holland, Inc., 9.25%, 8/1/2011 | 695,000 | 736,700 |
Cenveo Corp., 7.875%, 12/1/2013 (b) | 400,000 | 384,000 |
Collins & Aikman Floor Cover, Series B, 9.75%, 2/15/2010 | 470,000 | 432,400 |
Columbus McKinnon Corp., 10.0%, 8/1/2010 | 223,000 | 245,300 |
Compression Polymers Corp.: |
|
|
144A, 10.46%**, 7/1/2012 | 140,000 | 131,600 |
144A, 10.5%, 7/1/2013 | 430,000 | 404,200 |
Congoleum Corp., 8.625%, 8/1/2008* | 280,000 | 283,850 |
Cornell Companies, Inc., 10.75%, 7/1/2012 | 265,000 | 273,613 |
Dana Corp., 7.0%, 3/1/2029 | 510,000 | 362,100 |
ISP Chemco, Inc., Series B, 10.25%, 7/1/2011 | 840,000 | 894,600 |
K. Hovnanian Enterprises, Inc.: |
|
|
6.25%, 1/15/2016 | 425,000 | 385,030 |
8.875%, 4/1/2012 | 605,000 | 621,638 |
Kansas City Southern, 9.5%, 10/1/2008 | 945,000 | 1,020,600 |
Kinetek, Inc., Series D, 10.75%, 11/15/2006 | 695,000 | 656,775 |
Millennium America, Inc., 9.25%, 6/15/2008 | 805,000 | 869,400 |
Rainbow National Services LLC, 144A, 10.375%, 9/1/2014 | 400,000 | 436,000 |
Ship Finance International Ltd., 8.5%, 12/15/2013 | 365,000 | 345,381 |
Technical Olympic USA, Inc.: |
|
|
7.5%, 3/15/2011 (b) | 175,000 | 153,125 |
10.375%, 7/1/2012 | 495,000 | 487,575 |
The Brickman Group Ltd., Series B, 11.75%, 12/15/2009 | 280,000 | 309,400 |
United Rentals North America, Inc., 7.0%, 2/15/2014 (b) | 505,000 | 467,125 |
Xerox Capital Trust I, 8.0%, 2/1/2027 | 290,000 | 297,250 |
15,007,993 | ||
Information Technology 2.3% | ||
Activant Solutions, Inc.: |
|
|
144A, 10.054%**,4/1/2010 | 60,000 | 61,500 |
10.5%, 6/15/2011 | 371,000 | 402,535 |
Eschelon Operating Co., 8.375%, 3/15/2010 | 298,000 | 277,140 |
L-3 Communications Corp.: |
|
|
5.875%, 1/15/2015 | 75,000 | 72,000 |
144A, 6.375%, 10/15/2015 | 180,000 | 177,300 |
Lucent Technologies, Inc., 6.45%, 3/15/2029 | 985,000 | 849,562 |
Sanmina-SCI Corp.: |
|
|
6.75%, 3/1/2013 (b) | 665,000 | 633,413 |
10.375%, 1/15/2010 | 872,000 | 952,660 |
SS&C Technologies, Inc., 144A, 11.75%, 12/1/2013 | 135,000 | 136,688 |
SunGard Data Systems, Inc., 144A, 10.25%, 8/15/2015 | 520,000 | 525,200 |
UGS Corp., 10.0%, 6/1/2012 | 445,000 | 485,050 |
4,573,048 | ||
Materials 6.9% | ||
ARCO Chemical Co., 9.8%, 2/1/2020 | 1,215,000 | 1,360,800 |
Associated Materials, Inc.: |
|
|
Step-up Coupon, 0% to 3/1/2009, 11.25% to 3/1/2014 | 765,000 | 325,125 |
9.75%, 4/15/2012 | 65,000 | 61,100 |
Caraustar Industries, Inc., 9.875%, 4/1/2011 (b) | 865,000 | 869,325 |
Constar International, Inc.: |
|
|
7.715%**, 2/15/2012 (b) | 140,000 | 137,200 |
11.0%, 12/1/2012 (b) | 130,000 | 100,100 |
Dayton Superior Corp.: |
|
|
10.75%, 9/15/2008 | 325,000 | 316,875 |
13.0%, 6/15/2009 (b) | 485,000 | 349,200 |
DRS Technologies, Inc., 6.875%, 11/1/2013 | 110,000 | 104,500 |
Edgen Acquisition Corp., 9.875%, 2/1/2011 | 105,000 | 105,000 |
GEO Specialty Chemicals, Inc., 12.565%**, 12/31/2009 | 559,000 | 463,970 |
Georgia-Pacific Corp.: |
|
|
8.0%, 1/15/2024 (b) | 795,000 | 765,187 |
8.875%, 5/15/2031 | 100,000 | 100,000 |
9.375%, 2/1/2013 | 575,000 | 644,719 |
Huntsman Advanced Materials LLC, 11.0%, 7/15/2010 | 500,000 | 571,250 |
Huntsman LLC, 11.625%, 10/15/2010 | 685,000 | 778,331 |
IMC Global, Inc., 10.875%, 8/1/2013 | 718,000 | 829,290 |
Intermet Corp., 9.75%, 6/15/2009* (b) | 55,000 | 9,851 |
International Steel Group, Inc., 6.5%, 4/15/2014 | 240,000 | 238,200 |
MMI Products, Inc., Series B, 11.25%, 4/15/2007 | 640,000 | 595,200 |
Neenah Foundry Co.: |
|
|
144A, 11.0%, 9/30/2010 | 894,000 | 978,930 |
144A, 13.0%, 9/30/2013 | 325,879 | 327,508 |
NewPage Corp., 10.5%**, 5/1/2012 (b) | 345,000 | 341,550 |
Omnova Solutions, Inc., 11.25%, 6/1/2010 | 825,000 | 870,375 |
Oregon Steel Mills, Inc., 10.0%, 7/15/2009 | 205,000 | 219,863 |
Oxford Automotive, Inc., 144A, 12.0%, 10/15/2010* | 594,381 | 53,494 |
Portola Packaging, Inc., 8.25%, 2/1/2012 (b) | 275,000 | 214,500 |
Radnor Holdings Corp., 11.0%, 3/15/2010 | 460,000 | 377,200 |
Rockwood Specialties Group, Inc., 10.625%, 5/15/2011 | 112,000 | 121,240 |
TriMas Corp., 9.875%, 6/15/2012 | 830,000 | 680,600 |
UAP Holding Corp., Step-up Coupon, 0% to 1/15/2008, 10.75% to 7/15/2012 | 255,000 | 219,300 |
United States Steel Corp., 9.75%, 5/15/2010 | 605,000 | 657,181 |
13,786,964 | ||
Telecommunication Services 3.9% | ||
AirGate PCS, Inc., 7.9%**, 10/15/2011 | 250,000 | 259,375 |
American Cellular Corp., Series B, 10.0%, 8/1/2011 | 195,000 | 211,087 |
Cincinnati Bell, Inc.: |
|
|
7.25%, 7/15/2013 (b) | 500,000 | 520,000 |
8.375%, 1/15/2014 (b) | 515,000 | 504,700 |
Dobson Communications Corp., 8.875%, 10/1/2013 | 165,000 | 164,175 |
Insight Midwest LP, 9.75%, 10/1/2009 | 185,000 | 190,319 |
LCI International, Inc., 7.25%, 6/15/2007 | 490,000 | 488,775 |
Level 3 Financing, Inc., 10.75%, 10/15/2011 (b) | 80,000 | 71,200 |
MCI, Inc., 8.735%, 5/1/2014 | 1,280,000 | 1,412,800 |
Nextel Communications, Inc., Series D, 7.375%, 8/1/2015 | 1,860,000 | 1,957,855 |
Nextel Partners, Inc., 8.125%, 7/1/2011 | 300,000 | 319,500 |
Qwest Corp.: |
|
|
144A, 7.12%**, 6/15/2013 (b) | 125,000 | 134,687 |
7.25%, 9/15/2025 | 350,000 | 347,375 |
Rural Cellular Corp.: |
|
|
9.75%, 1/15/2010 | 70,000 | 70,000 |
9.875%, 2/1/2010 | 15,000 | 15,694 |
144A, 10.041%**, 11/1/2012 | 70,000 | 69,300 |
SBA Telecom, Inc., Step-up Coupon, 0% to 12/15/2007, 9.75% to 12/15/2011 | 146,000 | 133,590 |
Securus Technologies, Inc., 11.0%, 9/1/2011 (b) | 265,000 | 222,600 |
Telex Communications Holdings, Inc., 11.5%, 10/15/2008 | 35,000 | 37,100 |
Triton PCS, Inc., 8.5%, 6/1/2013 | 50,000 | 47,250 |
Ubiquitel Operating Co., 9.875%, 3/1/2011 | 175,000 | 193,594 |
US Unwired, Inc., Series B, 10.0%, 6/15/2012 | 355,000 | 402,037 |
7,773,013 | ||
Utilities 3.5% | ||
AES Corp., 144A, 8.75%, 5/15/2013 | 985,000 | 1,071,188 |
Allegheny Energy Supply Co. LLC, 144A, 8.25%, 4/15/2012 | 1,185,000 | 1,333,125 |
CMS Energy Corp.: |
|
|
8.5%, 4/15/2011 | 550,000 | 592,624 |
9.875%, 10/15/2007 | 700,000 | 747,250 |
DPL, Inc., 6.875%, 9/1/2011 | 173,000 | 183,380 |
Mission Energy Holding Co., 13.5%, 7/15/2008 | 1,370,000 | 1,592,625 |
PSE&G Energy Holdings LLC, 10.0%, 10/1/2009 | 1,315,000 | 1,443,212 |
6,963,404 | ||
Total Corporate Bonds (Cost $107,580,201) | 105,535,236 | |
| ||
Foreign Bonds — US$ Denominated 57.6% | ||
Consumer Discretionary 1.4% | ||
Cablemas SA de CV, 144A, 9.375%, 11/15/2015 | 185,000 | 186,850 |
IESY Repository GmbH, 144A, 10.375%, 2/15/2015 (b) | 75,000 | 78,187 |
Jafra Cosmetics International, Inc., 10.75%, 5/15/2011 | 830,000 | 906,775 |
Kabel Deutschland GmbH, 144A, 10.625%, 7/1/2014 | 450,000 | 483,750 |
Shaw Communications, Inc., 8.25%, 4/11/2010 | 405,000 | 433,350 |
Telenet Group Holding NV, 144A, Step-up Coupon, 0% to 12/15/2008, 11.5% to 6/15/2014 | 484,000 | 393,250 |
Vitro SA de CV, Series A, 144A, 12.75%, 11/1/2013 (b) | 290,000 | 266,800 |
2,748,962 | ||
Energy 6.0% | ||
Gaz Capital SA, 144A, 8.625%, 4/28/2034 | 100,000 | 125,500 |
Luscar Coal Ltd., 9.75%, 10/15/2011 | 610,000 | 657,275 |
OAO Gazprom, 144A, 9.625%, 3/1/2013 (b) | 640,000 | 766,400 |
Pemex Project Funding Master Trust: |
|
|
Series REG S, 7.375%, 12/15/2014 | 1,200,000 | 1,323,600 |
Series REG S, 8.0%, 11/15/2011 | 1,800,000 | 2,011,500 |
Series REG S, 9.75%, 9/15/2027 | 2,685,000 | 3,544,200 |
Series REG S, 144A, 9.75%, 9/15/2027 | 330,000 | 433,950 |
Petroleum Geo-Services ASA, 10.0%, 11/5/2010 | 1,460,020 | 1,653,473 |
Petronas Capital Ltd., Series REG S, 7.875%, 5/22/2022 | 1,000,000 | 1,218,650 |
Secunda International Ltd., 12.15%**, 9/1/2012 | 250,000 | 262,500 |
11,997,048 | ||
Financials 0.7% | ||
Conproca SA de CV, 12.0%, 6/16/2010 | 380,000 | 452,200 |
Doral Financial Corp., 5.004%**, 7/20/2007 | 785,000 | 733,125 |
New ASAT (Finance) Ltd., 9.25%, 2/1/2011 | 233,000 | 161,352 |
1,346,677 | ||
Health Care 0.2% | ||
Biovail Corp., 7.875%, 4/1/2010 (b) | 375,000 | 389,063 |
Industrials 1.6% | ||
CP Ships Ltd., 10.375%, 7/15/2012 | 455,000 | 513,012 |
Grupo Transportacion Ferroviaria Mexicana SA de CV: |
|
|
144A, 9.375%, 5/1/2012 | 315,000 | 344,138 |
10.25%, 6/15/2007 | 915,000 | 965,325 |
12.5%, 6/15/2012 | 322,000 | 367,080 |
J. Ray McDermott SA, 144A, 11.5%, 12/15/2013 | 515,000 | 587,100 |
LeGrand SA, 8.5%, 2/15/2025 | 255,000 | 306,000 |
Stena AB, 9.625%, 12/1/2012 | 120,000 | 130,800 |
3,213,455 | ||
Materials 2.2% | ||
Cascades, Inc., 7.25%, 2/15/2013 | 820,000 | 756,450 |
ISPAT Inland ULC, 9.75%, 4/1/2014 | 556,000 | 626,890 |
Novelis, Inc., 144A, 7.5%, 2/15/2015 | 415,000 | 388,025 |
Rhodia SA, 8.875%, 6/1/2011 (b) | 865,000 | 877,975 |
Sino-Forest Corp., 144A, 9.125%, 8/17/2011 | 15,000 | 16,125 |
Tembec Industries, Inc.: |
|
|
8.5%, 2/1/2011 | 1,810,000 | 1,086,000 |
8.625%, 6/30/2009 | 1,045,000 | 689,700 |
4,441,165 | ||
Sovereign Bonds 43.8% | ||
Aries Vermogensverwaltung GmbH, Series C, REG S, 9.6%, 10/25/2014 | 4,000,000 | 5,129,800 |
Central Bank of Nigeria, Series WW, 6.25%, 11/15/2020 | 3,250,000 | 3,233,750 |
Federative Republic of Brazil: |
|
|
8.75%, 2/4/2025 | 1,300,000 | 1,354,600 |
8.875%, 10/14/2019 | 125,000 | 133,313 |
9.25%, 10/22/2010 | 660,000 | 729,960 |
11.0%, 1/11/2012 | 1,780,000 | 2,141,340 |
11.0%, 8/17/2040 | 2,220,000 | 2,735,040 |
14.5%, 10/15/2009 | 3,000,000 | 3,810,000 |
Government of Ukraine, Series REG S, 7.65%, 6/11/2013 | 2,200,000 | 2,386,560 |
Republic of Argentina: |
|
|
Zero Coupon, 12/15/2035 (PIK) | 17,247,036 | 819,234 |
Step-up Coupon, 1.33% to 3/31/2009, 2.5% to 3/31/2019, 3.75% to 3/31/2029, 5.25% to 12/31/2038 | 6,060,000 | 1,945,260 |
8.28%, 12/31/2033 (PIK) (b) | 4,019,133 | 3,355,976 |
Republic of Bulgaria, 8.25%, 1/15/2015 | 3,090,000 | 3,703,365 |
Republic of Colombia: |
|
|
10.0%, 1/23/2012 | 1,300,000 | 1,540,500 |
10.75%, 1/15/2013 | 800,000 | 986,400 |
Republic of Ecuador, Step-up Coupon, 9.0% to 8/15/2006, 10.0% to 8/15/2030 | 2,700,000 | 2,477,250 |
Republic of Indonesia, Series REG S, 7.25%, 4/20/2015 | 1,370,000 | 1,390,550 |
Republic of Panama: |
|
|
7.125%, 1/29/2026 | 1,275,000 | 1,262,250 |
9.375%, 1/16/2023 | 3,600,000 | 4,401,000 |
Republic of Peru, 9.875%, 2/6/2015 | 800,000 | 988,000 |
Republic of Philippines: |
|
|
8.0%, 1/15/2016 | 2,200,000 | 2,275,460 |
8.375%, 2/15/2011 | 800,000 | 849,000 |
9.375%, 1/18/2017 | 1,730,000 | 1,948,412 |
9.5%, 2/2/2030 | 1,300,000 | 1,462,500 |
9.875%, 1/15/2019 | 1,050,000 | 1,212,750 |
Republic of Turkey: |
|
|
7.25%, 3/15/2015 | 1,850,000 | 1,921,688 |
7.375%, 2/5/2025 | 1,860,000 | 1,862,325 |
8.0%, 2/14/2034 | 300,000 | 318,000 |
11.75%, 6/15/2010 | 4,600,000 | 5,635,000 |
Republic of Uruguay, 9.25%, 5/17/2017 | 840,000 | 926,100 |
Republic of Venezuela: |
|
|
Floating Rate Note Debt Conversion Bond, LIBOR plus ..100, Series REG S, 5.194%**, 4/22/2011 | 400,000 | 391,000 |
Series A, Collateralized Par Bond, 6.75%, 3/31/2020 | 2,300,000 | 2,302,300 |
7.65%, 4/21/2025 | 1,700,000 | 1,668,550 |
9.375%, 1/13/2034 | 2,000,000 | 2,300,000 |
10.75%, 9/19/2013 | 4,210,000 | 5,052,000 |
Russian Federation, Series REG S, Step-up Coupon, 5.0% to 3/31/2007, 7.5% to 3/31/2030 | 5,600,000 | 6,273,120 |
Russian Ministry of Finance: |
|
|
Series V, 3.0%, 5/14/2008 | 2,800,000 | 2,649,360 |
Series VII, 3.0%, 5/14/2011 | 2,980,000 | 2,646,538 |
United Mexican States, Series A, 6.625%, 3/3/2015 | 1,290,000 | 1,393,200 |
87,611,451 | ||
Telecommunication Services 1.7% | ||
Cell C Property Ltd., 144A, 11.0%, 7/1/2015 (b) | 415,000 | 411,887 |
Embratel, Series B, 11.0%, 12/15/2008 | 253,000 | 287,155 |
Global Crossing UK Finance, 10.75%, 12/15/2014 | 305,000 | 280,600 |
Grupo Iusacell SA de CV, Series B, 10.0%, 7/15/2004* | 85,000 | 68,850 |
Intelsat Bermuda Ltd., 144A, 8.695%**, 1/15/2012 | 225,000 | 228,375 |
Intelsat Ltd., 5.25%, 11/1/2008 | 175,000 | 158,813 |
Millicom International Cellular SA, 10.0%, 12/1/2013 | 290,000 | 299,787 |
Mobifon Holdings BV, 12.5%, 7/31/2010 | 690,000 | 800,400 |
Nortel Networks Ltd., 6.125%, 2/15/2006 | 870,000 | 867,825 |
3,403,692 | ||
Total Foreign Bonds — US$ Denominated (Cost $112,907,196) | 115,151,513 | |
| ||
Foreign Bonds — Non US$ Denominated 6.7% | ||
Consumer Discretionary 0.2% | ||
IESY Repository GmbH, 144A, 8.75%, 2/15/2015 EUR | 310,000 | 364,576 |
Consumer Staples 0.1% | ||
Fage Dairy Industry SA, 144A, 7.5%, 1/15/2015 EUR | 205,000 | 203,024 |
Industrials 0.2% | ||
Grohe Holdings GmbH, 144A, 8.625%, 10/1/2014 EUR | 265,000 | 281,973 |
Sovereign Bonds 6.2% | ||
Aries Vermogensverwaltung GmbH, Series B, REG S, 7.75%, 10/25/2009 EUR | 750,000 | 1,016,720 |
Government of Malaysia, 4.305%, 2/27/2009 MYR | 8,800,000 | 2,374,106 |
Government of Poland, Series 0406, Zero Coupon,4/12/2006 PLZ | 4,300,000 | 1,275,427 |
Mexican Bonds: |
|
|
Series MI-10, 8.0%, 12/19/2013 MXN | 1,508,500 | 138,733 |
Series M-20, 8.0%, 12/7/2023 MXN | 8,000,000 | 691,636 |
Series M-20, 10.0%, 12/5/2024 MXN | 17,700,000 | 1,844,944 |
Republic of Argentina: |
|
|
Zero Coupon, 12/15/2035 (PIK) ARS | 18,174,047 | 269,585 |
Zero Coupon, 12/15/2035 (PIK) EUR | 2,441,840 | 132,431 |
Step-up Coupon, 1.2% to 3/31/2009, 2.26% to 3/31/2019, 3.38% to 3/31/2029, 4.74% to 12/31/2038 EUR | 1,700,000 | 616,322 |
5.83%, 12/31/2033 (PIK) ARS | 6,124,654 | 2,382,756 |
7.82%, 12/31/2033 (PIK) EUR | 265,575 | 260,667 |
Republic of Uruguay, 10.5%, 10/20/2006 UYU | 26,300,000 | 1,371,640 |
12,374,967 | ||
Telecommunication Services 0.0% | ||
Wind Acquisition Finance SA, 144A, 9.75%, 12/1/2015 (b) EUR | 50,000 | 60,866 |
Total Foreign Bonds — Non US$ Denominated (Cost $13,034,450) | 13,285,406 | |
| ||
Convertible Bond 0.4% | ||
Consumer Discretionary | ||
HIH Capital Ltd.: |
|
|
144A, Series DOM, 7.5%, 9/25/2006 | 535,000 | 529,650 |
144A, Series EURO, 7.5%, 9/25/2006 | 360,000 | 356,400 |
Total Convertible Bond (Cost $886,292) | 886,050 | |
| ||
|
| Value ($) |
|
| |
Common Stocks 0.1% | ||
Consumer Discretionary 0.0% | ||
Catalina Restaurant Group, Inc.* | 1,474 | 737 |
Materials 0.0% | ||
GEO Specialty Chemicals, Inc.* | 7,125 | 35,625 |
GEO Specialty Chemicals, Inc., 144A* | 649 | 3,245 |
38,870 | ||
Telecommunication Services 0.1% | ||
IMPSAT Fiber Networks, Inc.* | 8,203 | 56,601 |
Total Common Stocks (Cost $578,571) | 96,208 | |
| ||
Warrants 0.0% | ||
Industrials 0.0% | ||
DeCrane Aircraft Holdings, Inc., 144A* | 350 | 0 |
TravelCenters of America, Inc.* | 104 | 13 |
13 | ||
Materials 0.0% | ||
Dayton Superior Corp. 144A* | 25 | 0 |
Total Warrants (Cost $428) | 13 | |
| ||
Preferred Stocks 0.2% | ||
Paxson Communications Corp., 14.25% (PIK) (Cost $474,281) | 50 | 419,506 |
| ||
Convertible Preferred Stocks 0.0% | ||
Paxson Communications Corp. 144A, 9.75%, (PIK) (Cost $69,000) | 10 | 67,250 |
| Principal Amount ($)(a) | Value ($) |
|
| |
Loan Participation 0.6% | ||
Republic of Algeria, Floating Rate Debt Conversion Bond, LIBOR plus .8125, 4.813%**, 3/4/2010 (Cost $1,226,562) | 1,269,000 | 1,267,731 |
| ||
US Treasury Obligations 4.5% | ||
US Treasury Bond: |
|
|
7.5%, 11/15/2016 | 6,300,000 | 7,825,287 |
12.0%, 8/15/2013 | 1,000,000 | 1,191,602 |
Total US Treasury Obligations (Cost $9,605,891) | 9,016,889 | |
| Units | Value ($) |
|
| |
Other Investments 0.2% | ||
Hercules, Inc., (Bond Unit) | 520,000 | 382,200 |
SpinCycle, Inc., "F" (Common Stock Unit)* | 24 | 26 |
SpinCycle, Inc., (Common Stock Unit)* | 3,456 | 3,802 |
Total Other Investments (Cost $431,376) | 386,028 | |
| ||
| Shares | Value ($) |
|
| |
Securities Lending Collateral 10.8% | ||
Scudder Daily Assets Fund Institutional, 4.07% (c) (d) (Cost $21,471,110) | 21,471,110 | 21,471,110 |
| ||
Cash Equivalents 4.4% | ||
Scudder Cash Management QP Trust, 4.03% (e) (Cost $8,690,763) | 8,690,763 | 8,690,763 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $276,956,121)+ | 138.3 | 276,273,703 |
Other Assets and Liabilities, Net | (8.3) | (16,412,215) |
Notes payable | (30.0) | (60,000,000) |
Net Assets | 100.0 | 199,861,488 |
* Non-income producing security. In the case of a bond, generally denotes that the issuer has defaulted on the payment of principal or interest or has filed for bankruptcy.
The following table represents bonds that are in default:
Security | Coupon | Maturity Date | Principal Amount ($)(a) | Acquisition Cost ($) | Value ($) |
Congoleum Corp. | 8.625% | 8/1/2008 | 280,000 | 278,198 | 283,850 |
Group Iusacell SA de CV | 10.0% | 7/15/2004 | 85,000 | 55,444 | 68,850 |
Intermet Corp. | 9.75% | 6/15/2009 | 55,000 | 22,550 | 9,851 |
Oxford Automotive, Inc. | 12.0% | 10/15/2010 | 594,381 | 60,726 | 53,494 |
|
|
|
| 416,918 | 416,045 |
** Floating rate notes are securities whose yields vary with a designated market index or market rate, such as the coupon-equivalent of US Treasury bill rate. These securities are shown at the current rate as of November 30, 2005.
+ The cost for federal income tax purposes was $278,432,621. At November 30, 2005, net unrealized depreciation for all securities based on tax cost was $2,158,918. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $4,913,640 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $7,072,558.
(a) Principal amount stated in US dollars unless otherwise noted.
(b) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at November 30, 2005 amounted to $21,036,698, which is 10.5% of net assets.
(c) Represents collateral held in connection with securities lending.
(d) Scudder Daily Assets Fund Institutional, an affiliated fund, is managed by Deutsche Asset Management, Inc. The rate shown is the annualized seven-day yield at period end.
(e) Scudder Cash Management QP Trust, an affiliated fund, is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(f) When-issued.
144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
LIBOR: Represents the London InterBank Offered Rate.
PIK: Denotes that all or a portion of income is paid in-kind.
Currency Abbreviations | |||
ARS | Argentine Peso | MYR | Malaysian Ringgit |
EUR | Euro | PLZ | Polish Zloty |
MXN | Mexican Peso | UYU | Uruguayan Peso |
The accompanying notes are an integral part of the financial statements.
|
Statement of Assets and Liabilities as of November 30, 2005 | |
Assets | |
Investments: Investments in securities, at value (cost $246,794,248) — including $21,036,698 of securities loaned | $ 246,111,830 |
Investment in Scudder Cash Management QP Trust (cost $8,690,763) | 8,690,763 |
Investment in Scudder Daily Assets Fund Institutional (cost $21,471,110)* | 21,471,110 |
Total investments in securities, at value (cost $276,956,121) | 276,273,703 |
Cash | 259,811 |
Foreign currency, at value (cost $70,249) | 72,415 |
Receivable for investments sold | 2,828,020 |
Interest receivable | 5,345,370 |
Unrealized appreciation on forward foreign currency exchange contracts | 22,420 |
Other assets | 56,541 |
Total assets | 284,858,280 |
Liabilities | |
Payable for investments purchased | 2,617,501 |
Notes payable | 60,000,000 |
Interest on notes payable | 395,324 |
Payable upon return of securities loaned | 21,471,110 |
Payable for when-issued securities | 175,000 |
Unrealized depreciation on forward foreign currency exchange contracts | 30,326 |
Accrued management fee | 144,201 |
Other accrued expenses and payables | 163,330 |
Total liabilities | 84,996,792 |
Net assets, at value | $ 199,861,488 |
Net Assets | |
Net assets consist of: Undistributed net investment income | 4,525,461 |
Net unrealized appreciation (depreciation) on: Investments | (682,418) |
Foreign currency related transactions | (6,727) |
Accumulated net realized gain (loss) | (18,442,746) |
Paid-in capital | 214,467,918 |
Net assets, at value | $ 199,861,488 |
Net Asset Value | |
Net Asset Value per share ($199,861,488 ÷ 20,492,638 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 9.75 |
* Represents collateral on securities loaned.
The accompanying notes are an integral part of the financial statements.
|
|
Statement of Operations for the year ended November 30, 2005 | |
Investment Income | |
Income: Interest | $ 19,722,169 |
Interest — Scudder Cash Management QP Trust | 404,485 |
Securities lending income, including income from Scudder Daily Assets Fund Institutional, net of borrower rebates | 101,394 |
Dividends (net of foreign taxes withheld of $564) | 105,327 |
Total Income | 20,333,375 |
Expenses: Management fee | 1,684,471 |
Services to shareholders | 43,349 |
Custodian fees | 61,524 |
Auditing | 48,469 |
Legal | 60,860 |
Trustees' fees and expenses | 26,010 |
Reports to shareholders | 171,532 |
Interest expense | 2,043,647 |
Stock exchange listing fees | 13,740 |
Other | 91,981 |
Total expenses, before expense reductions | 4,245,583 |
Expense reductions | (6,646) |
Total expenses, after expense reductions | 4,238,937 |
Net investment income | 16,094,438 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from: Investments | 13,827,683 |
Foreign currency related transactions | (136,682) |
| 13,691,001 |
Net unrealized appreciation (depreciation) during the period on: Investments | (10,269,957) |
Foreign currency related transactions | 1,053,323 |
| (9,216,634) |
Net gain (loss) on investment transactions | 4,474,367 |
Net increase (decrease) in net assets resulting from operations | $ 20,568,805 |
The accompanying notes are an integral part of the financial statements.
|
|
Statement of Cash Flows for the year ended November 30, 2005 | |
Cash Flows from Operating Activities: |
|
Investment income received | $ 21,558,271 |
Payment of operating expenses | (2,214,924) |
Payment of interest expense | (1,906,362) |
Proceeds from sales and maturities of investments | 342,644,343 |
Purchases of investments | (345,471,744) |
Net purchases, sales and maturities of short-term investments | (1,738,723) |
Cash provided (used) by operating activities | $ 12,870,861 |
Cash Flows from Financing Activities: | |
Distributions paid (net of reinvestment of distributions) | $ (15,365,766) |
Cash provided (used) by financing activities | (15,365,766) |
Increase (decrease) in cash | (2,494,905) |
Cash at beginning of period* | 2,827,131 |
Cash at end of period* | $ 332,226 |
Reconciliation of Net Increase (Decrease) in Net Assets Resulting from Operations to Cash Provided (Used) by Operating Activities: | |
Net increase (decrease) in net assets resulting from operations | $ 20,568,805 |
Net (increase) decrease in cost of investments | (14,845,301) |
Net (increase) decrease in unrealized appreciation (depreciation) on investments | 10,269,957 |
(Increase) decrease in interest receivable | 719,743 |
(Increase) decrease in other assets | 14,060 |
(Increase) decrease in receivable for investments sold | (2,061,901) |
Increase (decrease) in payable for investments purchased | (707,016) |
(Increase) decrease in appreciation (depreciation) on forward foreign currency exchange contracts | (1,165,390) |
Increase (decrease) in other accrued expenses and payables | 4,754 |
Increase (decrease) in interest on notes payable | 73,150 |
Cash provided (used) by operating activities | $ 12,870,861 |
Non-Cash Financing Activities: | |
Reinvestment of distributions | $ 586,967 |
* Includes foreign currency
The accompanying notes are an integral part of the financial statements.
|
|
Statement of Changes in Net Assets | ||
Increase (Decrease) in Net Assets | Years Ended November 30, | |
2005 | 2004 | |
Operations: Net investment income | $ 16,094,438 | $ 15,863,845 |
Net realized gain (loss) on investment transactions | 13,691,001 | 5,737,265 |
Net unrealized appreciation (depreciation) during the period on investment transactions | (9,216,634) | 9,089,428 |
Net increase (decrease) in net assets resulting from operations | 20,568,805 | 30,690,538 |
Distributions to shareholders from: Net investment income | (15,952,733) | (15,222,025) |
Fund share transactions: Reinvestment of distributions | 586,967 | — |
Net increase (decrease) in net assets from Fund share transactions | 586,967 | — |
Increase (decrease) in net assets | 5,203,039 | 15,468,513 |
Net assets at beginning of period | 194,658,449 | 179,189,936 |
Net assets at end of period (including undistributed net investment income of $4,525,461 and $1,097,123, respectively) | $ 199,861,488 | $ 194,658,449 |
Other Information | ||
Shares outstanding at beginning of period | 20,432,247 | 20,432,247 |
Shares issued to shareholders in reinvestment of distributions | 60,391 | — |
Shares outstanding at end of period | 20,492,638 | 20,432,247 |
The accompanying notes are an integral part of the financial statements.
|
Years Ended November 30, | 2005 | 2004 | 2003 | 2002a | 2001 |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 9.53 | $ 8.77 | $ 7.52 | $ 8.04 | $ 8.27 |
Income (loss) from investment operations: | |||||
Net investment incomeb | .78 | .78 | .73 | .81 | .89 |
Net realized and unrealized gain (loss) on investment transactions | .22 | .73 | 1.28 | (.49) | (.05) |
Total from investment operations | 1.00 | 1.51 | 2.01 | .32 | .84 |
Less distributions from: Net investment income | (.78) | (.75) | (.76) | (.80) | (1.07) |
Tax return of capital | — | — | — | (.04) | — |
Total distributions | (.78) | (.75) | (.76) | (.84) | (1.07) |
Net asset value, end of period | $ 9.75 | $ 9.53 | $ 8.77 | $ 7.52 | $ 8.04 |
Market value, end of period | $ 10.15 | $ 9.08 | $ 8.57 | $ 7.33 | $ 8.52 |
Total Return | |||||
Based on net asset value (%)c | 10.85 | 18.48 | 28.12 | 4.17 | 10.21 |
Based on market value (%)c | 21.12 | 15.52 | 28.44 | (4.18) | 19.80 |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 200 | 195 | 179 | 153 | 163 |
Ratio of expenses (%) | 2.14 | 1.60 | 1.52 | 1.66 | 2.08 |
Ratio of expenses excluding interest expense (%) | 1.11 | 1.05 | 1.03 | 1.09 | 1.04 |
Ratio of net investment income (%) | 8.12 | 8.59 | 8.93 | 10.45 | 10.80 |
Portfolio turnover rate (%) | 143 | 187 | 224 | 117 | 31 |
Total debt outstanding end of period ($ thousands) | 60,000 | 60,000 | 50,500 | 38,000 | 30,000 |
Asset coverage per $1,000 of debtd | 4,331 | 4,244 | 4,548 | 5,029 | 6,427 |
a 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. b Based on average shares outstanding during the period. c Total return based on net asset value reflects changes in the Fund's net asset value during each period. Total return based on market value reflects changes in market value. Each figure assumes that dividend and capital gain distributions, if any, were reinvested. These figures will differ depending upon the level of any discount from or premium to NAV at which the Fund's shares trade during the period. d Asset coverage equals the total net assets plus borrowings of the Fund divided by the borrowings outstanding at period end. | |||||
|
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 a broker-dealer. 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 or official closing price reported on the exchange (US or foreign) or over-the-counter market on which the security is 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.
Securities Lending. The Fund may lend securities to financial institutions. The Fund retains beneficial ownership of the securities it has loaned and continues to receive interest and dividends paid by the securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of liquid, unencumbered assets having a value at least equal to the value of the securities loaned. The Fund may invest the cash collateral into a joint trading account in an affiliated money market fund pursuant to an Exemptive Order issued by the SEC. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of fees paid to lending agent. Either the Fund or the borrower may terminate the loan. The Fund is subject to all investment risks associated with the value of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.
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.
When Issued/Delayed Delivery Securities. The Fund may purchase securities with delivery or payment to occur at a later date beyond the normal settlement period. At the time the Fund enters into a commitment to purchase a security, the transaction is recorded and the value of the security is reflected in the net asset value. The price of such security and the date when the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. No interest accrues to the Fund until payment takes place. At the time the Fund enters into this type of transaction it is required to segregate cash or other liquid assets at least equal to the amount of the commitment.
Certain risks may arise upon entering into when-issued or delayed delivery securities from the potential inability of counterparties to meet the terms of their contracts or if the issuer does not issue the securities due to political, economic, or other factors. Additionally, losses may arise due to changes in the value of the underlying securities.
Loan Participations/Assignments. The Fund may invest in US dollar-denominated fixed and floating rate loans ("Loans") arranged through private negotiations between a foreign sovereign entity and one or more financial institutions ("Lenders"). The Fund invests in such Loans in the form of participations in Loans ("Participations") or assignments of all or a portion of loans from third parties ("Assignments"). Participations typically result in the Fund having a contractual relationship only with the Lender, not with the sovereign borrower. The Fund has the right to receive payments of principal, interest and any fees to which it is entitled from the Lender selling the Participation and only upon receipt by the Lender of the payments from the borrower. In connection with purchasing Participations, the Fund generally has no right to enforce compliance by the borrower with the terms of the loan agreement relating to the Loan, nor any rights of set-off against the borrower, and the Fund will not benefit directly from any collateral supporting the Loan in which it has purchased the Participation. As a result, the Fund assumes the credit risk of both the borrower and the Lender that is selling the Participation.
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, 2005, the Fund had a net tax basis capital loss carryforward of approximately $16,736,000, which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until November 30, 2009 ($495,000) and November 30, 2010 ($16,241,000), the respective expiration dates, whichever occurs first. In addition, from November 1, 2005 through November 30, 2005, the Fund incurred approximately $230,000 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 ended November 30, 2006.
During the year ended November 30, 2005, the Fund utilized approximately $11,337,000 of prior year capital loss carryforward.
Distribution of Income and Gains. Net investment income of the Fund, if any, 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, 2005, the Fund's components of distributable earnings (accumulated losses) on a tax-basis were as follows:
Undistributed ordinary income* | $ 4,542,700 |
Capital loss carryforwards | $ 16,736,000 |
Net unrealized appreciation (depreciation) on investments | $ (2,158,918) |
In addition, the tax character of distributions paid to shareholders by the Fund is summarized as follows:
| Years Ended November 30, | |
| 2005 | 2004 |
Distributions from ordinary income* | $ 15,952,733 | $ 15,222,025 |
* Included in the Fund's distributions from ordinary income for the year ended November 30, 2004, is $1,174,026 in excess of investment company taxable income, which in accordance with applicable US tax law, is taxable to shareholders as ordinary income distributions. For tax purposes short-term capital gains distributions are considered ordinary income distributions.
Statement of Cash Flows. Information on 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 the Fund's custodian bank at November 30, 2005. Significant non-cash activity from market discount accretion and premium amortization has been excluded from the Statement of Cash Flows.
Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment security transactions are reported on trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. Certain dividends from foreign securities may be recorded subsequent to the ex-dividend date as soon as the Fund is informed of such dividends. 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 in default of principal.
B. Purchases and Sales of Securities
During the year ended November 30, 2005, purchases and sales of investment securities (excluding short-term investments and US Treasury obligations) aggregated $288,089,806 and $295,545,004, respectively. Purchases and sales of US Treasury obligations aggregated $56,674,922 and $49,319,913, respectively.
C. Related Parties
Management Agreement. Under the Management Agreement with Deutsche Investment Management Americas Inc. ("DeIM" or the "Advisor"), an indirect, wholly owned subsidiary of Deutsche Bank AG, 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 the Fund's average weekly net assets. Prior to September 30, 2005, Deutsche Asset Management Investment Services Limited ("DeAMIS"), and affiliate of the Advisor, served as sub-advisor to the Fund with respect to a portion of the Fund's portfolio that was allocated to it by the Advisor for management. The Advisor compensated DeAMIS out of the management fee it received from the fund. (Please see Note L for details).
Service Provider Fees. Scudder Investments Service Company (``SISC''), an affiliate of the Advisor, is the transfer agent, dividend-paying and shareholder service agent for the Fund. 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. For the year ended November 30, 2005, the amount charged to the Fund by SISC aggregated $30,032, of which $3,968 is unpaid at November 30, 2005.
Typesetting and Filing Service Fees. Under an agreement with the Advisor, DeIM is compensated for providing typesetting and regulatory filing services to the Fund. For the year ended November 30, 2005, the amount charged to the Fund by DeIM included in the reports to shareholders aggregated $11,520, of which $5,760 is unpaid at November 30, 2005.
Trustees' Fees and Expenses. The Fund paid 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. Investing in High Yield Securities
Investing in high yield securities may involve greater risks and considerations not typically associated with investing in US Government bonds and other high quality fixed-income securities. These securities are non-investment grade securities, often referred to as "junk bonds." Economic downturns may disrupt the high yield market and impair the ability of issuers to repay principal and interest. Also, an increase in interest rates would likely have an adverse impact on the value of such obligations. Moreover, high yield securities may be less liquid to the extent that there is no established retail secondary market and because of a decline in the value of such securities.
E. 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, social and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls and delayed settlements and may have prices more volatile than those of comparable securities in the United States of America.
F. Expense Reductions
For the year ended November 30, 2005, the Advisor agreed to reimburse the Fund $3,465, which represents a portion of the fee savings expected to be realized by the Advisor related to the outsourcing by the Advisor of certain administrative services to an unaffiliated service provider.
In addition, the Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund's custodian expenses. During the year ended November 30, 2005, the Fund's custodian fees were reduced by $3,181 for custody credits earned.
G. Forward Foreign Currency Exchange Contracts
As of November 30, 2005, the Fund had the following open forward foreign currency exchange contracts:
Contracts to Deliver |
| In Exchange For |
| Settlement Date |
| Unrealized Appreciation (US$) | ||
EUR | 415,000 |
| USD | 501,974 |
| 12/7/2005 |
| $ 12,497 |
EUR | 16,768 |
| USD | 20,341 |
| 1/12/2006 |
| 525 |
EUR | 43,875 |
| USD | 52,697 |
| 1/12/2006 |
| 849 |
EUR | 74,658 |
| USD | 88,827 |
| 2/15/2006 |
| 447 |
USD | 67,783 |
| MXN | 733,299 |
| 2/10/2006 |
| 1,061 |
USD | 62,512 |
| MXN | 665,968 |
| 2/10/2006 |
| 12 |
PLN | 1,077,450 |
| USD | 331,786 |
| 12/2/2005 |
| 7,029 |
Total unrealized appreciation |
| $ 22,420 | ||||||
Contracts to Deliver |
| In Exchange For |
| Settlement Date |
| Unrealized Depreciation (US$) | ||
EUR | 159,062 |
| USD | 188,207 |
| 2/15/2006 |
| $ (88) |
EUR | 874,122 |
| USD | 1,029,778 |
| 2/15/2006 |
| (4,999) |
EUR | 52,610 |
| USD | 62,146 |
| 2/15/2006 |
| (134) |
EUR | 159,063 |
| USD | 188,208 |
| 2/15/2006 |
| (89) |
MXN | 5,896,000 |
| USD | 537,446 |
| 12/9/2005 |
| (20,344) |
MXN | 2,936,711 |
| USD | 271,037 |
| 2/10/2006 |
| (4,672) |
Total unrealized depreciation |
| $ (30,326) | ||||||
Currency Abbreviations |
| ||
EUR | Euro | PLN | Polish Zloty |
MXN | Mexican Peso | USD | United States Dollar |
H. Borrowings
The notes payable represents a secured loan of $60,000,000 from Barton Capital LLC at November 30, 2005. The note bears interest at the commercial paper rate plus dealer fees (4.05% at November 30, 2005) 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 June 27, 2005. Effective June 24, 2005, the size of the revolving credit agreement was increased to an amount not to exceed $75,000,000 and which is renewable annually until June 24, 2010.
The weighted average outstanding daily balance of all loans (based on the number of days the loans were outstanding) during the year ended November 30, 2005 was $60,000,000 with a weighted average interest rate of 3.08%.
I. Regulatory Matters and Litigation
Since at least July 2003, federal, state and industry regulators have been conducting ongoing inquiries and investigations ("inquiries") into the mutual fund industry, and have requested information from numerous mutual fund companies, including Scudder Investments. The funds' advisors have been cooperating in connection with these inquiries and are in discussions with these regulators concerning proposed settlements. Publicity about mutual fund practices arising from these industry-wide inquiries serves as the general basis of a number of private lawsuits against the Scudder funds. These lawsuits, which previously have been reported in the press, involve purported class action and derivative lawsuits, making various allegations and naming as defendants various persons, including certain Scudder funds, the funds' investment advisors and their affiliates, and certain individuals, including in some cases fund Trustees/Directors, officers, and other parties. Each Scudder fund's investment advisor has agreed to indemnify the applicable Scudder funds in connection with these lawsuits, or other lawsuits or regulatory actions that may be filed making allegations similar to these lawsuits regarding market timing, revenue sharing, fund valuation or other subjects arising from or related to the pending inquiries. It is not possible to determine with certainty what the outcome of these inquiries will be or what the effect, if any, would be on the funds or their advisors. Based on currently available information, however, the funds' investment advisors believe the likelihood that the pending lawsuits and any regulatory settlements will have a material adverse financial impact on a Scudder fund is remote and such actions are not likely to materially affect their ability to perform under their investment management agreements with the Scudder funds.
In connection with litigation or regulatory action related to possible improper market timing or other improper trading activity or possible improper marketing and sales activity in the Fund, the Fund's investment advisor has agreed, subject to applicable law and regulation, to indemnify and hold harmless the applicable Funds against any and all loss, damage, liability and expense, arising from market timing or marketing and sales matters alleged in any enforcement actions brought by governmental authorities involving or potentially affecting the Fund or the investment advisor ("Enforcement Actions") or that are the basis for private actions brought by shareholders of the Fund against the Fund, their directors and officers, the Fund's investment advisor and/or certain other parties ("Private Litigation"), or any proceedings or actions that may be threatened or commenced in the future by any person (including governmental authorities), arising from or similar to the matters alleged in the Enforcement Actions or Private Litigation. In recognition of its undertaking to indemnify the applicable Funds and in light of the rebuttable presumption generally afforded to independent directors/trustees of investment companies that they have not engaged in disabling conduct, the Fund's investment advisor has also agreed, subject to applicable law and regulation, to indemnify the applicable Funds' Independent Trustees against certain liabilities the Independent Trustees may incur from the matters alleged in any Enforcement Actions or Private Litigation or arising from or similar to the matters alleged in the Enforcement Actions or Private Litigation, and advance expenses that may be incurred by the Independent Trustees in connection with any Enforcement Actions or Private Litigation. The applicable investment advisor is not, however, required to provide indemnification and advancement of expenses: (1) with respect to any proceeding or action with respect to which the applicable Fund's Board determines that the Independent Trustee ultimately would not be entitled to indemnification or (2) for any liability of the Independent Trustee to the Fund or their shareholders to which the Independent Trustee would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the Independent Trustee's duties as a director or trustee of the Fund as determined in a final adjudication in such action or proceeding. The estimated amount of any expenses that may be advanced to the Independent Trustees or indemnity that may be payable under the indemnity agreements is currently unknown. These agreements by the Fund's investment advisor will survive the termination of the investment management agreements between the applicable investment advisor and the Fund.
J. Payments made by Affiliates
During the year ended November, 2005, the Advisor fully reimbursed the Fund $8,426 for losses incurred on a trade executed incorrectly.
K. Subsequent Event
Effective February 6, 2006, Scudder Investments will change its name to DWS Scudder and the Scudder funds will be renamed DWS funds. Scudder Multi-Market Income Trust will be renamed DWS Multi-Market Income Trust. The DWS Scudder name represents the alignment of Scudder with all of Deutsche Bank's mutual fund operations around the globe. The Web site for all Scudder funds will change to www.dws-scudder.com.
L. Other
On July 7, 2005, Deutsche Bank AG, the parent company of the Fund's investment advisor, entered into an agreement with Aberdeen Asset Management PLC ("Aberdeen") to sell parts of its asset management business based in London and Philadelphia.
The Fund's current investment advisor is Deutsche Investment Management Americas Inc. The Fund's subadvisor, Deutsche Asset Management Investment Services Limited ("DeAMIS"), was sold to Aberdeen. The Fund's Board allowed the subadvisory agreement with DeAMIS, due for renewal on September 30, 2005 to expire and only the advisory agreement with DeIM was approved for continuation. Aberdeen plays no role in managing the Fund.
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To the Board of Trustees and Shareholders of
Scudder Multi-Market Income Trust:
We have audited the accompanying statement of assets and liabilities of Scudder Multi-Market Income Trust (the "Fund"), including the portfolio of investments, as of November 30, 2005, and the related statements of operations and cash flows 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 the standards of the Public Company Accounting Oversight Board (United States). 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. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of November 30, 2005, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. 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 Scudder Multi-Market Income Trust at November 30, 2005, the results of its operations and its cash flows 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 U.S. generally accepted accounting principles.
Boston, Massachusetts |  |
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For corporate shareholders, 1% of the income dividends paid during the Fund's fiscal year ended November 30, 2005, qualified for the dividend received deduction.
For federal income tax purposes, the fund designates $116,000, or the maximum amount allowable under tax law, as qualified dividend income.
Please consult a tax advisor if you have questions about federal or state income tax laws, or on how to prepare your tax returns. If you have specific questions about your account, please call 1-800-294-4366.
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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 H 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.
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The Board of Trustees, including the Independent Trustees, approved the renewal of your Fund's investment management agreement (the "Agreement") with Deutsche Investment Management Americas Inc. ("DeIM" or the "Advisor") in September 2005. As part of its review process, the Board requested and evaluated all information it deemed reasonably necessary to evaluate the Agreement. Over the course of several months, the Contract Review Committee, in coordination with the Fixed-Income Oversight Committee and the Operations Committee of the Board, reviewed comprehensive materials received from the Advisor, independent third parties and independent counsel. The Board also received extensive information throughout the year regarding performance and operating results of the Fund. After their review of the information received, the Committees presented their findings and recommendations to the Independent Trustees as a group. The Independent Trustees then reviewed the Committees' findings and recommendations and presented their recommendations to the full Board.
In connection with the contract review process, the various Committees and the Board considered the factors discussed below, among others. The Board also considered that the Advisor and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders invested in the Fund, or approved the investment management agreement for the Fund, knowing that the Advisor managed the Fund and knowing the investment management fee schedule. In connection with recent and ongoing efforts by Deutsche Bank to restructure its U.S. mutual fund business, which resulted in turnover of senior management and other personnel of the Advisor, the Board considered Deutsche Bank's commitment that it will devote to the Advisor and its affiliates all attention and resources that are necessary to provide the Fund with top-quality investment management and shareholder, administrative and product distribution services.
Nature, Quality and Extent of Services. The Board considered the nature, extent and quality of services provided under the Agreement, including portfolio management services and administrative services. The Board considered the experience and skills of senior management and investment personnel, the resources made available to such personnel, the ability of the Advisor to attract and retain high-quality personnel, and the organizational depth and stability of the Advisor. The Board reviewed the Fund's performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market indices and peer groups. The Board considered whether investment results were consistent with the Fund's investment objective and policies. The Board also noted that it has put a process into place of identifying "Focus Funds" (e.g., funds performing poorly relative to their peer group), and receives more frequent reporting and information from the Advisor regarding such funds, along with the Advisor's remedial plans to address underperformance. The Board believes this process is an effective manner of addressing poorly performing funds at this time.
The Board noted that, in the past, the Advisor delegated a portion of the Fund's assets, to be invested in foreign securities, for management by Deutsche Asset Management Investment Services Limited ("DeAMIS"), an affiliate of the Advisor, pursuant to a sub-advisory agreement. In light of Deutsche Bank's agreement to sell DeAMIS, the Advisor did not recommend that the Board renew the sub-advisory agreement with DeAMIS, but, rather, it proposed that the assets previously managed by DeAMIS be managed by the Advisor utilizing the Advisor's existing resources. The Board received information related to the resources and capabilities of the Advisor in managing foreign securities.
On the basis of this evaluation and the ongoing review of investment results by the Fixed-Income Oversight Committee, the Board concluded that the nature, quality and extent of services provided by the Advisor historically have been and continue to be satisfactory, and that the Fund's performance over time was satisfactory. The Board also concluded that the Advisor has the resources and capabilities to manage the foreign securities portion of the Fund previously managed by DeAMIS.
Fees and Expenses. The Board considered the Fund's management fee rate, operating expenses and total expense ratio, and compared management fees to a peer group and total expenses to a broader peer universe based on information and data supplied by Lipper Inc. ("Lipper"). For purposes of this comparison, the Board relied on historical data compiled by Lipper for the peer funds and the Advisor's estimate of current expenses for the Fund. The information provided to the Board showed that the Fund's management fee rate was above the median of the peer group but below the fourth quartile, and that the Fund's total expense ratio was above the median of the peer universe but below the fourth quartile. The Board also considered the Fund's management fee rate as compared to fees charged by the Advisor and certain of its affiliates for comparable funds and considered differences in fund and fee structures among the various Scudder Funds.
On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by the Advisor. The Board noted that although the Fund's management fee rate was above the median for its peer group and total expense ratio was above the median of the peer universe, such ratios were within an acceptable range of the peer group and peer universe, respectively, and consistent with reasonable expectations in light of the nature, quality and extent of services provided by the Advisor.
Profitability. The Board reviewed detailed information regarding revenues received by the Advisor under the Agreement. The Board considered the estimated costs and pre-tax profits realized by the Advisor from advising the Scudder Funds, as well as estimates of the pre-tax profits attributable to managing the Fund in particular. The Board also received information regarding the estimated enterprise-wide profitability of the Scudder organization with respect to all fund services in totality and by fund. The Board reviewed DeIM's methodology in allocating its costs to the management of the Fund. Although the Board noted the inherently subjective nature of any allocation methodology, the Board received an attestation report from an accounting firm affirming that the allocation methods were consistently applied and were based upon practices commonly used in the investment management industry. Based on the information provided, the Board concluded that the pre-tax profits realized by DeIM in connection with the management of the Fund were not unreasonable.
Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. The Board considered whether the management fee rate under the Agreement is reasonable in relation to the asset size of the Fund. The Board concluded that the management fee schedule reflects an appropriate level of sharing of any economies of scale.
Other Benefits to DeIM and Its Affiliates. The Board also considered the character and amount of other incidental benefits received by DeIM and its affiliates, including fees received by the Advisor for administrative services provided to the Fund. The Board also considered benefits to DeIM related to brokerage and soft-dollar allocations, which pertain primarily to funds investing in equity securities. The Board considered that, during the past year, the Advisor agreed to cease allocating brokerage to acquire research services from third-party service providers. The Board concluded that management fees were reasonable in light of these fallout benefits.
Regulatory Matters. The Board also considered information regarding ongoing inquiries of the Advisor regarding market timing, late trading and other matters by federal and state regulators and private lawsuits on related topics. Among other matters, the Board considered the Advisor's commitment to indemnify the Scudder Funds against regulatory actions or lawsuits arising from such inquiries. The Board also considered management's representation that such actions will not materially impact the Advisor's ability to perform under the Agreement or materially impact the Fund.
Based on all of the information considered and the conclusions reached, the Board (including a majority of the Independent Trustees) determined that the terms of the Agreement continue to be fair and reasonable and that the continuation of the Agreement is in the best interests of the Fund. No single factor was determinative in the Board's analysis.
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The following table presents certain information regarding the Trustees and Officers of the fund as of November 30, 2005. Each individual's year of birth is set forth in parentheses after his or her name. Unless otherwise noted, (i) each individual has engaged in the principal occupation(s) noted in the table for at least the most recent five years, although not necessarily in the same capacity, and (ii) the address of each individual is c/o Deutsche Asset Management, 222 South Riverside Plaza, Chicago, Illinois 60606. Each Trustee's term of office extends until the next shareholders' meeting called for the purpose of electing Trustees and until the election and qualification of a successor, or until such Trustee sooner dies, retires, resigns or is removed as provided in the governing documents of the fund.
Independent Trustees | ||
Name, Year of Birth, Position(s) Held with the Fund and Length of Time Served1 | Principal Occupation(s) During Past 5 Years and | Number of Funds in Fund Complex Overseen |
Shirley D. Peterson (1941) Chairperson, 2004-present Trustee, 1995-present | Retired; formerly, President, Hood College (1995-2000); prior thereto, Partner, Steptoe & Johnson (law firm); Commissioner, Internal Revenue Service; Assistant Attorney General (Tax), US Department of Justice. Directorships: Federal Mogul Corp. (supplier of automotive components and subsystems); AK Steel (steel production); Goodyear Tire & Rubber Co. (April 2004-present) ; Champion Enterprises, Inc. (manufactured home building); Wolverine World Wide, Inc. (designer, manufacturer and marketer of footwear) (April 2005-present); Trustee, Bryn Mawr College. Former Directorship: Bethlehem Steel Corp. | 71 |
John W. Ballantine (1946) Trustee, 1999-present | Retired; formerly, Executive Vice President and Chief Risk Management Officer, First Chicago NBD Corporation/The First National Bank of Chicago (1996-1998); Executive Vice President and Head of International Banking (1995-1996). Directorships: First Oak Brook Bancshares, Inc.; Oak Brook Bank; American Healthways, Inc. (provider of disease and care management services); Portland General Electric (utility company) | 71 |
Donald L. Dunaway (1937) Trustee, 1980-present | Retired; formerly, Executive Vice President, A.O. Smith Corporation (diversified manufacturer) (1963-1994) | 71 |
James R. Edgar (1946) Trustee, 1999-present | Distinguished Fellow, University of Illinois, Institute of Government and Public Affairs (1999-present); formerly, Governor, State of Illinois (1991-1999). Directorships: Kemper Insurance Companies; John B. Sanfilippo & Son, Inc. (processor/packager/marketer of nuts, snacks and candy products); Horizon Group Properties, Inc.; Youbet.com (online wagering platform); Alberto-Culver Company (manufactures, distributes and markets health and beauty care products) | 71 |
Paul K. Freeman (1950) Trustee, 2002-present | President, Cook Street Holdings (consulting); Senior Visiting Research Scholar, Graduate School of International Studies, University of Denver; Consultant, World Bank/Inter-American Development Bank; formerly, Project Leader, International Institute for Applied Systems Analysis (1998-2001); Chief Executive Officer, The Eric Group, Inc. (environmental insurance) (1986-1998) | 71 |
Robert B. Hoffman (1936) Trustee, 1981-present | Retired; formerly, Chairman, Harnischfeger Industries, Inc. (machinery for the mining and paper industries) (1999-2000); prior thereto, Vice Chairman and Chief Financial Officer, Monsanto Company (agricultural, pharmaceutical and nutritional/food products) (1994-1999). Directorships: RCP Advisors, LLC (a private equity investment advisory firm) | 71 |
William McClayton (1944) Trustee, 2004-present | Managing Director of Finance and Administration, DiamondCluster International, Inc. (global management consulting firm) (2001-present); formerly, Partner, Arthur Andersen LLP (1986-2001). Formerly: Trustee, Ravinia Festival; Board of Managers, YMCA of Metropolitan Chicago | 71 |
Robert H. Wadsworth (1940) Trustee, 2004-present | President, Robert H. Wadsworth Associates, Inc. (consulting firm) (1983-present). Director, The European Equity Fund, Inc. (since 1986), The New Germany Fund, Inc. (since 1992), The Central Europe and Russia Fund, Inc. (since 1990). Formerly, Trustee of New York Board Scudder Funds; President and Trustee, Trust for Investment Managers (registered investment company) (1999-2002). President, Investment Company Administration, L.L.C. (1992*-2001); President, Treasurer and Director, First Fund Distributors, Inc. (June 1990-January 2002); Vice President, Professionally Managed Portfolios (May 1991-January 2002) and Advisors Series Trust (October 1996-January 2002) (registered investment companies) * Inception date of the corporation which was the predecessor to the L.L.C. | 74 |
Interested Trustee and Officers2 | ||
Name, Year of Birth, Position(s) Held with the Fund and Length of Time Served1 | Principal Occupation(s) During Past 5 Years and | Number of Funds in Fund Complex Overseen |
William N. Shiebler4 (1942) Trustee, 2004-present | Vice Chairman, Deutsche Asset Management ("DeAM") and a member of the DeAM Global Executive Committee (since 2002); Vice Chairman of Putnam Investments, Inc. (1999); Director and Senior Managing Director of Putnam Investments, Inc. and President, Chief Executive Officer, and Director of Putnam Mutual Funds Inc. (1990-1999) | 120 |
Vincent J. Esposito4 (1956) President, 2005-present | Managing Director3, Deutsche Asset Management (since 2003); President and Chief Executive Officer of The Central Europe and Russia Fund, Inc., The European Equity Fund, Inc., The New Germany Fund, Inc. (since 2003) (registered investment companies); Vice Chairman and Director of The Brazil Fund, Inc. (2004-present); formerly, Managing Director, Putnam Investments (1991-2002) | n/a |
Philip J. Collora (1945) Vice President and Assistant Secretary, 1986-present | Director3, Deutsche Asset Management | n/a |
Paul H. Schubert4 (1963) Chief Financial Officer, 2004-present Treasurer, 2005-present | Managing Director3, Deutsche Asset Management (since July 2004); formerly, Executive Director, Head of Mutual Fund Services and Treasurer for UBS Family of Funds (1998-2004); Vice President and Director of Mutual Fund Finance at UBS Global Asset Management (1994-1998) | n/a |
John Millette5 (1962) Secretary, 2001-present | Director3, Deutsche Asset Management | n/a |
Patricia DeFilippis4 (1963) Assistant Secretary, 2005-present | Vice President, Deutsche Asset Management (since June 2005); Counsel, New York Life Investment Management LLC (2003-2005); legal associate, Lord, Abbett & Co. LLC (1998-2003) | n/a |
Daniel O. Hirsch6 (1954) Assistant Secretary, 2002-present | Consultant. Formerly, Managing Director, Deutsche Asset Management (2002-2005); Director, Deutsche Asset Management (1999-2002), Principal, BT Alex. Brown Incorporated (now Deutsche Bank Securities Inc.) (1998-1999); Assistant General Counsel, United States Securities and Exchange Commission (1993-1998); Director, Deutsche Global Funds Ltd. (2002-2004) | n/a |
Elisa D. Metzger4 (1962) Assistant Secretary 2005-present | Director3, Deutsche Asset Management (since September 2005); Counsel, Morrison and Foerster LLP (1999-2005) | n/a |
Caroline Pearson5 (1962) Assistant Secretary, 1998-present | Managing Director3, Deutsche Asset Management | n/a |
Scott M. McHugh5 (1971) Assistant Treasurer, 2005-present | Director3, Deutsche Asset Management | n/a |
Kathleen Sullivan D'Eramo5 (1957) Assistant Treasurer, 2003-present | Director3, Deutsche Asset Management | n/a |
John Robbins4 (1966) Anti-Money Laundering Compliance Officer, 2005-present | Managing Director3, Deutsche Asset Management (since 2005); formerly, Chief Compliance Officer and Anti-Money Laundering Compliance Officer for GE Asset Management (1999-2005) | n/a |
Philip Gallo4 (1962) Chief Compliance Officer, 2004-present | Managing Director3, Deutsche Asset Management (2003-present); formerly, Co-Head of Goldman Sachs Asset Management Legal (1994-2003) | n/a |
1 Length of time served represents the date that each Trustee was first elected to the common board of Trustees which oversees a number of investment companies, including the fund, managed by the Advisor. For the Officers of the fund, the length of time served represents the date that each officer was first elected to serve as an officer of any fund overseen by the aforementioned common board of Trustees.
2 As a result of their respective positions held with the Advisor, these individuals are considered "interested persons" of the Advisor within the meaning of the 1940 Act. Interested persons receive no compensation from the fund.
3 Executive title, not a board directorship
4 Address: 345 Park Avenue, New York, New York 10154
5 Address: Two International Place, Boston, Massachusetts 02110
6 Address: One South Street, Baltimore, Maryland 21202. Effective December 31, 2005, Mr. Hirsch resigned as an officer of the Fund.
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Changes in Trustees and Officers
On July 19, 2005, the Board of Trustees appointed Paul H. Schubert as Treasurer of the fund.
On September 23, 2005, the Board of Trustees appointed Patricia DeFilippis as Assistant Secretary of the fund, John Robbins as the Anti-Money Laundering Compliance Officer of the fund and Vincent J. Esposito as President of the fund.
On November 16, 2005, the Board of Trustees appointed Elisa Metzger as Assistant Secretary of the fund.
Certifications
The fund's chief executive officer has certified to the New York Stock Exchange that, as of September 1, 2005, he was not aware of any violation by the fund of applicable NYSE corporate governance listing standards. The fund's reports to the Securities and Exchange Commission on Forms N-CSR and N-Q contain certifications by the fund's chief executive officer and chief financial officer that relate to the fund's disclosure in such reports and that are required by the rule 30a-2(a) under the Investment Company Act.
Changes Effective February 6, 2006
Scudder Investments will change its name to DWS Scudder and the Scudder funds will be renamed the DWS funds.
Scudder Multi-Market Income Trust will change its name to DWS Multi-Market Income Trust and the cusip number for the fund will change to 23338L108.
The Shareholder Service Agent will change its name to DWS Scudder Investments Service Company.
The web site address will change from www.scudder.com and www.cef.scudder.com to www.dws-scudder.com.
Additional Information (continued) |
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Automated Information Lines | Scudder Closed-End Fund Info Line (800) 349-4281 |
Web Sites | www.scudder.com or visit our Direct Link: www.cef.scudder.com Obtain monthly fact sheets, financial reports, press releases and webcasts when available. |
Written Correspondence | Deutsche Investment Management Americas Inc. 222 South Riverside Chicago, IL 60606 |
Proxy Voting | A description of the fund's policies and procedures for voting proxies for portfolio securities and information about how the fund voted proxies related to its portfolio securities during the 12-month period ended June 30 is available on our Web site — scudder.com (type "proxy voting" in the search field) — or on the SEC's Web site — www.sec.gov. To obtain a written copy of the fund's policies and procedures without charge, upon request, call us toll free at (800) 621-1048. |
Legal Counsel | Vedder, Price, Kaufman & Kammholz, P.C. 222 North LaSalle Street Chicago, IL 60601 |
Dividend Reinvestment Plan Agent | UMB Bank P.O. Box 410064 Kansas City, MO 64141-0064 |
Shareholder Service Agent | Scudder Investments Service Company P.O. Box 219066 Kansas City, MO 64121-9066 (800) 294-4366 |
Custodian and Transfer Agent | State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110 |
Independent Registered Public Accounting Firm | Ernst & Young LLP 200 Clarendon Street Boston, MA 02116 |
NYSE Symbol | KMM |
CUSIP Number | 81118Q101 |
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ITEM 2. CODE OF ETHICS.
As of the end of the period, November 30, 2005, Scudder Multi-Market Income
Trust has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that
applies to its Principal Executive Officer and Principal Financial Officer.
There have been no amendments to, or waivers from, a provision of the code of
ethics during the period covered by this report that would require disclosure
under Item 2.
A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Fund's Board of Directors/Trustees has determined that the Fund has at least
one "audit committee financial expert" serving on its audit committee: Mr.
Donald L. Dunaway. This audit committee member is "independent," meaning that he
is not an "interested person" of the Fund (as that term is defined in Section
2(a)(19) of the Investment Company Act of 1940) and he does not accept any
consulting, advisory, or other compensatory fee from the Fund (except in the
capacity as a Board or committee member).
An "audit committee financial expert" is not an "expert" for any purpose,
including for purposes of Section 11 of the Securities Act of 1933, as a result
of being designated as an "audit committee financial expert." Further, the
designation of a person as an "audit committee financial expert" does not mean
that the person has any greater duties, obligations, or liability than those
imposed on the person without the "audit committee financial expert"
designation. Similarly, the designation of a person as an "audit committee
financial expert" does not affect the duties, obligations, or liability of any
other member of the audit committee or board of directors.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
SCUDDER MULTI MARKET INCOME TRUST
FORM N-CSR DISCLOSURE RE: AUDIT FEES
The following table shows the amount of fees that Ernst & Young, LLP
("E&Y"), the Fund's auditor, billed to the Fund during the Fund's last two
fiscal years. The Audit Committee approved in advance all audit services and
non-audit services that E&Y provided to the Fund.
The Audit Committee has delegated certain pre-approval responsibilities to its
Chairman (or, in his absence, any other member of the Audit Committee).
Services that the Fund's Auditor Billed to the Fund
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Fiscal Audit Audit- All
Year Fees Related Tax Fees Other Fees
Ended Billed Fees Billed Billed Billed
November 30 to Fund to Fund to Fund to Fund
- --------------------------------------------------------------------------------
2005 $45,593 $0 $6,217 $0
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2004 $41,612 $0 $7,343 $0
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The above "Tax Fees" were billed for professional services rendered for tax
compliance and tax return preparation.
Services that the Fund's Auditor Billed to the Adviser and
Affiliated Fund Service Providers
The following table shows the amount of fees billed by E&Y to Deutsche
Investment Management Americas, Inc. ("DeIM" or the "Adviser"), and any entity
controlling, controlled by or under common control with DeIM ("Control
Affiliate") that provides ongoing services to the Fund ("Affiliated Fund Service
Provider"), for engagements directly related to the Fund's operations and
financial reporting, during the Fund's last two fiscal years.
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Tax Fees
Audit-Related Billed to All Other
Fees Billed Adviser and Fees Billed
Fiscal to Adviser Affiliated to Adviser
Year and Affiliated Fund and Affiliated
Ended Fund Service Service Fund Service
November 30 Providers Providers Providers
- --------------------------------------------------------------------------------
2005 $406,000 $70,570 $0
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2004 $281,500 $0 $0
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The "Audit-Related Fees" were billed for services in connection with the
assessment of internal controls, agreed upon procedures and additional related
procedures and the above "Tax Fees" were billed in connection with consultation
services and agreed upon procedures.
1
Non-Audit Services
The following table shows the amount of fees that E&Y billed during the
Fund's last two fiscal years for non-audit services. The Audit Committee
pre-approved all non-audit services that E&Y provided to the Adviser and any
Affiliated Fund Service Provider that related directly to the Fund's operations
and financial reporting. The Audit Committee requested and received information
from E&Y about any non-audit services that E&Y rendered during the
Fund's last fiscal year to the Adviser and any Affiliated Fund Service Provider.
The Committee considered this information in evaluating E&Y's independence.
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Total
Non-Audit
Fees billed to
Adviser and
Affiliated Fund Total
Service Non-Audit
Providers Fees billed
(engagements to Adviser
related and
Total directly to the Affiliated
Non-Audit operations Fund Service
Fees and financial Providers
Fiscal Billed to reporting (all other Total of
Year Fund of the Fund) engagements) (A), (B)
Ended
November 30 (A) (B) (C) and (C)
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2005 $6,217 $70,570 $40,586 $117,373
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2004 $7,343 $0 $386,601 $393,944
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All other engagement fees were billed for services in connection with risk
management and process improvement initiatives for DeIM and other related
entities that provide support for the operations of the fund.
***
E&Y recently advised the Fund's Audit Committee that various E&Y member
firms provided certain non-audit services to Deutsche Bank entities and
affiliates (collectively, the "DB entities") between 2004 and 2005 that raise
issues under the SEC auditor independence rules. The DB entities are within the
"Investment Company Complex" (as defined by SEC rules) and therefore covered by
the SEC auditor independence rules applicable to the Fund.
E&Y advised the Audit Committee that in connection with providing monthly
payroll services to employees of certain DB entities from May 2003 to February
2005, a member firm in Chile ("E&Y Chile") received funds from the DB
entities that went into an E&Y trust account and were used to pay the net
salaries and social security taxes of executives of the DB entities. E&Y has
advised the Audit Committee that handling those funds was in violation of Rule
2-01 of Regulation S-X.
E&Y also advised the Audit Committee that in connection with providing
certain services in assisting a DB entity with various regulatory reporting
requirements, a member firm in France
2
("E&Y France") entered into an engagement with the DB entity that resulted
in E&Y France staff functioning under the direct responsibility and
direction of a DB entity supervisor. E&Y advised the Audit Committee that,
although the services provided were "permitted services" under Rule 2-01 of
Regulation S-X, the structure of the engagement was in violation of Rule 2-01 of
Regulation S-X. (Rule 2-01(c)(4)(vi) provides that an accountant's independence
is impaired if the accountant acts as an employee of an audit client.)
The Audit Committee was informed that E&Y Chile received approximately
$11,724 and E&Y France received approximately $100,000 for the services they
provided to the DB entities. E&Y advised the Audit Committee that it
conducted an internal review of the situation and, in view of the fact that
similar expatriate tax compliance services were provided to a number of E&Y
audit clients unrelated to DB or the Fund, E&Y has advised the SEC and the
PCAOB of the independence issues arising from those services. E&Y advised
the Audit Committee that E&Y believes its independence as independent
registered public accounting firm for the Fund was not impaired during the
period the services were provided. In reaching this conclusion, E&Y noted a
number of factors, including that none of the E&Y personnel who provided the
non-audit services to the DB entities were involved in the provision of audit
services to the Fund, the E&Y professionals responsible for the Fund's
audits were not aware that these non-audit services took place, and that the
fees charged were not significant to E&Y overall or to the fees charged to
the Investment Company Complex. E&Y also noted that E&Y Chile is no
longer providing these services and that the E&Y France engagement has been
restructured.
3
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
The registrant has a separately-designated standing audit committee established
in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934,
as amended. The registrant's audit committee consists of Donald L. Dunaway
(Chairman), Robert B. Hoffman, Lewis A. Burnham, and William McClayton
ITEM 6. SCHEDULE OF INVESTMENTS
Not Applicable
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Proxy Voting Guidelines. The Fund has delegated proxy voting responsibilities to
its investment advisor, subject to the Board's general oversight. The Fund has
delegated proxy voting to the advisor with the direction that proxies should be
voted consistent with the Fund's best economic interests. The advisor has
adopted its own Proxy Voting Policies and Procedures ("Policies"), a Proxy
Voting Desktop Manual ("Manual"), and Proxy Voting Guidelines ("Guidelines") for
this purpose. The Policies address, among other things, conflicts of interest
that may arise between the interests of the Fund, and the interests of the
advisor and its affiliates. The Manual sets forth the procedures that the advisor
has implemented to vote proxies, including monitoring for corporate events,
communicating with the fund's custodian regarding proxies, considering the merits
of each proposal, and executing and recording the proxy vote. The Guidelines set
forth the advisor's general position on various proposals, such as:
o Shareholder Rights -- The advisor generally votes against proposals that
restrict shareholder rights.
o Corporate Governance -- The advisor generally votes for confidential and
cumulative voting and against supermajority voting requirements for charter
and bylaw amendments. The advisor generally votes for proposals to restrict
a chief executive officer from serving on more than three outside board of
directors. The advisor generally votes against proposals that require a
company to appoint a chairman who is an independent director.
o Anti-Takeover Matters -- The advisor generally votes for proposals that
require shareholder ratification of poison pills or that request boards to
redeem poison pills, and votes "against" the adoption of poison pills if
they are submitted for shareholder ratification. The advisor generally
votes for fair price proposals.
o Routine Matters -- The advisor generally votes for the ratification of
auditors, procedural matters related to the annual meeting, and changes in
company name, and against bundled proposals and adjournment.
The general provisions described above do not apply to investment companies. The
advisor generally votes proxies solicited by investment companies in accordance
with the recommendations of an independent third-party, except for proxies
solicited by or with respect to investment companies for which the advisor or an
affiliate serves as investment advisor or principal underwriter ("affiliated
investment companies"). The advisor votes affiliated investment company proxies
in the same proportion as the vote of the investment company's other
shareholders (sometimes called "mirror" or "echo" voting). Master fund proxies
solicited from feeder funds are voted in accordance with applicable requirements
of the Investment Company Act of 1940.
Although the Guidelines set forth the advisor's general voting positions on
various proposals, the advisor may, consistent with the Fund's best interests,
determine under some circumstances to vote contrary to those positions.
The Guidelines on a particular issue may or may not reflect the view of
individual members of the board, or of a majority of the board. In addition, the
Guidelines may reflect a voting position that differs from the actual practices
of the public companies within the Deutsche Bank organization or of the
investment companies for which the advisor or an affiliate serves as investment
advisor or sponsor.
The advisor may consider the views of a portfolio company's management in
deciding how to vote a proxy or in establishing general voting positions for the
Guidelines, but management's views are not determinative.
As mentioned above, the Policies describe the way in which the advisor resolves
conflicts of interest. To resolve conflicts, the advisor, under normal
circumstances, votes proxies in accordance with its Guidelines. If the advisor
departs from the Guidelines with respect to a particular proxy or if the
Guidelines do not specifically address a certain proxy proposal, a committee
established by the advisor will vote the proxy. Before voting any such proxy,
however, the committee will exclude from the voting discussions and
determinations any member who is involved in or aware of a material conflict of
interest. If, after excluding any and all such members, there are fewer than
three voting members remaining, the advisor will engage an independent third
party to vote the proxy or follow the proxy voting recommendations of an
independent third party.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS
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(c)
Total (d)
Number Maximum
of Shares Number of
(a) Purchased Shares that
Total as Part May Yet Be
Number (b) of Publicly Purchased
of Average Announced Under the
Shares Price Paid Plans or Plans or
Period Purchased per Share Programs Programs
- --------------------------------------------------------------------------------
December 1 through December 31 n/a n/a n/a n/a
January 1 through January 31 n/a n/a n/a n/a
February 1 through February 28 n/a n/a n/a n/a
March 1 through March 31 n/a n/a n/a n/a
April 1 through April 30 n/a n/a n/a n/a
May 1 through May 31 n/a n/a n/a n/a
June 1 through June 30 n/a n/a n/a n/a
July 1 through July 31 n/a n/a n/a n/a
August 1 through August 31 n/a n/a n/a n/a
September 1 through September 30 n/a n/a n/a n/a
October 1 through October 31 n/a n/a n/a n/a
November 1 through November 30 n/a n/a n/a n/a
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Total n/a n/a n/a n/a
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ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The primary function of the Nominating and Governance Committee is to identify
and recommend individuals for membership on the Board and oversee the
administration of the Board Governance Procedures and Guidelines. Shareholders
may recommend candidates for Board positions by forwarding their correspondence
by U.S. mail or courier service to the Fund's Secretary for the attention of the
Chairman of the Nominating and Governance Committee, Two International Place,
Boston, MA 02110. Suggestions for candidates must include a resume of the
candidate.
ITEM 11. 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) There have been no changes in the registrant's internal control over
financial reporting that occurred during the registrant's last half-year (the
registrant's second fiscal half-year in the case of the annual report) that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal controls over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached
hereto as EX-99.CODE ETH.
(a)(2) Certification pursuant to Rule 30a-2(a) under the Investment Company
Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as
Exhibit 99.CERT.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company
Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as
Exhibit 99.906CERT.
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/Vincent J. Esposito
----------------------
Vincent J. Esposito
President
Date: January 31, 2006
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/Vincent J. Esposito
----------------------
Vincent J. Esposito
President
Date: January 31, 2006
By: /s/Paul Schubert
----------------------
Paul Schubert
Chief Financial Officer and Treasurer
Date: January 31, 2006