[MFS LOGO](R)
INVESTMENT MANAGEMENT
MFS(R) CHARTER
INCOME TRUST
ANNUAL REPORT o NOVEMBER 30, 2002
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 3
Performance Summary ....................................................... 8
Results of Shareholder Meetings ........................................... 10
Portfolio of Investments .................................................. 11
Financial Statements ..................................................... 20
Notes to Financial Statements ............................................ 24
Independent Auditors' Report .............................................. 32
Trustees and Officers ..................................................... 34
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MFS(R) PRIVACY POLICY
At MFS(R), we are committed to protecting your privacy.
On behalf of the MFS Family of Funds(R), the MFS(R) Institutional Trusts, the
Vertex(SM) Funds, Massachusetts Financial Services Company, and certain
affiliates(1) (collectively, "MFS," "we," "us" or "our"), this privacy policy
outlines certain of our policies designed to maintain the privacy of your
nonpublic personal information.
Nonpublic personal information includes much of the information you provide to
us and the related information about you and your transactions involving your
MFS investment product or service. Examples of nonpublic personal information
include the information you provide on new account applications for MFS
investment products or services, your share balance or transactional history,
and the fact that you are a customer of MFS.
We may collect nonpublic personal information about you from the following
sources:
o information we receive from you on applications or other forms
o information about your transactions with us, our affiliates, or others, and
o information we receive from a consumer reporting agency
We do not disclose any nonpublic personal information about our customers or
former customers to anyone except as permitted by law. We may disclose all of
the information we collect, as described above, to companies that perform
marketing services on our behalf or to other financial institutions with whom
we have joint marketing arrangements.
We restrict access to nonpublic personal information about you to personnel
who are necessary or appropriate to provide products or services to you. We
maintain physical, electronic, and procedural safeguards that comply with
federal regulations to guard your nonpublic personal information.
Our privacy policy applies only to individual MFS investors who have a direct
relationship with us. If you own MFS products or receive MFS investment
services in the name of a third-party broker-dealer, bank, investment adviser
or other financial service provider, that third-party's privacy policies may
apply to you and our privacy policy may not.
If you have any questions with respect to MFS' privacy policy, please call
1-800-225-2606 any business day between 8 a.m. and 8 p.m. Eastern time.
(1) MFS Institutional Advisors, Inc., Vertex Investment Management, Inc., MFS
Original Research Advisors, LLC, MFS Original Research Partners, LLC,
MFS(R) Heritage Trust Company(SM), and MFS Fund Distributors, Inc.
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
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LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
As I write this in mid-December, major U.S. and overseas stock market indices
have shown positive performance for two straight months -- something we
haven't seen in a long time. The Dow Jones Industrial Average has recently
recorded its second-best October ever, in terms of percentage gains(1). We see
these as hopeful signs in what has been a difficult year for investors in
stocks and corporate bonds. In our view, signals on the future direction of
the economy and the market remain decidedly mixed.
A RELAY RACE
In mid-December, we could describe the state of the U.S. economy as a relay
race against time involving two runners: the consumer, whose spending has
fueled the beginning of a recovery, and corporate spending, which has yet to
contribute much to the recovery. The hope is that corporate spending kicks in
so that the consumer can pass the baton before running out of steam. But at
this point, the near-term direction of consumer spending or corporate spending
and profits is difficult to predict. The result is that the economy seems to
us to be in a holding pattern as we wait for clear signs that things are
improving.
REASONS FOR OPTIMISM
Optimists would point out that wages, according to the U.S. Labor Department,
have been rising over the past year. This, in combination with historically
low interest rates and inflation, may enable the consumer to keep spending. In
addition, worker productivity in the third quarter grew at the highest rate
since 1966 -- 5.1% on an annualized basis, according to the Labor Department.
Higher productivity may allow firms to raise wages without raising prices.
Our research indicates that business spending overall has at least stopped
falling and that corporate earnings and spending could trend upward in 2003.
An encouraging sign is that business spending in the third quarter of 2002
eked out its first increase in two years, according to a report from the U.S.
Commerce Department.
Pessimists, however, would counter that the outlook for corporate profits
remains very murky, that corporations could resort to further layoffs if
profits languish, that consumer confidence still appears weak, and that the
situation with Iraq adds to market uncertainty.
STAYING THE COURSE
With the economy in a holding pattern and markets extremely volatile, we think
it's important to remember the familiar investment strategies that we believe
apply in any market: Think long term. Be diversified. See crises as
opportunities. That's how we'd describe our approach to this volatile
environment -- which we think plays to our strength as research-based, bottom-
up, long-term investors.
We understand that the past few years have been discouraging. Short-term
events have sorely tested investors' long-term faith in the market. However,
we would caution investors about reacting to market news -- good or bad -- by
making major changes in their portfolios. We would suggest that in difficult
times it is even more important to have a long-term financial plan and to talk
on a regular basis with your investment professional. We would also point out
that history has shown that the market and the economy have been cyclical;
downturns have usually been followed by upturns.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman
MFS Investment Management(R)
December 16, 2002
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(1) Source: The Wall St. Journal, November 1, 2002. The Dow Jones Industrial
Average (DJIA) is a price-weighted average of 30 blue-chip stocks that are
generally the leaders in their industry. It is not possible to invest
directly in an index.
The opinions expressed in this letter are those of MFS, and no forecasts can
be guaranteed.
MANAGEMENT REVIEW AND OUTLOOK
[Photo of Joseph C. Flaherty, Jr.]
Joseph C. Flaherty, Jr.
Dear Shareholders,
For the 12 months ended November 30, 2002, the trust provided a total return
of 5.99% based on its beginning and ending stock market prices and assuming
the reinvestment of any dividends and capital gains distributions paid during
the period. The trust's total return based on its net asset value (NAV) was
6.10%. During the same period, the trust's benchmarks, the J.P. Morgan Non-
Dollar Government Bond Index, the Lehman Brothers Government Bond Index, and
the Lehman Brothers High Yield Bond Index, returned 11.81%, 7.91%, and -3.16%,
respectively. The J.P. Morgan Non-Dollar Government Bond Index is an unmanaged
aggregate of actively traded government bonds issued by 12 countries,
excluding the United States, with remaining maturities of at least one year.
The Lehman Brothers Government Bond Index is unmanaged and comprises all
publicly issued debt obligations of the U.S. Treasury, U.S. government
agencies, quasi-federal corporations, and corporate debt guaranteed by the
U.S. government. The Lehman Brothers High Yield Bond Index includes all fixed-
income securities having a maximum quality rating from Moody's Investors
Service of "Ba1," a minimum amount outstanding of $150 million, and at least
one year to maturity. Defaulted bonds are excluded from the index.
During the past 12 months, the U.S. Federal Reserve Board (the Fed) made
periodic cuts to short-term interest rates in an effort to stimulate a sagging
economy. By the end of November, short-term rates stood at 1.25%. In 2002,
accounting scandals and fraud in some of this country's largest companies were
front-page news. Stocks plunged across all industries, and corporate bonds
mirrored stock performance. Investment-grade bonds, even those issued by
companies with clean balance sheets, became much less attractive to potential
buyers. In July of 2002, the high-yield market declined severely when the
number of companies that were unable to make timely principal and/or interest
payments rose to new levels. There was a flight to quality as investors sold
their corporate bonds in favor of the safety offered by U.S. government
securities.
International bond markets, especially European holdings denominated in local
currencies, benefited from the strength of those currencies relative to a
weaker U.S. dollar. However, currency-hedged international government bonds
lagged their U.S. counterparts when the U.S. dollar declined in value. (A
currency hedge is used to reduce currency risks associated with ownership of
international securities that are not denominated in U.S. dollars.) Emerging
market bonds experienced a period of volatility during the summer but by the
end of the period delivered returns that were comparable to their developed
counterparts.
TIMELY ADDITION OF HIGH-QUALITY BONDS TO CORPORATE ALLOCATION
Historically, we had concentrated our corporate holdings in high yield bonds.
However, in the fourth quarter of 2001, we decided to add investment-grade
bonds to our corporate bond allocation. While this decision resulted in a
somewhat lower yield, the higher quality bonds made a positive contribution to
performance by holding their value better when market conditions deteriorated
in the summer of 2002.
BRIGHT SPOTS IN QUALITY, INTERNATIONAL, AND BANKING
Generally, the trust's overall focus on quality helped its performance
throughout the past 12 months. For example, we were overweight U.S. Treasury
and government bonds for much of the year, and they generated positive returns
for the trust.
International investments in Germany, the United Kingdom, and "dollar bloc"
countries such as Canada also performed well for the trust. These issues
offered higher yields than U.S. Treasury securities and provided additional
diversification to the high-quality portion of the portfolio. An increase in
currency exposure boosted trust performance in late spring through mid-summer
when the U.S. dollar weakened.
The trust's holdings in emerging market bonds stand at nearly 6% of the
portfolio, down from roughly 10% at the beginning of the period. We have
invested in what we believe is a well-diversified group that includes Mexico
and Russia. Both of those countries have made solid progress in reforming
social, political, and economic policies. As a result, their credit quality
has improved and they are much better able to attract investment capital.
The trust had a relatively large portion of its investment-grade corporate
bond holdings invested in U.S. banks, one of the few groups in the corporate
sector that did well. A hot U.S. housing market translated into increased
mortgage lending that improved business profitability for banks. The bank
bonds we held were well-capitalized and had a strong consumer base and fewer
credit problems than many investors expected.
HIGH-YIELD BOND HOLDINGS REDUCED
Although the trust avoided most of the bonds with significant accounting and
corporate governance problems such as Enron and Tyco, it did not escape from
the general declines experienced in corporate bond markets, especially in the
high-yield market. We reduced our high-yield holdings throughout the year from
approximately 17% at the beginning of the period to roughly 11% by the end as
we moved some of those assets into investment-grade bonds. Our high-yield
holdings detracted from performance when corporate issuers were unable to
fulfill their obligations. Our strategy within the high-yield sector was to
increase the trust's diversification across industries, focus on more liquid
issues where there was a ready market for buyers, and improve the credit
quality of our holdings.
OPPORTUNITIES IN MORTGAGE-BACKED AND INTERNATIONAL BONDS
The trust's mortgage-backed bonds have done well in the past few months, and
we think they will continue to be attractive assets. Recently, we've become
more interested in 15-year mortgage issues for several reasons. First,
mortgage-backed securities have higher yields than comparable U.S. Treasury
bonds. (The principal value and interest on Treasury securities are guaranteed
by the U.S. government if held to maturity.) Second, after the most recent
interest rate cut by the Fed, we think that there may be another spate of
refinancing, but that it would be the last for the near future. Third, if the
U.S. economy does strengthen and the Fed were to raise interest rates, we
believe that the 15-year maturity range may be less volatile in a potentially
rising interest rate market.
We continue to favor overseas bonds as we head into the new year. As of
November 30, yields on international bonds such as those from Germany, United
Kingdom, Denmark, Canada, and New Zealand are higher than the yields on U.S.
Treasury securities. We believe that these non-U.S. bonds offer investors
solid income opportunities as well as appreciation potential, especially if
the ECB makes further interest rate cuts.
POTENTIAL FOR CHANGE IN U.S. CORPORATE BOND MARKETS
Going forward, we expect to see U.S. companies continue to clean up and
strengthen their balance sheets to improve their credit quality. We would also
anticipate less volatility in the bond markets as investors' faith in the
corporate bond market is restored. That may already be happening. In our view,
the corporate bond investor's aversion to risk, real or perceived, has begun
to shift over the last quarter. Buyers are starting to come back. If business
spending were also to pick up, then long-term investors may be well positioned
to benefit.
Respectfully,
/s/ Joseph C. Flaherty, Jr.
Joseph C. Flaherty, Jr.
Portfolio Manager
Note to shareholders: Effective on November 1, 2002, Joseph C. Flaherty, Jr.
became portfolio manager of the Trust, replacing Stephen C. Bryant.
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. These views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
It is not possible to invest directly in an index.
The portfolio is actively managed, and current holdings may be different.
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PORTFOLIO MANAGER'S PROFILE
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JOSEPH C. FLAHERTY, JR., IS SENIOR VICE PRESIDENT OF MFS INVESTMENT
MANAGEMENT(R) (MFS(R)) AND MANAGER OF THE QUANTITATIVE RESEARCH GROUP.
HE IS PORTFOLIO MANAGER OF THE GLOBAL ASSET ALLOCATION PORTFOLIOS OF OUR
MUTUAL FUNDS, VARIABLE ANNUITIES, AND OFFSHORE INVESTMENT PRODUCTS.
JOE JOINED MFS AS A FIXED-INCOME QUANTITATIVE RESEARCH ASSOCIATE IN 1993
AND WAS NAMED QUANTITATIVE RESEARCH ANALYST AND ASSISTANT VICE PRESIDENT
IN 1996. HE BECAME VICE PRESIDENT AND MANAGER OF THE QUANTITATIVE
RESEARCH GROUP IN 1998 AND PORTFOLIO MANAGER IN 1999. HE EARNED A
BACHELOR OF SCIENCE DEGREE IN MECHANICAL ENGINEERING FROM TUFTS
UNIVERSITY IN 1984 AND AN M.B.A. IN FINANCE FROM BENTLEY COLLEGE IN
1990.
ALL PORTFOLIO MANAGERS AT MFS ARE SUPPORTED BY AN INVESTMENT STAFF OF
OVER 160 PROFESSIONALS UTILIZING MFS ORIGINAL RESEARCH(R), A GLOBAL,
COMPANY-ORIENTED, BOTTOM-UP PROCESS OF SELECTING SECURITIES.
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NUMBER OF SHAREHOLDERS
As of November 30, 2002, our records indicate that there are 5,168 registered
shareholders and approximately 34,914 shareholders owning trust shares in
"street" name, such as through brokers, banks, and other financial
intermediaries. If you are a "street" name shareholder and wish to directly
receive our reports, which contain important information about the trust,
please write or call:
State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
1-800-637-2304
ADDRESS CHANGE
Please use our new mailing address, effective immediately.
State Street Bank and Trust Company
c/o MFS Service Center, Inc.
P.O. Box 55024
Boston, MA 02205-5024
In accordance with Section 23(c) of the Investment Company Act of 1940, the
trust hereby gives notice that it may from time to time repurchase shares of
the trust in the open market at the option of the Board of Trustees and on
such terms as the Trustees shall determine.
OBJECTIVE: Seeks to maximize current income.
NEW YORK STOCK EXCHANGE SYMBOL: MCR
PERFORMANCE SUMMARY
(For the year ended November 30, 2002)
NET ASSET VALUE PER SHARE
November 30, 2001 $9.17
November 30, 2002 $9.09
NEW YORK STOCK EXCHANGE PRICE
November 30, 2001 $8.35
September 4, 2002 (high)* $8.64
October 24, 2002 (low)* $8.00
November 30, 2002 $8.26
* For the period December 1, 2001, through November 30, 2002.
RISK CONSIDERATIONS
Investments in foreign and/or emerging market securities may be unfavorably
affected by interest-rate and currency-exchange-rate changes as well as by
market, economic, and political conditions of the countries where investments
are made. There may be greater returns but also greater risk than with U.S.
investments.
The portfolio may invest in derivative securities which may include futures
and options. These types of instruments can increase price fluctuation.
Because the portfolio focuses its investments on companies in a limited number
of sectors, the portfolio is more susceptible to adverse economic, political
or regulatory developments affecting those sectors than is a portfolio that
invests more broadly.
Investments in lower-rated securities may provide greater returns but may have
greater-than-average risk.
As a nondiversified portfolio, the portfolio invests in a limited number of
companies and may have more risk because a change in one security's value may
have a more significant effect on the portfolio's net asset value. An
investment in the portfolio is not a complete investment program.
Government guarantees apply to the underlying securities only and not to the
prices and yields of the portfolio.
These risks may increase share price volatility. Please see the prospectus for
details.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
MFS offers a Dividend Reinvestment and Cash Purchase Plan that allows you to
reinvest either all of the distributions paid by the trust or only the long-
term capital gains. Purchases are made at the market price unless that price
exceeds the net asset value (the shares are trading at a premium). If the
shares are trading at a premium, purchases will be made at a discounted price
of either the net asset value or 95% of the market price, whichever is
greater. Twice each year you can also buy shares. Investments of $100 or more
can be made in January and July on the 15th of the month or shortly
thereafter.
If your shares are in the name of a brokerage firm, bank, or other nominee,
you can ask the firm or nominee to participate in the plan on your behalf. If
the nominee does not offer the plan, you may wish to request that your shares
be re-registered in your own name so that you can participate.
There is no service charge to reinvest distributions, nor are there brokerage
charges for shares issued directly by the trust. However, when shares are
bought on the New York Stock Exchange or otherwise on the open market, each
participant pays a pro rata share of the commissions. The automatic
reinvestment of distributions does not relieve you of any income tax that may
be payable (or required to be withheld) on the distributions.
To enroll in or withdraw from the plan, or if you have any questions, call
1-800-637-2304 any business day from 8 a.m. to 8 p.m. Eastern time. Please
have available the name of the trust and your account and Social Security
numbers. For certain types of registrations, such as corporate accounts,
instructions must be submitted in writing. Please call for additional details.
When you withdraw, you can receive the value of the reinvested shares in one
of two ways: a check for the value of the full and fractional shares, or a
certificate for the full shares and a check for the fractional shares.
RESULTS OF SHAREHOLDER MEETINGS (Unaudited)
At the annual meeting of shareholders of MFS Charter Income Trust, which was
held on October 1, 2002 the following actions were taken:
ITEM 1. To elect a board of trustees.
NUMBER OF SHARES
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NOMINEE FOR WITHHOLD AUTHORITY
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William R. Gutow 55,074,573.516 1,705,303.145
J. Atwood Ives 55,070,769.729 1,709,106.932
Abby O'Neill 55,044,556.628 1,735,320.033
Jeffrey L. Shames 55,060,704.007 1,719,172.654
ITEM 2. To ratify the selection of Ernst & Young LLP as the independent public
accountants for the current fiscal year.
NUMBER OF SHARES
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For 55,512,185.806
Against 739,236.488
Abstain 528,454.367
PORTFOLIO OF INVESTMENTS -- November 30, 2002
Bonds - 96.3%
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PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
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U.S. Bonds - 64.1%
Advertising & Broadcasting - 0.5%
Paxson Communications Corp. 0s to 2006, 12.25s to 2009 $ 2,305 $ 1,429,100
Spanish Broadcasting Systems, Inc., 9.625s, 2009 1,500 1,552,500
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$ 2,981,600
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Aerospace - 0.3%
Argo Tech Corp., 8.625s, 2007 $ 220 $ 156,200
K & F Industries, Inc., 9.25s, 2007 1,200 1,242,000
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$ 1,398,200
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Airlines
Airplane Pass-Through Trust, 10.875s, 2019 $ 222 $ 4,445
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Apparel & Textiles - 0.1%
Westpoint Stevens, Inc., 7.875s, 2008 $ 1,650 $ 346,500
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Automotive - 0.7%
DaimlerChrysler Corp., 7.45s, 2097 $ 1,321 $ 1,324,358
Ford Motor Credit Co., 7.375s, 2011 2,766 2,647,715
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$ 3,972,073
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Banks & Credit Cos. - 1.8%
Abbey National Capital, 1s, 2049 $ 2,159 $ 2,590,174
Credit Suisse First Boston USA, Inc., 6.5s, 2012 1,907 1,969,931
GS Escrow Corp., 7s, 2003 4,942 5,103,984
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$ 9,664,089
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Broadcast & Cable TV - 2.0%
Cox Communications, Inc., 7.125s, 2012 $ 3,800 $ 3,992,348
CSC Holdings, Inc., 8.125s, 2009 3,450 3,251,625
Mediacom Broadband LLC, 11s, 2013 2,400 2,448,000
Tele Communications, Inc., 9.8s, 2012 1,169 1,330,460
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$ 11,022,433
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Building - 0.8%
American Standard, Inc., 7.375s, 2008 $ 2,390 $ 2,503,525
Nortek, Inc., 8.875s, 2008 1,145 1,145,000
Williams Scotsman, Inc., 9.875s, 2007 1,000 940,000
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$ 4,588,525
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Building Materials - 0.2%
CRH America, Inc., 6.95s, 2012 $ 1,057 $ 1,157,464
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Business Services - 1.2%
Iron Mountain, Inc., 8.75s, 2009 $ 1,800 $ 1,876,500
Pierce Leahy Corp., 9.125s, 2007 1,100 1,144,000
Unisystem Corp., 7.875s, 2008 3,300 3,382,500
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$ 6,403,000
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Chemicals
Sterling Chemicals, Inc., 11.25s, 2007 $ 125 $ 12,500
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Consumer Goods & Services - 0.3%
Kindercare Learning Centers, Inc., 9.5s, 2009 $ 855 $ 820,800
Samsonite Corp., 10.75s, 2008 925 749,250
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$ 1,570,050
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Container, Forest & Paper Products - 1.9%
Ball Corp., 8.25s, 2008 $ 2,975 $ 3,123,750
Buckeye Cellulose Corp., 8.5s, 2005 1,010 919,100
Meadwestvaco Corp., 6.8s, 2032 2,741 2,699,605
Silgan Holdings, Inc., 9s, 2009 2,020 2,100,800
Weyerhaeuser Co., 6.75s, 2012 1,468 1,565,113
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$ 10,408,368
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Corporate Asset-Backed - 3.3%
Amresco Commercial Mortgage Funding I, 7s, 2029 $ 3,000 $ 2,939,062
Commercial Mortgage Acceptance Corp., 5.44s, 2030 3,535 2,967,181
First Union Lehman Brothers Bank of America, 0s, 2028 90,215 2,505,873
First Union Lehman Brothers Commercial, 7s, 2014 850 760,357
Morgan Stanley Capital I, Inc., 7.699s, 2039 2,000 1,887,302
TIAA Retail Commercial Mortgage Trust, 7.17s, 2032## 6,206 6,761,878
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$ 17,821,653
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Defense Electronics - 0.3%
L-3 Communications Corp., 7.625s, 2012 $ 1,480 $ 1,554,000
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Energy - 2.8%
AmeriGas Partners LP, 10.125s, 2007 $ 510 $ 520,200
AmeriGas Partners LP, 8.875s, 2011 3,235 3,364,400
Devon Financing Corp. ULC, 6.875s, 2011 2,529 2,774,487
Midamerican Energy Holdings Co., 5.875s, 2012 4,094 4,032,815
Ocean Energy, Inc., 4.375s, 2007 935 927,179
P&L Coal Holdings Corp., 9.625s, 2008 2,015 2,125,825
Valero Energy Corp., 6.875s, 2012 1,333 1,356,052
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$ 15,100,958
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Entertainment - 0.9%
News America Holdings, Inc., 7.7s, 2025 $ 530 $ 524,323
Time Warner, Inc., 6.95s, 2028 1,382 1,275,296
Turner Broadcasting, Inc., 8.375s, 2013 2,859 3,079,000
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$ 4,878,619
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Financial Institutions - 0.5%
Americo Life, Inc., 9.25s, 2005 $ 115 $ 110,400
General Motors Acceptance Corp., 7s, 2012 2,688 2,623,147
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$ 2,733,547
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Gaming & Hotels - 1.2%
MGM Mirage, 8.375s, 2011 $ 2,775 $ 2,948,437
Park Place Entertainment Corp., 8.875s, 2008 2,500 2,662,500
Starwood Hotels & Resorts, 7.875s, 2012## 800 790,000
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$ 6,400,937
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Machinery - 0.6%
AGCO Corp., 9.5s, 2008 $ 1,750 $ 1,898,750
Terex Corp., 9.25s, 2011 1,405 1,327,725
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$ 3,226,475
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Media - 2.8%
Allbritton Communications Co., 9.75s, 2007 $ 1,500 $ 1,558,125
Chancellor Media Corp., 8.75s, 2007 1,220 1,268,800
Chancellor Media Corp., 8s, 2008 2,000 2,150,000
Echostar DBS Corp., 9.375s, 2009 1,400 1,442,000
Jones Intercable, Inc., 8.875s, 2007 3,150 3,247,344
Lenfest Communications, Inc., 10.5s, 2006 1,900 1,976,000
LIN Televison Corp., 8.375s, 2008 1,000 1,045,000
Young Broadcasting, Inc., 8.5s, 2008 2,600 2,678,000
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$ 15,365,269
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Media - Cable - 0.4%
Panamsat Corp., 8.5s, 2012## $ 2,340 $ 2,287,350
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Medical & Health Technology Services - 0.7%
Fisher Scientific International, Inc., 8.125s, 2012 $ 1,320 $ 1,369,500
Tenet Healthcare Corp., 6.875s, 2031 2,621 2,201,640
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$ 3,571,140
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Natural Gas - Pipeline - 0.5%
Kinder Morgan Energy Partners, 7.3s, 2033 $ 2,638 $ 2,771,501
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Oil Services - 0.6%
Chesapeake Energy Corp., 8.125s, 2011## $ 1,645 $ 1,727,250
Pemex Project, 9.125s, 2010 1,014 1,120,470
Pemex Project, 8.625s, 2022## 620 630,075
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$ 3,477,795
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Pollution Control - 0.9%
Allied Waste North America, Inc., 10s, 2009 $ 2,500 $ 2,525,000
Waste Management, Inc., 7.75s, 2032## 2,522 2,611,607
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$ 5,136,607
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Printing & Publishing
Day International Group, Inc., 11.125s, 2005 $ 100 $ 101,000
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Real Estate Investment Trusts - 0.8%
Kimco Realty Corp., 6s, 2012 $ 1,437 $ 1,420,833
Vornado Realty Trust, 5.625s, 2007 2,927 2,941,723
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$ 4,362,556
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Special Products & Services
Thermadyne Manufacturing/Capital Corp., 9.875s, 2008 $ 225 $ 60,750
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Steel
WCI Steel, Inc., 10s, 2004 $ 1,260 $ 289,800
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Telecommunications - 0.6%
Granite Broadcasting Corp., 10.375s, 2005 $ 1,537 $ 1,262,261
Granite Broadcasting Corp., 8.875s, 2008 675 519,750
ICG Holdings, Inc., 1s, 2006 875 2,188
Triton PCS, Inc., 0s to 2003, 11s to 2008 1,615 1,421,200
------------
$ 3,205,399
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Telecommunications - Wireless - 0.3%
AT&T Wireless Services, Inc., 8.75s, 2031 $ 555 $ 513,375
Verizon Wireless, Inc., 5.375s, 2006 1,260 1,269,721
------------
$ 1,783,096
-------------------------------------------------------------------------------------------------------------
Telecommunications - Wireline - 0.4%
Citizens Communications Co., 8.5s, 2006 $ 812 $ 866,279
Sprint Capital Corp., 6.875s, 2028 1,519 1,122,931
------------
$ 1,989,210
-------------------------------------------------------------------------------------------------------------
U.S. Government Agencies - 17.7%
Federal National Mortgage Assn., 6s, 2017 $13,584 $ 14,114,518
Federal National Mortgage Assn., 6.262s, 2020 7 6,900
Federal National Mortgage Assn., 6.5s, 2031 - 2032 13,934 14,399,970
Financing Corp., 0s, 2014 13,519 7,231,935
Financing Corp., 10.35s, 2018 15,100 22,846,738
Government National Mortgage Assn., 6.5s, 2028 6,804 7,085,299
Government National Mortgage Assn., 7s, 2031 15,420 16,139,504
Government National Mortgage Assn., 6.5s, 2032 14,125 14,697,467
------------
$ 96,522,331
-------------------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 16.0%
U.S. Treasury Bonds, 10.75s, 2005 $ 8,000 $ 9,738,752
U.S. Treasury Bonds, 12s, 2013 7,500 10,707,420
U.S. Treasury Bonds, 9.875s, 2015 5,025 7,515,516
U.S. Treasury Bonds, 5.375s, 2031 4,933 5,176,182
U.S. Treasury Notes, 4.625s, 2006 20,137 21,375,889
U.S. Treasury Notes, 6.875s, 2006 8,000 9,075,000
U.S. Treasury Notes, 3.25s, 2007 6,431 6,439,290
U.S. Treasury Notes, 3.375s, 2007 5,242 5,562,562
U.S. Treasury Notes, 5s, 2011 3,870 4,118,527
U.S. Treasury Notes, 4.375s, 2012 4,971 5,032,750
U.S. Treasury Notes, 4.875s, 2012 2,722 2,864,480
------------
$ 87,606,368
-------------------------------------------------------------------------------------------------------------
Utilities - Electric - 2.0%
Firstenergy Corp., 5.5s, 2006 $ 2,308 $ 2,286,995
Niagara Mohawk Power Corp., 5.375s, 2004 2,800 2,887,108
Northwestern Corp., 7.875s, 2007 1,385 1,079,749
Progress Energy, Inc., 5.85s, 2008 2,580 2,640,506
PSEG Power, 7.75s, 2011 1,903 1,941,829
------------
$ 10,836,187
-------------------------------------------------------------------------------------------------------------
Utilities - Telephone - 1.0%
Verizon Global Funding Corp., 7.375s, 2012 $ 5,106 $ 5,650,963
-------------------------------------------------------------------------------------------------------------
Total U.S. Bonds $350,262,758
-------------------------------------------------------------------------------------------------------------
Foreign Bonds - 32.2%
Algeria
Republic of Algeria, 2.625s, 2004 - 2010 $ 221 $ 196,660
-------------------------------------------------------------------------------------------------------------
Austria - 1.0%
Republic of Austria, 5.5s, 2007 EUR 4,912 $ 5,218,789
-------------------------------------------------------------------------------------------------------------
Brazil - 0.2%
Federal Republic of Brazil, 8s, 2014 $ 1,563 $ 955,176
Federal Republic of Brazil, 8.875s, 2024 623 305,270
------------
$ 1,260,446
-------------------------------------------------------------------------------------------------------------
Bulgaria - 0.5%
National Republic of Bulgaria, 8.25s, 2015## $ 2,397 $ 2,600,745
-------------------------------------------------------------------------------------------------------------
Canada - 5.9%
Abitibi Consolidated, Inc., 8.55s, 2010 (Forest & Paper Products) $ 1,398 $ 1,476,625
Abitibi Consolidated, Inc., 8.85s, 2030 (Forest & Paper Products) 1,240 1,253,238
Government of Canada, 5.75s, 2006 CAD 9,140 6,178,334
Government of Canada, 5.25s, 2008 3,737 4,025,814
Government of Canada, 5.5s, 2009 6,800 4,530,132
Government of Canada, 5.5s, 2010 8,618 5,709,941
Government of Canada, 5.25s, 2012 7,964 5,139,017
Government of Canada, 8s, 2023 4,660 3,863,402
------------
$ 32,176,503
-------------------------------------------------------------------------------------------------------------
Cayman Islands - 0.4%
DBS Capital Funding Corp., 7.657s, 2049 (Banks & Credit Cos.)## $ 2,167 $ 2,349,245
-------------------------------------------------------------------------------------------------------------
Denmark - 1.3%
Kingdom of Denmark, 7s, 2007 DKK 41,210 $ 6,218,971
Kingdom of Denmark, 6s, 2009 5,397 786,247
------------
$ 7,005,218
-------------------------------------------------------------------------------------------------------------
Dominican Republic - 0.2%
Dominican Republic, 9.5s, 2006## $ 1,072 $ 1,141,680
-------------------------------------------------------------------------------------------------------------
Finland - 1.0%
Finland Republic, 5.375s, 2013 EUR 5,014 $ 5,284,641
-------------------------------------------------------------------------------------------------------------
France - 1.3%
France Telecom SA, 7.75s, 2011 (Telecom - Wireline) $ 2,423 $ 2,716,706
Republic of France, 4.75s, 2012 EUR 4,538 4,576,771
------------
$ 7,293,477
-------------------------------------------------------------------------------------------------------------
Germany - 5.0%
Federal Republic of Germany, 4.5s, 2009 EUR 27,076 $ 27,461,107
-------------------------------------------------------------------------------------------------------------
Grand Cayman Islands - 0.2%
Pemex Finance Ltd., 9.69s, 2009 (Financial Services) $ 915 $ 1,060,723
-------------------------------------------------------------------------------------------------------------
Ireland - 1.6%
MDP Acquisitions PLC, 9.625s, 2012 (Forest & Paper Products)## $ 970 $ 1,011,225
Republic of Ireland, 4.25s, 2007 EUR 3,953 3,989,748
Republic of Ireland, 5s, 2013 3,786 3,868,913
------------
$ 8,869,886
-------------------------------------------------------------------------------------------------------------
Italy - 1.1%
Republic of Italy, 5s, 2008 EUR 5,873 $ 6,093,217
-------------------------------------------------------------------------------------------------------------
Kazakhstan - 0.2%
Kaztransoil Co., 8.5s, 2006 (Industrial)## $ 1,002 $ 1,027,050
-------------------------------------------------------------------------------------------------------------
Luxembourg - 0.3%
Mobile Telesystems Finance, 10.95s, 2004 (Financial Institutions) $ 1,086 $ 1,134,870
PTC International Finance II S.A., 11.25s, 2009 (Telecommunications) 676 716,560
------------
$ 1,851,430
-------------------------------------------------------------------------------------------------------------
Malaysia - 0.3%
Petroliam Nasional Berhd, 7.75s, 2015 (Oils) $ 970 $ 1,072,706
Petronas Capital Ltd., 7.875s, 2022 (Oils)## 350 364,408
------------
$ 1,437,114
-------------------------------------------------------------------------------------------------------------
Mexico - 0.7%
BBVA Bancomer, 10.5s, 2011 (Banks & Credit Cos.)## $ 800 $ 886,000
Corp. Durango SA, 13.75s, 2009 (Forest & Paper Products)## 962 500,240
Petroleos Mexicanos, 9.5s, 2027 (Oils) 1,408 1,520,640
United Mexican States, 11.5s, 2026 653 865,734
------------
$ 3,772,614
-------------------------------------------------------------------------------------------------------------
Netherlands - 1.2%
Kingdom Of Netherlands, 5s, 2012 EUR 6,079 $ 6,244,125
PTC International Finance BV, 0s to 2002, 10.75s to 2007,
(Telecommunications) $ 195 202,800
------------
$ 6,446,925
-------------------------------------------------------------------------------------------------------------
New Zealand - 1.4%
Government of New Zealand, 8s, 2006 NZD 14,176 $ 7,540,196
-------------------------------------------------------------------------------------------------------------
Panama - 0.4%
Republic of Panama, 9.375s, 2029 $ 2,209 $ 2,363,630
-------------------------------------------------------------------------------------------------------------
Russia - 1.3%
Ministry of Finance Russia, 12.75s, 2028 $ 1,715 $ 2,263,800
Russian Federation, 3s, 2006 2,914 2,334,005
Russian Federation, 5s, 2030## 2,954 2,320,540
------------
$ 6,918,345
-------------------------------------------------------------------------------------------------------------
Singapore - 0.4%
Flextronics International Ltd., 9.875s, 2010 (Electronics) $ 1,890 $ 2,060,100
-------------------------------------------------------------------------------------------------------------
South Korea - 0.3%
Hanvit Bank, 12.75s, 2010 (Banks & Credit Cos.)## $ 1,200 $ 1,398,869
-------------------------------------------------------------------------------------------------------------
Spain - 3.1%
Kingdom of Spain, 7s, 2005 $ 5,930 $ 6,544,431
Kingdom of Spain, 5.35s, 2011 EUR 7,700 8,109,505
Kingdom of Spain, 5.5s, 2017 2,053 2,159,450
------------
$ 16,813,386
-------------------------------------------------------------------------------------------------------------
Sweden - 0.3%
Kingdom of Sweden, 5.5s, 2012 SEK 16,210 $ 1,848,997
-------------------------------------------------------------------------------------------------------------
United Kingdom - 2.6%
Barclays Bank PLC, 8.55s, 2049 (Banks & Credit Cos.)## $ 2,332 $ 2,773,191
Global Telesystems, Inc., 10.875s, 2008 (Telecommunications) 165 17
U.K. Treasury, 7.25s, 2007 GBP 1,785 3,109,245
U.K. Treasury, 5.75s, 2009 4,970 8,243,303
------------
$ 14,125,756
-------------------------------------------------------------------------------------------------------------
Total Foreign Bonds $175,616,749
-------------------------------------------------------------------------------------------------------------
Municipal Bonds - 3.0%
-------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
-------------------------------------------------------------------------------------------------------------
Austin Texas Electric, 5.5s, 2012 $ 1,200 $ 1,346,052
Metropolitan Pier & Exposition Authoriy Illinois, 5s, 2028 4,800 4,711,584
Metropolitan Transportation Authority New York, 5s, 2032 2,500 2,462,400
Missouri State Water Pollution Control Revenue, 5.25s, 2012 5,260 5,833,919
Sarasota County Florida Utility Systems Revenue, 5.25s, 2013 2,010 2,199,583
-------------------------------------------------------------------------------------------------------------
Total Municipal Bonds $ 16,553,538
-------------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $529,515,828) $542,433,045
-------------------------------------------------------------------------------------------------------------
Stocks - 0.2%
-------------------------------------------------------------------------------------------------------------
SHARES
-------------------------------------------------------------------------------------------------------------
U.S. Stocks - 0.2%
Apparel & Textiles - 0.1%
Sind Holdings, Inc.* 5,720 $ 371,800
-------------------------------------------------------------------------------------------------------------
Manufacturing
IKS Corp.* 2,499 $ 3,374
-------------------------------------------------------------------------------------------------------------
Metals & Minerals - 0.1%
Metal Management, Inc.* 93,507 $ 355,326
-------------------------------------------------------------------------------------------------------------
Telecommunications
ITC Deltacom, Inc.* 63,023 $ 170,162
-------------------------------------------------------------------------------------------------------------
Total U.S. Stocks $ 900,662
-------------------------------------------------------------------------------------------------------------
Foreign Stocks
United Kingdom
Colt Telecom Group PLC (Telecommunications)* 1,256 $ 3,428
-------------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $4,869,467) $ 904,090
-------------------------------------------------------------------------------------------------------------
Warrants
-------------------------------------------------------------------------------------------------------------
Loral Orion Network Systems, Inc., Expire 1/15/07*
(Telecommunications) 1,625 $ 1,625
Loral Orion Network Systems, Inc., Expire 1/15/07*
(Telecommunications) 750 3,750
Ono Finance PLC* (Media) 1,000 10
-------------------------------------------------------------------------------------------------------------
Total Warrants (Identified Cost, $167,394) $ 5,385
-------------------------------------------------------------------------------------------------------------
Repurchase Agreement - 1.0%
-------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
-------------------------------------------------------------------------------------------------------------
Merrill Lynch Repo Treasury, dated 11/29/02, due 12/02/02,
total to be received $5,710,638 (secured by various U.S.
Treasury and Federal Agency obligations in a jointly traded
account), at Cost $ 5,710 $ 5,710,000
-------------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $540,262,689) $549,052,520
Other Assets, Less Liabilities - (0.5)% (2,771,287)
-------------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $546,281,233
-------------------------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
Abbreviations have been used throughout this report to indicate amounts shown in currencies other than the U.S.
Dollar. A list of abbreviations is shown below:
CAD= Canadian Dollars GBP= British Pounds
DKK= Danish Kroner NZD= New Zealand Dollars
EUR= Euro Dollars SEK= Swedish Kroner
See notes to financial statements.
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
-------------------------------------------------------------------------------
NOVEMBER 30, 2002
-------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $540,262,689) $549,052,520
Investment of cash collateral for securities loaned, at
identified cost and value 67,516,834
Net receivable for forward foreign currency exchange contracts 198,481
Net receivable for forward foreign currency exchange contracts
subject to master netting agreements 28,181
Receivable for investments sold 3,736,587
Interest receivable 8,374,154
Other assets 4,752
------------
Total assets $628,911,509
------------
Liabilities:
Payable to custodian $ 150,827
Collateral for securities loaned, at value 67,516,834
Payable to dividend disbursing agent 205,559
Payable for Treasury shares reacquired 330,882
Payable for investments purchased 11,068,019
Net payable for forward foreign currency exchange contracts 2,357,924
Net payable for forward foreign currency exchange contracts
subject to master netting agreements 453,075
Payable to affiliates -
Management fee 27,943
Transfer and dividend disbursing agent fee 8,556
Accrued expenses and other liabilities 510,657
------------
Total liabilities $ 82,630,276
------------
Net assets $546,281,233
============
Net assets consist of:
Paid-in capital $628,071,240
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 6,313,928
Accumulated net realized loss on investments and foreign
currency transactions (84,748,417)
Accumulated net investment loss (3,355,518)
------------
Total $546,281,233
============
Shares of beneficial interest outstanding (64,693,883 shares
authorized less 4,601,344 treasury shares) 60,092,539
==========
Net asset value per share (net assets / shares of beneficial
interest outstanding) $9.09
=====
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Statement of Operations
-------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 2002
-------------------------------------------------------------------------------
Net investment income:
Income -
Interest $ 35,530,774
Dividends 607,719
------------
Total investment income $ 36,138,493
------------
Expenses -
Management fee $ 3,472,289
Trustees' compensation 143,480
Transfer and dividend disbursing agent fee 100,666
Administrative fee 51,240
Custodian fee 363,235
Investor communication expense 337,512
Printing 39,487
Auditing fees 38,200
Postage 26,798
Legal fees 2,827
Miscellaneous 77,054
------------
Total expenses $ 4,652,788
Fees paid indirectly (31,528)
------------
Net expenses $ 4,621,260
------------
Net investment income $ 31,517,233
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $(20,615,951)
Written option transactions 4,756
Foreign currency transactions (2,622,871)
------------
Net realized loss on investments and foreign currency
transactions $(23,234,066)
------------
Change in unrealized appreciation (depreciation) -
Investments $ 26,185,597
Translation of assets and liabilities in foreign currencies (4,923,726)
------------
Net unrealized gain on investments and foreign currency
translation $ 21,261,871
------------
Net realized and unrealized loss on investments and
foreign currency $ (1,972,195)
------------
Increase in net assets from operations $ 29,545,038
============
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Statements of Changes in Net Assets
------------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 2002 2001
------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 31,517,233 $ 40,604,777
Net realized loss on investments and foreign currency
transactions (23,234,066) (27,452,873)
Net unrealized gain on investments and foreign currency
translation 21,261,871 27,235,691
------------- -------------
Increase in net assets from operations $ 29,545,038 $ 40,387,595
------------- -------------
Distributions declared to shareholders -
From net investment income $ (29,555,338) $ (39,103,342)
From paid-in capital (5,548,996) (3,061,532)
------------- -------------
Total distributions declared to shareholders $ (35,104,334) $ (42,164,874)
------------- -------------
Net decrease in net assets from Trust share transactions (4,773,607) (2,713,656)
------------- -------------
Total decrease in net assets $ (10,332,903) $ (4,490,935)
Net assets:
At beginning of period 556,614,136 561,105,071
------------- -------------
At end of period (including accumulated net investment loss
of $3,355,518 and $6,738,826, respectively) $ 546,281,233 $ 556,614,136
============= =============
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Financial Highlights
------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 2002 2001 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $ 9.17 $ 9.20 $ 9.71 $10.39 $10.69
------ ------ ------ ------ ------
Income from investment operations# (S)(S) -
Net investment income $0.52 $ 0.67 $ 0.72 $ 0.72 $ 0.77
Net realized and unrealized gain (loss) on
investments and foreign currency (0.02) (0.01) (0.45) (0.65) (0.25)
------ ------ ------ ------ ------
Total from investment operations $0.50 $ 0.66 $ 0.27 $ 0.07 $ 0.52
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.49) $(0.64) $(0.61) $(0.68) $(0.77)
In excess of net investment income -- -- -- -- (0.05)
From paid-in capital (0.09) (0.05) (0.17) (0.07) --
------ ------ ------ ------ ------
Total distributions declared to shareholders $(0.58) $(0.69) $(0.78) $(0.75) $(0.82)
------ ------ ------ ------ ------
Net asset value - end of period $ 9.09 $ 9.17 $ 9.20 $ 9.71 $10.39
------ ------ ------ ------ ------
Per share market value - end of period $ 8.26 $ 8.35 $ 8.44 $ 8.06 $ 9.94
====== ====== ====== ====== ======
Total return 5.99% 6.92% 14.66% (11.88)% 11.30%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.85% 0.91% 0.93% 0.88% 0.87%
Net investment income 5.80% 7.18% 7.53% 7.17% 7.25%
Portfolio turnover 137% 98% 113% 121% 174%
Net assets at end of period (000 omitted) $546,281 $556,614 $561,105 $632,594 $697,881
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(S)(S) 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 $0.02, increase net realized gains and losses per
share by $0.02, and decrease the ratio of net investment income to average net assets by 0.24%. Per share, ratios, and
supplemental data for the periods prior to December 1, 2001 have not been restated to reflect this change in
presentation.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Charter Income Trust (the trust) is a non-diversified Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as a closed-end management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The trust can invest in foreign securities. Investments in foreign securities
are vulnerable to the effects of changes in the relative values of the local
currency and the U.S. dollar and to the effects of changes in each country's
legal, political, and economic environment.
Investment Valuations - Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues, and forward foreign
currency exchange contracts, are valued on the basis of valuations furnished
by dealers or by a pricing service with consideration to factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other
market data, without exclusive reliance upon exchange or over-the-counter
prices. Equity securities listed on securities exchanges or reported through
the NASDAQ system are reported at market value using last sale prices.
Unlisted equity securities or listed equity securities for which last sale
prices are not available are reported at market value using last quoted bid
prices. Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates market value. Options, and options on
futures contracts listed on commodities exchanges are reported at market value
using closing settlement prices. Over-the-counter options on securities are
valued by brokers. Over-the-counter currency options are valued through the
use of a pricing model which takes into account foreign currency exchange spot
and forward rates, implied volatility, and short-term repurchase rates.
Securities for which there are no such quotations or valuations are valued in
good faith at the direction of the Trustees.
Repurchase Agreements - The trust may enter into repurchase agreements with
institutions that the trust's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The trust
requires that the securities collateral in a repurchase transaction be
transferred to the custodian in a manner sufficient to enable the trust to
obtain those securities in the event of a default under the repurchase
agreement. The trust monitors, on a daily basis, the value of the collateral
to ensure that its value, including accrued interest, is greater than amounts
owed to the trust under each such repurchase agreement. The trust, along with
other affiliated entities of Massachusetts Financial Services Company (MFS),
may utilize a joint trading account for the purpose of entering into one or
more repurchase agreements.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and
losses on investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
Deferred Trustee Compensation - Under a Deferred Compensation Plan (the Plan)
independent Trustees may elect to defer receipt of all or a portion of their
annual compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the trust or other MFS trust selected
by the Trustee. Deferred amounts represent an unsecured obligation of the
trust until distributed in accordance with the Plan.
Written Options - The trust may write call or put options in exchange for a
premium. The premium is initially recorded as a liability, which is
subsequently adjusted to the current value of the option contract. When a
written option expires, the trust realizes a gain equal to the amount of the
premium received. When a written call option is exercised or closed, the
premium received is offset against the proceeds to determine the realized gain
or loss. When a written put option is exercised, the premium reduces the cost
basis of the security purchased by the trust. The trust, as writer of an
option, may have no control over whether the underlying securities may be sold
(call) or purchased (put) and, as a result, bears the market risk of an
unfavorable change in the price of the securities underlying the written
option. In general, written call options may serve as a partial hedge against
decreases in value in the underlying securities to the extent of the premium
received. Written options may also be used as part of an income producing
strategy reflecting the view of the trust's management on the direction of
interest rates.
Security Loans - State Street Bank and Trust Company ("State Street"), as
lending agent, may loan the securities of the trust to certain qualified
institutions (the "Borrowers") approved by the trust. The loans are
collateralized at all times by cash and U.S. Treasury securities in an amount
at least equal to the market value of the securities loaned. State Street
provides the trust with indemnification against Borrower default. The trust
bears the risk of loss with respect to the investment of cash collateral.
Cash collateral is invested in short-term securities. A portion of the income
generated upon investment of the collateral is remitted to the Borrowers, and
the remainder is allocated between the trust and the lending agent. On loans
collateralized by U.S. Treasury securities, a fee is received from the
Borrower, and is allocated between the trust and the lending agent. Income
from securities lending is included in interest income on the Statement of
Operations. The dividend and interest income earned on the securities loaned
is accounted for in the same manner as other dividend and interest income.
At November 30, 2002, the value of securities loaned was $66,172,458. These
loans were collateralized by cash of $67,516,834 which was invested in the
following short-term obligations:
PRINCIPAL AMORTIZED COST
AMOUNT AND VALUE
-------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio 67,516,834 $67,516,834
-----------
Forward Foreign Currency Exchange Contracts - The trust may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties
to meet the terms of their contracts and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar. The trust may enter
into forward foreign currency exchange contracts for hedging purposes as well
as for non-hedging purposes. For hedging purposes, the trust may enter into
contracts to deliver or receive foreign currency it will receive from or
require for its normal investment activities. The trust may also use contracts
in a manner intended to protect foreign currency-denominated securities from
declines in value due to unfavorable exchange rate movements. For non-hedging
purposes, the trust may enter into contracts with the intent of changing the
relative exposure of the trust's portfolio of securities to different
currencies to take advantage of anticipated changes. The forward foreign
currency exchange contracts are adjusted by the daily exchange rate of the
underlying currency and any gains or losses are recorded as unrealized until
the contract settlement date. On contract settlement date, the gains or losses
are recorded as realized gains or losses on foreign currency transactions.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All discount
is accreted for tax reporting purposes as required by federal income tax
regulations. Dividends received in cash are recorded on the ex-dividend date.
Dividend and interest payments received in additional securities are recorded
on the ex-dividend or ex-interest date in an amount equal to the value of the
security on such date. Some securities may be purchased on a "when-issued" or
"forward delivery" basis, which means that the securities will be delivered to
the trust at a future date, usually beyond customary settlement time.
Legal fees and other related expenses incurred to preserve and protect the
value of a security owned are added to the cost of the security; other legal
fees are expensed. Capital infusions made directly to the security issuer,
which are generally non-recurring, incurred to protect or enhance the value of
high-yield debt securities, are reported as additions to the cost basis of the
security. Costs that are incurred to negotiate the terms or conditions of
capital infusions or that are expected to result in a plan of reorganization
are reported as realized losses. Ongoing costs incurred to protect or enhance
an investment, or costs incurred to pursue other claims or legal actions, are
expensed.
Fees Paid Indirectly - The trust's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the trust. This amount is shown as a reduction of total expenses on the
Statement of Operations.
Tax Matters and Distributions - The trust's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The trust
distinguishes between distributions on a tax basis and a financial reporting
basis and only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in capital.
Common types of book and tax differences that could occur include differences
in accounting for foreign currency transactions, mortgage-backed securities,
derivatives, real estate investment trusts, defaulted bonds, capital losses,
and amortization and accretion on debt securities.
The tax character of distributions declared for the years ended November 30,
2002 and November 30, 2001 was as follows:
NOVEMBER 30, NOVEMBER 30,
2002 2001
-------------------------------------------------------------------------------
Distributions declared from:
Ordinary income $29,555,338 $39,103,342
Tax return of capital 5,548,996 3,061,532
----------- -----------
Total distributions declared $35,104,334 $42,164,874
=========== ===========
During the year ended November 30, 2002, accumulated net investment loss
decreased by $6,970,409, accumulated net realized loss on investments and
foreign currency transactions increased by $1,020,054, and paid-in capital
decreased by $5,950,355 due to differences between book and tax accounting for
mortgage-backed securities, currency transactions, and amortization and
accretion on debt securities. In addition, $5,548,996 was designated a tax
return of capital distribution. This change had no effect on the net assets or
net asset value per share. At November 30, 2002, accumulated net investment
loss and net realized loss on investments and foreign currency transactions
under book accounting were different from tax accounting due to temporary
differences in accounting for capital losses, defaulted bonds, foreign
currency transactions, and amortization and accretion on debt securities.
As of November 30, 2002, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Undistributed ordinary income $ --
Undistributed long-term capital gain --
Capital loss carryforward (79,675,399)
Unrealized gain 3,604,345
Other temporary differences (5,718,953)
For federal income tax purposes, the capital loss carryforward may be applied
against any net taxable realized gains of each succeeding year until the
earlier of its utilization or expiration on.
EXPIRATION DATE
November 30, 2003 $ (862,425)
November 30, 2007 (18,771,920)
November 30, 2008 (14,734,304)
November 30, 2009 (21,791,609)
November 30, 2010 (23,515,141)
-------------
Total $(79,675,399)
============
(3) Transactions with Affiliates
Investment Adviser - The trust has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities.
The management fee is computed daily and paid monthly at an annual rate of
0.32% of the trust's average daily net assets and 4.57% of investment income.
The trust pays the compensation of the Independent Trustees in the form of both
a retainer and attendance fees and pays no compensation directly to its
Trustees who are officers of the investment adviser, or to officers of the
trust, all of whom receive remuneration for their services to the trust from
MFS. Certain officers and Trustees of the trust are officers or directors of
MFS and MFS Service Center, Inc. (MFSC). On January 1, 2002, the Trustees
terminated the Independent Trustee unfunded defined benefit plan for active
Trustees and converted it to an unfunded retirement benefit deferral plan for
active Trustees. Under the new plan, the unfunded pension liability was
converted into an equivalent value of notional shares of the trust that will
fluctuate with the performance of the trust. Included in Trustees' compensation
is a net increase of $9,234 as a result of the change in the trust's pension
liability under this plan and a pension expense of $13,137 for inactive
trustees for the year ended November 30, 2002. Also included in Trustees'
compensation is a one-time settlement expense of $5,825 and a one- time
transition expense of $37,111.
Administrator - The trust has an administrative services agreement with MFS to
provide the trust with certain financial, legal, shareholder communications,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the trust pays MFS an administrative fee
at the following annual percentages of the trust's average daily net assets:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
Transfer Agent - MFSC acts as registrar and dividend disbursing agent for the
Trust. The agreement provides that the Trust will pay MFSC an account
maintenance fee of no more than $9.00 and a dividend services fee of $0.75 per
reinvestment and will reimburse MFSC for reasonable out-of-pocket expenses.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
PURCHASES SALES
-------------------------------------------------------------------------------
U.S. government securities $276,838,006 $276,730,098
------------ ------------
Investments (non-U.S. government securities) $441,712,807 $437,841,493
============ ============
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the trust, as computed on a federal income tax basis, are
as follows:
Aggregate cost $545,335,707
------------
Gross unrealized appreciation $ 16,454,224
Gross unrealized depreciation (12,737,411)
------------
Net unrealized appreciation $ 3,716,813
============
(5) Shares of Beneficial Interest
The trust's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. The Trustees have
authorized 64,693,883 full and fractional shares of beneficial interest.
Transactions in trust shares were as follows:
YEAR ENDED NOVEMBER 30, 2002 YEAR ENDED NOVEMBER 30, 2001
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------
Treasury shares
reacquired (579,900) (4,773,607) (316,600) (2,713,656)
-------- ---------- -------- ----------
In accordance with the provisions of the trust's prospectus, 579,900 shares of
beneficial interest were purchased by the trust during year ended November 30,
2002 at an average price per share of $8.23 and a weighted average discount of
9.02% per share. The trust repurchased 316,600 shares of beneficial interest
during the year ended November 30, 2001, at an average price per shares of
$8.57 and a weighted average discount of 7.84% per share.
(6) Line of Credit
The trust and other affiliated funds participate in an $800 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each fund, based on its borrowings, at a rate equal to the bank's
base rate. In addition, a commitment fee, based on the average daily unused
portion of the line of credit, is allocated among the participating funds at
the end of each quarter. The commitment fee allocated to the trust for the year
ended November 30, 2002, was $4,716. The trust had no borrowings during the
year.
(7) Financial Instruments
The trust trades financial instruments with off- balance-sheet risk in the
normal course of its investing activities in order to manage exposure to market
risks such as interest rates and foreign currency exchange rates. These
financial instruments include written options, forward foreign currency
exchange contracts, swap agreements, and futures contracts. The notional or
contractual amounts of these instruments represent the investment the trust has
in particular classes of financial instruments and does not necessarily
represent the amounts potentially subject to risk. The measurement of the risks
associated with these instruments is meaningful only when all related and
offsetting transactions are considered.
Written Option Transactions
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
------------------------------------------------------------------------------
Outstanding, beginning of period -- $ --
Options written 1 4,756
Options expired (1) (4,756)
--- ---------
Outstanding, end of period -- $ --
=== =========
At November 30, 2002, the trust had sufficient cash and/or securities at least
equal to the value of the written options.
Forward Foreign Currency Exchange Contracts
NET
UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
----------------------------------------------------------------------------------------------------------
Sales
12/16/02 CAD 34,658,454 $ 21,969,768 $ 22,132,726 $ (162,958)
12/16/02 DKK 120,581,031 15,818,662 16,116,731 (298,069)
12/16/02 EUR 77,413,333 75,982,627 76,814,121 (831,494)
12/16/02 GBP 7,998,181 12,428,233 12,421,087 7,146
12/16/02 NZD 32,790,516 15,242,344 16,291,411 (1,049,067)
12/16/02 SEK 6,141,750 680,265 676,335 3,930
------------ ------------ -----------
$142,121,899 $144,452,411 $(2,330,512)
============ ============ ===========
Purchases
12/16/02 CAD 89,877 $ 57,006 $ 57,395 $ 389
12/16/02 DKK 65,191,845 8,636,306 8,713,472 77,166
12/16/02 EUR 7,650,291 7,481,225 7,591,075 109,850
12/16/02 GBP 3,405,805 5,304,215 5,289,177 (15,038)
12/16/02 NZD 17,612,421 8,751,729 8,750,431 (1,298)
------------ ------------ -----------
$ 30,230,481 $ 30,401,550 $ 171,069
============ ============ ===========
At November 30, 2002, forward foreign currency purchases and sales under master
netting agreements excluded above amounted to a net receivable of $28,181 with
Credit Suisse First Boston Corp. and net payable of $453,075 with DB Clearing
Services.
At November 30, 2002, the trust had sufficient cash and/or securities to cover
any commitments under these contracts.
(8) Change in Accounting Principle
As required, effective December 1, 2001, the fund adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began amortizing
premium and accreting market discount on debt securities. Prior to December 1,
2001, the fund did not amortize premium nor accrete market discount on debt
securities. The cumulative effect of this accounting change had no impact on
total net assets of the fund, but resulted in a $3,914,186 reduction in cost of
securities and a corresponding $3,914,186 increase in net unrealized
appreciation, based on securities held by the fund on December 1, 2001.
The effect of this change for the year ended November 30, 2002 was to decrease
net investment income by $1,285,943, increase net unrealized appreciation by
$735,369, and increase net realized gains by $550,574. The Statement of Changes
in Net Assets and Financial Highlights for prior periods has not been restated
to reflect this change in presentation.
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of MFS Charter Income Trust:
We have audited the accompanying statement of assets and liabilities of MFS
Charter Income Trust (the Fund), including the portfolio of investments, as of
November 30, 2002, and the related statement of operations for the year then
ended, the statements 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 auditing standards generally
accepted in the 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. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our
procedures included confirmation of securities owned as of November 30, 2002,
by correspondence with the custodian and brokers or by other appropriate
auditing procedures where replies from brokers were not received. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Charter Income Trust at November 30, 2002, the results of its operations for
the year then ended, the changes in its net assets for each of the two years
in the period then ended and its financial highlights for each of the five
years in the period then ended, in conformity with accounting principles
generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
January 10, 2003
-------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (Unaudited)
-------------------------------------------------------------------------------
IN JANUARY 2003, SHAREHOLDERS WILL BE MAILED A FORM 1099-DIV REPORTING
THE FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR
YEAR 2002.
FOR THE YEAR ENDED NOVEMBER 30, 2002, THE AMOUNT OF DISTRIBUTIONS FROM
INCOME ELIGIBLE FOR THE 70% DIVIDENDS RECEIVED DEDUCTION FOR
CORPORATIONS IS 2.05%.
-------------------------------------------------------------------------------
MFS(R) CHARTER INCOME TRUST
The following tables present certain information regarding the Trustees and
officers of the Trust, including their principal occupations, which, unless
specific dates are shown, are of more than five years' duration, although the
titles may not have been the same throughout.
NAME, AGE, POSITION WITH THE TRUST, PRINCIPAL OCCUPATION, AND OTHER DIRECTORSHIPS(1)
TRUSTEES
JEFFREY L. SHAMES* (born 06/02/55) Trustee, ABBY M. O'NEILL (born 04/27/28) Trustee
Chairman Private investor; Rockefeller Financial Services,
Massachusetts Financial Services Company, Chairman Inc. (investment advisers), Chairman and Chief
Executive Officer
JOHN W. BALLEN* (born 09/12/59) Trustee and
President LAWRENCE T. PERERA (born 06/23/35) Trustee
Massachusetts Financial Services Company, Chief Hemenway & Barnes (attorneys), Partner
Executive Officer and Director
WILLIAM J. POORVU (born 04/10/35) Trustee
KEVIN J. PARKE* (born 12/14/59) Trustee Private investor; Harvard University Graduate
Massachusetts Financial Services Company, Chief School of Business Administration, Class of 1961,
Investment Officer, President and Director Adjunct Professor in Entrepreneurship Emeritus;
CBL & Associates Properties, Inc. (real estate
LAWRENCE H. COHN, M.D. (born 03/11/37) Trustee investment trust), Director
Brigham and Women's Hospital, Chief of Cardiac
Surgery; Harvard Medical School, Professor of J. DALE SHERRATT (born 09/23/38) Trustee
Surgery Insight Resources, Inc. (acquisition planning
specialists), President; Wellfleet Investments
THE HON. SIR J. DAVID GIBBONS, KBE (born 06/15/27) (investor in health care companies), Managing
Trustee General Partner (since 1993); Cambridge
Edmund Gibbons Limited (diversified holding Nutraceuticals (professional nutritional
company), Chief Executive Officer; Colonial products), Chief Executive Officer (until May
Insurance Company Ltd., Director and Chairman; 2001); Paragon Trade Brands, Inc. (disposable
Bank of Butterfield, Chairman (until 1997) consumer products), Director
WILLIAM R. GUTOW (born 09/27/41) Trustee ELAINE R. SMITH (born 04/25/46) Trustee
Private investor and real estate consultant; Independent health care industry consultant
Capitol Entertainment Management Company (video
franchise), Vice Chairman WARD SMITH (born 09/13/30) Trustee
Private investor; Sundstrand Corporation
J. ATWOOD IVES (born 05/01/36) Trustee (manufacturer of highly engineered products for
Private investor; KeySpan Corporation (energy industrial and aerospace applications), Director
related services), Director; Eastern Enterprises (until June 1999)
(diversified services company), Chairman, Trustee
and Chief Executive Officer (until November 2000)
(1) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission
(i.e., "public companies").
* "Interested person" of MFS within the meaning of the Investment Company Act of 1940 (referred to as the 1940
Act) which is the principal federal law governing investment companies like the Trust. The address of MFS is
500 Boylston Street, Boston, Massachusetts 02116.
OFFICERS
JEFFREY L. SHAMES (born 06/02/55) Trustee, RICHARD M. HISEY (born 08/29/58) Treasurer
Chairman Massachusetts Financial Services Company, Senior
Massachusetts Financial Services Company, Chairman Vice President (since July 2002); The Bank of New
York, Senior Vice President (September 2000 to
JOHN W. BALLEN (born 9/12/59) Trustee and July 2002); Lexington Global Asset Managers, Inc.,
President Executive Vice President and General Manager
Massachusetts Financial Services Company, Chief (prior to September 2000)
Executive Officer and Director
ELLEN MOYNIHAN (born 11/13/57) Assistant Treasurer
JAMES R. BORDEWICK, JR. (born 03/06/59) Assistant Massachusetts Financial Services Company, Vice
Secretary and Assistant Clerk President
Massachusetts Financial Services Company, Senior
Vice President and Associate General Counsel JAMES O. YOST (born 06/12/60) Assistant Treasurer
Massachusetts Financial Services Company, Senior
STEPHEN E. CAVAN (born 11/06/53) Secretary and Vice President
Clerk
Massachusetts Financial Services Company, Senior
Vice President, General Counsel and Secretary
ROBERT R. FLAHERTY (born 09/18/63) Assistant
Treasurer
Massachusetts Financial Services Company, Vice
President (since August 2000); UAM Fund Services,
Senior Vice President (prior to August 2000)
The Trust holds annual shareholder meetings for the purpose of electing Trustees, and Trustees are elected for
fixed terms. This means that each Trustee will be elected to hold office until his or her successor is chosen
and qualified or until his or her earlier death, resignation, retirement or removal. Each officer will hold
office until his or her successor is chosen and qualified, or until he or she retires, resigns or is removed
from office.
Messrs. Shames, Cohn, Gibbons, Sherratt and Smith, and Ms. O'Neill have served in their capacity as Trustee of
the Trust continuously since originally elected or appointed. Messrs. Ballen, Gutow, Ives, Perera and Poorvu,
and Ms. Smith were elected by shareholders and have served as Trustees of the Trust since January 1, 2002. Mr.
Parke has served as Trustee of the Trust since January 1, 2002.
Each of the Trust's Trustees and officers holds comparable positions with certain other funds of which MFS or
a subsidiary is the investment adviser or distributor and, in the case of the officers, with certain
affiliates of MFS. Each Trustee serves as a board member of 117 funds within the MFS Family of Funds.
The Statement of Additional Information contains further information about the Trustees and is available
without charge upon request, by calling 1-800-225-2606.
INVESTMENT ADVISER TRANSFER AGENT, REGISTRAR AND
Massachusetts Financial Services Company DIVIDEND DISBURSING AGENT
500 Boylston Street State Street Bank and Trust Company
Boston, MA 02116-3741 c/o MFS Service Center, Inc.
P.O. Box 55024
PORTFOLIO MANAGER Boston, MA 02205-8016
Joseph C. Flaherty, Jr.+ 1-800-637-2304
CUSTODIANS
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
JP Morgan Chase Bank
One Chase Manhattan Plaza
New York, NY 10081
AUDITORS
Ernst & Young LLP
+ MFS Investment Management
MFS(R) CHARTER INCOME TRUST ---------------
PRSRT STD
U.S. POSTAGE
[Logo] M F S(R) PAID
INVESTMENT MANAGEMENT MFS
---------------
500 Boylston Street
Boston, MA 02116-3741
(C)2003 MFS Investment Management(R).
500 Boylston Street, Boston, MA 02116.
MCR-ANN 1/03 53M