UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-5822
-------------------------------------------------------------------------------
MFS CHARTER INCOME TRUST
-------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
500 Boylston Street, Boston, Massachusetts 02116
-------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Susan S. Newton
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
-------------------------------------------------------------------------------
(Name and address of agents for service)
Registrant's telephone number, including area code: (617) 954-5000
-------------------------------------------------------------------------------
Date of fiscal year end: November 30
-------------------------------------------------------------------------------
Date of reporting period: May 31, 2006
-------------------------------------------------------------------------------
ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) Mutual Funds 5/31/06
SEMIANNUAL REPORT
MFS(R) CHARTER INCOME TRUST
[graphic omitted]
A path for pursuing opportunity
M F S(SM)
INVESTMENT MANAGEMENT(R)
-------------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK OR CREDIT UNION GUARANTEE NOT A DEPOSIT
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
-------------------------------------------------------------------------------------
MFS(R) CHARTER INCOME TRUST 5/31/06
The trust seeks to maximize current income.
New York Stock Exchange Symbol: MCR
TABLE OF CONTENTS
----------------------------------------------------
LETTER FROM THE CEO 1
----------------------------------------------------
PORTFOLIO COMPOSITION 2
----------------------------------------------------
PORTFOLIO MANAGERS' PROFILES 3
----------------------------------------------------
PERFORMANCE SUMMARY 4
----------------------------------------------------
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN 7
----------------------------------------------------
PORTFOLIO OF INVESTMENTS 8
----------------------------------------------------
FINANCIAL STATEMENTS 22
----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 26
----------------------------------------------------
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM 34
----------------------------------------------------
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 35
----------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION 35
----------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE 35
----------------------------------------------------
CONTACT INFORMATION BACK COVER
LETTER FROM THE CEO
[Photo of Robert J. Manning]
Dear Shareholders,
It has been said that change is the only constant in life. As investors have
seen, that theme is still accurate today as we recently have experienced
shifting economic cycles because of natural disasters and political instability
around the globe.
Markets worldwide have fluctuated in the past year as devastating hurricanes had
a dramatic effect on the international economy, particularly on oil prices. We
witnessed political unrest in the Middle East, highlighted by instability in
Iraq, and in Africa, the usually stable Nigeria also experienced violence. As a
result, energy prices have bounced up and down, with crude oil prices at one
point topping a record $70 per barrel.
Such cycles are not uncommon and in fact have almost become the norm in our
everyday lives. What does all of this mean to you as an investor? In times like
these, it helps to know that you're working with a seasoned investment
professional who has experience to guide you through difficult times. At MFS(R),
we believe our investment management team has the knowledge and confidence to
navigate through difficult cycles and at the same time see through adversity to
find investment opportunities for our clients and shareholders.
Our investment management process, honed over 80 years, combines a unique
concept of teamwork with our unwavering focus on the long term. We firmly
believe that the best way to realize long-term financial goals - be it a college
education, a comfortable retirement, or a secure family legacy - is to follow a
three-pronged approach that focuses on longer time horizons. Allocate holdings
across the major asset classes - including stocks, bonds, and cash. Diversify
within each class to take advantage of different market segments and investing
styles. Rebalance assets regularly to maintain a desired asset allocation. Of
course, these strategies cannot guarantee a profit or protect against a loss.
This long-term approach requires diligence and patience, two traits that in our
experience are essential to capitalizing on the many opportunities the financial
markets can offer - through both up and down economic cycles.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
July 17, 2006
The opinions expressed in this letter are those of MFS, and no forecasts can be
guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE(i)
Bonds 98.2%
Cash & Other Net Assets 1.7%
Convertible Stocks 0.1%
FIXED INCOME SECTORS (i)
Non-U.S. Government Bonds 24.0%
------------------------------------------------
High Yield Corporates 16.4%
------------------------------------------------
High Grade Corporates 15.6%
------------------------------------------------
Mortgage-Backed Securities 13.6%
------------------------------------------------
U.S. Treasury Securities 9.2%
------------------------------------------------
Emerging Market Bonds 7.5%
------------------------------------------------
Commercial Mortgage-Backed
Securities 6.2%
------------------------------------------------
U.S. Government Agencies 3.8%
------------------------------------------------
Asset-Backed Securities 1.8%
------------------------------------------------
Residential Mortgage-Backed
Securities 0.1%
------------------------------------------------
CREDIT QUALITY OF BONDS (r)
AAA 55.8%
------------------------------------------------
AA 2.4%
------------------------------------------------
A 3.5%
------------------------------------------------
BBB 17.4%
------------------------------------------------
BB 14.8%
------------------------------------------------
B 5.7%
------------------------------------------------
CCC 0.3%
------------------------------------------------
Not Rated 0.1%
------------------------------------------------
PORTFOLIO FACTS
Average Duration (d) 4.7
------------------------------------------------
Average Life (m) 7.3 yrs.
------------------------------------------------
Average Maturity (m) 12.2 yrs.
------------------------------------------------
Average Credit Quality of
Rated Securities (a) A+
------------------------------------------------
Average Short Term Credit Quality A-1
------------------------------------------------
COUNTRY WEIGHTINGS (i)
United States 63.5%
------------------------------------------------
United Kingdom 4.7%
------------------------------------------------
Germany 4.6%
------------------------------------------------
France 3.3%
------------------------------------------------
Ireland 3.1%
------------------------------------------------
Finland 2.7%
------------------------------------------------
Netherlands 2.5%
------------------------------------------------
Spain 2.4%
------------------------------------------------
Russia 1.8%
------------------------------------------------
Other Countries 11.4%
------------------------------------------------
(a) The average credit quality of rated securities is based upon a market
weighted average of portfolio holdings that are rated by public rating
agencies.
(d) Duration is a measure of how much a bond's price is likely to fluctuate with
general changes in interest rates, e.g., if rates rise 1.00%, a bond with a
5-year duration is likely to lose about 5.00% of its value.
(i) For purposes of this graphical presentation, the bond component includes
both accrued interest amounts and the equivalent exposure from any
derivative holdings, if applicable.
(m) The average maturity shown is calculated using the final stated maturity on
the portfolio's holdings without taking into account any holdings which have
been prerefunded to an earlier date or which have a mandatory put date prior
to the stated maturity. The average life shown takes into account these
earlier dates.
(r) Each security is assigned a rating from Moody's Investors Service. If not
rated by Moody's, the rating will be that assigned by Standard & Poor's.
Likewise, if not assigned a rating by Standard & Poor's, it will be based on
the rating assigned by Fitch, Inc. For those portfolios that hold a security
which is not rated by any of the three agencies, the security is considered
Not Rated. Holdings in U.S. Treasuries and government agency mortgage-backed
securities, if any, are included in the "AAA"-rating category. Percentages
are based on the total market value of investments as of 5/31/06.
Percentages are based on net assets as of 5/31/06, unless otherwise noted.
The portfolio is actively managed, and current holdings may be different.
PORTFOLIO MANAGERS' PROFILES
John F. Addeo, CFA, is Vice President and Associate Director of Fixed Income
Research of MFS Investment Management(R) (MFS(R)) and portfolio manager of the
high-yield bond portfolios of our mutual funds, variable annuities, offshore
accounts and closed-end funds. John joined MFS as a research analyst in 1998. He
became Vice President in 1999, associate portfolio manager in 2000, and
portfolio manager in 2001. He has been a portfolio manager of the fund since
February 2005. John was named Associate Director of Fixed Income Research in
2004. Previously, he was a quantitative analyst and a vice president in the
high-yield groups of several major investment companies. He received a Bachelor
of Science degree from Siena College in 1984. He holds the Chartered Financial
Analyst (CFA) designation.
Richard O. Hawkins, CFA, is Senior Vice President of MFS Investment
Management(R) an investment grade fixed income research analyst; and a portfolio
manager of MFS(R) Charter Income Trust. Prior to joining the firm in 1988, he
spent two years as an International Bond Analyst for Fidelity Management &
Research Company; and five years as an International Lending Officer for
Manufacturers Hanover Trust Company. He was named portfolio manager at MFS in
2004. He has been a portfolio manager of the fund since July 2004. Richard
earned a bachelor's degree from Brown University and a Master's of Business
Administration from the University of Pennsylvania. He is a member of the
Association for Investment Management and Research (AIMR) and the Boston
Security Analysts Society, Inc. He holds the Chartered Financial Analyst (CFA)
designation.
Scott B. Richards, CFA, is Vice President of MFS Investment Management(R)
(MFS(R)) and a portfolio manager of the firm's high-yield and strategic income
portfolios. He has been a portfolio manager of the fund since February 2005.
Scott joined MFS in May 2004 with more than 24 years experience as a high-yield
bond portfolio manager and research director at several leading investment
management firms. He earned a M.B.A. degree from the Amos Tuck School at
Dartmouth College in 1984 and a bachelor's degree in applied economics from
Cornell University in 1981. He holds the Chartered Financial Analyst (CFA)
designation and is a member of the Boston Security Analysts Society, Inc.
Matthew W. Ryan, CFA, is Senior Vice President of MFS Investment Management(R)
(MFS(R)) and portfolio manager of strategic income and high yield portfolios, as
well as the firm's emerging market debt portfolios. Before joining the firm in
1997, Matt worked for four years as an economist at the International Monetary
Fund and for five years as an international economist with the U.S. Treasury
Department. He was named a portfolio manager of MFS in 1998; Vice President in
1999; and Senior Vice President in 2005. He has been a portfolio manager of the
fund since September 2004. Matt is a graduate of Williams College and earned a
master's degree in international economics and foreign policy from Johns Hopkins
University. Matt also holds the Chartered Financial Analyst (CFA) designation.
PERFORMANCE SUMMARY THROUGH 5/31/06
All results are historical. Investment return and principal value will
fluctuate, and shares, when sold, may be worth more or less than their original
cost. More recent returns may be more or less than those shown. Past
performance is no guarantee of future results.
PRICE SUMMARY
Date Price
Six months ended
5/31/06
Net asset value per share 5/31/06 $9.38
------------------------------------------------------------------------------
11/30/05 $9.58
------------------------------------------------------------------------------
New York Stock Exchange Price 5/31/06 $8.30
------------------------------------------------------------------------------
1/24/06 (high) (t) $8.67
------------------------------------------------------------------------------
4/13/06 (low) (t) $8.23
------------------------------------------------------------------------------
11/30/05 $8.43
TOTAL RETURNS VS BENCHMARKS
Six months ended
5/31/06
New York Stock Exchange Price (r) 1.41%
------------------------------------------------------------------------------
Net asset value (r) 0.85%
------------------------------------------------------------------------------
Citigroup World Government Bond Non-Dollar Hedged Index (f) 0.02%
------------------------------------------------------------------------------
J.P. Morgan EMBI Global (f) 1.16%
------------------------------------------------------------------------------
Lehman Brothers U.S. Credit Bond Index (f) -0.73%
------------------------------------------------------------------------------
Lehman Brothers U.S. Government/Mortgage Bond Index (f) 0.23%
------------------------------------------------------------------------------
Lehman Brothers U.S. High-Yield Corporate Bond Index (f) 4.41%
(f) Source: FactSet Research Systems, Inc.
(r) Includes reinvestment of dividends and capital gain distributions.
(t) For the period December 1, 2005 through May 31, 2006.
INDEX DEFINITIONS
Citigroup World Government Bond Non-Dollar Hedged Index - a market
capitalization-weighted index that tracks the currency-hedged performance of the
major government bond markets, excluding the United States. Country eligibility
is determined based upon market capitalization and investability criteria.
J.P. Morgan Emerging Markets Bond Index Global (EMBI Global) - tracks total
returns for U.S.-dollar-denominated debt instruments issued by emerging market
sovereign and quasi-sovereign entities: Brady bonds, loans, and Eurobonds.
Lehman Brothers U.S. Credit Bond Index - measures publicly issued, SEC-
registered, U.S. corporate and specified foreign debentures and secured notes
that meet specified maturity, liquidity, and quality requirements.
Lehman Brothers U.S. Government/Mortgage Bond Index - measures debt issued by
the U.S. Government as well as mortgage-backed pass-through securities of Ginnie
Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC).
Lehman Brothers U.S. High-Yield Corporate Bond Index - measures the universe of
non-investment grade, fixed rate debt. Eurobonds, and debt issues from countries
designated as emerging markets (e.g., Argentina, Brazil, Venezuela, etc.) are
excluded.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
The trust's shares may trade at a discount to net asset value. Shareholders do
not have the right to cause the trust to repurchase their shares at net asset
value. When trust shares trade at a premium, buyers pay more than the net asset
value underlying trust shares, and shares purchased at a premium would receive
less than the amount paid for them in the event of the trust's liquidation. As a
result, the total returns that are calculated based on the net asset value and
New York Stock Exchange prices can be different.
The trust's monthly distributions may include a return of capital to
shareholders. Distributions that are treated for federal income tax purposes as
a return of capital will reduce each shareholder's basis in his or her shares
and, to the extent the return of capital exceeds such basis, will be treated as
gain to the shareholder from a sale of shares. Returns of shareholder capital
have the effect of reducing the trust's assets and may increase the trust's
expense ratio.
From time to time the trust may receive proceeds from litigation settlements,
without which performance would be lower.
Shareholders will be sent notices at least annually reporting the tax status of
such distributions. The notices will indicate whether any portion of such
distributions represent a return of capital. Effective August 1, 2006, the trust
will only send monthly notices reporting the tax status of such distributions
when required by SEC rules.
KEY RISK CONSIDERATIONS
The portfolio's yield and share prices change daily based on the credit quality
of its investments and changes in interest rates. In general, the value of debt
securities will decline when interest rates rise and will increase when interest
rates fall. Debt securities with longer maturity dates will be subject to
greater price fluctuations than those with shorter maturities. Mortgage
securities are subject to prepayment risk which can offer less potential for
gains in a declining interest rate environment and greater potential for loss in
a rising interest rate environment. Derivatives involve risks different from,
and greater than, those of the underlying indicator's in whose value the
derivative is based. The value of the derivative can move in unexpected ways and
result in unanticipated losses and increased volatility if the value of the
underlying indicator(s) does not move in the direction or the extent
anticipated. Interest payments on inflation adjusted debt instruments can be
unpredictable and vary based on the level of inflation. The value of floating
rate loans depends on the credit quality and adequacy of the collateral securing
the loan. Enforcing rights against the collateral may be difficult or
insufficient if the borrower of the floating rate loan defaults. Lower quality
debt securities involve substantially greater risk of default and their value
can decline significantly over time. Foreign investments can be more volatile
than U.S. investments. Changes in currency exchange rates may affect the
portfolio's net asset value, the value of dividends and interest earned and
gains and losses realized on the sale of securities. Investing in emerging
markets can involve risks in addition to those generally associated with
investing in more developed foreign markets. When you sell your shares, they may
be worth more or less than the amount you paid for them. Please see the
prospectus for further information regarding these and other risk
considerations.
These risks may increase share price volatility.
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.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
The trust 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 may be made in any amount
over $100 in January and July on the 15th of the month or shortly thereafter.
If your shares are in the name of a brokerage firm, bank, or other nominee, you
can ask the firm or nominee to participate in the plan on your behalf. If the
nominee does not offer the plan, you may wish to request that your shares be
re-registered in your own name so that you can participate.
There is no service charge to reinvest distributions, nor are there brokerage
charges for shares issued directly by the trust. However, when shares are bought
on the New York Stock Exchange or otherwise on the open market, each participant
pays a pro rata share of the commissions. The automatic reinvestment of
distributions does not relieve you of any income tax that may be payable (or
required to be withheld) on the distributions.
To enroll in or withdraw from the plan, or if you have any questions, call
1-800-637-2304 any business day from 8 a.m. to 8 p.m. Eastern time. Please have
available the name of the trust and your account and Social Security numbers.
For certain types of registrations, such as corporate accounts, instructions
must be submitted in writing. Please call for additional details. When you
withdraw from the plan, you can receive the value of the reinvested shares in
one of two ways: a check for the value of the full and fractional shares, or a
certificate for the full shares and a check for the fractional shares.
PORTFOLIO OF INVESTMENTS (unaudited) - 5/31/06
The Portfolio of Investments is a complete list of all securities owned by your
trust. It is categorized by broad-based asset classes.
Bonds - 98.6%
------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
------------------------------------------------------------------------------------------------
Advertising & Broadcasting - 1.1%
------------------------------------------------------------------------------------------------
Allbritton Communications Co., 7.75%, 2012 $ 365,000 $ 365,456
CBS Corp., 6.625%, 2011 860,000 884,512
EchoStar DBS Corp., 6.375%, 2011 1,945,000 1,867,200
Intelsat Subsidiary Holding Co. Ltd., 8.625%, 2015 340,000 344,250
Lamar Media Corp., 7.25%, 2013 675,000 669,094
News America Holdings, 7.7%, 2025 1,140,000 1,206,475
News America, Inc., 6.2%, 2034 542,000 489,972
---------------
$ 5,826,959
------------------------------------------------------------------------------------------------
Aerospace - 0.1%
------------------------------------------------------------------------------------------------
DRS Technologies, Inc., 7.625%, 2018 $ 440,000 $ 444,400
------------------------------------------------------------------------------------------------
Agency - Other - 1.0%
------------------------------------------------------------------------------------------------
Financing Corp., 10.35%, 2018 $ 3,600,000 $ 5,103,112
------------------------------------------------------------------------------------------------
Airlines - 0.2%
------------------------------------------------------------------------------------------------
Continental Airlines, Inc., 7.566%, 2020 $ 1,015,699 $ 955,076
------------------------------------------------------------------------------------------------
Asset Backed & Securitized - 8.0%
------------------------------------------------------------------------------------------------
Amresco Commercial Mortgage Funding I, 7%, 2029 $ 3,000,000 $ 3,021,048
Asset Securitization Corp., 7.525%, 2029 1,586,134 1,714,918
Asset Securitization Corp., FRN, 8.2937%, 2029 2,000,000 2,066,849
Bayview Financial Acquisition Trust, FRN, 5.483%, 2041 404,000 399,518
Bayview Financial Revolving Mortgage Loan Trust, FRN,
5.8906%, 2040 (a) 1,160,000 1,161,845
Bear Stearns Commercial Mortgage Securities, Inc., FRN,
5.116%, 2041 1,120,248 1,066,015
Countrywide Asset-Backed Certificates, FRN, 5.147%, 2035 2,000,000 1,976,877
Credit Suisse First Boston Mortgage Securities Corp., 6.75%,
2030 (a) 2,000,000 2,001,479
Crest Ltd., 7%, 2040 (a) 2,000,000 1,795,800
DLJ Commercial Mortgage Corp., 6.04%, 2031 2,000,000 2,007,247
First Union-Lehman Brothers Bank of America, FRN,
0.6883%, 2035 (i) 67,839,557 1,191,147
First Union-Lehman Brothers Commercial Mortgage Trust,
7%, 2029 (a) 850,000 931,560
First Union-Lehman Brothers Commercial Mortgage Trust, FRN,
7.5%, 2029 3,000,000 3,318,322
J.P. Morgan Chase Commercial Mortgage Securities Corp., FRN,
5.038%, 2046 4,000,000 3,782,455
Morgan Stanley Capital I, Inc., 5.168%, 2042 1,532,020 1,463,847
Mortgage Capital Funding, Inc., FRN, 0.9324%, 2031 (i) 18,072,179 212,661
New Century Home Equity Loan Trust, FRN, 4.532%, 2035 2,500,000 2,437,528
Residential Asset Mortgage Products, Inc., 3.878%, 2035 1,340,523 1,324,288
Spirit Master Funding LLC, 5.05%, 2023 (a) 1,928,754 1,813,524
Structured Asset Securities Corp., FRN, 4.67%, 2035 2,484,152 2,445,935
TIAA Real Estate CDO Ltd., 7.17%, 2032 (a) 2,003,810 2,023,650
Wachovia Bank Commercial Mortgage Trust, FRN, 4.847%, 2041 2,000,000 1,867,381
Wachovia Bank Commercial Mortgage Trust, FRN, 5.083%, 2042 2,000,000 1,894,873
---------------
$ 41,918,767
------------------------------------------------------------------------------------------------
Automotive - 1.6%
------------------------------------------------------------------------------------------------
American Axle & Manufacturing, Inc., 5.25%, 2014 $ 515,000 $ 426,806
DaimlerChrysler N.A. Holdings Corp., 8.5%, 2031 400,000 458,489
Ford Motor Credit Co., 4.95%, 2008 200,000 187,476
Ford Motor Credit Co., 6.625%, 2008 196,000 185,629
Ford Motor Credit Co., 5.8%, 2009 1,600,000 1,462,269
Ford Motor Credit Co., 7%, 2013 254,000 219,107
General Motors Acceptance Corp., 6.125%, 2008 234,000 226,594
General Motors Acceptance Corp., 5.85%, 2009 1,842,000 1,738,406
General Motors Acceptance Corp., 6.875%, 2011 1,400,000 1,315,188
General Motors Acceptance Corp., 6.75%, 2014 1,391,000 1,262,696
General Motors Acceptance Corp., 8%, 2031 534,000 501,583
General Motors Corp., 8.375%, 2033 100,000 75,875
Lear Corp., 8.11%, 2009 285,000 277,875
Lear Corp., 5.75%, 2014 50,000 40,750
---------------
$ 8,378,743
------------------------------------------------------------------------------------------------
Banks & Credit Companies - 5.6%
------------------------------------------------------------------------------------------------
Abbey National Capital Trust I, 8.963% to 2030, FRN to 2049 $ 1,500,000 $ 1,872,987
Banco BMG S.A., 9.15%, 2016 (a) 982,000 962,360
Banco do Estado de Sao Paulo S.A., 8.7%, 2049 (a) 1,400,000 1,380,750
Banco Mercantil del Norte S.A., 5.875% to 2009, FRN to 2014 (a) 808,000 799,920
BNP Paribas, 5.186% to 2015, FRN to 2049 (a) 1,667,000 1,533,097
Bosphorus Financial Services Ltd., FRN, 6.97%, 2012 (a) 1,500,000 1,505,954
Chuo Mitsui Trust & Banking Co., 5.506% to 2015, FRN to 2049(a) 1,676,000 1,568,873
DFS Funding Corp., FRN, 6.91%, 2010 (a) 1,750,000 1,776,250
HBOS Capital Funding LP, 6.071% to 2014, FRN to 2049 (a) 1,330,000 1,306,369
HSBK Europe B.V., 7.75%, 2013 (a) 637,000 644,963
J.P. Morgan Chase & Co., 5.125%, 2014 2,100,000 1,986,531
Kazkommerts International B.V., 10.125%, 2007 (a) 367,000 379,295
Kazkommerts International B.V., 10.125%, 2007 128,000 132,288
Mizuho Capital Investment 1 Ltd., 6.686% to 2016, FRN to 2049(a) 3,800,000 3,670,747
Mizuho Financial Group, Inc., 5.79%, 2014 (a) 1,898,000 1,869,365
MUFG Capital Finance 1 Ltd., 6.346% to 2016, FRN to 2049 1,408,000 1,386,414
RBS Capital Trust II, 6.425% to 2034, FRN to 2049 829,000 806,437
Resona Bank Ltd., 5.85% to 2016, FRN to 2049 (a) 655,000 624,133
Russian Standard Finance S.A., 8.125%, 2008 (a) 682,000 681,148
Russian Standard Finance S.A., 7.5%, 2010 (a) 176,000 168,520
Russian Standard Finance S.A., 8.625%, 2011 (a) 498,000 493,070
Turanalem Finance B.V., 7.75%, 2013 (a) 590,000 584,100
UFJ Finance Aruba AEC, 6.75%, 2013 1,300,000 1,357,383
Woori Bank, FRN, 6.125%, 2016 (a) 1,490,000 1,477,156
---------------
$ 28,968,110
------------------------------------------------------------------------------------------------
Broadcast & Cable TV - 1.2%
------------------------------------------------------------------------------------------------
CCH II LLC, 10.25%, 2010 $ 475,000 $ 473,812
CSC Holdings, Inc., 8.125%, 2009 1,050,000 1,076,250
Lenfest Communications, Inc., 10.5%, 2006 1,900,000 1,902,134
Mediacom LLC, 9.5%, 2013 280,000 281,400
Rogers Cable, Inc., 5.5%, 2014 1,025,000 927,625
TCI Communications, Inc., 9.8%, 2012 1,169,000 1,359,528
---------------
$ 6,020,749
------------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 1.0%
------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc., 5.7%, 2012 $ 2,680,000 $ 2,662,360
Morgan Stanley Dean Witter, Inc., 6.6%, 2012 2,537,000 2,642,077
---------------
$ 5,304,437
------------------------------------------------------------------------------------------------
Business Services - 0.6%
------------------------------------------------------------------------------------------------
Iron Mountain, Inc., 7.75%, 2015 $ 175,000 $ 174,562
Xerox Corp., 7.625%, 2013 920,000 943,000
Xerox Corp., 6.4%, 2016 2,000,000 1,910,000
---------------
$ 3,027,562
------------------------------------------------------------------------------------------------
Chemicals - 0.9%
------------------------------------------------------------------------------------------------
BCP Crystal Holdings Corp., 9.625%, 2014 $ 204,000 $ 223,890
Equistar Chemicals, LP, 10.125%, 2008 240,000 255,600
Hercules, Inc., 6.75%, 2029 860,000 817,000
Huntsman International LLC, 10.125%, 2009 331,000 336,792
Lyondell Chemical Co., 11.125%, 2012 615,000 676,500
Nalco Co., 7.75%, 2011 650,000 651,625
Nalco Co., 8.875%, 2013 70,000 72,013
Yara International A.S.A., 5.25%, 2014 (a) 2,000,000 1,863,654
---------------
$ 4,897,074
------------------------------------------------------------------------------------------------
Conglomerates - 0.2%
------------------------------------------------------------------------------------------------
Kennametal, Inc., 7.2%, 2012 $ 1,140,000 $ 1,198,260
------------------------------------------------------------------------------------------------
Construction - 0.5%
------------------------------------------------------------------------------------------------
Beazer Homes USA, Inc., 6.875%, 2015 $ 2,300,000 $ 2,173,500
M/I Homes, Inc., 6.875%, 2012 675,000 612,562
---------------
$ 2,786,062
------------------------------------------------------------------------------------------------
Consumer Goods & Services - 0.1%
------------------------------------------------------------------------------------------------
Church & Dwight Co., Inc., 6%, 2012 $ 460,000 $ 437,000
Service Corp. International, 7.5%, 2017 (a) 260,000 247,000
---------------
$ 684,000
------------------------------------------------------------------------------------------------
Containers - 0.4%
------------------------------------------------------------------------------------------------
Ball Corp., 6.625%, 2018 $ 475,000 $ 453,625
Crown Americas, 7.75%, 2015 (a) 565,000 569,238
Owens-Brockway Glass Container, Inc., 8.875%, 2009 430,000 443,975
Owens-Brockway Glass Container, Inc., 8.25%, 2013 865,000 873,650
---------------
$ 2,340,488
------------------------------------------------------------------------------------------------
Defense Electronics - 0.9%
------------------------------------------------------------------------------------------------
BAE Systems Holdings, Inc., 4.75%, 2010 (a) $ 790,000 $ 758,590
BAE Systems Holdings, Inc., 5.2%, 2015 (a) 2,000,000 1,863,890
L-3 Communications Corp., 5.875%, 2015 750,000 690,000
L-3 Communications Corp., 6.375%, 2015 1,500,000 1,417,500
---------------
$ 4,729,980
------------------------------------------------------------------------------------------------
Electronics - 0.1%
------------------------------------------------------------------------------------------------
Flextronics International Ltd., 6.5%, 2013 $ 790,000 $ 763,337
------------------------------------------------------------------------------------------------
Emerging Market Quasi-Sovereign - 1.1%
------------------------------------------------------------------------------------------------
Banco do Brasil S.A., 7.95%, 2049 (a) $ 161,000 $ 152,950
Gazprom OAO, 9.625%, 2013 (a) 1,510,000 1,744,050
Pemex Project Funding Master Trust, 8.625%, 2022 1,218,000 1,370,250
Petroleum Export/Cayman, 5.265%, 2011 (a) 275,252 267,853
Petronas Capital Ltd., 7.875%, 2022 (a) 464,000 534,794
Petronas Capital Ltd., 7.875%, 2022 1,340,000 1,544,448
---------------
$ 5,614,345
------------------------------------------------------------------------------------------------
Emerging Market Sovereign - 2.5%
------------------------------------------------------------------------------------------------
Republic of Argentina, FRN, 4.889%, 2012 $ 1,449,000 $ 1,330,929
Republic of Bulgaria, 8.25%, 2015 600,000 686,160
Republic of Colombia, FRN, 6.97%, 2015 1,514,000 1,566,936
Republic of Indonesia, 6.875%, 2017 (a) 171,000 167,477
Republic of Panama, 9.375%, 2029 1,121,000 1,367,620
Republic of South Africa, 9.125%, 2009 469,000 511,210
Russian Federation, 3%, 2008 6,252,000 5,913,767
Russian Federation, 11%, 2018 326,000 453,564
United Mexican States, 8.125%, 2019 976,000 1,094,584
---------------
$ 13,092,247
------------------------------------------------------------------------------------------------
Energy - Independent - 0.7%
------------------------------------------------------------------------------------------------
Chesapeake Energy Corp., 7.5%, 2014 $ 335,000 $ 342,119
Chesapeake Energy Corp., 7%, 2014 240,000 239,100
Chesapeake Energy Corp., 6.875%, 2016 1,025,000 996,812
Forest Oil Corp., 7.75%, 2014 550,000 555,500
Newfield Exploration Co., 6.625%, 2014 540,000 517,050
Quicksilver Resources, Inc., 7.125%, 2016 510,000 487,050
Vintage Petroleum, Inc., 8.25%, 2012 550,000 583,046
---------------
$ 3,720,677
------------------------------------------------------------------------------------------------
Entertainment - 0.5%
------------------------------------------------------------------------------------------------
AMC Entertainment, Inc., 9.5%, 2011 $ 224,000 $ 222,338
AMC Entertainment, Inc., 11%, 2016 (a) 200,000 216,000
Six Flags, Inc., 9.75%, 2013 220,000 220,550
Turner Broadcasting System, Inc., 8.375%, 2013 1,784,000 1,972,710
---------------
$ 2,631,598
------------------------------------------------------------------------------------------------
Financial Institutions - 0.3%
------------------------------------------------------------------------------------------------
HSBC Finance Corp., 5.5%, 2016 $ 1,481,000 $ 1,415,694
International Lease Finance Corp., 5%, 2010 321,000 312,959
---------------
$ 1,728,653
------------------------------------------------------------------------------------------------
Food & Non Alcoholic Beverages - 0.1%
------------------------------------------------------------------------------------------------
B&G Foods Holding Corp., 8%, 2011 $ 170,000 $ 171,275
Michael Foods, Inc., 8%, 2013 315,000 314,212
---------------
$ 485,487
------------------------------------------------------------------------------------------------
Forest & Paper Products - 0.8%
------------------------------------------------------------------------------------------------
Buckeye Technologies, Inc., 8.5%, 2013 $ 460,000 $ 450,800
Jefferson Smurfit Corp., 8.25%, 2012 185,000 173,900
MDP Acquisitions PLC, 9.625%, 2012 310,000 323,175
Norske Skog Canada Ltd., 7.375%, 2014 695,000 639,400
Stone Container Corp., 7.375%, 2014 1,000,000 895,000
Stora Enso Oyj, 6.404%, 2016 (a) 1,560,000 1,532,954
---------------
$ 4,015,229
------------------------------------------------------------------------------------------------
Gaming & Lodging - 2.3%
------------------------------------------------------------------------------------------------
Boyd Gaming Corp., 6.75%, 2014 $ 520,000 $ 501,800
Caesars Entertainment, Inc., 8.125%, 2011 730,000 777,450
GTECH Holdings Corp., 5.25%, 2014 235,000 226,125
Harrah's Operating Co., Inc., 5.625%, 2015 2,147,000 2,017,815
Host Marriott LP, 7.125%, 2013 465,000 467,325
Host Marriott LP, 6.375%, 2015 250,000 238,125
Host Marriott LP, 6.75%, 2016 (a) 1,000,000 971,250
Mandalay Resort Group, 9.375%, 2010 450,000 480,375
MGM Mirage, Inc., 8.375%, 2011 1,155,000 1,206,975
MGM Mirage, Inc., 6.75%, 2013 (a) 230,000 224,538
MGM Mirage, Inc., 6.875%, 2016 (a) 195,000 187,200
Royal Caribbean Cruises Ltd., 8%, 2010 990,000 1,042,567
Scientific Games Corp., 6.25%, 2012 380,000 365,750
Starwood Hotels & Resorts Worldwide, Inc., 7.875%, 2012 2,390,000 2,527,425
Station Casinos, Inc., 6.5%, 2014 440,000 420,200
Wynn Las Vegas LLC, 6.625%, 2014 225,000 213,469
---------------
$ 11,868,389
------------------------------------------------------------------------------------------------
Industrial - 0.2%
------------------------------------------------------------------------------------------------
Amsted Industries, Inc., 10.25%, 2011 (a) $ 725,000 $ 783,000
JohnsonDiversey Holdings, Inc., "B", 9.625%, 2012 310,000 313,100
---------------
$ 1,096,100
------------------------------------------------------------------------------------------------
Insurance - 0.9%
------------------------------------------------------------------------------------------------
American International Group, Inc., 4.25%, 2013 $ 4,250,000 $ 3,871,746
UnumProvident Corp., 7.625%, 2011 215,000 225,750
UnumProvident Corp., 6.85%, 2015 (a) 580,000 573,438
---------------
$ 4,670,934
------------------------------------------------------------------------------------------------
Insurance - Property & Casualty - 0.6%
------------------------------------------------------------------------------------------------
AXIS Capital Holdings Ltd., 5.75%, 2014 $ 1,689,000 $ 1,611,029
Fund American Cos., Inc., 5.875%, 2013 1,351,000 1,311,283
---------------
$ 2,922,312
------------------------------------------------------------------------------------------------
International Market Quasi-Sovereign - 2.6%
------------------------------------------------------------------------------------------------
KfW Bankengruppe, FRN, 2.844%, 2007 EUR 3,321,000 $ 4,250,289
Landesbank Baden-Wurttemberg, FRN, 2.764%, 2007 EUR 1,105,000 1,414,837
Landesbank Baden-Wurttemberg, FRN, 2.879%, 2007 EUR 1,033,000 1,318,758
Landesbank Baden-Wurttemberg, FRN, 2.704%, 2007 EUR 1,950,000 2,497,209
Network Rail MTN Finance PLC, FRN, 2.913%, 2007 EUR 3,359,000 4,301,568
---------------
$ 13,782,661
------------------------------------------------------------------------------------------------
International Market Sovereign - 20.8%
------------------------------------------------------------------------------------------------
Federal Republic of Germany, 3.5%, 2008 EUR 4,199,000 $ 5,380,749
Federal Republic of Germany, 3.75%, 2015 EUR 3,906,000 4,936,858
Federal Republic of Germany, 6.25%, 2030 EUR 774,000 1,278,045
Government of New Zealand, 6.5%, 2013 NZD 9,660,000 6,367,638
Government of New Zealand, 6%, 2017 NZD 1,975,000 1,278,072
Kingdom of Netherlands, 5.75%, 2007 EUR 4,645,000 6,052,640
Kingdom of Netherlands, 3.75%, 2009 EUR 5,253,000 6,767,279
Kingdom of Spain, 6%, 2008 EUR 5,210,000 6,945,670
Kingdom of Spain, 5.35%, 2011 EUR 3,009,000 4,144,686
Republic of Austria, 5.5%, 2007 EUR 5,174,000 6,813,612
Republic of Finland, 5.375%, 2013 EUR 8,575,000 12,004,613
Republic of France, 4.75%, 2007 EUR 9,352,000 12,173,111
Republic of France, 4.75%, 2012 EUR 1,219,000 1,643,687
Republic of France, 6%, 2025 EUR 814,000 1,284,861
Republic of Ireland, 4.25%, 2007 EUR 9,448,000 12,249,490
Republic of Ireland, 4.6%, 2016 EUR 2,507,000 3,374,033
United Kingdom Treasury, 5.75%, 2009 GBP 3,138,000 6,060,100
United Kingdom Treasury, 5%, 2012 GBP 3,055,000 5,807,331
United Kingdom Treasury, 8%, 2015 GBP 1,584,000 3,723,273
---------------
$ 108,285,748
------------------------------------------------------------------------------------------------
Machinery & Tools - 0.5%
------------------------------------------------------------------------------------------------
Case New Holland, Inc., 6%, 2009 $ 1,415,000 $ 1,390,237
Case New Holland, Inc., 9.25%, 2011 160,000 170,000
Case New Holland, Inc., 7.125%, 2014 (a) 380,000 368,600
Manitowoc Co., Inc., 10.5%, 2012 331,000 360,790
Terex Corp., 9.25%, 2011 265,000 280,237
---------------
$ 2,569,864
------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 1.6%
------------------------------------------------------------------------------------------------
AmerisourceBergen Corp., 5.875%, 2015 (a) $ 2,465,000 $ 2,374,330
DaVita, Inc., 6.625%, 2013 170,000 163,412
DaVita, Inc., 7.25%, 2015 400,000 390,000
Fisher Scientific International, Inc., 6.125%, 2015 1,500,000 1,458,750
HCA, Inc., 8.75%, 2010 960,000 1,026,611
HCA, Inc., 6.375%, 2015 740,000 701,023
Omnicare, Inc., 6.875%, 2015 760,000 737,200
Owens & Minor, Inc., 6.35%, 2016 970,000 951,120
Triad Hospitals, Inc., 7%, 2013 315,000 305,156
---------------
$ 8,107,602
------------------------------------------------------------------------------------------------
Metals & Mining - 0.9%
------------------------------------------------------------------------------------------------
Codelco, Inc., 5.625%, 2035 (a) $ 552,000 $ 494,255
Foundation PA Coal Co., 7.25%, 2014 900,000 904,500
Ispat Inland ULC, 9.75%, 2014 1,200,000 1,342,500
Massey Energy Co., 6.875%, 2013 (a) 785,000 753,600
Peabody Energy Corp., 5.875%, 2016 425,000 398,437
Peabody Energy Corp., "B", 6.875%, 2013 355,000 355,000
U.S. Steel Corp., 9.75%, 2010 413,000 443,975
---------------
$ 4,692,267
------------------------------------------------------------------------------------------------
Mortgage Backed - 13.6%
------------------------------------------------------------------------------------------------
Fannie Mae, 4.845%, 2013 $ 251,917 $ 240,810
Fannie Mae, 4.1%, 2013 942,224 866,397
Fannie Mae, 4.19%, 2013 796,800 734,699
Fannie Mae, 3.81%, 2013 584,655 529,037
Fannie Mae, 4.6%, 2014 759,991 713,664
Fannie Mae, 4.667%, 2014 1,343,004 1,264,911
Fannie Mae, 4.519%, 2014 906,209 845,736
Fannie Mae, 4.77%, 2014 593,248 560,844
Fannie Mae, 4.56%, 2015 318,496 296,222
Fannie Mae, 4.665%, 2015 257,927 241,549
Fannie Mae, 4.7%, 2015 246,095 230,995
Fannie Mae, 4.89%, 2015 173,356 164,737
Fannie Mae, 4.74%, 2015 600,000 563,731
Fannie Mae, 4.87%, 2015 519,609 492,712
Fannie Mae, 4.925%, 2015 1,935,921 1,842,324
Fannie Mae, 4.815%, 2015 600,000 565,872
Fannie Mae, 6%, 2016 - 2034 6,566,849 6,564,636
Fannie Mae, 5.5%, 2019 - 2035 41,275,166 39,994,371
Fannie Mae, 4.88%, 2020 573,170 555,613
Fannie Mae, 6.5%, 2032 - 2033 3,410,269 3,449,800
Freddie Mac, 6%, 2034 2,259,396 2,240,264
Freddie Mac, 5.5%, 2034 7,978,615 7,719,539
---------------
$ 70,678,463
------------------------------------------------------------------------------------------------
Natural Gas - Distribution - 0.1%
------------------------------------------------------------------------------------------------
AmeriGas Partners LP, 7.25%, 2015 $ 470,000 $ 458,250
AmeriGas Partners LP, 7.125%, 2016 175,000 168,437
---------------
$ 626,687
------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 1.2%
------------------------------------------------------------------------------------------------
Atlas Pipeline Partners LP, 8.125%, 2015 (a) $ 375,000 $ 382,500
CenterPoint Energy Resources Corp., 7.875%, 2013 1,600,000 1,757,762
Colorado Interstate Gas Co., 5.95%, 2015 170,000 158,788
Kinder Morgan Energy Partners, 7.125%, 2012 2,000,000 2,074,200
Magellan Midstream Partners LP, 5.65%, 2016 311,000 298,039
Southern Natural Gas Co., Inc., 8.875%, 2010 550,000 582,224
Williams Cos., Inc., 8.75%, 2032 800,000 896,000
---------------
$ 6,149,513
------------------------------------------------------------------------------------------------
Network & Telecom - 1.7%
------------------------------------------------------------------------------------------------
Citizens Communications Co., 9.25%, 2011 $ 815,000 $ 885,294
Citizens Communications Co., 9%, 2031 405,000 425,250
Deutsche Telekom International Finance B.V., 8.25%, 2030 1,500,000 1,733,769
Nordic Telephone Co. Holdings, 8.875%, 2016 (a) 180,000 185,850
Qwest Corp., 7.875%, 2011 860,000 884,725
Qwest Corp., 8.875%, 2012 450,000 482,625
Telecom Italia Capital, 6%, 2034 1,000,000 866,322
Telefonica Europe B.V., 7.75%, 2010 1,000,000 1,066,892
Verizon New York, Inc., 6.875%, 2012 2,542,000 2,594,424
---------------
$ 9,125,151
------------------------------------------------------------------------------------------------
Oil Services - 0.1%
------------------------------------------------------------------------------------------------
Basic Energy Services, Inc., 7.125%, 2016 (a) $ 130,000 $ 126,100
GulfMark Offshore, Inc., 7.75%, 2014 435,000 429,562
---------------
$ 555,662
------------------------------------------------------------------------------------------------
Oils - 0.7%
------------------------------------------------------------------------------------------------
Premcor Refining Group, Inc., 7.5%, 2015 $ 3,550,000 $ 3,677,335
------------------------------------------------------------------------------------------------
Printing & Publishing - 0.5%
------------------------------------------------------------------------------------------------
Dex Media East LLC, 9.875%, 2009 $ 565,000 $ 598,900
Dex Media West LLC, 9.875%, 2013 1,527,000 1,664,430
MediaNews Group, Inc., 6.875%, 2013 515,000 484,100
---------------
$ 2,747,430
------------------------------------------------------------------------------------------------
Railroad & Shipping - 0.6%
------------------------------------------------------------------------------------------------
TFM S.A. de C.V., 9.375%, 2012 $ 2,809,000 $ 2,991,585
------------------------------------------------------------------------------------------------
Real Estate - 0.5%
------------------------------------------------------------------------------------------------
EOP Operating LP, 4.75%, 2014 $ 1,500,000 $ 1,369,932
HRPT Properties Trust, 6.25%, 2016 1,324,000 1,317,483
---------------
$ 2,687,415
------------------------------------------------------------------------------------------------
Restaurants - 0.3%
------------------------------------------------------------------------------------------------
YUM! Brands, Inc., 8.875%, 2011 $ 1,500,000 $ 1,678,657
------------------------------------------------------------------------------------------------
Retailers - 0.7%
------------------------------------------------------------------------------------------------
Couche-Tard, Inc., 7.5%, 2013 $ 420,000 $ 423,150
Dollar General Corp., 8.625%, 2010 315,000 335,475
Gap, Inc., 9.55%, 2008 940,000 1,015,644
GSC Holdings Corp., 8%, 2012 (a) 250,000 248,750
Limited Brands, Inc., 5.25%, 2014 1,100,000 1,015,304
Rite Aid Corp., 8.125%, 2010 365,000 367,737
Steinway Musical Instruments, Inc., 7%, 2014 (a) 305,000 299,663
---------------
$ 3,705,723
------------------------------------------------------------------------------------------------
Steel - 0.1%
------------------------------------------------------------------------------------------------
Chaparral Steel Co., 10%, 2013 $ 515,000 $ 572,937
------------------------------------------------------------------------------------------------
Supranational - 0.3%
------------------------------------------------------------------------------------------------
Central American Bank, 4.875%, 2012 (a) $ 1,426,000 $ 1,332,249
------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 1.2%
------------------------------------------------------------------------------------------------
AT&T Wireless Services, Inc., 8.75%, 2031 $ 1,500,000 $ 1,841,125
Centennial Communications Corp., 10.125%, 2013 240,000 258,600
Cingular Wireless LLC, 6.5%, 2011 1,700,000 1,756,204
Excelcomindo Finance Co., 7.125%, 2013 (a) 100,000 97,500
Nextel Communications, Inc., 5.95%, 2014 1,315,000 1,277,859
Rogers Wireless, Inc., 6.375%, 2014 550,000 523,875
Rogers Wireless, Inc., 7.5%, 2015 450,000 457,875
---------------
$ 6,213,038
------------------------------------------------------------------------------------------------
Tobacco - 0.4%
------------------------------------------------------------------------------------------------
R.J. Reynolds Tobacco Holdings, Inc., 7.25%, 2012 $ 818,000 $ 811,865
R.J. Reynolds Tobacco Holdings, Inc., 7.3%, 2015 1,300,000 1,270,750
---------------
$ 2,082,615
------------------------------------------------------------------------------------------------
Transportation - Services - 0.2%
------------------------------------------------------------------------------------------------
Hertz Corp., 8.875%, 2014 (a) $ 315,000 $ 327,600
Stena AB, 7%, 2016 375,000 349,688
Westinghouse Air Brake Technologies Corp., 6.875%, 2013 370,000 364,450
---------------
$ 1,041,738
------------------------------------------------------------------------------------------------
U.S. Government Agencies - 2.8%
------------------------------------------------------------------------------------------------
Small Business Administration, 4.34%, 2024 $ 7,277,666 $ 6,671,555
Small Business Administration, 4.77%, 2024 5,582,028 5,268,469
Small Business Administration, 5.11%, 2025 2,526,531 2,427,355
---------------
$ 14,367,379
------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 9.8%
------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 12%, 2013 $ 7,500,000 $ 8,581,057
U.S. Treasury Bonds, 10.625%, 2015 3,350,000 4,685,290
U.S. Treasury Bonds, 6.25%, 2023 (f) 8,000,000 8,789,376
U.S. Treasury Bonds, 5.375%, 2031 635,000 642,243
U.S. Treasury Notes, 4.25%, 2014 2,500,000 2,352,930
U.S. Treasury Notes, 4.125%, 2015 1,285,000 1,193,694
U.S. Treasury Notes, 9.875%, 2015 5,025,000 6,783,162
U.S. Treasury Notes, 4.5%, 2016 4,128,000 3,928,857
U.S. Treasury Notes, TIPS, 2%, 2014 10,982,119 10,664,241
U.S. Treasury Notes, TIPS, 1.625%, 2015 3,772,561 3,539,575
---------------
$ 51,160,425
------------------------------------------------------------------------------------------------
Utilities - Electric Power - 3.9%
------------------------------------------------------------------------------------------------
Allegheny Energy Supply Co. LLC, 8.25%, 2012 (a) $ 370,000 $ 396,825
DPL, Inc., 6.875%, 2011 634,000 657,624
Duke Capital Corp., 8%, 2019 1,350,000 1,544,075
Edison Mission Energy, 7.75%, 2016 (a) 385,000 381,150
Empresa Nacional de Electricidad S.A., 8.35%, 2013 1,269,000 1,381,428
Enersis S.A., 7.375%, 2014 1,273,000 1,311,615
FirstEnergy Corp., 6.45%, 2011 4,199,000 4,288,985
HQI Transelec Chile S.A., 7.875%, 2011 1,500,000 1,592,160
Midwest Generation LLC, 8.75%, 2034 315,000 337,050
Mirant North America LLC, 7.375%, 2013 (a) 555,000 548,063
MSW Energy Holdings LLC, 7.375%, 2010 545,000 547,725
Nevada Power Co., 5.875%, 2015 900,000 862,419
NorthWestern Corp., 5.875%, 2014 1,435,000 1,403,330
NRG Energy, Inc., 7.375%, 2016 1,110,000 1,111,388
Reliant Resources, Inc., 9.5%, 2013 235,000 237,350
System Energy Resources, Inc., 5.129%, 2014 (a) 2,255,683 2,174,208
TXU Corp., 5.55%, 2014 570,000 523,564
TXU Energy Co., 7%, 2013 1,220,000 1,260,597
---------------
$ 20,559,556
------------------------------------------------------------------------------------------------
TOTAL BONDS (IDENTIFIED COST, $524,311,410) $ 514,584,787
------------------------------------------------------------------------------------------------
Common Stocks - 0.0%
------------------------------------------------------------------------------------------------
Printing & Publishing - 0.0%
------------------------------------------------------------------------------------------------
Golden Books Family Entertainment, Inc. (n) 3,683 $ 0
------------------------------------------------------------------------------------------------
Specialty Chemicals - 0.0%
------------------------------------------------------------------------------------------------
Sterling Chemicals, Inc. (n) 1 $ 13
------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $0) $ 13
------------------------------------------------------------------------------------------------
Convertible Preferred Stocks - 0.1%
------------------------------------------------------------------------------------------------
Automotive - 0.1%
------------------------------------------------------------------------------------------------
General Motors Corp., "B", 5.25% (Identified Cost, $263,915) 17,225 $ 302,643
------------------------------------------------------------------------------------------------
Warrants - 0.0%
------------------------------------------------------------------------------------------------
STRIKE FIRST
PRICE EXERCISE
------------------------------------------------------------------------------------------------
Business Services - 0.0%
------------------------------------------------------------------------------------------------
Loral Space & Communications Ltd. (n) $ 0.14 1/28/97 1,625 $0
Loral Space & Communications Ltd. (n) 0.14 1/28/97 750 0
------------------------------------------------------------------------------------------------
Specialty Chemicals - 0.0%
------------------------------------------------------------------------------------------------
Sterling Chemicals, Inc. (n) 52.00 12/31/02 1 $0
------------------------------------------------------------------------------------------------
TOTAL WARRANTS (IDENTIFIED COST, $29,434) $ 0
------------------------------------------------------------------------------------------------
Short-Term Obligations - 1.7%
------------------------------------------------------------------------------------------------
Edison Asset Securitization LLC, 5.06%, due 6/01/06,
at Amortized Cost and Value (t)(y) $ 8,650,000 $ 8,650,000
------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $533,254,759) (k) $ 523,537,443
------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (0.4)% (1,924,166)
------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $ 521,613,277
------------------------------------------------------------------------------------------------
(a) Security exempt from registration under Rule 144A of the Securities Act of 1933. These
securities may be sold in transactions exempt from registration, normally to qualified
institutional buyers. At period end, the aggregate value of these securities was $54,303,047,
representing 10.4% of net assets.
(f) All or a portion of the security has been segregated as collateral for an open futures
contract.
(i) Interest only security for which the trust receives interest on notional principal (Par
amount). Par amount shown is the notional principal and does not reflect the cost of the
security.
(k) As of May 31, 2006, the trust held securities fair valued in accordance with the policies
adopted by the Board of Trustees, aggregating $502,587,160 and 96.00% of market value, of
which 96.00% of market value was provided by an independent pricing service using an
evaluated bid.
(n) Non-income producing security.
(t) Security exempt from registration with the U.S. Securities and Exchange Commission under
Section 4(2) of the Securities Act of 1933.
(y) The rate shown represents an annualized yield at time of purchase.
The following abbreviations are used in the Portfolio of Investments and are defined:
FRN Floating Rate Note. The interest rate is the rate in effect as of period end. TIPS Treasury
Inflation Protected Security
Abbreviations have been used throughout this report to indicate amounts shown
in currencies other than the U.S. dollar. All amounts are stated in U.S.
dollars unless otherwise indicated. A list of abbreviations is
shown below:
AUD Australian Dollar GBP British Pound
CLP Chilean Peso JPY Japanese Yen
CNY Chinese Yuan Renminbi NZD New Zealand Dollar
EUR Euro TRY Turkish Lira
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Sales and Purchases in the table below are reported by currency.
NET UNREALIZED
CONTRACTS TO SETTLEMENT CONTRACTS APPRECIATION
DELIVER/RECEIVE DATE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
--------------------------------------------------------------------------------------------------------
SALES
-------------------------------------------------------------------------------------------------------
AUD 6,837,378 6/08/06-6/19/06 $ 5,223,251 $5,141,794 $ 81,457
EUR 79,291,220 6/08/06-7/17/06 96,892,572 101,638,469 (4,745,897)
GBP 19,182,069 6/05/06-8/02/06 34,624,192 35,861,054 (1,236,862)
NZD 22,360,296 6/06/06-6/26/06 13,728,272 14,184,713 (456,441)
-------------------------------------------------------------------------------------------------------
$150,468,287 $156,826,030 $(6,357,743)
-------------------------------------------------------------------------------------------------------
PURCHASES
-------------------------------------------------------------------------------------------------------
AUD 5,150,171 6/08/06-6/19/06 $ 3,931,598 $3,873,122 $ (58,476)
CLP 1,360,389,921 6/30/06 2,589,246 2,550,651 (38,595)
CNY 42,072,400 6/06/06 5,280,171 5,246,328 (33,843)
EUR 857,718 6/13/06 1,098,817 1,099,389 572
GBP 10,728,550 6/05/06 20,015,535 20,048,848 33,313
JPY 298,100,968 6/08/06 2,635,613 2,648,221 12,608
NZD 12,175,332 6/06/06-6/19/06 7,666,017 7,722,143 56,126
TRY 2,033,507 6/26/06 1,294,815 1,283,762 (11,053)
-------------------------------------------------------------------------------------------------------
$ 44,511,812 $44,472,464 $ (39,348)
-------------------------------------------------------------------------------------------------------
At May 31, 2006, forward foreign currency purchases and sales under master netting agreements excluded
above amounted to a net payable of $101,815 with Merrill Lynch International.
FUTURES CONTRACTS OUTSTANDING AT MAY 31, 2006:
UNREALIZED
EXPIRATION APPRECIATION/
DESCRIPTION CONTRACTS VALUE DATE (DEPRECIATION)
-----------------------------------------------------------------------------------------------------------------=
U.S. Treasury Bond (Long) 50 $5,310,938 Sep-06 $(32,206)
U.S. Treasury Note 10 year (Short) 88 9,233,125 Sep-06 45,783
-----------------------------------------------------------------------------------------------------------------
$ 13,577
-----------------------------------------------------------------------------------------------------------------
CREDIT DEFAULT SWAPS
UNREALIZED
NOTIONAL PRINCIPAL APPRECIATION
EXPIRATION AMOUNT OF CONTRACT DESCRIPTION (DEPRECIATION)
---------------------------------------------------------------------------------------------------------------
3/20/11 $1,270,000 Agreement between the trust and Citibank, N.A. $ (503)
to exchange the credit risk of AutoZone, Inc. As
a buyer of protection, the trust agrees to pay
Citibank N.A. quarterly at a fixed annual rate
of 0.65% of the notional amount of $1,270,000
until maturity on March 20, 2011. If AutoZone,
Inc. experiences one of the following credit
events: bankruptcy, failure to pay, or a
restructuring, the trust would then purchase
$1,270,000 par of AutoZone bonds at the post
credit event market price, and then deliver
those bonds to Citibank N.A., who in turn would
deliver $1,270,000 in cash to the trust.
3/20/11 $2,700,000 Agreement between the trust and Merrill Lynch (27,400)
Capital Services to exchange the credit risk of
Kohls Corp. As a buyer of protection, the trust
agrees to pay Merrill Lynch quarterly at a fixed
annual rate of 0.42% of the notional amount of
$2,700,000 until maturity on March 20, 2011. If
Kohls Corp. experiences one of the following
credit events: bankruptcy, failure to pay, or a
restructuring, the trust would then purchase
$2,700,000 par of Kohls bonds at the post credit
event market price, and then deliver those bonds
to Merrill Lynch, who in turn would deliver
$2,700,000 in cash to the trust.
3/20/11 $2,500,000 Agreement between the trust and Merrill Lynch (7,751)
Capital Services to exchange the credit risk of
New York Times Co. As a buyer of protection, the
trust agrees to pay Merrill Lynch quarterly at a
fixed annual rate of 0.43% of the notional
amount of $2,500,000 until maturity on March 20,
2011. If New York Times Co. experiences one of
the following credit events: bankruptcy, failure
to pay, or a restructuring, the trust would then
purchase $2,500,000 par of New York Times bonds
at the post credit event market price, and then
deliver those bonds to Merrill Lynch who in turn
would deliver $2,500,000 in cash to the trust.
--------
$(35,654)
At May 31, 2006 the trust had sufficient cash and/or securities to cover any commitments under these derivative contracts.
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS Statement of Assets and Liabilities (unaudited)
This statement represents your trust's balance sheet, which details the assets
and liabilities comprising the total value of the trust.
AT 5/31/06
ASSETS
------------------------------------------------------------------------------------------------------
Investments, at value (identified cost, $533,254,759) $523,537,443
Cash 223,025
Foreign currency, at value (identified cost, $29,042) 28,891
Receivable for forward foreign currency exchange contracts 327,445
Receivable for daily variation margin on open futures contracts 10,500
Interest receivable 8,101,296
Other assets 12,717
------------------------------------------------------------------------------------------------------
Total assets $532,241,317
------------------------------------------------------------------------------------------------------
LIABILITIES
------------------------------------------------------------------------------------------------------
Distributions payable $191,721
Payable for forward foreign currency exchange contracts 6,724,536
Payable for forward foreign currency exchange contracts subject
to master netting agreements 101,815
Payable for investments purchased 3,119,165
Payable for treasury shares reacquired 159,167
Unrealized depreciation on credit default swaps 35,654
Payable to affiliates
Management fee 20,920
Transfer agent and dividend disbursing costs 8,908
Administrative services fee 269
Payable for independent trustees' compensation 178,409
Accrued expenses and other liabilities 87,476
------------------------------------------------------------------------------------------------------
Total liabilities $10,628,040
------------------------------------------------------------------------------------------------------
Net assets $521,613,277
------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
------------------------------------------------------------------------------------------------------
Paid-in capital $588,262,477
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies (16,086,671)
Accumulated net realized gain (loss) on investments and foreign
currency transactions (54,022,668)
Undistributed net investment income 3,460,139
------------------------------------------------------------------------------------------------------
Net assets $521,613,277
------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding (60,240,083 issued,
less 4,601,344 treasury shares) 55,638,739
------------------------------------------------------------------------------------------------------
Net asset value per share (net assets of $521,613,277 / 55,638,739
shares of beneficial interest outstanding) $9.38
------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS Statement of Operations (unaudited)
This statement describes how much your trust earned in investment income and
accrued in expenses. It also describes any gains and/or losses generated by
trust operations.
SIX MONTHS ENDED 5/31/06
NET INVESTMENT INCOME
-------------------------------------------------------------------------------------------------------
Income
Interest $14,131,401
Dividends 16,734
-------------------------------------------------------------------------------------------------------
Total investment income $14,148,135
-------------------------------------------------------------------------------------------------------
Expenses
Management fee $1,570,119
Transfer agent and dividend disbursing costs 55,086
Administrative services fee 38,563
Independent trustees' compensation 40,669
Custodian fee 115,978
Shareholder communications 82,195
Auditing fees 29,415
Legal fees 4,832
Miscellaneous 117,251
-------------------------------------------------------------------------------------------------------
Total expenses $2,054,108
-------------------------------------------------------------------------------------------------------
Fees paid indirectly (40,991)
Reduction of expenses by investment adviser (1,842)
-------------------------------------------------------------------------------------------------------
Net expenses $2,011,275
-------------------------------------------------------------------------------------------------------
Net investment income $12,136,860
-------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
-------------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $(967,626)
Futures contracts 434,334
Swap transactions (2,079)
Foreign currency transactions (1,046,344)
-------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $(1,581,715)
-------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $(2,981,889)
Futures contracts (12,286)
Swap transactions (35,654)
Translation of assets and liabilities in foreign currencies (5,731,261)
-------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $(8,761,090)
-------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $(10,342,805)
-------------------------------------------------------------------------------------------------------
Change in net assets from operations $1,794,055
-------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS Statements of Changes in Net Assets
This statement describes the increases and/or decreases in net assets resulting
from operations, any distributions, and any shareholder transactions.
SIX MONTHS ENDED YEAR ENDED
5/31/06 11/30/05
(UNAUDITED)
CHANGE IN NET ASSETS
------------------------------------------------------------------------------------------------------
FROM OPERATIONS
------------------------------------------------------------------------------------------------------
Net investment income $12,136,860 $25,609,734
Net realized gain (loss) on investments and foreign
currency transactions (1,581,715) 20,004,433
Net unrealized gain (loss) on investments and foreign
currency translation (8,761,090) (24,950,918)
------------------------------------------------------------------------------------------------------
Change in net assets from operations $1,794,055 $20,663,249
------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
------------------------------------------------------------------------------------------------------
From net investment income $(14,117,181) $(29,042,810)
------------------------------------------------------------------------------------------------------
TRUST SHARE (PRINCIPAL) TRANSACTIONS
------------------------------------------------------------------------------------------------------
Cost of shares reacquired $(5,554,548) $(10,569,915)
------------------------------------------------------------------------------------------------------
Total change in net assets $(17,877,674) $(18,949,476)
------------------------------------------------------------------------------------------------------
NET ASSETS
------------------------------------------------------------------------------------------------------
At beginning of period 539,490,951 558,440,427
At end of period (including undistributed net investment
income of $3,460,139 and $5,440,460, respectively) $521,613,277 $539,490,951
------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS Financial Highlights
The financial highlights table is intended to help you understand the trust's financial performance for the semiannual period
and the past 5 fiscal years. Certain information reflects financial results for a single trust share. The total returns in the
table represent the rate by which an investor would have earned (or lost) on an investment in the trust share class (assuming
reinvestment of all distributions) held for the entire period.
SIX MONTHS YEARS ENDED 11/30
ENDED ----------------------------------------------------------------------
5/31/06 2005 2004 2003 2002 2001
(UNAUDITED)
Net asset value, beginning of period $9.58 $9.71 $9.58 $9.09 $9.17 $9.20
------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS (x)
------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.22 $0.45 $0.49 $0.49 $0.52 $0.67
Net realized and unrealized gain
(loss) on investments and foreign
currency (0.18) (0.09) 0.17 0.51 (0.03) (0.01)
------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.04 $0.36 $0.66 $1.00 $0.49 $0.66
------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.25) $(0.51) $(0.55) $(0.53) $(0.49) $(0.64)
From paid-in capital -- -- -- -- (0.09) (0.05)
------------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(0.25) $(0.51) $(0.55) $(0.53) $(0.58) $(0.69)
------------------------------------------------------------------------------------------------------------------------------
Net increase from repurchase of
capital shares $0.01 $0.02 $0.02 $0.02 $0.01 $0.00(w)
------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.38 $9.58 $9.71 $9.58 $9.09 $9.17
------------------------------------------------------------------------------------------------------------------------------
Per share market value, end of period $8.30 $8.43 $8.71 $8.78 $8.26 $8.35
------------------------------------------------------------------------------------------------------------------------------
Total return at market value (%)(r)(s) 1.41(n) 2.57 5.52 13.02 5.99 6.92
------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 0.78(a) 0.79 0.80 0.83 0.85 0.91
Expenses after expense reductions (f) 0.78(a) 0.79 0.80 0.83 0.85 0.91
Net investment income (x) 4.56(a) 4.64 5.11 5.21 5.80 7.18
Portfolio turnover 28 73 70 129 137 98
Net assets at end of period (000 Omitted) $521,613 $539,491 $558,440 $561,900 $546,281 $556,614
------------------------------------------------------------------------------------------------------------------------------
(a) Annualized.
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(n) Not annualized.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the trust may receive proceeds from litigation settlements, without which performance would be lower.
(w) Per share amount was less than $0.01.
(x) Effective December 31, 2001, the trust adopted the provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began amortizing and accreting all premiums and discounts on debt securities. Per share data and ratios for
periods prior to November 30, 2002 have not been restated to reflect this change.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) BUSINESS AND ORGANIZATION
MFS Charter Income Trust (the trust) is organized as a Massachusetts business
trust and is registered under the Investment Company Act of 1940, as amended, as
a closed-end management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The preparation of financial statements in conformity with U.S.
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, including securities of emerging market
issuers. 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. The markets of emerging markets countries are generally more
volatile than the markets of developed countries with more mature economies. All
of the risks of investing in foreign securities previously described are
heightened when investing in emerging markets countries.
INVESTMENT VALUATIONS - Debt instruments (other than short-term instruments),
including restricted debt instruments, are generally valued at an evaluated or
composite bid as reported by an independent pricing service. Values of debt
instruments obtained from pricing services can utilize both dealer-supplied
valuations and electronic data processing techniques, which take into account
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. Equity securities, including restricted equity
securities, are generally valued at the last sale or official closing price as
reported by an independent pricing service on the market or exchange on which
they are primarily traded. For securities for which there were no sales reported
that day, equity securities are generally valued at the last quoted daily bid
quotation as reported by an independent pricing service on the market or
exchange on which they are primarily traded. Short-term instruments with a
maturity at issuance of 397 days or less are generally valued at amortized cost,
which approximates market value. Futures contracts are generally valued at last
posted settlement price as reported by an independent pricing service on the
market on which they are primarily traded. Futures contracts for which there
were no trades that day for a particular position are generally valued at the
closing bid quotation as reported by an independent pricing service on the
market on which they are primarily traded. Forward foreign currency contracts
are generally valued at the mean of bid and asked prices for the time period
interpolated from rates reported by an independent pricing service for proximate
time periods. Swaps are generally valued at a broker-dealer bid quotation.
Securities and other assets generally valued on the basis of information from an
independent pricing service may also be valued at a broker-dealer bid quotation.
The values of foreign securities and other assets and liabilities expressed in
foreign currencies are converted to U.S. dollars using the mean of bid and asked
prices for rates reported by an independent pricing service. The Board of
Trustees has delegated primary responsibility for determining or causing to be
determined the value of the trust's investments (including any fair valuation)
to the adviser pursuant to valuation policies and procedures approved by the
Board. If the adviser determines that reliable market quotations are not readily
available, investments are valued at fair value as determined in good faith by
the adviser in accordance with such procedures under the oversight of the Board
of Trustees. Under the trust's valuation policies and procedures, market
quotations are not considered to be readily available for many types of debt
instruments. These investments are generally valued at fair value based on
information from independent pricing services. The adviser may rely on
independent pricing services or other information (such as the correlation with
price movements of similar securities in the same or other markets; the type,
cost and investment characteristics of the security; the business and financial
condition of the issuer; and trading and other market data) to assist in
determining whether to fair value and at what value to fair value an investment.
The value of an investment for purposes of calculating the trust's net asset
value can differ depending on the source and method used to determine value.
When fair valuation is used, the value of investments used to determine the
trust's net asset value may differ from quoted or published prices for the same
investments.
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.
INFLATION-ADJUSTED DEBT SECURITIES - The trust invests in inflation-adjusted
debt securities issued by the U.S. Treasury. The trust may also invest in
inflation-adjusted debt securities issued by U.S. Government agencies and
instrumentalities other than the U.S. Treasury and by other entities such as
U.S. and foreign corporations and foreign governments. The principal value of
these debt securities is adjusted by references to changes in the Consumer Price
Index or another general price or wage index. These debt securities typically
pay a fixed rate of interest, but this fixed rate is applied to the
inflation-adjusted principal amount. The principal paid at maturity of the debt
security is typically equal to the inflation-adjusted principal amount, or the
security's original par value, whichever is greater. Other types of
inflation-adjusted securities may use other methods to adjust for other measures
of inflation.
FOREIGN CURRENCY TRANSLATION - 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.
DERIVATIVE RISK - The trust may invest in derivatives for hedging or non-
hedging purposes. While hedging can reduce or eliminate losses, it can also
reduce or eliminate gains. When the trust uses derivatives as an investment to
gain market exposure, or for hedging purposes, gains and losses from derivative
instruments may be substantially greater than the derivative's original cost.
Derivative instruments include forward foreign currency exchange contracts, swap
agreements, and futures contracts.
FUTURES CONTRACTS - The trust may enter into futures contracts for the delayed
delivery of securities or currency, or contracts based on financial indices at a
fixed price on a future date. In entering such contracts, the trust is required
to deposit with the broker either in cash or securities an amount equal to a
certain percentage of the contract amount. Subsequent payments are made or
received by the trust each day, depending on the daily fluctuations in the value
of the contract, and are recorded for financial statement purposes as unrealized
gains or losses by the trust. Upon entering into such contracts, the trust bears
the risk of interest or exchange rates or securities prices moving unexpectedly,
in which case, the trust may not achieve the anticipated benefits of the futures
contracts and may realize a loss.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS - The trust may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of the contract. 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.
SWAP AGREEMENTS - The trust may enter into swap agreements. A swap is an
exchange of cash payments between the trust and another party. Net cash payments
are exchanged at specified intervals and are recorded as a realized gain or loss
in the Statement of Operations. The value of the swap is adjusted daily and the
change in value is recorded as unrealized appreciation or depreciation in the
Statement of Operations. Risks may arise upon entering into these agreements
from the potential inability of counterparties to meet the terms of their
contract and from unanticipated changes in the value of the financial index on
which the swap agreement is based.
CREDIT DEFAULT SWAPS - The trust may enter into credit default swaps to limit or
to reduce risk exposure of the trust to credit events such as bankruptcy,
failure to pay, or a restructuring of corporate and sovereign issuers. The trust
may also use credit default swaps to create direct or synthetic short or long
exposure to domestic or foreign corporate debt securities or certain sovereign
debt securities to which the trust is not otherwise exposed. In a credit default
swap, one party makes a stream of payments to another party in exchange for the
right to receive a specified return in the event of a default by a third party,
such as a corporate issuer or foreign issuer on its obligation.
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/or 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. On
loans collateralized by cash, the cash collateral is invested in a money market
fund or 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 May 31, 2006, there were no
securities on loan.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
discount is amortized or accreted for financial statement purposes in accordance
with U.S. generally accepted accounting principles. 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. Certain dividends from
foreign securities will be recorded when the trust is informed of the dividend
if such information is obtained subsequent to the ex- dividend date. Dividend
and interest payments received in additional securities are recorded on the
ex-dividend or ex-interest date in an amount equal to the value of the security
on such date. The trust may receive proceeds from litigation settlements
involving its portfolio holdings. Any proceeds received are reflected in
realized gain/loss in the Statement of Operations, or in unrealized gain/loss if
the security is still held by the trust.
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, for the six months ended May 31, 2006, is shown as a
reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The trust intends to continue to qualify as a
regulated investment company, as defined under Subchapter M of the Internal
Revenue Code, and to distribute all of its taxable income, including realized
capital gains. Accordingly, no provision for federal income tax is required in
the financial statements. Foreign taxes, if any, have been accrued by the trust
in the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from generally accepted accounting principles.
Certain capital accounts in the financial statements are periodically adjusted
for permanent differences in order to reflect their tax character. These
adjustments have no impact on net assets or net asset value per share. Temporary
differences which arise from recognizing certain items of income, expense, gain
or loss in different periods for financial statement and tax purposes will
reverse at some time in the future. Distributions in excess of net investment
income or net realized gains are temporary overdistributions for financial
statement purposes resulting from differences in the recognition or
classification of income or distributions for financial statement and tax
purposes.
Book/tax differences primarily relate to amortization and accretion of debt
securities, defaulted bonds, wash sale loss deferrals, straddle loss deferrals,
foreign currency transactions, and derivative transactions.
The tax character of distributions made during the current period will be
determined at fiscal year end.
The tax character of distributions declared to shareholders is as follows:
NOVEMBER 30, 2005 NOVEMBER 30, 2004
Ordinary income (including any
short-term capital gains) $29,042,810 $31,836,028
The federal tax cost and the tax basis components of distributable earnings were
as follows:
AS OF MAY 31, 2006
Cost of investments $541,116,892
---------------------------------------------------------
Gross appreciation $4,824,317
Gross depreciation (22,403,766)
---------------------------------------------------------
Net unrealized appreciation (depreciation) $(17,579,449)
AS OF NOVEMBER 30, 2005
Undistributed ordinary income 6,866,994
Capital loss carryforwards (45,279,622)
Other temporary differences (1,990,248)
Net unrealized appreciation (depreciation) (13,923,198)
The aggregate cost above includes prior fiscal year end tax adjustments.
As of May 31, 2006, the trust had available capital loss carryforwards to offset
future realized gains. Such losses expire as follows:
November 30, 2009 $(21,374,410)
November 30, 2010 (23,905,212)
-----------------------------------------------------
$(45,279,622)
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - The trust has an investment advisory agreement with 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 gross investment income.
The management fee, from net assets and gross investment income, incurred for
the six months ended May 31, 2006 was equivalent to an annual effective rate of
0.59% of the trust's average daily net assets.
TRANSFER AGENT - The trust pays a portion of transfer agent and dividend-
disbursing costs to MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary
of MFS. MFSC receives a fee from the trust, for its services as registrar and
dividend-disbursing agent. 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. For the six months ended May 31, 2006, these fees
amounted to $37,200. MFSC also receives payment from the trust for out-of-pocket
expenses paid by MFSC on behalf of the trust. For the six months ended May 31,
2006, these costs amounted to $11,868.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to certain funds
for which MFS acts as investment adviser. Under an administrative services
agreement, the funds may partially reimburse MFS the costs incurred to provide
these services, subject to review and approval by the Board of Trustees. Each
fund is charged a fixed amount plus a fee based on calendar year average net
assets. From July 1, 2005 through March 31, 2006, the trust's annual fixed
amount was $10,000. Effective April 1, 2006, the trust's annual fixed amount is
$17,500.
The administrative services fee incurred for the six months ended May 31, 2006
was equivalent to an annual effective rate of 0.0145% of the trust's average
daily net assets.
TRUSTEES' AND OFFICERS' COMPENSATION - The trust pays compensation to
Independent Trustees in the form of a retainer, attendance fees, and additional
compensation to Board and Committee chairpersons. The trust does not pay
compensation directly to Trustees or to officers of the trust who are also
officers of the investment adviser, 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 MFSC. The trust has an unfunded, defined
benefit plan for certain retired Independent Trustees which resulted in a
pension expense of $2,496. The trust also has an unfunded retirement benefit
deferral plan for certain Independent Trustees which resulted in an expense of
$1,017. Both amounts are included in Independent trustees' compensation for the
six months ended May 31, 2006. The deferred liability for retirement benefits
payable to certain Trustees under both plans amounted to $155,871 at May 31,
2006, and is included in payable for independent trustees' compensation.
DEFERRED TRUSTEE COMPENSATION - Under a Deferred Compensation Plan (the Plan)
Independent Trustees previously were allowed to elect to defer receipt of all or
a portion of their annual compensation. Trustees are no longer allowed to defer
compensation under the Plan. Amounts previously deferred are treated as though
equivalent dollar amounts had been invested in shares of the trust or other MFS
funds selected by the Trustee. Deferred amounts represent an unsecured
obligation of the trust until distributed in accordance with the Plan. Included
in other assets and payable for independent trustees' compensation is $12,717 of
Deferred Trustees' Compensation.
OTHER - This trust and certain other MFS funds (the funds) have entered into a
services agreement (the Agreement) which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an Independent
Chief Compliance Officer (ICCO) for the funds. The ICCO is an officer of the
funds and the sole member of Tarantino LLC. The funds can terminate the
Agreement with Tarantino LLC at any time under the terms of the Agreement. For
the six months ended May 31, 2006, the fee paid to Tarantino LLC was $2,195. MFS
has agreed to reimburse the trust for a portion of the payments made by the
funds to Tarantino LLC in the amount of $1,842, which is shown as a reduction of
total expenses in the Statement of Operations. Additionally, MFS has agreed to
bear all expenses associated with office space, other administrative support,
and supplies provided to the ICCO.
(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 $7,938,390 $6,294,306
-------------------------------------------------------------------------------
Investments (non-U.S. government securities) $142,060,697 $139,263,957
-------------------------------------------------------------------------------
(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 the repurchase by the trust of up to 10% annually of its own shares
of beneficial interest. The trust repurchased and retired 655,100 shares of
beneficial interest during the six months ended May 31, 2006 at an average price
per share of $8.35 and a weighted average discount of 10.84% per share. The
trust repurchased and retired 1,219,000 shares of beneficial interest during the
year ended November 30, 2005 at an average price per share of $8.67 and a
weighted average discount of 10.39% per share. Transactions in trust shares were
as follows:
SIX MONTHS ENDED YEAR ENDED
MAY 31, 2006 NOVEMBER 30, 2005
SHARES AMOUNT SHARES AMOUNT
Treasury shares reacquired (655,100) $(5,554,548) (1,219,100) $(10,569,915)
(6) LINE OF CREDIT
The trust and other affiliated funds participate in a $1 billion unsecured
committed line of credit provided by a syndication of banks under a credit
agreement. In addition, the trust and other affiliated funds have established
uncommitted borrowing arrangements with certain banks. Borrowings may be made
for temporary financing needs. Interest is charged to each fund, based on its
borrowings, at a rate equal to the Federal Reserve funds rate plus 0.35%. In
addition, a commitment fee, based on the average daily, unused portion of the
committed line of credit, is allocated among the participating funds at the end
of each calendar quarter. The commitment fee allocated to the trust for the six
months ended May 31, 2006 was $2,681 and is included in miscellaneous expense on
the Statement of Operations. The trust had no significant borrowings during the
six months ended May 31, 2006.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees and Shareholders of the MFS Charter Income Trust:
We have reviewed the accompanying statement of assets and liabilities of the MFS
Charter Income Trust (the Trust), including the portfolio of investments, as of
May 31, 2006, and the related statements of operations, changes in net assets,
and financial highlights for the six-month period ended May 31, 2006. These
interim financial statements are the responsibility of the Trust's management.
We conducted our review in accordance with the standards of the Public
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying interim financial statements for them to be in
conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the statement of changes in
net assets for the year ended November 30, 2005, and financial highlights for
each of the five years in the period ended November 30, 2005, and in our report
dated January 10, 2006, we expressed an unqualified opinion on such statement of
changes in net assets and financial highlights.
ERNST & YOUNG LLP
Boston, Massachusetts
July 14, 2006
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board's most recent review and renewal of the Fund's
investment advisory agreement is available by clicking on the fund's name under
"Select a fund" on the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds' proxy voting policies and procedures is
available without charge, upon request, by calling 1-800-225-2606, by visiting
the Proxy Voting section of mfs.com or by visiting the SEC's Web site at
http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is available
without charge by visiting the Proxy Voting section of mfs.com or by visiting
the SEC's Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The trust will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The trust's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-551-5850. The trust's Form N-Q is available on
the EDGAR database on the Commission's Internet Web site at http://www.sec.gov,
and copies of this information may be obtained, upon payment of a duplicating
fee, by electronic request at the following e-mail address: publicinfo@sec.gov
or by writing the Public Reference Section at the above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
CONTACT INFORMATION AND NUMBER OF SHAREHOLDERS
INVESTOR INFORMATION
Transfer Agent, Registrar and Dividend Disbursing Agent
Call 1-800-637-2304 any business day from 8 a.m. to 8 p.m. Eastern time
Write to: MFS Service Center, Inc.
P.O. Box 55024
Boston, MA 02205-5024
NUMBER OF SHAREHOLDERS
As of May 31, 2006, our records indicate that there are 3,811 registered
shareholders and approximately 32,596 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:
MFS Service Center, Inc.
P.O. Box 55024 Boston, MA 02205-5024
1-800-637-2304
M F S(SM)
INVESTMENT MANAGEMENT(R)
(C)2006 MFS Investment Management(R)
500 Boylston Street,
Boston, MA 02116.
MCR-SEM-07/06 43M
ITEM 2. CODE OF ETHICS.
The Registrant has not amended any provision in its Code of Ethics (the "Code")
that relates to any element of the Code's definition enumerated in paragraph
(b) of Item 2 of this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for semi-annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for semi-annual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable for semi-annual reports.
ITEM 6. SCHEDULE OF INVESTMENTS
A schedule of investments for each series of the Registrant is included as part
of the report to shareholders of such series under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable for semi-annual reports.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable because the portfolio manager(s) of the Registrant did not
change from those set forth in the Registrant's most recent annual Form N-CSR.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
=============================================================================================================
MFS CHARTER INCOME TRUST
-------------------------------------------------------------------------------------------------------------
(D)
(C) MAXIMUM NUMBER
TOTAL NUMBER OF (OR APPROXIMATE
(B) SHARES PURCHASED AS DOLLAR VALUE) OF
(A) AVERAGE PART OF PUBLICLY SHARES THAT MAY YET
TOTAL NUMBER OF PRICE PAID ANNOUNCED PLANS OR BE PURCHASED UNDER
PERIOD SHARES PURCHASED PER SHARE PROGRAMS THE PLANS OR PROGRAMS
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
12/1/05 - 12/31/05 103,600 $8.46 103,600 4,628,124
-------------------------------------------------------------------------------------------------------------
1/1/06 - 1/31/06 100,400 $8.67 100,400 4,527,724
-------------------------------------------------------------------------------------------------------------
2/1/06 - 2/28/06 84,300 $8.60 84,300 4,443,424
-------------------------------------------------------------------------------------------------------------
3/1/06 - 3/31/06 161,800 $8.47 161,800 5,438,754
-------------------------------------------------------------------------------------------------------------
4/1/06 - 4/30/06 73,100 $8.32 73,100 5,365,654
-------------------------------------------------------------------------------------------------------------
5/1/06 - 5/31/06 131,900 $8.37 131,900 5,233,754
-------------------------------------------------------------------------------------------------------------
Total 655,100 $8.48 665,100
-------------------------------------------------------------------------------------------------------------
Note: The Board of Trustees approves procedures to repurchase Fund shares
annually. The notification to shareholders of the program is included in the
semi-annual and annual reports sent to shareholders. These annual programs
begin on March 1st of each year. The programs conform to the conditions of Rule
10b-18 of the Securities Exchange Act of 1934 and limit the aggregate number of
Fund shares that may be repurchased in each annual period (March 1 through the
following February 28) to 10% of the Registrant's outstanding shares as of the
first day of the plan year (March 1). The aggregate number of Fund shares
available for repurchase for the March 1, 2006 plan year are 5,600,554.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no material changes to the procedures by which shareholders may send
recommendations to the Board for nominees to the Registrant's Board since the
Registrant last provided disclosure as to such procedures in response to the
requirements of Item 7(d)(2)(ii)(G) of Schedule 14A or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the effectiveness of the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940 (the "Act")) as conducted within 90 days of
the filing date of this Form N-CSR, the registrant's principal financial
officer and principal executive officer have concluded that those
disclosure controls and procedures provide reasonable assurance that the
material information required to be disclosed by the registrant on this
report is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and
forms.
(b) There were no changes in the registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during
the second fiscal quarter of the period covered by the report that have
materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant
intends to satisfy the Item 2 requirements through filing of an
exhibit.
(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Act (17 CFR 270.30a-2): Attached hereto.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the Act (17 CFR
270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17
CFR 240.13a-14(b) or 240.15d-14(b)) and Section 1350 of Chapter 63 of Title
18 of the United States Code (18 U.S.C. 1350) as an exhibit. A
certification furnished pursuant to this paragraph will not be deemed
"filed" for the purposes of Section 18 of the Exchange Act (15 U.S.C. 78r),
or otherwise subject to the liability of that section. Such certification
will not be deemed to be incorporated by reference into any filing under
the Securities Act of 1933 or the Exchange Act, except to the extent that
the registrant specifically incorporates it by reference: Attached hereto.
NOTICE
A copy of the Amended and Restated Declaration of Trust of the Registrant is on
file with the Secretary of State of the Commonwealth of Massachusetts and
notice is hereby given that this instrument is executed on behalf of the
Registrant by an officer of the Registrant as an officer and not individually
and the obligations of or arising out of this instrument are not binding upon
any of the Trustees or shareholders individually, but are binding only upon the
assets and property of the respective constituent series of the Registrant.
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) MFS CHARTER INCOME TRUST
------------------------------------------------------------------
By (Signature and Title)* MARIA F. DWYER
-----------------------------------------------------
Maria F. Dwyer, President
Date: July 21, 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.
By (Signature and Title)* MARIA F. DWYER
-----------------------------------------------------
Maria F. Dwyer, President (Principal Executive
Officer)
Date: July 21, 2006
-------------
By (Signature and Title)* TRACY ATKINSON
-----------------------------------------------------
Tracy Atkinson, Treasurer (Principal Financial Officer
and Accounting Officer)
Date: July 21, 2006
-------------
* Print name and title of each signing officer under his or her signature.