SCHEDULE: Activist Investor Opposes MFS Charter Income Trust Merger

Sit Investment Associates files Schedule 13D, revealing a 9.8% stake in MFS Charter Income Trust and strong opposition to its proposed reorganization into MFS Multimarket Income Trust.

Summary

• Sit Investment Associates Inc. and Sit Fixed Income Advisors II LLC (Sit Entities) filed a Schedule 13D for MFS Charter Income Trust (MCR).
• Sit Entities beneficially own 4,097,943 shares of MCR, representing 9.8% of the class outstanding.
• The shares were acquired for investment purposes using client funds.
• Sit Entities oppose the proposed reorganization of MCR, MFS Intermediate Income Trust (MIN), MFS Government Markets Income Trust (MGF), and MFS Intermediate High Income Fund (CIF) (Acquired Funds) into MFS Multimarket Income Trust (MMT, Acquiring Fund).
• The primary reason for opposition is the material difference in investment strategy and risk profile, specifically MMT's ability to invest 100% in junk bonds compared to MGF and MIN's significant allocation to high-quality securities.
• Sit Entities sent a letter to the Board of Trustees on February 24, 2026, stating their opposition and requesting the cancellation of the reorganization.
• Transactions in MCR shares by Sit Entities between December 26, 2025, and February 2, 2026, were all "BUY" transactions, totaling 220,731 shares at prices ranging from $6.26 to $6.35 per share.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as negative for the proposed reorganization and potentially negative for the Issuer's management, as a significant shareholder is publicly opposing a key strategic initiative due to perceived increased risk for investors.

Positives

• Sit Entities, experienced closed-end fund investors, see MCR shares as an attractive investment opportunity, evidenced by recent purchases.
• Sit Entities are actively advocating for shareholder interests by opposing a reorganization they deem detrimental.

Negatives

• The proposed reorganization would significantly increase risk for shareholders of MGF and MIN by merging them into a fund (MMT) that can invest 100% in junk bonds, contrasting with their current mandates for high-quality securities.
• Sit Entities believe the reorganization is not in the best interest of Acquired Funds shareholders and primarily benefits the Funds' sponsor.
• Sit Entities characterize the proposed reorganization as a "bait and switch scheme."

Risks

• Increased investment risk for MGF and MIN shareholders if the proposed reorganization proceeds, due to the Acquiring Fund's (MMT) ability to invest 100% in junk bonds, compared to MGF's 80% government securities mandate and MIN's significant high-quality allocation.
• Potential for changes in the Issuer's investment strategy and composition of its portfolio if the reorganization is approved.

Future Outlook

Sit Entities intend to continuously review their investment in MFS Charter Income Trust and may further purchase, hold, vote, trade, sell, or otherwise deal in the shares. They may also propose or take actions related to the Issuer's performance, market prices, distribution rate, capitalization, investment strategy, and portfolio holdings, including making shareholder proposals or nominating directors.

Management Comments

• "We do not support the proposed reorganization because the Acquiring Fund’s investment strategy and risk profile is materially different than the investment strategies and risk profiles of the Acquired Funds." Bryce A. Doty, Senior Portfolio Manager, Sit Investment Associates.
• "Specifically, and most importantly, MGF and MIN are currently required to maintain significant allocations to high-quality securities. In fact, MGF is required to invest at least 80% of its net assets in government securities. In contrast, the Acquiring Fund may invest 100% of its assets in junk bonds. If approved, the proposed reorganization will significantly increase the risk for investors in MGF and MIN. Our clients cannot accept this level of increased risk." Bryce A. Doty.
• "We believe that the proposed reorganization is not in the best interest of the Acquired Funds shareholders and only benefits the Funds sponsor." Bryce A. Doty.
• "We ask that the Board cancel the proposed reorganization." Bryce A. Doty.
• "We believe that the proposed reorganization is a bait and switch scheme by Massachusetts Financial Services Company." Bryce A. Doty.

Industry Context

StockSavvy.ai notes that activist investor filings like this Schedule 13D are common in the closed-end fund space, particularly when fund managers propose mergers or reorganizations that alter investment mandates or risk profiles. Such actions often draw scrutiny from long-term investors concerned about fee structures, liquidity, and alignment with original investment objectives. Sit Investment Associates' opposition highlights a broader trend of shareholders pushing back against changes perceived to benefit fund sponsors over investors.

Comparison to Industry Standards

• The filing does not provide specific comparisons to industry benchmarks or other comparable companies, projects, or results. It focuses on the internal comparison of the target funds' current mandates versus the acquiring fund's proposed mandate.

Corporate Governance

Stakeholder Impact

• Shareholders (MGF, MIN): Face significantly increased investment risk if the reorganization proceeds, due to exposure to lower-quality assets (junk bonds) in the Acquiring Fund.
• Shareholders (MCR, CIF): Also part of the reorganization, though the filing focuses on MGF and MIN's risk profile change.
• Management/Board of Trustees: Their proposed reorganization is being publicly challenged by a significant shareholder, potentially impacting their credibility and the outcome of the vote.
• Fund Sponsor (Massachusetts Financial Services Company): Accused by Sit Entities of proposing a "bait and switch scheme" that primarily benefits the sponsor, potentially damaging reputation.

Next Steps

• Sit Entities intend to review their investment in the Issuer's shares on a continuing basis.
• Sit Entities may further purchase, hold, vote, trade, sell, or otherwise deal in the shares.
• Sit Entities may engage in discussions with management, the Board of Trustees, and shareholders regarding the reorganization, performance, market prices, distribution rate, capitalization, investment strategy, and portfolio holdings.
• Sit Entities may make binding and non-binding shareholder proposals.
• Sit Entities may nominate one or more individuals for election to the Board of Trustees.
• The Board of Trustees of the Issuer and other Target Funds will proceed with the plan of reorganization unless cancelled, which requires shareholder approval.

Key Dates

Recommendation

The filing indicates a significant shareholder is actively opposing a proposed reorganization due to concerns about increased risk and misalignment with shareholder interests. This creates uncertainty around the merger's approval. Investors currently holding MCR, MGF, or MIN should hold to monitor the outcome of this activist campaign and the shareholder vote, as the success or failure of the reorganization could significantly impact the funds' future risk profiles and valuations. Investors considering new positions should also hold, awaiting clarity on the merger's fate.

Keywords

MFS Charter Income Trust, MCR, Sit Investment Associates, Schedule 13D, Activist Investor, Closed-End Fund, Reorganization, Merger Opposition, Investment Strategy, Risk Profile, Junk Bonds, Shareholder Activism, MFS Multimarket Income Trust, MMT