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 811-5078
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MFS GOVERNMENT MARKETS INCOME TRUST
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(Exact name of registrant as specified in charter)
500 Boylston Street, Boston, Massachusetts 02116
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(Address of principal executive offices) (Zip code)
Susan S. Newton
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
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(Name and address of agents for service)
Registrant's telephone number, including area code: (617) 954-5000
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Date of fiscal year end: November 30
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Date of reporting period: May 31, 2005
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ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) Mutual Funds
SEMIANNUAL REPORT 5/31/05
MFS(R) GOVERNMENT MARKETS
INCOME TRUST
A path for pursuing opportunity
M F S(SM)
INVESTMENT MANAGEMENT(R)
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NOT FDIC INSURED MAY LOSE VALUE NO BANK OR CREDIT UNION GUARANTEE NOT A DEPOSIT
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUIF
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MFS(R) GOVERNMENT MARKETS INCOME TRUST
The trust seeks to provide a high level of current income.
New York Stock Exchange Symbol: MGF
TABLE OF CONTENTS
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LETTER FROM THE CEO 1
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MFS ORIGINAL RESEARCH(R) 2
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PORTFOLIO COMPOSITION 3
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MANAGEMENT REVIEW 4
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PORTFOLIO MANAGER'S PROFILE 6
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PERFORMANCE SUMMARY 7
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DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN 9
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PORTFOLIO OF INVESTMENTS 10
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FINANCIAL STATEMENTS 15
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NOTES TO FINANCIAL STATEMENTS 20
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REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM 31
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RESULTS OF SHAREHOLDER MEETING 32
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PROXY VOTING POLICIES AND INFORMATION 33
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QUARTERLY PORTFOLIO DISCLOSURE 33
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CONTACT INFORMATION AND
NUMBER OF SHAREHOLDERS BACK COVER
LETTER FROM THE CEO
Dear Shareholders,
[Photo of Robert J. Manning]
Dear Shareholders,
As a professional investor for more than 20 years, I've often been asked to
name the single most important factor in investment success. My answer is
always the same: diversification. At MFS we talk about applying a disciplined
diversification(SM) strategy to a portfolio as a three step process: allocate
among the major asset classes; diversify within each asset class; and
rebalance regularly to avoid unnecessary risk.
Individual investors sometimes assume that the amount they're putting away is
too small to allow for diversification. My response would be that a good
investment plan, developed with the help of an investment professional, should
provide a way to properly diversify your contributions.
Remember that the purpose of diversification is to own investments that
historically have not moved in sync with each other - in the hope that, in any
given period, underperforming holdings will be somewhat counteracted by other
outperforming holdings. If none of your asset classes did badly in the past
year or so, you're probably not properly diversified.
Americans today have more of their wealth tied up in the markets than in any
previous period of our history, but we are not yet making the most of our
opportunities. While neither asset allocation nor diversification can
guarantee a profit or protect against a loss, I would voice the opinion that,
to a large extent, a failure to have a plan, diversify contributions, and
rebalance a portfolio annually has been behind many U.S. investors' failure to
reach their long-term financial goals.
For more information on how to apply a disciplined diversification(SM)
strategy to your portfolio, I would urge you to contact your own investment
professional. You may also want to refer to information on the subject on our
Website, MFS.COM.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
July 15, 2005
The opinions expressed in this letter are those of MFS, and no forecasts can
be guaranteed.
MFS ORIGINAL RESEARCH(R)
A DISCIPLINED INVESTMENT PROCESS
Since 1932 we have built our firm on the philosophy that fundamental, bottom-
up Original Research(SM) is the most effective process to take advantage of
investment opportunities in capital markets across all asset classes around
the world.
From start to finish, here is how the investment process at MFS(R) works:
o ANALYZE: Our analysts uncover investments one opportunity at a time by
developing in-depth, firsthand knowledge of companies.
o COLLABORATE: Constant communication enables our analysts and portfolio
managers to exchange opinions and challenge ideas in a spirit of
collaboration.
o RECOMMEND: The analysts give "buy" ratings to the securities they believe
offer the greatest long-term opportunities.
o INVEST: Our portfolio managers construct diversified portfolios by taking the
analysts' recommendations, drawing on their own experience, and using that
combined knowledge to select securities that they believe match their
portfolios' investment discipline.
o ASSESS RISK: MFS' quantitative teams help the managers in their efforts to
ensure that the risk levels they assume are appropriate for their portfolios'
objectives.
o MONITOR: The analysts and portfolio managers continue to review the
fundamentals of every security in a portfolio in their efforts to ensure it
remains a right fit for that particular portfolio.
FOCUSED ON YOUR GOALS
We believe that bottom-up research is the best way to uncover the factors that
drive security prices over the long term and the best way to help investors
pursue their long-term financial goals.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE*
Bonds 91.5%
Cash & Other Net Assets 8.5%
BOND MARKET SECTORS*
Mortgage-Backed Securities 54.0%
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U.S. Government Agencies 16.7%
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International Bonds 10.5%
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Cash and Other Net Assets 8.5%
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U.S. Treasury Securities 6.4%
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Emerging Market Bonds 3.3%
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Commercial Mortgage-Backed Securities 0.5%
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Residential Mortgage-Backed Securities 0.1%
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CREDIT QUALITY OF BONDS**
AAA 94.6%
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A 0.4%
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BBB 2.0%
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BB 1.1%
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B 0.4%
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Not Rated 1.5%
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PORTFOLIO FACTS
Average Duration 3.7
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Avererage Life 6.0 yrs.
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Average Maturity*** 14.8 yrs.
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Average Credit Quality**** AAA
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Average Short-Term Credit Quality A-1
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* For purposes of this graphical presentation, the bond component includes
both accrued interest amounts and the equivalent exposure from any
derivative holdings, if applicable.
** 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 mortgage-backed
securities, if any, are included in a "AAA"-rating category. Percentages
are based on the total market value of investments as of 5/31/05.
*** 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 pre- refunded 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.
**** The Portfolio Average Credit Quality rating is based upon a market
weighted average of portfolio holdings.
Percentages are based on net assets as of 5/31/05, unless otherwise noted.
The portfolio is actively managed, and current holdings may be different.
MANAGEMENT REVIEW
SUMMARY OF RESULTS
For the six months ended May 31, 2005, the MFS Government Markets Income Trust
provided a total return of 2.96%, at net asset value. In comparison, the
trust's benchmark, the Lehman Brothers Government/Mortgage Index, returned
2.89%. The trust's investment objective is to provide a high level of current
income. The trust will attempt to achieve this objective by investing at least
80% of its net assets in U.S. and non-U.S. government securities.
MARKET ENVIRONMENT
The U.S. fixed-income market experienced a flattening of the yield curve
during the six-month period. (A yield curve for bonds shows the relationship
between yield and time to maturity.) The U.S. Federal Reserve Board raised its
target federal funds rate four times, continuing its steady drumbeat of
quarter-point rate hikes that began on June 30, 2004. But while the Fed seemed
committed to a course of gradually raising short-term rates, several factors
caused long-term rates to stagnate or retreat.
Job growth, which had shot up in the spring of 2004, ebbed and flowed during
the period; uncertainty about the employment situation helped to push down
yields on longer-dated bonds. Another factor that held long-term rates down
was overseas demand for U.S. Treasuries, especially from foreign central
banks. However, moderate GDP growth and inflation concerns kept shorter-term
interest rates moving up. For the period as a whole, the net effect was a
substantial flattening of the yield curve as short-term rates rose
significantly while long-term rates were generally flat to down.
TRUST POSITIONING
MFS Government Markets Income Trust, a closed-end trust, maintains a portfolio
primarily consisting of U.S. government and foreign government securities.
A significant portion of the portfolio was invested in U.S. government
securities while the remainder was invested in emerging market debt and
sovereign debt of foreign governments. The majority of our U.S. holdings were
split amongst agencies, mortgage-backed and government securities. Our foreign
holdings were allocated across Europe and Pacific Rim nations, excluding
Japan. We emphasized European government bonds while avoiding Japan, because
we felt that interest rates there were extremely low and the environment
provided little potential for growth. Alternatively, we invested in Australia,
New Zealand and the U.K.
CONTRIBUTORS TO PERFORMANCE
The trust's yield curve exposure aided results relative to the benchmark.
Over the period interest rates increased on the short-end of the yield curve
(3 months to 5 years) while decreasing on the longer end (10 years to 30
years). In comparison to the index, the trust had a smaller concentration of
bonds with maturities less than five years, while a greater portion of the
portfolio was invested in bonds with maturities greater than ten years. In
this environment, having greater exposure to long term bonds and less exposure
to short term bonds contributed to the trust's outperformance over the period.
Our positioning in agency related securities and mortgages issued by Fannie
Mae generated strong results. Our holdings in European sovereign debt and
emerging markets contributed over the period as well.
DETRACTORS FROM PERFORMANCE
The trust's Japanese and Swedish currency exposure acted as a drag on
performance. Over the period, the dollar appreciated against the euro, British
pound, and Pacific Rim currencies, which hurt returns of our unhedged foreign
denominated bond holdings. During the period, the benchmark benefited from a
yield advantage over the trust. The benchmark generated a higher level of
income over the period, which negatively impacted performance. Additionally,
the trust's positioning in TIPS (treasury inflation protection securities)
dampened results.
Respectfully,
/s/ Peter C. Vaream
Peter C. Vaream
Portfolio Manager
On behalf of the MFS Fixed Income Strategy Group
The views expressed in this report are those of the portfolio management team
only through the end of the period of the report, as stated on the cover, and
do not necessarily reflect the views of MFS or any other person in the MFS
organization. These views are subject to change at any time based on market
and other conditions, and MFS disclaims any responsibility to update such
views. These views may not be relied upon as investment advice or as an
indication of trading intent on behalf of any MFS fund. References to specific
securities are not recommendations of such securities and may not be
representative of any MFS fund's current or future investments.
PORTFOLIO MANAGER'S PROFILE
Peter C. Vaream is Senior Vice President of MFS Investment Management(R)
(MFS(R)) and manages the investment-grade bond, government securities and
global governments portfolios of our mutual funds, variable annuities and
institutional accounts. He is a member of the MFS Fixed Income Strategy Group.
Peter joined MFS in 1992 and became a portfolio manager in 1993. Previously, he
was Vice President in the Fixed Income Department at The First Boston Corp.
from 1986 to 1992. Prior to that, he served as a corporate financial analyst.
Peter earned a bachelor's degree in finance from New York University.
All portfolio managers at MFS are supported by an investment staff of over 160
professionals utilizing MFS Original Research(R), a global, company-oriented,
bottom-up process of selecting securities.
PERFORMANCE SUMMARY FOR THE SIX MONTHS ENDED 5/31/05
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
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Net asset value 11/30/2004 $7.43
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5/31/2005 $7.48
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New York Stock Exchange 11/30/2004 $6.55
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2/04/2005 (high)* $6.77
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3/29/2005 (low)* $6.40
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5/31/2005 $6.69
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* For the period from December 1, 2004 through May 31, 2005.
TOTAL RETURNS VS BENCHMARKS
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New York Stock Exchange price** 4.46%
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Net asset value** 2.96%
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Lehman Brothers Government/Mortgage Index 2.89%
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** Includes reinvestments of dividends and capital distributions.
INDEX DEFINITIONS
Lehman Brothers Government/Mortgage 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).
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. The trust's shares also may trade at a premium to their net asset
value.
When trust shares trade at a premium, buyers pay more than the asset value of
the 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 return that is calculated based on the net asset value and
New York Stock Exchange price 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 increasing the trust's
expense ratio.
KEY RISK CONSIDERATIONS
The portfolio may invest in derivative securities, which may include futures
and options. These types of instruments can increase share price fluctuation.
The portfolio invests in foreign and/or emerging markets securities, which are
more susceptible to interest rates, currency exchange rates, economic, and
political risks.
The portfolio invests in government-guaranteed securities. These guarantees
apply to the underlying securities only and not to the prices and yields of
the portfolio.
The portfolio can invest a relatively high percentage of its assets in one or
more issuers, thereby making it more susceptible to any single economic,
political or regulatory occurence.
Because the portfolio invests in interest bearing securities, its value will
be affected by changes in interest rates.
These risks can increase share price volatility.
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) - 5/31/05
The Portfolio of Investments is a complete list of all securities
owned by your trust. It is categorized by broad-based asset classes.
Bonds - 98.7%
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ISSUER PAR AMOUNT $ VALUE
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U.S. Bonds - 85.2%
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Agency - Other - 6.0%
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Financing Corp., 10.7%, 2017 $ 4,095,000 $ 6,441,144
Financing Corp., 9.8%, 2018 4,350,000 6,517,762
Financing Corp., 10.35%, 2018 6,820,000 10,648,859
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$ 23,607,765
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Asset Backed & Securitized - 0.6%
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Freddie Mac, 3.108%, 2035 $ 501,433 $ 498,783
Prudential Securities Secured Financing Corp., 7.348%, 2013## 1,819,000 2,008,593
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$ 2,507,376
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Mortgage Backed - 55.9%
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Fannie Mae, 6.956%, 2007 $ 948,671 $993,220
Fannie Mae, 4.79%, 2012 3,522,804 3,509,780
Fannie Mae, 5%, 2013 - 2019 43,118,454 43,667,246
Fannie Mae, 4.8%, 2013 353,677 360,821
Fannie Mae, 4.845%, 2013 1,034,441 1,059,068
Fannie Mae, 5.06%, 2013 414,084 428,311
Fannie Mae, 4.65%, 2013 975,917 981,129
Fannie Mae, 4.45%, 2014 1,241,327 1,238,506
Fannie Mae, 4.771%, 2014 2,471,285 2,523,352
Fannie Mae, 4.6%, 2014 496,207 499,763
Fannie Mae, 4.667%, 2014 3,049,329 3,091,651
Fannie Mae, 4.846%, 2014 3,511,490 3,601,134
Fannie Mae, 5.1%, 2014 538,410 559,615
Fannie Mae, 4.62%, 2015 712,083 717,404
Fannie Mae, 4.82%, 2015 967,824 988,509
Fannie Mae, 4.69%, 2015 352,722 357,017
Fannie Mae, 4.85%, 2015 351,952 360,178
Fannie Mae, 4.56%, 2015 640,083 641,921
Fannie Mae, 4.665%, 2015 431,513 435,941
Fannie Mae, 4.7%, 2015 494,932 501,229
Fannie Mae, 4.89%, 2015 347,281 356,354
Fannie Mae, 4.74%, 2015 390,000 393,047
Fannie Mae, 4.375%, 2015 2,742,176 2,735,938
Fannie Mae, 4.925%, 2015 1,387,034 1,430,379
Fannie Mae, 6.5%, 2016 - 2032 15,353,301 15,989,387
Fannie Mae, 6%, 2016 - 2034 18,985,609 19,583,586
Fannie Mae, 5.5%, 2017 - 2034 55,686,163 56,737,071
Fannie Mae, 4.5%, 2019 23,206,648 23,125,442
Fannie Mae, 4.88%, 2020 387,146 396,204
Fannie Mae TBA, 5.5%, 2035 19,408,000 19,668,805
Freddie Mac, 7.5%, 2028 86,746 93,340
Ginnie Mae, 5.5%, 2033 8,634,856 8,829,075
Ginnie Mae, 5%, 2034 3,918,547 3,939,900
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$219,794,323
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U.S. Government Agencies - 10.4%
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Aid to Israel, 0%, 2024 $ 5,452,000 $2,190,774
Fannie Mae, 3.41%, 2007 3,945,000 3,898,441
Freddie Mac, 5.05%, 2015 3,680,000 3,728,418
Overseas Private Investment Corp., 0%, 2007 1,747,425 1,752,789
Small Business Administration, 8.875%, 2011 303,396 322,414
Small Business Administration, 6.35%, 2021 1,620,794 1,737,092
Small Business Administration, 6.34%, 2021 1,455,042 1,559,924
Small Business Administration, 6.44%, 2021 1,484,728 1,594,268
Small Business Administration, 6.625%, 2021 1,512,404 1,644,433
Small Business Administration, 4.98%, 2023 925,483 945,233
Small Business Administration, 4.72%, 2024 2,542,157 2,564,157
Small Business Administration, 4.34%, 2024 1,346,029 1,329,498
Small Business Administration, 4.77%, 2024 2,421,964 2,447,665
Small Business Administration, 5.52%, 2024 1,505,395 1,575,631
Small Business Administration, 4.86%, 2024 - 2025 2,889,465 2,929,628
Small Business Administration, 4.87%, 2024 1,591,000 1,614,004
Small Business Administration, 5.11%, 2025 1,427,000 1,464,364
U.S. Department of Housing & Urban Development, 6.36%, 2016 1,580,000 1,747,877
U.S. Department of Housing & Urban Development, 6.59%, 2016 5,612,000 5,991,893
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$ 41,038,503
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U.S. Treasury Obligations - 12.3%
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U.S. Treasury Bonds, 10.375%, 2012 $ 8,400,000 $9,708,233
U.S. Treasury Bonds, 12%, 2013 3,036,000 3,792,984
U.S. Treasury Bonds, 8.875%, 2017 6,000,000 8,673,048
U.S. Treasury Notes, 3.375%, 2007 7,886,904 8,207,001
U.S. Treasury Notes, 3.625%, 2008### 7,430,794 7,923,374
U.S. Treasury Notes, 2%, 2014 7,674,667 7,941,784
U.S. Treasury STRIPS, 0%, 2016 3,504,000 2,208,028
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$ 48,454,452
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Total U.S. Bonds $335,402,419
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Foreign Bonds - 13.5%
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Australia - 0.1%
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Commonwealth of Australia, 6%, 2017 AUD 640,000 $ 517,948
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Brazil - 0.4%
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Federal Republic of Brazil, 8%, 2014 $ 1,384,803 $ 1,414,230
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Canada - 1.0%
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Canada Housing Trust, 4.65%, 2009 CAD 95,000 $ 79,490
Government of Canada, 5.25%, 2008 $ 2,735,000 2,862,577
Government of Canada, 5.25%, 2012 CAD 1,170,000 1,018,681
Government of Canada, 4.5%, 2015 CAD 103,000 85,644
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$ 4,046,392
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Chile - 0.1%
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HQI Transelec Chile S.A., 7.875%, 2011 $ 314,000 $ 359,281
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Finland - 0.9%
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Republic of Finland, 3%, 2008 EUR 1,804,000 $2,263,376
Republic of Finland, 5.375%, 2013 EUR 956,000 1,369,317
------------
$ 3,632,693
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France - 0.8%
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Republic of France, 4.75%, 2007 EUR 2,187,000 $ 2,833,602
Republic of France, 6%, 2025 EUR 106,000 172,582
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$ 3,006,184
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Germany - 1.8%
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Federal Republic of Germany, 3.5%, 2008 EUR 4,687,000 $ 5,973,186
Federal Republic of Germany, 3.75%, 2015 EUR 380,000 487,926
Federal Republic of Germany, 6.25%, 2030 EUR 227,000 388,835
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$ 6,849,947
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Ireland - 1.0%
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Republic of Ireland, 4.25%, 2007 EUR 2,520,000 $ 3,245,547
Republic of Ireland, 4.6%, 2016 EUR 514,000 706,686
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$ 3,952,233
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Malaysia - 0.2%
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Petroliam Nasional Berhad, 7.75%, 2015 $ 537,000 $ 657,732
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Mexico - 0.7%
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Petroleos Mexicanos, 9.375%, 2008 $ 1,072,000 $ 1,224,224
United Mexican States, 8.125%, 2019 1,040,000 1,269,840
United Mexican States, 8.3%, 2031 128,000 158,080
------------
$ 2,652,144
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Netherlands - 0.9%
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Kingdom of Netherlands, 5.75%, 2007 EUR 1,213,000 $ 1,583,861
Kingdom of Netherlands, 3.75%, 2009 EUR 1,601,000 2,061,771
------------
$ 3,645,632
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New Zealand - 0.8%
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Government of New Zealand, 7%, 2009 NZD 477,000 $ 350,770
Government of New Zealand, 6.5%, 2013 NZD 3,668,000 2,713,069
Government of New Zealand, 6%, 2015 NZD 311,000 224,338
------------
$ 3,288,177
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Norway - 0.1%
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Kingdom of Norway, 6.5%, 2013 NOK 1,786,000 $ 334,834
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Panama - 0.2%
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Republic of Panama, 9.375%, 2023 $ 38,000 $ 45,980
Republic of Panama, 9.375%, 2029 677,000 825,940
------------
$ 871,920
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Qatar - 0.4%
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State of Qatar, 9.75%, 2030 $ 990,000 $ 1,517,175
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Russia - 0.8%
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Russian Federation, 3%, 2008 $ 1,474,000 $ 1,380,254
Russian Federation, 11%, 2018 640,000 939,776
Russian Ministry of Finance, 12.75%, 2028 443,000 787,743
------------
$ 3,107,773
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South Africa - 0.5%
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Republic of South Africa, 9.125%, 2009 $ 855,000 $ 992,869
Republic of South Africa, 8.5%, 2017 843,000 1,077,986
------------
$ 2,070,855
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Spain - 2.0%
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Kingdom of Spain, 7%, 2005 $ 3,600,000 $ 3,618,050
Kingdom of Spain, 6%, 2008 EUR 1,166,000 1,572,284
Kingdom of Spain, 5.35%, 2011 EUR 1,899,000 2,672,480
------------
$ 7,862,814
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United Kingdom - 0.8%
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United Kingdom Treasury, 5.75%, 2009 GBP 725,000 $ 1,399,781
United Kingdom Treasury, 8%, 2015 GBP 778,000 1,853,458
------------
$ 3,253,239
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Total Foreign Bonds $ 53,041,203
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Total Bonds (Identified Cost, $380,660,293) $388,443,622
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Repurchase Agreement - 5.5%
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ISSUER PAR AMOUNT $ VALUE
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Morgan Stanley, 3.05%, dated 5/31/05, due 6/01/05, total to be
received $21,446,817 (secured by U.S. Treasury and Federal
Agency obligations in a jointly traded account), at Cost $21,445,000 $ 21,445,000
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Total Investments (Identified Cost, $402,105,293) (S) $409,888,622
---------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (4.2)% (16,385,541)
---------------------------------------------------------------------------------------------------
Net Assets - 100.0% $393,503,081
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## SEC Rule 144A restriction.
### All or a portion of the security has been segregated as collateral for an open futures contract.
(S) As of May 31, 2005, the trust had one securitiy representing $396,204 and 0.1% of net assets
that was fair valued in accordance with the policies adopted by the Board of Trustees.
TBA = To Be Announced
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
CAD = Canadian Dollar
CHF = Swiss Franc
DKK = Danish Krone
EUR = Euro
GBP = British Pound
NOK = Norwegian Krone
NZD = New Zealand Dollar
SEK = Swedish Krona
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 composing the total value of the trust.
AT 5/31/05
ASSETS
--------------------------------------------------------------------------------
Investments, at value (identified
cost, $402,105,293) $409,888,622
Cash 803
Receivable for forward foreign currency exchange
contracts 1,416,012
Interest receivable 3,579,069
-------------------------------------------------------------------------------
Total assets $414,884,506
-------------------------------------------------------------------------------
LIABILITIES
-------------------------------------------------------------------------------
Payable for investments purchased $20,428,273
Payable to dividend disbursing agent 78,933
Payable for forward foreign currency exchange
contracts 250,355
Payable for forward foreign currency exchange
contracts subject
to master netting agreements 230,548
Payable for daily variation margin on open
futures contracts 34,219
Payable for treasury shares reacquired 41,033
Payable to affiliates
Management fee 23,149
Transfer agent and dividend disbursing costs 23,993
Administrative fee 682
Accrued expenses and other liabilities 270,240
-------------------------------------------------------------------------------
Total liabilities $21,381,425
-------------------------------------------------------------------------------
Net assets $393,503,081
-------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
-------------------------------------------------------------------------------
Paid-in capital $416,574,544
Unrealized appreciation on investments and
translation of assets and liabilities in
foreign currencies 8,678,418
Accumulated net realized loss on investments
and foreign currency transactions (30,427,640)
Accumulated distributions in excess of net
investment income (1,322,241)
-------------------------------------------------------------------------------
Net assets $393,503,081
-------------------------------------------------------------------------------
Shares of beneficial interest outstanding (57,708,786 issued,
less 5,104,331 treasury shares) 52,604,455
-------------------------------------------------------------------------------
Net asset value per share (net assets of $393,503,081 /
52,604,455 shares of beneficial interest outstanding) $7.48
-------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS Statement of Operations (unaudited)
This statement describes how much your trust received in investment income and
paid in expenses. It also describes any gains and/or losses generated by trust
operations.
SIX MONTHS ENDED 5/31/05
NET INVESTMENT INCOME
-------------------------------------------------------------------------------
Interest income $9,822,129
Foreign taxes withheld (2,449)
-------------------------------------------------------------------------------
Total investment income $9,819,680
-------------------------------------------------------------------------------
Expenses
Management fee $1,177,866
Trustees' compensation 67,625
Transfer agent and dividend disbursing costs 114,526
Administrative fee 23,272
Custodian fee 95,360
Printing 18,255
Postage 52,099
Auditing fees 36,123
Legal fees 4,523
Miscellaneous 67,135
-------------------------------------------------------------------------------
Total expenses $1,656,784
-------------------------------------------------------------------------------
Fees paid indirectly (8,507)
Reduction of expenses by investment adviser (886)
-------------------------------------------------------------------------------
Net expenses $1,647,391
-------------------------------------------------------------------------------
Net investment income $8,172,289
-------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
-------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $2,452,861
Futures contracts 111,094
Foreign currency transactions (377,205)
-------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $2,186,750
-------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $(2,295,720)
Futures contracts (100,360)
Translation of assets and liabilities in
foreign currencies 1,671,478
-------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and
foreign currency translation $(724,602)
-------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency $1,462,148
-------------------------------------------------------------------------------
Change in net assets from operations $9,634,437
-------------------------------------------------------------------------------
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
5/31/05 11/30/04
(UNAUDITED)
CHANGE IN NET ASSETS
-------------------------------------------------------------------------------------------------------
FROM OPERATIONS
-------------------------------------------------------------------------------------------------------
Net investment income $8,172,289 $16,739,762
Net realized gain (loss) on investments and foreign
currency transactions 2,186,750 1,132,505
Net unrealized gain (loss) on investments and foreign
currency translation (724,602) (1,687,040)
-------------------------------------------------------------------------------------------------------
Change in net assets from operations $9,634,437 $16,185,227
-------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
-------------------------------------------------------------------------------------------------------
From net investment income $(8,005,500) $(17,946,379)
-------------------------------------------------------------------------------------------------------
TRUST SHARE (PRINCIPAL) TRANSACTIONS
-------------------------------------------------------------------------------------------------------
Cost of shares reacquired $(7,186,637) $(13,273,004)
-------------------------------------------------------------------------------------------------------
Total change in net assets $(5,557,700) $(15,034,156)
-------------------------------------------------------------------------------------------------------
NET ASSETS
-------------------------------------------------------------------------------------------------------
At beginning of period $399,060,781 $414,094,937
At end of period (including accumulated distributions in
excess of net investment income of $1,322,241 and
$1,489,030, respectively) $393,503,081 $399,060,781
-------------------------------------------------------------------------------------------------------
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 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 (assuming reinvestment of
all distributions) held for the entire period.
SIX MONTHS YEARS ENDED 11/30
ENDED --------------------------------------------------------------------------
5/31/05 2004 2003 2002 2001 2000
(UNAUDITED)
Net asset value,
beginning of year $7.43 $7.44 $7.49 $7.32 $7.01 $6.94
------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS#(S)(S)
------------------------------------------------------------------------------------------------------------------------------
Net investment income(S) $0.15 $0.31 $0.26 $0.37 $0.42 $0.44
Net realized and unrealized
gain (loss) on investments and
foreign currency 0.03 (0.02) 0.02 0.20 0.31 0.06
------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.18 $0.29 $0.28 $0.57 $0.73 $0.50
------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.15) $(0.33) $(0.36) $(0.42) $(0.43) $(0.29)
From paid-in capital -- -- -- -- -- (0.20)
------------------------------------------------------------------------------------------------------------------------------
Total distributions declared
to shareholders $(0.15) $(0.33) $(0.36) $(0.42) $(0.43) $(0.49)
------------------------------------------------------------------------------------------------------------------------------
Net increase from repurchase of
capital shares $0.02 $0.03 $0.03 $0.02 $0.01 $0.06
------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $7.48 $7.43 $7.44 $7.49 $7.32 $7.01
------------------------------------------------------------------------------------------------------------------------------
Per share market value,
end of year $6.69 $6.55 $6.71 $6.77 $6.59 $6.19
------------------------------------------------------------------------------------------------------------------------------
Total return at market value (%) 4.46++ 2.49 4.38 9.31 13.56 15.24
------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEARS ENDED 11/30
ENDED --------------------------------------------------------------------------
5/31/05 2004 2003 2002 2001 2000
(UNAUDITED)
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
------------------------------------------------------------------------------------------------------------------------------
Expenses## 0.85+ 0.81 0.79 0.87 0.90 0.94
Net investment income(S)(S) 4.19+ 4.12 3.41 4.98 5.82 6.35
Portfolio turnover 24 71 108 123 105 151
Net assets at end of year
(000 Omitted) $393,503 $399,061 $414,095 $433,624 $436,173 $422,025
------------------------------------------------------------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the trust for its proportional share of
substantially all of Independent Chief Compliance Officer services paid to Tarantino LLC. If this fee had been incurred by
the trust, the net investment income per share and the ratios would have been:
Net investment income $0.15^ $0.31^ $-- $-- $-- $--
--------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
--------------------------------------------------------------------------------
Expenses## 0.85^+ 0.81^ -- -- -- --
Net investment income 4.19^+ 4.12^ -- -- -- --
--------------------------------------------------------------------------------------------
(S)(S) As required, effective December 1, 2001, the trust has adopted the provisions of the AICPA Audit and Accounting Guide
for Investment Companies and began amortizing premium on debt securities. The effect of this change for the year ended
November 30, 2002 was to decrease net investment income per share by $0.02, increase net realized and unrealized gains
and losses per share by $0.02, and decrease the ratio of net investment income to average net assets by 0.33%. Per
share, ratios, and supplemental data for periods prior to December 1, 2001 have not been restated to reflect this change
in presentation.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
^ The reimbursement impact per share amount and the ratios were less than $0.01 and 0.01%, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) BUSINESS AND ORGANIZATION
MFS Government Markets Income Trust (the trust) is a non-diversified trust
that 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. Investments in foreign securities are
vulnerable to the effects of changes in the relative values of the local
currency and the U.S. dollar and to the effects of changes in each country's
legal, political, and economic environment.
INVESTMENT VALUATIONS - Bonds and other fixed income securities (other than
short-term obligations) in the trust's portfolio are valued at an evaluated
bid price as reported by an independent pricing service, or to the extent a
valuation is not reported by a pricing service, such securities are valued on
the basis of quotes from brokers and dealers. Prices obtained from pricing
services utilize both dealer-supplied valuations and electronic data
processing techniques which take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data without exclusive reliance upon quoted prices or exchange or over-the-
counter prices, since such valuations are believed to reflect more accurately
the fair value of such securities. Listed options are valued at the closing
price as reported by an independent pricing service on the principal exchange
on which they are traded. Unlisted options are valued by an independent
pricing service or on the basis of quotations obtained from brokers and
dealers. Futures contracts are valued at the settlement price as reported by
an independent pricing service on the primary exchange on which they are
traded. Forward foreign currency contracts are valued using spot rates and
forward points as reported by an independent pricing source. Short-term
obligations with a remaining maturity in excess of 60 days will be valued upon
dealer-supplied valuations. All other short-term obligations in the trust's
portfolio are valued at amortized cost, which approximates market value as
determined by the Board of Trustees. Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. When pricing
service information or market quotations are not readily available, securities
are priced at fair value as determined under the direction of the Board of
Trustees.
REPURCHASE AGREEMENTS - The trust may enter into repurchase agreements with
institutions that the trust's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The trust
requires that the securities collateral in a repurchase transaction be
transferred to the custodian in a manner sufficient to enable the trust to
obtain those securities in the event of a default under the repurchase
agreement. The trust monitors, on a daily basis, the value of the collateral
to ensure that its value, including accrued interest, is greater than amounts
owed to the trust under each such repurchase agreement. The trust, along with
other affiliated entities of Massachusetts Financial Services Company (MFS),
may utilize a joint trading account for the purpose of entering into one or
more repurchase agreements.
FOREIGN CURRENCY TRANSLATION - 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.
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. The trust's investment in futures
contracts is designed to hedge against anticipated future changes in interest
or exchange rates or securities prices. Investments in interest rate futures
for purposes other than hedging may be made to modify the duration of the
portfolio without incurring the additional transaction costs involved in
buying and selling the underlying securities. Investments in currency futures
for purposes other than hedging may be made to change the trust's relative
position in one or more currencies without buying and selling portfolio
assets. Investments in equity index contracts or contracts on related options
for purposes other than hedging, may be made when the trust has cash on hand
and wishes to participate in anticipated market appreciation while the cash is
being invested. Should interest or exchange rates or securities prices move
unexpectedly, 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 a foreign currency relative to the U.S. dollar. The trust may enter
into forward foreign currency exchange contracts for hedging purposes as well
as for non-hedging purposes. For hedging purposes, the trust may enter into
contracts to deliver or receive foreign currency it will receive from or
require for its normal investment activities. The trust may also use contracts
in a manner intended to protect foreign currency-denominated securities from
declines in value due to unfavorable exchange rate movements. For non-hedging
purposes, the trust may enter into contracts with the intent of changing the
relative exposure of the trust's portfolio of securities to different
currencies to take advantage of anticipated changes. The forward foreign
currency exchange contracts are adjusted by the daily exchange rate of the
underlying currency and any gains or losses are recorded as unrealized until
the contract settlement date. On contract settlement date, the gains or losses
are recorded as realized gains or losses on foreign currency transactions.
DOLLAR ROLL TRANSACTIONS - The trust enters into dollar roll transactions,
with respect to mortgage backed securities issued by Ginnie Mae, Fannie Mae,
and Freddie Mac, in which the trust sells mortgage backed securities to
financial institutions and simultaneously agrees to accept substantially
similar (same type, coupon, and maturity) securities at a later date at an
agreed-upon price. During the period between the sale and repurchase in a
dollar roll transaction the trust will not be entitled to receive interest and
principal payments on the securities sold but is compensated by interest
earned on the proceeds of the initial sale and by a lower purchase price on
the securities to be repurchased which enhances the trust's total return. The
trust accounts for dollar roll transactions as purchases and sales. If certain
criteria are met these dollar roll transactions may be considered a financing
transaction whereby the difference in the sales price and the future purchase
price is recorded as an adjustment to interest income.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on
the trade date. Some securities may be purchased on a "when-issued" or
"forward delivery" basis, which means that the securities will be delivered to
the trust at a future date, usually beyond customary settlement time. 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. 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.
The trust may enter into "TBA" (to be announced) purchase commitments to
purchase securities for a fixed unit price at a future date. Although the unit
price has been established, the principal value has not been finalized.
However, the principal amount of the commitments will not fluctuate more than
0.01%. The trust holds, and maintains until settlement date, cash or high-
grade debt obligations in an amount sufficient to meet the purchase price, or
the trust may enter into offsetting contracts for the forward sale of other
securities it owns. Income on the securities will not be earned until
settlement date. TBA purchase commitments may be considered securities in
themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to settlement date, which is in addition to the risk
of decline in the value of the trust's other assets. Unsettled TBA purchase
commitments are valued at the current market value of the underlying
securities.
The trust may enter into "TBA" (to be announced) sale commitments to hedge its
portfolio positions or to sell mortgage-backed securities it owns under
delayed delivery arrangements. Proceeds of TBA sale commitments are not
received until the contractual settlement date. During the time a TBA sale
commitment is outstanding, equivalent deliverable securities, or an offsetting
TBA purchase commitment deliverable on or before the sale commitment date, are
held as "cover" for the transaction.
Legal fees and other related expenses incurred to preserve and protect the
value of a security owned are added to the cost of the security; other legal
fees are expensed. Capital infusions made directly to the security issuer,
which are generally non-recurring, incurred to protect or enhance the value of
high-yield debt securities, are reported as additions to the cost basis of the
security. Costs that are incurred to negotiate the terms or conditions of
capital infusions or that are expected to result in a plan of reorganization
are reported as realized losses. Ongoing costs incurred to protect or enhance
an investment, or costs incurred to pursue other claims or legal actions, are
expensed.
FEES PAID INDIRECTLY - The trust's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the trust. This amount, for the six months ended May 31, 2005, is shown as a
reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The trust's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The trust
distinguishes between distributions on a tax basis and a financial reporting
basis and only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. Common
types of book and tax differences that could occur include differences in
accounting for foreign currency transactions, amortization and accretion on
debt securities, straddle loss deferrals and wash sales.
The tax character of distributions declared for the years ended
November 30, 2004 and November 30, 2003 was as follows:
11/30/04 11/30/03
Distributions declared from:
Ordinary income $17,946,379 $20,675,908
As of November 30, 2004, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Undistributed ordinary income $1,417,714
Capital loss carryforward (28,360,010)
Unrealized appreciation (depreciation) 5,922,320
Other temporary differences (3,680,424)
For federal income tax purposes, the capital loss carryforward may be applied
against any net taxable realized gains of each succeeding year until the
earlier of its utilization or expiration as follows:
EXPIRATION DATE
November 30, 2005 $(7,140,598)
November 30, 2007 (11,594,208)
November 30, 2008 (5,988,179)
November 30, 2012 (3,637,025)
------------------------------------------------------------
Total $(28,360,010)
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - The trust has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.32%
of the trust's average daily net assets and 5.33% of gross investment income.
Management fees, from net assets and gross investment income, incurred for the
six months ended May 31, 2005 were at an effective rate of 0.60% of average
daily net assets on an annualized basis.
The trust pays compensation to its Independent Trustees in the form of a
retainer, attendance fees, and additional compensation to Board and Committee
chairpersons, and pays no compensation directly to its Trustees who are
officers of the investment adviser, or to officers of the trust, all of whom
receive remuneration for their services to the trust from MFS. Certain
officers and Trustees of the trust are officers or directors of MFS and MFS
Service Center, Inc. (MFSC). The trust has an unfunded, defined benefit plan
for retired Independent Trustees and an unfunded retirement benefit deferral
plan for current Independent Trustees. Included in Trustees' compensation is
$967 as a result of the change in the trust's unfunded retirement benefit
deferral plan for certain current Independent Trustees and a pension expense
of $33,776 for retired Independent Trustees for the six months ended
May 31, 2005.
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. MFS has agreed to
reimburse each of the funds for a proportional share of substantially all of
the payments made by the funds to Tarantino LLC and also to provide office
space and other administrative support and supplies to the ICCO. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement.
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 between the funds and MFS, MFS is entitled to partial reimbursement
of the costs MFS incurs to provide these services, subject to review and
approval by the Board of Trustees. Each fund is allocated a portion of these
administrative costs based on its size and relative average net assets. The
trust paid MFS an administrative fee up to the following annual percentage
rates of the trust's average daily net assets:
BEGINNING OF PERIOD
EFFECTIVE DATE THROUGH 2/28/05 3/01/05
First $2 billion 0.01120% 0.01626%
Next $2.5 billion 0.00832% 0.01206%
Next $2.5 billion 0.00032% 0.00056%
In excess of $7 billion 0.00000% 0.00000%
For the six months ended May 31, 2005, the trust paid MFS $23,272, equivalent
to 0.0119% of average daily net assets, to partially reimburse MFS for the
costs of providing administrative services.
TRANSFER AGENT - Included in transfer agent and dividend disbursing costs is a
fee paid to MFSC, a wholly owned subsidiary of MFS, for its services as
registrar and dividend disbursing agent for the trust. The agreement provides
that the trust will pay MFSC an account maintenance fee of no more than $9.00
and a dividend services fee of $0.75 per reinvestment. These fees amounted to
$55,536 for the six months ended May 31, 2005. Also included in transfer agent
and dividend disbursing costs are out-of-pocket expenses, paid to MFSC, which
amounted to $50,302 for the six months ended May 31, 2005, as well as other
expenses paid to unaffiliated vendors.
(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 $80,444,397 $63,332,526
-------------------------------------------------------------------------------
Investments (non-U.S. government securities) $23,913,351 $26,805,440
-------------------------------------------------------------------------------
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the trust, as computed on a federal income tax basis, are
as follows:
Aggregate cost $406,731,990
------------------------------------------------------------
Gross unrealized appreciation $6,970,135
Gross unrealized depreciation (3,813,503)
------------------------------------------------------------
Net unrealized appreciation (depreciation) $3,156,632
(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 1,089,600 shares of
beneficial interest during the six months ended May 31, 2005 at an average
price per share of $6.60 and a weighted average discount of 11.09% per share.
The trust repurchased and retired 1,993,000 shares of beneficial interest
during the year ended November 30, 2004 at an average price per share of $6.66
and a weighted average discount of 10.38% per share. Transactions in trust
shares were as follows:
Period ended 5/31/05 Year ended 11/30/04
SHARES AMOUNT SHARES AMOUNT
Treasury shares
reacquired (1,089,600) $(7,186,637) (1,993,000) $(13,273,004)
(6) LINE OF CREDIT
The trust and other affiliated funds participate in a $1 billion unsecured
line of credit provided by a syndication of banks under a credit agreement.
Borrowings may be made for temporary financing needs. Interest is charged to
each fund, based on its borrowings, at a rate equal to the Federal Reserve
funds rate plus 0.35%. In addition, a commitment fee, based on the average
daily, unused portion of the line of credit, is allocated among the
participating funds at the end of each calendar quarter. The commitment fee
allocated to the trust for the six months ended May 31, 2005 was $1,515, and
is included in miscellaneous expense. The trust had no significant borrowings
during the six months ended May 31, 2005.
(7) FINANCIAL INSTRUMENTS
The trust trades financial instruments with off-balance-sheet risk in the
normal course of its investing activities in order to manage exposure to
market risks such as interest rates and foreign currency exchange rates. These
financial instruments include forward foreign currency exchange contracts and
futures contracts. The notional or contractual amounts of these instruments
represent the investment the trust has in particular classes of financial
instruments and does not necessarily represent the amounts potentially subject
to risk. The measurement of the risks associated with these instruments is
meaningful only when all related and offsetting transactions are considered.
Forward Foreign Currency Exchange Contracts
NET
UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
SALES
6/07/05 AUD 652,204 $496,847 $493,134 $3,713
6/08/05-6/27/05 EUR 21,193,843 27,340,138 26,097,083 1,243,055
7/06/05 GBP 1,719,058 3,261,053 3,121,099 139,954
6/08/05 NOK 2,233,378 347,995 346,401 1,594
6/08/05 NZD 4,613,594 3,276,349 3,248,653 27,696
----------- ----------- ----------
$34,722,382 $33,306,370 $1,416,012
=========== =========== ==========
PURCHASES
6/08/05 CHF 1,162,135 $966,863 $931,551 $(35,312)
7/11/05 DKK 391,346 68,181 64,807 (3,374)
6/08/05-6/27/05 EUR 1,372,531 1,785,325 1,690,370 (94,955)
6/08/05 NOK 6,220,000 986,957 964,732 (22,225)
6/14/05 SEK 15,587,218 2,190,637 2,096,148 (94,489)
---------- ---------- ---------
$5,997,963 $5,747,608 $(250,355)
========== ========== =========
At May 31, 2005 forward foreign currency purchases and sales under master
netting agreements excluded above amounted to a net payable of $230,548 with
Merrill Lynch International.
At May 31, 2005, the trust had sufficient cash and/or securities to cover any
commitments under these contracts.
Futures Contracts
UNREALIZED
APPRECIATION
DESCRIPTION EXPIRATION CONTRACTS POSITION (DEPRECIATION)
U.S. Treasury Note 2 Year September 2005 87 Short $(1,718)
--------------------------------------------------------------------------------
U.S. Treasury Note 5 Year September 2005 54 Short (1,066)
--------------------------------------------------------------------------------
$(2,784)
--------------------------------------------------------------------------------
At May 31, 2005, the trust had sufficient cash and/or securities to cover any
margin requirements under these contracts.
(8) LEGAL PROCEEDINGS
On March 31, 2004, MFS settled an administrative proceeding with the
Securities and Exchange Commission ("SEC") regarding disclosure of brokerage
allocation practices in connection with MFS fund sales (the term "MFS funds"
means the open-end registered management investment companies sponsored by
MFS). Under the terms of the settlement, in which MFS neither admitted nor
denied any wrongdoing, MFS agreed to pay (one dollar) $1.00 in disgorgement
and $50 million in penalty to certain MFS funds, pursuant to a plan developed
by an independent distribution consultant. The brokerage allocation practices
which were the subject of this proceeding were discontinued by MFS in November
2003. The agreement with the SEC is reflected in an order of the SEC. The SEC
settlement order states that MFS failed to adequately disclose to the Boards
of Trustees and to shareholders of the MFS funds the specifics of its
preferred arrangements with certain brokerage firms selling MFS fund shares.
The SEC settlement order states that MFS had in place policies designed to
obtain best execution of all MFS fund trades. As part of the settlement, MFS
retained an independent compliance consultant to review the completeness of
its current policies and practices regarding disclosure to MFS fund trustees
and to MFS fund shareholders of strategic alliances between MFS or its
affiliates and broker-dealers and other financial intermediaries who support
the sale of MFS fund shares. Pursuant to the SEC order, on July 28, 2004, MFS
transferred these settlement amounts to the SEC, and those MFS funds entitled
to these settlement amounts accrued an estimate of their pro rata portion of
these amounts. The final distribution plan was approved by the SEC on January
21, 2005, and the affected MFS funds received the payment on February 16,
2005.
In addition, in February 2004, MFS reached agreement with the SEC, the New
York Attorney General ("NYAG") and the Bureau of Securities Regulation of the
State of New Hampshire ("NH") to settle administrative proceedings alleging
false and misleading information in certain MFS open-end retail fund ("MFS
retail funds") prospectuses regarding market timing and related matters (the
"February Settlements"). These regulators alleged that prospectus language for
certain MFS retail funds was false and misleading because, although the
prospectuses for those funds in the regulators' view indicated that they
prohibited market timing, MFS did not limit trading activity in 11 domestic
large cap stock, high grade bond and money market retail funds. MFS' former
Chief Executive Officer and former President also reached agreement with the
SEC in which they agreed to, among other terms, monetary fines and temporary
suspensions from association with any investment adviser or registered
investment company. These individuals have resigned their positions with, and
will not be returning to, MFS and the MFS funds. Under the terms of the
February Settlements, MFS and the executives neither admit nor deny
wrongdoing.
Under the terms of the February Settlements, a $225 million pool has been
established for distribution to shareholders in certain MFS retail funds,
which has been funded by MFS and of which $50 million is characterized as a
penalty. This pool will be distributed in accordance with a methodology
developed by an independent distribution consultant in consultation with MFS
and the Board of Trustees of the MFS retail funds, and acceptable to the SEC.
MFS has further agreed with NYAG to reduce its management fees in the
aggregate amount of approximately $25 million annually over the next five
years, and not to increase certain management fees during this period. MFS has
also paid an administrative fine to NH in the amount of $1 million, which will
be used for investor education purposes (NH retained $250,000 and $750,000 was
contributed to the North American Securities Administrators Association's
Investor Protection Trust). In addition, under the terms of the February
Settlements, MFS is in the process of adopting certain governance changes and
reviewing its policies and procedures.
Since December 2003, MFS, MFS Fund Distributors, Inc., MFS Service Center,
Inc., MFS Corporation Retirement Committee, Sun Life Financial Inc., various
MFS funds, certain current and/or former Trustees of these MFS funds, and
certain officers of MFS have been named as defendants in multiple lawsuits
filed in federal and state courts. The lawsuits variously have been commenced
as class actions or individual actions on behalf of investors who purchased,
held or redeemed shares of the MFS funds during specified periods, as ERISA
actions by participants in certain retirement plan accounts on behalf of those
accounts, or as derivative actions on behalf of the MFS funds. The lawsuits
relating to market timing and related matters have been transferred to, and
consolidated before, the United States District Court for the District of
Maryland, as part of a multi-district litigation of market timing and related
claims involving several other fund complexes (In re Mutual Funds Investment
Litigation (Alger, Columbia, Janus, MFS, One Group, Putnam, Allianz Dresdner),
No. 1:04-md-15863 (transfer began March 19, 2004)). The market timing cases
related to the MFS complex are Riggs v. MFS et al., Case No. 04-cv-01162-JFM
(direct), Hammerslough v. MFS et al., Case No. 04-md-01620 (derivative) and
Anita Walker v. MFS et al., Case No. 1:04-CV-01758 (ERISA). The plaintiffs in
these consolidated lawsuits generally seek injunctive relief including removal
of the named Trustees, adviser and distributor, rescission of contracts and
12b-1 Plans, disgorgement of fees and profits, monetary damages, punitive
damages, attorney's fees and costs and other equitable and declaratory relief.
Two lawsuits alleging improper brokerage allocation practices and excessive
compensation are pending in the United States District Court for the District
of Massachusetts (Forsythe v. Sun Life Financial Inc., et al., No. 04cv10584
(GAO) (a consolidated action) and Marcus Dumond, et al. v. Massachusetts
Financial Servs. Co., et al., No. 04cv11458 (GAO)). The plaintiffs in these
lawsuits generally seek compensatory damages, punitive damages, recovery of
fees, rescission of contracts, an accounting, restitution, declaratory relief,
equitable and/or injunctive relief and attorney's fees and costs. The various
lawsuits generally allege that some or all of the defendants (i) permitted or
acquiesced in market timing and/or late trading in some of the MFS funds,
inadequately disclosed MFS' internal policies concerning market timing and
such matters (ii) received excessive compensation as fiduciaries to the MFS
funds, or (iii) permitted or acquiesced in the improper use of fund assets by
MFS to support the distribution of MFS fund shares and inadequately disclosed
MFS' use of fund assets in this manner. The actions assert that some or all of
the defendants violated the federal securities laws, including the Securities
Act of 1933 and the Securities Exchange Act of 1934, the Investment Company
Act of 1940 and the Investment Advisers Act of 1940, the Employee Retirement
Income Security Act of 1974, as well as fiduciary duties and other violations
of common law. Insofar as any of the actions is appropriately brought
derivatively on behalf of any of the MFS funds, any recovery will inure to the
benefit of the MFS funds. In February, March, and April 2005, the defendants
filed separate motions to dismiss all claims of the various lawsuits. The
parties continue to brief the issues for the courts and various hearing dates
have been scheduled. Additional lawsuits based on similar allegations may be
filed in the future.
Any potential resolution of these matters may include, but not be limited to,
judgments or settlements for damages against MFS, the MFS funds, or any other
named defendant. As noted above, as part of the regulatory settlements, MFS
has established a restitution pool in the amount of $225 million to compensate
certain shareholders of certain MFS retail funds for damages that they
allegedly sustained as a result of market timing or late trading in certain of
the MFS retail funds, and distributed $50 million to affected MFS funds to
compensate those funds based upon the amount of brokerage commissions
allocated in recognition of MFS fund sales. It is not clear whether these
amounts will be sufficient to compensate shareholders for all of the damage
they allegedly sustained, whether certain shareholders or putative class
members may have additional claims to compensation, or whether the damages
that may be awarded in any of the actions will exceed these amounts. In the
event the MFS funds incur any losses, costs or expenses in connection with
such lawsuits, the Boards of Trustees of the affected MFS funds may pursue
claims on behalf of such funds against any party that may have liability to
the funds in respect thereof.
Review of these matters by the independent Trustees of the MFS funds and their
counsel is continuing. There can be no assurance that these regulatory actions
and lawsuits, or the adverse publicity associated with these developments,
will not result in increased fund redemptions, reduced sales of fund shares,
or other adverse consequences to the MFS funds.
While these developments relate to MFS and the MFS' open-end funds, there can
be no assurance that these developments, or the adverse publicity associated
with these developments, will not result in an increase to the market discount
of the MFS closed-end fund shares or other adverse consequences.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees and Shareholders of MFS Government Markets Income Trust:
We have reviewed the accompanying statement of assets and liabilities of MFS
Government Markets Income Trust (the "Trust"), including the portfolio of
investments, as of May 31, 2005, and the related statement of operations,
changes in net assets, and financial highlights for the six-month period ended
May 31, 2005. These interim financial statements and financial highlights are
the responsibility of the Trust's management.
We conducted our review in accordance with the standards of the Public Company
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 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 and financial
highlights referred to above for them to be in conformity with accounting
principles generally accepted in the United States of America.
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, 2004, and financial highlights
for each of the five years in the period ended November 30, 2004, and in our
report dated January 21, 2005, we expressed an unqualified opinion on such
statement of changes in net assets and financial highlights.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
July 25, 2005
RESULTS OF SHAREHOLDER MEETING (unaudited) - 5/31/05
At a special meeting of shareholders of MFS Government Markets Income Trust,
which was held on March 23, 2005, the following actions were taken:
ITEM 1. To elect a Board of Trustees:
NUMBER OF SHARES
-----------------------------------------------
NOMINEE AFFIRMATIVE WITHHOLD AUTHORITY
Lawrence H. Cohn, M.D. 43,737,265.161 1,741,484.164
------------------------------------------------------------------------------
David H. Gunning 43,798,236.826 1,680,512.499
------------------------------------------------------------------------------
William R. Gutow 43,718,184.446 1,760,564.879
------------------------------------------------------------------------------
Michael Hegarty 43,772,030.008 1,706,719.317
------------------------------------------------------------------------------
J. Atwood Ives 43,728,076.991 1,750,672.334
------------------------------------------------------------------------------
Amy B. Lane 43,769,581.032 1,709,168.293
------------------------------------------------------------------------------
Robert J. Manning 43,799,702.404 1,679,046.921
------------------------------------------------------------------------------
Lawrence T. Perara 43,786,374.766 1,692,374.559
------------------------------------------------------------------------------
Robert C. Pozen 43,784,322.522 1,694,426.803
------------------------------------------------------------------------------
J. Dale Sherratt 43,776,155.566 1,702,593.759
------------------------------------------------------------------------------
Laurie J. Thomsen 43,772,997.643 1,705,751.682
------------------------------------------------------------------------------
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 trust 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
Washington, D.C. 20549-0102
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-800-SEC-0330. The trust's Form N-Q is available on
the EDGAR database on the Commission's Internet website 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: State Street Bank and Trust Company
c/o MFS Service Center, Inc.
P.O. Box 55024
Boston, MA 02205-5024
NUMBER OF SHAREHOLDERS
As of May 31, 2005, our records indicate that there are 5,199 registered
shareholders and approximately 20,944 shareholders owning trust shares in
"street" name, such as through brokers, banks, and other financial
intermediaries.
If you are a "street" name shareholder and wish to directly receive our
reports, which contain important information about the trust, please write or
call:
State Street Bank and Trust Company
c/o MFS Service Center, Inc.
P.O. Box 55024
Boston, MA 02205-5024
1-800-637-2304
M F S(SM)
INVESTMENT MANAGEMENT(R)
(C) 2005 MFS Investment Management(R)
500 Boylston Street, Boston, MA 02116.
MGF-SEM-07/05 43M
ITEM 2. CODE OF ETHICS.
The Registrant has amended its Code of Ethics to reflect that the Registrant's
Principal Financial Officer has changed.
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 of the Registrant is included as part of the report
to shareholders of the Registrant 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 at this time.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
=============================================================================================================
MFS GOVERNMENT MARKETS 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
-------------------------------------------------------------------------------------------------------------
12/1/04-12/31/04 212,400 $6.60 212,400 3,855,336
-------------------------------------------------------------------------------------------------------------
1/1/05-1/31/05 152,900 $6.69 152,900 3,702,436
-------------------------------------------------------------------------------------------------------------
2/1/05-2/28/05 60,000 $6.73 60,000 3,642,436
-------------------------------------------------------------------------------------------------------------
3/1/05-3/31/05 291,600 $6.53 291,600 5,035,276
-------------------------------------------------------------------------------------------------------------
4/1/05-4/30/05 251,400 $6.54 251,400 4,783,876
-------------------------------------------------------------------------------------------------------------
5/1/05-5/31/05 121,300 $6.67 121,300 4,662,576
-------------------------------------------------------------------------------------------------------------
TOTAL 1,089,600 $6.60 1,089,600
=============================================================================================================
Note: The Board of Trustees approves procedures to repurchase shares annually.
The notification to shareholders of the program is part of 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 shares that
may be purchased 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 shares available for purchase for
the March 1, 2005 plan year are 5,326,876.
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.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under 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 covered by the report that has materially
affected, or is 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: Code of
Ethics attached hereto.
(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.
(3)Any written solicitation to purchase securities under Rule 23c-1 under
the Act sent or given during the period covered by the report by or on
behalf of the Registrant to 10 or more persons. Not applicable.
(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.
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 GOVERNMENT MARKETS INCOME TRUST
--------------------------------------------------------------------
By (Signature and Title)* ROBERT J. MANNING
-----------------------------------------------------
Robert J. Manning, President
Date: July 25, 2005
-------------
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)* ROBERT J. MANNING
-----------------------------------------------------
Robert J. Manning, President (Principal Executive
Officer)
Date: July 25, 2005
-------------
By (Signature and Title)* MARIA F. DWYER
-----------------------------------------------------
Maria F. Dwyer, Treasurer (Principal Financial Officer
and Accounting Officer)
Date: July 25, 2005
-------------
* Print name and title of each signing officer under his or her signature.