MFS Government Markets Income Trust
UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
FORM N-Q
 
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES 
 
Investment Company Act file number 811-5078
 
MFS GOVERNMENT MARKETS INCOME TRUST
(Exact name of registrant as specified in charter)
 
500 Boylston Street, Boston, Massachusetts 02116
(Address of principal executive offices) (Zip code)
 
Susan S. Newton
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116 
(Name and address of agents for service)
 
Registrant’s telephone number, including area code: (617) 954-5000 
Date of fiscal year end: November 30
Date of reporting period: February 28, 2006

 

ITEM 1. SCHEDULE OF INVESTMENTS.

 

MFS Government Markets Income Trust
PORTFOLIO OF INVESTMENTS (Unaudited) 02/28/2006

Issuer Par Amount   Value ($)  
Bonds – 98.5%            
U.S. Bonds – 87.6%    
Agency - Other – 7.9%    
Financing Corp., 10.7%, 2017     $ 4,095,000   $ 6,126,263  
Financing Corp., 9.4%, 2018       3,085,000     4,291,059  
Financing Corp., 9.8%, 2018       4,350,000     6,220,870  
Financing Corp., 10.35%, 2018       6,820,000     10,151,543  
Financing Corp., STRIPS, 0%, 2017       5,000,000     2,809,440  
            $ 29,599,175  
Asset Backed & Securitized – 0.5%    
Prudential Securities Secured Financing Corp., FRN, 7.2458%, 2013 (a)     $ 1,819,000   $ 1,945,792  
Utilities - Electric Power – 0.1%    
HQI Transelec Chile S.A., 7.875%, 2011     $ 314,000   $ 343,026  
Mortgage Backed – 49.0%    
Fannie Mae, 7.036%, 2007     $ 486,918   $ 494,279  
Fannie Mae, 4.79%, 2012       3,522,804     3,458,638  
Fannie Mae, 5%, 2013 - 2027       12,807,864     12,672,761  
Fannie Mae, 4.8%, 2013       348,393     340,022  
Fannie Mae, 4.845%, 2013       1,022,404     999,407  
Fannie Mae, 5.06%, 2013       409,238     404,502  
Fannie Mae, 4.65%, 2013       966,657     941,312  
Fannie Mae, 4.45%, 2014       1,228,028     1,171,721  
Fannie Mae, 4.771%, 2014       2,446,086     2,383,000  
Fannie Mae, 4.6%, 2014       491,089     472,697  
Fannie Mae, 4.667%, 2014       3,017,561     2,918,452  
Fannie Mae, 4.518%, 2014       643,243     616,421  
Fannie Mae, 4.77%, 2014       501,237     486,793  
Fannie Mae, 4.847%, 2014       3,435,124     3,358,120  
Fannie Mae, 5.1%, 2014       533,803     528,806  
Fannie Mae, 4.62%, 2015       704,944     677,799  
Fannie Mae, 4.82%, 2015       1,473,149     1,434,259  
Fannie Mae, 4.69%, 2015       349,257     337,287  
Fannie Mae, 4.85%, 2015       348,719     340,293  
Fannie Mae, 4.56%, 2015       633,665     606,569  
Fannie Mae, 4.665%, 2015       427,283     411,891  
Fannie Mae, 4.7%, 2015       490,117     473,531  
Fannie Mae, 4.89%, 2015       344,039     336,625  
Fannie Mae, 4.74%, 2015       390,000     377,527  
Fannie Mae, 4.925%, 2015       1,372,947     1,347,959  
Fannie Mae, 4.87%, 2015       369,787     361,344  
Fannie Mae, 4.815%, 2015       543,000     528,107  
Fannie Mae, 6.5%, 2016 - 2032       9,645,319     9,897,802  
Fannie Mae, 6%, 2016 - 2034       14,585,722     14,784,462  
Fannie Mae, 5.5%, 2017 - 2034       71,302,383     70,857,959  
Fannie Mae, 4.5%, 2019       16,520,560     16,074,085  
Fannie Mae, 4.88%, 2020       373,985     370,306  
Freddie Mac, 4.875%, 2009       3,691,000     3,688,365  
Freddie Mac, 4.5%, 2013 - 2015       2,362,531     2,336,516  
Freddie Mac, 4.375%, 2015       2,404,154     2,340,797  
Freddie Mac, 5%, 2024 - 2025       5,623,383     5,589,419  
Freddie Mac, 5.5%, 2025 - 2035       11,287,419     11,213,873  
Freddie Mac, 6%, 2035       1,666,188     1,682,890  
Freddie Mac, 3.108%, 2035       98,407     98,004  

1  

 

MFS Government Markets Income Trust
PORTFOLIO OF INVESTMENTS (Unaudited) 02/28/2006 - continued

Issuer Par Amount   Value ($)  
Bonds – continued    
U.S. Bonds – continued    
Mortgage Backed – continued    
Ginnie Mae, 5.5%, 2033     $ 7,284,143   $ 7,312,622  
            $ 184,727,222  
U.S. Government Agencies – 14.7%    
Aid to Egypt, 4.45%, 2015       1,755,000   $ 1,700,595  
Aid to Israel, 0%, 2021 - 2024       7,830,000     3,299,009  
Federal Home Loan Bank, 4.625%, 2008       9,515,000     9,465,903  
Freddie Mac, 4.2%, 2007       4,358,000     4,304,937  
Freddie Mac, 4.375%, 2015       6,170,000     5,923,360  
Overseas Private Investment Corp., 0%, 2007       1,791,247     1,822,594  
Small Business Administration, 8.875%, 2011       174,384     182,646  
Small Business Administration, 6.35%, 2021       1,439,463     1,501,692  
Small Business Administration, 6.34%, 2021       1,302,710     1,359,097  
Small Business Administration, 6.44%, 2021       1,257,034     1,314,309  
Small Business Administration, 6.625%, 2021       1,341,930     1,418,318  
Small Business Administration, 4.98%, 2023       901,797     890,191  
Small Business Administration, 4.72%, 2024       2,374,481     2,305,527  
Small Business Administration, 4.34%, 2024       1,308,154     1,240,764  
Small Business Administration, 4.77%, 2024       2,340,864     2,280,197  
Small Business Administration, 5.52%, 2024       1,408,449     1,429,007  
Small Business Administration, 4.86%, 2024 - 2025       2,761,342     2,699,156  
Small Business Administration, 4.87%, 2024       1,514,501     1,481,125  
Small Business Administration, 5.11%, 2025       1,401,772     1,390,546  
Small Business Administration, 4.76%, 2025       2,238,000     2,168,886  
U.S. Department of Housing & Urban Development, 6.36%, 2016       1,580,000     1,668,426  
U.S. Department of Housing & Urban Development, 6.59%, 2016       5,612,000     5,770,651  
            $ 55,616,936  
U.S. Treasury Obligations – 15.4%    
U.S. Treasury Bonds, 10.375%, 2012     $ 8,400,000   $ 9,170,767  
U.S. Treasury Bonds, 12%, 2013       3,036,000     3,549,035  
U.S. Treasury Bonds, 8.75%, 2017       6,100,000     8,256,686  
U.S. Treasury Bonds, 4.5%, 2036       6,301,000     6,297,553  
U.S. Treasury Notes, 6.5%, 2010       26,332,000     28,075,468  
U.S. Treasury Notes, TIPS, 3.875%, 2009       2,635,573     2,788,458  
            $ 58,137,967  
Total U.S. Bonds           $ 330,370,118  
Foreign Bonds – 10.9%    
Austria – 0.5%    
Republic of Austria, 5.5%, 2007   EUR   1,362,000   $ 1,688,735  
Brazil – 0%    
Federal Republic of Brazil, 8%, 2018     $ 102,000   $ 114,189  
Canada – 0.1%    
Government of Canada, 4.5%, 2015   CAD   378,000   $ 341,500  
Cayman Islands – 0%    
Petroleum Export Peloil, 5.265%, 2011 (a)     $ 100,000   $ 97,330  
Chile – 0.3%    
Republic of Chile, FRN, 5.06%, 2008     $ 1,057,000   $ 1,062,285  

2  

 

MFS Government Markets Income Trust
PORTFOLIO OF INVESTMENTS (Unaudited) 02/28/2006 - continued

Issuer Par Amount   Value ($)  
Bonds – continued    
Foreign Bonds – continued    
Finland – 0.8%    
Republic of Finland, 5.375%, 2013   EUR   2,227,000   $ 2,994,638  
France – 1.0%    
Republic of France, 4.75%, 2007   EUR   2,462,000   $ 3,008,584  
Republic of France, 4.75%, 2012   EUR   251,000     323,808  
Republic of France, 6%, 2025   EUR   318,000     499,659  
            $ 3,832,051  
Germany – 1.6%    
Federal Republic of Germany, 3.5%, 2008   EUR   1,668,000   $ 2,009,555  
Federal Republic of Germany, 3.75%, 2015   EUR   1,104,000     1,345,911  
Federal Republic of Germany, 6.25%, 2030   EUR   195,000     324,747  
KfW Bankengruppe, FRN, 2.563%, 2007   EUR   874,000     1,042,335  
Landesbank Baden-Wurttemberg, FRN, 2.508%, 2007   EUR   290,000     346,075  
Landesbank Baden-Wurttemberg, FRN, 2.594%, 2007   EUR   272,000     324,615  
Landesbank Baden-Wurttemberg, FRN, 2.704%, 2007   EUR   510,000     608,763  
            $ 6,002,001  
Ireland – 0.9%    
Republic of Ireland, 4.25%, 2007   EUR   2,387,000   $ 2,905,221  
Republic of Ireland, 4.6%, 2016   EUR   254,000     331,299  
            $ 3,236,520  
Malaysia – 0.1%    
Petronas Capital Ltd., 7.875%, 2022     $ 433,000   $ 538,449  
Mexico – 0.8%    
Pemex Project Funding Master Trust, 9.375%, 2008     $ 1,072,000   $ 1,177,056  
United Mexican States, 8.125%, 2019       1,040,000     1,287,000  
United Mexican States, 8.3%, 2031       128,000     167,680  
United Mexican States, 6.75%, 2034       312,000     348,660  
            $ 2,980,396  
Netherlands – 0.8%    
Kingdom of Netherlands, 5.75%, 2007   EUR   1,169,000   $ 1,432,767  
Kingdom of Netherlands, 3.75%, 2009   EUR   1,383,000     1,681,173  
            $ 3,113,940  
New Zealand – 0.7%    
Government of New Zealand, 6.5%, 2013   NZD   3,330,000   $ 2,300,112  
Government of New Zealand, 6%, 2015   NZD   204,000     137,555  
Government of New Zealand, 6%, 2017   NZD   519,000     351,124  
            $ 2,788,791  
Panama – 0.2%    
Republic of Panama, 9.375%, 2029     $ 677,000   $ 886,870  
Russia – 0.4%    
Russian Federation, 3%, 2008     $ 1,474,000   $ 1,400,890  
South Africa – 0.3%    
Republic of South Africa, 9.125%, 2009     $ 855,000   $ 951,188  
Spain – 0.7%    
Kingdom of Spain, 6%, 2008   EUR   1,293,000   $ 1,627,185  
Kingdom of Spain, 5.35%, 2011   EUR   771,000     1,014,096  
            $ 2,641,281  
United Kingdom – 1.7%    
Network Rail MTN Finance PLC, 2.628%, 2007   EUR   605,000   $ 722,268  

3  

 

MFS Government Markets Income Trust
PORTFOLIO OF INVESTMENTS (Unaudited) 02/28/2006 - continued


Issuer Par Amount   Value ($)  
Bonds – continued    
Foreign Bonds – continued    
United Kingdom – continued    
United Kingdom Treasury, 5.75%, 2009   GBP   1,279,000   $ 2,356,133  
United Kingdom Treasury, 8%, 2015   GBP   1,460,000     3,350,314  
            $ 6,428,715  
Total Foreign Bonds           $ 41,099,769  
      Total Bonds           $ 371,469,887  
Issue/Strike Price/Expiration Number of Contracts   Value ($)  
Call Options Purchased – 0.0%    
U.S. Treasury Notes 10yr Long Futures - May 2006 @ $109 (f)       73   $ 29,656  
Put Options Purchased – 0.0%    
U.S. Treasury Notes 10yr Long Futures - May 2006 @ $109 (f)       73   $ 109,500  
Issuer Par Amount   Value ($)  
Repurchase Agreement – 0.8%    
Goldman Sachs, 4.55%, dated 2/28/06, due 3/01/06, total to be received $2,827,357    
   (secured by various U.S. Treasury and Federal Agency obligations in a jointly    
   traded account)     $ 2,827,000   $ 2,827,000  
      Total Investments           $ 374,436,043  
Other Assets, Less Liabilities – 0.7%             2,662,273  
      Net Assets – 100.0%           $ 377,098,316  
  (f) All or a portion of the security has been segregated as collateral for an open futures contract.
  (a) SEC Rule 144A restriction.

The following abbreviations are used in the Portfolio of Investments and are defined:
FRN Floating Rate Note. The interest rate is the rate in effect as of period end.
STRIPS Separate Trading of Registered Interest and Principal of Securities
TIPS Treasury Inflation Protected Security

Abbreviations have been used throughout this report to indicate amounts shown in currencies other than the U.S. dollar. All amounts are stated in U.S. dollars unless otherwise indicated. A list of abbreviations is shown below:
  AUD Australian Dollar
  CAD Canadian Dollar
  DKK Danish Krone
  EUR Euro
  GBP British Pound
  NOK Norwegian Krone
  NZD New Zealand Dollar

See attached schedules. For more information see notes to financial statements as disclosed in the most recent semiannual or annual report.

4  

 

MFS Government Markets Income Trust
Supplemental Schedules (Unaudited) 02/28/2006

(1) Portfolio Securities

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     $ 383,071,217  
Gross unrealized appreciation     $ 1,936,697  
Gross unrealized depreciation       (10,571,871 )
Net unrealized appreciation (depreciation)     $ (8,635,174 )

Aggregate cost includes prior fiscal year end tax adjustments.

(2) Financial Instruments
      Derivatives

Forward Foreign Currency Exchange Contracts

Sales and Purchases in the table below are reported by currency.

Contracts to
Deliver/Receive		   Settlement Date In Exchange For   Contracts
at Value		   Net Unrealized Appreciation (Depreciation)  
Sales                  
AUD   227,038   4/07/06   $ 169,253   $ 168,683   $ 570  
EUR   17,864,927   3/27/06 - 4/18/06     21,315,162     21,383,482     (68,320 )
GBP   3,210,989   3/30/06     5,713,137     5,639,070     74,067  
NZD   4,753,650   4/07/06     3,262,436     3,144,598     117,838  
            $ 30,459,988   $ 30,335,833   $ 124,155  
 
Purchases  
AUD   227,038   4/07/06   $ 168,276   $ 168,683   $ 407  
CAD   421,321   3/20/06     363,537     370,702     7,165  
DKK   391,346   3/13/06     63,841     62,650     (1,191 )
EUR   450,254   3/20/06     547,032     538,049     (8,983 )
NOK   6,115,801   3/13/06     924,836     908,171     (16,665 )
NZD   549,955   4/07/06     373,672     363,802     (9,870 )
            $ 2,441,194   $ 2,412,057   $ (29,137 )

At February 28, 2006, forward foreign currency purchases and sales under master netting agreements excluded above amounted to a net payable of $56,630 with Merrill Lynch International.

5  

 

MFS Government Markets Income Trust
Supplemental Schedules (Unaudited) 02/28/2006 - continued

Futures Contracts

    Contracts     Value     Expiration Date   Unrealized Appreciation (Depreciation)  
  
U.S. Treasury Note 10 yr (Long)   56   $ 6,042,750     Jun-06   $ 13,367  
U.S. Treasury Note 5 yr (Short)   54     5,680,125     Jun-06     (7,783 )
U.S. Treasury Bond (Short)   59     6,672,531     Jun-06     (11,457 )
  
                    $ (5,873 )

At February 28, 2006, the trust had sufficient cash and/or securities to cover any margin requirements under these derivative contracts.

6  

 

ITEM 2. CONTROLS AND PROCEDURES.

(a) Based upon their evaluation of the effectiveness of the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as conducted within 90 days of the filing date of this Form N-Q, 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 registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

ITEM 3. EXHIBITS.

File as exhibits as part of this Form a separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2): Attached hereto.

 

Notice

A copy of the Amended and Restated Declaration of Trust of the Registrant is on file with the Secretary of State of the Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of the Registrant by an officer of the Registrant as an officer and not individually and the obligations of or arising out of this instrument are not binding upon any of the Trustees or shareholders individually, but are binding only upon the assets and property of the respective constituent series of the Registrant.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Registrant: MFS GOVERNMENT MARKETS INCOME TRUST


By (Signature and Title)* MARIA F. DWYER  
  Maria F. Dwyer, President  

Date: April 24, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


By (Signature and Title)* MARIA F. DWYER  
  Maria F. Dwyer, President (Principal Executive Officer)  

Date: April 24, 2006


By (Signature and Title)* TRACY ATKINSON  
  Tracy Atkinson, Treasurer (Principal Financial Officer and Accounting Officer)  

Date: April 24, 2006


* Print name and title of each signing officer under his or her signature.