MFS GOVERNMENT MARKETS INCOME TRUST N-Q

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 811-05078

MFS GOVERNMENT MARKETS INCOME TRUST

(Exact name of registrant as specified in charter)

111 Huntington Avenue, Boston, Massachusetts 02199

(Address of principal executive offices) (Zip code)

Christopher R. Bohane

Massachusetts Financial Services Company

111 Huntington Avenue

Boston, Massachusetts 02199

(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, 2017

ITEM 1. SCHEDULE OF INVESTMENTS.

QUARTERLY REPORT

February 28, 2017

 

LOGO

 

MFS® GOVERNMENT MARKETS INCOME TRUST

 

LOGO

PORTFOLIO OF INVESTMENTS

2/28/17 (unaudited)

The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.

 

Issuer    Shares/Par     Value ($)  
Bonds - 99.6%                 
U.S. Bonds - 95.0%                 
Agency - Other - 6.9%                 
Financing Corp., 10.7%, 10/06/2017    $ 4,095,000     $ 4,338,688  
Financing Corp., 9.4%, 2/08/2018      3,085,000       3,324,023  
Financing Corp., 10.35%, 8/03/2018      3,820,000       4,315,485  
    

 

 

  
      $ 11,978,196  
Asset-Backed & Securitized - 2.6%                 
Babson CLO Ltd., 13-IIA, “BR”, FRN, 1%, 1/18/2025 (z)    $ 583,669     $ 583,669  
Citigroup Commercial Mortgage Trust, FRN, 5.724%, 12/10/2049      736,133       738,841  
CNH Equipment Trust, 2015-C, “A2B”, FRN, 1.24%, 12/17/2018      75,119       75,142  
Commercial Mortgage Trust, 2015-DC1, “A5”, 3.35%, 2/10/2048      327,000       330,422  
Credit Suisse Commercial Mortgage Trust, “A4”, FRN, 5.94%, 9/15/2039      247,687       249,662  
Credit Suisse Commercial Mortgage Trust, “AM”, FRN, 5.638%, 6/15/2039      398,459       401,946  
Credit Suisse Commercial Mortgage Trust, “C4”, FRN, 5.94%, 9/15/2039      378,313       383,048  
CWCapital Cobalt Ltd., “A4”, FRN, 5.774%, 5/15/2046      348,785       350,691  
Fortress Credit BSL Ltd., 2013-1A, “A”, FRN, 2.204%, 1/19/2025 (n)      342,461       343,108  
JPMorgan Chase Commercial Mortgage Securities Corp., “A4”, FRN, 5.787%, 6/15/2049      543,773       544,863  
Morgan Stanley Capital I Trust, “AM”, FRN, 5.715%, 4/15/2049      431,000       431,522  
    

 

 

  
      $ 4,432,914  
Automotive - 0.1%                 
Ford Motor Credit Co. LLC, 2.551%, 10/05/2018    $ 241,000     $ 243,018  
Building - 0.0%                 
Martin Marietta Materials, Inc., 4.25%, 7/02/2024    $ 82,000     $ 85,049  
Business Services - 0.8%                 
Cisco Systems, Inc., 2.6%, 2/28/2023    $ 299,000     $ 298,610  
Fidelity National Information Services, Inc., 3.875%, 6/05/2024      1,000,000       1,026,416  
    

 

 

  
      $ 1,325,026  
Cable TV - 0.9%                 
Charter Communications Operating LLC/Charter Communications Operating Capital Corp., 4.908%, 7/23/2025    $ 242,000     $ 254,924  
Comcast Corp., 4.2%, 8/15/2034      96,000       98,476  
Time Warner Cable, Inc., 8.25%, 4/01/2019      1,000,000       1,118,371  
Time Warner Cable, Inc., 4.5%, 9/15/2042      100,000       91,004  
    

 

 

  
      $ 1,562,775  
Computer Software - 0.1%                 
Microsoft Corp., 3.125%, 11/03/2025    $ 124,000     $ 124,500  
Computer Software - Systems - 0.3%                 
Apple, Inc., 3.25%, 2/23/2026    $ 400,000     $ 406,027  
Apple, Inc., 4.375%, 5/13/2045      121,000       125,933  
    

 

 

  
      $ 531,960  
Consumer Products - 0.2%                 
Newell Rubbermaid, Inc., 3.15%, 4/01/2021    $ 369,000     $ 376,336  
Food & Beverages - 0.3%                 
Anheuser-Busch InBev Worldwide, Inc., 3.3%, 2/01/2023    $ 167,000     $ 170,676  
Anheuser-Busch InBev Worldwide, Inc., 4.7%, 2/01/2036      219,000       235,521  

 

1

Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
Bonds - continued                 
U.S. Bonds - continued                 
Food & Beverages - continued                 
Tyson Foods, Inc., 5.15%, 8/15/2044    $ 38,000     $ 40,297  
    

 

 

  
      $ 446,494  
Food & Drug Stores - 0.3%                 
CVS Health Corp., 3.5%, 7/20/2022    $ 277,000     $ 286,003  
CVS Health Corp., 5.125%, 7/20/2045      270,000       300,797  
    

 

 

  
      $ 586,800  
Insurance - 0.1%                 
American International Group, Inc., 4.7%, 7/10/2035    $ 108,000     $ 111,154  
Insurance - Health - 0.4%                 
UnitedHealth Group, Inc., 4.625%, 7/15/2035    $ 672,000     $ 743,330  
Insurance - Property & Casualty - 0.1%                 
Liberty Mutual Group, Inc., 4.85%, 8/01/2044 (n)    $ 99,000     $ 101,054  
Local Authorities - 1.2%                 
New Jersey Turnpike Authority Rev. (Build America Bonds), “F”, 7.414%, 1/01/2040    $ 32,000     $ 46,730  
State of California (Build America Bonds), 7.6%, 11/01/2040      925,000       1,382,810  
University of California Rev. (Build America Bonds), 5.77%, 5/15/2043      450,000       561,029  
    

 

 

  
      $ 1,990,569  
Major Banks - 0.4%                 
Bank of America Corp., 7.625%, 6/01/2019    $ 170,000     $ 190,547  
Goldman Sachs Group, Inc., 3.625%, 1/22/2023      446,000       457,759  
Goldman Sachs Group, Inc., 4.8%, 7/08/2044      94,000       100,978  
    

 

 

  
      $ 749,284  
Medical & Health Technology & Services - 0.2%                 
Becton, Dickinson and Co., 4.685%, 12/15/2044    $ 179,000     $ 190,202  
Laboratory Corp. of America Holdings, 4.7%, 2/01/2045      106,000       103,949  
    

 

 

  
      $ 294,151  
Medical Equipment - 0.1%                 
Medtronic, Inc., 4.625%, 3/15/2045    $ 237,000     $ 257,209  
Metals & Mining - 0.3%                 
Freeport-McMoRan, Inc., 3.875%, 3/15/2023    $ 500,000     $ 460,000  
Midstream - 0.9%                 
Enterprise Products Operating LLC, 3.9%, 2/15/2024    $ 29,000     $ 30,065  
Kinder Morgan Energy Partners LP, 6.85%, 2/15/2020      1,000,000       1,119,546  
Kinder Morgan Energy Partners LP, 5.4%, 9/01/2044      358,000       366,706  
    

 

 

  
      $ 1,516,317  
Mortgage-Backed - 49.9%                 
Fannie Mae, 1.9%, 6/01/2017    $ 153,774     $ 153,643  
Fannie Mae, 6%, 8/01/2017 - 7/01/2037      1,138,847       1,298,922  
Fannie Mae, 5.5%, 9/01/2017 - 3/01/2038      3,768,828       4,216,286  
Fannie Mae, 4.88%, 3/01/2020      107,096       111,846  
Fannie Mae, 3.87%, 7/01/2022      183,119       194,143  
Fannie Mae, 2.152%, 1/25/2023      401,000       393,623  
Fannie Mae, 2.41%, 5/01/2023      128,877       128,304  

 

2

Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
Bonds - continued                 
U.S. Bonds - continued                 
Mortgage-Backed - continued                 
Fannie Mae, 2.55%, 5/01/2023    $ 110,922     $ 111,268  
Fannie Mae, 2.59%, 5/01/2023      70,198       70,563  
Fannie Mae, 3.78%, 10/01/2023      64,036       67,951  
Fannie Mae, 2.7%, 7/01/2025      200,000       197,596  
Fannie Mae, 3.43%, 6/01/2026      198,119       205,644  
Fannie Mae, 3.59%, 9/01/2026      73,411       77,097  
Fannie Mae, 3%, 4/01/2027 - 11/01/2046      7,404,362       7,548,207  
Fannie Mae, 4.96%, 6/01/2030      129,860       144,179  
Fannie Mae, 6.5%, 5/01/2031 - 2/01/2037      682,769       782,843  
Fannie Mae, 5%, 6/01/2035 - 3/01/2042      734,265       807,115  
Fannie Mae, 4.5%, 1/01/2040 - 4/01/2044      6,248,077       6,735,357  
Fannie Mae, 4%, 9/01/2040 - 2/01/2045      10,687,536       11,280,824  
Fannie Mae, 3.5%, 4/01/2043 - 10/01/2046      5,745,445       5,908,102  
Fannie Mae, TBA, 3.5%, 2/01/2047      883,000       905,144  
Freddie Mac, 2.699%, 5/25/2018      787,888       796,825  
Freddie Mac, 2.412%, 8/25/2018      1,131,741       1,142,458  
Freddie Mac, 2.303%, 9/25/2018      275,000       277,547  
Freddie Mac, 2.323%, 10/25/2018      496,247       501,546  
Freddie Mac, 2.13%, 1/25/2019      1,558,601       1,570,339  
Freddie Mac, 5.085%, 3/25/2019      752,000       793,494  
Freddie Mac, 2.456%, 8/25/2019      383,000       387,982  
Freddie Mac, 4.186%, 8/25/2019      600,000       631,146  
Freddie Mac, 3.808%, 8/25/2020      219,000       231,237  
Freddie Mac, 3.034%, 10/25/2020      291,000       300,742  
Freddie Mac, 2.856%, 1/25/2021      400,000       411,520  
Freddie Mac, 6%, 5/01/2021 - 10/01/2038      587,318       673,351  
Freddie Mac, 2.791%, 1/25/2022      517,000       529,661  
Freddie Mac, 2.716%, 6/25/2022      399,000       407,197  
Freddie Mac, 2.355%, 7/25/2022      500,000       500,310  
Freddie Mac, 2.682%, 10/25/2022      189,000       192,095  
Freddie Mac, 2.51%, 11/25/2022      496,000       499,056  
Freddie Mac, 3.32%, 2/25/2023      433,000       454,041  
Freddie Mac, 3.3%, 4/25/2023 - 10/25/2026      1,034,471       1,073,554  
Freddie Mac, 3.06%, 7/25/2023      181,000       186,891  
Freddie Mac, 2.454%, 8/25/2023      379,000       377,341  
Freddie Mac, 3.458%, 8/25/2023      367,000       386,784  
Freddie Mac, 4.5%, 9/01/2024 - 5/01/2042      1,236,532       1,330,026  
Freddie Mac, 5.5%, 10/01/2024 - 6/01/2036      832,426       929,979  
Freddie Mac, 2.67%, 12/25/2024      827,000       825,288  
Freddie Mac, 2.811%, 1/25/2025      642,000       645,680  
Freddie Mac, 3.329%, 5/25/2025      928,000       962,943  
Freddie Mac, 3.01%, 7/25/2025      225,000       228,549  
Freddie Mac, 2.745%, 1/25/2026      629,000       623,938  
Freddie Mac, 2.673%, 3/25/2026      900,000       886,830  
Freddie Mac, 6.5%, 5/01/2037      153,940       173,014  
Freddie Mac, 5%, 4/01/2040 - 7/01/2041      2,311,055       2,533,048  
Freddie Mac, 4%, 1/01/2041 - 4/01/2044      657,643       693,122  
Freddie Mac, 3.5%, 5/01/2042 - 1/01/2047      8,948,607       9,199,203  
Freddie Mac, 3%, 4/01/2043 - 11/01/2046      4,888,366       4,873,336  
Ginnie Mae, 5.5%, 7/15/2033 - 1/20/2042      1,191,882       1,343,598  
Ginnie Mae, 4%, 8/15/2040 - 4/20/2041      186,487       198,245  
Ginnie Mae, 4.5%, 9/20/2041      223,492       241,381  
Ginnie Mae, 3.5%, 4/15/2042 - 5/20/2046      5,443,244       5,676,262  

 

3

Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
Bonds - continued                 
U.S. Bonds - continued                 
Mortgage-Backed - continued                 
Ginnie Mae, 3%, 7/20/2043    $ 821,778     $ 835,181  
Ginnie Mae, 6.157%, 4/20/2058      10,814       11,970  
    

 

 

  
      $ 85,875,367  
Network & Telecom - 0.8%                 
Verizon Communications, Inc., 5.05%, 3/15/2034    $ 750,000     $ 771,050  
Verizon Communications, Inc., “A”, 5.012%, 4/15/2049 (z)      596,000       584,512  
    

 

 

  
      $ 1,355,562  
Oils - 0.1%                 
Valero Energy Corp., 4.9%, 3/15/2045    $ 130,000     $ 132,121  
Other Banks & Diversified Financials - 0.6%                 
Discover Bank, 4.25%, 3/13/2026    $ 1,000,000     $ 1,033,265  
Pharmaceuticals - 0.2%                 
Actavis Funding SCS, 4.55%, 3/15/2035    $ 261,000     $ 262,971  
Gilead Sciences, Inc., 4.5%, 2/01/2045      82,000       82,074  
Gilead Sciences, Inc., 4.75%, 3/01/2046      80,000       83,160  
    

 

 

  
      $ 428,205  
Restaurants - 0.1%                 
McDonald’s Corp., 2.75%, 12/09/2020    $ 134,000     $ 136,349  
Supranational - 0.1%                 
Inter-American Development Bank, 4.375%, 1/24/2044    $ 158,000     $ 185,231  
Tobacco - 0.6%                 
Altria Group, Inc., 9.25%, 8/06/2019    $ 55,000     $ 64,657  
Altria Group, Inc., 4%, 1/31/2024      14,000       14,776  
Reynolds American, Inc., 8.125%, 6/23/2019      583,000       660,692  
Reynolds American, Inc., 4%, 6/12/2022      79,000       83,065  
Reynolds American, Inc., 4.45%, 6/12/2025      217,000       229,447  
    

 

 

  
      $ 1,052,637  
Transportation - Services - 0.0%                 
ERAC USA Finance LLC, 3.85%, 11/15/2024 (n)    $ 34,000     $ 34,791  
U.S. Government Agencies and Equivalents - 2.7%                 
AID-Tunisia, 2.452%, 7/24/2021    $ 235,000     $ 238,991  
AID-Ukraine, 1.844%, 5/16/2019      444,000       449,012  
AID-Ukraine, 1.847%, 5/29/2020      330,000       331,395  
Hashemite Kingdom of Jordan, 1.945%, 6/23/2019      443,000       447,450  
Hashemite Kingdom of Jordan, 2.503%, 10/30/2020      418,000       428,317  
Private Export Funding Corp., 2.25%, 3/15/2020      86,000       87,270  
Private Export Funding Corp., 2.3%, 9/15/2020      360,000       364,558  
Private Export Funding Corp., 1.875%, 7/15/2018      460,000       464,176  
Small Business Administration, 6.35%, 4/01/2021      52,482       55,446  
Small Business Administration, 6.34%, 5/01/2021      50,065       52,869  
Small Business Administration, 6.44%, 6/01/2021      57,383       60,361  
Small Business Administration, 6.625%, 7/01/2021      61,321       65,098  
Small Business Administration, 5.52%, 6/01/2024      117,285       124,930  
Small Business Administration, 2.21%, 2/01/2033      224,844       220,031  
Small Business Administration, 2.22%, 3/01/2033      395,311       386,848  

 

4

Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
U.S. Bonds - continued                 
U.S. Government Agencies and Equivalents - continued                 
Small Business Administration, 3.15%, 7/01/2033    $ 327,812     $ 337,935  
Small Business Administration, 3.62%, 9/01/2033      316,417       333,967  
Tennessee Valley Authority, 1.75%, 10/15/2018      292,000       294,420  
    

 

 

  
      $ 4,743,074  
U.S. Treasury Obligations - 23.7%                 
U.S. Treasury Bonds, 5.25%, 2/15/2029    $ 48,000     $ 61,791  
U.S. Treasury Bonds, 4.75%, 2/15/2037      336,000       441,774  
U.S. Treasury Bonds, 4.375%, 2/15/2038      5,037,000       6,336,979  
U.S. Treasury Bonds, 4.5%, 8/15/2039 (f)      5,097,100       6,480,682  
U.S. Treasury Bonds, 3.125%, 2/15/2043      453,700       466,602  
U.S. Treasury Bonds, 2.875%, 5/15/2043      1,697,100       1,665,877  
U.S. Treasury Bonds, 2.5%, 2/15/2045      2,504,000       2,270,717  
U.S. Treasury Notes, 4.75%, 8/15/2017      838,000       853,647  
U.S. Treasury Notes, 2.75%, 2/15/2019      1,654,000       1,702,651  
U.S. Treasury Notes, 3.125%, 5/15/2019      300,000       311,871  
U.S. Treasury Notes, 1%, 6/30/2019      3,593,000       3,566,893  
U.S. Treasury Notes, 2.625%, 8/15/2020      162,000       167,512  
U.S. Treasury Notes, 3.125%, 5/15/2021      5,026,000       5,297,917  
U.S. Treasury Notes, 1.75%, 5/15/2022      2,208,000       2,185,317  
U.S. Treasury Notes, 2.75%, 2/15/2024      577,000       598,074  
U.S. Treasury Notes, 2.5%, 5/15/2024      4,038,000       4,116,236  
U.S. Treasury Notes, 2%, 8/15/2025      98,000       95,523  
U.S. Treasury Notes, 2%, 11/15/2026      1,587,000       1,535,608  
U.S. Treasury Notes, 2.875%, 11/15/2046      2,766,000       2,712,301  
    

 

 

  
      $ 40,867,972  
Total U.S. Bonds     $ 163,760,710  
Foreign Bonds - 4.6%                 
Brazil - 0.2%                 
Federative Republic of Brazil, 5.625%, 1/07/2041    $ 162,000     $ 154,710  
Vale Overseas Ltd., 6.875%, 11/10/2039      165,000       180,056  
    

 

 

  
      $ 334,766  
Canada - 0.1%                 
Teck Resources Ltd., 6%, 8/15/2040    $ 200,000     $ 200,500  
Chile - 0.6%                 
Engie Energia Chile S.A., 5.625%, 1/15/2021    $ 566,000     $ 614,148  
GNL Quintero S.A., 4.634%, 7/31/2029 (n)      200,000       202,750  
Transelec S.A., 4.25%, 1/14/2025      200,000       202,162  
    

 

 

  
      $ 1,019,060  
China - 0.7%                 
Baidu, Inc., 3.25%, 8/06/2018    $ 240,000     $ 243,852  
CNPC (HK) Overseas Capital Ltd., 4.5%, 4/28/2021 (n)      226,000       240,402  
State Grid Overseas Investment (2014) Ltd., 4.125%, 5/07/2024 (n)      690,000       732,608  
    

 

 

  
      $ 1,216,862  
France - 0.2%                 
Banque Federative du Credit Mutuel S.A., 2.5%, 4/13/2021 (n)    $ 395,000     $ 391,058  
Kazakhstan - 0.1%                 
Republic of Kazakhstan, 5.125%, 7/21/2025 (n)    $ 201,000     $ 217,583  

 

5

Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
Bonds - continued                 
Foreign Bonds - continued                 
Mexico - 1.3%                 
Comision Federal de Electricidad, 4.875%, 5/26/2021    $ 277,000     $ 288,219  
Petroleos Mexicanos, 6.75%, 9/21/2047      21,000       20,790  
Petroleos Mexicanos, 4.625%, 9/21/2023      53,000       53,105  
Petroleos Mexicanos, 6%, 3/05/2020      202,000       216,847  
Petroleos Mexicanos, 5.5%, 1/21/2021      130,000       137,378  
Petroleos Mexicanos, 5.5%, 6/27/2044      12,000       10,320  
Petroleos Mexicanos, 4.875%, 1/18/2024      95,000       95,361  
Petroleos Mexicanos, 4.25%, 1/15/2025      15,000       14,273  
Petroleos Mexicanos, 5.625%, 1/23/2046      23,000       19,982  
Southern Copper Corp., 5.875%, 4/23/2045      80,000       84,670  
United Mexican States, 3.625%, 3/15/2022      1,164,000       1,189,608  
    

 

 

  
      $ 2,130,553  
Netherlands - 0.5%                 
ING Bank N.V., 5.8%, 9/25/2023 (n)    $ 769,000     $ 855,134  
Panama - 0.1%                 
Republic of Panama, 3.875%, 3/17/2028    $ 213,000     $ 215,982  
Peru - 0.3%                 
El Fondo Mivivienda S.A., 3.5%, 1/31/2023    $ 226,000     $ 225,435  
Republic of Peru, 8.75%, 11/21/2033      180,000       271,575  
    

 

 

  
      $ 497,010  
Romania - 0.1%                 
Republic of Romania, 4.375%, 8/22/2023 (n)    $ 36,000     $ 37,846  
Republic of Romania, 4.875%, 1/22/2024 (n)      58,000       62,794  
    

 

 

  
      $ 100,640  
Russia - 0.1%                 
LUKOIL International Finance B.V., 4.563%, 4/24/2023    $ 213,000     $ 217,260  
United Kingdom - 0.2%                 
Imperial Tobacco Finance PLC, 3.75%, 7/21/2022 (n)    $ 266,000     $ 274,269  
Royal Bank of Scotland Group PLC, 6%, 12/19/2023      124,000       131,792  
    

 

 

  
      $ 406,061  
Uruguay - 0.1%                 
Oriental Republic of Uruguay, 4.5%, 8/14/2024    $ 26,762     $ 28,435  
Oriental Republic of Uruguay, 4.375%, 10/27/2027      47,300       48,719  
    

 

 

  
      $ 77,154  
Total Foreign Bonds     $ 7,879,623  
Total Bonds     $ 171,640,333  
Money Market Funds - 1.2%                 
MFS Institutional Money Market Portfolio, 0.64% (v)      2,024,236     $ 2,024,236  
Total Investments     $ 173,664,569  
Other Assets, Less Liabilities - (0.8)%       (1,427,005 ) 
Net Assets - 100.0%     $ 172,237,564  

 

6

Portfolio of Investments (unaudited) – continued

 

 

(f) All or a portion of the security has been segregated as collateral for open futures contracts.
(n) Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. At period end, the aggregate value of these securities was $3,493,397 representing 2.0% of net assets.
(v) Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end.
(z) Restricted securities are not registered under the Securities Act of 1933 and are subject to legal restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are subsequently registered. Disposal of these securities may involve time-consuming negotiations and prompt sale at an acceptable price may be difficult. The fund holds the following restricted securities:

 

Restricted Securities    Acquisition
Date		     
Cost		      Value  
Babson CLO Ltd., 13-IIA, “BR”, FRN, 1%, 1/18/2025      2/17/17        $583,669        $583,669  
Verizon Communications, Inc., “A”, 5.012%, 4/15/2049      8/25/14-1/31/17        610,354        584,512  
Total Restricted Securities        $1,168,181  
% of Net assets        0.7%  

The following abbreviations are used in this report and are defined:

 

CLO   Collateralized Loan Obligation
FRN   Floating Rate Note. Interest rate resets periodically and the current rate may not be the rate reported at period end.
PLC   Public Limited Company
TBA   To Be Announced

Derivative Contracts at 2/28/17

Futures Contracts at 2/28/17

 

Description    Currency      Contracts      Value    Expiration Date    Unrealized
Appreciation
(Depreciation)		  
Asset Derivatives   
Interest Rate Futures   
U.S. Treasury Note 10 yr (Long)      USD        35      $4,360,234    June - 2017      $3,828  
              

 

 

  
              
Liability Derivatives   
Interest Rate Futures   
U.S. Treasury Note 5 yr (Long)      USD        50      $5,885,156    June - 2017      $(5,429 ) 
U.S. Treasury Bond 30 yr (Short)      USD        45      6,824,531    June - 2017      (54,110 ) 
              

 

 

  
                 $(59,539 ) 
              

 

 

  

At February 28, 2017, the fund had liquid securities with an aggregate value of $144,944 to cover any commitments for certain derivative contracts.

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

 

7

Supplemental Information

2/28/17 (unaudited)

The fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.

(1) Investment Valuations

Debt instruments and floating rate loans, including restricted debt instruments, are generally valued at an evaluated or composite bid as provided by a third-party pricing service. Short-term instruments with a maturity at issuance of 60 days or less may be valued at amortized cost, which approximates market value. Futures contracts are generally valued at last posted settlement price on their primary exchange as provided by a third-party pricing service. Futures contracts for which there were no trades that day for a particular position are generally valued at the closing bid quotation on their primary exchange as provided by a third-party pricing service. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.

The Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments (including any fair valuation) to the adviser pursuant to valuation policies and procedures approved by the Board. If the adviser determines that reliable market quotations are not readily available, investments are valued at fair value as determined in good faith by the adviser in accordance with such procedures under the oversight of the Board of Trustees. Under the fund’s valuation policies and procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the fund’s net asset value, or after the halting of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally traded. The adviser generally relies on third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.

Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. Other financial instruments are derivative instruments not reflected in total investments, such as futures contracts. The following is a summary of the levels used as of February 28, 2017 in valuing the fund’s assets or liabilities:

 

Investments at Value    Level 1      Level 2      Level 3      Total  
U.S. Treasury Bonds & U.S. Government Agency & Equivalents      $—        $57,589,242        $—        $57,589,242  
Non-U.S. Sovereign Debt      —        4,467,203        —        4,467,203  
U.S. Corporate Bonds      —        15,677,956        —        15,677,956  
Residential Mortgage-Backed Securities      —        85,875,367        —        85,875,367  
Commercial Mortgage-Backed Securities      —        3,430,995        —        3,430,995  
Asset-Backed Securities (including CDOs)      —        1,001,919        —        1,001,919  
Foreign Bonds      —        3,597,651        —        3,597,651  
Mutual Funds      2,024,236        —        —        2,024,236  
Total Investments      $2,024,236        $171,640,333        $—        $173,664,569  
Other Financial Instruments                            
Futures Contracts - Assets      $3,828        $—        $—        $3,828  
Futures Contracts - Liabilities      (59,539 )       —        —        (59,539 ) 

For further information regarding security characteristics, see the Portfolio of Investments.

 

8

Supplemental Information (unaudited) – continued

 

(2) Portfolio Securities

The cost and unrealized appreciation and depreciation in the value of the investments owned by the fund, as computed on a federal income tax basis, are as follows:

 

Aggregate cost      $173,945,230  
Gross unrealized appreciation      5,375,929  
Gross unrealized depreciation      (5,656,590 ) 
Net unrealized appreciation (depreciation)      $(280,661 ) 

The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.

(3) Transactions in Underlying Affiliated Funds – Affiliated Issuers

An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the fund assumes the following to be an affiliated issuer:

 

Underlying Affiliated Fund    Beginning
Shares/Par
Amount		      Acquisitions
Shares/Par
Amount		      Dispositions
Shares/Par
Amount		      Ending
Shares/Par
Amount		  
MFS Institutional Money Market Portfolio      10,282,023        8,819,364        (17,077,151 )       2,024,236  
Underlying Affiliated Fund    Realized
Gain (Loss)		      Capital Gain
Distributions		      Dividend
Income		      Ending
Value		  
MFS Institutional Money Market Portfolio      $(19 )       $—        $6,613        $2,024,236  

 

9

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, as amended, 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)*    DAVID L. DILORENZO
  David L. DiLorenzo, President

Date: April 13, 2017

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)*    DAVID L. DILORENZO
  David L. DiLorenzo, President (Principal Executive Officer)

Date: April 13, 2017

 

By (Signature and Title)*    JAMES O. YOST
  James O. Yost, Treasurer (Principal Financial Officer and Accounting Officer)

Date: April 13, 2017

 

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