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 811-5078

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: August 31, 2017

ITEM 1. SCHEDULE OF INVESTMENTS.

QUARTERLY REPORT

August 31, 2017

 

LOGO

 

MFS® GOVERNMENT MARKETS INCOME TRUST

 

LOGO

PORTFOLIO OF INVESTMENTS

8/31/17 (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 - 97.3%  
U.S. Bonds - 91.8%  
Agency - Other - 6.7%  
Financing Corp., 10.7%, 10/06/2017    $ 4,095,000     $ 4,134,259  
Financing Corp., 9.4%, 2/08/2018      3,085,000       3,198,124  
Financing Corp., 10.35%, 8/03/2018      3,820,000       4,132,973  
    

 

 

  
      $ 11,465,356  
Asset-Backed & Securitized - 1.8%  
A Voce CLO Ltd., 2014-1A, “A1R”, FLR, 2.463% (U.S. LIBOR-3mo. + 1.16%), 7/15/2026 (n)    $ 541,000     $ 539,820  
ALM Loan Funding CLO, 2014-14A, “A1R”, FLR, 2.463% (U.S. LIBOR-3mo. + 1.15%), 7/28/2026 (n)      371,723       372,718  
Atrium CDO Corp., 2011-A, “A1R”, FLR, 2.452% (U.S. LIBOR-3mo. + 1.14%), 10/23/2025 (n)      548,000       550,092  
Babson CLO Ltd., 2013-IIA, “BR”, FLR, 3.553% (U.S. LIBOR-3mo. + 2.25%), 1/18/2025 (n)      583,669       584,946  
Commercial Mortgage Trust, 2015-DC1, “A5”, 3.35%, 2/10/2048      327,000       338,571  
Fortress Credit BSL Ltd., 2013-1A, “A”, FLR, 2.486% (U.S. LIBOR-3mo. + 1.18%), 1/19/2025 (n)      194,064       194,363  
Morgan Stanley Capital I Trust, “AM”, 5.924%, 4/15/2049      884       898  
TICP CLO Ltd., FLR, 2.486% (U.S. LIBOR-3mo. + 1.18%), 1/20/2027 (n)      538,454       538,508  
    

 

 

  
      $ 3,119,916  
Automotive - 0.1%  
Ford Motor Credit Co. LLC, 2.551%, 10/05/2018    $ 241,000     $ 242,636  
Building - 0.1%  
Martin Marietta Materials, Inc., 4.25%, 7/02/2024    $ 82,000     $ 87,730  
Business Services - 0.3%  
Cisco Systems, Inc., 2.6%, 2/28/2023    $ 299,000     $ 303,956  
Fidelity National Information Services, Inc., 3.875%, 6/05/2024      271,000       286,600  
    

 

 

  
      $ 590,556  
Cable TV - 0.9%  
Charter Communications Operating LLC/Charter Communications Operating Capital Corp., 4.908%, 7/23/2025    $ 242,000     $ 259,248  
Comcast Corp., 4.2%, 8/15/2034      96,000       101,618  
Time Warner Cable, Inc., 8.25%, 4/01/2019      1,000,000       1,092,453  
Time Warner Cable, Inc., 4.5%, 9/15/2042      100,000       92,381  
    

 

 

  
      $ 1,545,700  
Chemicals - 0.2%  
Sherwin Williams Co., 2.75%, 6/01/2022    $ 345,000     $ 347,619  
Computer Software - 0.1%  
Microsoft Corp., 3.125%, 11/03/2025    $ 124,000     $ 128,276  
Computer Software - Systems - 0.3%  
Apple, Inc., 3.25%, 2/23/2026    $ 400,000     $ 413,631  
Apple, Inc., 4.375%, 5/13/2045      121,000       132,553  
    

 

 

  
      $ 546,184  
Consumer Products - 0.2%  
Newell Rubbermaid, Inc., 3.15%, 4/01/2021    $ 369,000     $ 379,518  
Food & Beverages - 0.3%  
Anheuser-Busch InBev Worldwide, Inc., 3.3%, 2/01/2023    $ 167,000     $ 173,421  
Anheuser-Busch InBev Worldwide, Inc., 4.7%, 2/01/2036      219,000       243,820  

 

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     $ 43,526  
    

 

 

  
      $ 460,767  
Food & Drug Stores - 0.2%  
CVS Health Corp., 5.125%, 7/20/2045    $ 270,000     $ 311,331  
Insurance - 0.1%  
American International Group, Inc., 4.7%, 7/10/2035    $ 108,000     $ 117,420  
Insurance - Health - 0.5%  
UnitedHealth Group, Inc., 4.625%, 7/15/2035    $ 672,000     $ 773,234  
Insurance - Property & Casualty - 0.1%  
Liberty Mutual Group, Inc., 4.85%, 8/01/2044 (n)    $ 99,000     $ 108,099  
Local Authorities - 1.2%  
New Jersey Turnpike Authority Rev. (Build America Bonds), “F”, 7.414%, 1/01/2040    $ 32,000     $ 48,955  
State of California (Build America Bonds), 7.6%, 11/01/2040      925,000       1,473,016  
University of California Rev. (Build America Bonds), 5.77%, 5/15/2043      450,000       589,091  
    

 

 

  
      $ 2,111,062  
Major Banks - 0.4%  
Bank of America Corp., 7.625%, 6/01/2019    $ 170,000     $ 186,157  
Goldman Sachs Group, Inc., 3.625%, 1/22/2023      446,000       463,577  
    

 

 

  
      $ 649,734  
Medical & Health Technology & Services - 0.2%  
Becton, Dickinson and Co., 4.685%, 12/15/2044    $ 179,000     $ 188,055  
Laboratory Corp. of America Holdings, 4.7%, 2/01/2045      106,000       111,850  
    

 

 

  
      $ 299,905  
Medical Equipment - 0.2%  
Medtronic, Inc., 4.625%, 3/15/2045    $ 237,000     $ 268,633  
Metals & Mining - 0.3%  
Freeport-McMoRan, Inc., 3.875%, 3/15/2023    $ 500,000     $ 495,000  
Midstream - 0.6%  
Kinder Morgan Energy Partners LP, 6.85%, 2/15/2020    $ 1,000,000     $ 1,104,771  
Mortgage-Backed - 49.4%  
Fannie Mae, 2.28%, 11/01/2026    $ 76,005     $ 74,728  
Fannie Mae, 3.5%, 4/01/2047      879,931       912,326  
Fannie Mae, 5.5%, 9/01/2017 - 3/01/2038      3,257,204       3,639,957  
Fannie Mae, 6%, 1/01/2018 - 7/01/2037      969,024       1,098,868  
Fannie Mae, 4.88%, 3/01/2020      90,891       94,221  
Fannie Mae, 3.87%, 7/01/2022      181,818       193,988  
Fannie Mae, 2.152%, 1/25/2023      401,000       400,183  
Fannie Mae, 2.41%, 5/01/2023      127,520       129,833  
Fannie Mae, 2.55%, 5/01/2023      109,727       112,491  
Fannie Mae, 2.59%, 5/01/2023      69,480       71,373  
Fannie Mae, 3.78%, 10/01/2023      63,523       68,235  
Fannie Mae, 2.7%, 7/01/2025      200,000       203,605  

 

2

Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
Bonds - continued  
U.S. Bonds - continued  
Mortgage-Backed - continued  
Fannie Mae, 3.43%, 6/01/2026    $ 196,594     $ 211,012  
Fannie Mae, 3.59%, 9/01/2026      72,813       78,065  
Fannie Mae, 4.96%, 6/01/2030      126,739       144,046  
Fannie Mae, 6.5%, 5/01/2031 - 2/01/2037      619,780       710,617  
Fannie Mae, 3%, 12/01/2031 - 11/01/2046      4,079,899       4,173,754  
Fannie Mae, 5%, 6/01/2035 - 3/01/2042      626,008       684,737  
Fannie Mae, 4.5%, 1/01/2040 - 4/01/2044      5,765,886       6,250,983  
Fannie Mae, 4%, 9/01/2040 - 7/01/2047      12,202,027       12,948,665  
Fannie Mae, 3.5%, 4/01/2043 - 1/01/2047      8,254,242       8,570,865  
Fannie Mae, 2.683%, 12/25/2026      729,000       726,258  
Freddie Mac, 4.5%, 9/01/2046      679,753       729,920  
Freddie Mac, 2.699%, 5/25/2018      780,032       784,123  
Freddie Mac, 2.412%, 8/25/2018      1,119,702       1,124,488  
Freddie Mac, 2.303%, 9/25/2018      275,000       276,545  
Freddie Mac, 2.323%, 10/25/2018      490,546       493,551  
Freddie Mac, 2.13%, 1/25/2019      1,541,341       1,551,036  
Freddie Mac, 5.085%, 3/25/2019      752,000       783,261  
Freddie Mac, 2.456%, 8/25/2019      383,000       387,633  
Freddie Mac, 4.186%, 8/25/2019      600,000       626,022  
Freddie Mac, 3.808%, 8/25/2020      219,000       230,692  
Freddie Mac, 3.034%, 10/25/2020      291,000       300,407  
Freddie Mac, 2.856%, 1/25/2021      400,000       412,454  
Freddie Mac, 6%, 5/01/2021 - 10/01/2038      501,502       566,644  
Freddie Mac, 2.791%, 1/25/2022      517,000       534,346  
Freddie Mac, 2.716%, 6/25/2022      399,000       411,305  
Freddie Mac, 2.355%, 7/25/2022      500,000       507,674  
Freddie Mac, 2.682%, 10/25/2022      189,000       194,281  
Freddie Mac, 2.51%, 11/25/2022      496,000       505,837  
Freddie Mac, 3.32%, 2/25/2023      433,000       458,813  
Freddie Mac, 3.3%, 4/25/2023 - 10/25/2026      1,034,471       1,095,202  
Freddie Mac, 3.06%, 7/25/2023      294,000       307,715  
Freddie Mac, 2.454%, 8/25/2023      379,000       384,551  
Freddie Mac, 3.458%, 8/25/2023      367,000       392,133  
Freddie Mac, 4.5%, 9/01/2024 - 3/01/2047      1,682,701       1,810,451  
Freddie Mac, 2.67%, 12/25/2024      827,000       844,197  
Freddie Mac, 2.811%, 1/25/2025      642,000       660,386  
Freddie Mac, 3.329%, 5/25/2025      928,000       986,920  
Freddie Mac, 3.01%, 7/25/2025      225,000       234,030  
Freddie Mac, 2.745%, 1/25/2026      629,000       639,671  
Freddie Mac, 2.673%, 3/25/2026      900,000       910,699  
Freddie Mac, 3.243%, 4/25/2027      583,000       614,017  
Freddie Mac, 3.117%, 6/25/2027      420,000       437,534  
Freddie Mac, 5.5%, 8/01/2035 - 6/01/2036      558,174       622,977  
Freddie Mac, 1.018%, 4/25/2024 (i)      4,368,994       212,506  
Freddie Mac, 6.5%, 5/01/2037      144,750       162,934  
Freddie Mac, 5%, 4/01/2040 - 7/01/2041      2,080,414       2,283,448  
Freddie Mac, 4%, 1/01/2041 - 4/01/2044      594,525       629,392  
Freddie Mac, 3.5%, 5/01/2042 - 1/01/2047      8,419,927       8,750,325  
Freddie Mac, 3%, 4/01/2043 - 11/01/2046      4,682,877       4,755,366  
Freddie Mac, 3.224%, 3/25/2027      575,000       603,622  
Ginnie Mae, 5.5%, 7/15/2033 - 1/20/2042      1,085,254       1,215,471  
Ginnie Mae, 4%, 8/15/2040 - 4/20/2041      172,252       182,643  
Ginnie Mae, 4.5%, 9/20/2041      199,604       214,244  

 

3

Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
Bonds - continued  
U.S. Bonds - continued  
Mortgage-Backed - continued  
Ginnie Mae, 3.5%, 4/15/2042 - 7/20/2043    $ 2,396,949     $ 2,510,198  
Ginnie Mae, 6.158%, 4/20/2058      11,151       12,243  
Ginnie Mae, 0.658%, 2/16/2059 (i)      568,682       38,767  
    

 

 

  
      $ 83,889,484  
Network & Telecom - 0.6%  
AT&T, Inc., 3.4%, 8/14/2024    $ 339,000     $ 342,194  
Verizon Communications, Inc., 5.012%, 4/15/2049      596,000       595,744  
    

 

 

  
      $ 937,938  
Oils - 0.1%  
Valero Energy Corp., 4.9%, 3/15/2045    $ 130,000     $ 138,038  
Pharmaceuticals - 0.1%  
Gilead Sciences, Inc., 4.5%, 2/01/2045    $ 82,000     $ 87,666  
Gilead Sciences, Inc., 4.75%, 3/01/2046      80,000       89,463  
    

 

 

  
      $ 177,129  
Restaurants - 0.1%  
McDonald’s Corp., 2.75%, 12/09/2020    $ 134,000     $ 137,258  
Supranational - 0.1%  
Inter-American Development Bank, 4.375%, 1/24/2044    $ 158,000     $ 193,691  
Tobacco - 0.6%  
Altria Group, Inc., 9.25%, 8/06/2019    $ 55,000     $ 62,682  
Reynolds American, Inc., 8.125%, 6/23/2019      583,000       645,047  
Reynolds American, Inc., 4%, 6/12/2022      79,000       83,792  
Reynolds American, Inc., 4.45%, 6/12/2025      217,000       235,001  
    

 

 

  
      $ 1,026,522  
Transportation - Services - 0.0%  
ERAC USA Finance LLC, 3.85%, 11/15/2024 (n)    $ 34,000     $ 35,575  
U.S. Government Agencies and Equivalents - 2.7%  
AID-Tunisia, 2.452%, 7/24/2021    $ 235,000     $ 239,652  
AID-Ukraine, 1.844%, 5/16/2019      444,000       447,852  
AID-Ukraine, 1.847%, 5/29/2020      330,000       331,886  
Hashemite Kingdom of Jordan, 1.945%, 6/23/2019      443,000       446,665  
Hashemite Kingdom of Jordan, 2.503%, 10/30/2020      418,000       429,927  
Private Export Funding Corp., 2.25%, 3/15/2020      86,000       87,360  
Private Export Funding Corp., 2.3%, 9/15/2020      360,000       367,311  
Private Export Funding Corp., 1.875%, 7/15/2018      460,000       462,257  
Small Business Administration, 6.35%, 4/01/2021      40,242       42,191  
Small Business Administration, 6.34%, 5/01/2021      40,260       42,193  
Small Business Administration, 6.44%, 6/01/2021      49,735       52,141  
Small Business Administration, 6.625%, 7/01/2021      50,318       52,888  
Small Business Administration, 5.52%, 6/01/2024      94,949       100,739  
Small Business Administration, 2.21%, 2/01/2033      210,968       208,782  
Small Business Administration, 2.22%, 3/01/2033      378,126       376,460  
Small Business Administration, 3.15%, 7/01/2033      314,548       327,257  
Small Business Administration, 3.62%, 9/01/2033      290,653       308,752  
Tennessee Valley Authority, 1.75%, 10/15/2018      292,000       293,431  
    

 

 

  
      $ 4,617,744  

 

4

Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
Bonds - continued  
U.S. Bonds - continued  
U.S. Treasury Obligations - 22.9%  
U.S. Treasury Bonds, 5.25%, 2/15/2029    $ 48,000     $ 62,933  
U.S. Treasury Bonds, 4.75%, 2/15/2037      336,000       456,750  
U.S. Treasury Bonds, 4.375%, 2/15/2038      4,287,000       5,576,282  
U.S. Treasury Bonds, 4.5%, 8/15/2039 (f)      5,097,100       6,747,286  
U.S. Treasury Bonds, 3.125%, 2/15/2043      453,700       490,740  
U.S. Treasury Bonds, 2.875%, 5/15/2043      1,697,100       1,754,907  
U.S. Treasury Bonds, 2.5%, 2/15/2045      2,954,000       2,828,570  
U.S. Treasury Notes, 3.125%, 5/15/2019      300,000       309,105  
U.S. Treasury Notes, 1%, 6/30/2019      1,596,000       1,587,085  
U.S. Treasury Notes, 2.625%, 8/15/2020      162,000       167,550  
U.S. Treasury Notes, 3.125%, 5/15/2021      5,026,000       5,309,105  
U.S. Treasury Notes, 1.75%, 5/15/2022      2,208,000       2,214,469  
U.S. Treasury Notes, 2.75%, 2/15/2024      577,000       606,864  
U.S. Treasury Notes, 2.5%, 5/15/2024      4,038,000       4,184,851  
U.S. Treasury Notes, 2%, 8/15/2025      98,000       97,778  
U.S. Treasury Notes, 2%, 11/15/2026      3,706,000       3,671,835  
U.S. Treasury Notes, 2.875%, 11/15/2046      2,766,000       2,848,548  
    

 

 

  
      $ 38,914,658  
Utilities - Electric Power - 0.4%  
FirstEnergy Corp., 3.9%, 7/15/2027    $ 694,000     $ 709,000  
Total U.S. Bonds            $ 155,930,484  
Foreign Bonds - 5.5%  
Australia - 0.0%  
APT Pipelines Ltd., 4.25%, 7/15/2027 (n)    $ 16,000     $ 16,649  
Brazil - 0.2%  
Federative Republic of Brazil, 5.625%, 1/07/2041    $ 162,000     $ 162,203  
Vale Overseas Ltd., 6.875%, 11/10/2039      165,000       188,100  
    

 

 

  
      $ 350,303  
Chile - 0.6%  
Engie Energia Chile S.A., 5.625%, 1/15/2021    $ 566,000     $ 618,797  
GNL Quintero S.A., 4.634%, 7/31/2029 (n)      200,000       209,250  
Transelec S.A., 4.25%, 1/14/2025      200,000       208,071  
    

 

 

  
      $ 1,036,118  
China - 0.7%  
Baidu, Inc., 3.25%, 8/06/2018    $ 240,000     $ 242,649  
CNPC (HK) Overseas Capital Ltd., 4.5%, 4/28/2021 (n)      226,000       241,829  
State Grid Overseas Investment (2014) Ltd., 4.125%, 5/07/2024 (n)      690,000       743,008  
    

 

 

  
      $ 1,227,486  
France - 0.3%  
Banque Federative du Credit Mutuel S.A., 2.5%, 4/13/2021 (n)    $ 395,000     $ 398,544  
Italy - 0.2%  
Enel Finance International N.V., 2.875%, 5/25/2022 (n)    $ 366,000     $ 369,866  
Kazakhstan - 0.1%  
Republic of Kazakhstan, 5.125%, 7/21/2025 (n)    $ 201,000     $ 224,849  

 

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     $ 296,390  
Petroleos Mexicanos, 6%, 3/05/2020      202,000       217,857  
Petroleos Mexicanos, 5.5%, 1/21/2021      130,000       139,360  
Petroleos Mexicanos, 5.5%, 6/27/2044      12,000       11,292  
Petroleos Mexicanos, 4.875%, 1/18/2024      95,000       98,943  
Petroleos Mexicanos, 4.25%, 1/15/2025      15,000       15,038  
Petroleos Mexicanos, 5.625%, 1/23/2046      23,000       21,626  
Petroleos Mexicanos, 6.75%, 9/21/2047      21,000       22,577  
Petroleos Mexicanos, 4.625%, 9/21/2023      53,000       55,173  
Southern Copper Corp., 5.875%, 4/23/2045      80,000       90,866  
United Mexican States, 3.625%, 3/15/2022      1,164,000       1,222,200  
    

 

 

  
      $ 2,191,322  
Netherlands - 0.7%  
ING Bank N.V., 5.8%, 9/25/2023 (n)    $ 769,000     $ 877,564  
ING Groep N.V., 3.15%, 3/29/2022      350,000       358,522  
    

 

 

  
      $ 1,236,086  
Panama - 0.1%  
Republic of Panama, 3.875%, 3/17/2028    $ 213,000     $ 225,248  
Peru - 0.3%  
El Fondo Mivivienda S.A., 3.5%, 1/31/2023    $ 226,000     $ 231,198  
Republic of Peru, 8.75%, 11/21/2033      180,000       283,950  
    

 

 

  
      $ 515,148  
Romania - 0.1%  
Republic of Romania, 4.375%, 8/22/2023 (n)    $ 36,000     $ 38,897  
Republic of Romania, 4.875%, 1/22/2024 (n)      58,000       64,525  
    

 

 

  
      $ 103,422  
Russia - 0.1%  
LUKOIL International Finance B.V., 4.563%, 4/24/2023    $ 213,000     $ 220,804  
United Kingdom - 0.7%  
BAT Capital Corp., 2.764%, 8/15/2022 (z)    $ 438,000     $ 441,775  
Imperial Tobacco Finance PLC, 3.75%, 7/21/2022 (n)      266,000       277,293  
Reckitt Benckiser Treasury Services PLC, 2.75%, 6/26/2024 (n)      267,000       268,154  
Royal Bank of Scotland Group PLC, 6%, 12/19/2023      124,000       137,404  
    

 

 

  
      $ 1,124,626  
Uruguay - 0.1%  
Oriental Republic of Uruguay, 4.5%, 8/14/2024    $ 26,762     $ 29,505  
Oriental Republic of Uruguay, 4.375%, 10/27/2027      47,300       51,008  
    

 

 

  
      $ 80,513  
Total Foreign Bonds            $ 9,320,984  
Total Bonds            $ 165,251,468  
Investment Companies (h) - 2.2%                 
Money Market Funds - 2.2%                 
MFS Institutional Money Market Portfolio, 1.11% (v)      3,848,695     $ 3,848,695  
Other Assets, Less Liabilities - 0.5%              765,112  
Net Assets - 100.0%            $ 169,865,275  

 

6

Portfolio of Investments (unaudited) – continued

 

 

(f) All or a portion of the security has been segregated as collateral for open futures contracts.
(h) 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. At period end, the aggregate values of the fund’s investments in affiliated issuers and in unaffiliated issuers were $3,848,695 and $165,251,468, respectively.
(i) Interest only security for which the fund receives interest on notional principal (Par amount). Par amount shown is the notional principal and does not reflect the cost of the security.
(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 $6,654,549 representing 3.9% of net assets.
(v) Affiliated issuer 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  
BAT Capital Corp., 2.764%, 8/15/2022      8/08/17        $438,000        $441,775  
% of Net assets        0.3%  

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

 

CDO   Collateralized Debt Obligation
CLO   Collateralized Loan Obligation
FLR   Floating rate. Interest rate resets periodically based on the parenthetically disclosed reference rate plus a spread (if any). The period-end rate reported may not be the current rate.
PLC   Public Limited Company

Derivative Contracts at 8/31/17

Futures Contracts at 8/31/17

 

Description    Long/Short      Currency      Contracts    Notional
Amount		      Expiration Date      Value/Unrealized
Appreciation
(Depreciation)		  
Asset Derivatives                  
Interest Rate Futures                  
U.S. Treasury Note 10 yr      Long        USD      34      $4,317,469        December - 2017        $9,562  
                 

 

 

  
Liability Derivatives                  
Interest Rate Futures                  
U.S. Treasury Bond 30 yr      Short        USD      45      $7,024,219        December - 2017        $(28,828 ) 
U.S. Treasury Note 5 yr      Long        USD      48      5,688,000        December - 2017        (4,500 ) 
                 

 

 

  
                    $(33,328 ) 
                 

 

 

  

At August 31, 2017, the fund had liquid securities with an aggregate value of $93,986 to cover any collateral or margin obligations 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

8/31/17 (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 August 31, 2017 in valuing the fund’s assets or liabilities:

 

Financial Instruments

    Level 1      Level 2      Level 3      Total  
U.S. Treasury Bonds & U.S. Government Agency & Equivalents      $—        $54,997,758        $—        $54,997,758  
Non-U.S. Sovereign Debt      —        4,590,366        —        4,590,366  
Municipal Bonds      —        2,111,062        —        2,111,062  
U.S. Corporate Bonds      —        11,618,574        —        11,618,574  
Residential Mortgage-Backed Securities      —        83,889,483        —        83,889,483  
Commercial Mortgage-Backed Securities      —        339,469        —        339,469  
Asset-Backed Securities (including CDOs)      —        2,780,447        —        2,780,447  
Foreign Bonds      —        4,924,309        —        4,924,309  
Mutual Funds      3,848,695        —        —        3,848,695  
Total      $3,848,695        $165,251,468        $—        $169,100,163  
Other Financial Instruments                            
Futures Contracts – Assets      $9,562        $—        $—        $9,562  
Futures Contracts – Liabilities      (33,328 )       —        —        (33,328 ) 

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      $167,961,532  
Gross unrealized appreciation      6,290,346  
Gross unrealized depreciation      (5,151,715 ) 
Net unrealized appreciation (depreciation)      $1,138,631  

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

(3) Investments in 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:

 

Affiliated Issuer            Beginning
Shares/Par
Amount		      Acquisitions
Shares/Par
Amount		      Dispositions
Shares/Par
Amount		      Ending
Shares/Par
Amount		  
MFS Institutional Money Market Portfolio         10,282,023        31,875,348        (38,308,676 )       3,848,695  
Affilated Issuer    Realized
Gain (Loss)		      Change in
Unrealized
Appreciation
(Depreciation)		      Capital Gain
Distributions		      Dividend
Income		      Ending
Value		  
MFS Institutional Money Market Portfolio      $287        $—        $—        $21,312        $3,848,695  

 

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: October 17, 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: October 17, 2017

 

By (Signature and Title)*    JAMES O. YOST
 

James O. Yost, Treasurer

(Principal Financial Officer

and Accounting Officer)

Date: October 17, 2017

 

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