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
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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: August 31, 2005
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ITEM 1. SCHEDULE OF INVESTMENTS.
MFS(R) Mutual Funds
QUARTERLY PORTFOLIO HOLDINGS 08/31/2005
MFS(R) GOVERNMENT
MARKETS INCOME TRUST
[graphic omitted]
[logo] M F S(R)
INVESTMENT MANAGEMENT
MFS Government Markets Income Trust
PORTFOLIO OF INVESTMENTS (Unaudited) 08/31/2005
ISSUER PAR AMOUNT $ VALUE
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BONDS - 97.3%
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U.S. BONDS - 85.0%
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AGENCY - OTHER - 7.2%
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Financing Corp., 10.7%, 2017 $ 4,095,000 $ 6,436,169
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Financing Corp., 9.4%, 2018 3,085,000 4,510,301
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Financing Corp., 9.8%, 2018 4,350,000 6,535,244
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Financing Corp., 10.35%, 2018 6,820,000 10,672,727
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$ 28,154,441
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ASSET BACKED & SECURITIZED - 0.6%
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Freddie Mac, 3.108%, 2035 $ 381,943 $ 379,458
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Prudential Securities Secured Financing Corp., FRN, 7.4094%, 2013## 1,819,000 2,030,563
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$ 2,410,021
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MORTGAGE BACKED - 54.2%
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Fannie Mae, 6.984%, 2007 $ 795,737 $ 825,413
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Fannie Mae, 6.8%, 2011 393,170 432,645
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Fannie Mae, 4.79%, 2012 3,522,804 3,488,525
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Fannie Mae, 5%, 2013 - 2019 18,341,797 18,503,848
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Fannie Mae, 4.8%, 2013 351,942 357,771
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Fannie Mae, 4.845%, 2013 1,030,483 1,049,354
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Fannie Mae, 5.06%, 2013 412,491 424,755
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Fannie Mae, 4.65%, 2013 972,873 973,971
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Fannie Mae, 4.45%, 2014 1,236,952 1,231,839
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Fannie Mae, 4.771%, 2014 2,463,001 2,508,102
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Fannie Mae, 4.6%, 2014 494,524 497,077
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Fannie Mae, 4.667%, 2014 3,038,884 3,074,768
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Fannie Mae, 4.518%, 2014 648,334 649,810
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Fannie Mae, 4.846%, 2014 3,497,276 3,579,393
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Fannie Mae, 5.1%, 2014 536,898 556,892
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Fannie Mae, 4.62%, 2015 709,735 714,050
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Fannie Mae, 4.82%, 2015 967,824 984,490
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Fannie Mae, 4.69%, 2015 351,582 355,414
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Fannie Mae, 4.85%, 2015 350,890 358,563
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Fannie Mae, 4.56%, 2015 637,972 639,223
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Fannie Mae, 4.665%, 2015 430,122 434,085
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Fannie Mae, 4.7%, 2015 493,349 499,055
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Fannie Mae, 4.89%, 2015 346,215 354,805
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Fannie Mae, 4.74%, 2015 390,000 394,537
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Fannie Mae, 4.925%, 2015 1,382,403 1,423,162
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Fannie Mae, 4.87%, 2015 372,161 380,903
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Fannie Mae, 6.5%, 2016 - 2032 11,500,188 11,912,614
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Fannie Mae, 6%, 2016 - 2034 17,213,222 17,686,239
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Fannie Mae, 5.5%, 2017 - 2034 64,524,751 65,344,104
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Fannie Mae, 4.5%, 2019 19,109,243 18,964,183
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Fannie Mae, 4.88%, 2020 382,817 387,015
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Fannie Mae TBA, 5.5%, 2035 34,385,000 34,728,850
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Freddie Mac, 4.5%, 2013 - 2015 2,362,531 2,370,079
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Freddie Mac, 4.375%, 2015 2,611,031 2,594,857
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Freddie Mac, 5.5%, 2025 2,772,481 2,820,520
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Freddie Mac, 7.5%, 2028 78,577 83,627
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Freddie Mac TBA, 6%, 2035 1,897,000 1,940,868
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Ginnie Mae, 5.5%, 2033 8,109,254 8,273,977
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$ 211,799,383
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U.S. GOVERNMENT AGENCIES - 11.2%
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Aid to Israel, 0%, 2024 $ 5,452,000 $ 2,268,138
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Freddie Mac, 4.2%, 2007 $ 4,358,000 $ 4,344,538
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Freddie Mac, 4.375%, 2015 6,170,000 6,169,685
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Overseas Private Investment Corp., 0%, 2007 1,762,209 1,776,643
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Small Business Administration, 8.875%, 2011 303,396 319,856
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Small Business Administration, 6.35%, 2021 1,620,794 1,735,729
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Small Business Administration, 6.34%, 2021 1,455,042 1,558,840
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Small Business Administration, 6.44%, 2021 1,385,343 1,489,967
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Small Business Administration, 6.625%, 2021 1,453,725 1,585,536
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Small Business Administration, 4.98%, 2023 925,483 948,309
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Small Business Administration, 4.72%, 2024 2,449,364 2,479,595
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Small Business Administration, 4.34%, 2024 1,346,029 1,337,017
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Small Business Administration, 4.77%, 2024 2,421,964 2,457,755
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Small Business Administration, 5.52%, 2024 1,455,325 1,527,831
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Small Business Administration, 4.86%, 2024 - 2025 2,858,567 2,911,326
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Small Business Administration, 4.87%, 2024 1,555,316 1,584,737
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Small Business Administration, 5.11%, 2025 1,427,000 1,470,705
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U.S. Department of Housing & Urban Development, 6.36%, 2016 1,580,000 1,736,616
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U.S. Department of Housing & Urban Development, 6.59%, 2016 5,612,000 5,945,443
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$ 43,648,266
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U.S. TREASURY OBLIGATIONS - 11.8%
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U.S. Treasury Bonds, 10.375%, 2012 $ 8,400,000 $ 9,539,578
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U.S. Treasury Bonds, 12%, 2013 3,036,000 3,724,082
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U.S. Treasury Bonds, 8.875%, 2017 6,000,000 8,644,686
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U.S. Treasury Notes, TIPS, 3.375%, 2007 7,937,726 8,227,326
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U.S. Treasury Notes, TIPS, 3.625%, 2008### 7,478,689 7,931,209
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U.S. Treasury Notes, TIPS, 2%, 2014 7,724,126 7,962,484
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$ 46,029,365
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Total U.S. Bonds $ 332,041,476
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FOREIGN BONDS - 12.3%
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AUSTRALIA - 0.2%
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Government of Australia, 6.25%, 2015 AUD 736,000 $ 604,293
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AUSTRIA - 0.4%
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Republic of Austria, 5.5%, 2007 EUR 1,291,000 $ 1,697,561
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BRAZIL - 0%
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Federal Republic of Brazil, 8%, 2018 $ 102,000 $ 105,417
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CANADA - 0.8%
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Canada Housing Trust, 4.65%, 2009 CAD 95,000 $ 83,923
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Government of Canada, 5.25%, 2008 $ 2,735,000 2,844,247
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Government of Canada, 5.25%, 2012 CAD 393,000 363,754
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$ 3,291,924
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CAYMAN ISLANDS - 0%
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Petroleum Export Peloil, 5.265%, 2011## $ 100,000 $ 100,900
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CHILE - 0.4%
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HQI Transelec Chile S.A., 7.875%, 2011 $ 314,000 $ 359,021
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Republic of Chile, FRN, 4.0691%, 2008 1,057,000 1,064,399
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$ 1,423,420
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FINLAND - 0.9%
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Republic of Finland, 3%, 2008 EUR 1,804,000 $ 2,266,184
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Republic of Finland, 5.375%, 2013 EUR $ 712,000 $ 1,027,495
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$ 3,293,679
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FRANCE - 0.8%
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Republic of France, 4.75%, 2007 EUR 2,399,000 $ 3,092,640
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Republic of France, 6%, 2025 EUR 106,000 177,229
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$ 3,269,869
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GERMANY - 1.0%
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Federal Republic of Germany, 3.5%, 2008 EUR 2,317,000 $ 2,955,073
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Federal Republic of Germany, 3.75%, 2015 EUR 380,000 494,073
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Federal Republic of Germany, 6.25%, 2030 EUR 227,000 401,104
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$ 3,850,250
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IRELAND - 1.0%
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Republic of Ireland, 4.25%, 2007 EUR 2,520,000 $ 3,235,607
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Republic of Ireland, 4.6%, 2016 EUR 514,000 717,058
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$ 3,952,665
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MALAYSIA - 0.1%
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Petronas Capital Ltd., 7.875%, 2022 $ 433,000 $ 549,506
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MEXICO - 0.7%
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Petroleos Mexicanos, 9.375%, 2008 $ 1,072,000 $ 1,214,576
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United Mexican States, 8.125%, 2019 1,040,000 1,283,881
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United Mexican States, 8.3%, 2031 128,000 162,240
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$ 2,660,697
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NETHERLANDS - 1.1%
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Kingdom of Netherlands, 5.75%, 2007 EUR 1,756,000 $ 2,274,873
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Kingdom of Netherlands, 3.75%, 2009 EUR 1,468,000 1,897,003
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$ 4,171,876
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NEW ZEALAND - 0.9%
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Government of New Zealand, 7%, 2009 NZD 477,000 $ 346,341
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Government of New Zealand, 6.5%, 2013 NZD 3,668,000 2,681,349
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Government of New Zealand, 6%, 2015 NZD 820,000 583,540
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$ 3,611,230
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NORWAY - 0.1%
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Kingdom of Norway, 6.5%, 2013 NOK 2,328,000 $ 441,569
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PANAMA - 0.2%
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Republic of Panama, 9.375%, 2029 $ 677,000 $ 854,713
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QATAR - 0.2%
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State of Qatar, 9.75%, 2030 $ 594,000 $ 923,670
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RUSSIA - 0.8%
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Russian Federation, 3%, 2008 $ 1,474,000 $ 1,397,942
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Russian Federation, 11%, 2018 640,000 973,440
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Russian Ministry of Finance, 12.75%, 2028 443,000 827,790
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$ 3,199,172
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SOUTH AFRICA - 0.3%
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Republic of South Africa, 9.125%, 2009 $ 855,000 $ 982,181
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SPAIN - 1.3%
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Kingdom of Spain, 6%, 2008 EUR 1,890,000 $ 2,530,736
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Kingdom of Spain, 5.35%, 2011 EUR $ 1,660,000 $ 2,342,511
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$ 4,873,247
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UNITED KINGDOM - 1.1%
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United Kingdom Treasury, 5.75%, 2009 GBP 970,000 $ 1,861,836
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United Kingdom Treasury, 8%, 2015 GBP 930,000 2,212,976
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$ 4,074,812
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Total Foreign Bonds $ 47,932,651
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Total Bonds (Identified Cost, $373,162,152) $ 379,974,127
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ISSUER PAR AMOUNT $ VALUE
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REPURCHASE AGREEMENTS - 12.6%
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Goldman Sachs, 3.56%, dated 8/31/05, due 9/01/05, total to be received $10,442,033
(secured by various U.S. Treasury and Federal Agency obligations in a jointly traded
account) $ 10,441,000 $ 10,441,000
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Morgan Stanley, 3.58%, dated 8/31/05, due 9/01/05, total to be received $38,950,873
(secured by various U.S. Treasury and Federal Agency obligations in a jointly traded
account) 38,947,000 38,947,000
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Total Repurchase Agreements, at Cost $ 49,388,000
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Total Investments (Identified Cost, $422,550,152) $ 429,362,127
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OTHER ASSETS, LESS LIABILITIES - (9.9)% (38,655,035)
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Net Assets - 100.0% $ 390,707,092
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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.
Abbreviations:
FRN=Floating Rate Note. The interest rate is the rate in effect as of period end.
TBA=To Be Announced
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
CHF = Swiss Franc
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.
MFS GOVERNMENT MARKETS INCOME TRUST
SUPPLEMENTAL SCHEDULES (UNAUDITED) 08/31/2005
(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 $427,554,395
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Gross unrealized appreciation $ 6,330,181
Gross unrealized depreciation (4,522,449)
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Net unrealized appreciation(depreciation) $ 1,807,732
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(2) 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
Sales and purchases in the table below are netted by currency.
MGF NET UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
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SALES
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10/05/05 AUD 652,204 $501,399 $490,561 $10,838
9/06/05 CHF 1,162,135 932,805 926,214 6,591
9/22/05 - 10/04/05 EUR 21,186,021 25,889,183 26,154,442 (265,259)
9/06/05 - 11/02/05 GBP 4,363,936 7,817,837 7,862,496 (44,659)
10/05/05 NZD 5,138,527 3,531,737 3,554,076 (22,339)
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$38,672,961 $38,987,789 $(314,828)
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PURCHASES
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9/07/05 CHF 1,162,135 $932,094 $926,292 $(5,802)
9/16/05 DKK 391,346 65,486 64,727 (759)
10/04/05 EUR 3,258,339 4,048,918 4,022,668 (26,250)
9/06/05 GBP 2,181,968 3,932,015 3,933,440 1,425
9/07/05 NOK 3,986,622 602,209 624,819 22,610
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$9,580,722 $9,571,946 $(8,776)
=========== =========== =========
At August 31, 2005, forward foreign currency purchases and sales under master
netting agreements excluded above amounted to a net receivable of $7,219 with
Merrill Lynch International.
At August 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)
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U.S. Treasury Note 2 Year December 2005 87 Short $(28,904)
U.S. Treasury Note 5 Year December 2005 54 Short (18,363)
U.S. Treasury Note 10 Year December 2005 186 Long 70,435
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$23,168
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At August 31, 2005, the trust had sufficient cash and/or securities to cover
any margin requirements under these contracts.
THE TRUST IS A CLOSED-END INVESTMENT PRODUCT. SHARES OF THE TRUST ARE ONLY
AVAILABLE FOR PURCHASE/SALE ON THE NYSE AT THE CURRENT MARKET PRICE. SHARES MAY
TRADE AT A PREMIUM OR DISCOUNT TO NAV.
(C)2005 MFS Investment Management
ITEM 2. 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 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 5Act that occurred during
the registrant's last fiscal quarter that has materially affected, or is
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.
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
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Robert J. Manning, President
Date: October 24, 2005
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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
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Robert J. Manning, President (Principal Executive
Officer)
Date: October 24, 2005
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By (Signature and Title)* TRACY ATKINSON
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Tracy Atkinson, Treasurer (Principal Financial Officer
and Accounting Officer)
Date: October 24, 2005
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* Print name and title of each signing officer under his or her signature.