<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
WE INVENTED THE MUTUAL FUND(R)
[Graphic Omitted]
MFS(R) GOVERNMENT
MARKETS INCOME TRUST
SEMIANNUAL REPORT o MAY 31, 2000
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 4
Performance Summary ....................................................... 8
Portfolio of Investments .................................................. 10
Financial Statements ...................................................... 14
Notes to Financial Statements ............................................. 18
Trustees and Officers ..................................................... 24
MFS ORIGINAL RESEARCH(R)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
I'm sure you've noticed that whenever financial markets suffer a large
decline, as they did very dramatically this past spring, there's a flurry of
information on "how to deal with market volatility" -- both in the popular
press and from those of us in the investment business. Our own thinking on
this is that, first, for long-term investors volatility is not necessarily
something to be feared; occasional volatility may in fact be healthy for the
markets.
Second, our experience has been that when markets begin to fall, it's often
too late to act. The best response may be to do nothing -- if you're properly
prepared with a long-term plan, created with the help of your investment
professional. To help you create or update that plan and take market
volatility in stride, here are some points you may want to consider the next
time you talk with your investment professional.
1. VOLATILITY CAN BE A GOOD THING
We would argue that the markets today are much healthier than they were before
the period of volatility this past spring, in the sense that stock prices have
returned to more reasonable levels and we have a stronger base for future
growth. Perhaps the worst of the market's wrath descended on companies with
very high stock prices, relative to their earnings, or with business concepts
that looked great in the euphoria of a booming market but in the end appeared
to have no fundamental backing. It has always been our view that one of the
best protections against market volatility is to invest in stocks and bonds of
fundamentally good companies selling at reasonable prices. When discussing
potential investments with your investment professional, you may want to ask
how they fared in previous periods of volatility, as well as in the good
times.
2. INVEST FOR THE LONG TERM
You've heard that before, but we think it's still probably the most important
concept in investing. Time is one of an investor's greatest allies. Over
nearly all long-term periods -- five, 10, 20 years, and more -- stock and bond
returns, as represented by most common indices, have been positive and
have considerably outpaced inflation. Investing is the best way we know of to
make your money work for you while you're doing something else.
Where investors can get into trouble is by confusing investing with trading.
In our view, traders who buy securities with the intention of selling them at
a profit in a matter of hours, days, or weeks are gambling. We believe this
seldom turns out to be a good strategy for increasing your wealth.
3. INVEST REGULARLY
Waiting for the "right time" to invest is almost always a poor strategy,
because only in retrospect do we know when that right time really was. Periods
of volatility are probably the worst times to make an investment decision.
Faced with turmoil in the markets, many investors have opted
to simply stay on the sidelines.
On the other hand, we think one of the best techniques for investing is
through automatic monthly or quarterly deductions from a checking or savings
account. This approach has at least three major benefits. First, you can
formulate a long-term plan -- how much to invest, how often, and
into which portfolios -- in a calm, rational manner, working with your
investment professional. Second, with this approach you invest regularly
without agonizing over the decision each time you buy shares. And, third, if
you invest equal amounts of money at regular intervals, you'll be taking
advantage of a strategy called dollar-cost averaging: by investing a fixed
amount while the share cost fluctuates, you end up with an average share cost
to you that is lower than the average share price over your investment
period.(1) If all this sounds familiar, it's probably because you're already
taking advantage of dollar-cost averaging by investing regularly for
retirement through a 401(k) or similar account at work.
4. DIVERSIFY
One of the dangers of not having an investment plan is that you may be tempted
to simply chase performance, by moving money into whatever asset class appears
to be outperforming at the moment -- small, mid, or large cap; growth or
value; United States or international; stocks or bonds. The problem with this
approach is that by the time a particular area is generally recognized as
"hot," you may have already missed some of the best performance.
International investing offers a case in point. In the 1980s, international
investments, as represented by the Morgan Stanley Capital International (MSCI)
Europe, Australia, Far East (EAFE) Index, outperformed U.S. investments, as
represented by the Standard & Poor's 500 Composite Index (S&P 500), in seven
out of 10 years.(2) For the decade, the MSCI EAFE's average annual performance
was 23%, compared to 18% for the S&P 500. Going into the 1990s, then, an
investor looking only at recent performance might have favored international
investments over U.S. investments.
But the 1990s turned out to be virtually a mirror image of the '80s. Domestic
investments outperformed international investments in seven out of 10 years,
with the S&P 500 returning an average of 18% annually for the decade and the
MSCI EAFE returning a 7% annual average. Looking ahead, however, we are
optimistic about international markets because we feel that many of the same
forces that propelled the current U.S. economic boom -- deregulation,
restructuring, and increased adoption of technology -- have taken root overseas.
The lesson to be learned is that nobody really knows what asset class will be
the next to outperform or how long that performance will be sustained. We
would suggest that one way to potentially profit from swings in the market --
to potentially be invested in various asset classes before the market shifts
in their favor -- is with a diversified portfolio covering several asset
classes.
If you haven't already done so, we encourage you to discuss these thoughts
with your investment professional and factor them into your long-range
financial planning. Hopefully, the next time the markets appear to be going
wild, you'll feel confident enough in your plan to view periods of volatility
as a time of potential opportunity -- or perhaps just a time to sit back and
do nothing.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
June 15, 2000
--------------
(1) For a more complete explanation of dollar-cost averaging and the math
involved, see "ABCs of Investing" in the Investor Education section of our
Web site (www.mfs.com).
(2) Source: Lipper Inc. Decade performance: '80s -- 12/31/79-12/31/89, '90s --
12/31/89- 12/31/99. The MSCI EAFE Index is an unmanaged,
market-capitalization- weighted total return index that measures the
performance of the same developed-country global stock markets included in
the MSCI World Index but excludes the United States, Canada, and the South
African mining component. The S&P 500 is a popular, unmanaged index of
common stock total return performance. It is not possible to invest directly
in an index. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
A prospectus containing more complete information on any MFS product,
including all charges and expenses, can be obtained from your investment
professional. Please read it carefully before you invest or send money.
Investments in mutual funds will fluctuate and may be worth more or less upon
redemption.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
Dear Shareholders,
For the six months ended May 31, 2000, the trust provided a total return of
6.39% based on its beginning and ending stock market prices and assuming the
reinvestment of any distributions paid during the period. The trust's total
return based on its net asset value (NAV) was 2.50%. During the same period,
the Salomon Brothers Medium Term (1- to 10-year) Treasury Government Sponsored
Index (the Salomon Index), an unmanaged index of medium-term U.S. Treasury and
government-agency securities, returned 1.54%. The J.P. Morgan Non-Dollar
Government Bond Index (the Morgan Index), an unmanaged index of actively
traded government bonds issued by 12 countries (excluding the United States)
with remaining maturities of at least one year, returned -4.61% over the same
period.
The past six months have been marked by persistent concerns about mounting
inflation pressures and the prospects of further interest-rate increases by
the Federal Reserve Board (the Fed). During most of the period, Treasury
securities, which represent a significant portion of the trust's investments,
absorbed the negative inflation news fairly well, benefiting from the
turbulence in the equity market and ongoing positive supply and demand trends.
The performance of Treasuries also was helped by the solid fiscal performance
of the U.S. government. Growing federal budget surpluses prompted the U.S.
Treasury to limit the size and frequency of its auctions of new debt and to
begin buying back nearly $30 billion of longer-maturity Treasury bonds
outstanding during 2000. The anticipated scarcity of long-term Treasury bonds
caused them to rally even as short-term interest rates kept climbing and most
other fixed-income investments lost ground. (Principal value and interest on
Treasury securities are guaranteed by the U.S. government if held to
maturity.)
In this environment, we have favored Treasuries because we feel their total
return potential has been more attractive than that of nongovernment
securities. Generally, we use our Treasury investments to help balance the
trust's duration, which is an indicator of a portfolio's sensitivity to
interest-rate changes. Currently, the portfolio's duration is about the same
as that of the Salomon Index. We want to avoid holding too many longer-
maturity bonds because their prices would decline if interest rates went up.
By the same token, we don't want to hold too many short-maturity bonds because
they produce relatively low yields. Accordingly, we emphasized Treasuries with
8- to 10-year and one-year and under maturities, while avoiding one- to four-
year Treasury securities because we found that they tended to be more
negatively affected by the Fed's interest-rate increases during the period.
However, if the economy begins to show signs of weakness as a result of the
Fed's interest-rate hikes, we will consider increasing our holdings in longer-
term bonds as a way to try to gain additional yield.
For most of the period, we underweighted the trust's investments in mortgage-
backed securities relative to the Salomon Index, which proved to be a helpful
strategy. Although mortgages performed well during the first few months of the
year, performance worsened as interest rates started to rise. One of the
characteristics of mortgage-backed securities is that their interest-rate
sensitivity increases as interest rates rise, which in turn causes their
prices to drop.
More recently, however, we've started to look closely at mortgage-backed bonds
issued by federal agencies such as the Government National Mortgage Association,
the Federal National Mortgage Association, and the Federal Home Loan Mortgage
Corporation because we believe they have offered unusually attractive values.
Yield spreads -- the yield differences between U.S. Treasuries, agency bonds,
and other fixed-income securities -- were at record levels, reflecting both the
shrinking supply of Treasury issues and investors' concerns that legislative
changes could affect the regulatory treatment of government-sponsored
institutions. However, we do not foresee any changes that would alter the high
ratings of existing agency securities. In addition, we believe any changes that
may occur are unlikely to jeopardize the ability of these agencies to make
timely coupon or principal payments.
International bonds have been used opportunistically in the trust when we
thought they would perform better than U.S. Treasuries. Because we felt the
relative attractiveness and value of many international bonds had begun to
deteriorate in the first quarter of 2000, we took some profits on
international bonds that had performed well. By the end of the period, we had
significantly reduced our exposure to international bonds.
In Europe, we bought German bonds because we believe they offered favorable
liquidity and because there was relatively less inflation in Germany than in
the United States. Also attractive were Greek bonds, which we believed offered
high yields compared to other European markets. In addition, Greek bonds
rallied as the country got closer to acceptance into European monetary union
(EMU) and as it lowered its interest rates to be more in line with EMU.
Over the next few months, we believe the U.S. bond market will most likely
remain cautious in anticipation of further Fed interest-rate hikes. Economic
growth during the third and fourth quarters of 1999 was very strong, but we
think we're almost at the point where economic growth and inflation concerns
have peaked. We believe we should start to see evidence that economic growth
is decelerating, which could start to calm inflation worries. If this scenario
begins to take shape, we could experience some improved performance from
fixed-income securities. In the meantime, we think the market remains
uncertain about how much inflation might accelerate and how far the Fed needs
to go to achieve a better balance between growth and the potential for
inflation.
Respectfully,
/s/ Stephen C. Bryant /s/ Steven E. Nothern
Stephen C. Bryant Steven E. Nothern
Portfolio Manager Portfolio Manager
The opinions expressed in this report are those of the portfolio managers and
are current only through the end of the period of the report as stated on the
cover. The managers' views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
It is not possible to invest directly in an index.
The portfolio is actively managed, and current holdings may be different.
<PAGE>
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PORTFOLIO MANAGERS' PROFILES
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STEPHEN C. BRYANT IS SENIOR VICE PRESIDENT OF MFS INVESTMENT
MANAGEMENT(R) AND PORTFOLIO MANAGER OF MFS(R) INSTITUTIONAL GLOBAL FIXED
INCOME FUND, MFS(R) INTERMEDIATE INCOME FUND, AND THE GLOBAL GOVERNMENTS
SERIES OFFERED THROUGH MFS(R)/SUN LIFE ANNUITY PRODUCTS. HE ALSO MANAGES
MFS(R) GOVERNMENT MARKETS INCOME TRUST AND MFS(R) INTERMEDIATE INCOME
TRUST, TWO CLOSED-END FUNDS. HE JOINED MFS IN 1987 AS ASSISTANT VICE
PRESIDENT. HE WAS NAMED VICE PRESIDENT IN 1989, PORTFOLIO MANAGER IN
1992, AND SENIOR VICE PRESIDENT IN 1993. MR. BRYANT IS A GRADUATE OF
WESLEYAN UNIVERSITY.
STEVEN E. NOTHERN IS SENIOR VICE PRESIDENT OF MFS INVESTMENT
MANAGEMENT(R). HE IS PORTFOLIO MANAGER OF MFS(R) GOVERNMENT SECURITIES
FUND AND THE GOVERNMENT SECURITIES SERIES OFFERED THROUGH MFS(R)/SUN
LIFE ANNUITY PRODUCTS. MR. NOTHERN ALSO MANAGES TWO CLOSED-END FUNDS,
MFS(R) INTERMEDIATE INCOME TRUST AND MFS(R) GOVERNMENT MARKETS INCOME
TRUST. MR. NOTHERN JOINED MFS IN 1986 IN THE FIXED INCOME DEPARTMENT AND
WAS NAMED VICE PRESIDENT IN 1989, PORTFOLIO MANAGER IN 1991, AND SENIOR
VICE PRESIDENT IN 1993. HE IS A GRADUATE OF MIDDLEBURY COLLEGE AND HOLDS
A MASTER OF BUSINESS ADMINISTRATION DEGREE FROM BOSTON UNIVERSITY. HE IS
A CHARTERED FINANCIAL ANALYST AND A MEMBER OF THE BOSTON SECURITY
ANALYSTS SOCIETY, INC.
ALL PORTFOLIO MANAGERS AT MFS INVESTMENT MANAGEMENT(R) ARE SUPPORTED BY
AN INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS ORIGINAL
RESEARCH(R), A GLOBAL, SECURITY-ORIENTED, BOTTOM-UP PROCESS OF SELECTING
SECURITIES.
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NUMBER OF SHAREHOLDERS
As of May 31, 2000, our records indicate that there are 8,028 registered
shareholders and approximately 26,500 shareholders owning trust shares in
"street" name, such as through brokers, banks, and other financial
intermediaries.
If you are a "street" name shareholder and wish to directly receive our
reports, which contain important information about the trust, please write
or call:
State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
1-800-637-2304
In accordance with Section 23(c) of the Investment Company Act of 1940, the
trust hereby gives notice that it may from time to time repurchase shares of
the trust in the open market at the option of the Board of Trustees and on
such terms as the Trustees shall determine.
<PAGE>
OBJECTIVE: Seeks to provide a high level of current income
NEW YORK STOCK EXCHANGE SYMBOL: MGF
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PERFORMANCE SUMMARY
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(For the period ended May 31, 2000)
NET ASSET VALUE PER SHARE
November 30, 1999 $6.94
May 31, 2000 $6.83
NEW YORK STOCK EXCHANGE PRICE
November 30, 1999 $5.8125
May 2, 2000 (high)* $6.1250
January 20, 2000 (low)* $5.6875
May 31, 2000 $5.9375
*For the six months ended November 30, 1999, through May 31, 2000.
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<PAGE>
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
MFS offers a Dividend Reinvestment and Cash Purchase Plan that allows you to
reinvest either all of the distributions paid by the trust or only the long-
term capital gains. Purchases are made at the market price unless that price
exceeds the net asset value (the shares are trading at a premium). If the
shares are trading at a premium, purchases will be made at a discounted price
of either the net asset value or 95% of the market price, whichever is
greater. Twice each year you can also buy shares. Investments from $100 to
$500 can be made in January and July on the 15th of the month or
shortly thereafter.
If your shares are in the name of a brokerage firm, bank, or other nominee,
you can ask the firm or nominee to participate in the plan on your behalf.
If the nominee does not offer the plan, you may wish to request that your
shares be re-registered in your own name so that you can participate.
There is no service charge to reinvest distributions, nor are there brokerage
charges for shares issued directly by the trust. However, when shares are
bought on the New York Stock Exchange or otherwise on the open market, each
participant pays a pro rata share of the commissions. A service fee of $0.75
is charged for each cash purchase as well as a pro rata share of the brokerage
commissions. The automatic reinvestment of distributions does not relieve you
of any income tax that may be payable (or required to be withheld) on the
distributions.
To enroll in or withdraw from the plan, or if you have any questions, call
1-800-637-2304 any business day from 8 a.m. to 8 p.m. Eastern time. Please have
available the name of the trust and your account and Social Security numbers.
For certain types of registrations, such as corporate accounts, instructions
must be submitted in writing. Please call for additional details. When you
withdraw, you can receive the value of the reinvested shares in one of two ways:
a check for the value of the full and fractional shares, or a certificate for
the full shares and a check for the fractional shares.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- May 31, 2000
<CAPTION>
Bonds - 90.9%
--------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Bonds - 80.7%
Government National Mortgage Association - 10.6%
GNMA, 7s, 2022 - 2029 $ 17,500 $ 16,837,517
GNMA, 7.5s, 2022 - 2027 20,308 19,950,081
GNMA, 8s, 2030 - 2030 6,492 6,507,691
GNMA, TBA, 7s, 2022 - 2025 1,037 995,541
GNMA, TBA, 7.5s, 2010 - 2025 519 513,180
------------
$ 44,804,010
--------------------------------------------------------------------------------------------------------
Small Business Administration - 0.5%
SBA, 8.875s, 2011 $ 2,082 $ 2,134,428
--------------------------------------------------------------------------------------------------------
U.S. Federal Agencies - 34.5%
Federal Home Loan Mortgage Corp., 6.875s, 2005 $ 50,130 $ 49,056,717
Federal Home Loan Mortgage Corp. Gold PCS, TBA,
7.5s, 2027 3,835 3,733,947
Federal National Mortgage Assn., 6.956s, 2007 5,748 5,598,789
Federal National Mortgage Assn., 7.5s, 2015 18,075 17,827,706
Federal National Mortgage Assn., 8.5s, 2027 10,100 10,447,137
Federal National Mortgage Assn., 7s, 2029 6,195 5,881,280
Federal National Mortgage Assn., 7s, 2030 21,778 20,675,129
Federal Housing Administration., 10.375s, 2030+ 2,254 2,254,102
Financing Corp., 10.7s, 2017 8,500 11,152,255
Financing Corp., 9.8s, 2018 5,000 6,140,600
Financing Corp., 10.35s, 2018 9,500 12,205,980
------------
$144,973,642
--------------------------------------------------------------------------------------------------------
U.S. Government Guaranteed - 2.0%
Housing Urban Development, 6.59s, 2016 $ 5,612 $ 4,978,896
Private Export Funding Corp., 7.01s, 2004 3,380 3,370,097
------------
$ 8,348,993
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U.S. Treasury Obligations - 33.1%
U.S. Treasury Bonds, 10.375s, 2009 $ 6,200 $ 7,042,828
U.S. Treasury Bonds, 10.375s, 2012 8,400 10,192,896
U.S. Treasury Bonds, 9.875s, 2015 32,750 43,618,742
U.S. Treasury Bonds, 8.875s, 2017 6,000 7,514,040
U.S. Treasury Bonds, 3.625s, 2028 10,551 9,921,408
U.S. Treasury Bonds, 6.125s, 2029 5,192 5,167,650
U.S. Treasury Notes, 8s, 2001 9,250 9,351,195
U.S. Treasury Notes, 5.875s, 2004 34,250 33,297,507
U.S. Treasury Notes, 4.25s, 2010 7,087 7,128,966
U.S. Treasury Notes, 6.5s, 2010 6,000 6,088,140
------------
$139,323,372
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Total U.S. Bonds $339,584,445
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Foreign Bonds - 10.2%
Argentina - 0.5%
Republic of Argentina, 0s, 2001 $ 1,500 $ 1,297,500
Republic of Argentina, 11.375s, 2010 100 88,000
Republic of Argentina, 6s, 2023 700 466,206
Republic of Argentina, 6.875s, 2023 435 361,050
------------
$ 2,212,756
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Brazil - 1.1%
Banco Naciona de Desenvolvi, 12.693s, 2008 (Banks and
Credit Cos.)## $ 80 $ 72,400
Federal Republic of Brazil, 7.438s, 2012 210 149,625
Federal Republic of Brazil, 8s, 2014 1,882 1,317,116
Federal Republic of Brazil, 12.75s, 2020 660 608,850
Federal Republic of Brazil, 7.375s, 2024 1,671 1,251,161
Federal Republic of Brazil, 12.25s, 2030 1,300 1,150,500
------------
$ 4,549,652
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Bulgaria - 0.3%
National Republic of Bulgaria, 7.063s, 2024 $ 1,455 $ 1,099,303
--------------------------------------------------------------------------------------------------------
Denmark - 0.4%
Kingdom of Denmark, 7s, 2007 DKK 12,142 $ 1,631,218
--------------------------------------------------------------------------------------------------------
France - 0.4%
Republic of France, 4s, 2009 EUR 2,121 $ 1,788,241
--------------------------------------------------------------------------------------------------------
Germany - 1.9%
Federal Republic of Germany, 4.5s, 2009 EUR 8,888 $ 7,885,850
--------------------------------------------------------------------------------------------------------
Greece - 3.7%
Hellenic Republic, 8.7s, 2005 GRD 521,000 $ 1,593,389
Hellenic Republic, 5.75s, 2008 EUR 731 680,440
Republic of Greece, 8.9s, 2003 GRD 2,650,000 7,846,334
Republic of Greece, 6s, 2006 2,000,000 5,497,825
------------
$ 15,617,988
--------------------------------------------------------------------------------------------------------
Mexico - 0.6%
Maxcom Telecomunicaciones Cv, 13.75s, 2007 $ 530 $ 457,125
Nuevo Grupo Iusacell SA, 14.25s, 2006 529 523,710
United Mexican States, 9.875s, 2007 800 796,000
United Mexican States, 7.313s, 2019 880 860,200
------------
$ 2,637,035
--------------------------------------------------------------------------------------------------------
Morocco - 0.2%
Kingdom of Morocco, 7.75s, 2009 $ 1,339 $ 903,681
--------------------------------------------------------------------------------------------------------
Netherlands - 0.1%
Netia Holdings B.V., 10.25s, 2007
(Telecommunications) $ 477 $ 398,295
--------------------------------------------------------------------------------------------------------
New Zealand - 0.5%
Government of New Zealand, 8s, 2006 NZD 3,999 $ 1,919,379
--------------------------------------------------------------------------------------------------------
Panama - 0.3%
Republic of Panama, 8.25s, 2008 $ 350 $ 291,375
Republic of Panama, 8.875s, 2027 1,180 920,400
------------
$ 1,211,775
--------------------------------------------------------------------------------------------------------
South Korea - 0.2%
Hanvit Bank, 12.75s, 2010 $ 955 $ 873,825
--------------------------------------------------------------------------------------------------------
Turkey
Republic of Turkey, 11.875s, 2030 $ 138 $ 143,347
--------------------------------------------------------------------------------------------------------
United Kingdom
United Kingdom Treasury, 6.75s, 2004 GBP 5 $ 7,771
--------------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 42,880,116
--------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $401,538,694) $382,464,561
--------------------------------------------------------------------------------------------------------
Warrants
--------------------------------------------------------------------------------------------------------
SHARES
--------------------------------------------------------------------------------------------------------
Republic of Venezuela* (Identified Cost, $0) 37,500 $ --
--------------------------------------------------------------------------------------------------------
Rights
--------------------------------------------------------------------------------------------------------
United Mexican States* (Identified Cost, $0) 1,354,000 $ --
--------------------------------------------------------------------------------------------------------
Short-Term Obligations - 8.6%
--------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
--------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Discount Notes,
due 6/01/00, at Amortized Cost $ 36,105 $ 36,105,000
--------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $437,643,694) $418,569,561
--------------------------------------------------------------------------------------------------------
Put Options Written - (0.1)%
--------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OF CONTRACTS
ISSUER/EXPIRATION MONTH/STRIKE PRICE (000 OMITTED)
--------------------------------------------------------------------------------------------------------
Canadian Dollars/June/1.49 CAD (20,980) $ (116,816)
Euro/August/.96 EUR (13,469) (178,089)
--------------------------------------------------------------------------------------------------------
Total Put Options Written (Premiums Received, $327,263) $ (294,905)
--------------------------------------------------------------------------------------------------------
Call Options Written - (0.3)%
--------------------------------------------------------------------------------------------------------
DESCRIPTION/EXPIRATION MONTH/STRIKE PRICE
--------------------------------------------------------------------------------------------------------
Japanese Yen/July/103 JPY(1,489,719) $ (52,140)
Australian Dollars/June/.60 AUD (19,247) (929,249)
Australian Dollars/May/.555 AUD (6,330) (177,280)
Euro/August/.88 EUR (10,957) (30,648)
--------------------------------------------------------------------------------------------------------
Total Call Options Written (Premiums Received, $844,900) $ (1,189,317)
--------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.9% 3,661,320
--------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $420,746,659
--------------------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
+ Restricted security.
Abbreviations have been used throughout this report to indicate amounts shown in currencies other than
the U.S. dollar. A list of abbreviations is shown below.
AUD = Australian Dollars GBP = British Pounds
CAD = Canadian Dollars GRD = Greek Drachma
DKK = Danish Kroner JPY = Japanese Yen
EUR = Euro NZD = New Zealand Dollars
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
-------------------------------------------------------------------------------
MAY 31, 2000
-------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $437,643,694) $418,569,561
Cash 23,157
Net receivable for forward foreign currency exchange
contracts to sell 2,002,066
Receivable for investments sold 720,404
Receivable for swap agreements 33,043
Interest receivable 4,922,003
Other assets 6,859
------------
Total assets $426,277,093
------------
Liabilities:
Payable for investments purchased $ 723,612
Payable for Fund shares reacquired 590,750
Payable to dividend disbursing agent 195,729
Net payable for forward foreign currency exchange
contracts to purchase 514,045
Net payable for forward foreign currency exchange
contracts subject to master netting agreements 1,600,994
Written options outstanding, at value (premium received,
$1,172,163) 1,484,222
Payable to affiliates -
Management fee 8,463
Transfer and dividend disbursing agent fee 13,667
Administration fee 202
Accrued expenses and other liabilities 398,750
------------
Total liabilities $ 5,530,434
------------
Net assets $420,746,659
============
Net assets consist of:
Paid-in capital $491,925,777
Unrealized depreciation on investments and translation of
assets and liabilities in foreign currencies (19,550,584)
Accumulated undistributed net realized loss on
investments and foreign currency transactions (49,779,239)
Accumulated distributions in excess of net investment
income (1,849,295)
------------
Total $420,746,659
============
Shares of beneficial interest outstanding (97,911,555
shares authorized, less 36,290,900 treasury shares) 61,620,655
===========
Net asset value per share (net assets / shares of
beneficial interest outstanding) $6.83
=====
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations (Unaudited)
-------------------------------------------------------------------------------
SIX MONTHS ENDED MAY 31, 2000
-------------------------------------------------------------------------------
Net investment income:
Interest income $ 15,750,046
------------
Expenses -
Management fee $ 1,519,710
Trustees' compensation 62,041
Transfer and dividend disbursing agent fee 82,124
Administrative fee 28,547
Investor communication expense 104,351
Custodian fee 88,982
Postage 26,155
Auditing fees 20,000
Printing 18,519
Legal fees 1,076
Miscellaneous 86,781
------------
Total expenses $ 2,038,286
Fees paid indirectly (19,152)
------------
Net expenses $ 2,019,134
------------
Net investment income $ 13,730,912
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ (8,529,375)
Foreign currency transactions 982,911
------------
Net realized loss on investments and foreign currency
transactions $ (7,546,464)
------------
Change in unrealized appreciation (depreciation) -
Investments $ 232,562
Written options (312,059)
Swap transactions 122,961
Translation of assets and liabilities in foreign currencies (217,221)
------------
Net unrealized loss on investments and foreign currency
translation $ (173,757)
------------
Net realized and unrealized loss on investments and
foreign currency $ (7,720,221)
------------
Increase in net assets from operations $ 6,010,691
============
See notes to financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
<CAPTION>
Statement of Changes in Net Assets
----------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MAY 31, 2000 NOVEMBER 30, 1999
(UNAUDITED)
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 13,730,912 $ 28,799,982
Net realized loss on investments and foreign currency
transactions (7,546,464) (12,498,873)
Net unrealized loss on investments and foreign currency
translation (173,757) (26,844,564)
------------ ------------
Increase (decrease) in net assets from operations $ 6,010,691 $(10,543,455)
------------ ------------
Distributions declared to shareholders -
From net investment income $(15,526,254) $(26,308,092)
From paid-in capital -- (3,973,796)
------------ ------------
Total distributions declared to shareholders $(15,526,254) $(30,281,888)
------------ ------------
Cost of shares reacquired $(16,915,490) $(23,857,509)
------------ ------------
Total decrease in net assets $(26,431,053) $(64,682,852)
Net assets:
At beginning of period 447,177,712 511,860,564
------------ ------------
At end of period (including accumulated distributions in
excess of net investment income of $1,849,295 and
$53,953 respectively) $420,746,659 $447,177,712
============ ============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
<CAPTION>
Financial Highlights
-------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30,
SIX MONTHS ENDED -------------------------------------------------------------------------
MAY 31, 2000 1999 1998 1997 1996 1995
(UNAUDITED)
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of
period $ 6.94 $ 7.50 $ 7.41 $ 7.56 $ 7.62 $ 6.90
------ ------ ------ ------ ------ ------
Income from investment
operations# -
Net investment income $ 0.18 $ 0.43 $ 0.46 $ 0.49 $ 0.49 $ 0.49
Net realized and unrealized
gain (loss) on investments
and foreign currency (0.08) (0.58) 0.08 (0.14) (0.07) 0.64
------ ------ ------ ------ ------ ------
Total from investment
operations $ 0.10 $(0.15) $ 0.54 $ 0.35 $ 0.42 $ 1.13
------ ------ ------ ------ ------ ------
Less distributions declared to
shareholders -
From net investment income $(0.25) $(0.40) $(0.46) $(0.49) $(0.49) $(0.49)
In excess of net investment
income -- -- (0.01) (0.03) (0.05) --
From paid in capital -- (0.06) -- -- -- --
------ ------ ------ ------ ------ ------
Total distributions
declared to shareholders $(0.25) $(0.46) $(0.47) $(0.52) $(0.54) $(0.49)
------ ------ ------ ------ ------ ------
Net increase from repurchase of
capital shares $ 0.04 $ 0.05 $ 0.02 $ 0.02 $ 0.06 $ 0.08
------ ------ ------ ------ ------ ------
Net asset value - end of period $ 6.83 $ 6.94 $ 7.50 $ 7.41 $ 7.56 $ 7.62
====== ====== ====== ====== ====== ======
Per share market value - end of
period $5.938 $5.813 $6.563 $6.688 $6.750 $6.500
Total return# 6.39%++ (4.80)% 4.21% 6.91% 12.61% 10.96%
Ratios (to average net assets)/
Supplemental data:
Expenses## 0.94%+ 0.92% 0.89% 0.94% 1.00% 0.99%
Net investment income 6.31%+ 6.00% 6.14% 6.56% 6.63% 6.84%
Portfolio turnover 115% 102% 253% 248% 249% 318%
Net assets at end of period
(000 omitted) $420,747 $447,178 $511,861 $524,580 $554,496 $606,135
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from certain expense offset arrangements.
+ Annualized.
++ Not annualized.
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Government Markets Income Trust (the Trust) is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as a non-diversified, closed-end management
investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The Trust
can invest in foreign securities. Investments in foreign securities are
vulnerable to the effects of changes in the relative values of the local
currency and the U.S. dollar and to the effects of changes in each country's
legal, political, and economic environment.
Investment Valuations - Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues, forward contracts,
and swap agreements, are valued on the basis of valuations furnished by
dealers or by a pricing service with consideration to factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other
market data, without exclusive reliance upon exchange or over-the-counter
prices. Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates market value. Non-U.S. dollar denominated
short-term obligations are valued at amortized cost as calculated in the
foreign currency and translated into U.S. dollars at the closing daily
exchange rates. Options, and options on futures contracts listed on
commodities exchanges are reported at market value using closing settlement
prices. Over-the-counter options on securities are valued by brokers. Over-
the-counter currency options are valued through the use of a pricing model
which takes into account foreign currency exchange spot and forward rates,
implied volatility, and short-term repurchase rates. Securities for which
there are no such quotations or valuations are valued in good faith, at fair
value, by the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and
losses on investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
Written Options - The Trust may write call or put options in exchange for a
premium. The premium is initially recorded as a liability which is
subsequently adjusted to the current value of the option contract. When a
written option expires, the Trust realizes a gain equal to the amount of the
premium received. When a written call option is exercised or closed, the
premium received is offset against the proceeds to determine the realized gain
or loss. When a written put option is exercised, the premium reduces the cost
basis of the security purchased by the Trust. The Trust, as writer of an
option, may have no control over whether the underlying securities may be sold
(call) or purchased (put) and, as a result, bears the market risk of an
unfavorable change in the price of the securities underlying the written
option. In general, written call options may serve as a partial hedge against
decreases in value in the underlying securities to the extent of the premium
received. Written options may also be used as part of an income producing
strategy reflecting the view of the Trust's management on the direction of
interest rates.
Forward Foreign Currency Exchange Contracts - The Trust may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties
to meet the terms of their contracts and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar. The Trust may enter
into forward contracts for hedging purposes as well as for non-hedging
purposes. For hedging purposes, the Trust may enter into contracts to deliver
or receive foreign currency it will receive from or require for its normal
investment activities. The Trust may also use contracts in a manner intended
to protect foreign currency-denominated securities from declines in value due
to unfavorable exchange rate movements. For non-hedging purposes, the Trust
may enter into contracts with the intent of changing the relative exposure of
the Trust's portfolio of securities to different currencies to take advantage
of anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains
or losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains
or losses on foreign currency transactions.
Swap Agreements - The Trust may enter into swap agreements. A swap is an
exchange of cash payments between the Trust and another party which is based
on a specific financial index. Cash payments are exchanged at specified
intervals and the expected income or expense is recorded on the accrual basis.
The value of the swap is adjusted daily and the change in value is recorded as
unrealized appreciation or depreciation. Risks may arise upon entering into
these agreements from the potential inability of counterparties to meet the
terms of their contract and from unanticipated changes in the value of the
financial index on which the swap agreement is based. The Trust uses swaps for
both hedging and non-hedging purposes. For hedging purposes, the Trust may use
swaps to reduce its exposure to interest and foreign exchange rate
fluctuations. For non-hedging purposes, the Trust may use swaps to take a
position on anticipated changes in the underlying financial index.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All discount is
accreted for financial statement and tax reporting purposes as required by
federal income tax regulations.
Fees Paid Indirectly - The Trust's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the Trust. This amount is shown as a reduction of total expenses on the
Statement of Operations.
Tax Matters and Distributions - The Trust's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The Trust
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits be reported in the financial statements as distributions from paid-in
capital. Differences in the recognition or classification of income between
the financial statements and tax earnings and profits, which result in
temporary over-distributions for financial statement purposes, are classified
as distributions in excess of net investment income or net realized gains.
At November 30, 1999, the Trust, for federal income tax purposes, had a capital
loss carryforward of $42,099,688 which may be applied against any net taxable
realized gains of each succeeding year until the earlier of its utilization or
expiration on November 30, 2002, ($21,490,437), November 30, 2004, ($196,662),
November 30, 2005, (8,818,381), and November 30, 2007, ($11,594,208).
(3) Transactions with Affiliates
Investment Adviser - The Trust has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at the lessor of 0.32% per
annum of the Trust's average daily net assets and 5.33% of investment income,
or 0.85% per annum of average daily net assets. The effective annual rate for
the six months ended May 31, 2000, was 0.70%.
The Trust pays no compensation directly to its Trustees who are officers of
the investment adviser, or to officers of the Trust, all of whom receive
remuneration for their services to the Trust from MFS. Certain officers and
Trustees of the Trust are officers or directors of MFS, and MFS Service
Center, Inc. (MFSC). The Trust has an unfunded defined benefit plan for all of
its independent Trustees. Included in Trustees' compensation is a net periodic
pension expense of $22,532 for the six months ended May 31, 2000.
Administrator - The Trust has an administrative services agreement with MFS to
provide the Trust with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Trust incurs an administrative fee
at the following annual percentages of the Fund's average daily net assets:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
Transfer Agent - MFSC acts as registrar and dividend disbursing agent for the
Trust. The agreement provides that the Trust will pay MFSC an account
maintenance fee of no more than $9.00 and a dividend services fee of $0.75 per
reinvestment and will reimburse MFSC for reasonable out-of-pocket expenses.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
PURCHASES SALES
-------------------------------------------------------------------------------
U.S. government securities $451,424,712 $444,973,448
------------ ------------
Investments (non-U.S. government securities) $ 26,818,563 $ 66,816,395
------------ ------------
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 $438,010,442
------------
Gross unrealized appreciation $ 1,534,666
Gross unrealized depreciation (20,975,547)
------------
Net unrealized depreciation $(19,440,881)
============
(5) Shares of Beneficial Interest
The Trustees have authorized 97,911,555 full and fractional shares of
beneficial interest. Transactions in Trust shares were as follows:
SIX MONTHS ENDED YEAR ENDED
MAY 31, 2000 NOVEMBER 30, 1999
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------
Treasury shares acquired 2,833,500 $16,915,490 3,808,400 $23,857,509
--------- ----------- --------- -----------
In accordance with the provisions of the Trust's prospectus, 2,833,500 shares
of beneficial interest were purchased by the Trust during the six months ended
May 31, 2000, at an average price per share of $5.97 and a weighted average
discount of 13.24% per share. The Trust reacquired 3,808,400 shares of
beneficial interest during the year ended November 30, 1999, at an average
price per share of $6.26 and a weighted average discount of 12.50% per share.
(6) Line of Credit
The Trust and other affiliated funds participate in a $1.1 billion unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each fund, based on its borrowings, at a rate equal to the bank's
base rate. In addition, a commitment fee, based on the average daily unused
portion of the line of credit, is allocated among the participating funds at the
end of each quarter. The commitment fee allocated to the Trust for the six
months ended May 31, 2000, was $1,502. The Fund had no borrowings during the
period.
(7) Financial Instruments
The Trust trades financial instruments with off-balance-sheet risk in the
normal course of its investing activities in order to manage exposure to
market risks such as interest rates and foreign currency exchange rates. These
financial instruments include written options, forward foreign currency
exchange contracts, swap agreements, 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.
Written Option Transactions
NUMBER OF
CONTRACTS PREMIUMS
-------------------------------------------------------------------------------
Outstanding, beginning of period -- $ --
Options written 7 1,211,363
Options terminated in closing transactions -- --
Options exercised -- --
Options expired (1) (39,200)
-- ---------
Outstanding, end of period 6 $1,172,163
== ==========
At May 31, 2000, the Trust had sufficient cash and/or securities at least
equal to the value of the written options.
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
NET
UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales 06/16/00 AUD 21,382,056 $13,017,755 $12,201,166 $ 816,589
06/16/00 CAD 21,662,067 14,836,406 14,471,776 364,630
06/16/00 DKK 14,344,441 1,873,293 1,794,597 78,696
06/16/00 EUR 31,440,043 29,382,686 29,350,822 31,864
06/16/00 JPY 2,845,504,094 26,833,224 26,493,449 339,775
06/16/00 NZD 10,099,418 4,989,113 4,618,601 370,512
----------- ----------- ----------
$90,932,477 $88,930,411 $2,002,066
=========== =========== ==========
Purchases 06/16/00 EUR 14,098,365 $12,767,476 $13,161,515 $ 394,039
06/16/00 JPY 3,396,928,583 32,535,645 31,627,561 (908,084)
----------- ----------- ----------
$45,303,121 $44,789,076 $ (514,045)
=========== =========== ==========
</TABLE>
At May 31, 2000, forward foreign currency purchases and sales under master
netting agreements excluded above amounted to a net payable of $1,029,677 with
Deutsche Bank, $42,124 with First Boston and $529,193 with Merrill Lynch.
At May 31, 2000, the Trust had sufficient cash and/or securities to cover any
commitments under these contracts.
Swap Agreements
Interest Rate Swaps
<TABLE>
<CAPTION>
UNREALIZED
NOTIONAL PRINCIPAL CASH FLOWS PAID CASH FLOWS RECEIVED APPRECIATION
EXPIRATION AMOUNT OF CONTRACT BY THE TRUST BY THE TRUST (DEPRECIATION)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
3/22/2003 SEK 78,300,000 Floating - 3M STIBOR Fixed - 4.38% $(259,788)
3/22/2003 EUR 8,480,000 Fixed - 3.76% Floating - 6M EURIBOR 292,831
---------
$ 33,043
=========
</TABLE>
At May 31, 2000, the Trust had sufficient cash and/or securities to cover any
commitments under these contracts.
(8) Restricted Securities
The Trust may invest not more than 10% of its net assets in securities which
are subject to legal or contractual restrictions on resale. At May 31, 2000,
the Trust owned the following restricted securities, excluding securities
issued under Rule 144A, constituting 0.54% of net assets which may not be
publicly sold without registration under the Securities Act of 1933. The Trust
does not have the right to demand that such securities be registered. The
value of these securities is determined by valuations furnished by dealers or
by a pricing service, or if not available, in good faith, at fair value, by
the Trustees.
<TABLE>
<CAPTION>
DATE OF PRINCIPAL AMOUNT
DESCRIPTION ACQUISITION (000 OMITTED) COST VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal Housing Administration,
10.375s, 2030 8/16/1993 2,254 $2,424,568 $2,254,102
</TABLE>
<PAGE>
<TABLE>
MFS(R) GOVERNMENT MARKETS INCOME TRUST
<S> <C>
TRUSTEES PORTFOLIO MANAGERS
Richard B. Bailey+(2) - Private Investor; Former Stephen C. Bryant*
Chairman and Director (until 1991), MFS Investment Steven E. Nothern*
Management
TREASURER
Marshall N. Cohan+(2) - Private Investor W. Thomas London*
Lawrence H. Cohn, M.D.+(2) - Chief of Cardiac ASSISTANT TREASURERS
Surgery, Brigham and Women's Hospital; Professor Mark E. Bradley*
of Surgery, Harvard Medical School Ellen Moynihan*
James O. Yost*
The Hon. Sir J. David Gibbons, KBE+ (1) - Chief
Executive Officer, Edmund Gibbons Ltd.; Chairman, SECRETARY
Colonial Insurance Company, Ltd. Stephen E. Cavan*
Abby M. O'Neill+(2) - Private Investor ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Walter E. Robb, III+(1) - President and Treasurer,
Benchmark Advisors, Inc. (corporate financial TRANSFER AGENT, REGISTRAR, AND
consultants); President, Benchmark Consulting DIVIDEND DISBURSING AGENT
Group, Inc. (office services) State Street Bank and Trust Company
c/o MFS Service Center, Inc.
Arnold D. Scott* - Senior Executive Vice P.O. Box 9024
President, Director, and Secretary, MFS Investment Boston, MA 02205-9824
Management 1-800-637-2304
Jeffrey L. Shames* - Chairman and Chief Executive CUSTODIAN
Officer, MFS Investment Management State Street Bank and Trust Company
J. Dale Sherratt+(1) - President, Insight
Resources, Inc. (acquisition planning specialists)
Ward Smith+(1) - Former Chairman (until 1994),
NACCO Industries (holding company)
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
+ Independent Trustee
* MFS Investment Management
(1) Member of Audit Committee
(2) Member of Portfolio Trading Committee
</TABLE>
<PAGE>
MFS(R) GOVERNMENT MARKETS ------------
INCOME TRUST BULK RATE
U.S. POSTAGE
[Logo] M F S(R) PAID
INVESTMENT MANAGEMENT MFS
We invented the mutual fund(R) ------------
500 Boylston Street
Boston, MA 02116-3741
(c)2000 MFS Investment Management(R).
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116. MGFCE-3 7/00 49.8M
