Dear Shareholders,
The current investment and economic environment bears little resemblance to
last year's. One year ago, global economies were floundering, and the crisis in
Asia threatened an already weak U.S. economy. Corporate earnings were flat, and
economists used the word "deflation" for the first time in recent memory.
Entering 1999, expectations for corporate earnings growth were lowered
dramatically. In an attempt to foster U.S. growth, the Federal Reserve Board
(the Fed) lowered interest rates.
As a result, this year the U.S. economy is booming and unemployment is low.
Many corporations are focused on improving their profitability, and investors
have been rewarded with positive surprises across a variety of industries. Our
analysts predict that corporate earnings growth for 1999 will average 12% -
15%.
Global economies also are showing signs of strength, and the Asian crisis has
passed. In fact, Japan's economic woes seem to have reached bottom. Although
the process is in its infancy, some Japanese corporations not only are talking
about restructuring and cost cutting, they also are beginning to take action,
looking within to become more competitive and improve returns on equity. While
still lagging the United States, Europe is beginning to restructure and
consolidate. These signs of international growth have contributed to concerns
that the U.S. economy now may be too strong. In June, and again in August, the
Fed raised rates by one-quarter of a percentage point to help ward off the
specter of inflation.
After an unprecedented four years of 20% annual returns in the U.S. equity
market, we fear that many investors have become accustomed to high returns and
have lost sight of the risks they take on to achieve them. In the current
market many investors are taking on additional risk - whether through day
trading or investing in speculative Internet stocks.
Risks are as much a part of the market today as they were one year ago. We
believe the market remains overvalued, with stocks priced 30% above our
analysts' earnings projections. And market narrowness has not abated; the top
25 stocks in the Standard & Poor's 500 Composite Index, a popular, unmanaged
index of common stock total return performance, are still the most overvalued.
Such extreme overvaluation makes the stock market sensitive to interest-rate
news and any negative earnings surprises. The Year 2000 (Y2K) computer problem
is another factor causing investor concern. While we believe corporate America
is well prepared to address any Y2K situations that may arise at year-end, no
one can predict investor behavior. In our opinion, it is investor behavior that
has the greatest potential to create market volatility.
We believe the best way to address Y2K and other market risks is through our
continuing commitment to MFS Original Research[RegTM] and our fundamental
investment tenet of long-term investing. Whether markets are up or down, MFS
analysts focus on analyzing industries and visiting companies to determine the
long-term winners and the prices that will make them attractive opportunities.
Because all companies will not benefit equally from the improving international
environment, bottom-up research remains critical to identifying those that we
believe are successfully restructuring, consolidating, and gaining market
share.
Changes in market and economic conditions can't be predicted but should always
be expected. The changes we have seen over the past year only reinforce our
commitment to long-term planning and investing. We believe volatility helps to
create opportunity for long-term investors to buy solid companies at attractive
prices. For this reason, we are continuing to expand our domestic and
international capabilities to ensure that MFS has primary, in-house research on
companies worldwide. We believe that we have built the right investment team,
backed by MFS Original Research, to take advantage of those opportunities for
our shareholders.
1
<PAGE>
We appreciate your confidence and welcome any questions or comments you may
have.
Respectfully,
/s/ Jeffrey L. Shares
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management[RegTM]
December 15, 1999
Management Review and Outlook
Dear Shareholders,
For the 12 months ended November 30, 1999, the Trust provided a total return of
- -4.80%, based on its beginning and ending stock market prices and assuming the
reinvestment of all distributions paid during the period. The Trust's total
return based on its net asset value (NAV) was -0.54%. During this period, the
Trust's stock market price, which stood at $6.56 on November 30, 1998,
decreased to $5.81 as of November 30,1999, while its net asset value (NAV)
price declined from $7.50 to $6.94.
Over 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 Treasury and agency securities, returned 1.17%. The J.P. Morgan
Non-Dollar Government Bond Index (The J.P. 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 -3.44% over
the same period.
The past 12 months have been a period marked by a rebound in global growth
after the uncertainties experienced during the summer of 1998. It also has been
an environment characterized by generally rising bond yields as the
uncertainties that had driven yields lower during 1998 receded. In this
environment, we have favored government-agency securities because their yield
has been attractive relative to U.S. Treasuries. We took advantage of this
opportunity by buying high-quality agency paper at what we believe to be
particularly appealing prices. During the first several months of 1999, spreads
narrowed when the perceived risks of holding non-Treasuries receded, and U.S.
government-agency securities solidly outperformed comparable Treasuries.
Principal value and interest on Treasury securities are guaranteed by the U.S.
government if held to maturity. We believe that over the long term,
government-agency securities offer more attractive returns than those of U.S.
Treasuries with essentially the same high quality and slightly higher yields.
The Trust's Treasury position remained underweighted compared to the Salomon
Index because of our focus on government-agency securities. Generally, we use
our Treasury investments to help balance the portfolio's duration, an indicator
of a portfolio's sensitivity to interest rate changes. During the period, we
emphasized Treasuries with eight- to 10-year maturities and those with under
one year in maturity, avoiding one- to four-year Treasury securities because
they have been most affected by the Federal Reserve Board's interest rate
increases.
For most of the period, we also underweighted the Trust's investments in
mortgage-backed securities relative to the Salomon Index. That 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, precisely the scenario an
investor wants to avoid.
More recently, however, we have added to the Trust's mortgage-backed
weighting -- largely through purchases of the Government National Mortgage
Association (Ginnie Mae) and Federal National Mortgage Association (Fannie Mae)
securities -- because their yields had widened to attractive levels. This has
brought the Fund's mortgage allocation back in line with the Salomon Index.
2
<PAGE>
The portfolio's sensitivity to changes in interest rates 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. However, if the economy shows signs of weakness over the
next few months, we will consider increasing slightly our long-term bonds as a
way to gain additional yield.
Over the course of the year, we have opportunistically added to our
international bond positions. By the end of November 1999, our weighting in this
sector has almost doubled to represent roughly 20% of the portfolio.
Within Europe, we have concentrated our positions primarily in German, English,
and Greek government bonds. Relative to the United States, the bond
fundamentals in Germany are quite positive with slower economic growth, a more
positive yield curve, and inflation running at approximately half the rate in
the United States. Meanwhile, the United Kingdom and especially Greece offer
yield convergence possibilities (spread tightening) versus other European
countries already in the European monetary union.
Elsewhere internationally, we added to our Australian holdings while decreasing
our New Zealand weighting due to the uncertainty surrounding federal elections
in November. The Australian positions were added at what we believe were
attractive yield spreads relative to the U.S. government bond market. With
respect to the overall duration of the international holdings, the maturities
have been shorter than the Salomon Brothers World Government Bond Index, an
unmanaged index consisting of complete universes of government bonds with
remaining maturities of at least five years. This was done in anticipation of
the Central Bank raising rates in order to moderate global economic demand. We
believe that this trend will continue in the near future, and we expect to
maintain a defensive posture.
Respectfully,
/s/ Stephen C. Bryant /s/ Stephen E. Nothern
Stephen C. Bryant Stephen 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.
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.
3
<PAGE>
Performance Summary
(For the year ended November 30, 1999)
<TABLE>
<S> <C>
Net Asset Value Per Share
November 30, 1998 $7.50
November 30, 1999 $6.94
New York Stock Exchange Price
November 30, 1998 $6.563
December 9, 1999 (high)* $6.688
November 30, 1999 (low)* $5.813
November 30, 1999 $5.813
</TABLE>
* For the period December 1, 1998, through November 30, 1999.
Past performance is no guarantee of future results.
Federal Tax Information
(For the year ended November 30, 1999)
In January 2000, shareholders will be mailed a Form 1099 reporting the federal
tax status of all distributions paid during the calendar year 1999.
Number of Employees
The Trust is organized as a Massachusetts business trust and is registered
under the Investment Company Act of 1940, as amended, as a closed-end,
nondiversified, management investment company and has no employees.
Number of Shareholders
As of November 30, 1999, our records indicate that there are 8,598 registered
shareholders and approximately 29,900 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 recieve 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
New York Stock Exchange Symbol
The New York Stock Exchange symbol is MGF.
Results of Shareholder Meeting
At the annual meeting of shareholders of MFS[RegTM] Government Markets Income
Trust, which was held on October 21, 1999, the following actions were taken:
Item 1. The election of Lawrence H. Cohn, Walter E. Robb, III, and J. Dale
Sherratt as Trustees of the Trust.
<TABLE>
<CAPTION>
Number of Shares
----------------
Nominee For Withheld
- ------- --- --------
<S> <C> <C>
Lawrence H. Cohn 58,796,022.1971 1,126,027.1946
Walter E. Robb, III 58,883,520.0051 1,038,529.3866
J. Dale Sherratt 58,872,728.2596 1,049,321.1321
</TABLE>
Trustees continuing in office who were not subject to re-election at this
meeting are Richard B. Bailey, Marshall N. Cohan, Sir J. David Gibbons, Abbey
M. O'Neill, Arnold D. Scott, Jeffrey L. Shames, and Ward Smith.
Item 2. The ratification of the selection of Deloitte & Touche LLP as the
independent public accountants to be employed by the Trust for
the fiscal year ending November 30, 1999.
<TABLE>
<CAPTION>
Number of Shares
----------------
<S> <C>
For 59,099,806.6918
Against 313,867.3647
Abstain 508,375.3352
</TABLE>
4
<PAGE>
Investment Objective and Policies
The investment objective of the Trust is to provide a high level of current
income.
The Trust will attempt to achieve this objective by investing at least 65% of
its assets in U.S. government securities and by engaging in transactions
involving related options. The Trust may invest up to 35% of its total assets
in foreign government securities. In pursuing its objective, the Trust will
consider the preservation of capital by balancing the yields of various
fixed-income securities against their attendant risks. However, the Trust will
not purchase securities with the goal of achieving capital appreciation.
For defensive purposes, the Trust may invest in cash (including foreign
currency) and cash equivalents. The Trust may also enter into options and
futures transactions, and forward foreign currency exchange contracts, and
interest-rate swaps and may purchase securities on a "when-issued" basis.
Dividend Reinvestment and
Cash Purchase Plan
MFS offers a Dividend Reinvestment and Cash Purchase Plan which 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, 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.
If you have any questions or would like a brochure providing a complete
description of the plan, please call 1-800-637-2304 any business day from 8
a.m. to 8 p.m. Eastern time.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
5
<PAGE>
Portfolio of Investments -- November 30, 1999
Bonds -- 94.7%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- 75.2%
U.S. Federal Agencies -- 30.4%
FHA, 10.375s, 2030+ .............................................. $ 2,269 $ 2,256,559
FICO, 10.7s, 2017 ................................................ 8,500 11,586,520
FICO, 9.8s, 2018 ................................................. 5,000 6,382,800
FICO, 10.35s, 2018 ............................................... 9,500 12,686,965
Federal Home Loan Mortgage
Corp. Gold PCS, TBA, 7.5s,
2027 ........................................................... 4,269 4,263,192
Federal National Mortgage
Assn., 5.625s, 2004 ............................................ 55,935 53,898,406
Federal National Mortgage
Assn., 6.956s, 2007 ............................................ 5,779 5,649,053
Federal National Mortgage
Assn., 5s, 2023 ................................................ 6,000 4,770,000
Federal National Mortgage
Assn., 8.5s, 2027 .............................................. 10,100 10,724,887
Federal National Mortgage
Assn., 7s, 2029 ................................................ 4,688 4,580,782
Federal National Mortgage
Assn., TBA, 7.5s, 2009 ......................................... 19,042 19,231,991
------------
$136,031,155
------------
U.S. Treasury Obligations -- 27.8%
U.S. Treasury Bonds, 10.375s,
2009 ........................................................... $14,600 $ 17,598,034
U.S. Treasury Bonds, 9.875s,
2015 ........................................................... 32,750 43,061,010
U.S. Treasury Bonds, 8.875s,
2017 ........................................................... 6,000 7,388,460
U.S. Treasury Bonds, 3.625s,
2028 ........................................................... 10,351 9,474,401
U.S. Treasury Bonds, 3.875s,
2029 ........................................................... 5,082 4,867,878
U.S. Treasury Bonds, 5.25s,
2029 ........................................................... 11,900 10,102,029
U.S. Treasury Bonds, 6.125s,
2029 ........................................................... 5,000 4,894,550
U.S. Treasury Notes, 8.5s,
2000 ........................................................... 6,250 6,287,125
U.S. Treasury Notes, 8s, 2001 9,250 9,507,242
U.S. Treasury Notes, 5.875s,
2004 ........................................................... 11,000 10,893,410
------------
$124,074,139
------------
Government National Mortgage
Association -- 14.6%
GNMA, 7s, 2011-2029 .............................................. $25,558 $ 25,166,995
GNMA, 7.5s, 2022-2027 ............................................ 21,514 21,469,918
GNMA, 6.5s, 2029 ................................................. 1,685 1,603,154
GNMA, TBA, 7.5s, 2010-2025 553 557,595
GNMA, TBA, 7s, 2022-2025 ......................................... 1,080 1,054,554
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
Government National Mortgage
Association -- continued
GNMA, TBA, 6.5s, 2028 ............................................ $16,375 $ 15,577,083
------------
$ 65,429,299
------------
U.S. Government Guaranteed -- 1.9%
Housing Urban Development,
6.59s, 2016 .................................................... $ 5,612 $ 5,022,740
Private Export Funding Corp.,
7.01s, 2004 .................................................... 3,380 3,424,481
------------
$ 8,447,221
------------
Small Business Administration -- 0.5%
SBA, 8.875s, 2011 ................................................ $ 2,256 $ 2,345,852
------------
Total U.S. Bonds ............................................... $336,327,666
------------
Foreign Bonds -- 19.5%
Argentina -- 0.6%
Republic of Argentina, 0s,
2001 ........................................................... $ 1,500 $ 1,252,500
Republic of Argentina, 6.813s,
2005 ........................................................... 392 342,180
Republic of Argentina,
11.786s, 2005 .................................................. 525 477,750
Republic of Argentina, 6s,
2023 ........................................................... 625 470,313
------------
$ 2,542,743
------------
Australia -- 3.3%
Commonwealth of Australia,
7.5s, 2005 .................................................... AUD 22,255 $ 14,819,427
------------
Brazil -- 0.6%
Federal Republic of Brazil,
11.625s, 2004 .................................................. $ 555 $ 532,800
Federal Republic of Brazil,
14.5s, 2009 .................................................... 128 133,286
Federal Republic of Brazil, 5s,
2014 ........................................................... 1,763 1,203,107
Federal Republic of Brazil,
6.938s, 2024 ................................................... 981 686,700
------------
$ 2,555,893
------------
Bulgaria -- 0.3%
National Republic of Bulgaria,
6.5s, 2024 ..................................................... $ 1,455 $ 1,134,900
------------
Canada -- 2.8%
Government of Canada, 5s,
2004 ........................................................... CAD 18,974 $ 12,315,302
------------
Denmark -- 0.4%
Kingdom of Denmark, 7s,
2007 ........................................................... DKK 12,142 $ 1,809,451
------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Foreign Bonds -- continued
France -- 0.4%
Republic of France, 4s, 2009 ..................................... EUR 2,121 $ 1,935,847
------------
Germany -- 4.0%
Federal Republic of Germany,
4.5s, 2009 ..................................................... EUR 18,485 $ 17,737,260
------------
Greece -- 3.8%
Hellenic Republic, 8.7s, 2005 .................................... GRD 521,000 $ 1,737,519
Hellenic Republic, 6s, 2006 ...................................... 2,000,000 5,930,540
Hellenic Republic, 5.75s, 2008 EUR 731 738,987
Republic of Greece, 8.01s,
2003 ........................................................... GRD 2,650,000 8,606,768
------------
$ 17,013,814
------------
Mexico -- 0.7%
Petroleos Mexicanos, 9.5s,
2027(Oils) ..................................................... $ 1,215 $ 1,148,175
United Mexican States,
9.875s, 2007 ................................................... 800 818,000
United Mexican States,
6.836s, 2019 ................................................... 650 589,095
United Mexican States,
6.933s, 2019 ................................................... 880 797,544
------------
$ 3,352,814
------------
Netherlands -- 0.1%
Netia Holdings B.V., 10.25s,
2007(Telecommunications) ....................................... $ 800 $ 680,000
------------
New Zealand -- 1.4%
Government of New Zealand,
8s, 2006 ....................................................... NZD 11,890 $ 6,382,781
------------
Panama -- 0.3%
Republic of Panama, 8.25s,
2008 ........................................................... $ 350 $ 304,063
Republic of Panama, 4.25s,
2014 ........................................................... 940 695,600
Republic of Panama, 8.875s,
2027 ........................................................... 530 447,850
------------
$ 1,447,513
------------
Peru -- 0.2%
Republic of Peru, 4.5s, 2017 ..................................... $ 1,580 $ 1,036,954
------------
Philippines -- 0.4%
Republic of Philippines,
9.875s, 2019 ................................................... $ 1,420 $ 1,444,850
Republic of Phillippines, 9.5s,
2024 ........................................................... 340 346,800
------------
$ 1,791,650
------------
Poland -- 0.2%
Telekomunikacja Polska S.A.,
7.75s, 2008(Financial)## ....................................... $ 750 $ 705,450
------------
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Foreign Bonds -- continued
United Kingdom
United Kingdom Treasury,
6.75s, 2004 .................................................... GBP 5 $ 8,219
------------
Total Foreign Bonds .................................................................... $ 87,270,018
------------
Total Bonds (Identified Cost, $442,904,379) $423,597,684
------------
Shares
Rights
United Mexican States*
(Identified Cost, $0) .......................................... 2,354,000 $ 0
------------
Warrants
Republic of Venezuela*
(Identified Cost, $0) .......................................... 37,500 $ 0
------------
Principal Amount
(000 Omitted)
Short-Term Obligations -- 4.4%
Federal Home Loan Mortgage
Discount Notes, due
12/01/99 at Amortized Cost $ 19,570 $ 19,570,000
------------
Total Investments
(Identified Cost, $462,474,379) ...................................................... $443,167,684
Other Assets,
Less Liabilities -- 0.9% ............................................................... 4,010,028
------------
Net Assets -- 100.0% ..................................................................... $447,177,712
------------
</TABLE>
* 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.
<TABLE>
<S> <C> <C>
AUD = Australian Dollars
CAD = Canadian Dollars
CHF = Swiss Francs
DKK = Danish Kronor
EUR = Euro
GBP = British Pounds
GRD = Greek Drachma
JPY = Japanese Yen
NZD = New Zealand Dollars
NOK = Norwegian Krone
</TABLE>
See notes to financial statements.
7
<PAGE>
Statement of Assets and Liabilities -- November 30, 1999
<TABLE>
<S> <C>
Assets:
Investments, at value (identified cost, $462,474,379) ................................... $ 443,167,684
Cash .................................................................................... 22,695
Net receivable for forward foreign currency exchange contracts to purchase .............. 680,996
Net receivable for forward foreign currency exchange contracts to sell .................. 455,073
Receivable for investments sold ......................................................... 2,618
Interest receivable ..................................................................... 4,588,885
Other assets ............................................................................ 6,859
-------------
Total assets .......................................................................... $ 448,924,810
-------------
Liabilities:
Payable to dividend disbursing agent .................................................... $ 196,603
Net payable for forward foreign currency exchange contracts closed or subject to master 1,049,420
netting agreements
Payable for swap agreements ............................................................. 89,918
Payable to affiliates -
Management fee ......................................................................... 25,321
Transfer and dividend disbursing agent fee ............................................. 14,884
Accrued expenses and other liabilities .................................................. 370,952
-------------
Total liabilities ..................................................................... $ 1,747,098
-------------
Net assets ............................................................................... $ 447,177,712
=============
Net assets consist of:
Paid-in capital ......................................................................... $ 508,841,267
Unrealized depreciation on investments and translation of assets and liabilities in (19,376,827)
foreign currencies
Accumulated net realized loss on investments and foreign currency transactions .......... (42,232,775)
Accumulated distributions in excess of net investment income ............................ (53,953)
-------------
Total ................................................................................. $ 447,177,712
=============
Shares of beneficial interest outstanding (97,911,555 shares authorized, 33,457,400
treasury shares)........................................................................ 64,454,155
=============
Net asset value per share (net assets/shares of beneficial interest outstanding) ......... $ 6.94
=============
</TABLE>
See notes to financial statements.
8
<PAGE>
Statement of Operations -- Year Ended November 30, 1999
<TABLE>
<S> <C>
Net investment income:
Interest income ............................................................ $ 33,152,513
-------------
Expenses --
Management fee ............................................................ $ 3,302,317
Trustees' compensation .................................................... 145,061
Transfer and dividend disbursing agent fee ................................ 178,957
Administrative fee ........................................................ 61,786
Investor communication expense ............................................ 242,763
Custodian fee ............................................................. 203,919
Postage ................................................................... 40,700
Auditing fees ............................................................. 39,823
Printing .................................................................. 34,781
Legal fees ................................................................ 3,707
Miscellaneous ............................................................. 155,618
-------------
Total expenses ........................................................... $ 4,409,432
Fees paid indirectly ...................................................... (56,901)
-------------
Net expenses ............................................................. $ 4,352,531
-------------
Net investment income ................................................... $ 28,799,982
-------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) --
Investment transactions .................................................. $ (11,327,714)
Written option transactions .............................................. 1,054,138
Foreign currency transactions ............................................ (2,225,297)
-------------
Net realized loss on investments and foreign currency transactions ...... $ (12,498,873)
-------------
Change in unrealized appreciation (depreciation) --
Investments .............................................................. $ (27,125,146)
Written options .......................................................... (178,743)
Swap transactions ........................................................ (89,918)
Translation of assets and liabilities in foreign currencies .............. 549,243
-------------
Net unrealized loss on investments and foreign currency translation ..... $ (26,844,564)
-------------
Net realized and unrealized loss on investments and foreign currency ... $ (39,343,437)
-------------
Decrease in net assets from operations ................................ $ (10,543,455)
=============
</TABLE>
See notes to financial statements.
9
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended November 30,
----------------------------------
1999 1998
---------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations --
Net investment income .................................................................. $ 28,799,982 $ 31,728,976
Net realized gain (loss) on investments and foreign currency transactions .............. (12,498,873) 4,152,679
Net unrealized gain (loss) on investments and foreign currency translation ............. (26,844,564) 951,710
------------- -------------
Increase (decrease) in net assets from operations ..................................... $ (10,543,455) $ 36,833,365
------------- -------------
Distributions declared to shareholders --
From net investment income ............................................................. $ (26,308,092) $ (31,728,976)
In excess of net investment income ..................................................... -- (967,060)
From paid-in capital ................................................................... (3,973,796) --
------------- -------------
Total distributions declared to shareholders ......................................... $ (30,281,888) $ (32,696,036)
------------- -------------
Net decrease in net assets from Trust share transactions ................................ $ (23,857,509) $ (16,857,235)
------------- -------------
Total decrease in net assets ........................................................ $ (64,682,852) $ (12,719,906)
Net assets:
At beginning of period ................................................................. 511,860,564 524,580,470
------------- -------------
At end of period (including accumulated distributions in excess of net investment income
of $53,953 and $714,573, respectively) ................................................ $ 447,177,712 $ 511,860,564
============= =============
</TABLE>
See notes to financial statements.
10
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Year Ended November 30,
----------------------------
1999 1998
-------------- -------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ............................ $ 7.50 $ 7.41
-------- --------
Income from investment operations# --
Net investment income ............................................ $ 0.43 $ 0.46
Net realized and unrealized gain (loss) on investments and foreign
currency ........................................................ (0.58) 0.08
-------- --------
Total from investment operations ................................ $ (0.15) $ 0.54
-------- --------
Less distributions declared to shareholders --
From net investment income ....................................... $ (0.40) $ (0.46)
In excess of net investment income ............................... -- (0.01)
From paid-in capital ............................................. (0.06) --
-------- --------
Total distributions declared to shareholders .................... $ (0.46) $ (0.47)
-------- --------
Net increase from repurchase of capital shares .................... $ 0.05 $ 0.02
-------- --------
Net asset value -- end of period .................................. $ 6.94 $ 7.50
======== ========
Per share market value -- end of period ........................... $ 5.813 $ 6.563
Total return ..................................................... (4.80)% 4.21%
Ratios (to average net assets)/Supplemental data
Expenses## ...................................................... 0.92% 0.89%
Net investment income ........................................... 6.00% 6.14%
Portfolio turnover ............................................... 102% 253%
Net assets at end of period
(000 Omitted) ................................................... $447,178 $511,861
<CAPTION>
Year Ended November 30,
-----------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ............................ $ 7.56 $ 7.62 $ 6.90
-------- ------- -------
Income from investment operations# --
Net investment income ............................................ $ 0.49 $ 0.49 $ 0.49
Net realized and unrealized gain (loss) on investments and foreign
currency ........................................................ (0.14) (0.07) 0.64
-------- -------- -------
Total from investment operations ................................ $ 0.35 $ 0.42 $ 1.13
-------- -------- -------
Less distributions declared to shareholders --
From net investment income ....................................... $ (0.49) $ (0.49) $ (0.49)
In excess of net investment income ............................... (0.03) (0.05) --
From paid-in capital ............................................. -- -- --
-------- -------- --------
Total distributions declared to shareholders .................... $ (0.52) $ (0.54) $ (0.49)
-------- -------- --------
Net increase from repurchase of capital shares .................... $ 0.02 $ 0.06 $ 0.08
-------- -------- --------
Net asset value -- end of period .................................. $ 7.41 $ 7.56 $ 7.62
======== ======== ========
Per share market value -- end of period ........................... $ 6.688 $ 6.750 $ 6.500
Total return ..................................................... 6.91% 12.61 % 10.96 %
Ratios (to average net assets)/Supplemental data
Expenses## ...................................................... 0.94% 1.00 % 0.99 %
Net investment income ........................................... 6.56% 6.63 % 6.84 %
Portfolio turnover ............................................... 248% 249% 318%
Net assets at end of period
(000 Omitted) ................................................... $524,580 $554,496 $606,135
#Per share data are based on average shares outstanding.
##Ratios do not reflect expense reductions from certain expense offset arrangements.
</TABLE>
See notes to financial statements.
11
<PAGE>
Notes to Financial Statements
(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
rate. 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 options 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
12
<PAGE>
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 calculated as a percentage
of the Trust's month end net assets. The 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 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 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
13
<PAGE>
Notes to Financial Statements -- continued
excess of net investment income or net realized gains. During the year ended
November 30, 1999, $1,831,270 was reclassified from accumulated distributions
in excess of net investment income to accumulated net realized loss on
investments and foreign currency transactions due to differences between book
and tax accounting for mortgage-backed securities and foreign currency
transactions. This change had no effect on the net assets or net asset value
per share. In addition, $3,973,796 was redesignated as a tax return of capital
distribution. At November 30, 1999, accumulated distributions in excess of net
investment income and accumulated net realized loss on investments and foreign
currency transactions under book accounting were different from tax accounting
due to temporary differences in accounting for capital losses and foreign
currency transactions.
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 lesser 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 year ended November 30, 1999, was 0.69%.
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 and Mr. Bailey. Included in Trustees' compensation is a
net periodic pension expense of $281,322 for the year ended November 30, 1999.
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 pays MFS an administrative fee
at the following annual percentages of the Trust's average daily net assets:
<TABLE>
<S> <C>
First $1 billion .................. 0.0150%
Next $1 billion ................... 0.0125%
Next $1 billion ................... 0.0100%
In excess of $3 billion ........... 0.0000%
</TABLE>
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:
<TABLE>
<CAPTION>
Purchases Sales
------------- ------------
<S> <C> <C>
U.S. government securities ............................ $342,217,905 $407,830,553
============ ============
Investments (non-U.S. government securities) .......... $132,533,819 $111,552,773
============ ============
</TABLE>
14
<PAGE>
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:
<TABLE>
<S> <C>
Aggregate cost ........................ $ 462,607,467
=============
Gross unrealized depreciation ......... $ (20,673,600)
Gross unrealized appreciation ......... 1,233,817
-------------
Net unrealized depreciation .......... $ (19,439,783)
=============
</TABLE>
(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:
<TABLE>
<CAPTION>
Year Ended Year Ended
November 30, 1999 November 30, 1998
-------------------------- --------------------------
Shares Amount Shares Amount
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Treasury shares acquired ......... 3,808,400 $23,857,509 2,490,700 $16,857,235
========= =========== ========= ===========
</TABLE>
In accordance with the provisions of the Trust's prospectus, 3,808,400 shares
of beneficial interest were purchased by the Trust 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. The Trust reacquired 2,490,700 shares of
beneficial interest during the year ended November 30, 1998, at an average
price per share of $6.76 and a weighted average discount of 9.6% per share.
(6) Line of Credit
The Trust and other affiliated Funds participate in an $820 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of
Trust shares. 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 year ended November 30, 1999, was $3,203. The Trust had no
borrowings during the year.
(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 and swap agreements. 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
<TABLE>
<CAPTION>
Number of
Contracts Premiums
----------- ------------
<S> <C> <C>
Outstanding, beginning of period 1 $228,144
Options written .................................... 17 1,779,326
Options terminated in closing transactions ......... (9) (968,336)
Options exercised .................................. (2) (216,735)
Options expired .................................... (7) (822,399)
---------
Outstanding, end of period ........................... $ --
---------
</TABLE>
15
<PAGE>
Notes to Financial Statements -- continued
There were no outstanding financial instruments with off-balance-sheet risk at
the end of the period.
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
Net Unrealized
Contracts to In Exchange Contracts Appreciation
Settlement Date Deliver/Receive For at Value (Depreciation)
------------------------------ -------------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Sales 12/01/99-3/15/2000 ........... AUD 27,310,715 $17,545,803 $17,380,293 $ 165,510
12/01/99-12/02/1999 .......... CAD 5,522,522 3,761,555 3,753,880 7,675
12/3/1999 .................... CHF 4,161,271 2,731,622 2,618,464 113,158
12/01/99-3/15/2000 ........... DKK 28,688,882 4,011,570 3,901,335 110,235
12/01/99-12/03/1999 .......... EUR 13,259,110 13,804,742 13,357,860 446,882
12/3/1999 .................... GBP 1,662,405 2,696,471 2,650,583 45,888
12/01/99-12/06/1999 .......... JPY 2,963,502,462 28,287,042 29,127,266 (840,224)
12/3/1999 .................... NOK 21,467,273 2,708,667 2,664,433 44,234
12/01/99-3/15/2000 ........... NZD 24,819,751 13,023,378 12,661,663 361,715
----------- ----------- ----------
$88,570,850 $88,115,777 $ 455,073
=========== =========== ==========
Purchases 12/01/99-12/03/1999 .......... AUD 17,115,213 $10,950,986 $10,885,369 $ (65,617)
12/02/1999 ................... CAD 4,002,701 2,731,622 2,720,831 (10,791)
12/3/1999 .................... CHF 4,161,271 2,682,182 2,618,464 (63,718)
12/01/99 ..................... DKK 14,344,441 1,980,729 1,944,218 (36,511)
12/01/99-12/03/1999 .......... EUR 11,203,311 11,644,644 11,286,848 (357,796)
12/3/1999 .................... GBP 1,662,405 2,731,623 2,650,583 (81,040)
12/01/99-3/15/2000 ........... JPY 4,115,770,884 39,097,895 40,498,127 1,400,232
12/3/1999 .................... NOK 21,467,273 2,731,622 2,664,433 (67,189)
12/01/99 ..................... NZD 14,720,333 7,541,000 7,504,426 (36,574)
----------- ----------- ----------
$82,092,303 $82,773,299 $ 680,996
=========== =========== ==========
</TABLE>
At November 30, 1999, forward foreign currency purchases and sales under master
netting agreements excluded above amounted to a net receivable of $90,359 with
Deutschebank and $153,649 with First Boston, and a net payable of $1,293,428
with Merrill Lynch.
At November 30, 1999, the Trust had sufficient cash and/or securities to cover
any commitments under these contracts.
Swap Agreements
Interest Rate Swaps
<TABLE>
<CAPTION>
Cash Flows Unrealized
Notional Principal Cash Flows Paid Received by the Appreciation
Expiration Amount of Contract by the Trust Trust (Depreciation)
- ------------ -------------------- ---------------------- ----------------------- ---------------
<S> <C> <C> <C> <C> <C>
3/22/2003 SEK .......... 78,300,000 Floating - 3M STIBOR Fixed - 4.38% $(311,902)
221,984
3/22/2003 EUR .......... 8,480,000 Fixed - 3.76% Floating - 6M EURIBOR ---------
$(89,918)
=========
</TABLE>
At November 30, 1999, the Trust had sufficient cash and/or securities to cover
any commitments under these contracts.
16
<PAGE>
(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 November 30,
1999, the Trust owned the following restricted security, excluding securities
issued under Rule 144A, constituting 0.50% 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 this security is determined by valuations furnished by dealers or by a
pricing service, or if not available, in good faith by the Trustees.
<TABLE>
<CAPTION>
Date of Principal Amount
Description Acquisition (000 Omitted) Cost Value
- ---------------------------- ------------- ----------------- ------------- -------------
<S> <C> <C> <C> <C>
FHA, 10.375s, 2030 ......... 8/16/1993 $2,269 $2,440,174 $2,256,559
</TABLE>
17
<PAGE>
Independent Auditors' Report
To the Trustees and Shareholders of MFS Governments Market Income Trust:
We have audited the accompanying statement of assets and liabilities of MFS
Governments Market Income Trust, including the portfolio of investments, as of
November 30, 1999, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1999, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significiant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Governments Market Income Trust as of November 30, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended, in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
January 6, 2000
18
<PAGE>
MFS' Year 2000 Readiness Disclosure
[Circle Logo MFS-Year 2000]
MFS Investment Management[R], as an investment
adviser and on behalf of the MFS funds, is committed to
the effective use of technology in managing our portfolio
investments, delivering high-quality service to MFS fund
shareholders, retirement plan participants, and MFS' institu-
tional clients, and supporting the financial consultants will sell
our products.
MFS can now say that it is ready for the Year 2000. Our testing has demonstrated
that MFS' computer hardware and software will recognize "00" as the Year 2000
and will not confuse those digits with 1900. All of our critical business
applications and processes has been successfully tested, and we have adopted
companywide policies that will help us maintain our readiness through the
remainder of the year. Any new technology that is brought into the company
before the end of the year will be held to the same stringent standards as our
current technology. We has also developed a vendor readiness survey, contacted
over 700 of our vendors, and established an ongoing process to review responses,
as well as to review readiness statements of new vendors and products.
MFS recognizes that fund shareholders and institutional clients also are
concerned about whether the companies whose securities are held in their
portfolios are addressing Y2K issues. As part of the MFS Original Research[R]
process of evaluating portfolio investments, one of the many relevant factors
that MFS' portfolio managers and research analysts may consider is a company's
Y2K readiness.
Y2K readiness is an enormously complex, worldwide issue. No company or
institution can guarantee that it will be unaffected by the Y2K issue. While MFS
is taking significant steps to protect the integrity of its internal system,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on MFS fund shareholders, retirement plan participants, or
institutional clients.
If you have further questions regarding MFS' Year 2000 Readiness Program, please
visit our Web site at www.mfs.com, call our toll-free line, 1-800-637-4406, or
write to the MFS Year 2000 Program Management Office by e-mail at [email protected] or
by letter at 500 Boylston Street, Boston, MA 02116-3741.
19
<PAGE>
MFS[RegTM] Government Markets Income Trust
Trustees
Richard B. Bailey+ (2)
Private Investor; Former Chairman and
Director (until 1991), MFS Investment Management
Marshall N. Cohan+ (2)
Private Investor
Lawrence H. Cohn, M.D.+ (2)
Chief of Cardiac Surgery,
Brigham and Women's Hospital;
Professor of Surgery, Harvard
Medical School
The Hon. Sir J. David
Gibbons, KBE+ (1)
Chief Executive Officer,
Edmund Gibbons Ltd.;
Chairman, Colonial Insurance
Company, Ltd.
Abby M. O'Neill+ (2)
Private Investor
Walter E. Robb, III+ (1)
President and Treasurer,
Benchmark Advisors, Inc.
(corporate financial consultants);
President, Benchmark Consulting
Group, Inc. (office services)
Arnold D. Scott *
Senior Executive Vice President,
Director, and Secretary,
MFS Investment Management
Jeffrey L. Shames*
Chairman and Chief Executive Officer,
MFS Investment Management
J. Dale Sherratt+ (1)
President, Insight Resources, Inc.
(acquisition planning specialist)
Ward Smith+ (1)
Former Chairman (until 1994),
NACCO Industries (holding company)
Portfolio Managers
Stephen C. Bryant*
Steven E. Nothern*
Treasurer
W. Thomas London*
Assistant Treasurers
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
Secretary
Stephen E. Cavan*
Assistant Secretary
James R. Bordewick, Jr.*
Transfer Agent,
Registrar, and Dividend
Disbursing Agent
State Street Bank and
Trust Company
c/o MFS Service Center, Inc.
P.O. Box 9024
Boston, MA 02205-9824
1-800-637-2304
Custodian
State Street Bank and
Trust Company
Independent Auditors
Deloitte & Touche LLP
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.
[Recycle] This report is printed on recycled paper. MGFCE-2 01/00 61.5M
[Picture of Couple at Desk] MFS[RM]
INVESTMENT MANAGEMENT
We invested the mutual fund[R]
MFS[R] Government
Markets Income Trust
Annual Report . November 30, 1999
