SCHEDULE: Sit Entities Oppose MFS Government Markets Income Trust Reorganization

Sit Investment Associates and Sit Fixed Income Advisors II oppose the proposed reorganization of MFS Government Markets Income Trust into MFS Multimarket Income Trust due to differing risk profiles.

Summary

• Sit Investment Associates Inc. and Sit Fixed Income Advisors II LLC (Sit Entities) filed a Schedule 13D, disclosing beneficial ownership of 9,101,782 shares, representing 27.9% of MFS Government Markets Income Trust (MGF) common stock.
• Sit Entities formally oppose the proposed reorganization of MGF, MFS Intermediate High Income Fund (CIF), MFS Charter Income Trust (MCR), and MFS Intermediate Income Trust (MIN) (collectively, Acquired Funds) into MFS Multimarket Income Trust (MMT) (the Acquiring Fund).
• The primary reason for opposition is the material difference in investment strategy and risk profile; MGF is required to invest at least 80% of its net assets in government securities, while MMT may invest 100% of its assets in junk bonds.
• Sit Entities acquired MGF shares in open market transactions using client funds for investment purposes, believing the shares represented an attractive investment opportunity.
• A letter was sent to the Board of Trustees on February 24, 2026, by Sit Entities, explicitly stating their opposition to the proposed Reorganization.
• As of December 31, 2025, Sit clients held significant positions in the Acquired Funds: MGF (8,788,620 shares, 27.0%, market value $26,585,576), MIN (29,167,975 shares, 25.6%, market value $76,128,415), MCR (3,993,082 shares, 9.6%, market value $25,036,624), and CIF (1,452,035 shares, 8.1%, market value $2,468,460), as well as MMT (642,159 shares, 1.2%, market value $2,986,039).

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as negative for MFS Government Markets Income Trust shareholders due to the proposed reorganization's significant increase in risk profile, which is actively opposed by a major shareholder.

Positives

• Sit Entities are actively engaging with management and the Board of Trustees to protect the investment objectives and risk tolerances of their clients.
• Sit Entities have a long-term investment approach to closed-end funds, emphasizing the income component of total return.

Negatives

• The proposed reorganization would significantly increase the investment risk for shareholders of MGF and MIN, as the Acquiring Fund (MMT) has a materially different and higher-risk investment strategy, allowing up to 100% investment in junk bonds.
• Sit Entities believe the proposed reorganization is not in the best interest of the Acquired Funds' shareholders and primarily benefits the Funds' sponsor, Massachusetts Financial Services Company.
• The proposed reorganization is characterized by Sit Entities as a 'bait and switch scheme' due to the stark contrast in risk profiles between the acquired and acquiring funds.

Risks

• Significant increase in investment risk for MGF and MIN shareholders if the proposed reorganization is approved, as the Acquiring Fund (MMT) may invest 100% of its assets in junk bonds, contrasting with MGF's 80% government securities requirement.
• Potential for adverse impact on investment objectives and risk tolerances of clients invested in MGF and MIN due to the change in fund strategy and risk profile.

Future Outlook

Sit Entities intend to continuously review their investment in MFS Government Markets Income Trust shares and may further purchase, hold, vote, trade, sell, or otherwise deal in the shares as deemed advisable. They may also propose or take actions including engaging in discussions with management, the Board of Trustees, and shareholders concerning the proposed reorganization, the Issuer's performance, market prices relative to asset value, distribution rate, capitalization, investment strategy, and portfolio holdings. Sit Entities may also make binding and non-binding shareholder proposals or nominate individuals for election to the Board of Trustees.

Management Comments

• "We do not support the proposed reorganization because the Acquiring Fund’s investment strategy and risk profile is materially different than the investment strategies and risk profiles of the Acquired Funds."
• "Specifically, and most importantly, MGF and MIN are currently required to maintain significant allocations to high-quality securities. In fact, MGF is required to invest at least 80% of its net assets in government securities. In contrast, the Acquiring Fund may invest 100% of its assets in junk bonds."
• "If approved, the proposed reorganization will significantly increase the risk for investors in MGF and MIN. Our clients cannot accept this level of increased risk."
• "We believe that the proposed reorganization is not in the best interest of the Acquired Funds shareholders and only benefits the Funds sponsor."
• "We ask that the Board cancel the proposed reorganization."
• "We believe that the proposed reorganization is a bait and switch scheme by Massachusetts Financial Services Company."

Industry Context

StockSavvy.ai notes that this filing highlights a growing trend of activist investor engagement in closed-end funds, particularly concerning mergers or reorganizations that alter fundamental investment mandates and risk profiles. Such actions often arise when investors perceive a misalignment between management's strategic decisions and shareholder interests, especially regarding fund liquidity, discount to NAV, or changes in investment policy.

Comparison to Industry Standards

• The proposed merger of MGF (mandated 80% government securities) into MMT (up to 100% junk bonds) represents a significant deviation from typical closed-end fund reorganizations that aim for strategic alignment or economies of scale without drastically altering risk profiles.
• This contrasts with mergers like the recent BlackRock closed-end fund reorganizations, which often consolidate funds with similar investment objectives to achieve greater scale and potentially reduce expense ratios, maintaining a consistent risk-return profile for shareholders.
• Sit's opposition, representing 27.9% of MGF, is a substantial block, indicating a strong shareholder voice against a perceived 'bait and switch' that could be detrimental to investors seeking high-quality, lower-risk income.

Corporate Governance

Stakeholder Impact

• Shareholders (MGF, MIN, MCR, CIF): Potential for significant increase in investment risk if the reorganization proceeds, particularly for MGF and MIN shareholders due to MMT's higher allocation to junk bonds.
• Shareholders (MMT): Potential for increased assets under management if the reorganization is approved, but also potential for integration challenges and differing shareholder expectations.
• Management/Board of Trustees (MFS Government Markets Income Trust): Faces significant opposition from a major shareholder regarding a key strategic decision, potentially leading to a contested vote or requiring reconsideration of the proposal.
• Funds Sponsor (Massachusetts Financial Services Company): Stands to benefit from the reorganization, according to Sit Entities, but faces reputational risk and potential shareholder dissent.

Next Steps

• Sit Entities intend to review their investment in the Issuer's Shares on a continuing basis.
• Sit Entities may further purchase, hold, vote, trade, sell or otherwise deal in the Shares.
• Sit Entities may engage in discussions with management, the Board of Trustees, and shareholders concerning various proposals, performance, market prices, distribution rates, capitalization, investment strategy, and portfolio holdings.
• Sit Entities may make binding and non-binding shareholder proposals.
• Sit Entities may nominate one or more individuals as nominees for election to the Board of Trustees.
• The proposed plan of reorganization, approved by the Board of Trustees on December 11, 2025, requires shareholder approval to proceed.

Key Dates

Recommendation

While a significant shareholder is opposing a proposed merger, the outcome is uncertain. The opposition highlights potential risks for existing shareholders of the acquired funds, but the stock's immediate reaction will depend on market perception of the likelihood of the merger proceeding or being blocked. Investors should hold to monitor developments and the ultimate resolution of the proposed reorganization.

Keywords

MFS Government Markets Income Trust, MGF, Sit Investment Associates, Schedule 13D, Closed-End Fund, Reorganization, Merger, Shareholder Activism, Investment Adviser, Junk Bonds, Government Securities, Risk Profile