Annual Report
September 30, 2023
MFS® International New Discovery Fund
MIO-ANN
MFS® International New Discovery Fund
CONTENTS
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| back cover |
The report is prepared for the
general information of shareholders. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED
• MAY LOSE VALUE • NO BANK GUARANTEE
Portfolio Composition - continued
| (g) | The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and S&P Global Market Intelligence Inc. (“S&P Global Market Intelligence”). GICS is a service mark of MSCI and S&P Global Market Intelligence and has been licensed for use by MFS. MFS has applied its own internal sector/industry classification methodology for equity securities and non-equity securities that are unclassified by GICS. |
| (x) | Represents the portfolio’s exposure to issuer countries as a percentage of a portfolio’s net assets. For purposes of this presentation, United States includes Cash & Cash Equivalents. |
| (y) | Represents the portfolio’s exposure to a particular currency as a percentage of a portfolio's net assets. For purposes of this presentation, United States Dollar includes Cash & Cash Equivalents. |
Cash & Cash Equivalents includes
any cash, investments in money market funds, short-term securities, and other assets less liabilities. Please see the Statement of Assets and Liabilities for additional information related to the fund’s cash
position and other assets and liabilities.
Percentages are based on net assets
as of September 30, 2023.
The portfolio is actively managed
and current holdings may be different.
2
Management Review
Summary of Results
For the twelve months ended
September 30, 2023, Class A shares of the MFS International New Discovery Fund (fund) provided a total return of 17.04%, at net asset value. This compares with a return of 19.95% for the fund’s benchmark, the
MSCI All Country World (ex-US) Small Mid Cap Index (net div).
Market Environment
During the reporting period, central
banks around the world had to combat the strongest inflationary pressures in four decades, fueled by the global fiscal response to the pandemic, disrupted supply chains and the dislocations to energy markets stemming
from the war in Ukraine. Interest rates rose substantially, but the effects of a tighter monetary policy may not have been fully experienced yet, given that monetary policy works with long and variable lags. Strains
resulting from the abrupt tightening of monetary policy began to affect some parts of the economy, most acutely among small and regional US banks, which suffered from deposit flight as depositors sought higher yields
on their savings. Those shifts exposed an asset-liability mismatch that forced the closure of several institutions by regulators. Given the importance of small and mid-sized lenders to the provision of credit in the
US, concerns were raised in the aftermath of the crisis that credit availability could become constrained, leading to slower economic growth, although those effects have been limited thus far. Additionally, activity
in the US housing sector has slowed as a result of higher mortgage rates. China’s abandonment of its Zero-COVID policy ushered in a brief uptick in economic activity in the world’s second-largest economy
in early 2023, although its momentum soon stalled as focus turned to the country’s highly-indebted property development sector. In developed markets, consumer demand for services remained stronger than the
demand for goods.
Policymakers found themselves in the
difficult position of trying to restrain inflation without tipping economies into recession. Despite the challenging macroeconomic and geopolitical environment, central banks remained focused on controlling price
pressures while also confronting increasing financial stability concerns. Central banks had to juggle achieving their inflation mandates while using macroprudential tools to keep banking systems liquid, a potentially
difficult balancing act, and one that suggested that we may be nearing a peak in policy rates.
Against an environment of relatively
tight labor markets, tighter global financial conditions and volatile materials prices, investor anxiety appeared to have increased over the potential that corporate profit margins may be past peak for this cycle.
That said, signs that supply chains have generally normalized, coupled with low levels of unemployment across developed markets and hopes that inflation levels have peaked, were supportive factors for the
macroeconomic backdrop.
Detractors from Performance
Relative to the MSCI All Country
World (ex-US) Small Mid Cap Index, stock selection within the information technology, materials and industrials sectors detracted from performance. Within the information technology sector, there were no individual
stocks, either in the fund or in the benchmark, that were among the fund's top relative detractors over the reporting period. Within the materials sector, the fund’s overweight
3
Management Review - continued
positions in pipe and precast products manufacturer
Forterra (United Kingdom), specialty chemical products maker Croda International (United Kingdom), global flavors and fragrances supplier Symrise (Germany) and fragrance and food company T. Hasegawa (Japan), and not
owning shares of strong-performing battery materials manufacturer Ecopro (South Korea), hindered relative results. The stock price of Croda International came under pressure as the company issued a profit warning, led
by destocking trends and weaker sales volumes in its consumer care segment. Within the industrials sector, the fund’s overweight positions in industrial waste disposal services provider Daiseki (Japan),
intellectual property services provider IPH (Australia) and industrial and electronics products distributor RS Group (United Kingdom) weakened relative performance. The stock price of Daiseki fell after the company
reported revenue results that were lower than expectations due to weak collected waste volumes and lower margins.
Elsewhere, the fund’s holdings
of brewing company China Resources Beer(b) (China) further hindered relative returns as the company delivered financial results that missed expectations, mainly due to lower-than-expected sales and weaker gross profit
margins as cost inflation pressures increased.
The fund’s cash and/or cash
equivalents position during the period detracted from relative performance. Under normal market conditions, the fund strives to be fully invested and generally holds cash to buy new holdings and to provide liquidity.
In a period when equity markets rose, as measured by the fund’s benchmark, holding cash hurt performance versus the benchmark, which has no cash position.
Contributors to Performance
An underweight position and
favorable stock selection in the real estate sector contributed to the fund’s relative performance, however, there were no individual stocks within this sector, either in the fund or in the benchmark, that were
among the fund's top relative contributors over the reporting period.
Stock selection within the health
care sector also benefited relative performance, led by the fund’s overweight position in purpose-made drug and medication packaging manufacturer Gerresheimer (Germany). The stock price of Gerresheimer advanced
as the company posted above-consensus financial results, driven by an improved product mix and strong top-line performance.
An underweight position in the
utilities sector was another factor that helped relative performance, however, there were no individual stocks within this sector, either in the fund or in the benchmark, that were among the fund's top relative
contributors over the reporting period.
Stocks in other sectors that
supported relative performance included the fund’s overweight positions in food and beverage glass packaging products maker Verallia (France), power transmission manufacturer LS Electric (South Korea),
transportation services provider Seino Holdings (Japan), circuit board manufacturer Tripod Technology (Taiwan), bakery retailer Greggs (United Kingdom) and compact excavator manufacturer Doosan Bobcat (South Korea).
The share price of Doosan Bobcat rose as the company reported robust demand for construction equipment in the US due to a strong order backlog. The fund's overweight positions in risk management solutions
provider AUB Group (Australia), precision electronic measuring instruments manufacturer Chroma ATE (Taiwan) and steam turbine, electric motor and generator
4
Management Review - continued
manufacturer Bharat Heavy Electricals (India)
further aided relative results. The share price of Doosan Bobcat rose as the company reported robust demand for construction equipment in the US due to a strong order backlog.
Respectfully,
Portfolio Manager(s)
Peter Fruzzetti, Lionel Gomez,
Robert Lau, Sandeep Mehta, and Nicholas Spratt
Note to Shareholders: Effective
April 15, 2023, Jose Luis Garcia is no longer a Portfolio Manager of the fund.
| (b) | Security is not a benchmark constituent. |
The views expressed in this report
are those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily reflect the views of MFS or any other person in the MFS organization. These views
are subject to change at any time based on market or other conditions, and MFS disclaims any responsibility to update such views. These views may not be relied upon as investment advice or an indication of trading
intent on behalf of any MFS portfolio. References to specific securities are not recommendations of such securities, and may not be representative of any MFS portfolio’s current or future investments.
5
Performance Summary THROUGH 9/30/23
The following chart illustrates a
representative class of the fund’s historical performance in comparison to its benchmark(s). Performance results include the deduction of the maximum applicable sales charge and reflect the percentage change in
net asset value, including reinvestment of dividends and capital gains distributions. The performance of other share classes will be greater than or less than that of the class depicted below. Benchmarks are unmanaged
and may not be invested in directly. Benchmark returns do not reflect sales charges, commissions or expenses. (See Notes to Performance Summary.)
Performance data shown represents past
performance and is no guarantee of future results. Investment return and principal value fluctuate so your shares, when sold, may be worth more or less than the original cost; current performance may be lower or
higher than quoted. The performance shown does not reflect the deduction of taxes, if any, that a shareholder would pay on fund distributions or the redemption of fund shares.
Growth of a Hypothetical $10,000
Investment
6
Performance Summary - continued
Total Returns through 9/30/23
Average annual without sales
charge
| Share Class | Class Inception Date | 1-yr | 5-yr | 10-yr |
| A | 10/09/97 | 17.04% | 0.71% | 3.67% |
| B | 10/02/00 | 16.17% | (0.04)% | 2.89% |
| C | 10/02/00 | 16.15% | (0.04)% | 2.89% |
| I | 10/09/97 | 17.35% | 0.97% | 3.92% |
| R1 | 4/01/05 | 16.15% | (0.04)% | 2.89% |
| R2 | 10/31/03 | 16.73% | 0.46% | 3.41% |
| R3 | 4/01/05 | 17.05% | 0.71% | 3.67% |
| R4 | 4/01/05 | 17.38% | 0.97% | 3.93% |
| R6 | 6/01/12 | 17.52% | 1.10% | 4.05% |
Comparative benchmark(s)
| MSCI All Country World (ex-US) Small Mid Cap Index (net div) (f) | 19.95% | 1.95% | 3.82% |
Average annual with sales
charge
| A With Initial Sales Charge (5.75%) | 10.31% | (0.47)% | 3.06% |
| B With CDSC (Declining over six years from 4% to 0%) (v) | 12.17% | (0.36)% | 2.89% |
| C With CDSC (1% for 12 months) (v) | 15.15% | (0.04)% | 2.89% |
CDSC – Contingent Deferred
Sales Charge.
Class I, R1, R2, R3, R4, and R6
shares do not have a sales charge.
| (f) | Source: FactSet Research Systems Inc. |
| (v) | Assuming redemption at the end of the applicable period. |
Benchmark Definition(s)
MSCI All Country World (ex-U.S.)
Small Mid Cap Index(e) (net div) – a free float weighted index that is designed to measure equity market performance of small and mid cap companies across global
developed and emerging market countries, excluding the United States. Index returns do not take into account any investment-related fees and expenses.
It is not possible to invest
directly in an index.
| (e) | Morgan Stanley Capital International (“MSCI”) makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. |
Notes to Performance Summary
Average annual total return
represents the average annual change in value for each share class for the periods presented.
7
Performance Summary - continued
Performance results reflect any
applicable expense subsidies and waivers in effect during the periods shown. Without such subsidies and waivers the fund's performance results would be less favorable. Please see the prospectus and financial
statements for complete details.
Performance results do not include
adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles and may differ from amounts reported in the financial highlights.
From time to time the fund may
receive proceeds from litigation settlements, without which performance would be lower.
8
Expense Table
Fund expenses borne by the
shareholders during the period,
April 1, 2023 through September 30, 2023
April 1, 2023 through September 30, 2023
As a shareholder of the fund, you
incur two types of costs: (1) transaction costs, including sales charges (loads) on certain purchase or redemption payments, and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and
other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an
investment of $1,000 invested at the beginning of the period and held for the entire period April 1, 2023 through September 30, 2023.
Actual Expenses
The first line for each share class
in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over
the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled
“Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for
Comparison Purposes
The second line for each share class
in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information
to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown
in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line for each share class in the table is useful in
comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
9
Expense Table - continued
| Share Class | Annualized Expense Ratio | Beginning Account Value 4/01/23 | Ending Account Value 9/30/23 | Expenses Paid During Period (p) 4/01/23-9/30/23 | |
| A | Actual | 1.32% | $1,000.00 | $966.11 | $6.51 |
| Hypothetical (h) | 1.32% | $1,000.00 | $1,018.45 | $6.68 | |
| B | Actual | 2.07% | $1,000.00 | $962.44 | $10.18 |
| Hypothetical (h) | 2.07% | $1,000.00 | $1,014.69 | $10.45 | |
| C | Actual | 2.07% | $1,000.00 | $962.31 | $10.18 |
| Hypothetical (h) | 2.07% | $1,000.00 | $1,014.69 | $10.45 | |
| I | Actual | 1.07% | $1,000.00 | $966.98 | $5.28 |
| Hypothetical (h) | 1.07% | $1,000.00 | $1,019.70 | $5.42 | |
| R1 | Actual | 2.07% | $1,000.00 | $962.43 | $10.18 |
| Hypothetical (h) | 2.07% | $1,000.00 | $1,014.69 | $10.45 | |
| R2 | Actual | 1.57% | $1,000.00 | $964.60 | $7.73 |
| Hypothetical (h) | 1.57% | $1,000.00 | $1,017.20 | $7.94 | |
| R3 | Actual | 1.32% | $1,000.00 | $966.03 | $6.51 |
| Hypothetical (h) | 1.32% | $1,000.00 | $1,018.45 | $6.68 | |
| R4 | Actual | 1.07% | $1,000.00 | $967.40 | $5.28 |
| Hypothetical (h) | 1.07% | $1,000.00 | $1,019.70 | $5.42 | |
| R6 | Actual | 0.92% | $1,000.00 | $967.96 | $4.54 |
| Hypothetical (h) | 0.92% | $1,000.00 | $1,020.46 | $4.66 |
| (h) | 5% class return per year before expenses. |
| (p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). Expenses paid do not include any applicable sales charges (loads). If these transaction costs had been included, your costs would have been higher. |
10
Portfolio of Investments
9/30/23
The Portfolio of Investments is a
complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
| Issuer | Shares/Par | Value ($) | ||
| Common Stocks – 94.8% | ||||
| Aerospace & Defense – 1.0% | ||||
| Babcock International Group PLC (a) | 1,393,969 | $6,996,495 | ||
| LISI Group | 516,538 | 12,126,083 | ||
| MTU Aero Engines Holding AG | 40,288 | 7,315,603 | ||
| Singapore Technologies Engineering Ltd. | 11,019,700 | 31,519,405 | ||
| $57,957,586 | ||||
| Airlines – 0.6% | ||||
| Enav S.p.A. | 4,662,291 | $17,271,942 | ||
| Grupo Aeroportuario del Sureste S.A.B. de C.V., ADR | 36,092 | 8,868,165 | ||
| Mainfreight Ltd. | 262,213 | 10,243,517 | ||
| $36,383,624 | ||||
| Alcoholic Beverages – 0.7% | ||||
| Carlsberg Group | 132,479 | $16,693,821 | ||
| China Resources Beer Holdings Co. Ltd. | 4,880,000 | 26,765,080 | ||
| $43,458,901 | ||||
| Apparel Manufacturers – 0.7% | ||||
| Burberry Group PLC | 511,400 | $11,860,627 | ||
| Coats Group PLC | 5,250,030 | 4,695,277 | ||
| Eclat Textile Co. Ltd. | 1,875,000 | 28,287,201 | ||
| $44,843,105 | ||||
| Automotive – 1.9% | ||||
| ARB Corp. (l) | 439,880 | $8,846,636 | ||
| Cie Plastic Omnium S.A. | 319,197 | 5,190,843 | ||
| Daikyonishikawa Corp. | 332,421 | 1,790,678 | ||
| Hero MotoCorp Ltd. | 591,167 | 21,764,428 | ||
| Koito Manufacturing Co. Ltd. | 1,291,600 | 19,502,780 | ||
| Mahindra & Mahindra Ltd. | 922,321 | 17,262,715 | ||
| Niterra Co. Ltd. (l) | 575,400 | 13,029,668 | ||
| Stanley Electric Co. Ltd. | 577,931 | 9,136,523 | ||
| TS Tech Co. Ltd. | 997,300 | 11,318,394 | ||
| USS Co. Ltd. | 472,300 | 7,814,252 | ||
| Vitesco Technologies Group AG (a) | 22,362 | 1,816,317 | ||
| $117,473,234 | ||||
11
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Common Stocks – continued | ||||
| Biotechnology – 0.6% | ||||
| Abcam PLC, ADR | 495,341 | $11,209,567 | ||
| Virbac S.A. | 88,791 | 24,031,817 | ||
| $35,241,384 | ||||
| Broadcasting – 0.5% | ||||
| 4imprint Group PLC | 76,916 | $4,886,163 | ||
| Nippon Television Holdings, Inc. | 767,100 | 7,761,344 | ||
| TBS Holdings, Inc. | 891,400 | 14,998,831 | ||
| $27,646,338 | ||||
| Brokerage & Asset Managers – 2.2% | ||||
| Bolsa Mexicana de Valores S.A. de C.V. | 7,252,800 | $13,612,916 | ||
| Euronext N.V. | 228,582 | 15,907,363 | ||
| Hargreaves Lansdown PLC | 1,312,899 | 12,316,853 | ||
| IPH Ltd. | 6,574,487 | 31,280,292 | ||
| JAFCO Group Co. Ltd. | 197,100 | 2,169,630 | ||
| Japan Exchange Group, Inc. | 145,300 | 2,697,151 | ||
| Moscow Exchange MICEX-RTS PJSC (a)(u) | 7,428,305 | 0 | ||
| Omni Bridgeway Ltd. (a) | 6,690,332 | 7,742,788 | ||
| Partners Group Holding AG | 3,296 | 3,708,825 | ||
| Pinnacle Investment Management Group Ltd. | 1,139,173 | 6,591,881 | ||
| Rathbones Group PLC | 780,513 | 16,551,042 | ||
| Schroders PLC | 498,250 | 2,462,619 | ||
| TMX Group Ltd. | 955,730 | 20,539,487 | ||
| $135,580,847 | ||||
| Business Services – 6.7% | ||||
| AEON Delight Co. Ltd. | 295,700 | $6,509,991 | ||
| Amadeus Fire AG | 135,656 | 16,034,614 | ||
| Bunzl PLC | 774,450 | 27,487,273 | ||
| Central Automotive Products Ltd. | 47,300 | 1,179,018 | ||
| Compass Group PLC | 1,325,120 | 32,282,225 | ||
| Comture Corp. | 503,300 | 7,803,440 | ||
| Doshisha Co. Ltd. (l) | 141,800 | 2,115,993 | ||
| Eurofins Scientific SE | 33,073 | 1,864,738 | ||
| Fullcast Holdings Co. Ltd. | 747,500 | 9,413,778 | ||
| Gruppo Mutuionline S.p.A. | 143,416 | 3,775,789 | ||
| Imdex Ltd. | 10,938,657 | 10,936,330 | ||
| Intertek Group PLC | 546,374 | 27,320,362 | ||
| Iwatani Corp. | 493,800 | 24,898,173 | ||
| Johnson Service Group PLC | 2,118,752 | 3,477,224 | ||
| Karnov Group AB (a) | 1,201,680 | 5,312,423 | ||
| NS Solutions Corp. | 3,613,300 | 102,881,367 | ||
| Pasona Group, Inc. | 612,500 | 6,697,169 | ||
12
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Common Stocks – continued | ||||
| Business Services – continued | ||||
| RS Group PLC | 4,251,051 | $37,982,004 | ||
| San-Ai Obbli Co. Ltd. (l) | 3,112,500 | 33,053,650 | ||
| SCSK Corp. | 848,700 | 14,817,039 | ||
| Sohgo Security Services Co. Ltd. | 2,845,000 | 17,175,850 | ||
| Thoughtworks Holding, Inc. (a) | 105,309 | 429,661 | ||
| TIS, Inc. | 546,200 | 12,035,845 | ||
| $405,483,956 | ||||
| Chemicals – 0.8% | ||||
| Borregaard ASA | 139,949 | $2,063,798 | ||
| IMCD Group N.V. | 169,639 | 21,442,834 | ||
| JCU Corp. | 817,100 | 17,004,691 | ||
| KH Neochem Co. Ltd. | 409,600 | 6,290,364 | ||
| $46,801,687 | ||||
| Computer Software – 3.2% | ||||
| ARGO GRAPHICS, Inc. | 688,500 | $15,295,905 | ||
| Douzone Bizon Co. Ltd. | 447,057 | 9,607,717 | ||
| EMIS Group PLC | 489,193 | 11,531,420 | ||
| OBIC Business Consultants Co. Ltd. | 91,900 | 3,812,768 | ||
| OBIC Co. Ltd. | 581,300 | 88,241,371 | ||
| Oracle Corp. Japan | 219,700 | 16,318,723 | ||
| PCA Corp. (h) | 1,398,900 | 11,308,025 | ||
| Sage Group PLC | 679,854 | 8,181,948 | ||
| Temairazu, Inc. | 261,400 | 4,409,725 | ||
| Totvs S.A. | 1,646,400 | 8,843,600 | ||
| Wisetech Global Ltd. | 355,979 | 14,888,429 | ||
| $192,439,631 | ||||
| Computer Software - Systems – 2.5% | ||||
| Alten S.A. | 131,487 | $17,257,983 | ||
| Amadeus IT Group S.A. | 600,104 | 36,164,482 | ||
| Cancom SE | 387,989 | 10,361,687 | ||
| DTS Corp. | 783,500 | 16,724,873 | ||
| Elecom Co. Ltd. | 850,200 | 9,916,345 | ||
| Kardex Holding AG | 89,831 | 19,581,871 | ||
| Pole To Win Holdings, Inc. | 1,706,900 | 6,019,381 | ||
| Temenos AG | 86,543 | 6,070,083 | ||
| Toshiba Tec Corp. | 209,700 | 4,792,060 | ||
| Venture Corp. Ltd. | 2,680,000 | 24,251,353 | ||
| $151,140,118 | ||||
| Conglomerates – 0.3% | ||||
| Ansell Ltd. | 1,061,273 | $15,100,305 | ||
13
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Common Stocks – continued | ||||
| Construction – 3.4% | ||||
| Bellway PLC | 527,100 | $14,651,372 | ||
| Breedon Group PLC | 13,593,547 | 54,333,474 | ||
| Fletcher Building Ltd. (l) | 3,298,000 | 9,181,545 | ||
| Forterra PLC (h) | 14,582,719 | 26,475,055 | ||
| Grupo Cementos de Chihuahua S.A.B. de C.V. | 1,158,231 | 10,894,782 | ||
| James Hardie Industries PLC (a) | 270,346 | 7,090,075 | ||
| Kingspan Group PLC | 45,427 | 3,386,564 | ||
| Marshalls PLC | 1,037,459 | 3,185,693 | ||
| PT Indocement Tunggal Prakarsa Tbk | 24,754,200 | 15,936,868 | ||
| Reliance Worldwide Corp. | 4,834,770 | 12,092,125 | ||
| Rinnai Corp. | 269,700 | 5,053,265 | ||
| Techtronic Industries Co. Ltd. | 2,534,500 | 24,597,526 | ||
| Toto Ltd. | 145,700 | 3,766,322 | ||
| Zhejiang Supor Co. Ltd. | 2,302,302 | 15,281,330 | ||
| $205,925,996 | ||||
| Consumer Products – 1.6% | ||||
| Amorepacific Corp. | 208,183 | $18,760,769 | ||
| Dabur India Ltd. | 2,506,366 | 16,648,491 | ||
| Essity AB | 864,312 | 18,626,170 | ||
| Kobayashi Pharmaceutical Co. Ltd. | 273,600 | 12,220,824 | ||
| Lion Corp. | 1,082,500 | 10,691,716 | ||
| Mitsubishi Pencil Co. Ltd. | 231,500 | 2,971,206 | ||
| PZ Cussons PLC | 364,404 | 629,567 | ||
| Uni-Charm Corp. | 505,800 | 17,908,109 | ||
| $98,456,852 | ||||
| Consumer Services – 1.8% | ||||
| Afya Ltd. (a) | 559,664 | $8,842,691 | ||
| Asante, Inc. (l) | 170,200 | 1,797,214 | ||
| Carsales.com Ltd. | 623,600 | 11,202,365 | ||
| Heian Ceremony Service Co. | 363,967 | 1,875,365 | ||
| Localiza Rent a Car S.A. | 705,772 | 8,222,341 | ||
| Meitec Corp. | 1,115,700 | 20,187,719 | ||
| Park24 Co. Ltd. (a) | 358,200 | 4,542,218 | ||
| Seek Ltd. | 762,170 | 10,815,121 | ||
| Trip.com Group Ltd. (a) | 689,981 | 24,600,169 | ||
| Webjet Ltd. (a) | 3,724,616 | 16,164,508 | ||
| $108,249,711 | ||||
| Containers – 2.6% | ||||
| Huhtamaki Oyj (l) | 615,309 | $20,240,693 | ||
| Mayr-Melnhof Karton AG | 133,652 | 18,023,347 | ||
| Toyo Seikan Group Holdings Ltd. | 1,427,000 | 23,371,136 | ||
14
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Common Stocks – continued | ||||
| Containers – continued | ||||
| Verallia | 1,784,413 | $70,163,543 | ||
| Viscofan S.A. | 372,627 | 22,737,158 | ||
| $154,535,877 | ||||
| Electrical Equipment – 2.4% | ||||
| Advantech Co. Ltd. | 1,194,843 | $12,769,964 | ||
| Bharat Heavy Electricals Ltd. | 14,453,222 | 22,800,380 | ||
| Halma PLC | 552,548 | 12,981,432 | ||
| Legrand S.A. | 563,871 | 51,750,230 | ||
| LS Electric Co. Ltd. | 266,901 | 18,473,806 | ||
| Sagami Rubber Industries Co. Ltd. | 264,700 | 1,682,716 | ||
| TAKUMA Co. Ltd. | 969,000 | 10,037,554 | ||
| Voltronic Power Technology Corp. | 292,659 | 14,369,806 | ||
| $144,865,888 | ||||
| Electronics – 3.8% | ||||
| Amano Corp. | 246,720 | $5,418,463 | ||
| ASM International N.V. | 62,540 | 26,116,652 | ||
| ASM Pacific Technology Ltd. | 3,681,000 | 32,951,060 | ||
| Cembre S.p.A. | 542,000 | 18,916,710 | ||
| Chroma Ate, Inc. | 4,346,000 | 37,158,532 | ||
| Fukui Computer Holdings, Inc. | 205,100 | 3,657,598 | ||
| INTER ACTION Corp. | 467,700 | 3,223,575 | ||
| Melexis N.V. | 178,211 | 15,335,880 | ||
| Realtek Semiconductor Corp. | 603,000 | 7,378,603 | ||
| Silergy Corp. | 1,366,000 | 12,885,395 | ||
| Silicon Motion Technology Corp., ADR (a) | 276,128 | 14,151,560 | ||
| Tripod Technology Corp. | 4,451,000 | 26,542,882 | ||
| WIN Semiconductors Corp. | 2,853,000 | 11,401,217 | ||
| Zuken, Inc. | 559,300 | 13,510,927 | ||
| $228,649,054 | ||||
| Energy - Integrated – 0.6% | ||||
| Capricorn Energy PLC | 257,341 | $548,687 | ||
| Galp Energia SGPS S.A., “B” | 2,267,659 | 33,591,211 | ||
| $34,139,898 | ||||
| Engineering - Construction – 1.3% | ||||
| Comsys Holdings Corp. (l) | 384,800 | $8,049,283 | ||
| Corporacion Inmobiliaria Vesta S.A.B. de C.V. | 3,909,330 | 12,896,134 | ||
| Doosan Bobcat, Inc. | 423,959 | 15,930,559 | ||
| JGC Holdings Corp. | 2,548,900 | 35,468,667 | ||
| Prologis Property Mexico S.A. de C.V., REIT | 2,330,235 | 8,015,928 | ||
| $80,360,571 | ||||
15
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Common Stocks – continued | ||||
| Entertainment – 1.2% | ||||
| CTS Eventim AG | 733,864 | $41,781,015 | ||
| Toei Co. Ltd. | 79,400 | 9,978,132 | ||
| Toho Co. Ltd. | 605,800 | 20,682,492 | ||
| $72,441,639 | ||||
| Food & Beverages – 6.7% | ||||
| ARIAKE JAPAN Co. Ltd. | 854,200 | $29,003,017 | ||
| AVI Ltd. | 4,871,301 | 19,203,481 | ||
| Bakkafrost P/f | 525,592 | 26,780,623 | ||
| Britvic PLC | 1,256,810 | 13,333,888 | ||
| Cranswick PLC | 1,007,811 | 43,560,941 | ||
| Ezaki Glico Co. Ltd. | 454,000 | 12,471,025 | ||
| Greencore Group PLC (a) | 1,183,806 | 1,090,373 | ||
| Gruma S.A.B. de C.V. | 891,493 | 15,268,560 | ||
| Kato Sangyo Co. Ltd. | 711,700 | 18,930,725 | ||
| Kerry Group PLC | 206,732 | 17,257,554 | ||
| Morinaga & Co. Ltd. | 878,000 | 31,738,196 | ||
| Orion Corp. | 354,577 | 33,712,931 | ||
| S Foods, Inc. | 841,000 | 18,824,578 | ||
| Shenguan Holdings Group Ltd. | 13,203,505 | 472,099 | ||
| T. Hasegawa Co. Ltd. (h) | 3,128,400 | 63,849,170 | ||
| Takasago International Corp. | 161,300 | 3,248,883 | ||
| Tate & Lyle PLC | 376,983 | 3,145,844 | ||
| Tingyi (Cayman Islands) Holdings Corp. | 13,534,000 | 18,907,280 | ||
| Toyo Suisan Kaisha Ltd. | 286,400 | 11,240,203 | ||
| Universal Robina Corp. | 11,928,240 | 25,068,364 | ||
| $407,107,735 | ||||
| Food & Drug Stores – 1.4% | ||||
| DFI Retail Group Holdings Ltd. | 6,359,109 | $16,915,230 | ||
| JM Holdings Co. Ltd. | 253,700 | 3,301,971 | ||
| Nahdi Medical Co. | 243,456 | 9,360,571 | ||
| Patlac Corp. | 463,300 | 14,540,130 | ||
| SAN-A Co. Ltd. | 87,700 | 2,805,179 | ||
| Sendas Distribuidora S.A. | 1,753,600 | 4,242,229 | ||
| Spencer's Retail Ltd. (a) | 723,473 | 615,953 | ||
| Sugi Holdings Co. Ltd. | 234,200 | 9,310,641 | ||
| Sundrug Co. Ltd. | 769,800 | 20,888,243 | ||
| $81,980,147 | ||||
| Forest & Paper Products – 0.2% | ||||
| Suzano S.A. | 1,122,200 | $12,118,255 | ||
16
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Common Stocks – continued | ||||
| Furniture & Appliances – 1.0% | ||||
| Codan Ltd. | 1,017,388 | $5,167,624 | ||
| Howden Joinery Group PLC | 1,757,505 | 15,704,216 | ||
| Paramount Bed Holdings Co. Ltd. | 1,473,800 | 23,225,368 | ||
| SEB S.A. | 162,083 | 15,124,073 | ||
| Zojirushi Corp. | 177,300 | 2,115,403 | ||
| $61,336,684 | ||||
| Gaming & Lodging – 0.7% | ||||
| Flutter Entertainment PLC (a) | 136,203 | $22,192,039 | ||
| Shangri-La Asia Ltd. (a) | 29,944,000 | 20,495,577 | ||
| $42,687,616 | ||||
| General Merchandise – 1.0% | ||||
| Dollarama, Inc. | 841,907 | $58,005,269 | ||
| Seria Co. Ltd. | 183,200 | 2,699,454 | ||
| $60,704,723 | ||||
| Insurance – 2.0% | ||||
| Admiral Group PLC | 212,870 | $6,156,717 | ||
| AUB Group Ltd. | 1,882,170 | 35,263,515 | ||
| Hiscox Ltd. | 1,978,378 | 24,203,498 | ||
| Samsung Fire & Marine Insurance Co. Ltd. | 96,292 | 18,544,977 | ||
| Steadfast Group Ltd. | 7,747,030 | 28,092,575 | ||
| Unipol Gruppo S.p.A. | 1,962,447 | 10,610,278 | ||
| $122,871,560 | ||||
| Internet – 2.1% | ||||
| Auto Trader Group PLC | 792,394 | $5,939,705 | ||
| Demae-Can Co. Ltd. (a)(l) | 607,900 | 1,501,038 | ||
| Digital Garage, Inc. | 471,000 | 10,842,077 | ||
| Kakaku.com, Inc. | 556,300 | 5,647,130 | ||
| MakeMyTrip Ltd. (a) | 889,012 | 36,022,766 | ||
| Moneysupermarket.com Group PLC | 4,670,058 | 13,770,611 | ||
| Proto Corp. (l) | 1,137,400 | 9,224,631 | ||
| Rakuten Group, Inc. | 119,300 | 489,446 | ||
| Rightmove PLC | 2,336,828 | 15,927,328 | ||
| Scout24 AG | 405,862 | 28,174,548 | ||
| $127,539,280 | ||||
| Leisure & Toys – 0.8% | ||||
| DeNA Co. Ltd. | 339,900 | $3,417,423 | ||
| GungHo Online Entertainment, Inc. | 135,000 | 2,132,411 | ||
| Kawai Musical Instruments Manufacturing Co. Ltd. | 119,800 | 2,861,925 | ||
| NCSoft Corp. | 66,779 | 11,011,062 | ||
17
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Common Stocks – continued | ||||
| Leisure & Toys – continued | ||||
| Thule Group AB (l) | 296,227 | $7,734,891 | ||
| VTech Holdings Ltd. | 3,136,965 | 18,787,460 | ||
| $45,945,172 | ||||
| Machinery & Tools – 5.3% | ||||
| Aalberts Industries N.V. | 221,991 | $8,095,899 | ||
| AirTAC International Group | 555,000 | 16,831,988 | ||
| Azbil Corp. | 820,800 | 25,144,689 | ||
| Carel Industries S.p.A. | 121,001 | 2,903,973 | ||
| DAIFUKU Co. Ltd. | 254,100 | 4,811,135 | ||
| Fuji Seal International, Inc. | 1,662,300 | 19,822,127 | ||
| Fujitec Co. Ltd. (l) | 719,300 | 16,605,895 | ||
| Fukushima Galilei Co. Ltd. | 610,000 | 19,817,653 | ||
| GEA Group AG | 1,208,466 | 44,666,668 | ||
| Haitian International Holdings Ltd. | 9,977,000 | 21,149,184 | ||
| METAWATER Co. Ltd. | 1,086,000 | 13,553,199 | ||
| MISUMI Group, Inc. | 225,900 | 3,531,955 | ||
| MonotaRO Co. Ltd. | 902,800 | 9,668,973 | ||
| Nabtesco Corp. | 815,900 | 14,722,125 | ||
| Nissei ASB Machine Co. Ltd. | 151,400 | 4,609,676 | ||
| Obara Group, Inc. (l) | 128,500 | 3,319,125 | ||
| Rational AG | 2,758 | 1,746,115 | ||
| Rotork PLC | 2,206,516 | 8,382,591 | ||
| Seven Group Holdings Ltd. | 980,316 | 19,633,663 | ||
| Shima Seiki Manufacturing Ltd. | 191,900 | 2,297,304 | ||
| SIG Combibloc Group AG | 1,383,743 | 34,073,205 | ||
| Spirax-Sarco Engineering PLC | 110,367 | 12,762,482 | ||
| VAT Group AG | 24,615 | 8,765,250 | ||
| $316,914,874 | ||||
| Major Banks – 0.2% | ||||
| Resona Holdings, Inc. (l) | 2,442,500 | $13,538,027 | ||
| Medical & Health Technology & Services – 1.5% | ||||
| ARATA Corp. | 148,400 | $5,541,167 | ||
| Arvida Group Ltd. | 9,909,956 | 7,246,229 | ||
| AS ONE Corp. | 441,600 | 16,134,475 | ||
| BML, Inc. | 883,400 | 16,528,282 | ||
| Burning Rock Biotech Ltd., ADR (a) | 285,384 | 276,823 | ||
| DKSH Holding Ltd. | 45,850 | 3,098,594 | ||
| Guangzhou KingMed Diagnostics Group Co. Ltd., “A” | 1,147,400 | 9,796,190 | ||
| ICON PLC (a) | 28,327 | 6,975,524 | ||
| Medipal Holdings Corp. | 724,100 | 12,246,806 | ||
| Ryman Healthcare Ltd. | 2,130,319 | 8,056,650 | ||
18
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Common Stocks – continued | ||||
| Medical & Health Technology & Services – continued | ||||
| Selcuk Ecza Deposu Ticaret ve Sanayi A.S. | 2,590,718 | $6,255,103 | ||
| $92,155,843 | ||||
| Medical Equipment – 3.9% | ||||
| ConvaTec Group PLC | 3,915,066 | $10,403,809 | ||
| Demant A.S. (a) | 271,692 | 11,251,207 | ||
| Eiken Chemical Co. Ltd. | 753,900 | 6,891,243 | ||
| Fukuda Denshi Co. Ltd. | 625,400 | 22,724,317 | ||
| Gerresheimer AG | 523,240 | 55,015,292 | ||
| Hogy Medical Co. Ltd. | 79,600 | 1,701,834 | ||
| JEOL Ltd. | 239,800 | 7,153,563 | ||
| Nakanishi, Inc. | 1,770,300 | 41,402,560 | ||
| Nihon Kohden Corp. | 521,600 | 12,886,424 | ||
| Shimadzu Corp. | 624,700 | 16,604,044 | ||
| Smith & Nephew PLC | 1,794,613 | 22,306,388 | ||
| Sonova Holding AG | 97,918 | 23,204,434 | ||
| Straumann Holding AG | 10,595 | 1,345,722 | ||
| $232,890,837 | ||||
| Metals & Mining – 1.0% | ||||
| Deterra Royalties Ltd. | 3,908,506 | $12,037,145 | ||
| Iluka Resources Ltd. | 2,312,804 | 11,420,293 | ||
| MOIL Ltd. | 4,160,987 | 11,128,869 | ||
| PT United Tractors Tbk | 14,165,800 | 25,893,488 | ||
| $60,479,795 | ||||
| Natural Gas - Distribution – 1.1% | ||||
| China Resources Gas Group Ltd. | 6,976,000 | $20,444,416 | ||
| DCC PLC | 323,970 | 18,162,332 | ||
| Italgas S.p.A. | 5,939,723 | 30,379,176 | ||
| $68,985,924 | ||||
| Network & Telecom – 0.1% | ||||
| NOHMI BOSAI Ltd. | 678,100 | $8,027,027 | ||
| Oil Services – 0.4% | ||||
| ADNOC Drilling Co. PJSC | 9,919,752 | $10,856,755 | ||
| Tenaris S.A., ADR | 434,060 | 13,716,296 | ||
| $24,573,051 | ||||
| Other Banks & Diversified Financials – 5.4% | ||||
| Abu Dhabi Islamic Bank PJSC | 2,552,427 | $7,824,649 | ||
| AEON Financial Service Co. Ltd. | 2,490,600 | 21,474,425 | ||
| AEON Thana Sinsap Public Co. Ltd. | 2,563,700 | 11,476,364 | ||
| Allfunds Group PLC | 812,189 | 4,483,595 | ||
19
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Common Stocks – continued | ||||
| Other Banks & Diversified Financials – continued | ||||
| Banco Santander Chile S.A. | 157,118,269 | $7,275,549 | ||
| Bank of Kyoto Ltd. | 575,700 | 32,448,615 | ||
| Chiba Bank Ltd. | 1,843,751 | 13,417,286 | ||
| Credicorp Ltd. | 70,398 | 9,008,832 | ||
| E.Sun Financial Holding Co. Ltd. | 12,818,678 | 9,629,744 | ||
| Federal Bank Ltd. | 4,183,029 | 7,414,892 | ||
| FinecoBank S.p.A. | 948,158 | 11,511,746 | ||
| Hachijuni Bank Ltd. | 3,710,800 | 20,483,397 | ||
| Iress Ltd. | 1,560,926 | 5,840,937 | ||
| Julius Baer Group Ltd. | 364,948 | 23,388,007 | ||
| Jyske Bank A.S. (a) | 285,747 | 20,880,676 | ||
| Komercni Banka A.S. | 462,760 | 13,443,290 | ||
| Metropolitan Bank & Trust Co. | 27,226,417 | 25,986,753 | ||
| Shizuoka Financial Group, Inc. | 4,113,600 | 33,555,128 | ||
| Shriram Transport Finance Ltd. | 1,710,637 | 39,538,315 | ||
| Zenkoku Hosho Co. Ltd. | 180,300 | 5,925,143 | ||
| $325,007,343 | ||||
| Pharmaceuticals – 1.5% | ||||
| Daito Pharmaceutical Co. Ltd. | 696,190 | $10,947,849 | ||
| Hypera S.A. | 733,005 | 5,416,002 | ||
| Ipca Laboratories Ltd. | 1,514,795 | 17,067,637 | ||
| Kalbe Farma Tbk PT | 224,705,600 | 25,516,553 | ||
| Santen Pharmaceutical Co. Ltd. | 2,042,300 | 18,770,738 | ||
| Suzuken Co. Ltd./Aichi Japan | 339,200 | 10,495,589 | ||
| $88,214,368 | ||||
| Pollution Control – 0.9% | ||||
| ALS Ltd. | 1,425,323 | $10,511,239 | ||
| Daiseki Co. Ltd. | 1,584,940 | 42,423,448 | ||
| $52,934,687 | ||||
| Precious Metals & Minerals – 0.5% | ||||
| Agnico Eagle Mines Ltd. | 664,559 | $30,198,109 | ||
| Printing & Publishing – 0.5% | ||||
| China Literature Ltd. (a) | 2,235,200 | $8,177,613 | ||
| Wolters Kluwer N.V. | 177,849 | 21,538,530 | ||
| $29,716,143 | ||||
| Railroad & Shipping – 0.4% | ||||
| Sankyu, Inc. | 610,100 | $21,110,995 | ||
20
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Common Stocks – continued | ||||
| Real Estate – 3.5% | ||||
| Aldar Properties PJSC | 9,684,574 | $15,187,146 | ||
| Big Yellow Group PLC, REIT | 902,264 | 10,290,917 | ||
| CapitaLand India Trusts IEU, REIT | 22,830,059 | 17,535,890 | ||
| CapitaLand Investment Ltd. | 9,775,600 | 22,168,515 | ||
| Cedar Woods Properties Ltd. | 2,256,844 | 6,602,222 | ||
| City Developments Ltd. | 2,898,600 | 14,015,908 | ||
| Embassy Office Parks REIT | 3,371,200 | 12,203,771 | ||
| LEG Immobilien SE (a) | 507,460 | 35,055,700 | ||
| Midland Holdings Ltd. (a)(h) | 43,113,000 | 3,358,332 | ||
| Rural Funds Group, REIT | 5,195,642 | 5,896,050 | ||
| Shaftesbury Capital PLC, REIT | 4,450,039 | 6,199,053 | ||
| Swire Properties Ltd. | 10,300,200 | 21,492,318 | ||
| TAG Immobilien AG (a) | 766,358 | 8,047,224 | ||
| Unite Group PLC, REIT | 2,917,297 | 31,785,449 | ||
| $209,838,495 | ||||
| Restaurants – 1.9% | ||||
| Cafe de Coral Holdings Ltd. | 16,092,000 | $17,405,198 | ||
| Domino's Pizza Enterprises Ltd. | 346,399 | 11,844,103 | ||
| Greggs PLC | 1,105,910 | 33,031,373 | ||
| Sodexo | 518,105 | 53,358,202 | ||
| $115,638,876 | ||||
| Specialty Chemicals – 4.5% | ||||
| Air Water, Inc. | 783,300 | $9,765,042 | ||
| Croda International PLC | 691,556 | 41,471,172 | ||
| Essentra PLC | 11,504,163 | 22,710,619 | ||
| Japan Pure Chemical Co. Ltd. | 41,700 | 730,810 | ||
| Kansai Paint Co. Ltd. | 1,037,000 | 14,832,625 | ||
| Kureha Corp. | 137,000 | 7,627,409 | ||
| Nihon Parkerizing Co. Ltd. | 1,049,600 | 7,768,051 | ||
| Nitto Denko Corp. | 144,400 | 9,477,216 | ||
| NOF Corp. | 320,000 | 12,796,574 | ||
| Sika AG | 137,623 | 34,881,548 | ||
| SK KAKEN Co. Ltd. | 590,500 | 27,027,703 | ||
| Symrise AG | 833,600 | 79,601,148 | ||
| Taisei Lamick Co. Ltd. | 219,800 | 4,384,528 | ||
| $273,074,445 | ||||
| Specialty Stores – 1.9% | ||||
| Just Eat Takeaway.com (a) | 1,208,551 | $14,960,066 | ||
| Just Eat Takeaway.com (a)(l) | 75,723 | 945,518 | ||
| Kitanotatsujin Corp. (l) | 1,132,600 | 1,811,372 | ||
| Multiplan Empreendimentos Imobiliarios S.A. | 4,108,065 | 20,080,404 | ||
21
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Common Stocks – continued | ||||
| Specialty Stores – continued | ||||
| Nick Scali Ltd. | 1,081,696 | $7,705,879 | ||
| Nishimatsuya Chain Co. Ltd. | 1,316,100 | 14,337,599 | ||
| Ryohin Keikaku Co. Ltd. | 1,186,100 | 15,361,995 | ||
| Shimamura Co. Ltd. | 52,800 | 5,218,523 | ||
| ZOZO, Inc. (l) | 1,800,400 | 33,040,665 | ||
| $113,462,021 | ||||
| Telecommunications - Wireless – 1.3% | ||||
| Cellnex Telecom S.A. | 1,311,061 | $45,587,426 | ||
| Etihad Etisalat Co. | 1,358,826 | 16,140,916 | ||
| Infrastrutture Wireless Italiane S.p.A. | 1,249,006 | 14,828,973 | ||
| $76,557,315 | ||||
| Telephone Services – 0.4% | ||||
| Helios Towers PLC (a) | 3,888,393 | $3,461,507 | ||
| Hellenic Telecommunications Organization S.A. | 1,031,343 | 15,069,154 | ||
| NOS, SGPS S.A. | 2,166,413 | 7,975,313 | ||
| $26,505,974 | ||||
| Trucking – 1.6% | ||||
| Freightways Group Ltd. | 2,126,298 | $10,399,077 | ||
| Hamakyorex Co. Ltd. | 114,900 | 3,121,614 | ||
| Seino Holdings Co. Ltd. (l) | 3,442,300 | 48,269,136 | ||
| Senko Group Holdings Co. Ltd. | 657,300 | 4,609,545 | ||
| SG Holdings Co. Ltd. | 1,043,800 | 13,375,783 | ||
| Trancom Co. Ltd. | 95,100 | 4,670,998 | ||
| Yamato Holdings Co. Ltd. | 923,400 | 15,046,032 | ||
| $99,492,185 | ||||
| Utilities - Electric Power – 0.6% | ||||
| CESC Ltd. | 30,954,810 | $33,530,145 | ||
| Utilities - Water – 0.1% | ||||
| Aguas Andinas S.A., “A” | 27,132,717 | $8,181,797 | ||
| Total Common Stocks (Identified Cost, $5,284,672,278) | $5,720,495,650 | |||
| Preferred Stocks – 0.2% | ||||
| Metals & Mining – 0.2% | ||||
| Gerdau S.A. (Identified Cost, $10,492,019) | 2,793,525 | $13,410,343 | ||
22
Portfolio of Investments –
continued
| Issuer | Strike Price | First Exercise | Shares/Par | Value ($) |
| Rights – 0.0% | ||||
| Consumer Services – 0.0% | ||||
| Localiza Rent a Car S.A. (1 share for 1 right, Expiration 11/30/2023) (a) (Identified Cost, $0) | BRL 47.13 | 11/10/23 | 5,173 | $16,466 |
| Investment Companies (h) – 4.6% | ||||
| Money Market Funds – 4.6% | ||||
| MFS Institutional Money Market Portfolio, 5.4% (v) (Identified Cost, $276,526,508) | 276,517,429 | $276,572,732 | ||
| Collateral for Securities Loaned – 0.2% | ||||
| JPMorgan U.S. Government Money Market Fund - Class IM Shares, 5.27% (j) (Identified Cost, $13,052,751) | 13,052,751 | $13,052,751 | ||
| Other Assets, Less Liabilities – 0.2% | 11,738,035 | |||
| Net Assets – 100.0% | $6,035,285,977 | |||
| (a) | Non-income producing security. | |||
| (h) | An affiliated issuer, which may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. At period end, the aggregate values of the fund's investments in affiliated issuers and in unaffiliated issuers were $381,563,314 and $5,641,984,628, respectively. | |||
| (j) | The rate quoted is the annualized seven-day yield of the fund at period end. | |||
| (l) | A portion of this security is on loan. See Note 2 for additional information. | |||
| (u) | The security was valued using significant unobservable inputs and is considered level 3 under the fair value hierarchy. For further information about the fund’s level 3 holdings, please see Note 2 in the Notes to Financial Statements. | |||
| (v) | Affiliated issuer that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
| The following abbreviations are used in this report and are defined: | |
| ADR | American Depositary Receipt |
| IEU | International Equity Unit |
| REIT | Real Estate Investment Trust |
| Abbreviations indicate amounts shown in currencies other than the U.S. dollar. All amounts are stated in U.S. dollars unless otherwise indicated. A list of abbreviations is shown below: | |
| BRL | Brazilian Real |
See Notes to Financial Statements
23
Financial Statements
Statement of Assets and
Liabilities
At 9/30/23
This statement represents your
fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
| Assets | |
| Investments in unaffiliated issuers, at value, including $44,863,831 of securities on loan (identified cost, $5,173,042,901) | $5,641,984,628 |
| Investments in affiliated issuers, at value (identified cost, $411,700,655) | 381,563,314 |
| Cash | 3,400,290 |
| Foreign currency, at value (identified cost, $231,265) | 232,135 |
| Receivables for | |
| Investments sold | 540,816 |
| Fund shares sold | 1,286,726 |
| Interest and dividends | 32,175,212 |
| Other assets | 2,055 |
| Total assets | $6,061,185,176 |
| Liabilities | |
| Payables for | |
| Investments purchased | $1,083,504 |
| Fund shares reacquired | 2,439,786 |
| Collateral for securities loaned, at value (c) | 13,052,751 |
| Payable to affiliates | |
| Investment adviser | 427,460 |
| Administrative services fee | 5,084 |
| Shareholder servicing costs | 627,388 |
| Distribution and service fees | 15,266 |
| Payable for independent Trustees' compensation | 18,158 |
| Deferred foreign capital gains tax expense payable | 6,170,483 |
| Accrued expenses and other liabilities | 2,059,319 |
| Total liabilities | $25,899,199 |
| Net assets | $6,035,285,977 |
| Net assets consist of | |
| Paid-in capital | $5,404,118,427 |
| Total distributable earnings (loss) | 631,167,550 |
| Net assets | $6,035,285,977 |
| Shares of beneficial interest outstanding | 202,913,372 |
| (c) | Non-cash collateral is not included. |
24
Statement of Assets and Liabilities – continued
| Net assets | Shares outstanding | Net asset value per share (a) | |
| Class A | $556,513,589 | 19,329,794 | $28.79 |
| Class B | 1,414,104 | 51,569 | 27.42 |
| Class C | 10,656,020 | 397,433 | 26.81 |
| Class I | 641,010,411 | 21,457,510 | 29.87 |
| Class R1 | 1,277,774 | 49,387 | 25.87 |
| Class R2 | 15,234,494 | 548,180 | 27.79 |
| Class R3 | 105,550,512 | 3,711,261 | 28.44 |
| Class R4 | 84,612,127 | 2,940,325 | 28.78 |
| Class R6 | 4,619,016,946 | 154,427,913 | 29.91 |
| (a) | Maximum offering price per share was equal to the net asset value per share for all share classes, except for Class A, for which the maximum offering price per share was $30.55 [100 / 94.25 x $28.79]. On sales of $50,000 or more, the maximum offering price of Class A shares is reduced. A contingent deferred sales charge may be imposed on redemptions of Class A, Class B, and Class C shares. Redemption price per share was equal to the net asset value per share for Classes I, R1, R2, R3, R4, and R6. |
See Notes to Financial Statements
25
Financial Statements
Statement of Operations
Year ended 9/30/23
This statement describes how much
your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
| Net investment income (loss) | |
| Income | |
| Dividends | $165,733,440 |
| Dividends from affiliated issuers | 13,066,112 |
| Income on securities loaned | 170,999 |
| Other | 2,630 |
| Foreign taxes withheld | (11,718,530) |
| Total investment income | $167,254,651 |
| Expenses | |
| Management fee | $54,180,471 |
| Distribution and service fees | 2,041,656 |
| Shareholder servicing costs | 2,503,019 |
| Administrative services fee | 629,143 |
| Independent Trustees' compensation | 104,245 |
| Custodian fee | 1,519,845 |
| Shareholder communications | 202,592 |
| Audit and tax fees | 84,834 |
| Legal fees | 32,063 |
| Miscellaneous | 879,499 |
| Total expenses | $62,177,367 |
| Fees paid indirectly | (9,419) |
| Reduction of expenses by investment adviser and distributor | (797,454) |
| Net expenses | $61,370,494 |
| Net investment income (loss) | $105,884,157 |
| Realized and unrealized gain (loss) | |
| Realized gain (loss) (identified cost basis) | |
| Unaffiliated issuers | $138,123,536 |
| Affiliated issuers | (698,454) |
| Foreign currency | (456,849) |
| Net realized gain (loss) | $136,968,233 |
| Change in unrealized appreciation or depreciation | |
| Unaffiliated issuers (net of $3,752,481 increase in deferred foreign capital gains tax) | $717,275,257 |
| Affiliated issuers | (9,677,613) |
| Translation of assets and liabilities in foreign currencies | 716,962 |
| Net unrealized gain (loss) | $708,314,606 |
| Net realized and unrealized gain (loss) | $845,282,839 |
| Change in net assets from operations | $951,166,996 |
See Notes to Financial Statements
26
Financial Statements
Statements of Changes in Net
Assets
These statements describe the
increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| Year ended | ||
| 9/30/23 | 9/30/22 | |
| Change in net assets | ||
| From operations | ||
| Net investment income (loss) | $105,884,157 | $83,968,729 |
| Net realized gain (loss) | 136,968,233 | 358,756,803 |
| Net unrealized gain (loss) | 708,314,606 | (2,802,468,869) |
| Change in net assets from operations | $951,166,996 | $(2,359,743,337) |
| Total distributions to shareholders | $(338,663,183) | $(403,492,683) |
| Change in net assets from fund share transactions | $(106,451,841) | $79,421,966 |
| Total change in net assets | $506,051,972 | $(2,683,814,054) |
| Net assets | ||
| At beginning of period | 5,529,234,005 | 8,213,048,059 |
| At end of period | $6,035,285,977 | $5,529,234,005 |
See Notes to Financial Statements
27
Financial Statements
Financial Highlights
The financial highlights table is
intended to help you understand the fund's financial performance for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
| Class A | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $25.99 | $38.59 | $33.91 | $32.56 | $35.00 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $0.40 | $0.27 | $0.27 | $0.13 | $0.29 |
| Net realized and unrealized gain (loss) | 3.98 | (11.06) | 5.80 | 2.09 | (0.82) |
| Total from investment operations | $4.38 | $(10.79) | $6.07 | $2.22 | $(0.53) |
| Less distributions declared to shareholders | |||||
| From net investment income | $(0.14) | $(0.37) | $(0.03) | $(0.35) | $(0.20) |
| From net realized gain | (1.44) | (1.44) | (1.36) | (0.52) | (1.71) |
| Total distributions declared to shareholders | $(1.58) | $(1.81) | $(1.39) | $(0.87) | $(1.91) |
| Net asset value, end of period (x) | $28.79 | $25.99 | $38.59 | $33.91 | $32.56 |
| Total return (%) (r)(s)(t)(x) | 17.04 | (29.31) | 18.25 | 6.83 | (0.85) |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 1.33 | 1.30 | 1.28 | 1.29 | 1.29 |
| Expenses after expense reductions (f) | 1.31 | 1.28 | 1.27 | 1.28 | 1.28 |
| Net investment income (loss) | 1.37 | 0.84 | 0.73 | 0.39 | 0.90 |
| Portfolio turnover | 9 | 12 | 11 | 25 | 14 |
| Net assets at end of period (000 omitted) | $556,514 | $546,845 | $885,605 | $871,605 | $1,015,817 |
See Notes to Financial Statements
28
Financial Highlights – continued
| Class B | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $24.87 | $36.95 | $32.73 | $31.42 | $33.86 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $0.14 | $0.00(w) | $(0.04) | $(0.13) | $0.04 |
| Net realized and unrealized gain (loss) | 3.85 | (10.59) | 5.62 | 2.02 | (0.77) |
| Total from investment operations | $3.99 | $(10.59) | $5.58 | $1.89 | $(0.73) |
| Less distributions declared to shareholders | |||||
| From net investment income | $— | $(0.05) | $— | $(0.06) | $— |
| From net realized gain | (1.44) | (1.44) | (1.36) | (0.52) | (1.71) |
| Total distributions declared to shareholders | $(1.44) | $(1.49) | $(1.36) | $(0.58) | $(1.71) |
| Net asset value, end of period (x) | $27.42 | $24.87 | $36.95 | $32.73 | $31.42 |
| Total return (%) (r)(s)(t)(x) | 16.17 | (29.85) | 17.37 | 6.03 | (1.57) |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 2.07 | 2.05 | 2.03 | 2.04 | 2.04 |
| Expenses after expense reductions (f) | 2.06 | 2.03 | 2.02 | 2.03 | 2.03 |
| Net investment income (loss) | 0.50 | 0.01 | (0.11) | (0.43) | 0.12 |
| Portfolio turnover | 9 | 12 | 11 | 25 | 14 |
| Net assets at end of period (000 omitted) | $1,414 | $2,151 | $5,180 | $5,875 | $9,834 |
| Class C | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $24.35 | $36.17 | $32.06 | $30.80 | $33.24 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $0.15 | $0.01 | $(0.05) | $(0.12) | $0.03 |
| Net realized and unrealized gain (loss) | 3.75 | (10.38) | 5.52 | 1.98 | (0.76) |
| Total from investment operations | $3.90 | $(10.37) | $5.47 | $1.86 | $(0.73) |
| Less distributions declared to shareholders | |||||
| From net investment income | $— | $(0.01) | $— | $(0.08) | $— |
| From net realized gain | (1.44) | (1.44) | (1.36) | (0.52) | (1.71) |
| Total distributions declared to shareholders | $(1.44) | $(1.45) | $(1.36) | $(0.60) | $(1.71) |
| Net asset value, end of period (x) | $26.81 | $24.35 | $36.17 | $32.06 | $30.80 |
| Total return (%) (r)(s)(t)(x) | 16.15 | (29.84) | 17.39 | 6.04 | (1.60) |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 2.07 | 2.05 | 2.03 | 2.04 | 2.04 |
| Expenses after expense reductions (f) | 2.06 | 2.03 | 2.02 | 2.03 | 2.03 |
| Net investment income (loss) | 0.54 | 0.03 | (0.14) | (0.40) | 0.10 |
| Portfolio turnover | 9 | 12 | 11 | 25 | 14 |
| Net assets at end of period (000 omitted) | $10,656 | $14,755 | $30,413 | $42,312 | $60,916 |
See Notes to Financial Statements
29
Financial Highlights – continued
| Class I | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $26.92 | $39.91 | $35.02 | $33.59 | $36.06 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $0.48 | $0.37 | $0.35 | $0.18 | $0.39 |
| Net realized and unrealized gain (loss) | 4.13 | (11.44) | 6.02 | 2.21 | (0.86) |
| Total from investment operations | $4.61 | $(11.07) | $6.37 | $2.39 | $(0.47) |
| Less distributions declared to shareholders | |||||
| From net investment income | $(0.22) | $(0.48) | $(0.12) | $(0.44) | $(0.29) |
| From net realized gain | (1.44) | (1.44) | (1.36) | (0.52) | (1.71) |
| Total distributions declared to shareholders | $(1.66) | $(1.92) | $(1.48) | $(0.96) | $(2.00) |
| Net asset value, end of period (x) | $29.87 | $26.92 | $39.91 | $35.02 | $33.59 |
| Total return (%) (r)(s)(t)(x) | 17.31 | (29.13) | 18.54 | 7.12 | (0.62) |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 1.08 | 1.05 | 1.03 | 1.04 | 1.04 |
| Expenses after expense reductions (f) | 1.06 | 1.03 | 1.02 | 1.03 | 1.03 |
| Net investment income (loss) | 1.58 | 1.08 | 0.91 | 0.55 | 1.18 |
| Portfolio turnover | 9 | 12 | 11 | 25 | 14 |
| Net assets at end of period (000 omitted) | $641,010 | $734,605 | $1,235,625 | $1,230,970 | $2,049,197 |
See Notes to Financial Statements
30
Financial Highlights – continued
| Class R1 | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $23.54 | $35.12 | $31.16 | $30.01 | $32.44 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $0.15 | $0.03 | $(0.02) | $(0.13) | $0.04 |
| Net realized and unrealized gain (loss) | 3.62 | (10.05) | 5.34 | 1.94 | (0.76) |
| Total from investment operations | $3.77 | $(10.02) | $5.32 | $1.81 | $(0.72) |
| Less distributions declared to shareholders | |||||
| From net investment income | $— | $(0.12) | $— | $(0.14) | $— |
| From net realized gain | (1.44) | (1.44) | (1.36) | (0.52) | (1.71) |
| Total distributions declared to shareholders | $(1.44) | $(1.56) | $(1.36) | $(0.66) | $(1.71) |
| Net asset value, end of period (x) | $25.87 | $23.54 | $35.12 | $31.16 | $30.01 |
| Total return (%) (r)(s)(t)(x) | 16.15 | (29.84) | 17.41 | 6.03 | (1.61) |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 2.08 | 2.05 | 2.03 | 2.04 | 2.04 |
| Expenses after expense reductions (f) | 2.06 | 2.03 | 2.02 | 2.03 | 2.03 |
| Net investment income (loss) | 0.58 | 0.11 | (0.07) | (0.45) | 0.14 |
| Portfolio turnover | 9 | 12 | 11 | 25 | 14 |
| Net assets at end of period (000 omitted) | $1,278 | $1,196 | $1,658 | $1,622 | $2,320 |
| Class R2 | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $25.13 | $37.36 | $32.92 | $31.63 | $34.02 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $0.32 | $0.19 | $0.15 | $0.01 | $0.22 |
| Net realized and unrealized gain (loss) | 3.85 | (10.71) | 5.65 | 2.07 | (0.81) |
| Total from investment operations | $4.17 | $(10.52) | $5.80 | $2.08 | $(0.59) |
| Less distributions declared to shareholders | |||||
| From net investment income | $(0.07) | $(0.27) | $— | $(0.27) | $(0.09) |
| From net realized gain | (1.44) | (1.44) | (1.36) | (0.52) | (1.71) |
| Total distributions declared to shareholders | $(1.51) | $(1.71) | $(1.36) | $(0.79) | $(1.80) |
| Net asset value, end of period (x) | $27.79 | $25.13 | $37.36 | $32.92 | $31.63 |
| Total return (%) (r)(s)(t)(x) | 16.73 | (29.48) | 17.95 | 6.58 | (1.10) |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 1.58 | 1.55 | 1.53 | 1.54 | 1.54 |
| Expenses after expense reductions (f) | 1.56 | 1.53 | 1.52 | 1.53 | 1.53 |
| Net investment income (loss) | 1.12 | 0.60 | 0.42 | 0.03 | 0.71 |
| Portfolio turnover | 9 | 12 | 11 | 25 | 14 |
| Net assets at end of period (000 omitted) | $15,234 | $14,568 | $24,443 | $24,546 | $43,493 |
See Notes to Financial Statements
31
Financial Highlights – continued
| Class R3 | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $25.69 | $38.19 | $33.58 | $32.25 | $34.69 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $0.40 | $0.26 | $0.29 | $0.13 | $0.29 |
| Net realized and unrealized gain (loss) | 3.93 | (10.92) | 5.72 | 2.08 | (0.83) |
| Total from investment operations | $4.33 | $(10.66) | $6.01 | $2.21 | $(0.54) |
| Less distributions declared to shareholders | |||||
| From net investment income | $(0.14) | $(0.40) | $(0.04) | $(0.36) | $(0.19) |
| From net realized gain | (1.44) | (1.44) | (1.36) | (0.52) | (1.71) |
| Total distributions declared to shareholders | $(1.58) | $(1.84) | $(1.40) | $(0.88) | $(1.90) |
| Net asset value, end of period (x) | $28.44 | $25.69 | $38.19 | $33.58 | $32.25 |
| Total return (%) (r)(s)(t)(x) | 17.05 | (29.32) | 18.25 | 6.86 | (0.88) |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 1.33 | 1.30 | 1.28 | 1.29 | 1.29 |
| Expenses after expense reductions (f) | 1.31 | 1.28 | 1.27 | 1.28 | 1.28 |
| Net investment income (loss) | 1.37 | 0.79 | 0.78 | 0.42 | 0.92 |
| Portfolio turnover | 9 | 12 | 11 | 25 | 14 |
| Net assets at end of period (000 omitted) | $105,551 | $109,712 | $201,807 | $142,713 | $132,789 |
| Class R4 | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $25.98 | $38.57 | $33.89 | $32.54 | $35.00 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $0.47 | $0.34 | $0.32 | $0.21 | $0.36 |
| Net realized and unrealized gain (loss) | 3.99 | (11.04) | 5.84 | 2.10 | (0.82) |
| Total from investment operations | $4.46 | $(10.70) | $6.16 | $2.31 | $(0.46) |
| Less distributions declared to shareholders | |||||
| From net investment income | $(0.22) | $(0.45) | $(0.12) | $(0.44) | $(0.29) |
| From net realized gain | (1.44) | (1.44) | (1.36) | (0.52) | (1.71) |
| Total distributions declared to shareholders | $(1.66) | $(1.89) | $(1.48) | $(0.96) | $(2.00) |
| Net asset value, end of period (x) | $28.78 | $25.98 | $38.57 | $33.89 | $32.54 |
| Total return (%) (r)(s)(t)(x) | 17.38 | (29.16) | 18.56 | 7.10 | (0.61) |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 1.08 | 1.05 | 1.03 | 1.04 | 1.04 |
| Expenses after expense reductions (f) | 1.06 | 1.03 | 1.02 | 1.03 | 1.03 |
| Net investment income (loss) | 1.60 | 1.02 | 0.85 | 0.66 | 1.14 |
| Portfolio turnover | 9 | 12 | 11 | 25 | 14 |
| Net assets at end of period (000 omitted) | $84,612 | $82,390 | $182,567 | $260,005 | $276,550 |
See Notes to Financial Statements
32
Financial Highlights – continued
| Class R6 | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $26.95 | $39.97 | $35.06 | $33.64 | $36.11 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $0.54 | $0.43 | $0.42 | $0.28 | $0.44 |
| Net realized and unrealized gain (loss) | 4.13 | (11.48) | 6.02 | 2.13 | (0.87) |
| Total from investment operations | $4.67 | $(11.05) | $6.44 | $2.41 | $(0.43) |
| Less distributions declared to shareholders | |||||
| From net investment income | $(0.27) | $(0.53) | $(0.17) | $(0.47) | $(0.33) |
| From net realized gain | (1.44) | (1.44) | (1.36) | (0.52) | (1.71) |
| Total distributions declared to shareholders | $(1.71) | $(1.97) | $(1.53) | $(0.99) | $(2.04) |
| Net asset value, end of period (x) | $29.91 | $26.95 | $39.97 | $35.06 | $33.64 |
| Total return (%) (r)(s)(t)(x) | 17.52 | (29.06) | 18.74 | 7.20 | (0.47) |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 0.93 | 0.91 | 0.90 | 0.92 | 0.92 |
| Expenses after expense reductions (f) | 0.92 | 0.90 | 0.89 | 0.91 | 0.91 |
| Net investment income (loss) | 1.79 | 1.26 | 1.08 | 0.84 | 1.34 |
| Portfolio turnover | 9 | 12 | 11 | 25 | 14 |
| Net assets at end of period (000 omitted) | $4,619,017 | $4,023,013 | $5,635,101 | $4,191,916 | $3,385,991 |
| (d) | Per share data is based on average shares outstanding. |
| (f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. See Note 2 in the Notes to Financial Statements for additional information. |
| (r) | Certain expenses have been reduced without which performance would have been lower. |
| (s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
| (t) | Total returns do not include any applicable sales charges. |
| (w) | Per share amount was less than $0.01. |
| (x) | The net asset values and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
33
Notes to Financial Statements
(1) Business and
Organization
MFS International New Discovery Fund
(the fund) is a diversified series of MFS Series Trust V (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company.
The fund is an investment company
and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services - Investment
Companies.
(2) Significant Accounting
Policies
General — The preparation of financial statements in conformity with U.S. 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 increases and decreases in net assets from operations
during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s
Statement of Assets and Liabilities through the date that the financial statements were issued. The fund will generally focus on securities of small size companies which may be more volatile than those of larger companies. The fund invests in foreign securities, including securities of emerging market issuers. 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 market, economic, industrial, political, regulatory, geopolitical, environmental, public health, and other conditions.
Investments in emerging markets can involve additional and greater risks than the risks associated with investments in developed foreign markets. Emerging markets can have less developed markets, greater custody and
operational risk, less developed legal, regulatory, accounting, and auditing systems, greater government involvement in the economy, greater risk of new or inconsistent government treatment of or restrictions on
issuers and instruments, and greater political, social, and economic instability than developed markets.
Balance Sheet Offsetting — The fund's accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the International
Swaps and Derivatives Association (ISDA) Master Agreement, or similar agreement, does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and
Liabilities across transactions between the fund and the applicable counterparty. The fund's right to setoff may be restricted or prohibited by the bankruptcy or insolvency laws of the particular jurisdiction to which
a specific master netting agreement counterparty is subject. Balance sheet offsetting disclosures, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note
under the captions for each of the fund’s in-scope financial instruments and transactions.
Investment Valuations — Subject to its oversight, the fund's Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments to MFS as
the fund's adviser, pursuant to the fund’s valuation policy and procedures which have been adopted by the adviser and approved by the Board. In accordance with Rule 2a-5 under the Investment Company Act of
1940, the
34
Notes to Financial Statements -
continued
Board of Trustees designated the adviser as the
“valuation designee” of the fund. If the adviser, as valuation designee, determines that reliable market quotations are not readily available for an investment, the investment is valued at fair value as
determined in good faith by the adviser in accordance with the adviser’s fair valuation policy and procedures.
Under the fund's valuation policy
and procedures, equity securities, including restricted equity securities, are generally valued at the last sale or official closing price on their primary market or exchange as provided by a third-party pricing
service. Equity securities, for which there were no sales reported that day, are generally valued at the last quoted daily bid quotation on their primary market or exchange as provided by a third-party pricing
service. Short-term instruments with a maturity at issuance of 60 days or less may be valued at amortized cost, which approximates market value.
Open-end investment companies are generally valued
at net asset value per share. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided
by a third-party pricing service.
Under the fund’s valuation
policy and procedures, market quotations are not considered to be readily available for debt instruments, floating rate loans, and many types of derivatives. These investments are generally valued at fair value based
on information from third-party pricing services or otherwise determined by the adviser in accordance with the adviser’s fair valuation policy and procedures. Securities and other assets generally valued on the
basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. In determining values, third-party pricing services can utilize both transaction data and market information
such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, spreads and other market data. An investment may also be valued at fair value if the adviser determines that the
investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the
determination of the fund’s net asset value, or after the halt of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally
traded. Events that occur after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be
deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on
third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the
business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes
of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net
asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the
same time at which the fund determines its net asset value per share.
35
Notes to Financial Statements -
continued
Various inputs are used in
determining the value of the fund's assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value
hierarchy. In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund's assessment of the significance of a
particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or
liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes significant
unobservable inputs, which may include the adviser's own assumptions in determining the fair value of investments. The following is a summary of the levels used as of September 30, 2023 in valuing the fund's assets
and liabilities:
| Financial Instruments | Level 1 | Level 2 | Level 3 | Total |
| Equity Securities: | ||||
| Japan | $1,820,498,406 | $32,448,615 | $— | $1,852,947,021 |
| United Kingdom | 178,708,901 | 517,138,291 | — | 695,847,192 |
| Germany | 326,053,499 | 3,562,432 | — | 329,615,931 |
| Australia | 312,766,100 | — | — | 312,766,100 |
| France | 24,031,817 | 242,743,058 | — | 266,774,875 |
| India | 235,998,362 | — | — | 235,998,362 |
| Taiwan | 191,406,892 | — | — | 191,406,892 |
| Switzerland | — | 158,117,539 | — | 158,117,539 |
| Hong Kong | 156,002,701 | — | — | 156,002,701 |
| Other Countries | 930,136,581 | 604,309,265 | 0 | 1,534,445,846 |
| Mutual Funds | 289,625,483 | — | — | 289,625,483 |
| Total | $4,465,228,742 | $1,558,319,200 | $0 | $6,023,547,942 |
For further information regarding
security characteristics, see the Portfolio of Investments. At September 30, 2023, the fund held one level 3 security valued at $0, which was also held and valued at $0 at September 30, 2022.
Foreign Currency Translation — 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 or on the reporting date for foreign denominated receivables and payables. 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 receivables, payables, 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.
Security Loans — Under its Securities Lending Agency Agreement with the fund, JPMorgan Chase and Co., as lending agent, loans the securities of the fund to certain qualified institutions (the
“Borrowers”) approved by the fund. Security loans can be terminated at the discretion of either the lending agent or the fund and the related securities must be returned within the earlier of the standard
trade settlement period for such securities or within three business days. The loans are collateralized by cash
36
Notes to Financial Statements -
continued
and/or U.S. Treasury and federal agency obligations
in an amount typically at least equal to the market value of the securities loaned. On loans collateralized by cash, the cash collateral is invested in a money market fund. The market value of the loaned securities is
determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. The lending agent provides the fund with indemnification against Borrower
default. In the event of Borrower default, the lending agent will, for the benefit of the fund, either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund
the market value of the loaned securities. In return, the lending agent assumes the fund's rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, the lending
agent is responsible for the shortfall, but only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. At
period end, the fund had investment securities on loan, all of which were classified as equity securities in the fund's Portfolio of Investments, with a fair value of $44,863,831. The fair value of the fund's
investment securities on loan and a related liability of $13,052,751 for cash collateral received on securities loaned are both presented gross in the Statement of Assets and Liabilities. Additionally, these loans
were collateralized by U.S. Treasury Obligations of $34,529,079 held by the lending agent. The collateral on securities loaned exceeded the value of securities on loan at period end. The liability for cash collateral
for securities loaned is carried at fair value, which is categorized as level 2 within the fair value hierarchy. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and
the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the fund and
the lending agent. Income from securities lending is separately reported in the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other
dividend and interest income.
Indemnifications — Under the fund's organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to
the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund's maximum exposure under these agreements is unknown
as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and
Income — Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is
obtained subsequent to the ex-dividend date. Dividend payments received in additional securities are recorded on the ex-dividend date in an amount equal to the value of the security on such date.
The fund may receive proceeds from
litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in
unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Investment transactions are recorded
on the trade date. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.
37
Notes to Financial Statements -
continued
Fees Paid Indirectly — The fund's custody fee may be reduced by a credit earned under an arrangement that measures the value of U.S. dollars deposited with the custodian by the fund. The amount of the
credit, for the year ended September 30, 2023, is shown as a reduction of total expenses in the Statement of Operations.
Tax Matters and Distributions — The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including
realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns, when filed, will remain subject to examination by the Internal Revenue Service for a three
year period. Management has analyzed the fund’s tax positions taken on federal and state tax returns for all open tax years and does not believe that there are any uncertain tax positions that require
recognition of a tax liability. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by
certain countries in which the fund invests. Additionally, capital gains realized by the fund on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those
countries.
Distributions to shareholders are
recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital
accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary
differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future.
Book/tax differences primarily
relate to passive foreign investment companies, wash sale loss deferrals, treating a portion of the proceeds from redemptions as a distribution for tax purposes, and foreign taxes.
The tax character of distributions
declared to shareholders for the last two fiscal years is as follows:
| Year ended 9/30/23 | Year ended 9/30/22 | |
| Ordinary income (including any short-term capital gains) | $49,150,638 | $151,654,086 |
| Long-term capital gains | 289,512,545 | 251,838,597 |
| Total distributions | $338,663,183 | $403,492,683 |
38
Notes to Financial Statements -
continued
The federal tax cost and the tax
basis components of distributable earnings were as follows:
| As of 9/30/23 | |
| Cost of investments | $5,627,835,675 |
| Gross appreciation | 1,409,243,112 |
| Gross depreciation | (1,013,530,845) |
| Net unrealized appreciation (depreciation) | $395,712,267 |
| Undistributed ordinary income | 119,850,221 |
| Undistributed long-term capital gain | 123,006,114 |
| Other temporary differences | (7,401,052) |
| Total distributable earnings (loss) | $631,167,550 |
Multiple Classes of Shares of
Beneficial Interest — The fund offers multiple classes of shares, which differ in their respective distribution and service fees. The fund's income, realized and unrealized gain (loss), and common
expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in
separate class expenses. Class B and Class C shares will convert to Class A shares approximately eight years after purchase. Effective March 21, 2022, all Class 529B and Class 529C shares were converted into Class
529A shares. Effective May 20, 2022, all Class 529A shares were redeemed. The fund’s distributions declared to shareholders as reported in the Statements of Changes in Net Assets are presented by class as
follows:
| Year ended 9/30/23 | Year ended 9/30/22 | ||
| Class A | $32,274,365 | $40,558,715 | |
| Class B | 107,835 | 195,811 | |
| Class C | 743,169 | 1,150,960 | |
| Class I | 41,319,509 | 58,815,770 | |
| Class R1 | 74,775 | 71,241 | |
| Class R2 | 865,845 | 1,080,274 | |
| Class R3 | 7,008,148 | 9,283,025 | |
| Class R4 | 5,175,642 | 7,139,611 | |
| Class R6 | 251,093,895 | 284,691,435 | |
| Class 529A | — | 468,895 | |
| Class 529B | — | 3,931 | |
| Class 529C | — | 33,015 | |
| Total | $338,663,183 | $403,492,683 |
39
Notes to Financial Statements -
continued
(3) Transactions with
Affiliates
Investment Adviser — The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates based on the fund's average daily net assets:
| Up to $500 million | 0.975% |
| In excess of $500 million and up to $1 billion | 0.925% |
| In excess of $1 billion and up to $3 billion | 0.90% |
| In excess of $3 billion and up to $5 billion | 0.85% |
| In excess of $5 billion and up to $10 billion | 0.80% |
| In excess of $10 billion | 0.75% |
MFS has agreed in writing to reduce
its management fee by a specified amount if certain MFS mutual fund assets exceed thresholds agreed to by MFS and the fund's Board of Trustees. MFS has also agreed in writing to waive at least 0.01% of its management
fee as part of this agreement. The agreement to waive at least 0.01% of the management fee will continue until modified by the fund's Board of Trustees, but such agreement will continue at least until January 31,
2024. For the year ended September 30, 2023, this management fee reduction amounted to $797,061, which is included in the reduction of total expenses in the Statement of Operations. The management fee incurred for the
year ended September 30, 2023 was equivalent to an annual effective rate of 0.86% of the fund's average daily net assets.
Distributor — MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, as distributor, received $12,911 for the year ended September 30, 2023, as its portion of the initial sales
charge on sales of Class A shares of the fund.
The Board of Trustees has adopted a
distribution plan for certain share classes pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund's distribution plan
provides that the fund will pay MFD for services provided by MFD and financial intermediaries in connection with the distribution and servicing of certain share classes. One component of the plan is a
distribution fee paid to MFD and another component of the plan is a service fee paid to MFD. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries. The
distribution and service fees are computed daily and paid monthly.
40
Notes to Financial Statements -
continued
Distribution Plan Fee Table:
| Distribution Fee Rate (d) | Service Fee Rate (d) | Total Distribution Plan (d) | Annual Effective Rate (e) | Distribution and Service Fee | |
| Class A | — | 0.25% | 0.25% | 0.25% | $ 1,488,834 |
| Class B | 0.75% | 0.25% | 1.00% | 1.00% | 18,999 |
| Class C | 0.75% | 0.25% | 1.00% | 1.00% | 132,720 |
| Class R1 | 0.75% | 0.25% | 1.00% | 1.00% | 13,277 |
| Class R2 | 0.25% | 0.25% | 0.50% | 0.50% | 81,389 |
| Class R3 | — | 0.25% | 0.25% | 0.25% | 306,437 |
| Total Distribution and Service Fees | $2,041,656 |
| (d) | In accordance with the distribution plan for certain classes, the fund pays distribution and/or service fees equal to these annual percentage rates of each class’s average daily net assets. The distribution and service fee rates disclosed by class represent the current rates in effect at the end of the reporting period. Any rate changes, if applicable, are detailed below. |
| (e) | The annual effective rates represent actual fees incurred under the distribution plan for the year ended September 30, 2023 based on each class's average daily net assets. MFD has voluntarily agreed to rebate a portion of each class's 0.25% service fee attributable to accounts for which there is no financial intermediary specified on the account except for accounts attributable to MFS or its affiliates' seed money. For the year ended September 30, 2023, this rebate amounted to $250, $76, and $67 for Class A, Class R2, and Class R3 shares, respectively, and is included in the reduction of total expenses in the Statement of Operations. |
Certain Class A shares are
subject to a contingent deferred sales charge (CDSC) in the event of a shareholder redemption within 18 months of purchase. Class B shares are subject to a CDSC in the event of a shareholder redemption within six
years of purchase. Class C shares are subject to a CDSC in the event of a shareholder redemption within 12 months of purchase. All contingent deferred sales charges are paid to MFD and during the year ended
September 30, 2023, were as follows:
| Amount | |
| Class A | $769 |
| Class B | 713 |
| Class C | 144 |
Shareholder Servicing Agent — MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent calculated as a percentage of the
average daily net assets of the fund as determined periodically under the supervision of the fund's Board of Trustees. For the year ended September 30, 2023, the fee was $123,980, which equated to 0.0020% annually of
the fund's average daily net assets. MFSC also receives reimbursement from the fund for out-of-pocket expenses, sub-accounting and other shareholder servicing costs which may be paid to affiliated and unaffiliated
service providers. Class R6 shares do not incur sub-accounting fees. For the year ended September 30, 2023, these out-of-pocket expenses, sub-accounting and other shareholder servicing costs amounted to
$2,379,039.
Administrator — MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the
fund reimburses MFS the costs incurred to provide these
41
Notes to Financial Statements -
continued
services. The fund is charged an annual fixed
amount of $17,500 plus a fee based on average daily net assets. The administrative services fee is computed daily and paid monthly. The administrative services fee incurred for the year ended September 30,
2023 was equivalent to an annual effective rate of 0.0101% of the fund's average daily net assets.
Trustees’ and Officers’
Compensation — The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons.
Independent Trustees’ compensation is accrued daily and paid subsequent to each Trustee Board meeting. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers
of the investment adviser, all of whom receive remuneration from MFS for their services to the fund. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Other — The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks current income consistent with preservation of capital and liquidity. This money
market fund does not pay a management fee to MFS but does incur investment and operating costs.
During the year ended September 30,
2023, pursuant to a policy adopted by the Board of Trustees and designed to comply with Rule 17a-7 under the Investment Company Act of 1940 (the “Act”) and relevant guidance, the fund engaged in
purchase and sale transactions with funds and accounts for which MFS serves as investment adviser or sub-adviser (“cross-trades”) which amounted to $414,129 and $1,339,540, respectively. The sales
transactions resulted in net realized gains (losses) of $(98,006).
(4) Portfolio Securities
For the year ended September 30,
2023, purchases and sales of investments, other than short-term obligations, aggregated $533,132,155 and $940,862,133, respectively.
42
Notes to Financial Statements -
continued
(5) Shares of Beneficial
Interest
The fund's Declaration of Trust
permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
| Year ended 9/30/23 | Year ended 9/30/22 | ||||
| Shares | Amount | Shares | Amount | ||
| Shares sold | |||||
| Class A | 848,578 | $24,740,833 | 1,023,143 | $33,970,510 | |
| Class B | 22 | 600 | 58 | 1,984 | |
| Class C | 11,817 | 323,049 | 10,852 | 331,084 | |
| Class I | 1,905,649 | 56,905,922 | 3,526,867 | 122,378,252 | |
| Class R1 | 7,217 | 190,804 | 9,526 | 281,112 | |
| Class R2 | 61,654 | 1,749,778 | 101,721 | 3,217,527 | |
| Class R3 | 645,054 | 18,305,933 | 1,051,751 | 37,466,728 | |
| Class R4 | 470,453 | 13,796,333 | 553,764 | 18,112,531 | |
| Class R6 | 13,323,415 | 408,228,786 | 16,208,229 | 575,363,909 | |
| Class 529A | — | — | 39,063 | 1,282,894 | |
| Class 529C | — | — | 892 | 29,321 | |
| 17,273,859 | $524,242,038 | 22,525,866 | $792,435,852 | ||
| Shares issued to shareholders in reinvestment of distributions | |||||
| Class A | 1,033,398 | $28,862,801 | 1,009,595 | $36,870,405 | |
| Class B | 4,028 | 107,835 | 5,528 | 194,428 | |
| Class C | 27,964 | 731,889 | 32,746 | 1,127,105 | |
| Class I | 1,336,675 | 38,656,651 | 1,458,992 | 55,076,952 | |
| Class R1 | 2,961 | 74,775 | 2,141 | 71,240 | |
| Class R2 | 31,871 | 861,149 | 30,289 | 1,071,615 | |
| Class R3 | 254,010 | 7,008,147 | 257,147 | 9,283,025 | |
| Class R4 | 168,193 | 4,685,843 | 179,428 | 6,538,372 | |
| Class R6 | 8,359,122 | 241,745,799 | 7,081,328 | 267,390,965 | |
| Class 529A | — | — | 12,747 | 455,719 | |
| Class 529B | — | — | 117 | 3,931 | |
| Class 529C | — | — | 998 | 32,942 | |
| 11,218,222 | $322,734,889 | 10,071,056 | $378,116,699 | ||
43
Notes to Financial Statements -
continued
| Year ended 9/30/23 | Year ended 9/30/22 | ||||
| Shares | Amount | Shares | Amount | ||
| Shares reacquired | |||||
| Class A | (3,594,738) | $(104,513,846) | (3,938,988) | $(129,035,209) | |
| Class B | (38,966) | (1,078,132) | (59,284) | (1,789,431) | |
| Class C | (248,408) | (6,689,170) | (278,446) | (8,460,526) | |
| Class I | (9,078,106) | (273,108,797) | (8,651,169) | (288,754,908) | |
| Class R1 | (11,605) | (306,784) | (8,065) | (246,053) | |
| Class R2 | (125,135) | (3,534,767) | (206,456) | (6,406,185) | |
| Class R3 | (1,458,409) | (42,769,272) | (2,322,289) | (76,361,082) | |
| Class R4 | (869,046) | (25,143,686) | (2,295,925) | (80,799,395) | |
| Class R6 | (16,515,864) | (496,284,314) | (15,027,341) | (489,236,861) | |
| Class 529A | — | — | (309,521) | (9,204,770) | |
| Class 529B | — | — | (2,428) | (74,067) | |
| Class 529C | — | — | (25,377) | (762,098) | |
| (31,940,277) | $(953,428,768) | (33,125,289) | $(1,091,130,585) | ||
| Net change | |||||
| Class A | (1,712,762) | $(50,910,212) | (1,906,250) | $(58,194,294) | |
| Class B | (34,916) | (969,697) | (53,698) | (1,593,019) | |
| Class C | (208,627) | (5,634,232) | (234,848) | (7,002,337) | |
| Class I | (5,835,782) | (177,546,224) | (3,665,310) | (111,299,704) | |
| Class R1 | (1,427) | (41,205) | 3,602 | 106,299 | |
| Class R2 | (31,610) | (923,840) | (74,446) | (2,117,043) | |
| Class R3 | (559,345) | (17,455,192) | (1,013,391) | (29,611,329) | |
| Class R4 | (230,400) | (6,661,510) | (1,562,733) | (56,148,492) | |
| Class R6 | 5,166,673 | 153,690,271 | 8,262,216 | 353,518,013 | |
| Class 529A | — | — | (257,711) | (7,466,157) | |
| Class 529B | — | — | (2,311) | (70,136) | |
| Class 529C | — | — | (23,487) | (699,835) | |
| (3,448,196) | $(106,451,841) | (528,367) | $79,421,966 | ||
The fund is one of several mutual
funds in which certain MFS funds may invest. The MFS funds do not invest in the underlying funds for the purpose of exercising management or control. At the end of the period, the MFS International
Diversification Fund, the MFS Growth Allocation Fund, the MFS Aggressive Growth Allocation Fund, and the MFS Moderate Allocation Fund were the owners of record of approximately 59%, 2%, 2%, and 1%,
respectively, of the value of outstanding voting shares of the fund. In addition, the MFS Lifetime 2030 Fund, the MFS Lifetime 2035 Fund, the MFS Lifetime 2040 Fund, the MFS Lifetime 2045 Fund, the MFS Lifetime
2050 Fund, the MFS Lifetime 2055 Fund, the MFS Lifetime 2060 Fund, and the MFS Lifetime 2065 Fund were each the owners of record of less than 1% of the value of outstanding voting shares of the fund.
44
Notes to Financial Statements -
continued
Effective June 1, 2019, purchases of
the fund’s Class B and Class 529B shares were closed to new and existing investors subject to certain exceptions. Effective at the close of business on November 29, 2019, purchases of the fund were closed to new
investors subject to certain exceptions. Effective after the close of business on March 18, 2022, all sales of Class 529B and Class 529C shares were suspended, and Class 529B and Class 529C shares were converted into
Class 529A shares of the fund effective March 21, 2022. Effective after the close of business on May 13, 2022, all sales and redemptions of Class 529A shares were suspended, and all Class 529A shares were
redeemed on May 20, 2022. On March 30, 2023, the fund announced that effective after the close of business on September 29, 2023, purchases of Class R1 and Class R2 shares will be closed to new eligible investors.
(6) Line of Credit
The fund and certain other funds
managed by MFS participate in a $1.45 billion unsecured committed line of credit of which $1.2 billion is reserved for use by the fund and certain other MFS U.S. funds. The line of credit is provided by a syndicate of
banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the highest of 1) Daily Simple SOFR
(Secured Overnight Financing Rate) plus 0.10%, 2) the Federal Funds Effective Rate, or 3) the Overnight Bank Funding Rate, each plus an agreed upon spread. A commitment fee, based on the average daily unused portion
of the committed line of credit, is allocated among the participating funds. The line of credit expires on March 14, 2024 unless extended or renewed. In addition, the fund and other funds managed by MFS have
established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at rates equal to customary reference rates plus an
agreed upon spread. For the year ended September 30, 2023, the fund’s commitment fee and interest expense were $31,683 and $0, respectively, and are included in “Miscellaneous” expense in the
Statement of Operations.
(7) Investments in Affiliated
Issuers
An affiliated issuer may be
considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the following were affiliated issuers:
| Affiliated Issuers | Beginning Value | Purchases | Sales Proceeds | Realized Gain (Loss) | Change in Unrealized Appreciation or Depreciation | Ending Value |
| Forterra PLC | $40,036,956 | $— | $1,939,324 | $(706,893) | $(10,915,684) | $26,475,055 |
| MFS Institutional Money Market Portfolio | 225,046,256 | 1,001,077,757 | 949,578,840 | 8,439 | 19,120 | 276,572,732 |
| Midland Holdings Ltd. | 3,066,471 | — | — | — | 291,861 | 3,358,332 |
| PCA Corp. | 9,878,227 | — | — | — | 1,429,798 | 11,308,025 |
| T. Hasegawa Co. Ltd. | 64,351,878 | — | — | — | (502,708) | 63,849,170 |
| $342,379,788 | $1,001,077,757 | $951,518,164 | $(698,454) | $(9,677,613) | $381,563,314 |
45
Notes to Financial Statements -
continued
| Affiliated Issuers | Dividend Income | Capital Gain Distributions |
| Forterra PLC | $2,313,061 | $— |
| MFS Institutional Money Market Portfolio | 9,328,901 | — |
| Midland Holdings Ltd. | — | — |
| PCA Corp. | 161,466 | — |
| T. Hasegawa Co. Ltd. | 1,262,684 | — |
| $13,066,112 | $— |
(8) Russia and Ukraine
Conflict
The fund invests in securities
and/or derivative instruments that are economically tied to Russia and/or Ukraine. Escalation of the conflict between Russia and Ukraine in late February 2022 caused market volatility and disruption in the tradability
of Russian securities, including closure of the local securities market, temporary restriction on securities sales by non-residents, and disruptions to clearance and payment systems. To the extent that the fund is
unable to sell securities, whether due to market constraints or to the sanctions imposed on Russia by the United States and other countries, those securities are considered illiquid and the value of those securities
reflects their illiquid classification. Management continues to monitor these events and to evaluate the related impacts on fund performance.
46
Report of Independent Registered Public
Accounting Firm
To the Shareholders of MFS
International New Discovery Fund and the Board of Trustees of MFS Series Trust V
Opinion on the Financial Statements
We have audited the accompanying
statement of assets and liabilities of MFS International New Discovery Fund (the “Fund”) (one of the funds constituting MFS Series Trust V (the “Trust”)), including the portfolio of
investments, as of September 30, 2023,and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial
highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in
all material respects, the financial position of the Fund (one of the funds constituting MFS Series Trust V) at September 30, 2023, 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 its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the
responsibility of the Trust’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in
accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether
due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express
no such opinion.
47
Report of Independent Registered Public
Accounting Firm – continued
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2023, by correspondence with the custodian, brokers and
others; when replies were not received from brokers and others, we performed other auditing procedures. Our audits also included evaluating the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one
or more MFS investment companies since 1993.
Boston, Massachusetts
November 14, 2023
November 14, 2023
48
Trustees and
Officers — Identification and Background
The Trustees and Officers of the
Trust, as of November 1, 2023, are listed below, together with their principal occupations during the past five years. (Their titles may have varied during that period.) The address of each Trustee and Officer
is 111 Huntington Avenue, Boston, Massachusetts 02199-7618.
| Name, Age | Position(s) Held with Fund | Trustee/Officer Since(h) | Number of MFS Funds overseen by the Trustee | Principal Occupations During the Past Five Years | Other Directorships During the Past Five Years (j) | |||||
| INTERESTED TRUSTEE | ||||||||||
| Michael W. Roberge (k) (age 57) | Trustee | January 2021 | 136 | Massachusetts Financial Services Company, Chairman (since January 2021); Chief Executive Officer (since January 2017); Director; Chairman of the Board (since January 2022); President (until December 2018); Chief Investment Officer (until December 2018) | N/A | |||||
| INDEPENDENT TRUSTEES | ||||||||||
| John P. Kavanaugh (age 68) | Trustee and Chair of Trustees | January 2009 | 136 | Private investor | N/A | |||||
| Steven E. Buller (age 72) | Trustee | February 2014 | 136 | Private investor | N/A | |||||
| John A. Caroselli (age 69) | Trustee | March 2017 | 136 | Private investor; JC Global Advisors, LLC (management consulting), President (since 2015) | N/A | |||||
| Maureen R. Goldfarb (age 68) | Trustee | January 2009 | 136 | Private investor | N/A | |||||
| Peter D. Jones (age 68) | Trustee | January 2019 | 136 | Private investor | N/A | |||||
| James W. Kilman, Jr. (age 62) | Trustee | January 2019 | 136 | Burford Capital Limited (finance and investment management), Senior Advisor (since May 3, 2021), Chief Financial Officer (2019 - May 2, 2021); KielStrand Capital LLC (family office), Chief Executive Officer (since 2016) | Alpha-En Corporation, Director (2016-2019) |
49
Trustees and Officers - continued
| Name, Age | Position(s) Held with Fund | Trustee/Officer Since(h) | Number of MFS Funds overseen by the Trustee | Principal Occupations During the Past Five Years | Other Directorships During the Past Five Years (j) | |||||
| Clarence Otis, Jr. (age 67) | Trustee | March 2017 | 136 | Private investor | VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director | |||||
| Maryanne L. Roepke (age 67) | Trustee | May 2014 | 136 | Private investor | N/A | |||||
| Laurie J. Thomsen (age 66) | Trustee | March 2005 | 136 | Private investor | The Travelers Companies, Director; Dycom Industries, Inc., Director |
| Name, Age | Position(s) Held with Fund | Trustee/Officer Since(h) | Number of MFS Funds for which the Person is an Officer | Principal Occupations During the Past Five Years | ||||
| OFFICERS | ||||||||
| Christopher R. Bohane (k) (age 49) | Assistant Secretary and Assistant Clerk | July 2005 | 136 | Massachusetts Financial Services Company, Senior Vice President and Senior Managing Counsel | ||||
| Kino Clark (k) (age 55) | Assistant Treasurer | January 2012 | 136 | Massachusetts Financial Services Company, Vice President | ||||
| John W. Clark, Jr. (k) (age 56) | Assistant Treasurer | April 2017 | 136 | Massachusetts Financial Services Company, Vice President | ||||
| David L. DiLorenzo (k) (age 55) | President | July 2005 | 136 | Massachusetts Financial Services Company, Senior Vice President | ||||
| Heidi W. Hardin (k) (age 56) | Secretary and Clerk | April 2017 | 136 | Massachusetts Financial Services Company, Executive Vice President and General Counsel | ||||
| Brian E. Langenfeld (k) (age 50) | Assistant Secretary and Assistant Clerk | June 2006 | 136 | Massachusetts Financial Services Company, Vice President and Managing Counsel |
50
Trustees and Officers - continued
| Name, Age | Position(s) Held with Fund | Trustee/Officer Since(h) | Number of MFS Funds for which the Person is an Officer | Principal Occupations During the Past Five Years | ||||
| Rosa E. Licea-Mailloux (k) (age 47) | Chief Compliance Officer | March 2022 | 136 | Massachusetts Financial Services Company, Vice President (since 2018); Director of Corporate Compliance (2018-2021), Senior Director Compliance (2021-2022), Senior Managing Director of North American Compliance & Chief Compliance Officer (since March 2022); Natixis Investment Managers (investment management), Funds Chief Compliance Officer, Deputy General Counsel & Senior Vice President (until 2018) | ||||
| Amanda S. Mooradian (k) (age 44) | Assistant Secretary and Assistant Clerk | September 2018 | 136 | Massachusetts Financial Services Company, Assistant Vice President and Senior Counsel | ||||
| Susan A. Pereira (k) (age 52) | Assistant Secretary and Assistant Clerk | July 2005 | 136 | Massachusetts Financial Services Company, Vice President and Managing Counsel | ||||
| Kasey L. Phillips (k) (age 52) | Assistant Treasurer | September 2012 | 136 | Massachusetts Financial Services Company, Vice President | ||||
| Matthew A. Stowe (k) (age 48) | Assistant Secretary and Assistant Clerk | October 2014 | 136 | Massachusetts Financial Services Company, Vice President and Senior Managing Counsel | ||||
| William B. Wilson (k) (age 41) | Assistant Secretary and Assistant Clerk | October 2022 | 136 | Massachusetts Financial Services Company, Assistant Vice President and Senior Counsel | ||||
| James O. Yost (k) (age 63) | Treasurer | September 1990 | 136 | Massachusetts Financial Services Company, Senior Vice President |
| (h) | Date first appointed to serve as Trustee/Officer of an MFS Fund. Each Trustee has served continuously since appointment unless indicated otherwise. From January 2012 through December 2016, Messrs. DiLorenzo and Yost served as Treasurer and Deputy Treasurer of the Funds, respectively. |
| (j) | Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., “public companies”). |
| (k) | “Interested person” of the Trust within the meaning of the Investment Company Act of 1940 (referred to as the 1940 Act), which is the principal federal law governing investment companies like the fund, as a result of a position with MFS. The address of MFS is 111 Huntington Avenue, Boston, Massachusetts 02199-7618. |
51
Trustees and Officers - continued
Each Trustee (other than Messrs.
Jones, Kilman and Roberge) has been elected by shareholders and each Trustee and Officer holds office until his or her successor is chosen and qualified or until his or her earlier death, resignation, retirement or
removal. Mr. Roberge became a Trustee of the Funds on January 1, 2021 and Messrs. Jones and Kilman became Trustees of the Funds on January 1, 2019. The Trust does not hold annual meetings for the purpose of electing
Trustees, and Trustees are not elected for fixed terms. Under the terms of the Board's retirement policy, an Independent Trustee shall retire at the end of the calendar year in which he or she reaches the earlier of
75 years of age or 15 years of service on the Board (or, in the case of any Independent Trustee who joined the Board prior to 2015, 20 years of service on the Board).
Messrs. Buller, Kilman and Otis and
Ms. Roepke are members of the Trust’s Audit Committee.
Each of the Interested Trustees and
certain Officers hold comparable officer positions with certain affiliates of MFS.
The Statement of Additional
Information for a Fund includes further information about the Trustees and is available without charge upon request by calling 1-800-225-2606.
| Investment Adviser | Custodian |
| Massachusetts Financial Services Company 111 Huntington Avenue Boston, MA 02199-7618 | JPMorgan Chase Bank, NA 4 Metrotech Center New York, NY 11245 |
| Distributor | Independent Registered Public Accounting Firm |
| MFS Fund Distributors, Inc. 111 Huntington Avenue Boston, MA 02199-7618 | Ernst & Young LLP 200 Clarendon Street Boston, MA 02116 |
| Portfolio Manager(s) | |
| Peter Fruzzetti Lionel Gomez Robert Lau Sandeep Mehta Nicholas Spratt |
52
Board Review of Investment Advisory
Agreement
MFS International New Discovery
Fund
The Investment Company Act of 1940
requires that both the full Board of Trustees and a majority of the non-interested (“independent”) Trustees, voting separately, annually approve the continuation of the Fund’s investment advisory
agreement with MFS. The Trustees consider matters bearing on the Fund and its advisory arrangements at their meetings throughout the year, including a review of performance data at each regular meeting. In
addition, the independent Trustees met several times over the course of three months beginning in May and ending in July, 2023 (“contract review meetings”) for the specific purpose of considering whether
to approve the continuation of the investment advisory agreement for the Fund and the other investment companies that the Board oversees (the “MFS Funds”). The independent Trustees were assisted in
their evaluation of the Fund’s investment advisory agreement by independent legal counsel, from whom they received separate legal advice and with whom they met separately from MFS during various contract review
meetings. The independent Trustees were also assisted in this process by an independent consultant who was retained by and reported to the independent Trustees.
In connection with their
deliberations regarding the continuation of the investment advisory agreement, the Trustees, including the independent Trustees, considered such information and factors as they believed, in light of the legal advice
furnished to them and their own business judgment, to be relevant. The investment advisory agreement for the Fund was considered separately, although the Trustees also took into account the common interests of
all MFS Funds in their review. As described below, the Trustees considered the nature, quality, and extent of the various investment advisory, administrative, and shareholder services performed by MFS under the
existing investment advisory agreement and other arrangements with the Fund.
In connection with their contract
review meetings, the Trustees received and relied upon materials that included, among other items: (i) information provided by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent third
party, on the investment performance of the Fund for various time periods ended December 31, 2022 and the investment performance of a group of funds with substantially similar investment classifications/objectives
(the “Broadridge performance universe”), (ii) information provided by Broadridge on the Fund’s advisory fees and other expenses and the advisory fees and other expenses of comparable funds identified
by Broadridge as well as all other funds in the same investment classification/category (the “Broadridge expense group and universe”), (iii) information provided by MFS on the advisory fees of portfolios
of other clients of MFS, including institutional separate accounts and other clients, (iv) information as to whether and to what extent applicable expense waivers, reimbursements or fee “breakpoints” are
observed for the Fund, (v) information regarding MFS’ financial results and financial condition, including MFS’ and certain of its affiliates’ estimated profitability from services performed for the
Fund and the MFS Funds as a whole, and compared to MFS’ institutional business, (vi) MFS’ views regarding the outlook for the mutual fund industry and the strategic business plans of MFS, (vii)
descriptions of various functions performed by MFS for the Funds, such as compliance monitoring and portfolio trading practices, and (viii) information regarding the overall organization of MFS, including information
about
53
Board Review of Investment Advisory
Agreement - continued
MFS’ senior management and other personnel
providing investment advisory, administrative and other services to the Fund and the other MFS Funds. The comparative performance, fee and expense information prepared and provided by Broadridge was not
independently verified and the independent Trustees did not independently verify any information provided to them by MFS.
The Trustees’ conclusion as to
the continuation of the investment advisory agreement was based on a comprehensive consideration of all information provided to the Trustees and not the result of any single factor. Some of the factors that
figured particularly in the Trustees’ deliberations are described below, although individual Trustees may have evaluated the information presented differently from one another, giving different weights to
various factors. It is also important to recognize that the fee arrangements for the Fund and other MFS Funds are the result of years of review and discussion between the independent Trustees and MFS, that
certain aspects of such arrangements may receive greater scrutiny in some years than in others, and that the Trustees’ conclusions may be based, in part, on their consideration of these same arrangements during
the course of the year and in prior years.
Based on information provided by
Broadridge and MFS, the Trustees reviewed the Fund’s total return investment performance as well as the Broadridge performance universe over various time periods. The Trustees placed particular emphasis on
the total return performance of the Fund’s Class I shares in comparison to the performance of funds in its Broadridge performance universe over the five-year period ended December 31, 2022, which the Trustees
believed was a long enough period to reflect differing market conditions. The total return performance of the Fund’s Class I shares was in the 3rd quintile relative to the other funds in the universe for this five-year period (the 1st quintile being the best performers and the 5th quintile being the worst performers). The total return performance of the Fund’s Class I shares was in the 1st quintile for the one-year period and the 3rd quintile for the three-year period ended December 31, 2022 relative to the Broadridge performance universe. Because of the passage of time,
these performance results may differ from the performance results for more recent periods, including those shown elsewhere in this report.
In addition to considering the
performance information provided in connection with the contract review meetings, the Trustees noted that, in light of the Fund’s substandard relative performance at the time of their contract review meetings in
2022, they had met at each of their regular meetings since then with MFS’ senior investment management personnel to discuss the Fund’s performance and MFS’ efforts to improve the Fund’s
performance. The Trustees further noted that the Fund’s five-year performance as compared to its Broadridge performance universe improved for the period ended December 31, 2022, as compared to the prior year.
Taking this information into account, the Trustees concluded, within the context of their overall conclusions regarding the investment advisory agreement, that they were satisfied with MFS’ responses and efforts
relating to investment performance.
In assessing the reasonableness of
the Fund’s advisory fee, the Trustees considered, among other information, the Fund’s advisory fee and the total expense ratio of the Fund’s Class I shares as a percentage of average daily net assets
and the advisory fee and total expense ratios of the Broadridge expense group based on information provided by Broadridge. The Trustees considered that, according to the data provided
54
Board Review of Investment Advisory
Agreement - continued
by Broadridge (which takes into account any fee
reductions or expense limitations that were in effect during the Fund’s last fiscal year), the Fund’s effective advisory fee rate and total expense ratio were each lower than the Broadridge expense group
median.
The Trustees also considered the
advisory fees charged by MFS to any institutional separate accounts advised by MFS (“separate accounts”) and unaffiliated investment companies for which MFS serves as subadviser (“subadvised
funds”) that have comparable investment strategies to the Fund, if any. In comparing these fees, the Trustees considered information provided by MFS as to the generally broader scope of services provided
by MFS to the Fund, as well as the more extensive regulatory burdens imposed on MFS in managing the Fund, in comparison to separate accounts and subadvised funds. The Trustees also considered the higher
demands placed on MFS’ investment personnel and trading infrastructure as a result of the daily cash in-flows and out-flows of the Fund in comparison to separate accounts.
The Trustees also considered whether
the Fund may benefit from any economies of scale in the management of the Fund in the event of growth in assets of the Fund and/or growth in assets of the MFS Funds as a whole. They noted that the Fund’s
advisory fee rate schedule is subject to contractual breakpoints that reduce the Fund’s advisory fee rate on average daily net assets over $500 million, $1 billion, $3 billion, $5 billion and $10 billion.
The Trustees also noted that MFS has agreed in writing to waive a portion of the management fees of certain MFS Funds, including the Fund, if the total combined assets of certain funds within the MFS Funds’
complex increase above agreed upon thresholds (the “group fee waiver”), enabling the Fund’s shareholders to share in the benefits from any economies of scale at the complex level. The group fee
waiver is reviewed and renewed annually between the Board and MFS. The Trustees concluded that the breakpoints and the group fee waiver were sufficient to allow the Fund to benefit from economies of scale as its
assets and overall complex assets grow.
The Trustees also considered
information prepared by MFS relating to MFS’ costs and profits with respect to the Fund, the MFS Funds considered as a group, and other investment companies and accounts advised by MFS, as well as MFS’
methodologies used to determine and allocate its costs to the MFS Funds, the Fund and other accounts and products for purposes of estimating profitability.
After reviewing these and other
factors described herein, the Trustees concluded, within the context of their overall conclusions regarding the investment advisory agreement, that the advisory fees charged to the Fund represent reasonable
compensation in light of the services being provided by MFS to the Fund.
In addition, the Trustees considered
MFS’ resources and related efforts to continue to retain, attract and motivate capable personnel to serve the Fund. The Trustees also considered current and developing conditions in the financial services
industry, including the presence of large and well-capitalized companies which are spending, and appear to be prepared to continue to spend, substantial sums to engage personnel and to provide services to competing
investment companies. In this regard, the Trustees also considered the financial resources of MFS and its ultimate parent, Sun Life Financial Inc. The Trustees also considered the advantages and possible
disadvantages to the Fund of having an adviser that also serves other investment companies as well as other accounts.
55
Board Review of Investment Advisory
Agreement - continued
The Trustees also considered the
nature, quality, cost, and extent of administrative, transfer agency, and distribution services provided to the Fund by MFS and its affiliates under agreements and plans other than the investment advisory agreement,
including any 12b-1 fees the Fund pays to MFS Fund Distributors, Inc., an affiliate of MFS. The Trustees also considered the nature, extent and quality of certain other services MFS performs or arranges for on
the Fund’s behalf, which may include securities lending programs, directed expense payment programs, class action recovery programs, and MFS’ interaction with third-party service providers, principally
custodians and sub-custodians. The Trustees concluded that the various non-advisory services provided by MFS and its affiliates on behalf of the Fund were satisfactory.
The Trustees considered so-called
“fall-out benefits” to MFS such as reputational value derived from serving as investment manager to the MFS Funds. The Trustees also considered that MFS discontinued its historic practice of
obtaining investment research from portfolio brokerage commissions paid by certain MFS Funds effective January 2018, and directly pays or voluntarily reimburses a Fund, if applicable, for the costs of external
research acquired through the use of the Fund’s portfolio brokerage commissions.
Based on their evaluation of factors
that they deemed to be material, including those factors described above, the Board of Trustees, including the independent Trustees, concluded that the Fund’s investment advisory agreement with MFS should be
continued for an additional one-year period, commencing August 1, 2023.
56
Proxy Voting Policies and
Information
MFS votes proxies on behalf of the
fund pursuant to proxy voting policies and procedures that are available without charge, upon request, by calling 1-800-225-2606, by visiting mfs.com/proxyvoting, or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund
voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available by August 31 of each year without charge by visiting mfs.com/proxyvoting, or by visiting the SEC’s Web site at http://www.sec.gov.
Quarterly Portfolio
Disclosure
The fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund's Form N-PORT reports are available on the SEC's Web site at http://www.sec.gov. A shareholder can obtain the portfolio holdings report for the first and third quarters of the fund's fiscal year at mfs.com/openendfunds by choosing the fund's name and then scrolling to the “Resources” section and clicking on the “Prospectus and Reports” tab.
Further Information
From time to time, MFS may post
important information about the fund or the MFS Funds on the MFS Web site (mfs.com). This information is available at https://www.mfs.com/announcements or at mfs.com/openendfunds by choosing the fund’s name and then scrolling to the “Resources” section and clicking on the “Announcements” tab, if any.
Information About Fund
Contracts and Legal Claims
The fund has entered into
contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, and custodian who each provide services to the fund. Unless expressly stated otherwise, shareholders are
not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek
any remedy under them against the service providers, either directly or on behalf of the fund.
Under the Trust’s By-Laws and
Declaration of Trust, any claims asserted against or on behalf of the MFS Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of
Massachusetts.
Federal Tax Information
(unaudited)
The fund will notify shareholders of
amounts for use in preparing 2023 income tax forms in January 2024. The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund designates the maximum
amount allowable as qualified dividend income eligible to be taxed at the same rate as long-term capital gain.
The fund designates $328,400,000 as
capital gain dividends paid during the fiscal year.
Income derived from foreign sources
was $169,465,656. The fund intends to pass through foreign tax credits of $11,718,112 for the fiscal year.
57
rev. 3/16
| FACTS | WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION? |
| Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
| What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include: |
| • Social Security number and account balances | |
| • Account transactions and transaction history | |
| • Checking account information and wire transfer instructions | |
| When you are no longer our customer, we continue to share your information as described in this notice. |
| How? | All financial companies need to share customers' personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers' personal information; the reasons MFS chooses to share; and whether you can limit this sharing. |
| Reasons we can share your personal information | Does MFS share? | Can you limit this sharing? |
| For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | Yes | No |
| For our marketing purposes – to offer our products and services to you | No | We don't share |
| For joint marketing with other financial companies | No | We don't share |
| For our affiliates' everyday business purposes – information about your transactions and experiences | No | We don't share |
| For our affiliates' everyday business purposes – information about your creditworthiness | No | We don't share |
| For nonaffiliates to market to you | No | We don't share |
| Questions? | Call 800-225-2606 or go to mfs.com. |
58
Page 2
| Who we are | |
| Who is providing this notice? | MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., and MFS Heritage Trust Company. |
| What we do | |
| How does MFS protect my personal information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you. |
| How does MFS collect my personal information? | We collect your personal information, for example, when you |
| • open an account or provide account information | |
| • direct us to buy securities or direct us to sell your securities | |
| • make a wire transfer | |
| We also collect your personal information from others, such as credit bureaus, affiliates, or other companies. | |
| Why can't I limit all sharing? | Federal law gives you the right to limit only |
| • sharing for affiliates' everyday business purposes – information about your creditworthiness | |
| • affiliates from using your information to market to you | |
| • sharing for nonaffiliates to market to you | |
| State laws and individual companies may give you additional rights to limit sharing. | |
| Definitions | |
| Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies. |
| • MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice. | |
| Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies. |
| • MFS does not share with nonaffiliates so they can market to you. | |
| Joint marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you. |
| • MFS doesn't jointly market. | |
| Other important information |
| If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. |
59
Annual Report
September 30, 2023
MFS® Research Fund
MFR-ANN
MFS® Research Fund
CONTENTS
| 1 | |
| 2 | |
| 4 | |
| 7 | |
| 9 | |
| 15 | |
| 17 | |
| 19 | |
| 20 | |
| 29 | |
| 40 | |
| 42 | |
| 46 | |
| 50 | |
| 50 | |
| 50 | |
| 50 | |
| 50 | |
| 52 |
| back cover |
The report is prepared for the
general information of shareholders. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED
• MAY LOSE VALUE • NO BANK GUARANTEE
Portfolio Composition
| (k) | The sectors set forth above and the associated portfolio composition are based on MFS’ own custom sector classification methodology. |
| (o) | Less than 0.1%. |
| (s) | Includes securities sold short. |
Cash & Cash
Equivalents includes any cash, investments in money market funds, short-term securities, and other assets less liabilities. Please see the Statement of Assets and Liabilities for additional information related to the
fund’s cash position and other assets and liabilities.
Other includes equivalent
exposure from currency derivatives and/or any offsets to derivative positions and may be negative.
Percentages are based on
net assets as of September 30, 2023.
The portfolio is actively
managed and current holdings may be different.
1
Management Review
Summary of Results
For the twelve months ended
September 30, 2023, Class A shares of the MFS Research Fund (fund) provided a total return of 17.07%, at net asset value. This compares with a return of 21.62% for the fund’s benchmark, the Standard &
Poor’s 500 Stock Index (S&P 500 Index).
Market Environment
During the reporting period, central
banks around the world had to combat the strongest inflationary pressures in four decades, fueled by the global fiscal response to the pandemic, disrupted supply chains and the dislocations to energy markets stemming
from the war in Ukraine. Interest rates rose substantially, but the effects of a tighter monetary policy may not have been fully experienced yet, given that monetary policy works with long and variable lags. Strains
resulting from the abrupt tightening of monetary policy began to affect some parts of the economy, most acutely among small and regional US banks, which suffered from deposit flight as depositors sought higher yields
on their savings. Those shifts exposed an asset-liability mismatch that forced the closure of several institutions by regulators. Given the importance of small and mid-sized lenders to the provision of credit in the
US, concerns were raised in the aftermath of the crisis that credit availability could become constrained, leading to slower economic growth, although those effects have been limited thus far. Additionally, activity
in the US housing sector has slowed as a result of higher mortgage rates. China’s abandonment of its Zero-COVID policy ushered in a brief uptick in economic activity in the world’s second-largest economy
in early 2023, although its momentum soon stalled as focus turned to the country’s highly-indebted property development sector. In developed markets, consumer demand for services remained stronger than the
demand for goods.
Policymakers found themselves in the
difficult position of trying to restrain inflation without tipping economies into recession. Despite the challenging macroeconomic and geopolitical environment, central banks remained focused on controlling price
pressures while also confronting increasing financial stability concerns. Central banks had to juggle achieving their inflation mandates while using macroprudential tools to keep banking systems liquid, a potentially
difficult balancing act, and one that suggested that we may be nearing a peak in policy rates.
Against an environment of relatively
tight labor markets, tighter global financial conditions and volatile materials prices, investor anxiety appeared to have increased over the potential that corporate profit margins may be past peak for this cycle.
That said, signs that supply chains have generally normalized, coupled with low levels of unemployment across developed markets and hopes that inflation levels have peaked, were supportive factors for the
macroeconomic backdrop.
Detractors from Performance
Relative to the S&P 500 Index,
stock selection within the technology sector was a primary detractor from performance, led by the fund’s underweight positions in strong-performing computer graphics processor maker NVIDIA and social networking
service provider Meta Platforms. The stock price of NVIDIA climbed as the company reported earnings per share results well above expectations, primarily driven by
2
Management Review - continued
stronger-than-expected revenue growth within its
data center, generative AI and networking segments. Not owning shares of semiconductor company Broadcom, and the fund’s overweight position in global banking and payments technology provider Fidelity National
Information Services(h), also weakened relative performance.
Stock selection within the consumer
cyclicals sector held back relative performance, driven by the fund’s overweight position in merchandise store operator Dollar General. The stock price of Dollar General declined as the company posted
below-consensus earnings per share results due to worse-than-expected sales and higher-than-expected operating and selling, general, and administrative expenses.
Individual stocks in other sectors
that weighed on relative returns included the fund’s overweight positions in real estate investment trusts SBA Communications, Extra Space Storage and financial services provider Charles Schwab. The fund’s
holdings of life sciences company Maravai Lifesciences Holdings(b)(h) and data, video and voice services provider Cable One(b) further weakened relative performance.
Contributors to Performance
Stock selection within both the
health care and capital goods sectors contributed to relative performance. Within the health care sector, avoiding shares of poor-performing health insurance and Medicare/Medicaid provider UnitedHealth Group and
drugstore retailer CVS Health aided relative results. The share price of UnitedHealth Group came under pressure as the company posted subdued medical loss ratio figures and higher-than-anticipated investment costs in
its Optum Insights segment. Within the capital goods sector, not owning shares of electric vehicle manufacturer Tesla benefited relative results. The share price of Tesla declined due to uncertainties surrounding
production shutdowns at the company’s Shanghai manufacturing plant, reduced vehicle deliveries, increased competitive concerns, and questions regarding Tesla CEO Elon Musk’s acquisition of social media
platform X (formerly Twitter).
Elsewhere, the fund's short position
in real estate investment trust Crown Castle, and overweight positions in technology company Alphabet, semiconductor chips and electronics engineering solutions provider Applied Materials, software giant Microsoft,
and semiconductor company Lam Research benefited relative performance. The fund’s position in enterprise software solutions company Constellation Software(b) (Canada), and not owning shares of financial services
firm Bank of America, further boosted relative returns.
Respectfully,
Portfolio Manager(s)
Joseph MacDougall
| (b) | Security is not a benchmark constituent. |
| (h) | Security was not held in the portfolio at period end. |
The views expressed in this report
are those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily reflect the views of MFS or any other person in the MFS organization. These views
are subject to change at any time based on market or other conditions, and MFS disclaims any responsibility to update such views. These views may not be relied upon as investment advice or an indication of trading
intent on behalf of any MFS portfolio. References to specific securities are not recommendations of such securities, and may not be representative of any MFS portfolio’s current or future investments.
3
Performance Summary THROUGH 9/30/23
The following chart illustrates a
representative class of the fund’s historical performance in comparison to its benchmark(s). Performance results include the deduction of the maximum applicable sales charge and reflect the percentage change in
net asset value, including reinvestment of dividends and capital gains distributions. The performance of other share classes will be greater than or less than that of the class depicted below. Benchmarks are unmanaged
and may not be invested in directly. Benchmark returns do not reflect sales charges, commissions or expenses. (See Notes to Performance Summary.)
Performance data shown represents past
performance and is no guarantee of future results. Investment return and principal value fluctuate so your shares, when sold, may be worth more or less than the original cost; current performance may be lower or
higher than quoted. The performance shown does not reflect the deduction of taxes, if any, that a shareholder would pay on fund distributions or the redemption of fund shares.
Growth of a Hypothetical $10,000
Investment
4
Performance Summary - continued
Total Returns through 9/30/23
Average annual without sales
charge
| Share Class | Class Inception Date | 1-yr | 5-yr | 10-yr |
| A | 10/13/71 | 17.07% | 8.45% | 10.56% |
| B | 9/07/93 | 16.18% | 7.64% | 9.74% |
| C | 1/03/94 | 16.19% | 7.64% | 9.73% |
| I | 1/02/97 | 17.36% | 8.72% | 10.83% |
| R1 | 4/01/05 | 16.20% | 7.64% | 9.73% |
| R2 | 10/31/03 | 16.78% | 8.18% | 10.29% |
| R3 | 4/01/05 | 17.06% | 8.45% | 10.56% |
| R4 | 4/01/05 | 17.38% | 8.71% | 10.84% |
| R6 | 5/01/06 | 17.44% | 8.79% | 10.92% |
Comparative benchmark(s)
| Standard & Poor’s 500 Stock Index (f) | 21.62% | 9.92% | 11.91% |
Average annual with sales
charge
| A With Initial Sales Charge (5.75%) | 10.34% | 7.17% | 9.91% |
| B With CDSC (Declining over six years from 4% to 0%) (v) | 12.18% | 7.34% | 9.74% |
| C With CDSC (1% for 12 months) (v) | 15.19% | 7.64% | 9.73% |
CDSC – Contingent Deferred
Sales Charge.
Class I, R1, R2, R3, R4, and R6
shares do not have a sales charge.
| (f) | Source: FactSet Research Systems Inc. |
| (v) | Assuming redemption at the end of the applicable period. |
Benchmark Definition(s)
Standard & Poor's 500 Stock
Index(g) – a market capitalization-weighted index of 500 widely held equity securities, designed to measure broad U.S. equity performance.
It is not possible to invest
directly in an index.
| (g) | “Standard & Poor's®” and “S&P®” are registered trademarks of Standard & Poor's Financial Services LLC (“S&P”) and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and have been licensed for use by S&P Dow Jones Indices LLC and sublicensed for certain purposes by MFS. The S&P 500® is a product of S&P Dow Jones Indices LLC, and has been licensed for use by MFS. MFS's product(s) is not sponsored, endorsed, sold, or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, or their respective affiliates, and neither S&P Dow Jones Indices LLC, Dow Jones, S&P, nor their respective affiliates make any representation regarding the advisability of investing in such product(s). |
Notes to Performance Summary
Average annual total return
represents the average annual change in value for each share class for the periods presented.
5
Performance Summary - continued
Performance results reflect any
applicable expense subsidies and waivers in effect during the periods shown. Without such subsidies and waivers the fund's performance results would be less favorable. Please see the prospectus and financial
statements for complete details.
Performance results do not include
adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles and may differ from amounts reported in the financial highlights.
From time to time the fund may
receive proceeds from litigation settlements, without which performance would be lower.
6
Expense Table
Fund expenses borne by the
shareholders during the period,
April 1, 2023 through September 30, 2023
April 1, 2023 through September 30, 2023
As a shareholder of the fund, you
incur two types of costs: (1) transaction costs, including sales charges (loads) on certain purchase or redemption payments, and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and
other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an
investment of $1,000 invested at the beginning of the period and held for the entire period April 1, 2023 through September 30, 2023.
Actual Expenses
The first line for each share class
in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over
the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled
“Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for
Comparison Purposes
The second line for each share class
in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information
to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown
in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line for each share class in the table is useful in
comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
7
Expense Table - continued
| Share Class | Annualized Expense Ratio | Beginning Account Value 4/01/23 | Ending Account Value 9/30/23 | Expenses Paid During Period (p) 4/01/23-9/30/23 | |
| A | Actual | 0.80% | $1,000.00 | $1,043.22 | $4.10 |
| Hypothetical (h) | 0.80% | $1,000.00 | $1,021.06 | $4.05 | |
| B | Actual | 1.55% | $1,000.00 | $1,039.29 | $7.92 |
| Hypothetical (h) | 1.55% | $1,000.00 | $1,017.30 | $7.84 | |
| C | Actual | 1.55% | $1,000.00 | $1,039.46 | $7.92 |
| Hypothetical (h) | 1.55% | $1,000.00 | $1,017.30 | $7.84 | |
| I | Actual | 0.55% | $1,000.00 | $1,044.61 | $2.82 |
| Hypothetical (h) | 0.55% | $1,000.00 | $1,022.31 | $2.79 | |
| R1 | Actual | 1.55% | $1,000.00 | $1,039.27 | $7.92 |
| Hypothetical (h) | 1.55% | $1,000.00 | $1,017.30 | $7.84 | |
| R2 | Actual | 1.05% | $1,000.00 | $1,042.07 | $5.38 |
| Hypothetical (h) | 1.05% | $1,000.00 | $1,019.80 | $5.32 | |
| R3 | Actual | 0.80% | $1,000.00 | $1,043.26 | $4.10 |
| Hypothetical (h) | 0.80% | $1,000.00 | $1,021.06 | $4.05 | |
| R4 | Actual | 0.55% | $1,000.00 | $1,044.69 | $2.82 |
| Hypothetical (h) | 0.55% | $1,000.00 | $1,022.31 | $2.79 | |
| R6 | Actual | 0.49% | $1,000.00 | $1,044.81 | $2.51 |
| Hypothetical (h) | 0.49% | $1,000.00 | $1,022.61 | $2.48 |
| (h) | 5% fund return per year before expenses. |
| (p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). Expenses paid do not include any applicable sales charges (loads). If these transaction costs had been included, your costs would have been higher. |
Notes to Expense Table
Expense ratios include 0.04% of
investment related expenses from short sales (See Note 2 of the Notes to Financial Statements).
8
Portfolio of Investments
9/30/23
The Portfolio of Investments is a
complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
| Issuer | Shares/Par | Value ($) | ||
| Common Stocks – 99.9% | ||||
| Aerospace & Defense – 3.7% | ||||
| Boeing Co. (a) | 259,519 | $49,744,602 | ||
| General Dynamics Corp. | 210,011 | 46,406,131 | ||
| Honeywell International, Inc. | 402,410 | 74,341,223 | ||
| Howmet Aerospace, Inc. | 950,289 | 43,950,866 | ||
| Leidos Holdings, Inc. | 356,634 | 32,867,389 | ||
| RTX Corp. | 172,217 | 12,394,458 | ||
| $259,704,669 | ||||
| Alcoholic Beverages – 0.6% | ||||
| Constellation Brands, Inc., “A” | 170,102 | $42,751,736 | ||
| Apparel Manufacturers – 0.7% | ||||
| NIKE, Inc., “B” | 541,177 | $51,747,345 | ||
| Automotive – 0.3% | ||||
| Aptiv PLC (a) | 248,668 | $24,516,178 | ||
| Broadcasting – 0.9% | ||||
| Walt Disney Co. (a) | 765,362 | $62,032,590 | ||
| Brokerage & Asset Managers – 1.9% | ||||
| Charles Schwab Corp. | 1,218,483 | $66,894,717 | ||
| CME Group, Inc. | 340,584 | 68,191,728 | ||
| $135,086,445 | ||||
| Business Services – 2.0% | ||||
| Accenture PLC, “A” | 369,891 | $113,597,225 | ||
| Tyler Technologies, Inc. (a) | 70,465 | 27,209,355 | ||
| $140,806,580 | ||||
| Cable TV – 0.7% | ||||
| Cable One, Inc. | 76,076 | $46,835,429 | ||
| Computer Software – 12.3% | ||||
| Cadence Design Systems, Inc. (a) | 378,214 | $88,615,540 | ||
| Microsoft Corp. (s) | 1,903,848 | 601,140,006 | ||
| NICE Systems Ltd., ADR (a) | 181,578 | 30,868,260 | ||
| Palo Alto Networks, Inc. (a) | 133,886 | 31,388,234 | ||
| Salesforce, Inc. (a) | 559,021 | 113,358,278 | ||
| $865,370,318 | ||||
9
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Common Stocks – continued | ||||
| Computer Software - Systems – 5.4% | ||||
| Apple, Inc. (s) | 1,516,393 | $259,621,645 | ||
| Constellation Software, Inc. | 30,694 | 63,366,924 | ||
| ServiceNow, Inc. (a) | 105,235 | 58,822,156 | ||
| $381,810,725 | ||||
| Construction – 2.6% | ||||
| AZEK Co., Inc. (a) | 973,310 | $28,946,239 | ||
| Masco Corp. | 640,711 | 34,246,003 | ||
| Sherwin-Williams Co. | 187,499 | 47,821,620 | ||
| Summit Materials, Inc., “A” (a) | 1,235,386 | 38,469,920 | ||
| Vulcan Materials Co. | 152,095 | 30,726,232 | ||
| $180,210,014 | ||||
| Consumer Products – 1.3% | ||||
| Colgate-Palmolive Co. | 652,519 | $46,400,626 | ||
| International Flavors & Fragrances, Inc. | 300,611 | 20,492,652 | ||
| Kenvue, Inc. | 1,253,499 | 25,170,260 | ||
| $92,063,538 | ||||
| Consumer Services – 0.2% | ||||
| Bright Horizons Family Solutions, Inc. (a) | 196,278 | $15,988,806 | ||
| Electrical Equipment – 1.3% | ||||
| Johnson Controls International PLC | 1,094,462 | $58,236,323 | ||
| TE Connectivity Ltd. | 276,795 | 34,192,486 | ||
| $92,428,809 | ||||
| Electronics – 5.4% | ||||
| Applied Materials, Inc. | 610,209 | $84,483,436 | ||
| Lam Research Corp. | 91,926 | 57,616,459 | ||
| Marvell Technology, Inc. | 746,664 | 40,416,922 | ||
| NVIDIA Corp. | 253,139 | 110,112,934 | ||
| NXP Semiconductors N.V. | 426,002 | 85,166,320 | ||
| $377,796,071 | ||||
| Energy - Independent – 4.2% | ||||
| ConocoPhillips | 1,074,005 | $128,665,799 | ||
| Diamondback Energy, Inc. | 294,207 | 45,566,780 | ||
| Hess Corp. | 498,324 | 76,243,572 | ||
| Valero Energy Corp. | 297,602 | 42,173,180 | ||
| $292,649,331 | ||||
10
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Common Stocks – continued | ||||
| Food & Beverages – 2.4% | ||||
| Hostess Brands, Inc. (a) | 573,758 | $19,111,879 | ||
| Mondelez International, Inc. | 863,092 | 59,898,585 | ||
| Oatly Group AB, ADR (a)(l) | 6,290,957 | 5,637,327 | ||
| PepsiCo, Inc. | 475,708 | 80,603,963 | ||
| $165,251,754 | ||||
| Gaming & Lodging – 0.6% | ||||
| Marriott International, Inc., “A” | 201,841 | $39,673,867 | ||
| General Merchandise – 0.7% | ||||
| Dollar General Corp. | 234,512 | $24,811,370 | ||
| Five Below, Inc. (a) | 153,638 | 24,720,354 | ||
| $49,531,724 | ||||
| Health Maintenance Organizations – 1.3% | ||||
| Cigna Group | 317,668 | $90,875,285 | ||
| Insurance – 3.0% | ||||
| Aon PLC | 252,657 | $81,916,452 | ||
| Chubb Ltd. | 443,216 | 92,268,707 | ||
| Willis Towers Watson PLC | 175,851 | 36,745,825 | ||
| $210,930,984 | ||||
| Internet – 8.5% | ||||
| Alphabet, Inc., “A” (a)(s) | 2,512,898 | $328,837,832 | ||
| Alphabet, Inc., “C” (a) | 649,699 | 85,662,813 | ||
| Gartner, Inc. (a) | 120,482 | 41,398,820 | ||
| Meta Platforms, Inc., “A” (a) | 471,789 | 141,635,776 | ||
| $597,535,241 | ||||
| Leisure & Toys – 0.7% | ||||
| Electronic Arts, Inc. | 384,212 | $46,259,125 | ||
| Machinery & Tools – 2.0% | ||||
| Eaton Corp. PLC | 178,850 | $38,145,128 | ||
| Ingersoll Rand, Inc. | 430,461 | 27,428,975 | ||
| Regal Rexnord Corp. | 176,068 | 25,156,596 | ||
| Wabtec Corp. | 495,400 | 52,646,158 | ||
| $143,376,857 | ||||
| Major Banks – 3.7% | ||||
| JPMorgan Chase & Co. | 962,385 | $139,565,073 | ||
| Morgan Stanley | 800,625 | 65,387,044 | ||
| PNC Financial Services Group, Inc. | 438,363 | 53,817,825 | ||
| $258,769,942 | ||||
11
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Common Stocks – continued | ||||
| Medical & Health Technology & Services – 1.5% | ||||
| ICON PLC (a) | 182,039 | $44,827,104 | ||
| McKesson Corp. | 136,278 | 59,260,488 | ||
| $104,087,592 | ||||
| Medical Equipment – 5.0% | ||||
| Agilent Technologies, Inc. | 512,552 | $57,313,565 | ||
| Becton, Dickinson and Co. | 213,857 | 55,288,450 | ||
| Boston Scientific Corp. (a) | 1,363,029 | 71,967,931 | ||
| Envista Holdings Corp. (a) | 909,159 | 25,347,353 | ||
| Masimo Corp. (a) | 108,880 | 9,546,598 | ||
| Medtronic PLC | 948,424 | 74,318,505 | ||
| STERIS PLC | 272,646 | 59,823,985 | ||
| $353,606,387 | ||||
| Network & Telecom – 0.8% | ||||
| Equinix, Inc., REIT | 73,692 | $53,519,552 | ||
| Oil Services – 0.5% | ||||
| Schlumberger Ltd. | 643,331 | $37,506,197 | ||
| Other Banks & Diversified Financials – 3.8% | ||||
| Moody's Corp. | 113,389 | $35,850,200 | ||
| Northern Trust Corp. | 538,642 | 37,424,846 | ||
| Visa, Inc., “A” (s) | 841,971 | 193,661,750 | ||
| $266,936,796 | ||||
| Pharmaceuticals – 6.2% | ||||
| AbbVie, Inc. | 298,474 | $44,490,535 | ||
| Eli Lilly & Co. | 197,784 | 106,235,720 | ||
| Johnson & Johnson | 636,443 | 99,125,997 | ||
| Pfizer, Inc. | 1,975,154 | 65,515,858 | ||
| Vertex Pharmaceuticals, Inc. (a) | 230,762 | 80,245,178 | ||
| Zoetis, Inc. | 249,656 | 43,435,151 | ||
| $439,048,439 | ||||
| Railroad & Shipping – 0.8% | ||||
| Canadian Pacific Kansas City Ltd. | 789,334 | $58,734,343 | ||
| Real Estate – 0.8% | ||||
| Extra Space Storage, Inc., REIT | 282,346 | $34,327,626 | ||
| Jones Lang LaSalle, Inc. (a) | 138,954 | 19,617,526 | ||
| $53,945,152 | ||||
12
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Common Stocks – continued | ||||
| Restaurants – 1.2% | ||||
| Starbucks Corp. | 600,490 | $54,806,722 | ||
| Wendy's Co. | 1,308,295 | 26,702,301 | ||
| $81,509,023 | ||||
| Specialty Chemicals – 1.8% | ||||
| Air Products & Chemicals, Inc. | 190,749 | $54,058,266 | ||
| Corteva, Inc. | 278,780 | 14,262,385 | ||
| DuPont de Nemours, Inc. | 810,930 | 60,487,269 | ||
| $128,807,920 | ||||
| Specialty Stores – 6.2% | ||||
| Amazon.com, Inc. (a)(s) | 2,056,884 | $261,471,094 | ||
| Home Depot, Inc. | 307,549 | 92,929,006 | ||
| Ross Stores, Inc. | 419,354 | 47,366,035 | ||
| Target Corp. | 312,004 | 34,498,282 | ||
| $436,264,417 | ||||
| Telecommunications - Wireless – 1.5% | ||||
| SBA Communications Corp., REIT | 441,505 | $88,376,056 | ||
| T-Mobile USA, Inc. | 121,419 | 17,004,731 | ||
| $105,380,787 | ||||
| Tobacco – 0.6% | ||||
| Philip Morris International, Inc. | 486,974 | $45,084,053 | ||
| Utilities - Electric Power – 2.8% | ||||
| Alliant Energy Corp. | 734,683 | $35,595,391 | ||
| Duke Energy Corp. | 530,239 | 46,798,894 | ||
| NextEra Energy, Inc. | 679,241 | 38,913,717 | ||
| PG&E Corp. (a) | 2,854,549 | 46,043,876 | ||
| PPL Corp. | 1,186,011 | 27,942,419 | ||
| $195,294,297 | ||||
| Total Common Stocks (Identified Cost, $4,704,771,376) | $7,023,728,318 | |||
| Strike Price | First Exercise | |||
| Warrants – 0.0% | ||||
| Computer Software - Systems – 0.0% | ||||
| Constellation Software, Inc. (CAD 100 principal amount of Series 2 Debentures for 1 warrant, Expiration 3/31/40) (a) (Identified Cost, $0) | CAD 11.5 | N/A | 30,929 | $0 |
13
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Investment Companies (h) – 0.6% | ||||
| Money Market Funds – 0.6% | ||||
| MFS Institutional Money Market Portfolio, 5.4% (v) (Identified Cost, $40,365,655) | 40,363,372 | $40,371,444 | ||
| Collateral for Securities Loaned – 0.0% | ||||
| JPMorgan U.S. Government Money Market Fund - Class IM Shares, 5.27% (j) (Identified Cost, $1,458,608) | 1,458,608 | $1,458,608 | ||
| Securities Sold Short – (0.3)% | ||||
| Telecommunications - Wireless – (0.3)% | ||||
| Crown Castle, Inc., REIT (Proceeds Received, $31,963,062) | (247,822) | $(22,807,059) | ||
| Other Assets, Less Liabilities – (0.2)% | (11,476,357) | |||
| Net Assets – 100.0% | $7,031,274,954 | |||
| (a) | Non-income producing security. | |||
| (h) | An affiliated issuer, which may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. At period end, the aggregate values of the fund's investments in affiliated issuers and in unaffiliated issuers were $40,371,444 and $7,025,186,926, respectively. | |||
| (j) | The rate quoted is the annualized seven-day yield of the fund at period end. | |||
| (l) | A portion of this security is on loan. See Note 2 for additional information. | |||
| (s) | Security or a portion of the security was pledged to cover collateral requirements for securities sold short. | |||
| (v) | Affiliated issuer that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
| The following abbreviations are used in this report and are defined: | |
| ADR | American Depositary Receipt |
| REIT | Real Estate Investment Trust |
| Abbreviations indicate amounts shown in currencies other than the U.S. dollar. All amounts are stated in U.S. dollars unless otherwise indicated. A list of abbreviations is shown below: | |
| CAD | Canadian Dollar |
At September 30, 2023, the fund had
cash collateral of $2,230 and other liquid securities with an aggregate value of $89,836,926 to cover any collateral or margin obligations for securities sold short. Restricted cash and/or deposits with brokers in the
Statement of Assets and Liabilities are comprised of cash collateral.
See Notes to Financial Statements
14
Financial Statements
Statement of Assets and
Liabilities
At 9/30/23
This statement represents your
fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
| Assets | |
| Investments in unaffiliated issuers, at value, including $2,353,068 of securities on loan (identified cost, $4,706,229,984) | $7,025,186,926 |
| Investments in affiliated issuers, at value (identified cost, $40,365,655) | 40,371,444 |
| Cash | 18,289 |
| Deposits with brokers for | |
| Securities sold short | 2,230 |
| Receivables for | |
| Investments sold | 46,644,089 |
| Fund shares sold | 6,558,500 |
| Interest and dividends | 7,934,215 |
| Other assets | 2,683 |
| Total assets | $7,126,718,376 |
| Liabilities | |
| Payables for | |
| Securities sold short, at value (proceeds received, $31,963,062) | $22,807,059 |
| Investments purchased | 45,513,520 |
| Fund shares reacquired | 22,411,651 |
| Collateral for securities loaned, at value (c) | 1,458,608 |
| Payable to affiliates | |
| Investment adviser | 243,759 |
| Administrative services fee | 5,084 |
| Shareholder servicing costs | 986,325 |
| Distribution and service fees | 31,385 |
| Payable for independent Trustees' compensation | 21,695 |
| Accrued expenses and other liabilities | 1,964,336 |
| Total liabilities | $95,443,422 |
| Net assets | $7,031,274,954 |
| Net assets consist of | |
| Paid-in capital | $4,296,722,332 |
| Total distributable earnings (loss) | 2,734,552,622 |
| Net assets | $7,031,274,954 |
| Shares of beneficial interest outstanding | 136,523,282 |
| (c) | Non-cash collateral is not included. |
15
Statement of Assets and Liabilities – continued
| Net assets | Shares outstanding | Net asset value per share (a) | |
| Class A | $1,288,552,319 | 25,421,886 | $50.69 |
| Class B | 5,385,864 | 122,654 | 43.91 |
| Class C | 44,531,893 | 1,024,715 | 43.46 |
| Class I | 3,701,926,865 | 70,579,202 | 52.45 |
| Class R1 | 3,328,777 | 78,626 | 42.34 |
| Class R2 | 13,611,232 | 281,823 | 48.30 |
| Class R3 | 35,980,853 | 717,340 | 50.16 |
| Class R4 | 9,985,340 | 196,841 | 50.73 |
| Class R6 | 1,927,971,811 | 38,100,195 | 50.60 |
| (a) | Maximum offering price per share was equal to the net asset value per share for all share classes, except for Class A, for which the maximum offering price per share was $53.78 [100 / 94.25 x $50.69]. On sales of $50,000 or more, the maximum offering price of Class A shares is reduced. A contingent deferred sales charge may be imposed on redemptions of Class A, Class B, and Class C shares. Redemption price per share was equal to the net asset value per share for Classes I, R1, R2, R3, R4, and R6. |
See Notes to Financial Statements
16
Financial Statements
Statement of Operations
Year ended 9/30/23
This statement describes how much
your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
| Net investment income (loss) | |
| Income | |
| Dividends | $106,194,980 |
| Dividends from affiliated issuers | 2,314,903 |
| Income on securities loaned | 264,003 |
| Other | 174,685 |
| Foreign taxes withheld | (361,392) |
| Total investment income | $108,587,179 |
| Expenses | |
| Management fee | $30,580,662 |
| Distribution and service fees | 4,085,677 |
| Shareholder servicing costs | 4,049,388 |
| Administrative services fee | 629,143 |
| Independent Trustees' compensation | 121,802 |
| Custodian fee | 222,903 |
| Shareholder communications | 172,820 |
| Audit and tax fees | 68,489 |
| Legal fees | 37,913 |
| Dividend and interest expense on securities sold short | 3,145,843 |
| Interest expense and fees | 42,278 |
| Miscellaneous | 280,352 |
| Total expenses | $43,437,270 |
| Fees paid indirectly | (3,458) |
| Reduction of expenses by distributor | (8,327) |
| Net expenses | $43,425,485 |
| Net investment income (loss) | $65,161,694 |
17
Statement of Operations –
continued
| Realized and unrealized gain (loss) | |
| Realized gain (loss) (identified cost basis) | |
| Unaffiliated issuers | $490,910,412 |
| Affiliated issuers | 17,366 |
| Foreign currency | 9,785 |
| Net realized gain (loss) | $490,937,563 |
| Change in unrealized appreciation or depreciation | |
| Unaffiliated issuers | $583,516,090 |
| Affiliated issuers | 2,158 |
| Securities sold short | 13,015,611 |
| Translation of assets and liabilities in foreign currencies | 917 |
| Net unrealized gain (loss) | $596,534,776 |
| Net realized and unrealized gain (loss) | $1,087,472,339 |
| Change in net assets from operations | $1,152,634,033 |
See Notes to Financial Statements
18
Financial Statements
Statements of Changes in Net
Assets
These statements describe the
increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| Year ended | ||
| 9/30/23 | 9/30/22 | |
| Change in net assets | ||
| From operations | ||
| Net investment income (loss) | $65,161,694 | $59,993,748 |
| Net realized gain (loss) | 490,937,563 | 415,002,471 |
| Net unrealized gain (loss) | 596,534,776 | (1,797,248,727) |
| Change in net assets from operations | $1,152,634,033 | $(1,322,252,508) |
| Total distributions to shareholders | $(512,700,968) | $(482,432,724) |
| Change in net assets from fund share transactions | $(396,517,039) | $110,267,716 |
| Total change in net assets | $243,416,026 | $(1,694,417,516) |
| Net assets | ||
| At beginning of period | 6,787,858,928 | 8,482,276,444 |
| At end of period | $7,031,274,954 | $6,787,858,928 |
See Notes to Financial Statements
19
Financial Statements
Financial Highlights
The financial highlights table is
intended to help you understand the fund's financial performance for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
| Class A | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $46.50 | $58.66 | $48.66 | $44.50 | $46.73 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $0.34 | $0.29 | $0.20 | $0.33 | $0.37 |
| Net realized and unrealized gain (loss) | 7.37 | (9.17) | 12.41 | 5.52 | 1.90 |
| Total from investment operations | $7.71 | $(8.88) | $12.61 | $5.85 | $2.27 |
| Less distributions declared to shareholders | |||||
| From net investment income | $(0.34) | $(0.19) | $(0.28) | $(0.35) | $(0.28) |
| From net realized gain | (3.18) | (3.09) | (2.33) | (1.34) | (4.22) |
| Total distributions declared to shareholders | $(3.52) | $(3.28) | $(2.61) | $(1.69) | $(4.50) |
| Net asset value, end of period (x) | $50.69 | $46.50 | $58.66 | $48.66 | $44.50 |
| Total return (%) (r)(s)(t)(x) | 17.07 | (16.34) | 26.85 | 13.46 | 6.46 |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 0.81 | 0.79 | 0.78 | 0.79 | 0.80 |
| Expenses after expense reductions (f) | 0.81 | 0.78 | 0.78 | 0.78 | 0.79 |
| Net investment income (loss) | 0.68 | 0.52 | 0.37 | 0.72 | 0.89 |
| Portfolio turnover | 24 | 17 | 26 | 36 | 32 |
| Net assets at end of period (000 omitted) | $1,288,552 | $1,198,757 | $1,536,575 | $1,290,401 | $1,452,740 |
| Supplemental Ratios (%): | |||||
| Ratios of expenses to average net assets after expense reductions excluding short sale expenses and interest expense and fees (f) | 0.76 | 0.76 | 0.76 | 0.77 | 0.77 |
See Notes to Financial Statements
20
Financial Highlights – continued
| Class B | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $40.69 | $51.91 | $43.39 | $39.84 | $42.40 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $(0.03) | $(0.12) | $(0.19) | $(0.01) | $0.05 |
| Net realized and unrealized gain (loss) | 6.43 | (8.01) | 11.04 | 4.93 | 1.66 |
| Total from investment operations | $6.40 | $(8.13) | $10.85 | $4.92 | $1.71 |
| Less distributions declared to shareholders | |||||
| From net investment income | $— | $— | $— | $(0.03) | $(0.05) |
| From net realized gain | (3.18) | (3.09) | (2.33) | (1.34) | (4.22) |
| Total distributions declared to shareholders | $(3.18) | $(3.09) | $(2.33) | $(1.37) | $(4.27) |
| Net asset value, end of period (x) | $43.91 | $40.69 | $51.91 | $43.39 | $39.84 |
| Total return (%) (r)(s)(t)(x) | 16.18 | (16.97) | 25.91 | 12.61 | 5.63 |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 1.56 | 1.53 | 1.53 | 1.54 | 1.55 |
| Expenses after expense reductions (f) | 1.56 | 1.53 | 1.53 | 1.54 | 1.54 |
| Net investment income (loss) | (0.06) | (0.25) | (0.39) | (0.03) | 0.14 |
| Portfolio turnover | 24 | 17 | 26 | 36 | 32 |
| Net assets at end of period (000 omitted) | $5,386 | $7,126 | $12,047 | $13,373 | $17,765 |
| Supplemental Ratios (%): | |||||
| Ratios of expenses to average net assets after expense reductions excluding short sale expenses and interest expense and fees (f) | 1.51 | 1.51 | 1.51 | 1.52 | 1.52 |
See Notes to Financial Statements
21
Financial Highlights – continued
| Class C | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $40.30 | $51.44 | $43.02 | $39.53 | $42.05 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $(0.03) | $(0.11) | $(0.19) | $(0.01) | $0.05 |
| Net realized and unrealized gain (loss) | 6.37 | (7.94) | 10.94 | 4.90 | 1.65 |
| Total from investment operations | $6.34 | $(8.05) | $10.75 | $4.89 | $1.70 |
| Less distributions declared to shareholders | |||||
| From net investment income | $— | $— | $— | $(0.06) | $— |
| From net realized gain | (3.18) | (3.09) | (2.33) | (1.34) | (4.22) |
| Total distributions declared to shareholders | $(3.18) | $(3.09) | $(2.33) | $(1.40) | $(4.22) |
| Net asset value, end of period (x) | $43.46 | $40.30 | $51.44 | $43.02 | $39.53 |
| Total return (%) (r)(s)(t)(x) | 16.19 | (16.97) | 25.90 | 12.62 | 5.64 |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 1.56 | 1.54 | 1.53 | 1.55 | 1.55 |
| Expenses after expense reductions (f) | 1.56 | 1.54 | 1.53 | 1.54 | 1.55 |
| Net investment income (loss) | (0.07) | (0.24) | (0.38) | (0.03) | 0.13 |
| Portfolio turnover | 24 | 17 | 26 | 36 | 32 |
| Net assets at end of period (000 omitted) | $44,532 | $47,651 | $68,140 | $70,785 | $71,371 |
| Supplemental Ratios (%): | |||||
| Ratios of expenses to average net assets after expense reductions excluding short sale expenses and interest expense and fees (f) | 1.51 | 1.51 | 1.51 | 1.53 | 1.53 |
See Notes to Financial Statements
22
Financial Highlights – continued
| Class I | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $48.01 | $60.47 | $50.09 | $45.74 | $48.03 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $0.48 | $0.44 | $0.35 | $0.45 | $0.49 |
| Net realized and unrealized gain (loss) | 7.61 | (9.47) | 12.77 | 5.70 | 1.93 |
| Total from investment operations | $8.09 | $(9.03) | $13.12 | $6.15 | $2.42 |
| Less distributions declared to shareholders | |||||
| From net investment income | $(0.47) | $(0.34) | $(0.41) | $(0.46) | $(0.49) |
| From net realized gain | (3.18) | (3.09) | (2.33) | (1.34) | (4.22) |
| Total distributions declared to shareholders | $(3.65) | $(3.43) | $(2.74) | $(1.80) | $(4.71) |
| Net asset value, end of period (x) | $52.45 | $48.01 | $60.47 | $50.09 | $45.74 |
| Total return (%) (r)(s)(t)(x) | 17.36 | (16.15) | 27.16 | 13.76 | 6.68 |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 0.56 | 0.54 | 0.53 | 0.55 | 0.55 |
| Expenses after expense reductions (f) | N/A | N/A | N/A | N/A | N/A |
| Net investment income (loss) | 0.93 | 0.77 | 0.62 | 0.97 | 1.13 |
| Portfolio turnover | 24 | 17 | 26 | 36 | 32 |
| Net assets at end of period (000 omitted) | $3,701,927 | $3,665,406 | $4,577,919 | $3,492,027 | $2,835,696 |
| Supplemental Ratios (%): | |||||
| Ratios of expenses to average net assets after expense reductions excluding short sale expenses and interest expense and fees (f) | 0.51 | 0.51 | 0.51 | 0.53 | 0.53 |
See Notes to Financial Statements
23
Financial Highlights – continued
| Class R1 | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $39.38 | $50.34 | $42.14 | $38.72 | $41.37 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $(0.03) | $(0.11) | $(0.18) | $(0.02) | $0.04 |
| Net realized and unrealized gain (loss) | 6.22 | (7.76) | 10.71 | 4.81 | 1.60 |
| Total from investment operations | $6.19 | $(7.87) | $10.53 | $4.79 | $1.64 |
| Less distributions declared to shareholders | |||||
| From net investment income | $(0.05) | $— | $— | $(0.03) | $(0.07) |
| From net realized gain | (3.18) | (3.09) | (2.33) | (1.34) | (4.22) |
| Total distributions declared to shareholders | $(3.23) | $(3.09) | $(2.33) | $(1.37) | $(4.29) |
| Net asset value, end of period (x) | $42.34 | $39.38 | $50.34 | $42.14 | $38.72 |
| Total return (%) (r)(s)(t)(x) | 16.20 | (16.98) | 25.92 | 12.62 | 5.62 |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 1.56 | 1.54 | 1.53 | 1.54 | 1.55 |
| Expenses after expense reductions (f) | 1.56 | 1.54 | 1.53 | N/A | N/A |
| Net investment income (loss) | (0.07) | (0.23) | (0.39) | (0.04) | 0.12 |
| Portfolio turnover | 24 | 17 | 26 | 36 | 32 |
| Net assets at end of period (000 omitted) | $3,329 | $2,933 | $3,416 | $3,596 | $4,187 |
| Supplemental Ratios (%): | |||||
| Ratios of expenses to average net assets after expense reductions excluding short sale expenses and interest expense and fees (f) | 1.51 | 1.51 | 1.51 | 1.53 | 1.53 |
See Notes to Financial Statements
24
Financial Highlights – continued
| Class R2 | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $44.44 | $56.29 | $46.78 | $42.85 | $45.23 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $0.21 | $0.14 | $0.06 | $0.20 | $0.25 |
| Net realized and unrealized gain (loss) | 7.04 | (8.76) | 11.92 | 5.33 | 1.82 |
| Total from investment operations | $7.25 | $(8.62) | $11.98 | $5.53 | $2.07 |
| Less distributions declared to shareholders | |||||
| From net investment income | $(0.21) | $(0.14) | $(0.14) | $(0.26) | $(0.23) |
| From net realized gain | (3.18) | (3.09) | (2.33) | (1.34) | (4.22) |
| Total distributions declared to shareholders | $(3.39) | $(3.23) | $(2.47) | $(1.60) | $(4.45) |
| Net asset value, end of period (x) | $48.30 | $44.44 | $56.29 | $46.78 | $42.85 |
| Total return (%) (r)(s)(t)(x) | 16.78 | (16.55) | 26.53 | 13.19 | 6.18 |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 1.06 | 1.04 | 1.03 | 1.04 | 1.05 |
| Expenses after expense reductions (f) | N/A | N/A | N/A | N/A | N/A |
| Net investment income (loss) | 0.44 | 0.27 | 0.12 | 0.47 | 0.63 |
| Portfolio turnover | 24 | 17 | 26 | 36 | 32 |
| Net assets at end of period (000 omitted) | $13,611 | $32,036 | $43,862 | $19,726 | $21,738 |
| Supplemental Ratios (%): | |||||
| Ratios of expenses to average net assets after expense reductions excluding short sale expenses and interest expense and fees (f) | 1.02 | 1.01 | 1.02 | 1.03 | 1.03 |
See Notes to Financial Statements
25
Financial Highlights – continued
| Class R3 | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $46.05 | $58.12 | $48.23 | $44.12 | $46.46 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $0.34 | $0.28 | $0.20 | $0.32 | $0.37 |
| Net realized and unrealized gain (loss) | 7.29 | (9.08) | 12.29 | 5.48 | 1.86 |
| Total from investment operations | $7.63 | $(8.80) | $12.49 | $5.80 | $2.23 |
| Less distributions declared to shareholders | |||||
| From net investment income | $(0.34) | $(0.18) | $(0.27) | $(0.35) | $(0.35) |
| From net realized gain | (3.18) | (3.09) | (2.33) | (1.34) | (4.22) |
| Total distributions declared to shareholders | $(3.52) | $(3.27) | $(2.60) | $(1.69) | $(4.57) |
| Net asset value, end of period (x) | $50.16 | $46.05 | $58.12 | $48.23 | $44.12 |
| Total return (%) (r)(s)(t)(x) | 17.06 | (16.34) | 26.85 | 13.46 | 6.44 |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 0.81 | 0.79 | 0.78 | 0.79 | 0.80 |
| Expenses after expense reductions (f) | N/A | N/A | N/A | N/A | N/A |
| Net investment income (loss) | 0.68 | 0.52 | 0.37 | 0.72 | 0.88 |
| Portfolio turnover | 24 | 17 | 26 | 36 | 32 |
| Net assets at end of period (000 omitted) | $35,981 | $34,133 | $43,493 | $40,434 | $44,941 |
| Supplemental Ratios (%): | |||||
| Ratios of expenses to average net assets after expense reductions excluding short sale expenses and interest expense and fees (f) | 0.76 | 0.76 | 0.76 | 0.78 | 0.78 |
See Notes to Financial Statements
26
Financial Highlights – continued
| Class R4 | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $46.55 | $58.72 | $48.71 | $44.53 | $46.88 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $0.47 | $0.42 | $0.34 | $0.43 | $0.47 |
| Net realized and unrealized gain (loss) | 7.37 | (9.16) | 12.40 | 5.55 | 1.88 |
| Total from investment operations | $7.84 | $(8.74) | $12.74 | $5.98 | $2.35 |
| Less distributions declared to shareholders | |||||
| From net investment income | $(0.48) | $(0.34) | $(0.40) | $(0.46) | $(0.48) |
| From net realized gain | (3.18) | (3.09) | (2.33) | (1.34) | (4.22) |
| Total distributions declared to shareholders | $(3.66) | $(3.43) | $(2.73) | $(1.80) | $(4.70) |
| Net asset value, end of period (x) | $50.73 | $46.55 | $58.72 | $48.71 | $44.53 |
| Total return (%) (r)(s)(t)(x) | 17.35 | (16.13) | 27.16 | 13.76 | 6.69 |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 0.56 | 0.53 | 0.53 | 0.54 | 0.55 |
| Expenses after expense reductions (f) | N/A | N/A | N/A | N/A | N/A |
| Net investment income (loss) | 0.94 | 0.76 | 0.62 | 0.97 | 1.13 |
| Portfolio turnover | 24 | 17 | 26 | 36 | 32 |
| Net assets at end of period (000 omitted) | $9,985 | $11,620 | $16,260 | $14,246 | $16,869 |
| Supplemental Ratios (%): | |||||
| Ratios of expenses to average net assets after expense reductions excluding short sale expenses and interest expense and fees (f) | 0.51 | 0.51 | 0.51 | 0.53 | 0.53 |
See Notes to Financial Statements
27
Financial Highlights – continued
| Class R6 | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $46.44 | $58.60 | $48.62 | $44.44 | $46.82 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $0.50 | $0.46 | $0.38 | $0.47 | $0.50 |
| Net realized and unrealized gain (loss) | 7.35 | (9.15) | 12.37 | 5.53 | 1.86 |
| Total from investment operations | $7.85 | $(8.69) | $12.75 | $6.00 | $2.36 |
| Less distributions declared to shareholders | |||||
| From net investment income | $(0.51) | $(0.38) | $(0.44) | $(0.48) | $(0.52) |
| From net realized gain | (3.18) | (3.09) | (2.33) | (1.34) | (4.22) |
| Total distributions declared to shareholders | $(3.69) | $(3.47) | $(2.77) | $(1.82) | $(4.74) |
| Net asset value, end of period (x) | $50.60 | $46.44 | $58.60 | $48.62 | $44.44 |
| Total return (%) (r)(s)(t)(x) | 17.44 | (16.09) | 27.25 | 13.85 | 6.75 |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 0.49 | 0.47 | 0.46 | 0.48 | 0.48 |
| Expenses after expense reductions (f) | N/A | N/A | N/A | N/A | N/A |
| Net investment income (loss) | 1.00 | 0.84 | 0.68 | 1.04 | 1.19 |
| Portfolio turnover | 24 | 17 | 26 | 36 | 32 |
| Net assets at end of period (000 omitted) | $1,927,972 | $1,788,197 | $2,180,565 | $1,632,527 | $1,433,024 |
| Supplemental Ratios (%): | |||||
| Ratios of expenses to average net assets after expense reductions excluding short sale expenses and interest expense and fees (f) | 0.45 | 0.45 | 0.45 | 0.46 | 0.46 |
| (d) | Per share data is based on average shares outstanding. |
| (f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. See Note 2 in the Notes to Financial Statements for additional information. |
| (r) | Certain expenses have been reduced without which performance would have been lower. |
| (s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
| (t) | Total returns do not include any applicable sales charges. |
| (x) | The net asset values and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
28
Notes to Financial Statements
(1) Business and
Organization
MFS Research Fund (the fund) is
a diversified series of MFS Series Trust V (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management
investment company.
The fund is an investment company
and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services - Investment
Companies.
(2) Significant Accounting
Policies
General — The preparation of financial statements in conformity with U.S. 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 increases and decreases in net assets from operations
during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s
Statement of Assets and Liabilities through the date that the financial statements were issued.
Balance Sheet Offsetting — The fund's accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the International
Swaps and Derivatives Association (ISDA) Master Agreement, or similar agreement, does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and
Liabilities across transactions between the fund and the applicable counterparty. The fund's right to setoff may be restricted or prohibited by the bankruptcy or insolvency laws of the particular jurisdiction to which
a specific master netting agreement counterparty is subject. Balance sheet offsetting disclosures, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note
under the captions for each of the fund’s in-scope financial instruments and transactions.
Investment Valuations — Subject to its oversight, the fund's Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments to MFS as
the fund's adviser, pursuant to the fund’s valuation policy and procedures which have been adopted by the adviser and approved by the Board. In accordance with Rule 2a-5 under the Investment Company Act of
1940, the Board of Trustees designated the adviser as the “valuation designee” of the fund. If the adviser, as valuation designee, determines that reliable market quotations are not readily available for
an investment, the investment is valued at fair value as determined in good faith by the adviser in accordance with the adviser’s fair valuation policy and procedures.
Under the fund's valuation policy
and procedures, equity securities, including restricted equity securities and equity securities sold short, are generally valued at the last sale or official closing price on their primary market or exchange as
provided by a third-party pricing service. Equity securities, for which there were no sales reported that day, are generally valued at the last quoted daily bid quotation on their primary market or exchange as
provided by a third-party pricing service. Equity securities sold short, for
29
Notes to Financial Statements -
continued
which there were no sales reported that day, are
generally valued at the last quoted daily ask quotation on their primary market or exchange as provided by a third-party pricing service. Short-term instruments with a maturity at issuance of 60 days or less may be
valued at amortized cost, which approximates market value. Open-end investment companies are generally valued at net asset value per share. The values of foreign securities and other assets and liabilities expressed
in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party pricing service.
Under the fund’s valuation
policy and procedures, market quotations are not considered to be readily available for debt instruments, floating rate loans, and many types of derivatives. These investments are generally valued at fair value based
on information from third-party pricing services or otherwise determined by the adviser in accordance with the adviser’s fair valuation policy and procedures. Securities and other assets generally valued on the
basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. In determining values, third-party pricing services can utilize both transaction data and market information
such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, spreads and other market data. An investment may also be valued at fair value if the adviser determines that the
investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the
determination of the fund’s net asset value, or after the halt of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally
traded. Events that occur after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be
deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on
third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the
business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes
of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net
asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the
same time at which the fund determines its net asset value per share.
Various inputs are used in
determining the value of the fund's assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value
hierarchy. In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund's assessment of the significance of a
particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or
liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes significant
30
Notes to Financial Statements -
continued
unobservable inputs, which may include the
adviser's own assumptions in determining the fair value of investments. The following is a summary of the levels used as of September 30, 2023 in valuing the fund's assets and liabilities:
| Financial Instruments | Level 1 | Level 2 | Level 3 | Total |
| Equity Securities: | ||||
| United States | $6,870,758,791 | $— | $— | $6,870,758,791 |
| Canada | 122,101,267 | 0 | — | 122,101,267 |
| Israel | 30,868,260 | — | — | 30,868,260 |
| Mutual Funds | 41,830,052 | — | — | 41,830,052 |
| Total | $7,065,558,370 | $0 | $— | $7,065,558,370 |
| Securities Sold Short | $(22,807,059) | $— | $— | $(22,807,059) |
For further information regarding
security characteristics, see the Portfolio of Investments.
Foreign Currency Translation — 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 or on the reporting date for foreign denominated receivables and payables. 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 receivables, payables, 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.
Short Sales — The fund entered into short sales whereby it sells a security it does not own in anticipation of a decline in the value of that security. The fund will realize a gain if the
security price decreases and a loss if the security price increases between the date of the short sale and the date on which the fund replaces the borrowed security. Losses from short sales can exceed the proceeds of
the security sold; and they can also exceed the potential loss from an ordinary buy and sell transaction. The amount of any premium, dividends, or interest the fund may be required to pay in connection with a short
sale will be recognized as a fund expense. During the year ended September 30, 2023, this expense amounted to $3,145,843.
Security Loans — Under its Securities Lending Agency Agreement with the fund, JPMorgan Chase and Co., as lending agent, loans the securities of the fund to certain qualified institutions (the
“Borrowers”) approved by the fund. Security loans can be terminated at the discretion of either the lending agent or the fund and the related securities must be returned within the earlier of the standard
trade settlement period for such securities or within three business days. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market
value of the securities loaned. On loans collateralized by cash, the cash collateral is invested in a money market fund. The market value of the loaned securities is determined at the close of business of the fund and
any additional required collateral is delivered to the fund on the next business day. The lending agent provides the fund with indemnification against Borrower default. In the event of Borrower default, the lending
agent will, for the benefit of the fund, either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the
31
Notes to Financial Statements -
continued
fund the market value of the loaned securities. In
return, the lending agent assumes the fund's rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, the lending agent is responsible for the shortfall, but
only to the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. At period end, the fund had investment securities on
loan, all of which were classified as equity securities in the fund's Portfolio of Investments, with a fair value of $2,353,068. The fair value of the fund's investment securities on loan and a related liability of
$1,458,608 for cash collateral received on securities loaned are both presented gross in the Statement of Assets and Liabilities. Additionally, these loans were collateralized by U.S. Treasury Obligations of
$1,049,043 held by the lending agent. The collateral on securities loaned exceeded the value of securities on loan at period end. The liability for cash collateral for securities loaned is carried at fair value, which
is categorized as level 2 within the fair value hierarchy. A portion of the income generated upon investment of the collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the
lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the Borrower, and is allocated between the fund and the lending agent. Income from securities lending
is separately reported in the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income.
Indemnifications — Under the fund's organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to
the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund's maximum exposure under these agreements is unknown
as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and
Income — Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such information is
obtained subsequent to the ex-dividend date. Dividend payments received in additional securities are recorded on the ex-dividend date in an amount equal to the value of the security on such date.
The fund may receive proceeds from
litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in
unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Investment transactions are recorded
on the trade date. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.
Fees Paid Indirectly — The fund's custody fee may be reduced by a credit earned under an arrangement that measures the value of U.S. dollars deposited with the custodian by the fund. The amount of the
credit, for the year ended September 30, 2023, is shown as a reduction of total expenses in the Statement of Operations.
Tax Matters and Distributions — The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including
realized capital gains. As a result,
32
Notes to Financial Statements -
continued
no provision for federal income tax is required.
The fund’s federal tax returns, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Management has analyzed the fund’s tax positions taken on federal and
state tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability. Foreign taxes, if any, have been accrued by the fund in the
accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests. Additionally, capital gains realized by the
fund on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those countries.
Distributions to shareholders are
recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital
accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary
differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future.
Book/tax differences primarily
relate to wash sale loss deferrals and treating a portion of the proceeds from redemptions as a distribution for tax purposes.
The tax character of distributions
declared to shareholders for the last two fiscal years is as follows:
| Year ended 9/30/23 | Year ended 9/30/22 | |
| Ordinary income (including any short-term capital gains) | $64,000,990 | $104,031,455 |
| Long-term capital gains | 448,699,978 | 378,401,269 |
| Total distributions | $512,700,968 | $482,432,724 |
The federal tax cost and the tax
basis components of distributable earnings were as follows:
| As of 9/30/23 | |
| Cost of investments | $4,740,659,750 |
| Gross appreciation | 2,611,903,492 |
| Gross depreciation | (309,811,931) |
| Net unrealized appreciation (depreciation) | $2,302,091,561 |
| Undistributed ordinary income | 37,267,938 |
| Undistributed long-term capital gain | 395,194,468 |
| Other temporary differences | (1,345) |
| Total distributable earnings (loss) | $2,734,552,622 |
Multiple Classes of Shares of
Beneficial Interest — The fund offers multiple classes of shares, which differ in their respective distribution and service fees. The fund's income, realized and unrealized gain (loss), and common
expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in
separate class expenses. Class B and Class C shares will convert to
33
Notes to Financial Statements -
continued
Class A shares approximately eight years after
purchase. The fund’s distributions declared to shareholders as reported in the Statements of Changes in Net Assets are presented by class as follows:
| Year ended 9/30/23 | Year ended 9/30/22 | ||
| Class A | $89,561,564 | $85,011,553 | |
| Class B | 513,792 | 683,436 | |
| Class C | 3,591,652 | 3,981,765 | |
| Class I | 271,873,886 | 258,213,877 | |
| Class R1 | 241,164 | 207,362 | |
| Class R2 | 2,320,635 | 2,424,401 | |
| Class R3 | 2,576,989 | 2,423,554 | |
| Class R4 | 909,091 | 906,505 | |
| Class R6 | 141,112,195 | 128,580,271 | |
| Total | $512,700,968 | $482,432,724 |
(3) Transactions with
Affiliates
Investment Adviser — The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates based on the fund's average daily net assets:
| Up to $5 billion | 0.43% |
| In excess of $5 billion and up to $10 billion | 0.40% |
| In excess of $10 billion | 0.37% |
The management fee incurred for the
year ended September 30, 2023 was equivalent to an annual effective rate of 0.42% of the fund's average daily net assets.
Distributor — MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, as distributor, received $57,040 for the year ended September 30, 2023, as its portion of the initial sales
charge on sales of Class A shares of the fund.
The Board of Trustees has adopted a
distribution plan for certain share classes pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund's distribution plan
provides that the fund will pay MFD for services provided by MFD and financial intermediaries in connection with the distribution and servicing of certain share classes. One component of the plan is a
distribution fee paid to MFD and another component of the plan is a service fee paid to MFD. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries. The
distribution and service fees are computed daily and paid monthly.
34
Notes to Financial Statements -
continued
Distribution Plan Fee Table:
| Distribution Fee Rate (d) | Service Fee Rate (d) | Total Distribution Plan (d) | Annual Effective Rate (e) | Distribution and Service Fee | |
| Class A | — | 0.25% | 0.25% | 0.25% | $ 3,255,545 |
| Class B | 0.75% | 0.25% | 1.00% | 1.00% | 65,031 |
| Class C | 0.75% | 0.25% | 1.00% | 1.00% | 480,444 |
| Class R1 | 0.75% | 0.25% | 1.00% | 1.00% | 32,688 |
| Class R2 | 0.25% | 0.25% | 0.50% | 0.50% | 160,105 |
| Class R3 | — | 0.25% | 0.25% | 0.25% | 91,864 |
| Total Distribution and Service Fees | $4,085,677 |
| (d) | In accordance with the distribution plan for certain classes, the fund pays distribution and/or service fees equal to these annual percentage rates of each class’s average daily net assets. The distribution and service fee rates disclosed by class represent the current rates in effect at the end of the reporting period. Any rate changes, if applicable, are detailed below. |
| (e) | The annual effective rates represent actual fees incurred under the distribution plan for the year ended September 30, 2023 based on each class's average daily net assets. MFD has voluntarily agreed to rebate a portion of each class's 0.25% service fee attributable to accounts for which there is no financial intermediary specified on the account except for accounts attributable to MFS or its affiliates' seed money. For the year ended September 30, 2023, this rebate amounted to $8,307, $14, $1, and $5 for Class A, Class B, Class C, and Class R1 shares, respectively, and is included in the reduction of total expenses in the Statement of Operations. |
Certain Class A shares are
subject to a contingent deferred sales charge (CDSC) in the event of a shareholder redemption within 18 months of purchase. Class B shares are subject to a CDSC in the event of a shareholder redemption within six
years of purchase. Class C shares are subject to a CDSC in the event of a shareholder redemption within 12 months of purchase. All contingent deferred sales charges are paid to MFD and during the year ended
September 30, 2023, were as follows:
| Amount | |
| Class A | $6,104 |
| Class B | 1,290 |
| Class C | 2,876 |
Shareholder Servicing Agent — MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent calculated as a percentage of the
average daily net assets of the fund as determined periodically under the supervision of the fund's Board of Trustees. For the year ended September 30, 2023, the fee was $403,942, which equated to 0.0056% annually of
the fund's average daily net assets. MFSC also receives reimbursement from the fund for out-of-pocket expenses, sub-accounting and other shareholder servicing costs which may be paid to affiliated and unaffiliated
service providers. Class R6 shares do not incur sub-accounting fees. For the year ended September 30, 2023, these out-of-pocket expenses, sub-accounting and other shareholder servicing costs amounted to
$3,645,446.
35
Notes to Financial Statements -
continued
Administrator — MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the
fund reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee is
computed daily and paid monthly. The administrative services fee incurred for the year ended September 30, 2023 was equivalent to an annual effective rate of 0.0087% of the fund's average daily net
assets.
Trustees’ and Officers’
Compensation — The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons.
Independent Trustees’ compensation is accrued daily and paid subsequent to each Trustee Board meeting. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers
of the investment adviser, all of whom receive remuneration from MFS for their services to the fund. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Prior to December 31, 2001, the fund
had an unfunded defined benefit plan (“DB plan”) for independent Trustees. As of December 31, 2001, the Board took action to terminate the DB plan with respect to then-current and any future
independent Trustees, such that the DB plan covers only certain of those former independent Trustees who retired on or before December 31, 2001. The DB plan resulted in a pension expense of $587 and is included in
“Independent Trustees’ compensation” in the Statement of Operations for the year ended September 30, 2023. The liability for deferred retirement benefits payable to those former independent Trustees
under the DB plan amounted to $1,077 at September 30, 2023, and is included in “Payable for independent Trustees’ compensation” in the Statement of Assets and Liabilities. The deferred
retirement benefits compensation fee is accrued daily and paid monthly.
Other — The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks current income consistent with preservation of capital and liquidity. This money
market fund does not pay a management fee to MFS but does incur investment and operating costs.
During the year ended September 30,
2023, pursuant to a policy adopted by the Board of Trustees and designed to comply with Rule 17a-7 under the Investment Company Act of 1940 (the “Act”) and relevant guidance, the fund engaged in
purchase transactions with funds and accounts for which MFS serves as investment adviser or sub-adviser (“cross-trades”) which amounted to $8,164,144.
The adviser has voluntarily
undertaken to reimburse the fund from its own resources on a quarterly basis for the cost of investment research embedded in the cost of the fund’s securities trades. This agreement may be rescinded at any time.
For the year ended September 30, 2023, this reimbursement amounted to $172,799, which is included in “Other” income in the Statement of Operations.
(4) Portfolio Securities
For the year ended September 30,
2023, purchases and sales of investments, other than short sales and short-term obligations, aggregated $1,770,581,564 and $2,572,056,918, respectively.
36
Notes to Financial Statements -
continued
(5) Shares of Beneficial
Interest
The fund's Declaration of Trust
permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
| Year ended 9/30/23 | Year ended 9/30/22 | ||||
| Shares | Amount | Shares | Amount | ||
| Shares sold | |||||
| Class A | 906,432 | $44,851,432 | 1,051,786 | $58,311,873 | |
| Class B | 68 | 2,850 | 1,037 | 53,432 | |
| Class C | 81,565 | 3,497,465 | 126,260 | 6,160,769 | |
| Class I | 10,539,224 | 539,599,456 | 12,746,586 | 727,917,046 | |
| Class R1 | 5,286 | 216,310 | 9,121 | 403,052 | |
| Class R2 | 95,531 | 4,585,182 | 111,029 | 5,868,109 | |
| Class R3 | 52,938 | 2,608,656 | 117,360 | 6,469,189 | |
| Class R4 | 26,663 | 1,317,928 | 37,571 | 2,164,599 | |
| Class R6 | 1,547,310 | 75,599,899 | 1,861,296 | 103,067,406 | |
| 13,255,017 | $672,279,178 | 16,062,046 | $910,415,475 | ||
| Shares issued to shareholders in reinvestment of distributions | |||||
| Class A | 1,748,944 | $83,302,157 | 1,321,232 | $78,296,097 | |
| Class B | 12,303 | 510,843 | 12,948 | 675,501 | |
| Class C | 82,683 | 3,397,461 | 73,864 | 3,816,563 | |
| Class I | 5,483,263 | 269,721,721 | 4,189,873 | 255,875,509 | |
| Class R1 | 6,025 | 241,164 | 4,106 | 207,362 | |
| Class R2 | 51,025 | 2,320,635 | 42,696 | 2,422,998 | |
| Class R3 | 54,667 | 2,576,989 | 41,294 | 2,423,554 | |
| Class R4 | 17,349 | 825,457 | 14,051 | 831,800 | |
| Class R6 | 2,931,232 | 139,028,313 | 2,154,549 | 127,204,589 | |
| 10,387,491 | $501,924,740 | 7,854,613 | $471,753,973 | ||
| Shares reacquired | |||||
| Class A | (3,014,342) | $(149,559,449) | (2,785,111) | $(154,253,367) | |
| Class B | (64,870) | (2,803,020) | (70,900) | (3,458,392) | |
| Class C | (322,045) | (13,738,300) | (342,258) | (16,472,060) | |
| Class I | (21,786,678) | (1,118,367,833) | (16,302,923) | (923,270,505) | |
| Class R1 | (7,164) | (297,087) | (6,604) | (314,997) | |
| Class R2 | (585,679) | (27,994,526) | (212,046) | (11,192,643) | |
| Class R3 | (131,507) | (6,429,468) | (165,730) | (9,096,817) | |
| Class R4 | (96,813) | (4,936,517) | (78,897) | (4,525,719) | |
| Class R6 | (4,880,504) | (246,594,757) | (2,726,427) | (149,317,232) | |
| (30,889,602) | $(1,570,720,957) | (22,690,896) | $(1,271,901,732) | ||
37
Notes to Financial Statements -
continued
| Year ended 9/30/23 | Year ended 9/30/22 | ||||
| Shares | Amount | Shares | Amount | ||
| Net change | |||||
| Class A | (358,966) | $(21,405,860) | (412,093) | $(17,645,397) | |
| Class B | (52,499) | (2,289,327) | (56,915) | (2,729,459) | |
| Class C | (157,797) | (6,843,374) | (142,134) | (6,494,728) | |
| Class I | (5,764,191) | (309,046,656) | 633,536 | 60,522,050 | |
| Class R1 | 4,147 | 160,387 | 6,623 | 295,417 | |
| Class R2 | (439,123) | (21,088,709) | (58,321) | (2,901,536) | |
| Class R3 | (23,902) | (1,243,823) | (7,076) | (204,074) | |
| Class R4 | (52,801) | (2,793,132) | (27,275) | (1,529,320) | |
| Class R6 | (401,962) | (31,966,545) | 1,289,418 | 80,954,763 | |
| (7,247,094) | $(396,517,039) | 1,225,763 | $110,267,716 | ||
The fund is one of several mutual
funds in which certain MFS funds may invest. The MFS funds do not invest in the underlying funds for the purpose of exercising management or control. At the end of the period, the MFS Growth Allocation Fund, the
MFS Moderate Allocation Fund, the MFS Aggressive Growth Allocation Fund, and the MFS Conservative Allocation Fund were the owners of record of approximately 8%, 7%, 4%, and 3%, respectively, of the value of
outstanding voting shares of the fund. In addition, the MFS Lifetime 2025 Fund, the MFS Lifetime 2030 Fund, the MFS Lifetime 2035 Fund, the MFS Lifetime 2040 Fund, the MFS Lifetime 2045 Fund, the MFS Lifetime 2050
Fund, the MFS Lifetime 2055 Fund, the MFS Lifetime 2060 Fund, the MFS Lifetime 2065 Fund, and the MFS Lifetime Income Fund were each the owners of record of less than 1% of the value of outstanding voting shares of
the fund.
Effective June 1, 2019, purchases of
the fund’s Class B shares were closed to new and existing investors subject to certain exceptions. On March 30, 2023, the fund announced that effective after the close of business on September 29, 2023,
purchases of Class R1 and Class R2 shares will be closed to new eligible investors.
(6) Line of Credit
The fund and certain other funds
managed by MFS participate in a $1.45 billion unsecured committed line of credit of which $1.2 billion is reserved for use by the fund and certain other MFS U.S. funds. The line of credit is provided by a syndicate of
banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the highest of 1) Daily Simple SOFR
(Secured Overnight Financing Rate) plus 0.10%, 2) the Federal Funds Effective Rate, or 3) the Overnight Bank Funding Rate, each plus an agreed upon spread. A commitment fee, based on the average daily unused portion
of the committed line of credit, is allocated among the participating funds. The line of credit expires on March 14, 2024 unless extended or renewed. In addition, the fund and other funds managed by MFS have
established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at rates equal to customary reference rates plus
an
38
Notes to Financial Statements -
continued
agreed upon spread. For the year ended September
30, 2023, the fund’s commitment fee and interest expense were $37,447 and $0, respectively, and are included in “Interest expense and fees” in the Statement of Operations.
(7) Investments in Affiliated
Issuers
An affiliated issuer may be
considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the following were affiliated issuers:
| Affiliated Issuers | Beginning Value | Purchases | Sales Proceeds | Realized Gain (Loss) | Change in Unrealized Appreciation or Depreciation | Ending Value |
| MFS Institutional Money Market Portfolio | $20,054,221 | $883,215,291 | $862,917,592 | $17,366 | $2,158 | $40,371,444 |
| Affiliated Issuers | Dividend Income | Capital Gain Distributions |
| MFS Institutional Money Market Portfolio | $2,314,903 | $— |
39
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of MFS
Series Trust V and the Shareholders of MFS Research Fund:
Opinion on the Financial Statements
and Financial Highlights
We have audited the accompanying
statement of assets and liabilities of MFS Research Fund (the “Fund”), including the portfolio of investments, as of September 30, 2023, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the
financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of September 30, 2023, and 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 accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements and
financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund's financial statements and financial highlights based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in
accordance with the standards of the PCAOB. 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, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required
to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we
express no such opinion.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights.
40
Report of Independent Registered Public
Accounting Firm – continued
Our procedures included confirmation of securities
owned as of September 30, 2023, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable
basis for our opinion.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 14, 2023
November 14, 2023
We have served as the auditor of
one or more of the MFS investment companies since 1924.
41
Trustees and
Officers — Identification and Background
The Trustees and Officers of the
Trust, as of November 1, 2023, are listed below, together with their principal occupations during the past five years. (Their titles may have varied during that period.) The address of each Trustee and Officer
is 111 Huntington Avenue, Boston, Massachusetts 02199-7618.
| Name, Age | Position(s) Held with Fund | Trustee/Officer Since(h) | Number of MFS Funds overseen by the Trustee | Principal Occupations During the Past Five Years | Other Directorships During the Past Five Years (j) | |||||
| INTERESTED TRUSTEE | ||||||||||
| Michael W. Roberge (k) (age 57) | Trustee | January 2021 | 136 | Massachusetts Financial Services Company, Chairman (since January 2021); Chief Executive Officer (since January 2017); Director; Chairman of the Board (since January 2022); President (until December 2018); Chief Investment Officer (until December 2018) | N/A | |||||
| INDEPENDENT TRUSTEES | ||||||||||
| John P. Kavanaugh (age 68) | Trustee and Chair of Trustees | January 2009 | 136 | Private investor | N/A | |||||
| Steven E. Buller (age 72) | Trustee | February 2014 | 136 | Private investor | N/A | |||||
| John A. Caroselli (age 69) | Trustee | March 2017 | 136 | Private investor; JC Global Advisors, LLC (management consulting), President (since 2015) | N/A | |||||
| Maureen R. Goldfarb (age 68) | Trustee | January 2009 | 136 | Private investor | N/A | |||||
| Peter D. Jones (age 68) | Trustee | January 2019 | 136 | Private investor | N/A | |||||
| James W. Kilman, Jr. (age 62) | Trustee | January 2019 | 136 | Burford Capital Limited (finance and investment management), Senior Advisor (since May 3, 2021), Chief Financial Officer (2019 - May 2, 2021); KielStrand Capital LLC (family office), Chief Executive Officer (since 2016) | Alpha-En Corporation, Director (2016-2019) |
42
Trustees and Officers - continued
| Name, Age | Position(s) Held with Fund | Trustee/Officer Since(h) | Number of MFS Funds overseen by the Trustee | Principal Occupations During the Past Five Years | Other Directorships During the Past Five Years (j) | |||||
| Clarence Otis, Jr. (age 67) | Trustee | March 2017 | 136 | Private investor | VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director | |||||
| Maryanne L. Roepke (age 67) | Trustee | May 2014 | 136 | Private investor | N/A | |||||
| Laurie J. Thomsen (age 66) | Trustee | March 2005 | 136 | Private investor | The Travelers Companies, Director; Dycom Industries, Inc., Director |
| Name, Age | Position(s) Held with Fund | Trustee/Officer Since(h) | Number of MFS Funds for which the Person is an Officer | Principal Occupations During the Past Five Years | ||||
| OFFICERS | ||||||||
| Christopher R. Bohane (k) (age 49) | Assistant Secretary and Assistant Clerk | July 2005 | 136 | Massachusetts Financial Services Company, Senior Vice President and Senior Managing Counsel | ||||
| Kino Clark (k) (age 55) | Assistant Treasurer | January 2012 | 136 | Massachusetts Financial Services Company, Vice President | ||||
| John W. Clark, Jr. (k) (age 56) | Assistant Treasurer | April 2017 | 136 | Massachusetts Financial Services Company, Vice President | ||||
| David L. DiLorenzo (k) (age 55) | President | July 2005 | 136 | Massachusetts Financial Services Company, Senior Vice President | ||||
| Heidi W. Hardin (k) (age 56) | Secretary and Clerk | April 2017 | 136 | Massachusetts Financial Services Company, Executive Vice President and General Counsel | ||||
| Brian E. Langenfeld (k) (age 50) | Assistant Secretary and Assistant Clerk | June 2006 | 136 | Massachusetts Financial Services Company, Vice President and Managing Counsel |
43
Trustees and Officers - continued
| Name, Age | Position(s) Held with Fund | Trustee/Officer Since(h) | Number of MFS Funds for which the Person is an Officer | Principal Occupations During the Past Five Years | ||||
| Rosa E. Licea-Mailloux (k) (age 47) | Chief Compliance Officer | March 2022 | 136 | Massachusetts Financial Services Company, Vice President (since 2018); Director of Corporate Compliance (2018-2021), Senior Director Compliance (2021-2022), Senior Managing Director of North American Compliance & Chief Compliance Officer (since March 2022); Natixis Investment Managers (investment management), Funds Chief Compliance Officer, Deputy General Counsel & Senior Vice President (until 2018) | ||||
| Amanda S. Mooradian (k) (age 44) | Assistant Secretary and Assistant Clerk | September 2018 | 136 | Massachusetts Financial Services Company, Assistant Vice President and Senior Counsel | ||||
| Susan A. Pereira (k) (age 52) | Assistant Secretary and Assistant Clerk | July 2005 | 136 | Massachusetts Financial Services Company, Vice President and Managing Counsel | ||||
| Kasey L. Phillips (k) (age 52) | Assistant Treasurer | September 2012 | 136 | Massachusetts Financial Services Company, Vice President | ||||
| Matthew A. Stowe (k) (age 48) | Assistant Secretary and Assistant Clerk | October 2014 | 136 | Massachusetts Financial Services Company, Vice President and Senior Managing Counsel | ||||
| William B. Wilson (k) (age 41) | Assistant Secretary and Assistant Clerk | October 2022 | 136 | Massachusetts Financial Services Company, Assistant Vice President and Senior Counsel | ||||
| James O. Yost (k) (age 63) | Treasurer | September 1990 | 136 | Massachusetts Financial Services Company, Senior Vice President |
| (h) | Date first appointed to serve as Trustee/Officer of an MFS Fund. Each Trustee has served continuously since appointment unless indicated otherwise. From January 2012 through December 2016, Messrs. DiLorenzo and Yost served as Treasurer and Deputy Treasurer of the Funds, respectively. |
| (j) | Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., “public companies”). |
| (k) | “Interested person” of the Trust within the meaning of the Investment Company Act of 1940 (referred to as the 1940 Act), which is the principal federal law governing investment companies like the fund, as a result of a position with MFS. The address of MFS is 111 Huntington Avenue, Boston, Massachusetts 02199-7618. |
44
Trustees and Officers - continued
Each Trustee (other than Messrs.
Jones, Kilman and Roberge) has been elected by shareholders and each Trustee and Officer holds office until his or her successor is chosen and qualified or until his or her earlier death, resignation, retirement or
removal. Mr. Roberge became a Trustee of the Funds on January 1, 2021 and Messrs. Jones and Kilman became Trustees of the Funds on January 1, 2019. The Trust does not hold annual meetings for the purpose of electing
Trustees, and Trustees are not elected for fixed terms. Under the terms of the Board's retirement policy, an Independent Trustee shall retire at the end of the calendar year in which he or she reaches the earlier of
75 years of age or 15 years of service on the Board (or, in the case of any Independent Trustee who joined the Board prior to 2015, 20 years of service on the Board).
Messrs. Buller, Kilman and Otis and
Ms. Roepke are members of the Trust’s Audit Committee.
Each of the Interested Trustees and
certain Officers hold comparable officer positions with certain affiliates of MFS.
The Statement of Additional
Information for a Fund includes further information about the Trustees and is available without charge upon request by calling 1-800-225-2606.
| Investment Adviser | Custodian |
| Massachusetts Financial Services Company 111 Huntington Avenue Boston, MA 02199-7618 | JPMorgan Chase Bank, NA 4 Metrotech Center New York, NY 11245 |
| Distributor | Independent Registered Public Accounting Firm |
| MFS Fund Distributors, Inc. 111 Huntington Avenue Boston, MA 02199-7618 | Deloitte & Touche LLP 200 Berkeley Street Boston, MA 02116 |
| Portfolio Manager(s) | |
| Joseph MacDougall |
45
Board Review of Investment Advisory
Agreement
MFS Research Fund
The Investment Company Act of 1940
requires that both the full Board of Trustees and a majority of the non-interested (“independent”) Trustees, voting separately, annually approve the continuation of the Fund’s investment advisory
agreement with MFS. The Trustees consider matters bearing on the Fund and its advisory arrangements at their meetings throughout the year, including a review of performance data at each regular meeting. In
addition, the independent Trustees met several times over the course of three months beginning in May and ending in July, 2023 (“contract review meetings”) for the specific purpose of considering whether
to approve the continuation of the investment advisory agreement for the Fund and the other investment companies that the Board oversees (the “MFS Funds”). The independent Trustees were assisted in
their evaluation of the Fund’s investment advisory agreement by independent legal counsel, from whom they received separate legal advice and with whom they met separately from MFS during various contract review
meetings. The independent Trustees were also assisted in this process by an independent consultant who was retained by and reported to the independent Trustees.
In connection with their
deliberations regarding the continuation of the investment advisory agreement, the Trustees, including the independent Trustees, considered such information and factors as they believed, in light of the legal advice
furnished to them and their own business judgment, to be relevant. The investment advisory agreement for the Fund was considered separately, although the Trustees also took into account the common interests of
all MFS Funds in their review. As described below, the Trustees considered the nature, quality, and extent of the various investment advisory, administrative, and shareholder services performed by MFS under the
existing investment advisory agreement and other arrangements with the Fund.
In connection with their contract
review meetings, the Trustees received and relied upon materials that included, among other items: (i) information provided by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent third
party, on the investment performance of the Fund for various time periods ended December 31, 2022 and the investment performance of a group of funds with substantially similar investment classifications/objectives
(the “Broadridge performance universe”), (ii) information provided by Broadridge on the Fund’s advisory fees and other expenses and the advisory fees and other expenses of comparable funds identified
by Broadridge as well as all other funds in the same investment classification/category (the “Broadridge expense group and universe”), (iii) information provided by MFS on the advisory fees of portfolios
of other clients of MFS, including institutional separate accounts and other clients, (iv) information as to whether and to what extent applicable expense waivers, reimbursements or fee “breakpoints” are
observed for the Fund, (v) information regarding MFS’ financial results and financial condition, including MFS’ and certain of its affiliates’ estimated profitability from services performed for the
Fund and the MFS Funds as a whole, and compared to MFS’ institutional business, (vi) MFS’ views regarding the outlook for the mutual fund industry and the strategic business plans of MFS, (vii)
descriptions of various functions performed by MFS for the Funds, such as compliance monitoring and portfolio trading practices, and (viii) information regarding the overall organization of MFS, including information
about
46
Board Review of Investment Advisory
Agreement - continued
MFS’ senior management and other personnel
providing investment advisory, administrative and other services to the Fund and the other MFS Funds. The comparative performance, fee and expense information prepared and provided by Broadridge was not
independently verified and the independent Trustees did not independently verify any information provided to them by MFS.
The Trustees’ conclusion as to
the continuation of the investment advisory agreement was based on a comprehensive consideration of all information provided to the Trustees and not the result of any single factor. Some of the factors that
figured particularly in the Trustees’ deliberations are described below, although individual Trustees may have evaluated the information presented differently from one another, giving different weights to
various factors. It is also important to recognize that the fee arrangements for the Fund and other MFS Funds are the result of years of review and discussion between the independent Trustees and MFS, that
certain aspects of such arrangements may receive greater scrutiny in some years than in others, and that the Trustees’ conclusions may be based, in part, on their consideration of these same arrangements during
the course of the year and in prior years.
Based on information provided by
Broadridge and MFS, the Trustees reviewed the Fund’s total return investment performance as well as the Broadridge performance universe over various time periods. The Trustees placed particular emphasis on
the total return performance of the Fund’s Class I shares in comparison to the performance of funds in its Broadridge performance universe over the five-year period ended December 31, 2022, which the Trustees
believed was a long enough period to reflect differing market conditions. The total return performance of the Fund’s Class I shares was in the 2nd quintile relative to the other funds in the universe for this five-year period (the 1st quintile being the best performers and the 5th quintile being the worst performers). The total return performance of the Fund’s Class I shares was in the 3rd quintile for the one-year period and the 4th quintile for the three-year period ended December 31, 2022 relative to the Broadridge performance universe. Because of the passage of time,
these performance results may differ from the performance results for more recent periods, including those shown elsewhere in this report.
In the course of their
deliberations, the Trustees took into account information provided by MFS in connection with the contract review meetings, as well as during investment review meetings conducted with portfolio management personnel
during the course of the year regarding the Fund’s performance. After reviewing these and related factors, the Trustees concluded, within the context of their overall conclusions regarding the investment
advisory agreement, that they were satisfied with MFS’ responses and efforts relating to investment performance.
In assessing the reasonableness of
the Fund’s advisory fee, the Trustees considered, among other information, the Fund’s advisory fee and the total expense ratio of the Fund’s Class I shares as a percentage of average daily net assets
and the advisory fee and total expense ratios of the Broadridge expense group based on information provided by Broadridge. The Trustees considered that, according to the data provided by Broadridge (which takes
into account any fee reductions or expense limitations that were in effect during the Fund’s last fiscal year), the Fund’s effective advisory fee rate and total expense ratio were each lower than the
Broadridge expense group median.
47
Board Review of Investment Advisory
Agreement - continued
The Trustees also considered the
advisory fees charged by MFS to any institutional separate accounts advised by MFS (“separate accounts”) and unaffiliated investment companies for which MFS serves as subadviser (“subadvised
funds”) that have comparable investment strategies to the Fund, if any. In comparing these fees, the Trustees considered information provided by MFS as to the generally broader scope of services provided by MFS
to the Fund, as well as the more extensive regulatory burdens imposed on MFS in managing the Fund, in comparison to separate accounts and subadvised funds. The Trustees also considered the higher demands placed on
MFS’ investment personnel and trading infrastructure as a result of the daily cash in-flows and out-flows of the Fund in comparison to separate accounts.
The Trustees also considered whether
the Fund may benefit from any economies of scale in the management of the Fund in the event of growth in assets of the Fund. They noted that the Fund’s advisory fee rate schedule is subject to contractual
breakpoints that reduce the Fund’s advisory fee rate on average daily net assets over $5 billion and $10 billion. The Trustees concluded that the breakpoints were sufficient to allow the Fund to benefit
from economies of scale as its assets grow.
The Trustees also considered
information prepared by MFS relating to MFS’ costs and profits with respect to the Fund, the MFS Funds considered as a group, and other investment companies and accounts advised by MFS, as well as MFS’
methodologies used to determine and allocate its costs to the MFS Funds, the Fund and other accounts and products for purposes of estimating profitability.
After reviewing these and other
factors described herein, the Trustees concluded, within the context of their overall conclusions regarding the investment advisory agreement, that the advisory fees charged to the Fund represent reasonable
compensation in light of the services being provided by MFS to the Fund.
In addition, the Trustees considered
MFS’ resources and related efforts to continue to retain, attract and motivate capable personnel to serve the Fund. The Trustees also considered current and developing conditions in the financial services
industry, including the presence of large and well-capitalized companies which are spending, and appear to be prepared to continue to spend, substantial sums to engage personnel and to provide services to competing
investment companies. In this regard, the Trustees also considered the financial resources of MFS and its ultimate parent, Sun Life Financial Inc. The Trustees also considered the advantages and possible
disadvantages to the Fund of having an adviser that also serves other investment companies as well as other accounts.
The Trustees also considered the
nature, quality, cost, and extent of administrative, transfer agency, and distribution services provided to the Fund by MFS and its affiliates under agreements and plans other than the investment advisory agreement,
including any 12b-1 fees the Fund pays to MFS Fund Distributors, Inc., an affiliate of MFS. The Trustees also considered the nature, extent and quality of certain other services MFS performs or arranges for on
the Fund’s behalf, which may include securities lending programs, directed expense payment programs, class action recovery programs, and MFS’ interaction with third-party service providers, principally
custodians and sub-custodians. The Trustees concluded that the various non-advisory services provided by MFS and its affiliates on behalf of the Fund were satisfactory.
48
Board Review of Investment Advisory
Agreement - continued
The Trustees considered so-called
“fall-out benefits” to MFS such as reputational value derived from serving as investment manager to the MFS Funds. The Trustees also considered that MFS discontinued its historic practice of
obtaining investment research from portfolio brokerage commissions paid by certain MFS Funds effective January 2018, and directly pays or voluntarily reimburses a Fund, if applicable, for the costs of external
research acquired through the use of the Fund’s portfolio brokerage commissions.
Based on their evaluation of factors
that they deemed to be material, including those factors described above, the Board of Trustees, including the independent Trustees, concluded that the Fund’s investment advisory agreement with MFS should be
continued for an additional one-year period, commencing August 1, 2023.
49
Proxy Voting Policies and
Information
MFS votes proxies on behalf of the
fund pursuant to proxy voting policies and procedures that are available without charge, upon request, by calling 1-800-225-2606, by visiting mfs.com/proxyvoting, or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund
voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available by August 31 of each year without charge by visiting mfs.com/proxyvoting, or by visiting the SEC’s Web site at http://www.sec.gov.
Quarterly Portfolio
Disclosure
The fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund's Form N-PORT reports are available on the SEC's Web site at http://www.sec.gov. A shareholder can obtain the portfolio holdings report for the first and third quarters of the fund's fiscal year at mfs.com/openendfunds by choosing the fund's name and then scrolling to the “Resources” section and clicking on the “Prospectus and Reports” tab.
Further Information
From time to time, MFS may post
important information about the fund or the MFS Funds on the MFS Web site (mfs.com). This information is available at https://www.mfs.com/announcements or at mfs.com/openendfunds by choosing the fund’s name and then scrolling to the “Resources” section and clicking on the “Announcements” tab, if any.
Information About Fund
Contracts and Legal Claims
The fund has entered into
contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, and custodian who each provide services to the fund. Unless expressly stated otherwise, shareholders are
not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek
any remedy under them against the service providers, either directly or on behalf of the fund.
Under the Trust’s By-Laws and
Declaration of Trust, any claims asserted against or on behalf of the MFS Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of
Massachusetts.
Federal Tax Information
(unaudited)
The fund will notify shareholders of
amounts for use in preparing 2023 income tax forms in January 2024. The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund designates the maximum
amount allowable as qualified dividend income eligible to be taxed at the same rate as long-term capital gain.
The fund designates $526,759,000 as
capital gain dividends paid during the fiscal year.
For corporate shareholders, 100.00%
of the ordinary income dividends paid during the prior calendar year qualify for the corporate dividends received deduction.
50
Federal Tax Information (unaudited) - continued
The fund designates the maximum
amount allowable as Section 199A dividends as defined in Proposed Treasury Regulation §1.199A-3(d).
51
rev. 3/16
| FACTS | WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION? |
| Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
| What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include: |
| • Social Security number and account balances | |
| • Account transactions and transaction history | |
| • Checking account information and wire transfer instructions | |
| When you are no longer our customer, we continue to share your information as described in this notice. |
| How? | All financial companies need to share customers' personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers' personal information; the reasons MFS chooses to share; and whether you can limit this sharing. |
| Reasons we can share your personal information | Does MFS share? | Can you limit this sharing? |
| For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | Yes | No |
| For our marketing purposes – to offer our products and services to you | No | We don't share |
| For joint marketing with other financial companies | No | We don't share |
| For our affiliates' everyday business purposes – information about your transactions and experiences | No | We don't share |
| For our affiliates' everyday business purposes – information about your creditworthiness | No | We don't share |
| For nonaffiliates to market to you | No | We don't share |
| Questions? | Call 800-225-2606 or go to mfs.com. |
52
Page 2
| Who we are | |
| Who is providing this notice? | MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., and MFS Heritage Trust Company. |
| What we do | |
| How does MFS protect my personal information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you. |
| How does MFS collect my personal information? | We collect your personal information, for example, when you |
| • open an account or provide account information | |
| • direct us to buy securities or direct us to sell your securities | |
| • make a wire transfer | |
| We also collect your personal information from others, such as credit bureaus, affiliates, or other companies. | |
| Why can't I limit all sharing? | Federal law gives you the right to limit only |
| • sharing for affiliates' everyday business purposes – information about your creditworthiness | |
| • affiliates from using your information to market to you | |
| • sharing for nonaffiliates to market to you | |
| State laws and individual companies may give you additional rights to limit sharing. | |
| Definitions | |
| Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies. |
| • MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice. | |
| Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies. |
| • MFS does not share with nonaffiliates so they can market to you. | |
| Joint marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you. |
| • MFS doesn't jointly market. | |
| Other important information |
| If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. |
53
Annual Report
September 30, 2023
MFS® Total Return Fund
MTR-ANN
MFS® Total Return Fund
CONTENTS
| 1 | |
| 4 | |
| 7 | |
| 10 | |
| 12 | |
| 32 | |
| 34 | |
| 36 | |
| 37 | |
| 43 | |
| 58 | |
| 60 | |
| 64 | |
| 68 | |
| 68 | |
| 68 | |
| 68 | |
| 68 | |
| 70 |
| back cover |
The report is prepared for the
general information of shareholders. It is authorized for distribution to prospective investors only when preceded or accompanied by a current prospectus.
NOT FDIC INSURED
• MAY LOSE VALUE • NO BANK GUARANTEE
Portfolio Composition - continued
Fixed income sectors (i)
| Mortgage-Backed Securities | 13.2% |
| U.S. Treasury Securities | 12.4% |
| Investment Grade Corporates | 12.2% |
| Collateralized Debt Obligations | 3.3% |
| Commercial Mortgage-Backed Securities | 1.9% |
| Asset-Backed Securities | 0.6% |
| Municipal Bonds | 0.3% |
| Emerging Markets Bonds | 0.1% |
| High Yield Corporates | 0.1% |
| Non-U.S. Government Bonds (o) | 0.0% |
| U.S. Government Agencies (o) | 0.0% |
| (a) | For all securities other than those specifically described below, ratings are assigned to underlying securities utilizing ratings from Moody’s, Fitch, and Standard & Poor’s rating agencies and applying the following hierarchy: If all three agencies provide a rating, the middle rating (after dropping the highest and lowest ratings) is assigned; if two of the three agencies rate a security, the lower of the two is assigned. If none of the 3 rating agencies above assign a rating, but the security is rated by DBRS Morningstar, then the DBRS Morningstar rating is assigned. If none of the 4 rating agencies listed above rate the security, but the security is rated by the Kroll Bond Rating Agency (KBRA), then the KBRA rating is assigned. Ratings are shown in the S&P and Fitch scale (e.g., AAA). Securities rated BBB or higher are considered investment grade. All ratings are subject to change. U.S. Government includes securities issued by the U.S. Department of the Treasury. Federal Agencies includes rated and unrated U.S. Agency fixed-income securities, U.S. Agency mortgage-backed securities, and collateralized mortgage obligations of U.S. Agency mortgage-backed securities. |
Not Rated includes fixed income
securities and fixed income derivatives that have not been rated by any rating agency. Non-Fixed Income includes equity securities (including convertible bonds and equity derivatives), ETFs and Options on ETFs, and/or
commodity-linked derivatives.
The fund may or may not have
held all of these instruments on this date. The fund is not rated by these agencies.
| (g) | The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and S&P Global Market Intelligence Inc. (“S&P Global Market Intelligence”). GICS is a service mark of MSCI and S&P Global Market Intelligence and has been licensed for use by MFS. MFS has applied its own internal sector/industry classification methodology for equity securities and non-equity securities that are unclassified by GICS. |
| (h) | UMBS may include both Fannie Mae and Freddie Mac securities. |
| (i) | For purposes of this presentation, the components include the value of securities, and reflect the impact of the equivalent exposure of derivative positions, if any. These amounts may be negative from time to time. Equivalent exposure is a calculated amount that translates the derivative position into a reasonable approximation of the amount of the underlying asset that the portfolio would have to hold at a given point in time to have the same price sensitivity that results from the portfolio’s ownership of the derivative contract. When dealing with derivatives, equivalent exposure is a more representative measure of the potential impact of a position on portfolio performance than value. The bond component will include any accrued interest amounts. |
| (o) | Less than 0.1%. |
Where the fund holds convertible
bonds, they are treated as part of the equity portion of the portfolio.
2
Portfolio Composition - continued
Cash & Cash Equivalents includes
any cash, investments in money market funds, short-term securities, and other assets less liabilities. Please see the Statement of Assets and Liabilities for additional information related to the fund’s cash
position and other assets and liabilities.
Other includes equivalent exposure
from currency derivatives and/or any offsets to derivative positions and may be negative.
Percentages are based on net assets
as of September 30, 2023.
The portfolio is actively managed
and current holdings may be different.
3
Management Review
Summary of Results
For the twelve months ended
September 30, 2023, Class A shares of the MFS Total Return Fund (fund) provided a total return of 9.43%, at net asset value. This compares with a return of 21.62% and 0.64% for the fund’s benchmarks, the
Standard & Poor’s 500 Stock Index (S&P 500 Index) and the Bloomberg U.S. Aggregate Bond Index (Bloomberg Index), respectively. The fund’s other benchmark, the MFS Total Return Blended Index
(Blended Index), generated a return of 13.01%. The Blended Index reflects the blended returns of the equity and fixed income market indices, with percentage allocations to each index designed to resemble the
equity and fixed income allocations of the fund. The market indices and related percentage allocations used to compile the Blended Index are set forth in the Performance Summary.
Market Environment
During the reporting period, central
banks around the world had to combat the strongest inflationary pressures in four decades, fueled by the global fiscal response to the pandemic, disrupted supply chains and the dislocations to energy markets stemming
from the war in Ukraine. Interest rates rose substantially, but the effects of a tighter monetary policy may not have been fully experienced yet, given that monetary policy works with long and variable lags. Strains
resulting from the abrupt tightening of monetary policy began to affect some parts of the economy, most acutely among small and regional US banks, which suffered from deposit flight as depositors sought higher yields
on their savings. Those shifts exposed an asset-liability mismatch that forced the closure of several institutions by regulators. Given the importance of small and mid-sized lenders to the provision of credit in the
US, concerns were raised in the aftermath of the crisis that credit availability could become constrained, leading to slower economic growth, although those effects have been limited thus far. Additionally, activity
in the US housing sector has slowed as a result of higher mortgage rates. China’s abandonment of its Zero-COVID policy ushered in a brief uptick in economic activity in the world’s second-largest economy
in early 2023, although its momentum soon stalled as focus turned to the country’s highly-indebted property development sector. In developed markets, consumer demand for services remained stronger than the
demand for goods.
Policymakers found themselves in the
difficult position of trying to restrain inflation without tipping economies into recession. Despite the challenging macroeconomic and geopolitical environment, central banks remained focused on controlling price
pressures while also confronting increasing financial stability concerns. Central banks had to juggle achieving their inflation mandates while using macroprudential tools to keep banking systems liquid, a potentially
difficult balancing act, and one that suggested that we may be nearing a peak in policy rates.
Against an environment of relatively
tight labor markets, tighter global financial conditions and volatile materials prices, investor anxiety appeared to have increased over the potential that corporate profit margins may be past peak for this cycle.
That said, signs that supply chains have generally normalized, coupled with low levels of unemployment across developed markets and hopes that inflation levels have peaked, were supportive factors for the
macroeconomic backdrop.
4
Management Review - continued
Detractors from Performance
Within the equity portion of the
fund, a combination of stock selection and an overweight position in the financials sector detracted from performance relative to the S&P 500 Index, led by the fund’s overweight positions in financial
services providers Charles Schwab, Truist Financial, Bank of America, and Northern Trust. The share price of Charles Schwab fell sharply in March due to regional bank failures attributed to problems related to rising
interest rates and troubled loan portfolios.
An underweight position and stock
selection in the information technology sector also held back relative returns. Within this sector, not owning shares of computer graphics processor maker NVIDIA and broadband communications and networking services
company Broadcom weighed on relative results as both stocks outperformed the S&P 500 Index. The stock price of NVIDIA climbed as the company reported earnings per share results well above expectations, primarily
driven by stronger-than-expected revenue growth within its data center, generative AI and networking segments. NVIDIA’s revenue and earnings per share guidance were significantly above expectations, driven by
continued robust demand related to generative AI, which further supported the stock.
Security selection within the
communication services sector dampened relative performance. Here, not owning shares of strong-performing social networking service provider Meta Platforms hindered relative results. The share price of Meta Platforms
appreciated as the company reported robust revenue growth, implemented effective cost controls, such as job restructuring and property consolidation, and experienced stronger-than-anticipated user engagement across
its applications.
Individual stocks within other
sectors that weakened relative returns included the fund's overweight positions in global health services provider Cigna Group and global aerospace and defense technology innovator L3Harris Technologies, and not
owning shares of pharmaceutical company Eli Lilly.
Within the fixed income portion of
the fund, an overweight allocation and bond selection within the MBS (Mortgage-backed securities) agency fixed-rate sector held back relative performance. Additionally, not owning any securities within the
strong-performing government-related sovereign sector also weakened relative returns.
Contributors to Performance
Within the equity portion of the
fund, an underweight position and stock selection in the consumer discretionary sector supported performance relative to the S&P 500 Index. Within this sector, not owning shares of electric vehicle manufacturer
Tesla and internet retailer Amazon.com helped relative results. The share price of Tesla declined due to uncertainties surrounding production shutdowns at the company’s Shanghai manufacturing plant, reduced
vehicle deliveries, increased competitive concerns, and questions regarding Tesla CEO Elon Musk’s acquisition of social media platform X (formerly Twitter).
An underweight position in the real
estate sector also benefited relative results, however, there were no individual stocks within this sector, either in the fund or in the benchmark, that were among the fund’s largest relative contributors during
the period.
5
Management Review - continued
Stocks in other sectors that
contributed to relative performance included the fund’s overweight positions in diversified industrial manufacturer Eaton, cable services provider Comcast, global financial services firm JPMorgan Chase,
pharmaceutical company Merck(h), global integrated energy company Hess and semiconductor chips and electronics engineering solutions provider Applied Materials. The share price of Eaton advanced as the company posted
above-consensus operating revenue in the Americas region, driven by a robust backlog of electrical orders and power grid improvement projects. Not owning shares of health insurance and Medicare/Medicaid provider
UnitedHealth Group and electricity provider NextEra Energy also aided relative returns. The share price of UnitedHealth Group came under pressure as the company posted subdued medical loss ratio figures and
higher-than-anticipated investment costs in its Optum Insights segment. Additionally, tougher government Medicare reimbursement policies and increased costs related to elective surgery claims that were delayed due to
COVID-19 negatively affected UnitedHealth Group’s revenue growth.
Within the fixed income portion of
the fund, an underweight allocation to the treasury sector was a primary factor that supported relative performance. The fund’s overweight allocation and favorable bond selection in both the industrials and
financial institutions sectors, particularly within the “A” and “BBB” rated(r) credit quality segments, also strengthened relative returns.
Respectfully,
Portfolio Manager(s)
Steven Gorham, Alexander Mackey,
Joshua Marston, and Johnathan Munko
Note to Shareholders: Effective
January 20, 2023, Henry Peabody is no longer a Portfolio Manager of the fund.
| (h) | Security was not held in the portfolio at period end. |
| (r) | Securities rated “BBB”, “Baa”, or higher are considered investment grade; securities rated “BB”, “Ba”, or below are considered non-investment grade. Ratings are assigned to underlying securities utilizing ratings from Moody's, Fitch, and Standard & Poor's and applying the following hierarchy: If all three agencies provide a rating, the middle rating (after dropping the highest and lowest ratings) is assigned; if two of the three agencies rate a security, the lower of the two is assigned. If none of the 3 rating agencies above assign a rating, but the security is rated by DBRS Morningstar, then the DBRS Morningstar rating is assigned. If none of the 4 rating agencies listed above rate the security, but the security is rated by the Kroll Bond Rating Agency (KBRA), then the KBRA rating is assigned. Ratings are shown in the S&P and Fitch scale (e.g., AAA). For securities that are not rated by any of the rating agencies, the security is considered Not Rated. |
The views expressed in this report
are those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily reflect the views of MFS or any other person in the MFS organization. These views
are subject to change at any time based on market or other conditions, and MFS disclaims any responsibility to update such views. These views may not be relied upon as investment advice or an indication of trading
intent on behalf of any MFS portfolio. References to specific securities are not recommendations of such securities, and may not be representative of any MFS portfolio’s current or future investments.
6
Performance Summary THROUGH 9/30/23
The following chart illustrates a
representative class of the fund’s historical performance in comparison to its benchmark(s). Performance results include the deduction of the maximum applicable sales charge and reflect the percentage change in
net asset value, including reinvestment of dividends and capital gains distributions. The performance of other share classes will be greater than or less than that of the class depicted below. Benchmarks are unmanaged
and may not be invested in directly. Benchmark returns do not reflect sales charges, commissions or expenses. (See Notes to Performance Summary.)
Performance data shown represents past
performance and is no guarantee of future results. Investment return and principal value fluctuate so your shares, when sold, may be worth more or less than the original cost; current performance may be lower or
higher than quoted. The performance shown does not reflect the deduction of taxes, if any, that a shareholder would pay on fund distributions or the redemption of fund shares.
Growth of a Hypothetical $10,000
Investment
7
Performance Summary - continued
Total Returns through 9/30/23
Average annual without sales
charge
| Share Class | Class Inception Date | 1-yr | 5-yr | 10-yr |
| A | 10/06/70 | 9.43% | 5.03% | 6.12% |
| B | 8/23/93 | 8.55% | 4.24% | 5.32% |
| C | 8/01/94 | 8.56% | 4.24% | 5.32% |
| I | 1/02/97 | 9.64% | 5.29% | 6.38% |
| R1 | 4/01/05 | 8.60% | 4.24% | 5.32% |
| R2 | 10/31/03 | 9.10% | 4.76% | 5.85% |
| R3 | 4/01/05 | 9.41% | 5.03% | 6.11% |
| R4 | 4/01/05 | 9.62% | 5.28% | 6.38% |
| R6 | 6/01/12 | 9.78% | 5.37% | 6.47% |
Comparative benchmark(s)
| Standard & Poor's 500 Stock Index (f) | 21.62% | 9.92% | 11.91% |
| Bloomberg U.S. Aggregate Bond Index (f) | 0.64% | 0.10% | 1.13% |
| MFS Total Return Blended Index (f)(w) | 13.01% | 6.27% | 7.74% |
Average annual with sales
charge
| A With Initial Sales Charge (5.75%) | 3.13% | 3.79% | 5.49% |
| B With CDSC (Declining over six years from 4% to 0%) (v) | 4.55% | 3.91% | 5.32% |
| C With CDSC (1% for 12 months) (v) | 7.56% | 4.24% | 5.32% |
CDSC – Contingent Deferred
Sales Charge.
Class I, R1, R2, R3, R4, and R6
shares do not have a sales charge.
| (f) | Source: FactSet Research Systems Inc. |
| (v) | Assuming redemption at the end of the applicable period. |
| (w) | The MFS Total Return Blended Index (a custom index) was comprised of the following at the beginning and at the end of the reporting period: |
| 9/30/23 | |
| Standard & Poor’s 500 Stock Index | 60% |
| Bloomberg U.S. Aggregate Bond Index | 40% |
Benchmark Definition(s)
Bloomberg U.S. Aggregate Bond
Index(a) – a market capitalization-weighted index that measures the performance of the U.S. investment-grade, fixed rate bond market, with index
components for government and corporate securities, mortgage pass-through securities, and asset-backed securities with at least one year to final maturity.
Standard & Poor's 500 Stock
Index(g) – a market capitalization-weighted index of 500 widely held equity securities, designed to measure broad U.S. equity performance.
8
Performance Summary - continued
It is not possible to invest
directly in an index.
| (a) | Source: Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg or Bloomberg's licensors own all proprietary rights in the Bloomberg Indices. Bloomberg neither approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith. |
| (g) | “Standard & Poor's®” and “S&P®” are registered trademarks of Standard & Poor's Financial Services LLC (“S&P”) and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and have been licensed for use by S&P Dow Jones Indices LLC and sublicensed for certain purposes by MFS. The S&P 500® is a product of S&P Dow Jones Indices LLC, and has been licensed for use by MFS. MFS's product(s) is not sponsored, endorsed, sold, or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, or their respective affiliates, and neither S&P Dow Jones Indices LLC, Dow Jones, S&P, nor their respective affiliates make any representation regarding the advisability of investing in such product(s). |
Notes to Performance Summary
Average annual total return
represents the average annual change in value for each share class for the periods presented.
Performance results reflect any
applicable expense subsidies and waivers in effect during the periods shown. Without such subsidies and waivers the fund's performance results would be less favorable. Please see the prospectus and financial
statements for complete details.
Performance results do not include
adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles and may differ from amounts reported in the financial highlights.
From time to time the fund may
receive proceeds from litigation settlements, without which performance would be lower.
9
Expense Table
Fund expenses borne by the
shareholders during the period,
April 1, 2023 through September 30, 2023
April 1, 2023 through September 30, 2023
As a shareholder of the fund, you
incur two types of costs: (1) transaction costs, including sales charges (loads) on certain purchase or redemption payments, and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and
other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an
investment of $1,000 invested at the beginning of the period and held for the entire period April 1, 2023 through September 30, 2023.
Actual Expenses
The first line for each share class
in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over
the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled
“Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for
Comparison Purposes
The second line for each share class
in the following table provides information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information
to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown
in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line for each share class in the table is useful in
comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
10
Expense Table - continued
| Share Class | Annualized Expense Ratio | Beginning Account Value 4/01/23 | Ending Account Value 9/30/23 | Expenses Paid During Period (p) 4/01/23-9/30/23 | |
| A | Actual | 0.72% | $1,000.00 | $1,001.25 | $3.61 |
| Hypothetical (h) | 0.72% | $1,000.00 | $1,021.46 | $3.65 | |
| B | Actual | 1.47% | $1,000.00 | $997.36 | $7.36 |
| Hypothetical (h) | 1.47% | $1,000.00 | $1,017.70 | $7.44 | |
| C | Actual | 1.47% | $1,000.00 | $997.40 | $7.36 |
| Hypothetical (h) | 1.47% | $1,000.00 | $1,017.70 | $7.44 | |
| I | Actual | 0.47% | $1,000.00 | $1,002.49 | $2.36 |
| Hypothetical (h) | 0.47% | $1,000.00 | $1,022.71 | $2.38 | |
| R1 | Actual | 1.47% | $1,000.00 | $997.91 | $7.36 |
| Hypothetical (h) | 1.47% | $1,000.00 | $1,017.70 | $7.44 | |
| R2 | Actual | 0.97% | $1,000.00 | $999.96 | $4.86 |
| Hypothetical (h) | 0.97% | $1,000.00 | $1,020.21 | $4.91 | |
| R3 | Actual | 0.72% | $1,000.00 | $1,001.23 | $3.61 |
| Hypothetical (h) | 0.72% | $1,000.00 | $1,021.46 | $3.65 | |
| R4 | Actual | 0.47% | $1,000.00 | $1,002.49 | $2.36 |
| Hypothetical (h) | 0.47% | $1,000.00 | $1,022.71 | $2.38 | |
| R6 | Actual | 0.39% | $1,000.00 | $1,002.87 | $1.96 |
| Hypothetical (h) | 0.39% | $1,000.00 | $1,023.11 | $1.98 |
| (h) | 5% class return per year before expenses. |
| (p) | “Expenses Paid During Period” are equal to each class’s annualized expense ratio, as shown above, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). Expenses paid do not include any applicable sales charges (loads). If these transaction costs had been included, your costs would have been higher. |
11
Portfolio of Investments
9/30/23
The Portfolio of Investments is a
complete list of all securities owned by your fund. It is categorized by broad-based asset classes.
| Issuer | Shares/Par | Value ($) | ||
| Common Stocks – 58.1% | ||||
| Aerospace & Defense – 1.8% | ||||
| General Dynamics Corp. | 124,390 | $27,486,458 | ||
| Honeywell International, Inc. | 235,246 | 43,459,346 | ||
| Howmet Aerospace, Inc. | 447,765 | 20,709,131 | ||
| L3Harris Technologies, Inc. | 220,615 | 38,413,484 | ||
| $130,068,419 | ||||
| Alcoholic Beverages – 0.8% | ||||
| Constellation Brands, Inc., “A” | 149,877 | $37,668,587 | ||
| Diageo PLC | 634,891 | 23,414,038 | ||
| $61,082,625 | ||||
| Automotive – 1.8% | ||||
| Aptiv PLC (a) | 554,732 | $54,691,028 | ||
| Lear Corp. | 276,713 | 37,134,885 | ||
| LKQ Corp. | 848,528 | 42,010,621 | ||
| $133,836,534 | ||||
| Broadcasting – 0.9% | ||||
| Omnicom Group, Inc. | 603,453 | $44,945,179 | ||
| Warner Bros. Discovery, Inc. (a) | 1,981,438 | 21,518,417 | ||
| $66,463,596 | ||||
| Brokerage & Asset Managers – 2.6% | ||||
| Cboe Global Markets, Inc. | 224,335 | $35,043,370 | ||
| Charles Schwab Corp. | 2,099,376 | 115,255,742 | ||
| CME Group, Inc. | 134,580 | 26,945,608 | ||
| Invesco Ltd. | 959,502 | 13,931,969 | ||
| $191,176,689 | ||||
| Business Services – 2.2% | ||||
| Accenture PLC, “A” | 132,595 | $40,721,251 | ||
| Amdocs Ltd. | 335,972 | 28,386,274 | ||
| Cognizant Technology Solutions Corp., “A” | 398,003 | 26,960,723 | ||
| Fidelity National Information Services, Inc. | 527,162 | 29,136,244 | ||
| Fiserv, Inc. (a) | 337,947 | 38,174,493 | ||
| $163,378,985 | ||||
| Cable TV – 2.0% | ||||
| Comcast Corp., “A” | 3,268,036 | $144,904,716 | ||
12
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Common Stocks – continued | ||||
| Chemicals – 0.6% | ||||
| PPG Industries, Inc. | 363,451 | $47,175,940 | ||
| Computer Software – 2.7% | ||||
| Dun & Bradstreet Holdings, Inc. | 3,154,807 | $31,516,522 | ||
| Microsoft Corp. | 452,290 | 142,810,567 | ||
| Oracle Corp. | 259,806 | 27,518,652 | ||
| $201,845,741 | ||||
| Computer Software - Systems – 0.3% | ||||
| Seagate Technology Holdings PLC | 274,084 | $18,075,840 | ||
| Construction – 1.7% | ||||
| Masco Corp. | 1,389,673 | $74,278,022 | ||
| Stanley Black & Decker, Inc. | 413,379 | 34,550,216 | ||
| Summit Materials, Inc., “A” (a) | 407,342 | 12,684,630 | ||
| $121,512,868 | ||||
| Consumer Products – 0.5% | ||||
| Kenvue, Inc. | 1,883,259 | $37,815,841 | ||
| Consumer Services – 0.3% | ||||
| Booking Holdings, Inc. (a) | 6,143 | $18,944,705 | ||
| Electrical Equipment – 1.1% | ||||
| Johnson Controls International PLC | 1,557,294 | $82,863,614 | ||
| Electronics – 2.9% | ||||
| Analog Devices, Inc. | 69,760 | $12,214,278 | ||
| Applied Materials, Inc. | 338,199 | 46,823,652 | ||
| Intel Corp. | 1,788,656 | 63,586,721 | ||
| NXP Semiconductors N.V. | 340,327 | 68,038,174 | ||
| Taiwan Semiconductor Manufacturing Co. Ltd., ADR | 300,496 | 26,113,102 | ||
| $216,775,927 | ||||
| Energy - Independent – 3.2% | ||||
| ConocoPhillips | 874,649 | $104,782,950 | ||
| Hess Corp. | 512,900 | 78,473,700 | ||
| Pioneer Natural Resources Co. | 238,675 | 54,787,846 | ||
| $238,044,496 | ||||
| Energy - Integrated – 0.6% | ||||
| Suncor Energy, Inc. | 1,245,467 | $42,831,411 | ||
13
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Common Stocks – continued | ||||
| Food & Beverages – 0.7% | ||||
| Archer Daniels Midland Co. | 300,357 | $22,652,925 | ||
| Danone S.A. | 340,363 | 18,752,609 | ||
| J.M. Smucker Co. | 105,404 | 12,955,205 | ||
| $54,360,739 | ||||
| Health Maintenance Organizations – 1.6% | ||||
| Cigna Group | 413,266 | $118,223,005 | ||
| Insurance – 3.3% | ||||
| Aon PLC | 263,003 | $85,270,833 | ||
| Chubb Ltd. | 349,582 | 72,775,981 | ||
| Travelers Cos., Inc. | 175,669 | 28,688,504 | ||
| Willis Towers Watson PLC | 277,879 | 58,065,596 | ||
| $244,800,914 | ||||
| Internet – 1.1% | ||||
| Alphabet, Inc., “A” (a) | 619,986 | $81,131,368 | ||
| Leisure & Toys – 0.3% | ||||
| Electronic Arts, Inc. | 175,161 | $21,089,384 | ||
| Machinery & Tools – 3.2% | ||||
| Eaton Corp. PLC | 631,872 | $134,765,660 | ||
| Ingersoll Rand, Inc. | 762,865 | 48,609,758 | ||
| Regal Rexnord Corp. | 364,057 | 52,016,464 | ||
| $235,391,882 | ||||
| Major Banks – 6.3% | ||||
| Bank of America Corp. | 3,154,036 | $86,357,506 | ||
| Goldman Sachs Group, Inc. | 473,179 | 153,106,529 | ||
| JPMorgan Chase & Co. | 973,098 | 141,118,672 | ||
| Morgan Stanley | 670,702 | 54,776,232 | ||
| PNC Financial Services Group, Inc. | 234,976 | 28,848,003 | ||
| $464,206,942 | ||||
| Medical & Health Technology & Services – 1.4% | ||||
| ICON PLC (a) | 141,809 | $34,920,466 | ||
| McKesson Corp. | 158,037 | 68,722,390 | ||
| $103,642,856 | ||||
| Medical Equipment – 1.6% | ||||
| Becton, Dickinson and Co. | 91,831 | $23,741,068 | ||
| Boston Scientific Corp. (a) | 491,196 | 25,935,149 | ||
| Medtronic PLC | 853,991 | 66,918,735 | ||
| $116,594,952 | ||||
14
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Common Stocks – continued | ||||
| Metals & Mining – 0.2% | ||||
| Glencore PLC | 3,109,491 | $17,782,581 | ||
| Other Banks & Diversified Financials – 1.1% | ||||
| Northern Trust Corp. | 598,450 | $41,580,306 | ||
| Truist Financial Corp. | 1,429,487 | 40,897,623 | ||
| $82,477,929 | ||||
| Pharmaceuticals – 3.8% | ||||
| Bayer AG | 1,018,020 | $48,917,910 | ||
| Johnson & Johnson | 604,178 | 94,100,723 | ||
| Organon & Co. | 543,960 | 9,443,146 | ||
| Pfizer, Inc. | 2,135,922 | 70,848,533 | ||
| Roche Holding AG | 143,798 | 39,223,087 | ||
| Vertex Pharmaceuticals, Inc. (a) | 61,981 | 21,553,273 | ||
| $284,086,672 | ||||
| Railroad & Shipping – 1.0% | ||||
| Union Pacific Corp. | 362,428 | $73,801,214 | ||
| Restaurants – 0.2% | ||||
| Wendy's Co. | 809,181 | $16,515,384 | ||
| Specialty Chemicals – 1.1% | ||||
| Axalta Coating Systems Ltd. (a) | 1,492,613 | $40,151,290 | ||
| DuPont de Nemours, Inc. | 590,783 | 44,066,504 | ||
| $84,217,794 | ||||
| Specialty Stores – 0.5% | ||||
| Ross Stores, Inc. | 101,154 | $11,425,344 | ||
| Walmart Stores, Inc. | 162,503 | 25,989,105 | ||
| $37,414,449 | ||||
| Telecommunications - Wireless – 0.8% | ||||
| T-Mobile USA, Inc. | 411,635 | $57,649,482 | ||
| Tobacco – 1.1% | ||||
| Altria Group, Inc. | 210,940 | $8,870,027 | ||
| Philip Morris International, Inc. | 784,662 | 72,644,008 | ||
| $81,514,035 | ||||
| Utilities - Electric Power – 2.8% | ||||
| Dominion Energy, Inc. | 286,690 | $12,806,442 | ||
| Duke Energy Corp. | 556,569 | 49,122,780 | ||
| Exelon Corp. | 790,930 | 29,889,245 | ||
| National Grid PLC | 1,828,742 | 21,829,233 | ||
| PG&E Corp. (a) | 2,910,363 | 46,944,155 | ||
15
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Common Stocks – continued | ||||
| Utilities - Electric Power – continued | ||||
| Southern Co. | 716,399 | $46,365,343 | ||
| $206,957,198 | ||||
| Total Common Stocks (Identified Cost, $2,857,618,598) | $4,298,656,727 | |||
| Bonds – 40.4% | ||||
| Aerospace & Defense – 0.1% | ||||
| BAE Systems PLC, 3.4%, 4/15/2030 (n) | $ | 3,048,000 | $2,654,136 | |
| Raytheon Technologies Corp., 4.125%, 11/16/2028 | 1,540,000 | 1,435,981 | ||
| $4,090,117 | ||||
| Asset-Backed & Securitized – 5.8% | ||||
| ACRES 2021-FL2 Issuer Ltd., “AS”, FLR, 7.197% ((SOFR - 1mo. + 0.11448%) + 1.75%), 1/15/2037 (n) | $ | 6,082,500 | $5,930,871 | |
| Allegro CLO Ltd., 2016-1A, “BR2”, FLR, 7.119% ((SOFR - 3mo. + 0.26161%) + 1.55%), 1/15/2030 (n) | 7,806,564 | 7,766,524 | ||
| Arbor Realty Trust, Inc., CLO, 2021-FL1, “AS”, FLR, 6.646% ((SOFR - 1mo. + 0.11448%) + 1.2%), 12/15/2035 (n) | 6,771,500 | 6,639,672 | ||
| Arbor Realty Trust, Inc., CLO, 2021-FL2, “B”, FLR, 7.046% ((SOFR - 1mo. + 0.11448%) + 1.6%), 5/15/2036 (n) | 1,950,000 | 1,880,040 | ||
| Arbor Realty Trust, Inc., CLO, 2021-FL3, “B”, FLR, 7.046% ((SOFR - 1mo. + 0.11448%) + 1.6%), 8/15/2034 (n) | 5,818,000 | 5,573,603 | ||
| Arbor Realty Trust, Inc., CLO, 2022-FL1, “B”, FLR, 7.413% (SOFR - 30 day + 2.1%), 1/15/2037 (n) | 16,706,500 | 16,159,238 | ||
| AREIT 2019-CRE3 Trust, “AS”, FLR, 6.746% ((SOFR - 1mo. + 0.11448%) + 1.3%), 9/14/2036 (n) | 8,058,870 | 7,958,094 | ||
| AREIT 2022-CRE6 Trust, “B”, FLR, 7.163% (SOFR - 30 day + 1.85%), 1/20/2037 (n) | 10,151,500 | 9,819,952 | ||
| Bayview Financial Revolving Mortgage Loan Trust, FLR, 7.032% ((SOFR - 1mo. + 0.11448%) + 1.6%), 12/28/2040 (n) | 914,594 | 1,244,885 | ||
| Benchmark 2023-V3 Mortgage Trust, “A3”, 6.363%, 7/15/2056 | 1,190,323 | 1,203,075 | ||
| Brazos Securitization LLC, 5.243%, 9/01/2040 (n) | 5,403,000 | 5,129,585 | ||
| BSPRT 2021-FL6 Issuer Ltd., “AS”, FLR, 6.747% ((SOFR - 1mo. + 0.11448%) + 1.3%), 3/15/2036 (n) | 17,122,500 | 16,476,331 | ||
| BSPRT 2021-FL7 Issuer Ltd., “B”, FLR, 7.496% ((SOFR - 1mo. + 0.11448%) + 2.05%), 12/15/2038 (n) | 2,794,000 | 2,722,013 | ||
| BSPRT 2022-FL8 Issuer Ltd., “B”, FLR, 7.363% (SOFR - 30 day + 2.05%), 2/15/2037 (n) | 5,979,000 | 5,771,303 | ||
| Business Jet Securities LLC, 2021-1A, “A”, 2.162%, 4/15/2036 (n) | 2,537,920 | 2,308,070 | ||
| BXMT 2021-FL4 Ltd., “AS”, FLR, 6.746% ((SOFR - 1mo. + 0.11448%) + 1.3%), 5/15/2038 (n) | 16,816,500 | 15,589,012 | ||
| CHCP 2021-FL1 Ltd., “AS”, FLR, 6.745% ((SOFR - 1mo. + 0.11448%) + 1.3%), 2/15/2038 (n) | 7,049,000 | 6,866,296 | ||
16
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Bonds – continued | ||||
| Asset-Backed & Securitized – continued | ||||
| Columbia Cent CLO 28 Ltd., “A-2-R”, 7.331%, 11/07/2030 (n) | $ | 11,264,069 | $11,130,196 | |
| Commercial Mortgage Pass-Through Certificates, 2023-BNK46, “A4”, 5.745%, 8/14/2056 | 16,647,021 | 16,501,390 | ||
| Commercial Mortgage Trust, 2015-DC1, “A5”, 3.35%, 2/10/2048 | 7,000,000 | 6,696,999 | ||
| Commercial Mortgage Trust, 2015-LC21, “A4”, 3.708%, 7/10/2048 | 9,641,397 | 9,229,469 | ||
| Commercial Mortgage Trust, 2015-PC1, “A5”, 3.902%, 7/10/2050 | 11,000,000 | 10,569,765 | ||
| Credit Acceptance Auto Loan Trust, 2021-3A, “B”, 1.38%, 7/15/2030 (n) | 3,623,000 | 3,447,917 | ||
| CSAIL Commercial Mortgage Trust, 2015-C2, “A4”, 3.504%, 6/15/2057 | 5,534,308 | 5,275,703 | ||
| Cutwater 2015-1A Ltd., “AR”, FLR, 6.79% ((SOFR - 3mo. + 0.26161%) + 1.22%), 1/15/2029 (n) | 2,646,766 | 2,644,720 | ||
| Dryden Senior Loan Fund, 2013-26A, “AR”, CLO, FLR, 6.469% ((SOFR - 3mo. + 0.26161%) + 0.9%), 4/15/2029 (n) | 6,645,500 | 6,622,606 | ||
| Dryden Senior Loan Fund, 2018-55A, “A1”, CLO, FLR, 6.59% ((SOFR - 3mo. + 0.26161%) + 1.02%), 4/15/2031 (n) | 11,533,976 | 11,504,680 | ||
| GLS Auto Select Receivables Trust, 2023-1A, “A2”, 6.27%, 8/16/2027 (n) | 16,695,250 | 16,654,539 | ||
| GMAC Mortgage Corp. Loan Trust, FGIC, 5.805%, 10/25/2036 | 181,787 | 178,901 | ||
| GS Mortgage Securities Trust, 2015-GC30, “A4”, 3.382%, 5/10/2050 | 10,734,280 | 10,181,656 | ||
| JPMBB Commercial Mortgage Securities Trust, 2015-C28, “A4”, 3.227%, 10/15/2048 | 13,361,337 | 12,671,676 | ||
| Kubota Credit Owner Trust, 2023-2A, “A2”, 5.61%, 7/15/2026 (n) | 3,077,101 | 3,064,181 | ||
| LCCM 2021-FL2 Trust, “B”, FLR, 7.347% ((SOFR - 1mo. + 0.11448%) + 1.9%), 12/13/2038 (n) | 8,231,500 | 7,778,767 | ||
| LoanCore 2021-CRE5 Ltd., “AS”, FLR, 7.196% ((SOFR - 1mo. + 0.11448%) + 1.75%), 7/15/2036 (n) | 16,915,500 | 16,519,999 | ||
| MF1 2020-FL4 Ltd., “A”, FLR, 7.147% ((SOFR - 1mo. + 0.11448%) + 1.7%), 11/15/2035 (n) | 2,777,443 | 2,771,838 | ||
| MF1 2021-FL5 Ltd., “AS”, FLR, 6.647% ((SOFR - 1mo. + 0.11448%) + 1.2%), 7/15/2036 (n) | 17,497,000 | 17,074,570 | ||
| MF1 2022-FL8 Ltd., “B”, FLR, 7.277% (SOFR - 30 day + 1.95%), 2/19/2037 (n) | 7,392,231 | 7,144,303 | ||
| MF1 2023-FL12 LLC, FLR, “A”, 7.366% (SOFR - 1mo. + 2.066%), 10/18/2038 (n) | 14,505,000 | 14,432,475 | ||
| MidOcean Credit CLO, 2013-2A, “BR”, FLR, 7.28% ((SOFR - 3mo. + 0.26161%) + 1.65%), 1/29/2030 (n) | 12,682,806 | 12,649,476 | ||
17
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Bonds – continued | ||||
| Asset-Backed & Securitized – continued | ||||
| Morgan Stanley Bank of America Merrill Lynch Trust, 2017-C34, “A4”, 3.536%, 11/15/2052 | $ | 4,195,516 | $3,811,822 | |
| Neuberger Berman CLO Ltd., 2013-15A, “BR2”, FLR, 6.919% ((SOFR - 3mo. + 0.26161%) + 1.35%), 10/15/2029 (n) | 5,618,950 | 5,551,416 | ||
| Neuberger Berman CLO Ltd., 2015-20A, “ARR”, FLR, 6.73% ((SOFR - 3mo. + 0.26161%) + 1.16%), 7/15/2034 (n) | 5,725,000 | 5,697,703 | ||
| Oaktree CLO 2019-1A Ltd., “BR”, FLR, 7.357% ((SOFR - 3mo. + 0.26161%) + 1.75%), 4/22/2030 (n) | 16,678,518 | 16,380,806 | ||
| PFP III 2021-7 Ltd., “AS”, FLR, 6.596% ((SOFR - 1mo. + 0.114%) + 1.15%), 4/14/2038 (n) | 10,248,204 | 10,146,204 | ||
| ReadyCap Commercial Mortgage Trust, 2021-FL5, “A”, FLR, 6.434% ((SOFR - 1mo. + 0.11448%) + 1%), 4/25/2038 (z) | 4,067,346 | 4,024,118 | ||
| ReadyCap Commercial Mortgage Trust, 2021-FL7, “B”, FLR, 7.234% ((SOFR - 1mo. + 0.11448%) + 1.8%), 11/25/2036 (z) | 3,695,000 | 3,572,823 | ||
| Residential Funding Mortgage Securities, Inc., FGIC, 3.985%, 12/25/2035 | 140,906 | 4,654 | ||
| Santander Drive Auto Receivables Trust, 2022-6, “A2”, 4.37%, 5/15/2025 | 289,550 | 289,382 | ||
| Starwood Commercial Mortgage, 2022-FL3, “AS”, FLR, 7.113% (SOFR - 30 day + 1.8%), 11/15/2038 (n) | 17,154,000 | 16,363,823 | ||
| Toyota Lease Owner Trust, 2023-A, “A2”, 5.3%, 8/20/2025 (n) | 4,220,696 | 4,201,163 | ||
| TPG Real Estate Finance, 2021-FL4, “A”, FLR, 6.647% ((SOFR - 1mo. + 0.11448%) + 1.2%), 3/15/2038 (n) | 12,869,115 | 12,575,313 | ||
| Voya CLO 2012-4A Ltd., “A2R3”, FLR, 7.019% ((SOFR - 3mo. + 0.26161%) + 1.45%), 10/15/2030 (n) | 6,439,259 | 6,298,387 | ||
| Wells Fargo Commercial Mortgage Trust, 2015-NXS1, “A5”, 3.148%, 5/15/2048 | 6,507,931 | 6,193,410 | ||
| Westlake Automobile Receivables Trust, 2022-3A, “A2”, 5.24%, 7/15/2025 (n) | 10,244,320 | 10,227,156 | ||
| $429,122,570 | ||||
| Automotive – 0.4% | ||||
| Lear Corp., 4.25%, 5/15/2029 | $ | 2,163,000 | $1,961,054 | |
| Magna International, Inc., 2.45%, 6/15/2030 | 6,114,000 | 5,012,186 | ||
| Stellantis N.V., 2.691%, 9/15/2031 (n) | 10,166,000 | 7,835,334 | ||
| Volkswagen Group of America Finance LLC, 3.35%, 5/13/2025 (n) | 12,232,000 | 11,721,812 | ||
| $26,530,386 | ||||
18
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Bonds – continued | ||||
| Broadcasting – 0.2% | ||||
| Walt Disney Co., 3.5%, 5/13/2040 | $ | 7,789,000 | $5,833,968 | |
| WarnerMedia Holdings, Inc., 5.05%, 3/15/2042 | 9,836,000 | 7,607,048 | ||
| WarnerMedia Holdings, Inc., 5.141%, 3/15/2052 | 5,588,000 | 4,152,110 | ||
| $17,593,126 | ||||
| Brokerage & Asset Managers – 0.4% | ||||
| Charles Schwab Corp., 5.853% to 5/19/2033, FLR (SOFR - 1 day + 2.5%) to 5/19/2034 | $ | 13,058,000 | $12,416,767 | |
| Intercontinental Exchange, Inc., 2.1%, 6/15/2030 | 6,958,000 | 5,592,562 | ||
| LPL Holdings, Inc., 4.375%, 5/15/2031 (n) | 8,558,000 | 7,320,961 | ||
| Raymond James Financial, Inc., 4.95%, 7/15/2046 | 5,992,000 | 4,959,833 | ||
| $30,290,123 | ||||
| Building – 0.2% | ||||
| Martin Marietta Materials, Inc., 2.5%, 3/15/2030 | $ | 622,000 | $509,612 | |
| Masco Corp., 2%, 2/15/2031 | 12,460,000 | 9,548,555 | ||
| Vulcan Materials Co., 3.5%, 6/01/2030 | 1,246,000 | 1,084,911 | ||
| $11,143,078 | ||||
| Business Services – 0.7% | ||||
| Equinix, Inc., 2.625%, 11/18/2024 | $ | 9,037,000 | $8,694,603 | |
| Equinix, Inc., 1.8%, 7/15/2027 | 5,883,000 | 5,078,761 | ||
| Equinix, Inc., 2.5%, 5/15/2031 | 7,470,000 | 5,831,080 | ||
| Experian Finance PLC, 4.25%, 2/01/2029 (n) | 4,011,000 | 3,759,652 | ||
| Fiserv, Inc., 2.65%, 6/01/2030 | 2,445,000 | 2,008,471 | ||
| Global Payments, Inc., 1.2%, 3/01/2026 | 6,442,000 | 5,745,493 | ||
| Global Payments, Inc., 2.9%, 11/15/2031 | 8,226,000 | 6,453,061 | ||
| Verisk Analytics, Inc., 4.125%, 3/15/2029 | 5,997,000 | 5,582,274 | ||
| Verisk Analytics, Inc., 5.75%, 4/01/2033 | 5,062,000 | 5,033,609 | ||
| $48,187,004 | ||||
| Cable TV – 0.3% | ||||
| Charter Communications Operating LLC/Charter Communications Operating Capital Corp., 6.384%, 10/23/2035 | $ | 3,413,000 | $3,180,038 | |
| Charter Communications Operating LLC/Charter Communications Operating Capital Corp., 3.5%, 6/01/2041 | 6,803,000 | 4,302,073 | ||
| Charter Communications Operating LLC/Charter Communications Operating Capital Corp., 5.375%, 5/01/2047 | 1,390,000 | 1,059,213 | ||
| Charter Communications Operating LLC/Charter Communications Operating Capital Corp., 5.25%, 4/01/2053 | 5,724,000 | 4,278,708 | ||
| Cox Communications, Inc., 1.8%, 10/01/2030 (n) | 4,310,000 | 3,267,159 | ||
| Time Warner Entertainment Co. LP, 8.375%, 7/15/2033 | 6,553,000 | 7,044,870 | ||
| $23,132,061 | ||||
19
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Bonds – continued | ||||
| Chemicals – 0.1% | ||||
| RPM International, Inc., 2.95%, 1/15/2032 | $ | 4,666,000 | $3,629,723 | |
| Computer Software – 0.1% | ||||
| Oracle Corp., 4.9%, 2/06/2033 | $ | 2,585,000 | $2,382,673 | |
| Roper Technologies, Inc., 2%, 6/30/2030 | 4,196,000 | 3,318,046 | ||
| $5,700,719 | ||||
| Conglomerates – 0.1% | ||||
| Westinghouse Air Brake Technologies Corp., 4.15%, 3/15/2024 | $ | 966,000 | $956,804 | |
| Westinghouse Air Brake Technologies Corp., 3.2%, 6/15/2025 | 2,623,000 | 2,491,652 | ||
| Westinghouse Air Brake Technologies Corp., 4.7%, 9/15/2028 | 6,723,000 | 6,321,742 | ||
| $9,770,198 | ||||
| Consumer Products – 0.1% | ||||
| Kenvue, Inc., 4.9%, 3/22/2033 (n) | $ | 10,448,000 | $9,985,149 | |
| Consumer Services – 0.1% | ||||
| Booking Holdings, Inc., 4.625%, 4/13/2030 | $ | 4,593,000 | $4,360,129 | |
| Electrical Equipment – 0.1% | ||||
| Arrow Electronics, Inc., 2.95%, 2/15/2032 | $ | 9,575,000 | $7,486,060 | |
| Electronics – 0.1% | ||||
| Broadcom, Inc., 4.3%, 11/15/2032 | $ | 4,290,000 | $3,742,764 | |
| Broadcom, Inc., 4.926%, 5/15/2037 (n) | 2,223,000 | 1,916,063 | ||
| $5,658,827 | ||||
| Energy - Integrated – 0.3% | ||||
| BP Capital Markets America, Inc., 2.721%, 1/12/2032 | $ | 13,688,000 | $11,109,831 | |
| Eni S.p.A., 4.75%, 9/12/2028 (n) | 11,589,000 | 11,099,506 | ||
| $22,209,337 | ||||
| Financial Institutions – 0.6% | ||||
| AerCap Ireland Capital DAC/AerCap Global Aviation Trust, 4.875%, 1/16/2024 | $ | 1,093,000 | $1,088,620 | |
| AerCap Ireland Capital DAC/AerCap Global Aviation Trust, 2.45%, 10/29/2026 | 13,587,000 | 12,169,815 | ||
| AerCap Ireland Capital DAC/AerCap Global Aviation Trust, 3.65%, 7/21/2027 | 7,729,000 | 7,015,861 | ||
| Air Lease Corp., 2.2%, 1/15/2027 | 4,561,000 | 4,038,955 | ||
| Air Lease Corp., 2.875%, 1/15/2032 | 5,987,000 | 4,666,389 | ||
| Avolon Holdings Funding Ltd., 4.375%, 5/01/2026 (n) | 2,248,000 | 2,110,729 | ||
| Avolon Holdings Funding Ltd., 3.25%, 2/15/2027 (n) | 7,097,000 | 6,321,178 | ||
| Avolon Holdings Funding Ltd., 2.528%, 11/18/2027 (n) | 5,867,000 | 4,952,637 | ||
20
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Bonds – continued | ||||
| Financial Institutions – continued | ||||
| Park Aerospace Holdings Ltd., 5.5%, 2/15/2024 (n) | $ | 2,057,000 | $2,046,752 | |
| $44,410,936 | ||||
| Food & Beverages – 0.3% | ||||
| Anheuser-Busch InBev S.A., 8%, 11/15/2039 | $ | 9,558,000 | $11,382,971 | |
| Anheuser-Busch InBev Worldwide, Inc., 4.375%, 4/15/2038 | 2,398,000 | 2,078,893 | ||
| Diageo Capital PLC, 2.375%, 10/24/2029 | 8,369,000 | 7,087,720 | ||
| Keurig Dr Pepper, Inc., 3.2%, 5/01/2030 | 986,000 | 850,302 | ||
| $21,399,886 | ||||
| Gaming & Lodging – 0.2% | ||||
| GLP Capital LP/GLP Financing II, Inc., 5.3%, 1/15/2029 | $ | 5,014,000 | $4,648,079 | |
| Las Vegas Sands Corp., 3.9%, 8/08/2029 | 2,476,000 | 2,113,102 | ||
| Marriott International, Inc., 4.625%, 6/15/2030 | 6,716,000 | 6,186,503 | ||
| Marriott International, Inc., 2.85%, 4/15/2031 | 23,000 | 18,540 | ||
| Marriott International, Inc., 2.75%, 10/15/2033 | 5,250,000 | 3,961,462 | ||
| $16,927,686 | ||||
| Insurance – 0.4% | ||||
| AIA Group Ltd., 3.375%, 4/07/2030 (n) | $ | 7,948,000 | $6,958,671 | |
| Corebridge Financial, Inc., 3.9%, 4/05/2032 | 11,118,000 | 9,355,752 | ||
| Metropolitan Life Global Funding I, 3.3%, 3/21/2029 (n) | 15,225,000 | 13,532,259 | ||
| $29,846,682 | ||||
| Insurance - Health – 0.1% | ||||
| Humana, Inc., 5.875%, 3/01/2033 | $ | 4,392,000 | $4,366,175 | |
| Insurance - Property & Casualty – 0.4% | ||||
| Aon Corp., 4.5%, 12/15/2028 | $ | 6,955,000 | $6,625,224 | |
| Aon Corp., 3.75%, 5/02/2029 | 6,488,000 | 5,881,921 | ||
| Brown & Brown, Inc., 4.2%, 3/17/2032 | 7,012,000 | 6,066,478 | ||
| Fairfax Financial Holdings Ltd., 5.625%, 8/16/2032 | 10,369,000 | 9,684,753 | ||
| Liberty Mutual Group, Inc., 3.951%, 10/15/2050 (n) | 3,061,000 | 2,055,210 | ||
| $30,313,586 | ||||
| International Market Quasi-Sovereign – 0.0% | ||||
| Electricite de France S.A., 6.9%, 5/23/2053 (n) | $ | 2,221,000 | $2,203,794 | |
| Machinery & Tools – 0.2% | ||||
| Ashtead Capital, Inc., 5.5%, 8/11/2032 (n) | $ | 10,029,000 | $9,266,297 | |
| CNH Industrial Capital LLC, 4.2%, 1/15/2024 | 5,288,000 | 5,258,243 | ||
| CNH Industrial Capital LLC, 1.875%, 1/15/2026 | 1,459,000 | 1,337,491 | ||
| $15,862,031 | ||||
21
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Bonds – continued | ||||
| Major Banks – 2.3% | ||||
| Bank of America Corp., 2.572% to 10/20/2031, FLR (SOFR - 1 day + 1.21%) to 10/20/2032 | $ | 11,722,000 | $9,007,097 | |
| Barclays PLC, 2.894% to 11/24/2031, FLR (CMT - 1yr. + 1.3%) to 11/24/2032 | 3,616,000 | 2,721,088 | ||
| Barclays PLC, 7.437% to 11/02/2032, FLR (CMT - 1yr. + 3.5%) to 11/02/2033 | 9,484,000 | 9,738,911 | ||
| Capital One Financial Corp., 3.75%, 3/09/2027 | 5,440,000 | 4,979,199 | ||
| Capital One Financial Corp., 3.273% to 3/01/2029, FLR (SOFR - 1 day + 1.79%) to 3/01/2030 | 16,465,000 | 13,772,964 | ||
| Deutsche Bank AG, 7.146% to 7/13/2026, FLR (SOFR - 1 day + 2.52%) to 7/13/2027 | 2,981,000 | 3,001,179 | ||
| Deutsche Bank AG, 2.311% to 11/16/2026, FLR (SOFR - 1 day + 1.219%) to 11/16/2027 | 2,877,000 | 2,505,246 | ||
| Deutsche Bank AG, 6.72% to 1/18/2028, FLR (SOFR - 1 day + 3.18%) to 1/18/2029 | 7,588,000 | 7,542,901 | ||
| Goldman Sachs Group, Inc., 2.6%, 2/07/2030 | 10,872,000 | 8,904,168 | ||
| Goldman Sachs Group, Inc., 2.383% to 7/21/2031, FLR (SOFR - 1 day + 1.248%) to 7/21/2032 | 9,008,000 | 6,860,390 | ||
| HSBC Holdings PLC, 4.7% to 9/09/2031, FLR (CMT - 1yr. + 3.25%) to 9/09/2169 | 3,072,000 | 2,307,407 | ||
| HSBC Holdings PLC, 4% to 9/09/2026, FLR (CMT - 1yr. + 3.222%) to 9/09/2170 | 1,215,000 | 1,046,566 | ||
| JPMorgan Chase & Co., 2.956% to 5/13/2030, FLR (SOFR - 1 day + 2.515%) to 5/13/2031 | 1,546,000 | 1,270,232 | ||
| JPMorgan Chase & Co., 2.545% to 11/08/2031, FLR (SOFR - 1 day + 1.18%) to 11/08/2032 | 15,046,000 | 11,644,010 | ||
| JPMorgan Chase & Co., 2.963% to 1/25/2032, FLR (SOFR - 1 day + 1.26%) to 1/25/2033 | 5,837,000 | 4,646,992 | ||
| JPMorgan Chase & Co., 3.109% to 4/22/2040, FLR (SOFR - 1 day + 2.46%) to 4/22/2041 | 7,872,000 | 5,470,990 | ||
| JPMorgan Chase & Co., 3.897% to 1/23/2048, FLR ((SOFR - 3mo. + 0.26161%) + 1.22%) to 1/23/2049 | 2,847,000 | 2,064,963 | ||
| Mitsubishi UFJ Financial Group, Inc., 2.852% to 1/19/2032, FLR (CMT - 1yr. + 1.1%) to 1/19/2033 | 9,207,000 | 7,236,410 | ||
| Morgan Stanley, 2.699% to 1/22/2030, FLR (SOFR - 1 day + 1.143%) to 1/22/2031 | 19,340,000 | 15,812,593 | ||
| Morgan Stanley, 2.943% to 1/21/2032, FLR (SOFR - 1 day + 1.29%) to 1/21/2033 | 10,273,000 | 8,090,068 | ||
| Sumitomo Mitsui Financial Group, Inc., 2.472%, 1/14/2029 | 17,106,000 | 14,409,205 | ||
| UBS Group AG, 2.095% to 2/11/2031, FLR (CMT - 1yr. + 1.0%) to 2/11/2032 (n) | 20,862,000 | 15,436,840 | ||
22
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Bonds – continued | ||||
| Major Banks – continued | ||||
| Wells Fargo & Co., 3.35% to 3/02/2032, FLR (SOFR - 1 day + 1.5%) to 3/02/2033 | $ | 17,236,000 | $13,932,608 | |
| $172,402,027 | ||||
| Medical & Health Technology & Services – 0.3% | ||||
| Adventist Health System/West, 5.43%, 3/01/2032 | $ | 8,829,000 | $8,534,859 | |
| Alcon Finance Corp., 2.6%, 5/27/2030 (n) | 944,000 | 777,935 | ||
| Becton, Dickinson and Co., 4.669%, 6/06/2047 | 5,389,000 | 4,484,862 | ||
| Cigna Corp., 3.2%, 3/15/2040 | 1,517,000 | 1,066,054 | ||
| HCA, Inc., 5.125%, 6/15/2039 | 5,707,000 | 4,943,690 | ||
| Laboratory Corp. of America Holdings, 4.7%, 2/01/2045 | 3,373,000 | 2,749,056 | ||
| Northwell Healthcare, Inc., 3.979%, 11/01/2046 | 490,000 | 354,564 | ||
| Northwell Healthcare, Inc., 4.26%, 11/01/2047 | 3,797,000 | 2,848,156 | ||
| $25,759,176 | ||||
| Medical Equipment – 0.1% | ||||
| Boston Scientific Corp., 2.65%, 6/01/2030 | $ | 5,104,000 | $4,266,073 | |
| Metals & Mining – 0.3% | ||||
| Anglo American Capital PLC, 3.875%, 3/16/2029 (n) | $ | 1,639,000 | $1,468,704 | |
| Anglo American Capital PLC, 5.625%, 4/01/2030 (n) | 4,259,000 | 4,113,234 | ||
| Anglo American Capital PLC, 2.625%, 9/10/2030 (n) | 14,840,000 | 11,854,779 | ||
| Glencore Funding LLC, 2.5%, 9/01/2030 (n) | 5,444,000 | 4,303,152 | ||
| Glencore Funding LLC, 2.85%, 4/27/2031 (n) | 2,292,000 | 1,818,732 | ||
| $23,558,601 | ||||
| Midstream – 0.3% | ||||
| Kinder Morgan Energy Partners LP, 4.15%, 2/01/2024 | $ | 4,439,000 | $4,410,213 | |
| Plains All American Pipeline LP, 3.8%, 9/15/2030 | 6,093,000 | 5,233,567 | ||
| Sabine Pass Liquefaction LLC, 4.5%, 5/15/2030 | 1,665,000 | 1,526,906 | ||
| Spectra Energy Partners LP, 3.375%, 10/15/2026 | 2,677,000 | 2,490,261 | ||
| Targa Resources Corp., 4.2%, 2/01/2033 | 2,470,000 | 2,100,211 | ||
| Targa Resources Corp., 6.125%, 3/15/2033 | 7,772,000 | 7,618,894 | ||
| $23,380,052 | ||||
| Mortgage-Backed – 13.1% | ||||
| Fannie Mae, 5.25%, 8/01/2024 | $ | 845,964 | $836,999 | |
| Fannie Mae, 5%, 3/25/2025 - 3/01/2042 | 3,999,818 | 3,914,457 | ||
| Fannie Mae, 4.54%, 7/01/2026 | 862,821 | 845,783 | ||
| Fannie Mae, 3.95%, 1/01/2027 | 832,961 | 802,542 | ||
| Fannie Mae, 3%, 11/01/2028 - 9/01/2046 | 6,657,697 | 6,070,084 | ||
| Fannie Mae, 6.5%, 6/01/2031 - 7/01/2037 | 1,221,541 | 1,235,316 | ||
| Fannie Mae, 2.5%, 11/01/2031 | 145,770 | 131,288 | ||
| Fannie Mae, 5.5%, 2/01/2033 - 4/01/2040 | 5,789,407 | 5,698,003 | ||
23
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Bonds – continued | ||||
| Mortgage-Backed – continued | ||||
| Fannie Mae, 3%, 2/25/2033 (i) | $ | 712,378 | $60,150 | |
| Fannie Mae, 4.5%, 8/01/2033 - 6/01/2044 | 10,540,245 | 9,937,792 | ||
| Fannie Mae, 6%, 1/01/2034 - 7/01/2037 | 3,405,616 | 3,395,213 | ||
| Fannie Mae, 3.5%, 4/01/2038 - 7/01/2046 | 28,356,326 | 25,055,122 | ||
| Fannie Mae, 3.25%, 5/25/2040 | 203,007 | 181,328 | ||
| Fannie Mae, 4%, 9/01/2040 - 6/01/2047 | 23,335,973 | 21,349,618 | ||
| Fannie Mae, 2%, 5/25/2044 - 4/25/2046 | 558,279 | 499,325 | ||
| Fannie Mae, 4%, 7/25/2046 (i) | 765,698 | 142,681 | ||
| Fannie Mae, UMBS, 2%, 10/01/2036 - 3/01/2052 | 113,778,441 | 90,607,897 | ||
| Fannie Mae, UMBS, 2.5%, 11/01/2036 - 8/01/2052 | 132,994,606 | 106,767,577 | ||
| Fannie Mae, UMBS, 5%, 10/01/2037 - 6/30/2053 | 11,912,036 | 11,255,271 | ||
| Fannie Mae, UMBS, 3%, 12/01/2037 - 2/01/2053 | 61,960,528 | 51,570,769 | ||
| Fannie Mae, UMBS, 4.5%, 5/01/2038 - 3/01/2053 | 5,813,164 | 5,377,777 | ||
| Fannie Mae, UMBS, 1.5%, 2/01/2042 - 4/01/2052 | 19,036,952 | 13,723,475 | ||
| Fannie Mae, UMBS, 3.5%, 5/01/2052 - 7/01/2053 | 7,199,184 | 6,196,874 | ||
| Fannie Mae, UMBS, 6%, 10/31/2052 - 7/31/2053 | 2,508,895 | 2,513,974 | ||
| Fannie Mae, UMBS, 4%, 11/01/2052 | 6,371,035 | 5,675,040 | ||
| Fannie Mae, UMBS, 5.5%, 3/01/2053 - 8/31/2053 | 12,541,971 | 12,125,295 | ||
| Freddie Mac, 1.042%, 4/25/2024 (i) | 7,383,393 | 20,295 | ||
| Freddie Mac, 0.728%, 7/24/2024 (i) | 11,309,253 | 33,214 | ||
| Freddie Mac, 0.637%, 7/25/2024 (i) | 40,823,000 | 174,220 | ||
| Freddie Mac, 4.5%, 8/01/2024 - 5/01/2042 | 1,587,747 | 1,501,948 | ||
| Freddie Mac, 0.438%, 8/25/2024 (i) | 44,106,000 | 180,813 | ||
| Freddie Mac, 0.506%, 8/25/2024 (i) | 71,242,391 | 221,478 | ||
| Freddie Mac, 3.064%, 8/25/2024 | 2,207,413 | 2,160,402 | ||
| Freddie Mac, 0.464%, 10/25/2024 (i) | 51,809,384 | 120,799 | ||
| Freddie Mac, 3.171%, 10/25/2024 | 2,993,251 | 2,915,296 | ||
| Freddie Mac, 0.399%, 11/25/2024 (i) | 44,690,000 | 149,390 | ||
| Freddie Mac, 2.67%, 12/25/2024 | 3,687,000 | 3,562,996 | ||
| Freddie Mac, 3.5%, 12/01/2025 - 10/25/2058 | 15,114,503 | 13,410,896 | ||
| Freddie Mac, 0.777%, 6/25/2027 (i) | 39,273,000 | 873,003 | ||
| Freddie Mac, 0.885%, 6/25/2027 (i) | 12,367,025 | 276,328 | ||
| Freddie Mac, 0.705%, 7/25/2027 (i) | 33,065,633 | 596,818 | ||
| Freddie Mac, 0.458%, 8/25/2027 (i) | 27,934,000 | 353,714 | ||
| Freddie Mac, 0.552%, 8/25/2027 (i) | 17,323,950 | 241,654 | ||
| Freddie Mac, 0.406%, 9/25/2027 (i) | 30,183,000 | 328,711 | ||
| Freddie Mac, 0.323%, 11/25/2027 (i) | 47,333,000 | 393,110 | ||
| Freddie Mac, 0.413%, 11/25/2027 (i) | 33,227,232 | 326,684 | ||
| Freddie Mac, 0.454%, 11/25/2027 (i) | 29,422,770 | 338,942 | ||
| Freddie Mac, 0.375%, 12/25/2027 (i) | 29,308,000 | 295,688 | ||
| Freddie Mac, 0.415%, 12/25/2027 (i) | 32,765,000 | 388,809 | ||
| Freddie Mac, 0.491%, 12/25/2027 (i) | 50,584,247 | 673,676 | ||
| Freddie Mac, 1.219%, 7/25/2029 (i) | 853,123 | 43,151 | ||
24
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Bonds – continued | ||||
| Mortgage-Backed – continued | ||||
| Freddie Mac, 1.267%, 8/25/2029 (i) | $ | 13,305,651 | $709,473 | |
| Freddie Mac, 1.915%, 4/25/2030 (i) | 2,500,000 | 241,062 | ||
| Freddie Mac, 1.985%, 4/25/2030 (i) | 7,819,828 | 762,895 | ||
| Freddie Mac, 1.768%, 5/25/2030 (i) | 4,048,749 | 363,105 | ||
| Freddie Mac, 1.906%, 5/25/2030 (i) | 8,995,049 | 867,875 | ||
| Freddie Mac, 1.436%, 6/25/2030 (i) | 3,687,431 | 271,492 | ||
| Freddie Mac, 1.703%, 8/25/2030 (i) | 3,331,192 | 294,774 | ||
| Freddie Mac, 1.262%, 9/25/2030 (i) | 2,196,896 | 144,894 | ||
| Freddie Mac, 1.171%, 11/25/2030 (i) | 4,320,889 | 267,799 | ||
| Freddie Mac, 0.419%, 1/25/2031 (i) | 17,083,587 | 306,481 | ||
| Freddie Mac, 0.872%, 1/25/2031 (i) | 6,541,106 | 302,734 | ||
| Freddie Mac, 1.026%, 1/25/2031 (i) | 4,767,487 | 261,989 | ||
| Freddie Mac, 0.611%, 3/25/2031 (i) | 13,836,183 | 408,296 | ||
| Freddie Mac, 0.828%, 3/25/2031 (i) | 5,934,811 | 265,430 | ||
| Freddie Mac, 1.325%, 5/25/2031 (i) | 2,518,959 | 185,191 | ||
| Freddie Mac, 1.039%, 7/25/2031 (i) | 4,010,843 | 234,758 | ||
| Freddie Mac, 0.608%, 8/25/2031 (i) | 5,125,483 | 162,071 | ||
| Freddie Mac, 0.632%, 9/25/2031 (i) | 16,898,337 | 593,030 | ||
| Freddie Mac, 0.955%, 9/25/2031 (i) | 5,075,984 | 270,112 | ||
| Freddie Mac, 0.441%, 11/25/2031 (i) | 25,136,487 | 587,450 | ||
| Freddie Mac, 0.597%, 12/25/2031 (i) | 23,600,379 | 760,711 | ||
| Freddie Mac, 0.665%, 12/25/2031 (i) | 40,016,231 | 1,444,954 | ||
| Freddie Mac, 0.432%, 11/25/2032 (i) | 24,265,504 | 453,510 | ||
| Freddie Mac, 3%, 2/15/2033 (i) | 792,839 | 43,774 | ||
| Freddie Mac, 6%, 3/01/2033 - 6/01/2037 | 1,338,770 | 1,348,146 | ||
| Freddie Mac, 5%, 9/01/2033 - 7/01/2041 | 2,092,633 | 2,048,253 | ||
| Freddie Mac, 5.5%, 12/01/2033 - 10/01/2035 | 1,241,431 | 1,226,351 | ||
| Freddie Mac, 6.5%, 5/01/2034 - 7/01/2037 | 520,856 | 525,103 | ||
| Freddie Mac, 5.5%, 2/15/2036 (i) | 140,258 | 22,204 | ||
| Freddie Mac, 4%, 8/01/2037 - 4/01/2044 | 4,923,690 | 4,512,239 | ||
| Freddie Mac, 3%, 1/01/2038 - 2/25/2059 | 22,011,823 | 18,846,972 | ||
| Freddie Mac, 4.5%, 12/15/2040 (i) | 88,314 | 7,204 | ||
| Freddie Mac, 4%, 8/15/2044 (i) | 145,568 | 16,565 | ||
| Freddie Mac, 3.25%, 11/25/2061 | 1,999,451 | 1,654,757 | ||
| Freddie Mac, UMBS, 5%, 7/01/2035 - 8/31/2053 | 7,047,586 | 6,661,495 | ||
| Freddie Mac, UMBS, 6%, 1/01/2036 - 12/01/2052 | 2,241,808 | 2,213,874 | ||
| Freddie Mac, UMBS, 2%, 9/30/2036 - 4/01/2052 | 117,420,735 | 91,578,902 | ||
| Freddie Mac, UMBS, 2.5%, 3/01/2037 - 5/01/2052 | 72,324,593 | 58,445,975 | ||
| Freddie Mac, UMBS, 3%, 12/01/2037 - 10/01/2052 | 20,806,053 | 17,386,481 | ||
| Freddie Mac, UMBS, 4.5%, 5/01/2038 - 1/01/2053 | 19,359,279 | 17,995,525 | ||
| Freddie Mac, UMBS, 3.5%, 12/01/2046 - 4/01/2053 | 19,696,048 | 17,008,399 | ||
| Freddie Mac, UMBS, 4%, 8/01/2047 - 10/01/2052 | 19,993,260 | 17,891,840 | ||
| Freddie Mac, UMBS, 1.5%, 3/01/2051 - 10/01/2051 | 2,537,595 | 1,829,820 | ||
25
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Bonds – continued | ||||
| Mortgage-Backed – continued | ||||
| Freddie Mac, UMBS, 5.5%, 12/01/2052 - 8/01/2053 | $ | 9,035,849 | $8,751,985 | |
| Ginnie Mae, 6%, 9/15/2032 - 1/15/2038 | 1,210,679 | 1,232,057 | ||
| Ginnie Mae, 5.5%, 12/15/2032 - 8/20/2053 | 47,297,500 | 45,937,931 | ||
| Ginnie Mae, 4.5%, 7/15/2033 - 12/20/2052 | 39,681,097 | 36,799,375 | ||
| Ginnie Mae, 5%, 7/20/2033 - 8/20/2053 | 36,565,138 | 34,669,551 | ||
| Ginnie Mae, 4%, 1/20/2041 - 10/20/2052 | 16,003,703 | 14,493,511 | ||
| Ginnie Mae, 3.5%, 12/15/2041 - 3/20/2048 | 7,327,320 | 6,542,651 | ||
| Ginnie Mae, 3%, 4/20/2045 - 10/20/2052 | 36,532,186 | 31,146,479 | ||
| Ginnie Mae, 2.5%, 8/20/2051 - 4/20/2052 | 50,516,336 | 41,310,441 | ||
| Ginnie Mae, 2%, 1/20/2052 - 3/20/2052 | 23,979,495 | 18,963,337 | ||
| Ginnie Mae, 0.584%, 2/16/2059 (i) | 6,718,642 | 226,140 | ||
| Ginnie Mae, TBA, 6%, 10/15/2053 | 14,050,000 | 13,921,569 | ||
| Ginnie Mae, TBA, 3.5%, 10/23/2053 | 22,075,000 | 19,334,596 | ||
| Ginnie Mae, TBA, 6.5%, 10/23/2053 | 4,875,000 | 4,902,422 | ||
| UMBS, TBA, 5%, 10/24/2038 | 5,500,000 | 5,355,625 | ||
| UMBS, TBA, 2%, 10/12/2053 | 2,450,000 | 1,863,340 | ||
| $972,426,660 | ||||
| Municipals – 0.3% | ||||
| New Jersey Turnpike Authority Rev., Taxable (Build America Bonds), “F”, 7.414%, 1/01/2040 | $ | 5,815,000 | $6,761,664 | |
| Rhode Island Student Loan Authority Education Loan Rev., Taxable, 6.081%, 12/01/2042 | 9,975,000 | 9,184,693 | ||
| State of Florida, Taxable, “A”, 2.154%, 7/01/2030 | 3,327,000 | 2,664,593 | ||
| $18,610,950 | ||||
| Natural Gas - Distribution – 0.1% | ||||
| NiSource, Inc., 2.95%, 9/01/2029 | $ | 3,979,000 | $3,429,417 | |
| NiSource, Inc., 5.65%, 2/01/2045 | 1,946,000 | 1,760,508 | ||
| $5,189,925 | ||||
| Natural Gas - Pipeline – 0.0% | ||||
| APA Infrastructure Ltd., 4.25%, 7/15/2027 (n) | $ | 777,000 | $732,826 | |
| Network & Telecom – 0.1% | ||||
| Verizon Communications, Inc., 3.15%, 3/22/2030 | $ | 3,413,000 | $2,913,128 | |
| Verizon Communications, Inc., 2.55%, 3/21/2031 | 2,821,000 | 2,246,179 | ||
| Verizon Communications, Inc., 4.812%, 3/15/2039 | 6,030,000 | 5,196,340 | ||
| $10,355,647 | ||||
26
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Bonds – continued | ||||
| Oils – 0.2% | ||||
| Marathon Petroleum Corp., 4.75%, 9/15/2044 | $ | 2,845,000 | $2,254,075 | |
| Phillips 66 Co., 2.15%, 12/15/2030 | 9,976,000 | 7,854,696 | ||
| Valero Energy Corp., 6.625%, 6/15/2037 | 6,797,000 | 6,967,812 | ||
| $17,076,583 | ||||
| Other Banks & Diversified Financials – 0.3% | ||||
| Macquarie Group Ltd., 4.442% to 6/21/2032, FLR (SOFR - 1 day + 2.405%) to 6/21/2033 (n) | $ | 19,423,000 | $16,545,219 | |
| Northern Trust Corp., 6.125%, 11/02/2032 | 9,142,000 | 9,026,834 | ||
| $25,572,053 | ||||
| Pollution Control – 0.3% | ||||
| Republic Services, Inc., 1.45%, 2/15/2031 | $ | 2,765,000 | $2,077,749 | |
| Waste Management, Inc., 4.875%, 2/15/2034 | 20,620,000 | 19,514,200 | ||
| $21,591,949 | ||||
| Real Estate - Office – 0.0% | ||||
| Boston Properties LP, REIT, 2.55%, 4/01/2032 | $ | 4,222,000 | $3,047,603 | |
| Real Estate - Other – 0.2% | ||||
| Public Storage Operating, REIT, 5.1%, 8/01/2033 | $ | 15,515,000 | $14,830,948 | |
| Real Estate - Retail – 0.1% | ||||
| Brixmor Operating Partnership LP, REIT, 4.125%, 5/15/2029 | $ | 567,000 | $505,036 | |
| Brixmor Operating Partnership LP, REIT, 4.05%, 7/01/2030 | 5,371,000 | 4,688,901 | ||
| Realty Income Corp., REIT, 3.25%, 1/15/2031 | 1,594,000 | 1,339,425 | ||
| $6,533,362 | ||||
| Retailers – 0.1% | ||||
| Alimentation Couche-Tard, Inc., 3.439%, 5/13/2041 (n) | $ | 6,827,000 | $4,541,058 | |
| Specialty Stores – 0.1% | ||||
| Genuine Parts Co., 2.75%, 2/01/2032 | $ | 12,549,000 | $9,803,530 | |
| Telecommunications - Wireless – 0.5% | ||||
| Crown Castle, Inc., REIT, 3.65%, 9/01/2027 | $ | 7,941,000 | $7,289,819 | |
| Rogers Communications, Inc., 3.8%, 3/15/2032 | 17,162,000 | 14,262,073 | ||
| T-Mobile USA, Inc., 2.05%, 2/15/2028 | 6,192,000 | 5,324,377 | ||
| T-Mobile USA, Inc., 4.5%, 4/15/2050 | 7,223,000 | 5,538,812 | ||
| Vodafone Group PLC, 5.625%, 2/10/2053 | 2,616,000 | 2,318,239 | ||
| $34,733,320 | ||||
| Tobacco – 0.4% | ||||
| B.A.T. International Finance PLC, 4.448%, 3/16/2028 | $ | 17,004,000 | $15,856,578 | |
| Philip Morris International, Inc., 5.125%, 11/17/2027 | 3,015,000 | 2,952,259 | ||
| Philip Morris International, Inc., 5.625%, 11/17/2029 | 1,299,000 | 1,284,266 | ||
27
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Bonds – continued | ||||
| Tobacco – continued | ||||
| Philip Morris International, Inc., 5.125%, 2/15/2030 | $ | 4,902,000 | $4,701,224 | |
| Philip Morris International, Inc., 5.75%, 11/17/2032 | 5,756,000 | 5,616,270 | ||
| $30,410,597 | ||||
| Transportation - Services – 0.0% | ||||
| ERAC USA Finance LLC, 7%, 10/15/2037 (n) | $ | 2,711,000 | $2,934,119 | |
| U.S. Government Agencies and Equivalents – 0.0% | ||||
| Small Business Administration, 4.77%, 4/01/2024 | $ | 15,696 | $15,585 | |
| Small Business Administration, 5.18%, 5/01/2024 | 45,342 | 45,015 | ||
| Small Business Administration, 5.52%, 6/01/2024 | 18,749 | 18,683 | ||
| Small Business Administration, 4.99%, 9/01/2024 | 39,853 | 39,338 | ||
| Small Business Administration, 4.95%, 3/01/2025 | 62,007 | 61,553 | ||
| $180,174 | ||||
| U.S. Treasury Obligations – 9.0% | ||||
| U.S. Treasury Bonds, 3.5%, 2/15/2039 | $ | 5,140,000 | $4,440,277 | |
| U.S. Treasury Bonds, 1.75%, 8/15/2041 | 28,989,000 | 18,052,447 | ||
| U.S. Treasury Bonds, 2.375%, 2/15/2042 | 9,700,000 | 6,704,746 | ||
| U.S. Treasury Bonds, 4%, 11/15/2042 | 28,650,000 | 25,429,113 | ||
| U.S. Treasury Bonds, 2.875%, 5/15/2043 | 36,361,000 | 26,938,388 | ||
| U.S. Treasury Bonds, 4.375%, 8/14/2043 | 7,100,000 | 6,624,078 | ||
| U.S. Treasury Bonds, 3%, 11/15/2045 | 215,000 | 159,024 | ||
| U.S. Treasury Bonds, 2.875%, 11/15/2046 | 14,148,000 | 10,161,138 | ||
| U.S. Treasury Bonds, 2.375%, 11/15/2049 | 151,800,000 | 97,157,929 | ||
| U.S. Treasury Bonds, 1.875%, 11/15/2051 | 9,015,000 | 5,024,806 | ||
| U.S. Treasury Bonds, 2.25%, 2/15/2052 | 44,658,400 | 27,405,604 | ||
| U.S. Treasury Notes, 1.375%, 1/31/2025 (f) | 52,400,000 | 49,755,437 | ||
| U.S. Treasury Notes, 4.625%, 6/30/2025 | 33,700,000 | 33,411,707 | ||
| U.S. Treasury Notes, 4.75%, 7/31/2025 | 58,800,000 | 58,409,532 | ||
| U.S. Treasury Notes, 5%, 8/30/2025 | 37,200,000 | 37,124,438 | ||
| U.S. Treasury Notes, 0.375%, 11/30/2025 | 200,700,000 | 181,845,176 | ||
| U.S. Treasury Notes, 2.75%, 4/30/2027 | 41,067,600 | 38,403,019 | ||
| U.S. Treasury Notes, 4.125%, 7/30/2028 | 30,000,000 | 29,353,125 | ||
| U.S. Treasury Notes, 4%, 11/15/2052 | 7,700,000 | 6,824,727 | ||
| $663,224,711 | ||||
| Utilities - Electric Power – 1.0% | ||||
| American Electric Power Co., Inc., 5.95%, 11/01/2032 | $ | 4,413,000 | $4,400,010 | |
| American Transmission Systems, Inc., 2.65%, 1/15/2032 (n) | 1,738,000 | 1,373,912 | ||
| Duke Energy Carolinas LLC, 4.95%, 1/15/2033 | 13,849,000 | 13,159,082 | ||
| Duke Energy Corp., 2.65%, 9/01/2026 | 1,236,000 | 1,136,894 | ||
| Duke Energy Corp., 4.5%, 8/15/2032 | 10,428,000 | 9,380,587 | ||
| Duke Energy Progress LLC, 3.45%, 3/15/2029 | 5,584,000 | 5,063,178 | ||
28
Portfolio of Investments –
continued
| Issuer | Shares/Par | Value ($) | ||
| Bonds – continued | ||||
| Utilities - Electric Power – continued | ||||
| Enel Finance International N.V., 6.8%, 10/14/2025 (n) | $ | 2,896,000 | $2,929,711 | |
| Enel Finance International N.V., 4.75%, 5/25/2047 (n) | 2,194,000 | 1,678,321 | ||
| Evergy, Inc., 2.9%, 9/15/2029 | 3,028,000 | 2,586,224 | ||
| Exelon Corp., 4.05%, 4/15/2030 | 5,246,000 | 4,721,453 | ||
| FirstEnergy Corp., 3.4%, 3/01/2050 | 3,479,000 | 2,162,369 | ||
| Georgia Power Co., 3.7%, 1/30/2050 | 482,000 | 337,778 | ||
| Jersey Central Power & Light Co., 4.3%, 1/15/2026 (n) | 4,141,000 | 3,990,174 | ||
| Jersey Central Power & Light Co., 2.75%, 3/01/2032 (n) | 2,958,000 | 2,316,538 | ||
| Oncor Electric Delivery Co. LLC, 5.75%, 3/15/2029 | 3,548,000 | 3,601,127 | ||
| Pacific Gas & Electric Co., 2.1%, 8/01/2027 | 1,561,000 | 1,334,762 | ||
| Pacific Gas & Electric Co., 3%, 6/15/2028 | 4,502,000 | 3,862,194 | ||
| Pacific Gas & Electric Co., 2.5%, 2/01/2031 | 6,796,000 | 5,170,262 | ||
| Pacific Gas & Electric Co., 3.3%, 8/01/2040 | 3,004,000 | 1,923,381 | ||
| Xcel Energy, Inc., 3.4%, 6/01/2030 | 3,122,000 | 2,696,427 | ||
| $73,824,384 | ||||
| Utilities - Gas – 0.0% | ||||
| East Ohio Gas Co., 2%, 6/15/2030 (n) | $ | 3,679,000 | $2,866,896 | |
| Total Bonds (Identified Cost, $3,390,740,218) | $2,992,072,607 | |||
| Preferred Stocks – 0.7% | ||||
| Computer Software - Systems – 0.2% | ||||
| Samsung Electronics Co. Ltd. | 420,580 | $16,986,520 | ||
| Consumer Products – 0.5% | ||||
| Henkel AG & Co. KGaA | 514,245 | $36,702,883 | ||
| Total Preferred Stocks (Identified Cost, $59,361,931) | $53,689,403 | |||
| Investment Companies (h) – 1.3% | ||||
| Money Market Funds – 1.3% | ||||
| MFS Institutional Money Market Portfolio, 5.4% (v) (Identified Cost, $96,472,903) | 96,469,933 | $96,489,227 | ||
| Other Assets, Less Liabilities – (0.5)% | (34,550,499) | |||
| Net Assets – 100.0% | $7,406,357,465 | |||
| (a) | Non-income producing security. |
| (f) | All or a portion of the security has been segregated as collateral for open futures contracts. |
| (h) | An affiliated issuer, which may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. At period end, the aggregate values of the fund's investments in affiliated issuers and in unaffiliated issuers were $96,489,227 and $7,344,418,737, respectively. |
| (i) | Interest only security for which the fund receives interest on notional principal (Par amount). Par amount shown is the notional principal and does not reflect the cost of the security. |
29
Portfolio of Investments –
continued
| (n) | Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. At period end, the aggregate value of these securities was $527,407,176, representing 7.1% of net assets. |
| (v) | Affiliated issuer that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
| (z) | Restricted securities are not registered under the Securities Act of 1933 and are subject to legal restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are subsequently registered. Disposal of these securities may involve time-consuming negotiations and prompt sale at an acceptable price may be difficult. The fund holds the following restricted securities: |
| Restricted Securities | Acquisition Date | Cost | Value |
| ReadyCap Commercial Mortgage Trust, 2021-FL5, “A”, FLR, 6.434% ((SOFR - 1mo. + 0.11448%) + 1%), 4/25/2038 | 3/19/21 | $4,067,346 | $4,024,118 |
| ReadyCap Commercial Mortgage Trust, 2021-FL7, “B”, FLR, 7.234% ((SOFR - 1mo. + 0.11448%) + 1.8%), 11/25/2036 | 11/12/21 | 3,695,000 | 3,572,823 |
| Total Restricted Securities | $7,596,941 | ||
| % of Net assets | 0.1% |
| The following abbreviations are used in this report and are defined: | |
| ADR | American Depositary Receipt |
| CLO | Collateralized Loan Obligation |
| CMT | Constant Maturity Treasury |
| FGIC | Financial Guaranty Insurance Co. |
| FLR | Floating Rate. Interest rate resets periodically based on the parenthetically disclosed reference rate plus a spread (if any). The period-end rate reported may not be the current rate. All reference rates are USD unless otherwise noted. |
| REIT | Real Estate Investment Trust |
| SOFR | Secured Overnight Financing Rate |
| TBA | To Be Announced |
| UMBS | Uniform Mortgage-Backed Security |
Derivative Contracts at 9/30/23
| Futures Contracts | ||||||
| Description | Long/ Short | Currency | Contracts | Notional Amount | Expiration Date | Value/Unrealized Appreciation (Depreciation) |
| Asset Derivatives | ||||||
| Interest Rate Futures | ||||||
| U.S. Treasury Ultra Note 10 yr | Short | USD | 883 | $98,509,688 | December – 2023 | $2,645,022 |
| Liability Derivatives | ||||||
| Interest Rate Futures | ||||||
| U.S. Treasury Note 2 yr | Long | USD | 363 | $73,584,070 | December – 2023 | $(188,478) |
| U.S. Treasury Note 5 yr | Long | USD | 2,040 | 214,933,125 | December – 2023 | (1,610,572) |
30
Portfolio of Investments –
continued
| Futures Contracts - continued | ||||||
| Description | Long/ Short | Currency | Contracts | Notional Amount | Expiration Date | Value/Unrealized Appreciation (Depreciation) |
| Liability Derivatives - continued | ||||||
| Interest Rate Futures - continued | ||||||
| U.S. Treasury Ultra Bond | Long | USD | 515 | $61,124,063 | December – 2023 | $(4,560,759) |
| $(6,359,809) | ||||||
At September 30, 2023, the fund had
liquid securities with an aggregate value of $4,839,754 to cover any collateral or margin obligations for certain derivative contracts.
See Notes to Financial Statements
31
Financial Statements
Statement of Assets and
Liabilities
At 9/30/23
This statement represents your
fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.
| Assets | |
| Investments in unaffiliated issuers, at value (identified cost, $6,307,720,747) | $7,344,418,737 |
| Investments in affiliated issuers, at value (identified cost, $96,472,903) | 96,489,227 |
| Cash | 5,903 |
| Restricted cash for MBS/TBA | 280,000 |
| Receivables for | |
| Net daily variation margin on open futures contracts | 341,785 |
| Investments sold | 10,660,212 |
| Fund shares sold | 6,696,133 |
| Interest and dividends | 27,710,355 |
| Other assets | 2,762 |
| Total assets | $7,486,605,114 |
| Liabilities | |
| Payables for | |
| Distributions | $1,286,822 |
| Investments purchased | 23,018,673 |
| TBA purchase commitments | 46,309,427 |
| Fund shares reacquired | 7,238,700 |
| Payable to affiliates | |
| Investment adviser | 212,238 |
| Administrative services fee | 5,084 |
| Shareholder servicing costs | 1,589,670 |
| Distribution and service fees | 124,709 |
| Payable for independent Trustees' compensation | 22,146 |
| Accrued expenses and other liabilities | 440,180 |
| Total liabilities | $80,247,649 |
| Net assets | $7,406,357,465 |
| Net assets consist of | |
| Paid-in capital | $6,136,916,081 |
| Total distributable earnings (loss) | 1,269,441,384 |
| Net assets | $7,406,357,465 |
| Shares of beneficial interest outstanding | 403,707,366 |
32
Statement of Assets and Liabilities – continued
| Net assets | Shares outstanding | Net asset value per share (a) | |
| Class A | $4,667,098,116 | 254,506,827 | $18.34 |
| Class B | 33,156,337 | 1,801,673 | 18.40 |
| Class C | 269,522,167 | 14,553,302 | 18.52 |
| Class I | 923,969,732 | 50,402,951 | 18.33 |
| Class R1 | 6,165,878 | 336,633 | 18.32 |
| Class R2 | 79,853,547 | 4,334,886 | 18.42 |
| Class R3 | 207,157,695 | 11,284,588 | 18.36 |
| Class R4 | 214,802,498 | 11,697,589 | 18.36 |
| Class R6 | 1,004,631,495 | 54,788,917 | 18.34 |
| (a) | Maximum offering price per share was equal to the net asset value per share for all share classes, except for Class A, for which the maximum offering price per share was $19.46 [100 / 94.25 x $18.34]. On sales of $50,000 or more, the maximum offering price of Class A shares is reduced. A contingent deferred sales charge may be imposed on redemptions of Class A, Class B, and Class C shares. Redemption price per share was equal to the net asset value per share for Classes I, R1, R2, R3, R4, and R6. |
See Notes to Financial Statements
33
Financial Statements
Statement of Operations
Year ended 9/30/23
This statement describes how much
your fund earned in investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
| Net investment income (loss) | |
| Income | |
| Interest | $110,177,048 |
| Dividends | 106,253,533 |
| Dividends from affiliated issuers | 5,661,878 |
| Other | 699,774 |
| Income on securities loaned | 198,416 |
| Foreign taxes withheld | (1,443,604) |
| Total investment income | $221,547,045 |
| Expenses | |
| Management fee | $26,595,257 |
| Distribution and service fees | 16,657,128 |
| Shareholder servicing costs | 6,688,411 |
| Administrative services fee | 629,143 |
| Independent Trustees' compensation | 125,754 |
| Custodian fee | 284,039 |
| Shareholder communications | 255,163 |
| Audit and tax fees | 90,204 |
| Legal fees | 39,941 |
| Miscellaneous | 405,308 |
| Total expenses | $51,770,348 |
| Fees paid indirectly | (21,630) |
| Reduction of expenses by distributor | (25,725) |
| Net expenses | $51,722,993 |
| Net investment income (loss) | $169,824,052 |
34
Statement of Operations –
continued
| Realized and unrealized gain (loss) | |
| Realized gain (loss) (identified cost basis) | |
| Unaffiliated issuers | $337,548,142 |
| Affiliated issuers | (2,405) |
| Futures contracts | (22,049,684) |
| Foreign currency | 57,861 |
| Net realized gain (loss) | $315,553,914 |
| Change in unrealized appreciation or depreciation | |
| Unaffiliated issuers | $183,671,840 |
| Affiliated issuers | (8,757) |
| Futures contracts | 5,807,982 |
| Translation of assets and liabilities in foreign currencies | 84,539 |
| Net unrealized gain (loss) | $189,555,604 |
| Net realized and unrealized gain (loss) | $505,109,518 |
| Change in net assets from operations | $674,933,570 |
See Notes to Financial Statements
35
Financial Statements
Statements of Changes in Net
Assets
These statements describe the
increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.
| Year ended | ||
| 9/30/23 | 9/30/22 | |
| Change in net assets | ||
| From operations | ||
| Net investment income (loss) | $169,824,052 | $127,213,031 |
| Net realized gain (loss) | 315,553,914 | 287,614,613 |
| Net unrealized gain (loss) | 189,555,604 | (1,451,061,819) |
| Change in net assets from operations | $674,933,570 | $(1,036,234,175) |
| Total distributions to shareholders | $(446,866,652) | $(682,742,351) |
| Change in net assets from fund share transactions | $44,833,930 | $365,177,591 |
| Total change in net assets | $272,900,848 | $(1,353,798,935) |
| Net assets | ||
| At beginning of period | 7,133,456,617 | 8,487,255,552 |
| At end of period | $7,406,357,465 | $7,133,456,617 |
See Notes to Financial Statements
36
Financial Statements
Financial Highlights
The financial highlights table is
intended to help you understand the fund's financial performance for the past 5 years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
| Class A | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $17.77 | $22.04 | $19.78 | $19.42 | $19.09 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $0.41 | $0.31 | $0.28 | $0.36 | $0.41 |
| Net realized and unrealized gain (loss) | 1.27 | (2.83) | 3.36 | 0.63 | 0.78 |
| Total from investment operations | $1.68 | $(2.52) | $3.64 | $0.99 | $1.19 |
| Less distributions declared to shareholders | |||||
| From net investment income | $(0.46) | $(0.26) | $(0.33) | $(0.37) | $(0.39) |
| From net realized gain | (0.65) | (1.49) | (1.05) | (0.26) | (0.47) |
| Total distributions declared to shareholders | $(1.11) | $(1.75) | $(1.38) | $(0.63) | $(0.86) |
| Net asset value, end of period (x) | $18.34 | $17.77 | $22.04 | $19.78 | $19.42 |
| Total return (%) (r)(s)(t)(x) | 9.43 | (12.61) | 19.02 | 5.21 | 6.73 |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 0.72 | 0.72 | 0.72 | 0.73 | 0.73 |
| Expenses after expense reductions (f) | 0.72 | 0.72 | 0.72 | 0.72 | 0.72 |
| Net investment income (loss) | 2.18 | 1.52 | 1.32 | 1.87 | 2.20 |
| Portfolio turnover | 43 | 88 | 112 | 92 | 39 |
| Net assets at end of period (000 omitted) | $4,667,098 | $4,462,807 | $5,207,735 | $4,476,559 | $4,666,095 |
See Notes to Financial Statements
37
Financial Highlights – continued
| Class B | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $17.83 | $22.10 | $19.82 | $19.45 | $19.12 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $0.27 | $0.15 | $0.12 | $0.22 | $0.27 |
| Net realized and unrealized gain (loss) | 1.26 | (2.82) | 3.38 | 0.63 | 0.77 |
| Total from investment operations | $1.53 | $(2.67) | $3.50 | $0.85 | $1.04 |
| Less distributions declared to shareholders | |||||
| From net investment income | $(0.31) | $(0.11) | $(0.17) | $(0.22) | $(0.24) |
| From net realized gain | (0.65) | (1.49) | (1.05) | (0.26) | (0.47) |
| Total distributions declared to shareholders | $(0.96) | $(1.60) | $(1.22) | $(0.48) | $(0.71) |
| Net asset value, end of period (x) | $18.40 | $17.83 | $22.10 | $19.82 | $19.45 |
| Total return (%) (r)(s)(t)(x) | 8.55 | (13.25) | 18.16 | 4.44 | 5.90 |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 1.47 | 1.47 | 1.47 | 1.48 | 1.48 |
| Expenses after expense reductions (f) | 1.47 | 1.47 | 1.47 | 1.48 | 1.47 |
| Net investment income (loss) | 1.41 | 0.73 | 0.57 | 1.12 | 1.44 |
| Portfolio turnover | 43 | 88 | 112 | 92 | 39 |
| Net assets at end of period (000 omitted) | $33,156 | $48,449 | $80,923 | $94,906 | $124,982 |
| Class C | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $17.94 | $22.23 | $19.92 | $19.55 | $19.21 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $0.27 | $0.16 | $0.12 | $0.22 | $0.27 |
| Net realized and unrealized gain (loss) | 1.28 | (2.85) | 3.41 | 0.63 | 0.78 |
| Total from investment operations | $1.55 | $(2.69) | $3.53 | $0.85 | $1.05 |
| Less distributions declared to shareholders | |||||
| From net investment income | $(0.32) | $(0.11) | $(0.17) | $(0.22) | $(0.24) |
| From net realized gain | (0.65) | (1.49) | (1.05) | (0.26) | (0.47) |
| Total distributions declared to shareholders | $(0.97) | $(1.60) | $(1.22) | $(0.48) | $(0.71) |
| Net asset value, end of period (x) | $18.52 | $17.94 | $22.23 | $19.92 | $19.55 |
| Total return (%) (r)(s)(t)(x) | 8.56 | (13.26) | 18.22 | 4.41 | 5.92 |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 1.47 | 1.47 | 1.47 | 1.48 | 1.48 |
| Expenses after expense reductions (f) | 1.47 | 1.47 | 1.47 | 1.48 | 1.48 |
| Net investment income (loss) | 1.42 | 0.75 | 0.57 | 1.12 | 1.44 |
| Portfolio turnover | 43 | 88 | 112 | 92 | 39 |
| Net assets at end of period (000 omitted) | $269,522 | $325,551 | $450,129 | $482,340 | $602,145 |
See Notes to Financial Statements
38
Financial Highlights – continued
| Class I | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $17.77 | $22.04 | $19.77 | $19.41 | $19.08 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $0.46 | $0.36 | $0.34 | $0.41 | $0.45 |
| Net realized and unrealized gain (loss) | 1.26 | (2.83) | 3.37 | 0.63 | 0.78 |
| Total from investment operations | $1.72 | $(2.47) | $3.71 | $1.04 | $1.23 |
| Less distributions declared to shareholders | |||||
| From net investment income | $(0.51) | $(0.31) | $(0.39) | $(0.42) | $(0.43) |
| From net realized gain | (0.65) | (1.49) | (1.05) | (0.26) | (0.47) |
| Total distributions declared to shareholders | $(1.16) | $(1.80) | $(1.44) | $(0.68) | $(0.90) |
| Net asset value, end of period (x) | $18.33 | $17.77 | $22.04 | $19.77 | $19.41 |
| Total return (%) (r)(s)(t)(x) | 9.64 | (12.39) | 19.38 | 5.47 | 6.99 |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 0.47 | 0.47 | 0.47 | 0.48 | 0.48 |
| Expenses after expense reductions (f) | N/A | N/A | N/A | N/A | N/A |
| Net investment income (loss) | 2.43 | 1.77 | 1.57 | 2.11 | 2.44 |
| Portfolio turnover | 43 | 88 | 112 | 92 | 39 |
| Net assets at end of period (000 omitted) | $923,970 | $871,532 | $1,008,628 | $848,687 | $663,464 |
See Notes to Financial Statements
39
Financial Highlights – continued
| Class R1 | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $17.75 | $22.02 | $19.75 | $19.39 | $19.06 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $0.26 | $0.16 | $0.12 | $0.22 | $0.27 |
| Net realized and unrealized gain (loss) | 1.28 | (2.83) | 3.37 | 0.63 | 0.77 |
| Total from investment operations | $1.54 | $(2.67) | $3.49 | $0.85 | $1.04 |
| Less distributions declared to shareholders | |||||
| From net investment income | $(0.32) | $(0.11) | $(0.17) | $(0.23) | $(0.24) |
| From net realized gain | (0.65) | (1.49) | (1.05) | (0.26) | (0.47) |
| Total distributions declared to shareholders | $(0.97) | $(1.60) | $(1.22) | $(0.49) | $(0.71) |
| Net asset value, end of period (x) | $18.32 | $17.75 | $22.02 | $19.75 | $19.39 |
| Total return (%) (r)(s)(t)(x) | 8.60 | (13.28) | 18.20 | 4.42 | 5.93 |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 1.47 | 1.47 | 1.47 | 1.48 | 1.48 |
| Expenses after expense reductions (f) | N/A | N/A | N/A | N/A | N/A |
| Net investment income (loss) | 1.41 | 0.76 | 0.57 | 1.12 | 1.44 |
| Portfolio turnover | 43 | 88 | 112 | 92 | 39 |
| Net assets at end of period (000 omitted) | $6,166 | $8,391 | $10,420 | $9,119 | $10,508 |
| Class R2 | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $17.85 | $22.13 | $19.85 | $19.48 | $19.15 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $0.36 | $0.26 | $0.23 | $0.31 | $0.36 |
| Net realized and unrealized gain (loss) | 1.27 | (2.84) | 3.38 | 0.64 | 0.78 |
| Total from investment operations | $1.63 | $(2.58) | $3.61 | $0.95 | $1.14 |
| Less distributions declared to shareholders | |||||
| From net investment income | $(0.41) | $(0.21) | $(0.28) | $(0.32) | $(0.34) |
| From net realized gain | (0.65) | (1.49) | (1.05) | (0.26) | (0.47) |
| Total distributions declared to shareholders | $(1.06) | $(1.70) | $(1.33) | $(0.58) | $(0.81) |
| Net asset value, end of period (x) | $18.42 | $17.85 | $22.13 | $19.85 | $19.48 |
| Total return (%) (r)(s)(t)(x) | 9.10 | (12.83) | 18.75 | 4.97 | 6.43 |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 0.97 | 0.97 | 0.97 | 0.98 | 0.98 |
| Expenses after expense reductions (f) | N/A | N/A | N/A | N/A | 0.98 |
| Net investment income (loss) | 1.92 | 1.26 | 1.07 | 1.62 | 1.94 |
| Portfolio turnover | 43 | 88 | 112 | 92 | 39 |
| Net assets at end of period (000 omitted) | $79,854 | $88,487 | $118,257 | $125,160 | $165,893 |
See Notes to Financial Statements
40
Financial Highlights – continued
| Class R3 | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $17.79 | $22.06 | $19.79 | $19.43 | $19.10 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $0.41 | $0.31 | $0.28 | $0.36 | $0.41 |
| Net realized and unrealized gain (loss) | 1.27 | (2.83) | 3.37 | 0.63 | 0.78 |
| Total from investment operations | $1.68 | $(2.52) | $3.65 | $0.99 | $1.19 |
| Less distributions declared to shareholders | |||||
| From net investment income | $(0.46) | $(0.26) | $(0.33) | $(0.37) | $(0.39) |
| From net realized gain | (0.65) | (1.49) | (1.05) | (0.26) | (0.47) |
| Total distributions declared to shareholders | $(1.11) | $(1.75) | $(1.38) | $(0.63) | $(0.86) |
| Net asset value, end of period (x) | $18.36 | $17.79 | $22.06 | $19.79 | $19.43 |
| Total return (%) (r)(s)(t)(x) | 9.41 | (12.60) | 19.05 | 5.20 | 6.71 |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 0.72 | 0.72 | 0.72 | 0.73 | 0.73 |
| Expenses after expense reductions (f) | N/A | N/A | N/A | N/A | N/A |
| Net investment income (loss) | 2.17 | 1.51 | 1.32 | 1.86 | 2.19 |
| Portfolio turnover | 43 | 88 | 112 | 92 | 39 |
| Net assets at end of period (000 omitted) | $207,158 | $222,265 | $294,584 | $284,813 | $290,210 |
| Class R4 | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $17.80 | $22.07 | $19.80 | $19.44 | $19.11 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $0.46 | $0.36 | $0.34 | $0.41 | $0.46 |
| Net realized and unrealized gain (loss) | 1.26 | (2.83) | 3.37 | 0.63 | 0.77 |
| Total from investment operations | $1.72 | $(2.47) | $3.71 | $1.04 | $1.23 |
| Less distributions declared to shareholders | |||||
| From net investment income | $(0.51) | $(0.31) | $(0.39) | $(0.42) | $(0.43) |
| From net realized gain | (0.65) | (1.49) | (1.05) | (0.26) | (0.47) |
| Total distributions declared to shareholders | $(1.16) | $(1.80) | $(1.44) | $(0.68) | $(0.90) |
| Net asset value, end of period (x) | $18.36 | $17.80 | $22.07 | $19.80 | $19.44 |
| Total return (%) (r)(s)(t)(x) | 9.62 | (12.37) | 19.35 | 5.47 | 6.98 |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 0.47 | 0.47 | 0.47 | 0.48 | 0.48 |
| Expenses after expense reductions (f) | N/A | N/A | N/A | N/A | N/A |
| Net investment income (loss) | 2.43 | 1.77 | 1.57 | 2.11 | 2.45 |
| Portfolio turnover | 43 | 88 | 112 | 92 | 39 |
| Net assets at end of period (000 omitted) | $214,802 | $203,954 | $252,366 | $251,641 | $236,165 |
See Notes to Financial Statements
41
Financial Highlights – continued
| Class R6 | Year ended | ||||
| 9/30/23 | 9/30/22 | 9/30/21 | 9/30/20 | 9/30/19 | |
| Net asset value, beginning of period | $17.77 | $22.04 | $19.77 | $19.42 | $19.09 |
| Income (loss) from investment operations | |||||
| Net investment income (loss) (d) | $0.47 | $0.38 | $0.35 | $0.42 | $0.47 |
| Net realized and unrealized gain (loss) | 1.27 | (2.83) | 3.37 | 0.63 | 0.78 |
| Total from investment operations | $1.74 | $(2.45) | $3.72 | $1.05 | $1.25 |
| Less distributions declared to shareholders | |||||
| From net investment income | $(0.52) | $(0.33) | $(0.40) | $(0.44) | $(0.45) |
| From net realized gain | (0.65) | (1.49) | (1.05) | (0.26) | (0.47) |
| Total distributions declared to shareholders | $(1.17) | $(1.82) | $(1.45) | $(0.70) | $(0.92) |
| Net asset value, end of period (x) | $18.34 | $17.77 | $22.04 | $19.77 | $19.42 |
| Total return (%) (r)(s)(t)(x) | 9.78 | (12.32) | 19.47 | 5.50 | 7.07 |
| Ratios (%) (to average net assets) and Supplemental data: | |||||
| Expenses before expense reductions (f) | 0.39 | 0.39 | 0.39 | 0.40 | 0.40 |
| Expenses after expense reductions (f) | N/A | N/A | N/A | N/A | N/A |
| Net investment income (loss) | 2.51 | 1.85 | 1.65 | 2.19 | 2.52 |
| Portfolio turnover | 43 | 88 | 112 | 92 | 39 |
| Net assets at end of period (000 omitted) | $1,004,631 | $902,020 | $1,023,815 | $895,481 | $753,666 |
| (d) | Per share data is based on average shares outstanding. |
| (f) | Ratios do not reflect reductions from fees paid indirectly, if applicable. See Note 2 in the Notes to Financial Statements for additional information. |
| (r) | Certain expenses have been reduced without which performance would have been lower. |
| (s) | From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
| (t) | Total returns do not include any applicable sales charges. |
| (x) | The net asset values and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes. |
See Notes to Financial Statements
42
Notes to Financial Statements
(1) Business and
Organization
MFS Total Return Fund (the fund) is
a diversified series of MFS Series Trust V (the trust). The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management
investment company.
The fund is an investment company
and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services - Investment
Companies.
(2) Significant Accounting
Policies
General — The preparation of financial statements in conformity with U.S. 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 increases and decreases in net assets from operations
during the reporting period. Actual results could differ from those estimates. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s
Statement of Assets and Liabilities through the date that the financial statements were issued.
Balance Sheet Offsetting — The fund's accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the International
Swaps and Derivatives Association (ISDA) Master Agreement, or similar agreement, does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and
Liabilities across transactions between the fund and the applicable counterparty. The fund's right to setoff may be restricted or prohibited by the bankruptcy or insolvency laws of the particular jurisdiction to which
a specific master netting agreement counterparty is subject. Balance sheet offsetting disclosures, to the extent applicable to the fund, have been included in the fund’s Significant Accounting Policies note
under the captions for each of the fund’s in-scope financial instruments and transactions.
Investment Valuations — Subject to its oversight, the fund's Board of Trustees has delegated primary responsibility for determining or causing to be determined the value of the fund’s investments to MFS as
the fund's adviser, pursuant to the fund’s valuation policy and procedures which have been adopted by the adviser and approved by the Board. In accordance with Rule 2a-5 under the Investment Company Act of
1940, the Board of Trustees designated the adviser as the “valuation designee” of the fund. If the adviser, as valuation designee, determines that reliable market quotations are not readily available for
an investment, the investment is valued at fair value as determined in good faith by the adviser in accordance with the adviser’s fair valuation policy and procedures.
Under the fund's valuation policy
and procedures, equity securities, including restricted equity securities, are generally valued at the last sale or official closing price on their primary market or exchange as provided by a third-party pricing
service. Equity securities, for which there were no sales reported that day, are generally valued at the last quoted daily bid quotation on their primary market or exchange as provided by a third-party pricing
service. Debt instruments and floating rate loans, including restricted
43
Notes to Financial Statements -
continued
debt instruments, are generally valued at an
evaluated or composite bid as provided by a third-party pricing service. Short-term instruments with a maturity at issuance of 60 days or less may be valued at amortized cost, which approximates market value.
Futures contracts are generally valued at last
posted settlement price on their primary exchange as provided by a third-party pricing service. Futures contracts for which there were no trades that day for a particular position are generally valued at the closing
bid quotation on their primary exchange as provided by a third-party pricing service.
Open-end investment companies are generally valued
at net asset value per share. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided
by a third-party pricing service.
Under the fund’s valuation
policy and procedures, market quotations are not considered to be readily available for debt instruments, floating rate loans, and many types of derivatives. These investments are generally valued at fair value based
on information from third-party pricing services or otherwise determined by the adviser in accordance with the adviser’s fair valuation policy and procedures. Securities and other assets generally valued on the
basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. In determining values, third-party pricing services can utilize both transaction data and market information
such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, spreads and other market data. An investment may also be valued at fair value if the adviser determines that the
investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the
determination of the fund’s net asset value, or after the halt of trading of a specific security where trading does not resume prior to the close of the exchange or market on which the security is principally
traded. Events that occur after foreign markets close (such as developments in foreign markets and significant movements in the U.S. markets) and prior to the determination of the fund’s net asset value may be
deemed to have a material effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on
third-party pricing services or other information (such as the correlation with price movements of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the
business and financial condition of the issuer; and trading and other market data) to assist in determining whether to fair value and at what value to fair value an investment. The value of an investment for purposes
of calculating the fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net
asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the
same time at which the fund determines its net asset value per share.
Various inputs are used in
determining the value of the fund's assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value
hierarchy. In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund's assessment of the significance of a
particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted
44
Notes to Financial Statements -
continued
quoted prices in active markets for identical
assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes
significant unobservable inputs, which may include the adviser's own assumptions in determining the fair value of investments. Other financial instruments are derivative instruments, such as futures contracts. The
following is a summary of the levels used as of September 30, 2023 in valuing the fund's assets and liabilities:
| Financial Instruments | Level 1 | Level 2 | Level 3 | Total |
| Equity Securities: | ||||
| United States | $4,059,792,756 | $— | $— | $4,059,792,756 |
| Germany | 48,917,910 | 36,702,883 | — | 85,620,793 |
| United Kingdom | — | 63,025,852 | — | 63,025,852 |
| Canada | 42,831,411 | — | — | 42,831,411 |
| Switzerland | — | 39,223,087 | — | 39,223,087 |
| Taiwan | 26,113,102 | — | — | 26,113,102 |
| France | — | 18,752,609 | — | 18,752,609 |
| South Korea | 16,986,520 | — | — | 16,986,520 |
| U.S. Treasury Bonds & U.S. Government Agencies & Equivalents | — | 663,404,885 | — | 663,404,885 |
| Non - U.S. Sovereign Debt | — | 2,203,794 | — | 2,203,794 |
| Municipal Bonds | — | 18,610,950 | — | 18,610,950 |
| U.S. Corporate Bonds | — | 644,504,897 | — | 644,504,897 |
| Residential Mortgage-Backed Securities | — | 972,610,215 | — | 972,610,215 |
| Commercial Mortgage-Backed Securities | — | 142,368,226 | — | 142,368,226 |
| Asset-Backed Securities (including CDOs) | — | 286,570,789 | — | 286,570,789 |
| Foreign Bonds | — | 261,798,851 | — | 261,798,851 |
| Mutual Funds | 96,489,227 | — | — | 96,489,227 |
| Total | $4,291,130,926 | $3,149,777,038 | $— | $7,440,907,964 |
| Other Financial Instruments | ||||
| Futures Contracts – Assets | $2,645,022 | $— | $— | $2,645,022 |
| Futures Contracts – Liabilities | (6,359,809) | — | — | (6,359,809) |
For further information regarding
security characteristics, see the Portfolio of Investments.
Foreign Currency Translation — 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 or on the reporting date for foreign denominated receivables and payables. 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 receivables, payables, income and expenses
45
Notes to Financial Statements -
continued
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.
Derivatives — The fund uses derivatives primarily to increase or decrease exposure to a particular market or segment of the market, or security, to increase or decrease interest rate or currency
exposure, or as alternatives to direct investments. Derivatives are used for hedging or non-hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the fund uses
derivatives as an investment to increase market exposure, or for hedging purposes, gains and losses from derivative instruments may be substantially greater than the derivative’s original cost.
The derivative instruments used by
the fund during the period were futures contracts. Depending on the type of derivative, a fund may exit a derivative position by entering into an offsetting transaction with a counterparty or exchange,
negotiating an agreement with the derivative counterparty, or novating the position to a third party. The fund may be unable to promptly close out a futures position in instances where the daily fluctuation in the
price for that type of future exceeds the daily limit set by the exchange. The fund's period end derivatives, as presented in the Portfolio of Investments and the associated Derivative Contract tables, generally
are indicative of the volume of its derivative activity during the period.
The following table presents, by
major type of derivative contract, the fair value, on a gross basis, of the asset and liability components of derivatives held by the fund at September 30, 2023 as reported in the Statement of Assets and
Liabilities:
| Fair Value (a) | |||
| Risk | Derivative Contracts | Asset Derivatives | Liability Derivatives |
| Interest Rate | Futures Contracts | $2,645,022 | $(6,359,809) |
| (a) | Values presented in this table for futures contracts correspond to the values reported in the Portfolio of Investments. Only the current day net variation margin for futures contracts is reported separately within the Statement of Assets and Liabilities. |
The following table presents, by
major type of derivative contract, the realized gain (loss) on derivatives held by the fund for the year ended September 30, 2023 as reported in the Statement of Operations:
| Risk | Futures Contracts |
| Interest Rate | $(22,049,684) |
The following table presents, by
major type of derivative contract, the change in unrealized appreciation or depreciation on derivatives held by the fund for the year ended September 30, 2023 as reported in the Statement of Operations:
| Risk | Futures Contracts |
| Interest Rate | $5,807,982 |
Derivative counterparty credit risk
is managed through formal evaluation of the creditworthiness of all potential counterparties. On certain, but not all, uncleared derivatives, the fund attempts to reduce its exposure to counterparty credit risk
46
Notes to Financial Statements -
continued
whenever possible by entering into an ISDA Master
Agreement on a bilateral basis. The ISDA Master Agreement gives each party to the agreement the right to terminate all transactions traded under such agreement if there is a specified deterioration in the credit
quality of the other party. Upon an event of default or a termination of the ISDA Master Agreement, the non-defaulting party has the right to close out all transactions traded under such agreement and to net amounts
owed under each agreement to one net amount payable by one party to the other. This right to close out and net payments across all transactions traded under the ISDA Master Agreement could result in a reduction of the
fund's credit risk to such counterparty equal to any amounts payable by the fund under the applicable transactions, if any.
Collateral and margin requirements
differ by type of derivative. For cleared derivatives (e.g., futures contracts, cleared swaps, and exchange-traded options), margin requirements are set by the clearing broker and the clearing house and collateral, in
the form of cash or securities, is posted by the fund directly with the clearing broker. Collateral terms are counterparty agreement specific for uncleared derivatives (e.g., forward foreign currency exchange
contracts, uncleared swap agreements, and uncleared options) and collateral, in the form of cash and securities, is held in segregated accounts with the fund's custodian in connection with these agreements. For
derivatives traded under an ISDA Master Agreement, which contains a credit support annex, the collateral requirements are netted across all transactions traded under such counterparty-specific agreement and an amount
is posted from one party to the other to collateralize such obligations. Cash that has been segregated or delivered to cover the fund's collateral or margin obligations under derivative contracts, if any, will be
reported separately in the Statement of Assets and Liabilities as restricted cash for uncleared derivatives and/or deposits with brokers for cleared derivatives. Securities pledged as collateral or margin for the same
purpose, if any, are noted in the Portfolio of Investments. The fund may be required to make payments of interest on uncovered collateral or margin obligations with the broker. Any such payments are included in
“Miscellaneous” expense in the Statement of Operations.
Futures Contracts — The fund entered into futures contracts which may be used to hedge against or obtain broad market exposure, interest rate exposure, currency exposure, or to manage duration. A
futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date.
Upon entering into a futures
contract, the fund is required to deposit with the broker, either in cash or securities, an initial margin in an amount equal to a specified percentage of the notional amount of the contract. Subsequent payments
(variation margin) are made or received by the fund each day, depending on the daily fluctuations in the value of the contract, and are recorded for financial statement purposes as unrealized gain or loss by the fund
until the contract is closed or expires at which point the gain or loss on futures contracts is realized.
The fund bears the risk of interest
rates, exchange rates or securities prices moving unexpectedly, in which case, the fund may not achieve the anticipated benefits of the futures contracts and may realize a loss. While futures contracts may present
less counterparty risk to the fund since the contracts are exchange traded and the exchange’s clearinghouse guarantees payments to the broker, there is still counterparty credit risk due to the insolvency of the
broker. The fund’s maximum risk of loss due to counterparty credit risk is equal to the margin posted by the fund to the broker plus any gains or minus any losses on the outstanding futures contracts.
47
Notes to Financial Statements -
continued
Mortgage-Backed/Asset-Backed
Securities — The fund invests a significant portion of its assets in asset-backed and/or mortgage-backed securities. For these securities, the value of the debt instrument also depends on
the credit quality and adequacy of the underlying assets or collateral as well as whether there is a security interest in the underlying assets or collateral. Enforcing rights, if any, against the underlying
assets or collateral may be difficult. U.S. Government securities not supported as to the payment of principal or interest by the U.S. Treasury, such as those issued by Fannie Mae, Freddie Mac, and the Federal Home
Loan Banks, are subject to greater credit risk than are U.S. Government securities supported by the U.S. Treasury, such as those issued by Ginnie Mae.
Security Loans — Under its Securities Lending Agency Agreement with the fund, JPMorgan Chase and Co., as lending agent, loans the securities of the fund to certain qualified institutions (the
“Borrowers”) approved by the fund. Security loans can be terminated at the discretion of either the lending agent or the fund and the related securities must be returned within the earlier of the standard
trade settlement period for such securities or within three business days. The loans are collateralized by cash and/or U.S. Treasury and federal agency obligations in an amount typically at least equal to the market
value of the securities loaned. On loans collateralized by cash, the cash collateral is invested in a money market fund. The market value of the loaned securities is determined at the close of business of the fund and
any additional required collateral is delivered to the fund on the next business day. The lending agent provides the fund with indemnification against Borrower default. In the event of Borrower default, the lending
agent will, for the benefit of the fund, either purchase securities identical to those loaned or, when such purchase is commercially impracticable, pay the fund the market value of the loaned securities. In return,
the lending agent assumes the fund's rights to the related collateral. If the collateral value is less than the cost to purchase identical securities, the lending agent is responsible for the shortfall, but only to
the extent that such shortfall is not due to a decline in collateral value resulting from collateral reinvestment for which the fund bears the risk of loss. A portion of the income generated upon investment of the
collateral is remitted to the Borrowers, and the remainder is allocated between the fund and the lending agent. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the
Borrower, and is allocated between the fund and the lending agent. Income from securities lending is separately reported in the Statement of Operations. The dividend and interest income earned on the securities loaned
is accounted for in the same manner as other dividend and interest income. At September 30, 2023, there were no securities on loan or collateral outstanding.
Indemnifications — Under the fund's organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to
the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund's maximum exposure under these agreements is unknown
as this would involve future claims that may be made against the fund that have not yet occurred.
Investment Transactions and
Income — Interest income is recorded on the accrual basis. All premium and discount is amortized or accreted for financial statement purposes in accordance with U.S. generally accepted accounting principles. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund is informed of the dividend if such
48
Notes to Financial Statements -
continued
information is obtained subsequent to the
ex-dividend date. Dividend and interest payments received in additional securities are recorded on the ex-dividend or ex-interest date in an amount equal to the value of the security on such date.
The fund may receive proceeds from
litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in
unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
Investment transactions are recorded
on the trade date. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost basis.
The fund may purchase or sell
mortgage-backed securities on a “To Be Announced” (TBA) basis. A TBA transaction is subject to extended settlement and typically does not designate the actual security to be delivered, but instead includes
an approximate principal amount. The price of the TBA security and the date that it will be settled are fixed at the time the transaction is negotiated. The value of the security varies with market fluctuations and no
interest accrues to the fund until settlement takes place. TBA purchase and sale commitments are held at carrying amount, which approximates fair value and are categorized as level 2 within the fair value hierarchy
and included in TBA purchase and TBA sale commitments in the Statement of Assets and Liabilities, as applicable. Losses may arise as a result of changes in the value of the TBA investment prior to settlement date or
due to counterparty non-performance.
The fund may also enter into
mortgage dollar rolls, typically TBA dollar rolls, in which the fund sells TBA mortgage-backed securities to financial institutions and simultaneously agrees to repurchase similar (same issuer, type and coupon)
securities at a later date at an agreed-upon price. During the period between the sale and repurchase, the fund will not be entitled to receive interest and principal payments on the securities sold. The fund accounts
for dollar roll transactions as purchases and sales and realizes gains and losses on these transactions. Dollar roll transactions involve the risk that the market value of the securities that the fund is required to
purchase may decline below the agreed upon repurchase price of those securities.
To mitigate the counterparty credit
risk on TBA transactions, mortgage dollar rolls, and other types of forward settling mortgage-backed and asset-backed security transactions, the fund whenever possible enters into a Master Securities Forward
Transaction Agreement (“MSFTA”) on a bilateral basis with each of the counterparties with whom it undertakes a significant volume of transactions. The MSFTA gives each party to the agreement the right to
terminate all transactions traded under such agreement if there is a specified deterioration in the credit quality of the other party. Upon an event of default or a termination of the MSFTA, the non-defaulting party
has the right to close out all transactions traded under such agreement and to net amounts owed under each transaction to one net amount payable by one party to the other. This right to close out and net payments
across all transactions traded under the MSFTA could result in a reduction of the fund's credit risk to such counterparty equal to any amounts payable by the fund under the applicable transactions, if any.
For mortgage-backed and asset-backed
securities traded under a MSFTA, the collateral and margining requirements are contract specific. Collateral amounts across all transactions traded under such agreement are netted and an amount is posted from
49
Notes to Financial Statements -
continued
one party to the other to collateralize such
obligations. Cash that has been pledged to cover the fund's collateral or margin obligations under a MSFTA, if any, will be reported separately on the Statement of Assets and Liabilities as restricted cash. Securities
pledged as collateral or margin for the same purpose, if any, are noted in the Portfolio of Investments.
Fees Paid Indirectly — The fund's custody fee may be reduced by a credit earned under an arrangement that measures the value of U.S. dollars deposited with the custodian by the fund. The amount of the
credit, for the year ended September 30, 2023, is shown as a reduction of total expenses in the Statement of Operations.
Tax Matters and Distributions — The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including
realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns, when filed, will remain subject to examination by the Internal Revenue Service for a three
year period. Management has analyzed the fund’s tax positions taken on federal and state tax returns for all open tax years and does not believe that there are any uncertain tax positions that require
recognition of a tax liability. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements in accordance with the applicable foreign tax law. Foreign income taxes may be withheld by
certain countries in which the fund invests. Additionally, capital gains realized by the fund on securities issued in or by certain foreign countries may be subject to capital gains tax imposed by those
countries.
Distributions to shareholders are
recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital
accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary
differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future.
Book/tax differences primarily
relate to amortization and accretion of debt securities, wash sale loss deferrals, derivative transactions, and treating a portion of the proceeds from redemptions as a distribution for tax purposes.
The tax character of distributions
declared to shareholders for the last two fiscal years is as follows:
| Year ended 9/30/23 | Year ended 9/30/22 | |
| Ordinary income (including any short-term capital gains) | $190,402,180 | $136,491,411 |
| Long-term capital gains | 256,464,472 | 546,250,940 |
| Total distributions | $446,866,652 | $682,742,351 |
50
Notes to Financial Statements -
continued
The federal tax cost and the tax
basis components of distributable earnings were as follows:
| As of 9/30/23 | |
| Cost of investments | $6,442,908,136 |
| Gross appreciation | 1,579,559,337 |
| Gross depreciation | (585,274,296) |
| Net unrealized appreciation (depreciation) | $994,285,041 |
| Undistributed ordinary income | 26,657,136 |
| Undistributed long-term capital gain | 272,242,270 |
| Other temporary differences | (23,743,063) |
| Total distributable earnings (loss) | $1,269,441,384 |
Multiple Classes of Shares of
Beneficial Interest — The fund offers multiple classes of shares, which differ in their respective distribution and service fees. The fund's income, realized and unrealized gain (loss), and common
expenses are allocated to shareholders based on the daily net assets of each class. Dividends are declared separately for each class. Differences in per share dividend rates are generally due to differences in
separate class expenses. Class B and Class C shares will convert to Class A shares approximately eight years after purchase. Effective March 21, 2022, all Class 529B and Class 529C shares were converted into Class
529A shares. Effective May 20, 2022, all Class 529A shares were redeemed. The fund’s distributions declared to shareholders as reported in the Statements of Changes in Net Assets are presented by class as
follows:
| Year ended 9/30/23 | Year ended 9/30/22 | ||
| Class A | $278,298,921 | $418,611,116 | |
| Class B | 2,339,606 | 5,538,194 | |
| Class C | 16,504,687 | 31,577,135 | |
| Class I | 56,544,330 | 84,020,236 | |
| Class R1 | 431,295 | 729,791 | |
| Class R2 | 5,062,784 | 8,866,198 | |
| Class R3 | 13,568,537 | 21,993,557 | |
| Class R4 | 13,259,620 | 20,304,676 | |
| Class R6 | 60,856,872 | 88,095,200 | |
| Class 529A | — | 2,584,106 | |
| Class 529B | — | 43,713 | |
| Class 529C | — | 378,429 | |
| Total | $446,866,652 | $682,742,351 |
51
Notes to Financial Statements -
continued
(3) Transactions with
Affiliates
Investment Adviser — The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid monthly at the following annual rates based on the fund's average daily net assets:
| Up to $6.3 billion | 0.35% |
| In excess of $6.3 billion and up to $10 billion | 0.34% |
| In excess of $10 billion | 0.33% |
The management fee incurred for the
year ended September 30, 2023 was equivalent to an annual effective rate of 0.35% of the fund's average daily net assets.
Distributor — MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of MFS, as distributor, received $268,970 for the year ended September 30, 2023, as its portion of the initial sales
charge on sales of Class A shares of the fund.
The Board of Trustees has adopted a
distribution plan for certain share classes pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund's distribution plan
provides that the fund will pay MFD for services provided by MFD and financial intermediaries in connection with the distribution and servicing of certain share classes. One component of the plan is a
distribution fee paid to MFD and another component of the plan is a service fee paid to MFD. MFD may subsequently pay all, or a portion, of the distribution and/or service fees to financial intermediaries. The
distribution and service fees are computed daily and paid monthly.
Distribution Plan Fee Table:
| Distribution Fee Rate (d) | Service Fee Rate (d) | Total Distribution Plan (d) | Annual Effective Rate (e) | Distribution and Service Fee | |
| Class A | — | 0.25% | 0.25% | 0.25% | $ 11,969,803 |
| Class B | 0.75% | 0.25% | 1.00% | 1.00% | 430,530 |
| Class C | 0.75% | 0.25% | 1.00% | 1.00% | 3,154,696 |
| Class R1 | 0.75% | 0.25% | 1.00% | 1.00% | 78,370 |
| Class R2 | 0.25% | 0.25% | 0.50% | 0.50% | 447,734 |
| Class R3 | — | 0.25% | 0.25% | 0.25% | 575,995 |
| Total Distribution and Service Fees | $16,657,128 |
| (d) | In accordance with the distribution plan for certain classes, the fund pays distribution and/or service fees equal to these annual percentage rates of each class’s average daily net assets. The distribution and service fee rates disclosed by class represent the current rates in effect at the end of the reporting period. Any rate changes, if applicable, are detailed below. |
| (e) | The annual effective rates represent actual fees incurred under the distribution plan for the year ended September 30, 2023 based on each class's average daily net assets. MFD has voluntarily agreed to rebate a portion of each class's 0.25% service fee attributable to accounts for which there is no financial intermediary specified on the account except for accounts attributable to MFS or its affiliates' seed money. For the year ended September 30, 2023, this rebate amounted to $25,699, $14, and $12 for Class A, Class B, and Class C shares, respectively, and is included in the reduction of total expenses in the Statement of Operations. |
52
Notes to Financial Statements -
continued
Certain Class A shares are
subject to a contingent deferred sales charge (CDSC) in the event of a shareholder redemption within 18 months of purchase. Class B shares are subject to a CDSC in the event of a shareholder redemption within six
years of purchase. Class C shares are subject to a CDSC in the event of a shareholder redemption within 12 months of purchase. All contingent deferred sales charges are paid to MFD and during the year ended
September 30, 2023, were as follows:
| Amount | |
| Class A | $121,245 |
| Class B | 17,928 |
| Class C | 17,029 |
Shareholder Servicing Agent — MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS, receives a fee from the fund for its services as shareholder servicing agent calculated as a percentage of the
average daily net assets of the fund as determined periodically under the supervision of the fund's Board of Trustees. For the year ended September 30, 2023, the fee was $1,144,641, which equated to 0.0150% annually
of the fund's average daily net assets. MFSC also receives reimbursement from the fund for out-of-pocket expenses, sub-accounting and other shareholder servicing costs which may be paid to affiliated and unaffiliated
service providers. Class R6 shares do not incur sub-accounting fees. For the year ended September 30, 2023, these out-of-pocket expenses, sub-accounting and other shareholder servicing costs amounted to
$5,543,770.
Administrator — MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the
fund reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee is
computed daily and paid monthly. The administrative services fee incurred for the year ended September 30, 2023 was equivalent to an annual effective rate of 0.0082% of the fund's average daily net
assets.
Trustees’ and Officers’
Compensation — The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons.
Independent Trustees’ compensation is accrued daily and paid subsequent to each Trustee Board meeting. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers
of the investment adviser, all of whom receive remuneration from MFS for their services to the fund. Certain officers and Trustees of the fund are officers or directors of MFS, MFD, and MFSC.
Prior to December 31, 2001, the fund
had an unfunded defined benefit plan (“DB plan”) for independent Trustees. As of December 31, 2001, the Board took action to terminate the DB plan with respect to then-current and any future
independent Trustees, such that the DB plan covers only certain of those former independent Trustees who retired on or before December 31, 2001. The DB plan resulted in a pension expense of $1,583 and is included in
“Independent Trustees’ compensation” in the Statement of Operations for the year ended September 30, 2023. The liability for deferred retirement benefits payable to those former independent Trustees
under the
53
Notes to Financial Statements -
continued
DB plan amounted to $1,556 at September 30, 2023,
and is included in “Payable for independent Trustees’ compensation” in the Statement of Assets and Liabilities. The deferred retirement benefits compensation fee is accrued daily and paid
monthly.
Other — The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks current income consistent with preservation of capital and liquidity. This money
market fund does not pay a management fee to MFS but does incur investment and operating costs.
During the year ended September 30,
2023, pursuant to a policy adopted by the Board of Trustees and designed to comply with Rule 17a-7 under the Investment Company Act of 1940 (the “Act”) and relevant guidance, the fund engaged in
purchase transactions with funds and accounts for which MFS serves as investment adviser or sub-adviser (“cross-trades”) which amounted to $20,752,945.
The adviser has voluntarily
undertaken to reimburse the fund from its own resources on a quarterly basis for the cost of investment research embedded in the cost of the fund’s securities trades. This agreement may be rescinded at any time.
For the year ended September 30, 2023, this reimbursement amounted to $56,404, which is included in “Other” income in the Statement of Operations.
(4) Portfolio Securities
For the year ended September 30,
2023, purchases and sales of investments, other than short-term obligations, were as follows:
| Purchases | Sales | |
| U.S. Government securities | $2,160,917,096 | $2,053,806,220 |
| Non-U.S. Government securities | 1,065,052,863 | 1,410,531,236 |
54
Notes to Financial Statements -
continued
(5) Shares of Beneficial
Interest
The fund's Declaration of Trust
permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest. Transactions in fund shares were as follows:
| Year ended 9/30/23 | Year ended 9/30/22 | ||||
| Shares | Amount | Shares | Amount | ||
| Shares sold | |||||
| Class A | 30,895,012 | $580,170,699 | 33,466,090 | $685,904,737 | |
| Class B | 19,758 | 369,987 | 64,882 | 1,352,760 | |
| Class C | 1,437,928 | 27,257,335 | 2,025,034 | 42,058,580 | |
| Class I | 8,656,719 | 162,456,530 | 8,055,892 | 165,126,705 | |
| Class R1 | 18,939 | 355,288 | 65,465 | 1,324,712 | |
| Class R2 | 567,772 | 10,687,880 | 1,082,159 | 22,119,106 | |
| Class R3 | 1,876,262 | 35,256,883 | 1,890,128 | 38,458,674 | |
| Class R4 | 1,571,624 | 29,523,343 | 1,620,907 | 32,981,077 | |
| Class R6 | 11,135,706 | 209,429,437 | 10,669,076 | 220,675,812 | |
| Class 529A | — | — | 434,771 | 8,989,314 | |
| Class 529B | — | — | 1,403 | 30,325 | |
| Class 529C | — | — | 13,616 | 288,833 | |
| 56,179,720 | $1,055,507,382 | 59,389,423 | $1,219,310,635 | ||
| Shares issued to shareholders in reinvestment of distributions | |||||
| Class A | 14,091,229 | $263,806,339 | 18,694,354 | $395,412,895 | |
| Class B | 121,924 | 2,286,907 | 242,070 | 5,165,735 | |
| Class C | 834,267 | 15,749,169 | 1,394,909 | 29,934,385 | |
| Class I | 2,621,447 | 49,064,749 | 3,465,621 | 73,200,874 | |
| Class R1 | 23,095 | 431,295 | 34,376 | 729,791 | |
| Class R2 | 267,643 | 5,030,803 | 413,882 | 8,810,700 | |
| Class R3 | 723,974 | 13,568,500 | 1,038,015 | 21,991,573 | |
| Class R4 | 656,517 | 12,307,902 | 887,010 | 18,764,485 | |
| Class R6 | 3,038,763 | 56,906,317 | 3,882,876 | 81,967,596 | |
| Class 529A | — | — | 120,661 | 2,564,548 | |
| Class 529B | — | — | 2,039 | 43,713 | |
| Class 529C | — | — | 17,529 | 377,330 | |
| 22,378,859 | $419,151,981 | 30,193,342 | $638,963,625 | ||
55
Notes to Financial Statements -
continued
| Year ended 9/30/23 | Year ended 9/30/22 | ||||
| Shares | Amount | Shares | Amount | ||
| Shares reacquired | |||||
| Class A | (41,583,618) | $(781,373,753) | (37,317,685) | $(760,718,025) | |
| Class B | (1,057,462) | (19,894,331) | (1,251,172) | (25,461,990) | |
| Class C | (5,869,176) | (111,207,596) | (5,522,629) | (112,793,492) | |
| Class I | (9,928,365) | (186,303,942) | (8,240,538) | (167,418,678) | |
| Class R1 | (178,124) | (3,354,399) | (100,431) | (2,095,634) | |
| Class R2 | (1,458,236) | (27,574,573) | (1,882,649) | (38,756,685) | |
| Class R3 | (3,809,104) | (71,963,943) | (3,787,075) | (79,296,111) | |
| Class R4 | (1,991,477) | (37,458,034) | (2,482,485) | (50,562,583) | |
| Class R6 | (10,144,231) | (190,694,862) | (10,243,653) | (208,928,217) | |
| Class 529A | — | — | (2,103,345) | (40,378,179) | |
| Class 529B | — | — | (35,628) | (744,598) | |
| Class 529C | — | — | (286,953) | (5,942,477) | |
| (76,019,793) | $(1,429,825,433) | (73,254,243) | $(1,493,096,669) | ||
| Net change | |||||
| Class A | 3,402,623 | $62,603,285 | 14,842,759 | $320,599,607 | |
| Class B | (915,780) | (17,237,437) | (944,220) | (18,943,495) | |
| Class C | (3,596,981) | (68,201,092) | (2,102,686) | (40,800,527) | |
| Class I | 1,349,801 | 25,217,337 | 3,280,975 | 70,908,901 | |
| Class R1 | (136,090) | (2,567,816) | (590) | (41,131) | |
| Class R2 | (622,821) | (11,855,890) | (386,608) | (7,826,879) | |
| Class R3 | (1,208,868) | (23,138,560) | (858,932) | (18,845,864) | |
| Class R4 | 236,664 | 4,373,211 | 25,432 | 1,182,979 | |
| Class R6 | 4,030,238 | 75,640,892 | 4,308,299 | 93,715,191 | |
| Class 529A | — | — | (1,547,913) | (28,824,317) | |
| Class 529B | — | — | (32,186) | (670,560) | |
| Class 529C | — | — | (255,808) | (5,276,314) | |
| 2,538,786 | $44,833,930 | 16,328,522 | $365,177,591 | ||
Effective June 1, 2019, purchases of
the fund’s Class B and Class 529B shares were closed to new and existing investors subject to certain exceptions. Effective after the close of business on March 18, 2022, all sales of Class 529B and Class 529C
shares were suspended, and Class 529B and Class 529C shares were converted into Class 529A shares of the fund effective March 21, 2022. Effective after the close of business on May 13, 2022, all sales and redemptions
of Class 529A shares were suspended, and all Class 529A shares were redeemed on May 20, 2022. On March 30, 2023, the fund announced that effective after the close of business on September 29, 2023, purchases of Class
R1 and Class R2 shares will be closed to new eligible investors.
56
Notes to Financial Statements -
continued
(6) Line of Credit
The fund and certain other funds
managed by MFS participate in a $1.45 billion unsecured committed line of credit of which $1.2 billion is reserved for use by the fund and certain other MFS U.S. funds. The line of credit is provided by a syndicate of
banks under a credit agreement. Borrowings may be made for temporary financing needs. Interest is charged to each fund, based on its borrowings, generally at a rate equal to the highest of 1) Daily Simple SOFR
(Secured Overnight Financing Rate) plus 0.10%, 2) the Federal Funds Effective Rate, or 3) the Overnight Bank Funding Rate, each plus an agreed upon spread. A commitment fee, based on the average daily unused portion
of the committed line of credit, is allocated among the participating funds. The line of credit expires on March 14, 2024 unless extended or renewed. In addition, the fund and other funds managed by MFS have
established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at rates equal to customary reference rates plus an
agreed upon spread. For the year ended September 30, 2023, the fund’s commitment fee and interest expense were $39,329 and $0, respectively, and are included in “Miscellaneous” expense in the
Statement of Operations.
(7) Investments in Affiliated
Issuers
An affiliated issuer may be
considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the following were affiliated issuers:
| Affiliated Issuers | Beginning Value | Purchases | Sales Proceeds | Realized Gain (Loss) | Change in Unrealized Appreciation or Depreciation | Ending Value |
| MFS Institutional Money Market Portfolio | $177,296,073 | $1,254,805,512 | $1,335,601,196 | $(2,405) | $(8,757) | $96,489,227 |
| Affiliated Issuers | Dividend Income | Capital Gain Distributions |
| MFS Institutional Money Market Portfolio | $5,661,878 | $— |
57
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of MFS
Series Trust V and the Shareholders of MFS Total Return Fund:
Opinion on the Financial Statements
and Financial Highlights
We have audited the accompanying
statement of assets and liabilities of MFS Total Return Fund (the “Fund”), including the portfolio of investments, as of September 30, 2023, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the
financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of September 30, 2023, and 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 accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements and
financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund's financial statements and financial highlights based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in
accordance with the standards of the PCAOB. 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, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required
to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we
express no such opinion.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights.
58
Report of Independent Registered Public
Accounting Firm – continued
Our procedures included confirmation of securities
owned as of September 30, 2023, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable
basis for our opinion.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 14, 2023
November 14, 2023
We have served as the auditor of
one or more of the MFS investment companies since 1924.
59
Trustees and
Officers — Identification and Background
The Trustees and Officers of the
Trust, as of November 1, 2023, are listed below, together with their principal occupations during the past five years. (Their titles may have varied during that period.) The address of each Trustee and Officer
is 111 Huntington Avenue, Boston, Massachusetts 02199-7618.
| Name, Age | Position(s) Held with Fund | Trustee/Officer Since(h) | Number of MFS Funds overseen by the Trustee | Principal Occupations During the Past Five Years | Other Directorships During the Past Five Years (j) | |||||
| INTERESTED TRUSTEE | ||||||||||
| Michael W. Roberge (k) (age 57) | Trustee | January 2021 | 136 | Massachusetts Financial Services Company, Chairman (since January 2021); Chief Executive Officer (since January 2017); Director; Chairman of the Board (since January 2022); President (until December 2018); Chief Investment Officer (until December 2018) | N/A | |||||
| INDEPENDENT TRUSTEES | ||||||||||
| John P. Kavanaugh (age 68) | Trustee and Chair of Trustees | January 2009 | 136 | Private investor | N/A | |||||
| Steven E. Buller (age 72) | Trustee | February 2014 | 136 | Private investor | N/A | |||||
| John A. Caroselli (age 69) | Trustee | March 2017 | 136 | Private investor; JC Global Advisors, LLC (management consulting), President (since 2015) | N/A | |||||
| Maureen R. Goldfarb (age 68) | Trustee | January 2009 | 136 | Private investor | N/A | |||||
| Peter D. Jones (age 68) | Trustee | January 2019 | 136 | Private investor | N/A | |||||
| James W. Kilman, Jr. (age 62) | Trustee | January 2019 | 136 | Burford Capital Limited (finance and investment management), Senior Advisor (since May 3, 2021), Chief Financial Officer (2019 - May 2, 2021); KielStrand Capital LLC (family office), Chief Executive Officer (since 2016) | Alpha-En Corporation, Director (2016-2019) |
60
Trustees and Officers - continued
| Name, Age | Position(s) Held with Fund | Trustee/Officer Since(h) | Number of MFS Funds overseen by the Trustee | Principal Occupations During the Past Five Years | Other Directorships During the Past Five Years (j) | |||||
| Clarence Otis, Jr. (age 67) | Trustee | March 2017 | 136 | Private investor | VF Corporation, Director; Verizon Communications, Inc., Director; The Travelers Companies, Director | |||||
| Maryanne L. Roepke (age 67) | Trustee | May 2014 | 136 | Private investor | N/A | |||||
| Laurie J. Thomsen (age 66) | Trustee | March 2005 | 136 | Private investor | The Travelers Companies, Director; Dycom Industries, Inc., Director |
| Name, Age | Position(s) Held with Fund | Trustee/Officer Since(h) | Number of MFS Funds for which the Person is an Officer | Principal Occupations During the Past Five Years | ||||
| OFFICERS | ||||||||
| Christopher R. Bohane (k) (age 49) | Assistant Secretary and Assistant Clerk | July 2005 | 136 | Massachusetts Financial Services Company, Senior Vice President and Senior Managing Counsel | ||||
| Kino Clark (k) (age 55) | Assistant Treasurer | January 2012 | 136 | Massachusetts Financial Services Company, Vice President | ||||
| John W. Clark, Jr. (k) (age 56) | Assistant Treasurer | April 2017 | 136 | Massachusetts Financial Services Company, Vice President | ||||
| David L. DiLorenzo (k) (age 55) | President | July 2005 | 136 | Massachusetts Financial Services Company, Senior Vice President | ||||
| Heidi W. Hardin (k) (age 56) | Secretary and Clerk | April 2017 | 136 | Massachusetts Financial Services Company, Executive Vice President and General Counsel | ||||
| Brian E. Langenfeld (k) (age 50) | Assistant Secretary and Assistant Clerk | June 2006 | 136 | Massachusetts Financial Services Company, Vice President and Managing Counsel |
61
Trustees and Officers - continued
| Name, Age | Position(s) Held with Fund | Trustee/Officer Since(h) | Number of MFS Funds for which the Person is an Officer | Principal Occupations During the Past Five Years | ||||
| Rosa E. Licea-Mailloux (k) (age 47) | Chief Compliance Officer | March 2022 | 136 | Massachusetts Financial Services Company, Vice President (since 2018); Director of Corporate Compliance (2018-2021), Senior Director Compliance (2021-2022), Senior Managing Director of North American Compliance & Chief Compliance Officer (since March 2022); Natixis Investment Managers (investment management), Funds Chief Compliance Officer, Deputy General Counsel & Senior Vice President (until 2018) | ||||
| Amanda S. Mooradian (k) (age 44) | Assistant Secretary and Assistant Clerk | September 2018 | 136 | Massachusetts Financial Services Company, Assistant Vice President and Senior Counsel | ||||
| Susan A. Pereira (k) (age 52) | Assistant Secretary and Assistant Clerk | July 2005 | 136 | Massachusetts Financial Services Company, Vice President and Managing Counsel | ||||
| Kasey L. Phillips (k) (age 52) | Assistant Treasurer | September 2012 | 136 | Massachusetts Financial Services Company, Vice President | ||||
| Matthew A. Stowe (k) (age 48) | Assistant Secretary and Assistant Clerk | October 2014 | 136 | Massachusetts Financial Services Company, Vice President and Senior Managing Counsel | ||||
| William B. Wilson (k) (age 41) | Assistant Secretary and Assistant Clerk | October 2022 | 136 | Massachusetts Financial Services Company, Assistant Vice President and Senior Counsel | ||||
| James O. Yost (k) (age 63) | Treasurer | September 1990 | 136 | Massachusetts Financial Services Company, Senior Vice President |
| (h) | Date first appointed to serve as Trustee/Officer of an MFS Fund. Each Trustee has served continuously since appointment unless indicated otherwise. From January 2012 through December 2016, Messrs. DiLorenzo and Yost served as Treasurer and Deputy Treasurer of the Funds, respectively. |
| (j) | Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., “public companies”). |
| (k) | “Interested person” of the Trust within the meaning of the Investment Company Act of 1940 (referred to as the 1940 Act), which is the principal federal law governing investment companies like the fund, as a result of a position with MFS. The address of MFS is 111 Huntington Avenue, Boston, Massachusetts 02199-7618. |
62
Trustees and Officers - continued
Each Trustee (other than Messrs.
Jones, Kilman and Roberge) has been elected by shareholders and each Trustee and Officer holds office until his or her successor is chosen and qualified or until his or her earlier death, resignation, retirement or
removal. Mr. Roberge became a Trustee of the Funds on January 1, 2021 and Messrs. Jones and Kilman became Trustees of the Funds on January 1, 2019. The Trust does not hold annual meetings for the purpose of electing
Trustees, and Trustees are not elected for fixed terms. Under the terms of the Board's retirement policy, an Independent Trustee shall retire at the end of the calendar year in which he or she reaches the earlier of
75 years of age or 15 years of service on the Board (or, in the case of any Independent Trustee who joined the Board prior to 2015, 20 years of service on the Board).
Messrs. Buller, Kilman and Otis and
Ms. Roepke are members of the Trust’s Audit Committee.
Each of the Interested Trustees and
certain Officers hold comparable officer positions with certain affiliates of MFS.
The Statement of Additional
Information for a Fund includes further information about the Trustees and is available without charge upon request by calling 1-800-225-2606.
| Investment Adviser | Custodian |
| Massachusetts Financial Services Company 111 Huntington Avenue Boston, MA 02199-7618 | JPMorgan Chase Bank, NA 4 Metrotech Center New York, NY 11245 |
| Distributor | Independent Registered Public Accounting Firm |
| MFS Fund Distributors, Inc. 111 Huntington Avenue Boston, MA 02199-7618 | Deloitte & Touche LLP 200 Berkeley Street Boston, MA 02116 |
| Portfolio Manager(s) | |
| Steven Gorham Alexander Mackey Joshua Marston Johnathan Munko |
63
Board Review of Investment Advisory
Agreement
MFS Total Return Fund
The Investment Company Act of 1940
requires that both the full Board of Trustees and a majority of the non-interested (“independent”) Trustees, voting separately, annually approve the continuation of the Fund’s investment advisory
agreement with MFS. The Trustees consider matters bearing on the Fund and its advisory arrangements at their meetings throughout the year, including a review of performance data at each regular meeting. In
addition, the independent Trustees met several times over the course of three months beginning in May and ending in July, 2023 (“contract review meetings”) for the specific purpose of considering whether
to approve the continuation of the investment advisory agreement for the Fund and the other investment companies that the Board oversees (the “MFS Funds”). The independent Trustees were assisted in
their evaluation of the Fund’s investment advisory agreement by independent legal counsel, from whom they received separate legal advice and with whom they met separately from MFS during various contract review
meetings. The independent Trustees were also assisted in this process by an independent consultant who was retained by and reported to the independent Trustees.
In connection with their
deliberations regarding the continuation of the investment advisory agreement, the Trustees, including the independent Trustees, considered such information and factors as they believed, in light of the legal advice
furnished to them and their own business judgment, to be relevant. The investment advisory agreement for the Fund was considered separately, although the Trustees also took into account the common interests of all MFS
Funds in their review. As described below, the Trustees considered the nature, quality, and extent of the various investment advisory, administrative, and shareholder services performed by MFS under the existing
investment advisory agreement and other arrangements with the Fund.
In connection with their contract
review meetings, the Trustees received and relied upon materials that included, among other items: (i) information provided by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent third
party, on the investment performance of the Fund for various time periods ended December 31, 2022 and the investment performance of a group of funds with substantially similar investment classifications/objectives
(the “Broadridge performance universe”), (ii) information provided by Broadridge on the Fund’s advisory fees and other expenses and the advisory fees and other expenses of comparable funds identified
by Broadridge as well as all other funds in the same investment classification/category (the “Broadridge expense group and universe”), (iii) information provided by MFS on the advisory fees of portfolios
of other clients of MFS, including institutional separate accounts and other clients, (iv) information as to whether and to what extent applicable expense waivers, reimbursements or fee “breakpoints” are
observed for the Fund, (v) information regarding MFS’ financial results and financial condition, including MFS’ and certain of its affiliates’ estimated profitability from services performed for the
Fund and the MFS Funds as a whole, and compared to MFS’ institutional business, (vi) MFS’ views regarding the outlook for the mutual fund industry and the strategic business plans of MFS, (vii)
descriptions of various functions performed by MFS for the Funds, such as compliance monitoring and portfolio trading practices, and (viii) information regarding the overall organization of MFS, including information
about
64
Board Review of Investment Advisory
Agreement - continued
MFS’ senior management and other personnel
providing investment advisory, administrative and other services to the Fund and the other MFS Funds. The comparative performance, fee and expense information prepared and provided by Broadridge was not
independently verified and the independent Trustees did not independently verify any information provided to them by MFS.
The Trustees’ conclusion as to
the continuation of the investment advisory agreement was based on a comprehensive consideration of all information provided to the Trustees and not the result of any single factor. Some of the factors that
figured particularly in the Trustees’ deliberations are described below, although individual Trustees may have evaluated the information presented differently from one another, giving different weights to
various factors. It is also important to recognize that the fee arrangements for the Fund and other MFS Funds are the result of years of review and discussion between the independent Trustees and MFS, that
certain aspects of such arrangements may receive greater scrutiny in some years than in others, and that the Trustees’ conclusions may be based, in part, on their consideration of these same arrangements during
the course of the year and in prior years.
Based on information provided by
Broadridge and MFS, the Trustees reviewed the Fund’s total return investment performance as well as the Broadridge performance universe over various time periods. The Trustees placed particular emphasis on
the total return performance of the Fund’s Class I shares in comparison to the performance of funds in its Broadridge performance universe over the five-year period ended December 31, 2022, which the Trustees
believed was a long enough period to reflect differing market conditions. The total return performance of the Fund’s Class I shares was in the 2nd quintile relative to the other funds in the universe for this five-year period (the 1st quintile being the best performers and the 5th quintile being the worst performers). The total return performance of the Fund’s Class I shares was in the 1st quintile for each of the one- and three-year periods ended December 31, 2022 relative to the Broadridge performance universe. Because of the
passage of time, these performance results may differ from the performance results for more recent periods, including those shown elsewhere in this report.
In the course of their
deliberations, the Trustees took into account information provided by MFS in connection with the contract review meetings, as well as during investment review meetings conducted with portfolio management personnel
during the course of the year regarding the Fund’s performance. After reviewing these and related factors, the Trustees concluded, within the context of their overall conclusions regarding the investment
advisory agreement, that they were satisfied with MFS’ responses and efforts relating to investment performance.
In assessing the reasonableness of
the Fund’s advisory fee, the Trustees considered, among other information, the Fund’s advisory fee and the total expense ratio of the Fund’s Class I shares as a percentage of average daily net assets
and the advisory fee and total expense ratios of the Broadridge expense group based on information provided by Broadridge. The Trustees considered that, according to the data provided by Broadridge (which takes
into account any fee reductions or expense limitations that were in effect during the Fund’s last fiscal year), the Fund’s effective advisory fee rate and total expense ratio were each lower than the
Broadridge expense group median.
65
Board Review of Investment Advisory
Agreement - continued
The Trustees also considered the
advisory fees charged by MFS to any institutional separate accounts advised by MFS (“separate accounts”) and unaffiliated investment companies for which MFS serves as subadviser (“subadvised
funds”) that have comparable investment strategies to the Fund, if any. In comparing these fees, the Trustees considered information provided by MFS as to the generally broader scope of services provided
by MFS to the Fund, as well as the more extensive regulatory burdens imposed on MFS in managing the Fund, in comparison to separate accounts and subadvised funds. The Trustees also considered the higher demands
placed on MFS’ investment personnel and trading infrastructure as a result of the daily cash in-flows and out-flows of the Fund in comparison to separate accounts.
The Trustees also considered whether
the Fund may benefit from any economies of scale in the management of the Fund in the event of growth in assets of the Fund. They noted that the Fund’s advisory fee rate schedule is subject to contractual
breakpoints that reduce the Fund’s advisory fee rate on average daily net assets over $6.3 billion and $10 billion. The Trustees concluded that the breakpoints were sufficient to allow the Fund to benefit
from economies of scale as its assets grow.
The Trustees also considered
information prepared by MFS relating to MFS’ costs and profits with respect to the Fund, the MFS Funds considered as a group, and other investment companies and accounts advised by MFS, as well as MFS’
methodologies used to determine and allocate its costs to the MFS Funds, the Fund and other accounts and products for purposes of estimating profitability.
After reviewing these and other
factors described herein, the Trustees concluded, within the context of their overall conclusions regarding the investment advisory agreement, that the advisory fees charged to the Fund represent reasonable
compensation in light of the services being provided by MFS to the Fund.
In addition, the Trustees considered
MFS’ resources and related efforts to continue to retain, attract and motivate capable personnel to serve the Fund. The Trustees also considered current and developing conditions in the financial services
industry, including the presence of large and well-capitalized companies which are spending, and appear to be prepared to continue to spend, substantial sums to engage personnel and to provide services to competing
investment companies. In this regard, the Trustees also considered the financial resources of MFS and its ultimate parent, Sun Life Financial Inc. The Trustees also considered the advantages and possible
disadvantages to the Fund of having an adviser that also serves other investment companies as well as other accounts.
The Trustees also considered the
nature, quality, cost, and extent of administrative, transfer agency, and distribution services provided to the Fund by MFS and its affiliates under agreements and plans other than the investment advisory agreement,
including any 12b-1 fees the Fund pays to MFS Fund Distributors, Inc., an affiliate of MFS. The Trustees also considered the nature, extent and quality of certain other services MFS performs or arranges for on
the Fund’s behalf, which may include securities lending programs, directed expense payment programs, class action recovery programs, and MFS’ interaction with third-party service providers, principally
custodians and sub-custodians. The Trustees concluded that the various non-advisory services provided by MFS and its affiliates on behalf of the Fund were satisfactory.
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Board Review of Investment Advisory
Agreement - continued
The Trustees considered so-called
“fall-out benefits” to MFS such as reputational value derived from serving as investment manager to the MFS Funds. The Trustees also considered that MFS discontinued its historic practice of
obtaining investment research from portfolio brokerage commissions paid by certain MFS Funds effective January 2018, and directly pays or voluntarily reimburses a Fund, if applicable, for the costs of external
research acquired through the use of the Fund’s portfolio brokerage commissions.
Based on their evaluation of factors
that they deemed to be material, including those factors described above, the Board of Trustees, including the independent Trustees, concluded that the Fund’s investment advisory agreement with MFS should be
continued for an additional one-year period, commencing August 1, 2023.
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Proxy Voting Policies and
Information
MFS votes proxies on behalf of the
fund pursuant to proxy voting policies and procedures that are available without charge, upon request, by calling 1-800-225-2606, by visiting mfs.com/proxyvoting, or by visiting the SEC’s Web site at http://www.sec.gov.
Information regarding how the fund
voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available by August 31 of each year without charge by visiting mfs.com/proxyvoting, or by visiting the SEC’s Web site at http://www.sec.gov.
Quarterly Portfolio
Disclosure
The fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund's Form N-PORT reports are available on the SEC's Web site at http://www.sec.gov. A shareholder can obtain the portfolio holdings report for the first and third quarters of the fund's fiscal year at mfs.com/openendfunds by choosing the fund's name and then scrolling to the “Resources” section and clicking on the “Prospectus and Reports” tab.
Further Information
From time to time, MFS may post
important information about the fund or the MFS Funds on the MFS Web site (mfs.com). This information is available at https://www.mfs.com/announcements or at mfs.com/openendfunds by choosing the fund’s name and then scrolling to the “Resources” section and clicking on the “Announcements” tab, if any.
Information About Fund
Contracts and Legal Claims
The fund has entered into
contractual arrangements with an investment adviser, administrator, distributor, shareholder servicing agent, and custodian who each provide services to the fund. Unless expressly stated otherwise, shareholders are
not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek
any remedy under them against the service providers, either directly or on behalf of the fund.
Under the Trust’s By-Laws and
Declaration of Trust, any claims asserted against or on behalf of the MFS Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of
Massachusetts.
Federal Tax Information
(unaudited)
The fund will notify shareholders of
amounts for use in preparing 2023 income tax forms in January 2024. The following information is provided pursuant to provisions of the Internal Revenue Code.
The fund designates the maximum
amount allowable as qualified dividend income eligible to be taxed at the same rate as long-term capital gain.
The fund designates $302,630,000 as
capital gain dividends paid during the fiscal year.
For corporate shareholders, 57.75%
of the ordinary income dividends paid during the prior calendar year qualify for the corporate dividends received deduction.
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Federal Tax Information (unaudited) - continued
The fund designates the maximum
amount allowable as Section 199A dividends as defined in Proposed Treasury Regulation §1.199A-3(d).
The fund intends to pass through the
maximum amount allowable as Section 163(j) Interest Dividends as defined in Treasury Regulation §1.163(j)-1(b).
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rev. 3/16
| FACTS | WHAT DOES MFS DO WITH YOUR PERSONAL INFORMATION? |
| Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
| What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include: |
| • Social Security number and account balances | |
| • Account transactions and transaction history | |
| • Checking account information and wire transfer instructions | |
| When you are no longer our customer, we continue to share your information as described in this notice. |
| How? | All financial companies need to share customers' personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers' personal information; the reasons MFS chooses to share; and whether you can limit this sharing. |
| Reasons we can share your personal information | Does MFS share? | Can you limit this sharing? |
| For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | Yes | No |
| For our marketing purposes – to offer our products and services to you | No | We don't share |
| For joint marketing with other financial companies | No | We don't share |
| For our affiliates' everyday business purposes – information about your transactions and experiences | No | We don't share |
| For our affiliates' everyday business purposes – information about your creditworthiness | No | We don't share |
| For nonaffiliates to market to you | No | We don't share |
| Questions? | Call 800-225-2606 or go to mfs.com. |
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Page 2
| Who we are | |
| Who is providing this notice? | MFS Funds, MFS Investment Management, MFS Institutional Advisors, Inc., and MFS Heritage Trust Company. |
| What we do | |
| How does MFS protect my personal information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include procedural, electronic, and physical safeguards for the protection of the personal information we collect about you. |
| How does MFS collect my personal information? | We collect your personal information, for example, when you |
| • open an account or provide account information | |
| • direct us to buy securities or direct us to sell your securities | |
| • make a wire transfer | |
| We also collect your personal information from others, such as credit bureaus, affiliates, or other companies. | |
| Why can't I limit all sharing? | Federal law gives you the right to limit only |
| • sharing for affiliates' everyday business purposes – information about your creditworthiness | |
| • affiliates from using your information to market to you | |
| • sharing for nonaffiliates to market to you | |
| State laws and individual companies may give you additional rights to limit sharing. | |
| Definitions | |
| Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies. |
| • MFS does not share personal information with affiliates, except for everyday business purposes as described on page one of this notice. | |
| Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies. |
| • MFS does not share with nonaffiliates so they can market to you. | |
| Joint marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you. |
| • MFS doesn't jointly market. | |
| Other important information |
| If you own an MFS product or receive an MFS service in the name of a third party such as a bank or broker-dealer, their privacy policy may apply to you instead of ours. |
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